Document:

exv10w19

Ex 10.19

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH
“[***]”. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE
SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION
REQUESTING CONFIDENTIAL TREATMENT UNDER RULE 406 OF THE SECURITIES ACT OF 1933.

Distribution and Manufacturing Agreement

This Distribution and Manufacturing Agreement (the “Agreement”), effective August 27, 2009 (the
“Effective Date”), is made between VUZIX Corporation, whose principal place of business is located
at 75 Town Centre Drive, Rochester, New York 14623 U.S.A. (herein referred to as “VUZIX”) and
YuView Holdings Ltd., with its registered office at 800-885 West Georgia Street, Vancouver, B.C.
V6C 3H1 (hereinafter referred to as “RESELLER”) each a “Party” and, collectively, the “Parties”.

NOW THEREFORE in consideration of the mutual covenants and agreements herein and other good and
valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties
agree as follows:

	1.	 	GRANT OF LICENSE AND AREA OF RESPONSIBILITY
	 
	1.1	 	VUZIX grants to RESELLER the exclusive right to sell, promote and distribute the products
listed in Schedule B (the “Products”) in the area(s) (the “Territory”) described on Schedule A
-I (the “License”).
	 
	1.2	 	This License is limited to the Territory, and does not extend to any other area or market. No
exporting or re-exporting of Products to any customers outside of the Territory, either
directly or indirectly, is authorized unless written authorized permission is granted by
VUZIX.
	 
	1.3	 	The License may be terminated by VUZIX if RESELLER fails to meet the sales volume goals
established by VUZIX and RESELLER for any period, as specified in Schedule B to this
Agreement.
	 
	1.4	 	If RESELLER has not signed a Letter Of Intent, Letter of Understanding, or a Product Supply
Agreement with [**************************************************] in the Territory to be a
preferred or strategic supplier of video eyewear Products made by VUZIX or based on VUZIX Key
Components within [**********] of the signing of the Agreement, VUZIX shall the right
thereafter to change of all RESELLER’s rights under this Agreement to non-exclusive.
	 
	2.	 	RESELLER’S OBLIGATIONS
	 
	2.1	 	RESELLER agrees to use commercially reasonable diligent, good faith efforts to promote the
sale, distribution and promotion of the Products in the Territory. RESELLER shall actively and
continuously develop, promote and maintain the distribution and support network for the
Products within the Territory and shall engage in public relations and educational campaigns
to inform the public of the Products within the Territory (including running pilot tests of
the Products with potential customers), that RESELLER in its sole discretion considers
necessary to create a demand therefore.
	 
	 	 	RESELLER agrees that it will not directly or indirectly, manufacture, market or distribute
other products that are competitive with or substantially similar (either in function, form
or features) to the Products covered under this Agreement, nor will it assist anyone else
to do so.
	 
	2.2	 	RESELLER shall organize, train and maintain a competent force of sales persons who shall call
on or contact customers in the Territory on a regular basis.

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	2.3	 	RESELLER shall set up and maintain a technical support centre for customers in the Territory
that is adequate to provide support to its customers in a manner that is reasonably consistent
with the practices provided by other companies within the Territory for similar types of
consumer oriented products.
	 
	2.4	 	RESELLER may make full and effective use of promotional aids, selling aids, educational
materials, advertising materials and related items as VUZIX may furnish to RESELLER.
RESELLER, at its own cost, may develop and produce its own promotional materials which shall
be in a manner that maintains the image of VUZIX and the Products and protects VUZIX’
trademarks. RESELLER will use commercially reasonable efforts to provide VUZIX with copies of
all such materials before they are released publicly. If VUZIX provides any written comments
within ten days (10) after its receipt of such materials, RESELLER will work with VUZIX to
implement or address those suggestions.
	 
	2.5	 	RESELLER shall cooperate with VUZIX marketing, sales management and field educational
personnel in the promotion and selling of the Products.
	 
	2.6	 	RESELLER shall keep such amount of inventory of the Products as to be reasonably determined
by RESELLER in view of the actual demand of the Products and Product manufacturing lead times.
	 
	2.7	 	RESELLER will maintain an adequate capital base and available credit lines to operate
effectively with enough working capital to meet the demands of the customers within the
Territory.
	 
	2.8	 	RESELLER will (i) conduct its business in a manner that reflects favorably at all times on
the VUZIX Products and the good name, goodwill and reputation of VUZIX; (ii) avoid deceptive,
misleading or unethical practices, that are or might be detrimental to VUZIX, the Products or
the public; (iii) make no false or misleading representation with regard to VUZIX or the
Products; (iv) not publish or employ or cooperate in the publication or employment of
deceptive or misleading advertising material with regard to VUZIX or the Products; (v) make no
representations, warranties or guarantees to customers or the trade with respect to the
specifications, features or capabilities of the Products other than those included in the
Products user documentation.
	 
	2.9	 	Both parties shall comply with all applicable international, national, provincial and state,
regional, and local laws and regulations, including but not limited to export laws and
regulations, in performing their duties hereunder and in any of their dealings with respect to
the Products.
	 
	2.10	 	RESELLER shall only distribute, sell or resell the Products in the Territory under RESELLER’s
trade names or trade-marks or co-brand the Products with the VUZIX’ trade names and
trade-marks in accordance with the terms of this Agreement and with standards for the use of
VUZIX’s trademarks supplied by VUZIX.
	 
	2.11	 	RESELLER will distribute the Products with all packaging, warranties, disclaimers and license
agreements intact as shipped from VUZIX, and will provide each of its customers with the terms
of the License Agreement applicable to any VUZIX software included with the Products.
Notwithstanding the above, if RESELLER has exercised its option to manufacture the Products
under Section 5, RESELLER will be responsible for providing packaging, warranties and
disclaimers for the Products manufactured in the Territory with the exception of all
warranties and disclaimers applicable to Key Components (as defined herein), which warranties
and disclaimers VUZIX will be responsible for. VUZIX will make no, and will have no
responsibility for, warranties with respect to such products, other than with respect to Key
Components. In the event the RESELLER has exercised its

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	 	 	option to manufacture the Products pursuant to Section 5 of this Agreement, RESELLER will
ensure that all packaging, license terms, warranties, and disclaimers provide adequate
protection for the intellectual property of VUZIX, which will have the right to approve
such license terms, warranties and disclaimers as they relate to VUZIX intellectual
property or the Key Components and will provide such approval within a reasonable time not
to exceed thirty (30) days.
	 
	2.12	 	RESELLER will use commercially reasonable efforts to advise VUZIX promptly concerning any
market information that comes to RESELLER’s attention regarding the Products, VUZIX’s market
position or the continued competitiveness of the Products in the marketplace.

	3.	 	VUZIX’S OBLIGATIONS
	 
	3.1	 	VUZIX will, at the request of RESELLER, provide RESELLER with information and materials
reasonably necessary for RESELLER’s performance of marketing as contemplated hereby. VUZIX
shall furnish to RESELLER, free of charge, such number of copies as required by RESELLER,
within reason, of all available manuals in the English and Mandarin Language, and Product
related sales and advertising material, Product manuals, and installation and operation
manuals then in use by VUZIX (unless specifically prepared for another customer of VUZIX). For
the avoidance of doubt, VUZIX shall have no obligation to create for or provide to RESELLER
any materials other than its then-existing standard materials.
	 
	3.2	 	VUZIX will modify all packaging associated with the Products as reasonably requested by the
RESELLER to reflect RESELLER’s trade-marks and to meet special needs due to language
differences and imposed packaging requirements in the Territory.
	 
	3.3	 	VUZIX shall make available to RESELLER in Beijing, at least twice per calendar year for
periods of not more than 5 business days each or on a more frequent basis if required to
support the launch of new Products or amended technology in existing Products, technically
competent personnel to counsel RESELLER’s engineers in a manner reasonably necessary to enable
RESELLER’s marketing of the Products as contemplated herein. RESELLER shall bear the
reasonable expenses of having VUZIX personnel attend and instruct such courses in China,
namely, the expenses of transportation, accommodation and meals.
	 
	3.4	 	VUZIX shall provide to RESELLER access to any reasonably necessary technical training courses
that it develops, free of charge. RESELLER shall bear the reasonable expenses of having VUZIX
personnel attend and instruct such courses in China, namely, the expenses of transportation,
accommodation and meals. RESELLER shall have the right to have each such course presented in
China once without charge other than for expenses, and each additional presentation of such
course shall be paid for by RESELLER at VUZIX’ standard per diem rate for the VUZIX personnel
involved.
	 
	3.5	 	VUZIX in cooperation with the RESELLER shall prepare, obtain or transmit to RESELLER and all
parties concerned, all export documents that are normally required to export the Products from
the United States to RESELLER’s designated shipment point in the Territory provided, however,
that VUZIX shall not prepare, obtain or transport documents providing for the export of the
Products in violation of applicable United States export regulations or where such export is
prohibited or substantially restricted. VUZIX shall not be responsible for delivery delays
caused by its inability to obtain export clearance so long as VUZIX reasonably attempts and
continues to attempt to obtain such clearance.

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	3.6	 	VUZIX shall be responsible for all export costs into the Territory, however such costs will
be included in its selling price to the RESELLER, and RESELLER shall be responsible for all
import costs into the Territory, CIF Beijing.
	 
	3.7	 	VUZIX will not itself and will not authorize anyone else to directly or indirectly market,
advertise, promote or sell products that are manufactured by VUZIX or its licensed third party
partners or OEM’s that are substantially similar with the Products in the Territory. VUZIX
will promptly refer all inquiries regarding the Products received from within or about the
Territory to RESELLER. VUZIX may market its brand within the Territory, subject to the prior
consent of the RESELLER, with such consent not to be unreasonably withheld.
	 
	3.8	 	VUZIX will be responsible for and will use reasonable commercial efforts to protect and
enforce VUZIX’s intellectual property rights in and arising from the Products throughout the
Territory, including the filing of applications and the maintenance of registrations for
patent, copyright, trade-mark, industrial design and other applicable intellectual property
rights throughout the Territory. If RESELLER becomes aware of any third party infringement or
other misuse of such intellectual property rights, RESELLER will promptly inform VUZIX of such
infringement and RESELLER will, at VUZIX’s cost, provide such reasonable assistance to VUZIX
as VUZIX requests for the purpose of enforcing its intellectual property rights against such
infringement. If VUZIX elects not to take any action to prevent the infringement or other
misuse of its intellectual property rights in the Territory within 60 days of being advised of
an infringement (i) after having being advised by its legal counsel that such action is
justified and has a reasonable likelihood of success, and (ii) where the expected damages
recovery or damage mitigation would be greater than the costs of action or the costs of doing
nothing, RESELLER may, at RESELLER’s option, take such action at VUZIX’s expense, in which
case VUZIX will, at VUZIX’s expense, provide reasonable cooperation in such action. VUZIX will
promptly provide RESELLER with the basis of the determination as set out in (i) and (ii) in
the previous sentence, and in the event RESELLER disagrees with the determination and the
parties are not able to arrive at an agreed course of action within 10 days, either party may
at its option refer the matter for arbitration as set out in this Agreement. In the event the
RESELLER is unsuccessful in having arbitration agreeing such actions have reasonable merits to
proceed, then it will be required to reimburse VUZIX for all its costs related to this matter,
inclusive of all costs since the matter was originally raised by the RESELLER. In the event
where RESELLER elects to proceed with an action that it solely undertakes at its own cost, and
VUZIX has elected not to proceed in accordance with the terms of this Agreement after an
arbitrators decision on the lack of positive merits of such an action, then VUZIX shall not be
liable for any costs but will provide reasonable cooperation in such actions, at RESELLER’s
expense. Any money or proceeds recovered by way of damages, judgments, settlements or
otherwise with respect to such action that are not measured by the royalties that would be
payable to Vuzix for the use of such intellectual property, will be kept by the Party who bore
the costs of such action or, in any case where the Parties have shared the costs, such money
will be shared in proportion to the costs borne by each Party.
	 
	3.9	 	RESELLER will at all times be responsible for protecting and enforcing RESELLER’s trade-mark
rights in and relating to the Products throughout the Territory.
	 
	3.10	 	VUZIX reserves the right to protect and enforce such rights in the Territory if it so wishes
and will prepare and submit or file all such rights on its own behalf only. RESELLER may use
Vuzix’ trademarks, trade names and trade dress only in such manner as Vuzix shall specify,
inclusive of any local and special requirements to ensure the protection of the rights within
the Territory.
	 
	3.11	 	VUZIX will use commercially reasonable efforts to advise RESELLER promptly concerning any
market information that comes to VUZIX’s attention regarding the

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	 	 	Products, the RESELLER’s market position or the continued competitiveness of the Products.

	4.	 	TERMS OF SALE AND SHIPMENT
	 
	4.1	 	All sales to RESELLER shall be in accordance with the prices and volume discounts disclosed
in Schedule C. At no time will the price and volume discounts set out in Schedule C be less
advantageous to RESELLER than the best price for equivalent volumes offered by VUZIX to its
best resellers for the same Product, subject to the pricing adjustments described in Schedule
C. Payments shall be made in accordance with the terms set out in Schedule C.
	 
	4.2	 	Unless RESELLER has exercised its option to manufacture the Products under Section 5, if
RESELLER does not meet the minimum business volumes (“MBV”) set out in Schedule B within the
times set forth in such Schedule, VUZIX may terminate this Agreement in accordance with
Section 11.4. If RESELLER has exercised its option to manufacture the Products under Section
5, and if RESELLER does not meet the MBV set out in Schedule B for Key Components, VUZIX may
terminate this Agreement in accordance with Section 11.4. The MBV set out in Schedule B may
be amended from time to time by written agreement of the Parties.
	 
	4.3	 	VUZIX reserves the right, to change at anytime, and from time to time, its Products,
packaging, labeling, and promotional material and manufacturing techniques, upon 90 days prior
written notice to RESELLER. VUZIX however, will use commercially reasonable efforts to consult
with the RESELLER in advance when such changes are intended.
	 
	4.4	 	All orders are subject to acceptance by VUZIX, which acceptance shall not be unreasonably
withheld, conditioned or delayed. Delivery is subject to Product availability, VUZIX overall
manufacturing capabilities and working capital position at the time RESELLER’s order is
received.
	 
	4.5	 	Subject to the conditions contained in Section 4.4, VUZIX will use commercially reasonable
efforts to meet delivery dates accepted by it in each order. Orders accepted by VUZIX may
not be canceled by RESELLER except on terms acceptable to VUZIX, unless VUZIX is unable to
meet delivery dates previously agreed upon. Orders accepted by VUZIX may not be canceled by
VUZIX unless RESELLER is on credit hold or in breach of this Agreement, except on terms
acceptable to RESELLER.
	 
	4.6	 	VUZIX shall pack all Products it delivers in accordance with good commercial practices.
Shipment of Products will be made on terms CIF Beijing. Title and risk of loss passes to
RESELLER when the Products are delivered to RESELLER in Beijing. RESELLER is obligated to
examine any shipment upon receipt and report any damage to or shortage of merchandise promptly
to the carrier, its agents or insurance agents and to VUZIX within thirty (30) days of
delivery. VUZIX is responsible for any losses or damage caused by the freight carrier during
shipment that are reported within the thirty (30) days. Any RESELLER claim for other
adjustments of an invoice is deemed to be waived if RESELLER fails to present such claim
within thirty (30) days from the date of the invoice. .
	 
	4.7	 	Purchase orders and instructions between VUZIX and RESELLER shall be written and may be sent
by facsimile machine (with delivery acknowledgment) , mail (acknowledged, return receipt
requested), electronic mail (with delivery acknowledgement) and/or hand delivered and shall be
effective as to a party when received by it, subject to the other provisions of this
Agreement. VUZIX will provide RESELLER with confirmation of receipt of purchase orders and
instructions within five (5) business days. While RESELLER may

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	 	 	employ its own form of purchase order, RESELLER agrees that the terms of this Agreement
shall exclusively govern the sale of the Products and any terms or provisions of RESELLER’s
purchase orders or of VUZIX’s invoices which are different from or in addition to the terms
of this Agreement shall be null, void and of no force and effect.

	4.8	 	If RESELLER fails to pay any sum that has not been disputed on a reasonable commercial basis
when due, after the provision of ten (10) days written notice by VUZIX, VUZIX may discontinue
performance under this and or any other Agreement between VUZIX and RESELLER and pursue such
other remedies as may be available to it including, but not limited to, termination of this
Agreement.
	 
	4.9	 	Net RESELLER Price in Schedule C is CIF Beijing, in U.S. Dollars, unless otherwise indicated
on the quotation. VUZIX reserves the right to charge RESELLER for all routing, packing,
handling, or additional insurance requested by RESELLER and agreed to by VUZIX. Orders shipped
under special routing instructions must be separately agreed upon and may be subject to
additional charges.
	 
	4.10	 	Prices are exclusive of, and the RESELLER will report and pay all, applicable sales, use,
service, excise, import duties, value added or like taxes, unless RESELLER has provided VUZIX
with an appropriate exemption certificate for delivery into the Territory. RESELLER is
responsible for obtaining all necessary import approvals for the Product.
	 
	4.11	 	In the event a customer of RESELLER proposes to impose late delivery charges or other similar
terms on RESELLER for a particular order or orders, RESELLER will advise VUZIX of such
proposed terms and VUZIX and RESELLER will negotiate in good faith and acting reasonably, the
imposition of the same terms on VUZIX (to the extent that late delivery if the result of any
action or failure to act by Vuzix, other than as the result of a force majeure event) if VUZIX
accepts such order.
	 
	4.12	 	RESELLER acknowledges that any commitment made by RESELLER to its customers with respect to
price, quantities, delivery, specifications, warranties, modifications, interfacing capability
or suitability (each a “Commitment”), which is more favorable to the customer than the
standard terms generally made available by VUZIX to RESELLER or, in the case of warranties
greater than the warranty terms set out in Section 8, will be RESELLER’s sole responsibility,
and RESELLER will indemnify VUZIX from liability for any such more favorable Commitment by
RESELLER.
	 
	5.	 	RIGHT TO MANUFACTURE
	 
	5.1	 	If RESELLER sells at least the number of units (the “Minimum for Manufacturing Amount”) of
the Products set out in Schedule B in the Territory during any twelve (12) consecutive month
period, RESELLER will have the right, but not the obligation, to manufacture in the Territory
RESELLER’s full future requirement of the Products, as well as any additional Products
required under Section 5.8. For these purposes, a sale shall mean that Products are ordered by
RESELLER in accordance with normal lead times, payment and credit terms for such orders and
shall include such Products that have been ordered but can not be delivered in the requested
time frame by VUZIX.
	 
	5.2	 	If RESELLER elects to exercise its right to manufacture the Products, RESELLER will notify
VUZIX in writing. In the event the RESELLER does not manufacture the Products itself,
RESELLER will before it has contracted with any third party manufacturer, provide notice of
its selection along with enough information (including the option for VUZIX to physically
visit) for VUZIX to investigate and approve any such third party manufacturers before
proceeding. RESELLER shall not retain or permit anyone to manufacture Products without the
prior written consent of VUZIX and such consent will be provided in a reasonable time not to
exceed 60 days, The written consent of VUZIX for RESELLER’s

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	 	 	choice of third party manufacturers is not to be unreasonably withheld; provided, that
VUZIX shall have the absolute right to approve any manufacture who is, or is an Affiliate
of, any person who manufactures or sells any products (or any component thereof) that
compete with the Products. In the event that the RESELLER subsequently changes
manufacturers, VUZIX must re-approve the selection.

	5.3	 	RESELLER must use commercially reasonable diligent efforts to ensure that the Products, or
any Products components, manufactured by RESELLER are not sold or otherwise distributed,
exported, sold, leased or licensed outside of the Territory. Any failure of RESELLER to use
commercially reasonable diligent efforts to ensure that such distribution, export, sale, lease
or license does not occur outside of the Territory will be considered a material breach of
this Agreement for all purposes, including the right of termination set forth in Section 11.6.
	 
	5.4	 	(a) Notwithstanding Section 5.2, RESELLER acknowledges that the key components of the
Products, as described in Schedule D-I (the “Key Components”) will not be disclosed to
RESELLER and will not be manufactured by RESELLER. RESELLER will purchase the Key Components
exclusively from VUZIX, as set out in Schedule D. VUZIX shall sell the Key Components to
RESELLER at the same price it sells the same Key Components to other OEM customers purchasing
the same unit volumes and on the same terms. The price paid by a customer for a Key Component
will include all license fees or royalties paid with respect to the license, purchase, sale or
use of the Key Components and VUZIX’ or other parties’ intellectual property included in the
Key Component. If the price charged to another OEM customer is lower for purchases of the
same Key Components in equivalent volumes and on the same terms, the difference in price paid
by RESELLER to VUZIX, shall be adjusted retroactively to (i) the date on which such lower
purchase price was charged to the OEM, if such lower price was first charged after sales have
been made to RESELLER or (ii) the date on which sales were first made to RESELLER, if such
lower a purchase price was in effect on that date. If VUZIX ceases to sell Key Components to
such other OEM customer(s) at such lower prices, the purchase price to RESELLER shall be
adjusted (upward or downward) as of the applicable date to new the price being paid by such
OEM. Such an adjustment shall be made each time an adjustment is made in the purchase price
being paid by an OEM, but it will only cover the period of such pricing for the duration the
OEM is purchasing the Key Components.

(b) VUZIX will take all commercially reasonable steps to ensure that the Key Components
incorporating VUZIX proprietary technology used in the manufacture of the Products are only
available for purchase through VUZIX and that the manufacturers of such Key Components for
VUZIX can not sell the Key Components to other third parties for use in substantially
similar products.

(c) In the event there are no other third party customers other than the RESELLER that are
purchasing the Key Components from VUZIX to establish a reasonable basis for competitive
pricing, it is understood that the total dollar gross margin to be earned by VUZIX in
selling the Key Components shall not exceed the total dollar gross margin that VUZIX
otherwise earns by selling a finished product incorporating the same Key Components as a
finished product to its third party customers, less an allowance for the typical gross
margin that would be required for a third party manufacturer of like volumes of all the
other raw components and labor costs that get combined and assembled with the Key
Components into an equivalent finished product.

(d) If the RESELLER has exercised its option to manufacture the Products using Key
Components as per Section 5.1, RESELLER may request, not more than twice annually for VUZIX
to provide its costing of all the non-Key Components required to manufacture a specific
video eyewear Product for informational purposes only. The RESELLER may request a
“verification” of such costing information provided by VUZIX, subject to an audit

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by an independent third party under an obligation of confidentiality. All costs of any
verification audit will be the sole responsibility of the RESELLER and such audits are to
take place at VUZIX main office in Rochester, New York.

	5.5	 	VUZIX and RESELLER will use commercially reasonable efforts to cooperate to maximize their
respective returns and have uninterrupted supply of Key Components sufficient to meet the
manufacturing needs of both Parties.
	 
	5.6	 	If RESELLER notifies VUZIX of its intent to manufacture the Products in the Territory, VUZIX
will within 90 days establish and maintain an escrow agreement (the “Escrow Agreement”) for
the documentation and any other collateral materials related to manufacture of the Key
Components that VUZIX directly owns or controls, to the extent that VUZIX is legally entitled
to place such materials in escrow or deliver them to a third party with a recognized and
reputable third party escrow agent mutually agreed to by VUZIX and RESELLER (the “Escrow
Agent”). VUZIX will, pursuant to the Escrow Agreement deposit the documentation, information
and collateral materials necessary, useful and sufficient to enable someone skilled in the art
to manufacture and produce the Key Components, (collectively, the “Escrowed Materials”).
VUZIX will also deposit with the Escrow Agent all documentation, information and collateral
materials in respect of all upgrades, improvements, enhancements and other modifications to
the Key Components, within 30 days from the date that such upgrades, improvements and other
modifications become commercially available, and such upgrades, improvements and other
modifications shall form part of the Escrowed Materials. RESELLER will have the right to
receive the Escrowed Materials from the Escrow Agent if VUZIX ceases, without just cause to
provide RESELLER with the Key Components either directly or indirectly through a qualified
successor or subcontractor pursuant to the terms of this Agreement. Upon any release of the
Escrowed Materials to RESELLER pursuant to the Escrow Agreement, VUZIX hereby grants to
RESELLER a non-exclusive right to use and modify the Escrowed Materials for the sole purpose
of making, using and selling the Key Components for their inclusion in the finished Products
within the Territory, without the right to disclose, sublicense, assign or otherwise transfer
such right. All other terms of this Agreement shall remain in full force inclusive of the
payment of royalties to Vuzix and Territorial limitations.
	 
	5.7	 	RESELLER will be responsible for all costs related to manufacturing and setting up
manufacturing in the Territory, and for the maintenance of the Escrow Agreement. VUZIX will
provide RESELLER with all required knowledge, information and specifications to enable
RESELLER to manufacture the Products except for the Key Components.
	 
	5.8	 	If VUZIX wishes to use RESELLER as a manufacturer of Products outside the Territory, the
Parties will use good faith efforts to negotiate a suitable arrangement.
	 
	5.9	 	RESELLER will consult with VUZIX throughout the manufacturing process in order to ensure that
the Intellectual Property, as defined in Schedule D, is diligently protected, and that the
character and quality of the Product manufactured by RESELLER are substantially similar to the
character and quality of the Product manufactured by VUZIX, and based on appropriate industry
standards. Samples of all RESELLER manufactured Product shall be provided to VUZIX at least
quarterly, or at such more frequent intervals as VUZIX may request, so that VUZIX can insure
their performance and quality before they are sold.
	 
	5.10	 	RESELLER will be responsible for all costs related to warranties for the Products it
manufactures, with the exception of costs related to warranties for Key Components, which
costs VUZIX will be responsible for.

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	5.11	 	VUZIX will provide technical assistance where reasonably necessary to assist RESELLER in the
manufacturing of the Products in the Territory, on a cost recovery basis to VUZIX.
	 
	6.	 	IMPROVEMENTS
	 
	6.1	 	RESELLER will have the right to modify the Products (if RESELLER is manufacturing the
Product) or request VUZIX to modify the Products (if RESELLER is not manufacturing the
Product) at RESELLER’s expense as may be required or desired to improve the Products or to
make the Products suitable for sale in the Territory where such modifications exceed UL, FCC,
or CE cost equivalents. VUZIX will use commercially reasonable efforts (taking into account
such factors as Vuzix’ capacity for its other requirements and the general utility of such
modifications) to comply with any such requests received from RESELLER. Such improvements to
the Products made by RESELLER will, at VUZIX’s option, be licensed back to VUZIX for its
worldwide use, outside the Territory based on RESELLER’s actual costs relating to the
improvement prorated reasonably over the total number of units of Products anticipated to be
produced by both RESELLER and VUZIX over a 24 month period. After the 24 month period, the
license will be royalty free.
	 
	7.	 	RIGHT TO VERIFY
	 
	7.1	 	VUZIX will have the right to verify the unit sales of Products, royalty amounts (if
applicable under Section 5), and the protection of Intellectual Property, and RESELLER will
promptly provide VUZIX with such accurate and complete information upon request: RESELLER
shall provide VUZIX the right to periodically have an independent third party perform an
audit, but not more than once annually, of the books and records of RESELLER to verify the
accuracy and correctness of the royalty payments to VUZIX under a standard non-disclosure
agreement. RESELLER agrees that it will provide reasonable access to its facilities and
personnel for purposes of verifying compliance In the event it is determined as a result of
such audit that RESELLER has underpaid or under-reported royalty payments due to VUZIX by more
than five percent (5%) in any period, RESELLER will be required to reimburse VUZIX immediately
for the costs of the audit, all unpaid and overdue Royalty payments, plus pay accrued interest
of 1.5% per month, and a fifty percent (50%) penalty on any such unpaid royalties. In the
event royalty payments have been intentionally or negligently underpaid by 10% of more,
RESELLER will be deemed to have made a material breach of this Agreement and Vuzix may in
addition to other remedies recover the amounts together with a fifty percent (50%) penalty and
interest at the rate of 1.5% per month and may terminate this Agreement pursuant to the
provisions of Section 11.6.
	 
	7.2	 	RESELLER has the right to verify their actual purchase price of the Products that it
purchases from VUZIX to ensure compliance with the best pricing for equivalent volumes under
the provisions of Section 4.1 of this Agreement, and VUZIX will promptly provide RESELLER with
such accurate and complete information (other than the names of its customers) upon request
not more than twice annually. For the purposes of this clause, RESELLER shall not make any
direct contact with other VUZIX customers. The “verification” shall be based upon material
provided by Vuzix, subject to audit not more than once annually, by an independent third party
under an obligation of confidentiality. In the event it is determined as a result of such
review that VUZIX has over charged RESELLER more than five percent (5%) in any period, VUZIX
will be required to reimburse RESELLER immediately for the costs of the review, all over
charged amounts, plus pay accrued interest of 1.5% per month. In the event costs have been
intentionally or negligently over charged by 10% of more, VUZIX will be deemed to have made a
material breach of this Agreement and RESELLER may recover the amount of such

Page 9 of 32

 

	 	 	overpayment, together with interest at the rate of 1.5% per month, and may terminate this
Agreement pursuant to the provisions of Section 11.6.
	 
	7.3	 	After the RESELLER has exercised its option to manufacture under Section 5 of this Agreement,
RESELLER will have the right to verify that it is paying the correct purchase price of the Key
Components that it purchases from VUZIX, and VUZIX will promptly provide RESELLER with such
accurate and complete information (other than the names of its customers) upon request not
more than twice annually. For the purposes of this clause, RESELLER shall not make any direct
contact with other VUZIX customers or suppliers. The “verification” shall be based upon
material provided by Vuzix, subject to audit not more than once annually by an independent
third party under an obligation of confidentiality. In the event it is determined as a result
of such review that VUZIX has over charged RESELLER more than five percent (5%) in any period,
VUZIX will be required to reimburse RESELLER immediately for the costs of the review, all over
charged amounts, plus pay accrued interest of 1.5% per month. In the event costs have been
intentionally or negligently over charged by 10% of more, VUZIX will be deemed to have made a
material breach of this Agreement and RESELLER may recover the amount of such overpayment,
together with interest at the rate of 1.5% per month, and may terminate this Agreement
pursuant to the provisions of Section 11.6.
	 
	8.	 	LIMITED WARRANTY
	 
	8.1	 	VUZIX warrants that it shall ship to RESELLER only those Products which have passed the
inspection standard established by VUZIX and that all the Products shipped hereunder shall
conform to their specifications in all material respects and be free from defects in design,
materials and workmanship, and will perform in accordance with their specifications in all
material respects when used without modification and for their intended purposes for the
period disclosed in the Product manual and warranty documentation attached as Schedule F. The
Products will also comply with the quality control specifications and quality control rate set
out in Schedule E.

Page 10 of 32

 

	8.2	 	VUZIX will provide warranty service for all Products, unless RESELLER has exercised its
option to manufacture the Products in the Territory under Section 5. For all Products
manufactured outside of the Territory, for a period of one year after delivery to RESELLER,
VUZIX will promptly repair or replace any Products that do not meet the warranty set out in
Section 8.1. RESELLER will be the contact for all warranty claims by customers within the
Territory, and will maintain adequate inventory of Products in order to ensure that customers
within the Territory have prompt access to replacement Products. If RESELLER has exercised
its option to manufacture the Products in the Territory under Section 5, RESELLER will be
responsible for all Product warranties in the Territory, with the exception of warranties for
Key Components, which VUZIX will be responsible for. In the event VUZIX determines to pay
RESELLER to provide warranty service for Products in the Territory, VUZIX and RESELLER will in
good faith negotiate such an arrangement.
	 
	8.3	 	No warranties set forth therein shall be applied and VUZIX shall be free from any liability
if the Products are used under condition beyond the scope set forth in the Product manuals.
Product warranties do not cover cosmetic damage or damage due to acts of God, accident,
misuse, abuse, negligence, or unauthorized modification of or to any part of the Product, or
use of the Products with any other device or equipment other than as specified in the
specification for that Product. All Product warranties do not cover damage due to improper
operation or maintenance, connection to improper voltage supply, or attempted repair by anyone
other than VUZIX or a VUZIX’ authorized service facility.
	 
	8.4	 	REPAIR OR REPLACEMENT AS PROVIDED UNDER THE PRODUCT WARRANTY IS THE EXCLUSIVE REMEDY OF THE
CONSUMER. VUZIX SHALL NOT BE LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES FOR BREACH OF
ANY EXPRESS OR IMPLIED WARRANTY EXCEPT TO THE EXTENT AN EXCLUSION OF
SUCH LIABILITY IS
PROHIBITED BY APPLICABLE LAW. VUZIX SHALL NOT BE LIABLE FOR ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. ANY WARRANTY ON THE PRODUCTS IS LIMITED
IN DURATION TO THE DURATION OF THE SPECIFIC PRODUCT WARRANTY, AS SET OUT IN SCHEDULE F.
	 
	8.5	 	RESELLER shall include the foregoing disclaimer (Section 8.4) with all Product sold by it.
	 
	9.	 	INDEMNIFICATION; DISCLAIMER OF WARRANTIES; LIMITED LIABILITY
	 
	9.1	 	Subject to the limitations set forth in this Agreement, VUZIX agrees to defend or settle, at
VUZIX’s cost, any claim against RESELLER (including, for the purposes of this section only,
RESELLER’s end-user customer, or third parties to whom RESELLER is authorized by VUZIX to
resell or sublicense) and VUZIX will indemnify and hold RESELLER harmless for any loss, damage
or liability (including reasonable attorney’s fees and costs of litigation) relating to all
third party product liability claims or allegations, all enforceable claims by any third party
resulting directly from VUZIX’s acts, omissions or representations, and all claims or
allegations that the Products or Key Components, delivered under this Agreement infringe a
third party patent, utility model, industrial design, copyright, trade secret, mask work,
integrated topography or trade-mark in the Territory or country where Products or Key
Components are used, sold, or receive support, provided RESELLER (1) promptly notifies VUZIX
in writing of any such claim; (2) cooperates fully with VUZIX at VUZIX’s expense, in, and
grants VUZIX sole control of the defense or settlement; and (3) sells said Products or Key
Components in material compliance with this Agreement.

Page 11 of 32

 

	9.2	 	If such a claim appears likely, VUZIX may modify the Products or the Key Components, as
applicable, so that they are no longer infringing or unsafe, procure any necessary license, or
replace them. If VUZIX determines that none of these alternatives is reasonably available,
VUZIX will refund RESELLER’s purchase price upon return of the Products or the Key Components,
as applicable, if within one (1) year of Delivery\.
	 
	9.3	 	Not withstanding the prior Section 9.1 and 9.2, VUZIX has no obligation for any claim of
infringement arising from: (1) VUZIX’ compliance with RESELLER’s designs, specifications or
instructions; (2) unauthorized Product modification by RESELLER or a third party; (3) Product
use prohibited by specifications or related application notes set out in Schedule F; (4) or
use of the Product with products not supplied or authorized by VUZIX.
	 
	9.4	 	Subject to the limitations set forth in this Agreement, RESELLER agrees to indemnify VUZIX
(including reasonable attorney’s fees and costs of litigation) against and hold VUZIX harmless
from any and all enforceable claims by any third party resulting directly from RESELLER’s
acts, omissions or representations, other than those acts, omissions or representations
permitted under this Agreement, regardless of the form of action. Provided that such
indemnity is conditional upon VUZIX promptly notifying RESELLER in writing of any such claim,
VUZIX cooperating fully with RESELLER in and granting to RESELLER sole control of the defense
or settlement of such claim and VUZIX complying fully with the terms of any such settlement.
NOTWITHSTANDING THE ABOVE, UNDER NO CIRCUMSTANCES SHALL RESELLER BE LIABLE TO VUZIX FOR ANY
SPECIAL, INDIRECT, INCIDENTIAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES WHATSOEVER, INCLUDING BUT
NOT LIMITED TO LOST PROFITS, BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION OR ANY OTHER
PECUNIARY LOSS ARISING OUT OF THIS AGREEMENT OR ANY ACTS, OMISSIONS OR REPRESENTATIONS OF
RESELLER, EVEN IF RESELLER HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
	 
	9.5	 	The terms in this Section and the end user warranty attached as schedules to this Agreement,
state VUZIX’ entire liability to RESELLER and its customers for claims of intellectual
property infringement. Such warranty, including all of the disclaimers and limitations
contained therein, shall be included with all Product sold by RESELLER to its customers.
	 
	9.6	 	VUZIX MAKES NO WARRANTIES OR REPRESENTATIONS AS TO PERFORMANCE OF VUZIX’S PRODUCTS OR AS TO
SERVICE TO RESELLER TO ANY OTHER PERSON, EXCEPT AS SET FORTH IN VUZIX’S LIMITED WARRANTY
CONTAINED HEREIN AND THE END USER WARRANTY AS CONTAINED IN THE ATTACHED SCHEDULES TO THIS
AGREEMENT AND WITH THE PRODUCTS. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW AND EXCEPT
AS PROVIDED IN THIS AGREEMENT, ALL VUZIX PRODUCTS ARE DELIVERED “AS IS” AND WITHOUT EXPRESS OR
IMPLIED WARRANTY OF ANY KIND BY EITHER VUZIX OR ANYONE ELSE WHO HAS BEEN INVOLVED IN THE
CREATION, PRODUCTION OR DELIVERY OF SUCH PRODUCTS, INCLUDING BUT NOT LIMITED TO ANY IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND THE PROVISION OF OR
FAILURE TO PROVIDE SUPPORT SERVICES. VUZIX DOES NOT PROMISE THAT THE VUZIX PRODUCTS WILL BE
ERROR-FREE OR WILL OPERATE WITHOUT INTERRUPTION.
	 
	9.7	 	UNDER NO CIRCUMSTANCES SHALL VUZIX OR ITS SUPPLIERS BE LIABLE TO RESELLER, END-USER CUSTOMERS
OR ANY THIRD PARTIES ON ACCOUNT OF ANY CLAIM (WHETHER BASED UPON PRINCIPLES OF CONTRACT,
WARRANTY, NEGLIGENCE OR OTHER TORT, BREACH OF ANY STATUTORY DUTY, PRINCIPLES OF INDEMNITY, THE
FAILURE OF ANY LIMITED REMEDY TO ACHIEVE

Page 12 of 32

 

ITS ESSENTIAL PURPOSE, OR OTHERWISE) FOR ANY SPECIAL, INDIRECT, INCIDENTIAL,
CONSEQUENTIAL OR EXEMPLARY DAMAGES WHATSOEVER, INCLUDING BUT NOT LIMITED TO
LOST PROFITS, BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION, ANY OTHER
PECUNIARY LOSS OR FOR ANY DAMAGES OR SUMS PAID BY RESELLER TO THIRD PARTIES,
ARISING OUT OF THE USE OF OR INABILITY TO USE THE PRODUCTS OR THE
PROVISION OF
OR FAILURE TO PROVIDE SUPPORT SERVICES, EVEN IF VUZIX HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.

	9.8	 	VUZIX’ MAXIMUM LIABILITY UNDER THIS LIMITED WARRANTY IS EXPRESSLY LIMITED
 TO THE AMOUNTS PAID BY RESELLER UNDER THIS AGREEMENT.
 IN THE EVENT OF END-USER CUSTOMERS OR ANY THIRD PARTIES, VUZIX’
 MAXIMUM LIABILITY UNDER THIS LIMITED WARRANTY IS EXPRESSLY LIMITED TO THE AMOUNTS THEY ORIGINALLY
 PAID FOR THE PRODUCT OR THE COST OF REPAIR OR REPLACEMENT OF ANY HARDWARE COMPONENTS THAT MALFUNCTION
 IN CONDITIONS OF NORMAL USE DURING THE APPLICABLE WARRANTY PERIOD
	 
	9.9	 	The foregoing paragraph (Section 9.7) shall be included with all Products sold by RESELLER to
its customers.
	 
	10.	 	RESELLER’S STATUS AND MISCELLANEOUS RESPONSIBILITIES
	 
	10.1	 	RESELLER is an independent contractor, not an employee of VUZIX. This Agreement does not
create an employer-employee, a franchisor-franchisee or a principal-agent relationship between
VUZIX and RESELLER. RESELLER is not authorized, nor will it represent that it has, any power,
right or authority to enter into agreements for or on behalf of VUZIX, to create any
obligation due or owed VUZIX, to accept service of process on VUZIX or to bind VUZIX in any
manner.
	 
	10.2	 	VUZIX grants RESELLER an exclusive, royalty-free license to display one or more designated
VUZIX trade-marks, logo types, trade names and insignia (“VUZIX Marks”) in the Territory
solely to promote, distribute and sell the Products, and to otherwise meet RESELLER’s
obligations under this Agreement. Any display of VUZIX Marks must be in good taste, in a
manner that preserves their value as VUZIX Marks, and in accordance with written standards
provided by VUZIX for their display and use. RESELLER will not use any name or symbol in a
way, which may imply that RESELLER is an agency or branch of VUZIX. RESELLER will discontinue
any such use of a name or mark as requested by VUZIX promptly upon notice. RESELLER will use
commercially reasonable efforts to provide VUZIX with copies of any materials using the VUZIX
Marks in advance of any public use. RESELLER will comply with any VUZIX suggestions it
receives back in writing. Any rights or purported rights in any VUZIX Marks acquired through
RESELLER’s use belong solely to VUZIX, and any goodwill in the VUZIX Marks will accrue to
VUZIX. Upon termination of this Agreement, RESELLER promptly discontinue any use of the VUZIX
Marks and promptly remove the VUZIX Marks from all invoices, displays, telephone directories,
trade literature and all other advertising medium. Failure to discontinue the use of VUZIX
Marks as required hereunder shall constitute trademark infringement. VUZIX Marks may be used
only on or in connection with the sale and marketing of the Products in the Territory.
	 
	10.3	 	RESELLER grants VUZIX the non-exclusive, royalty free right to display RESELLER’s name or
trademarks, service marks and logos (“RESELLER Marks”) in advertising and promotional material
solely for directing prospective purchasers of Products to RESELLER’s selling locations. Any
display of the RESELLER Marks must be in good taste, in a manner that preserves their value as
RESELLER Marks, and in accordance with standards provided by RESELLER for their display. Any
rights or purported rights in any RESELLER Marks acquired by VUZIX through this Agreement
belong solely to

Page 13 of 32

 

	 	 	RESELLER, and any goodwill in the RESELLER Marks will accrue to the RESELLER. Upon
termination of this Agreement, VUZIX agrees to use commercially reasonable efforts to
promptly discontinue any use of the RESELLER Marks and promptly remove the RESELLER Marks
from all invoices, displays, telephone directories, trade literature and all other
advertising medium. Failure to discontinue the use of the RESELLER Marks as required shall
constitute trademark infringement.

	10.4	 	Each Party acknowledges that all manufacturing specifications and data, all Escrowed
Materials, financial information, sales and marketing information, distribution agreements and
their terms, repair, replacement and maintenance information and data related to the Products
or this Agreement which are obtained by one Party (the “Recipient”) from or about the other
(the “Discloser”) is commercially valuable confidential information (the “Confidential
Information”) of the Discloser. Each Party shall use the Confidential Information of the
Discloser solely in connection with the distribution or manufacturing of the Products and the
furtherance of this Agreement and shall not use or disclose the Confidential Information for
any other purpose.
	 
	10.5	 	In the event that Confidential Information is exchanged, each Party will protect the
Confidential Information of the other in the same manner in which it protects its own like
proprietary, confidential, and trade secret information and will use it only for purposes of
this Agreement. Information shall be considered Confidential Information If the Discloser
furnishes such information in writing and marks such information as “Confidential” or if such
information is provided orally, such information shall be considered Confidential Information
if (a) the Discloser summarizes the content of oral disclosures which are proprietary or
confidential within thirty (30) days of its communication, and (b) such information was
identified as confidential or proprietary when orally disclosed. All such Confidential
Information will remain confidential for the term of this Agreement plus five (5) years.
	 
	10.6	 	Notwithstanding sections 10.5 and 10.6, there is no obligation upon a Recipient with respect
to Confidential Information which (a) was demonstrably in the Recipient’s possession before
the disclosure without restriction on its use or disclosure; (b) is or becomes a matter of
public knowledge through no fault of the Recipient; (c) is rightfully received by the
Recipient from a third party without a duty of confidentiality to the Discloser; (d) is
disclosed by the Discloser to a third party without a duty of confidentiality on the third
party; (e) is demonstrably independently developed by the Recipient without the use of any
other Confidential Information; (f) is disclosed under (and only to the extent required by)
operation of law; or (g) is disclosed by the Recipient with the Discloser’s prior written
approval.
	 
	11.	 	TERM AND TERMINATION
	 
	11.1	 	This Agreement will have a term of five (5) years from the Effective Date and will renew
automatically, subject to 11.3, on the fifth anniversary of the Effective Date for a further
five (5) year period, unless RESELLER is then in breach of this Agreement.
	 
	11.2	 	RESELLER may terminate this Agreement at any time by giving VUZIX six (6) months prior
written notice.

Page 14 of 32

 

	11.3	 	The “Minimum Business Volume” MBV requirements for the Territory for each measurement period
along with bench marks for such minimums where they have not yet been finalized, are listed in
Schedule B of this Agreement. New MBV requirements must be negotiated in good faith and in
accordance with the bench marks set out in Schedule B for the automatic renewal in Section
11.1 to take place. This Agreement may be terminated by VUZIX if RESELLER fails to meet the
sales volume goals established by VUZIX and RESELLER for any period, as specified in Schedule
B to this Agreement.
	 
	11.4	 	The RESELLER’s Initial Funding Target, Initial Funding and Operational Date, Date of
Determination for Minimum Cumulative Sales and Minimum Cumulative Sales Requirements, and
Minimum Business Volumes requirements are listed in Schedule B of this Agreement. VUZIX shall
have the right to terminate this Agreement under Section 11.6 if the RESELLER does not meet
such requirements. Such termination shall be effective upon the giving of notice by VUZIX.
	 
	11.5	 	If either Party becomes insolvent, is unable to pay its debt when due, files for bankruptcy,
is the subject of involuntary bankruptcy, has a receiver appointed, or has its assets
assigned, the other Party may terminate this Agreement on thirty (30) days written notice and
may cancel any unfulfilled obligations.
	 
	11.6	 	Either Party may terminate this Agreement because of a material breach by the other Party of
this Agreement unless such other Party cures the breach within thirty (30) days after having
been advised in writing of such breach by the non-breaching Party.
	 
	11.7	 	Upon termination or expiration of this Agreement in accordance with the terms of this
Agreement, all amounts owed from either Party to the other Party shall immediately become due,
and RESELLER shall not thereafter represent or hold itself out as an authorized VUZIX reseller
or engage in any practices that might make it appear that RESELLER is still an authorized
VUZIX reseller. Upon termination or expiration, RESELLER will immediately cease to be an
authorized VUZIX reseller and will among other things, not use any VUZIX Marks and will cause
all of its authorized sub-resellers to cease using any VUZIX Marks. Authorization of VUZIX to
use any of RESELLER’s trade-marks will automatically cease upon such termination or
expiration.
	 
	11.8	 	Upon termination or expiration of this Agreement, VUZIX reserves the right (without any
obligation to do so) to repurchase from RESELLER, any or all Products then in the possession
or under the control of RESELLER that are still unopened, in new merchantable condition and in
their original packaging. Such repurchase shall be made at the actual price paid for such
Products by RESELLER, FOB RESELLER’s principal place of business, less any and all amounts
then owing, for whatever reasons, from RESELLER to VUZIX. Such right must be exercised by
giving written notice thereof within Sixty (60) days from the date of expiration or from the
date notice of termination was given, as the case may be.
	 
	11.9	 	Acceptance of orders by VUZIX after notice of termination has been given shall be construed
as separate transactions and shall not operate as a renewal or revival of this Agreement or as
a waiver of such termination. VUZIX reserves the right for any reason and in its sole
discretion to accept or reject, in whole or in part, any such orders and apply any new terms
of sale. If no new terms of sale are agreed to by the parties but the order is nevertheless
accepted by VUZIX, then the applicable terms of this Agreement shall apply to such order.
	 
	11.10	 	All obligations concerning outstanding transactions, warranties, support, Products,
intellectual property protection, limitations of liability and remedies, confidentiality, and
the general terms and conditions will survive termination or expiration of this Agreement,

Page 15 of 32

 

	 	 	except that the provisions for confidentially will survive only through the periods set
forth in this Agreement.

	11.11	 	The Party terminating this Agreement pursuant to the express provisions hereof shall not
incur any liability to the other Party by reason of termination of this Agreement either for
compensation or damages on account of the loss of present or prospective profits or
expenditures or investments or for any reason.
	 
	11.12	 	The term “Force Majeure” as employed in this Section means and includes the causes beyond
the reasonable control of the Party so affected, including, but not limited to, war (declared
or undeclared), hostility, riot, revolution, embargo, fire, earthquake, flood, or other acts
of God. The Party so affected shall use its best efforts to provide the other Party with a
prompt written notice within fourteen (14) days after occurrence thereof.
	 
	11.13	 	If the performance of this Agreement or any obligation hereunder is prevented, delayed,
restricted or intervened with by reason of the Force Majeure, the Party so affected shall be
excused from such performance to the extent of such prevention, delay, restriction or
interference and such shall not constitute a breach of this agreement, provided, however, that
the Party so affected shall use its best efforts to avoid or remove such causes of
non-performance and whenever those are removed, it shall commence and/or continue performance
promptly. Notwithstanding the foregoing, nothing shall relieve the RESELLER from any payment
obligations under this Agreement.
	 
	11.14	 	Notwithstanding the foregoing, in the event that the Force Majeure remains uncured for a
period of Two (2) months, the Party not so affected may, at no charge and without any
liability to the Party so affected (other than the obligation to pay amounts due or to become
due and the obligation to continue to be bound by the terms of this Agreement that expressly
or by their nature survive termination), cancel all orders and terminate this Agreement on
prior written notice to the Party so affected.
	 
	12.	 	ASSIGNMENTS AND OPTIONS TO BUY
	 
	12.1	 	This Agreement and the rights of RESELLER hereunder may not be assigned or otherwise
transferred by RESELLER without the prior written consent of VUZIX, which shall not be
unreasonably withheld or delayed; provided that it shall not be unreasonable for VUZIX to
withhold its consent to such an assignment or transfer for any negative tax or corporate
structure reasons or if the proposed assignment or transfer is to be made to a supplier of
parts or components to VUZIX, to a party that performs manufacturing services of the Products
or Key Components for or on behalf of VUZIX, to a Competitor of VUZIX or to an Affiliate (as
both defined in Section 12.2) of any of such persons.
	 
	12.2	 	If RESELLER receives a bona fide offer (an “Offer”) from a third party that is a Competitor
of VUZIX (as hereinafter defined) (the “Offeror”) to purchase an Interest (as hereinafter
defined) in RESELLER, VUZIX shall have a right of first refusal to purchase such Interest, on
the same terms and conditions as those proposed by the Offeror. If RESELLER receives and
wishes to accept an Offer, it shall send a written notice (the “Notice of Offer”) to VUZIX,
which shall set forth the identity of the Offeror, the Interest proposed to be sold, the sale
price, the manner of payment thereof, and all other terms and conditions of the Offer. VUZIX
shall then have the right, to be exercised by notice in writing given to RESELLER within 30
days of the receipt of the Notice of Offer, to acquire such Interest, on the same terms and
conditions as are contained in the Notice of Offer. During the 30 day period following the
Notice of Offer, VUZIX shall have the right to conduct such due diligence with respect to
RESELLER and the Interest as it may reasonably require, and RESELLER shall cooperate in such
due diligence review in all such respects as VUZIX may reasonably require. If (and provided
that it has received the right to conduct such due review) VUZIX does not exercise its right
of first refusal within 30 days of the Notice of Offer, then RESELLER may sell the Interest to
such third party on the same (but not

Page 16 of 32

 

	 	 	on any other) terms as contained in the Notice of Offer. If it does not consummate such
sale within such period, its right to sell to the third party free of VUZIX’s right of
first refusal shall expire.
	 	 	For purposes of this Section 12.2,
	 
	 	 	“Interest” means an equity interest, or a right to acquire or that is convertible into an
equity interest, as a result of the ownership of which a person or entity has or has the
right to acquire the ability to (a) control the business or operations of RESELLER or (b)
own more than 50% of the equity interests in or assets of RESELLER,
	 
	 	 	“Competitor” shall mean a party that, at the time of the Offer, (a) is selling products
similar to the Products or (b) that has publicly stated its intention to sell such products
or (c) has as its primary business the manufacture and resale or OEM of audio, video,
computer, video game, or entertainment hardware products to the consumer electronics
sector, or any Affiliate of such a person. Competitor does not include any entity whose
primary business is being a wireless cell phone operator or carrier; a financial
institution; video game online operator or manufacturer (software publisher); or a content
provider.
	 
	 	 	“Affiliate” means any person or entity that controls, is controlled by or is under common
control with another person or entity.

	12.3	 	(a) If at any time after the expiry of the initial 5 years terms
of this Agreement VUZIX or its shareholders shall enter into
negotiations with a third party, or receive a proposal from
a third party, regarding (i) the sale or transfer of
substantially all of the equity interests of VUZIX, whether
by purchase, merger or otherwise, (ii) the sale or transfer
of substantially all of the assets of VUZIX, whether by
purchase, merger or otherwise or (iii) the sale or transfer
of those assets of VUZIX that are used in the production,
distribution and sale of the Products, whether by purchase,
merger or otherwise (together, a “Sale Transaction”), then
VUZIX shall give RESELLER notice of the proposed Sale
Transaction (the “Sale Transaction Notice”), and RESELLER
shall treat all information regarding such discussions or
proposals (including the fact thereof) as Confidential
Information in accordance with Article 10 of this Agreement.
	 
	 	 	(b) In the event of a Sale Transaction, VUZIX shall have an option to convert RESELLER’s
right to distribute Products in the Territory to a nonexclusive right (that is subject in
all other respects to the identical terms and conditions contained in this Agreement).
Such option shall be exercised, if at all, in the Sale Transaction Notice, but shall not be
effective unless the Sale Transaction is completed in accordance with its terms. The amount
to be paid by VUZIX for such conversion, as the case may be, shall be the Fair Value of the
rights converted, as determined in accordance with Section 12.3 (c) herein.
	 
	 	 	(c) For purposes of this Section 12.3, the Fair Value shall be the difference as of thirty
(30) days prior to closing date of the Sale Transaction between RESELLER’s exclusive and
RESELLER’s nonexclusive right to resell the Products and shall be determined by the average
valuations of two appraisers who are experienced in valuing business for purposes of sale,
one of which shall be selected by each of the parties; provided, however, that if the
appraisals differ by more than 10% of the higher appraisal, the two appraisers shall select
a third appraiser who is similarly qualified, and (x) if the third appraiser’s appraisal is
between the first two, the Fair Value shall be as determined by the average of the first
two and (y) if the third appraisal is either higher or lower than both of the first two
appraisals, then the third appraisal shall be used as Fair Value. All fees and other costs
related this Section 12.3, including all appraisal fees incurred by the parties pursuant to
Section 12.3(c) herein, will be paid by VUZIX. The Fair Value will be
determined by the appraisers taking into account, among other things considered

Page 17 of 32

 

	 	 	relevant,
the amount of time remaining in the then current renewal term of this Agreement.
	 
	 	 	(d) VUZIX may, at its option, pay the Fair Value amount determined pursuant to Section
12.3(c) in cash or in shares of its Common Stock, based upon the valuation of such shares
on the closing date of the Sale Transaction. The Fair Value amount determined pursuant to
Section 12.3 (c) will be paid upon completion of the Sale Transaction, or such other time
as expressly agreed by RESELLER.
	 
	 	 	(e) If the Sale Transaction involves the receipt by VUZIX’s shareholder of the securities
of another entity, VUZIX will use commercially reasonable efforts to have any such
securities received by RESELLER or its shareholders treated in the same manner, and subject
to the same rights and restrictions as are applicable to the securities received by VUZIX’s
shareholders in such Sale Transaction, provided that RESELLER and its shareholders satisfy
such obligations in connection with such securities as are applicable to other shareholders
of VUZIX.
	 
	 	 	(f) Other than as expressly set out under Section 12.3(b), all other rights and obligations
of the parties under this Agreement will continue unaffected by the application of Section
12.3(b)
	 
	 	 	(g). This Section 12.3 will not affect or limit the right of VUZIX to (i) acquire the
RESELLER or any of its securities on the open market or through a tender offer if the
RESELLER is a public company; or (ii) negotiating to buy the RESELLER outright; (iii) or
negotiating to buy-out this Agreement or any of the RESELLER’s right hereunder.
	 
	12.4	 	a) If VUZIX is involved in a Sale Transaction that closes with a third party within the first
5 year term of this Agreement, then at any time after the expiry of the initial 5 year term of
this Agreement, then the other party to the Sale Transaction shall have an option exercisable
notice to RESELLER 3 months in advance to convert RESELLER’s right to distribute Products to a
nonexclusive right (that is subject in all other respects to the identical terms and
conditions contained in this Agreement), subject to such party’s or VUZIX’s payment
(“Compensation”) to the RESELLER of the difference as of the date of the notice of the
exercise of such option between the value of RESELLER’s exclusive and the value of RESELLER’s
nonexclusive right to resell the Products in the Territory for the remainder of the renewal
term of this Agreement. The amount of such values and the difference between them shall be
determined in accordance with Section 12.4 (b) herein.
	 
	 	 	(b) For purposes of this Section 12.4, the Compensation shall be determined by the average
valuations of the difference between such exclusive and nonexclusive rights as determined
by two appraisers who are experienced in valuing business for purposes of sale, one of
which shall be selected by each of the parties; provided, however, that if the appraisals
differ by more than 10% of the higher appraisal, the two appraisers shall select a third
appraiser who is similarly qualified, and (x) if the third appraiser’s appraisal is between
the first two, the Compensation shall be as determined by the average of the first two and
(y) if the third appraisal is either higher or lower than both of the first two
appraisals, then the third appraisal’s valuation shall be used as the Compensation. All
fees and other costs related this Section 12.4, including all appraisal fees incurred by
the parties pursuant to Section 12.4(b) herein, will be paid by such other party to the
Sale Transaction or VUZIX, as the case may be. The form and settlement of the Compensation
will be negotiated by the parties, acting reasonably, at that time. If the parties are
unable to agree on the form and settlement of the Compensation, other than in the form of
cash, within thirty (30) days after the determination of the Compensation
amount determined by the appraisers, then the option granted to the new owner (the 

Page 18 of 32

 

	 	 	other
party to the Sale Transaction) will expire and the exclusive right granted to RESELLER
herein will not be converted into a nonexclusive right. The Compensation will be
determined by the appraisers taking into account, among other things considered relevant,
the amount of time remaining in the then current renewal term of this Agreement, namely the
entire 5 year renewal term.
	 
	 	 	(c) Other than as expressly set out under Section 12.4 (a), all other rights and
obligations of the parties under this Agreement will continue unaffected by the application
of Section 12.3(b)
	 
	12.5	 	RESELLER agrees to offer VUZIX the option to purchase up to $[*********] of any financing
that it undertakes in its efforts to achieve its Initial Funding Targets (as defined in
Schedule B) by December 31, 2009. The VUZIX investment option would be on the same terms and
conditions as all the RESELLER’s other investors and adequate time is to be given to VUZIX to
evaluate this investment.
	 
	13.	 	CHOICE OF LAW AND CORRECTIVE CHANGES
	 
	13.1	 	This Agreement shall be governed by and construed in accordance with the laws of the State of
New York, USA without regard to its conflict or choice of law provisions.
	 
	13.2	 	The parties agree to make any required reasonable changes within 60 days from the signing of
this Agreement, to make the main terms of this Agreement enforceable in the Territory and with
no negative tax or other consequences to VUZIX and to ensure that this Agreement does not have
any unintended consequences to either party.
	 
	13.3	 	Both parties acknowledge that they have obtained their own legal representation in the
negotiation of this Agreement. In the construction of any terms in this Agreement, no term
shall be construed against any Party on the basis of that Party having drafted that language.
	 
	14.	 	ARBITRATION
	 
	14.1	 	RESELLER and VUZIX agree to first enter into negotiations to resolve any controversy, claim
or dispute (“Dispute”) arising under or relating to this Agreement. The Parties agree to
negotiate in good faith to reach a mutually agreeable resolution of such Dispute within a
reasonable period of time. If the Parties are unable to resolve any Dispute within 30 days,
or such other period agreed to in writing by the Parties, the Dispute will be referred to and
finally resolved by binding and final arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in effect. A total of three
(3) arbitrators shall be appointed in accordance with the then prevailing rules. If initiated
by VUZIX, the arbitration shall take place in Vancouver, British Columbia. If initiated by
RESELLER the arbitration shall take place in the County of Monroe, New York, USA. The
arbitrator(s) shall be bound to, follow the provisions of this Agreement in resolving the
dispute, and may not award punitive damages. The decision of the arbitrator(s) shall be final
and may be entered or enforced in any court of competent jurisdiction.
	 
	15.	 	WAIVER

Page 19 of 32

 

	15.1	 	In the event that either VUZIX or RESELLER waives any right under any provision of this
Agreement, such waiver by either Party shall not constitute a waiver with regard to any other
rights set forth in this Agreement or a waiver of the provision in the future.
	 
	16.	 	VALIDITY OF AGREEMENT
	 
	16.1	 	VUZIX and RESELLER agree that if any portion of this Agreement is found to be invalid such
portion may be severed from the Agreement, such a finding does not serve to invalidate any
other provision of this Agreement, nor does such a finding serve to invalidate this Agreement
as a whole, unless such finding causes this Agreement to fail of its essential purpose.
	 
	17.	 	GENERAL
	 
	17.1	 	All notices that are required under this Agreement will be in writing and will be considered
given as of twenty-four (24) hours after sending by electronic means, facsimile transmission,
overnight courier, or hand delivery, or as of four (4) days of certified mailing and
appropriately addressed to the locations noted at the beginning of this Agreement, or
elsewhere as directed by each Party, provided that each such form of delivery shall be
confirmed by appropriate receipt of delivery.
	 
	17.2	 	This Agreement constitutes the entire understanding between VUZIX and RESELLER, and
supersedes any previous communications, representations or agreements between the Parties,
whether oral or written, regarding transactions hereunder. No modification of this Agreement
will be binding on either Party unless made in writing and signed by both Parties.
	 
	17.3	 	Parties hereto agree that neither will refer to this Agreement or to the presence thereof in
any advertising material or otherwise, or disclose the terms or conditions of this Agreement
to a third party without prior written consent of the other Party, such consent not to be
unreasonably withheld, conditioned or delayed.
	 
	17.4	 	Time is of the essence in this Agreement.

Page 20 of 32

 

	18.	 	SIGNATURE
	 
	18.1	 	Each Party warrants that the person signing is its duly authorized representative, that they
have read and understood this Agreement, that the Party enters into this Agreement freely to
advance its economic interests and that signature binds the Party to the obligations imposed
upon it by this Agreement.
	 
	18.2	 	This Agreement may be executed in counterparts, each of which, when so executed, will be
deemed to be an original copy hereof, and all such counterparts together will constitute one
single agreement. Either Party may deliver a counterpart signature page by electronic
transmission.

	 	 	 	 	 
	     VUZIX CORPORATION

	 	     YUVIEW HOLDINGS LTD.	 	 
	 
	 	 	 	 
	     /s/ Paul J. Travers
 

                              Signature

	 	     /s/ Steve Babtabue
 

                                Signature
	 	 
	 
	 	 	 	 
	     Paul J. Travers

	 	     Steve Babtabue	 	 
	 

	 	 	 	 
	Print Name & Title

	 	Print Name & Title	 	 
	 
	 	 	 	 
	     August 27, 2009

	 	     August 27, 2009	 	 
	 

	 	 	 	 
	Date Signed

	 	Date Signed	 	 

Page 21 of 32

 

SCHEDULE A

TERRITORY

     RESELLER’s exclusive Territory is Mainland China, Hong Kong, Macau, and Taiwan

Page 22 of 32

 

 

SCHEDULE B

PRODUCTS and MINIMUM BUSINESS VOLUMES

In this Agreement “Products” means all present and future consumer video eyewear products produced
and/or sold by VUZIX or its licensed third party partners or OEMs, including any video eyewear
products incorporating Key Components and all improvements and accessories, and any other consumer
near eye display products produced by VUZIX in the present and future. A Unit means a single
Product.

Minimum Business Volume (“MBV”) Requirements: 

	 	-	 	MBV refers to the minimum unit sales of Products by RESELLER or RESELLER
purchases of complete sets of Key Components incorporated into Products in the Vendor
manufacturing stage of this Agreement.
	 
	 	-	 	The initial or first Date of Determination shall be the later of 18 months
after November 30, 2009. The Minimum Cumulative sales or MBV for this first Date of
Determination is [********] Units. Product compliance testing per Chinese CCC rules
(“CCC”) will commence with either the Wrap 310 or Wrap 920 Product from VUZIX, as
chosen by RESELLER. RESELLER is responsible for all costs of obtaining certifications
and compliance with any regulatory CCC rules required for the import, sale or
manufacturing of all Products in the Territory. VUZIX and RESELLER will cooperate
fully with each other in the getting Territory regulatory approvals and VUZIX will use
its best commercial efforts and at its own cost to make any necessary modifications to
its standard Products to comply with any such regulations or certifications. To the
extent that VUZIX is required to make hardware changes to the Products and if their
time to implement those changes totals more than 2 weeks for further compliance
testing with CCC, then the 18 month period’s first Date of Determination will be
extended by the amount of time required for such changes (i.e. a 5 week Product change
would mean the 18 month period gets extended out by 5 weeks).
	 
	 	-	 	VUZIX and RESELLER will negotiate in good faith at least 60 days prior to May
31, 2011 an update of the MBV on May 31, 2011, and subsequently on an annual basis
unless otherwise agreed by the parties.
	 
	 	-	 	In the event the parties cannot agree upon a MBV for any period after good
faith negotiations, the Agreement shall remain in good standing until such time as the
matter of the MBV has been referred to and determined by arbitration as set forth in
the Agreement. The ultimate determination from the arbitration process will be
retroactively applied to the beginning of the period for the purposes of calculating
the MBV for the 12 month period. If the matter of the MBV is submitted to arbitration,
both parties agree that the key bench marks to be considered by the arbitrators in
setting new MBV for the parties are:

	 	•	 	VUZIX’ Unit sales volumes in each of North America and in Europe for the
prior calendar year period, are to be averaged and considered as a starting
MBV from which the following factors (up and down) are to be considered in
determining the new MBV for the Territory:

	 	i.	 	The average Unit volumes in North America
and Europe are to exclude unusual Unit volumes caused by wireless
carrier OEM subsidies and partnership arrangements which artificially
reduces end user retail buying prices causing an increase in unit
volumes because of the implied lower end user buying price. This
exclusion from the average Unit volumes is only apply so long as
similar wireless carrier or OEM subsidies and partnership
arrangements are not taking place in the Territory.

Page 23 of 32

 

 

	 	ii.	 	If the market share of the Products in the
Territory is greater than that of VUZIX in the North American and in
Europe.
	 
	 	iii.	 	The per-capita sales in Japan are to also
be compared against the average per-capita sales in the North America
and Europe. In the event Japanese per-capita sales are less and it is
reasonably due primarily to cultural or other “Asian market
influences” which negatively affect sales, the Unit sales of the
North America and the European market places are to be discounted on
a reasonable basis when used as the benchmarks for the Territory.
	 
	 	iv.	 	VUZIX Product development timelines and the
timeliness of new or improved Products which result in increased
competitive advantage to the Products.

	

	 	•	 	In the event the RESELLER License becomes non-exclusive as per Section 1.4
of this Agreement, the criteria for the determination of the Minimum Business
Volumes for each annual period after the first Date of Determination will be
renegotiated and reduced accordingly. If the RESELLER falls below [***]% of the
total annual unit volume of VUZIX based video eyewear Products within the
Territory, then VUZIX will have the option to terminate this Agreement as per
Section 11, for RESELLER’s lack of performance.
	

Initial Funding Target for RESELLER: RESELLER will raise a minimum of $[**********] and open an
office in Beijing by December 31, 2009

Initial Funding and Operational Date: December 31, 2009

Minimum for Manufacturing Amount: [*********] units of Product and the RESELLER shall provide
VUZIX with a certificate advising VUZIX that in the RESELLER’s opinion RESELLER has sufficient
capital to undertake manufacturing operations with a viable business model of at least 12 months
and supporting materials to validate the certificate.

Minimum Cumulative sales of Products required by Date of Determination: [*******] units of
Product.

Page 24 of 32

 

 

SCHEDULE C

PRICING and PAYMENT TERMS

Pricing: 

	 	-	 	All prices are in US dollars, CIF Beijing
	 
	 	-	 	Products include a one-year warranty provided by VUZIX to the end user customer
	 
	 	-	 	Products are assumed packaged with English and Mandarin manual
	 
	 	-	 	Pricing to RESELLER is to be the best price for equivalent volumes offered by
VUZIX to its best resellers for the same Product, plus all costs of CIF Beijing added
to the RESELLER’s buying price.
	 
	 	-	 	As a further reasonableness test, discounts offered to RESELLER will at least
be a great as the average gross margin report reported on VUZIX in its financial
statements.
	 
	 	-	 	All pricing excludes any transfer pricing used by VUZIX worldwide and its
affiliates.
	 
	 	-	 	All pricing excludes any limited time discounts regarding clearance of
products and end life product changeover, provided similar offers have been made to
RESELLER in any given calendar quarter. Such discounting will only be available for
orders received by VUZIX after its official determination of its clearance activities
and are not to be retroactively applied.
	 
	 	-	 	The following pricing adjustments (whether paid by Credit Memo, free
products, or a reduction in the net selling price) are not to be factored in to the
determination of “best price” unless they are given generally to North American
resellers consistently and not considered marketing expenses:

	 	¡	 	Promotional allowances,
	 
	 	¡	 	Market Development Funds,
	 
	 	¡	 	Catalog fees,
	 
		¡	 	Stocking fees, new SKU and Planogram allowances,
	 
		¡	 	Coop advertising allowances,
	 
	 	¡	 	New store opening allowances,
	 
	 	¡	 	Demo allowances including Point of Purchase demonstrators,
	 
	 	¡	 	Other advertising or marketing related merchandise allowances

Payment Terms:

	 	-	 	All payments will be made in US dollars and secured by Letter of Credit
acceptable to the bank providing credit facilities to VUZIX as collateral for such
credit facilities.
	 
	 	-	 	VUZIX must wait 30 days after delivery prior to presenting Letters of Credit
for payment.

Page 25 of 32

 

 

SCHEDULE D

MANUFACTURING BY RESELLER IN THE TERRITORY

In this Agreement, “Intellectual Property” means all patents, patent applications, copyright,
trade-marks, trade secrets, know how and any other intellectual property necessary for the
manufacture of the Products.

Description of Key Components (estimate based on VUZIX’s currently planned product line):

Wrap:

	 	–	 	[************************************************************************]

	 	o	 	[***********************]†
	 
	 	o	 	[************]
	 
	 	o	 	[*************************************]
	 
	 	o	 	[*************************************]
	 
	 	o	 	[*************]

	 	–	 	[***********************************************]
	 
	 	†	 	[*******************************************************************************]

Blade 2D:

	 	–	 	[********************************]

	 	o	 	[*****************]

	 	§	 	[*************]

	 	o	 	[***********************]
	 
	 	o	 	[***********************]
	 
	 	o	 	[**************************]
	 
	 	o	 	[**********************]

	 	–	 	[****************************]†

	 	o	 	[***************]

	 	–	 	[***********************************************]
	 
	 	†	 	[********************************************************************************]

Scanning Blade

	 	–	 	[***********************************]

	 	o	 	[***************]

	 	§	 	[************]

	 	o	 	[***************]
	 
	 	o	 	[************]
	 
	 	o	 	[**************]
	 
	 	o	 	[*****************]
	 
	 	o	 	[********************]

	 	–	 	[********************************]†

	 	o	 	[**************]

	 	–	 	[*****************************************]
	 
	 	†	 	[*********************************************************************************].

Page 26 of 32

 

SCHEDULE E

QUALITY CONTROL

	A.	 	VUZIX agrees to strive for minimal defects and continuous quality excellence as part of its
standard quality levels, set formally and or informally, for its consumer product lines. VUZIX
warrants that it shall ship to RESELLER only those Products or Key Components which have
passed the inspection standard established by VUZIX and that all the Products or Key
Components shipped hereunder shall conform to their specifications and be free from defects in
design, materials and workmanship, and will perform in accordance with their specifications
for the period disclosed in the Product manual and warranty documentation included by VUZIX
with each Product.
	 
	B.	 	VUZIX shall cause to establish and maintain a Quality Assurance Program with respect to the
Products and Key Components reasonably necessary to assure their performance and the
protection of RESELLER’s goodwill. As part of such Program, VUZIX shall cause to have the
Products and Key Components inspected and shall provide to RESELLER a Certificate of
Compliance with each shipment of Products or Key Components and shall make available to
RESELLER quality records as and when reasonably requested including but not limited to, copies
of VUZIX’s quality procedures, manuals and certifications.
	 
	C.	 	VUZIX will pass through the quality specifications received and warranted by our component
suppliers, including those for Key Components, to the final product specifications and quality
levels of the final Key Component or Product being manufactured and supplied to the RESELLER
	 
	D.	 	If VUZIX licenses RESELLER for the production of any particular Product (during the
Manufacturing Stage), the RESELLER shall be responsible for all QA Control for that Product
model other than for that of Key Components.
	 
	E.	 	During the production process any changes, either from VUZIX or requested by the RESELLER,
will be controlled and communicated through VUZIX’s standard Engineering Change Notice
(“ECN”).
	 
	F.	 	In the event there is a quality problem with Products or Key Components delivered to the
RESELLER, RESELLER has the right to request by way of an Corrective Action Request (“CAR”)
that an analysis and corrective measures, if applicable, be used to identify and fix the
quality problem. The responses by VUZIX to the CAR will identify the corrective action
required to be implemented to fix any identified quality problem. Further, VUZIX shall issue
ongoing status reports on a timely basis regarding the implementation of the corrective
actions, as defined in VUZIX’s Quality Assurance Program. In each CAR, RESELLER shall classify
the level of severity for the problem it is reporting (critical, major and minor). Vuzix
agrees respond promptly (within 14 days) from the time of the initial report by CAR as per its
Quality Assurance Program.
	 
	G.	 	If Vuzix decides to change the Product being supplied to the RESELLER, Vuzix shall given
notice to RESELLER as per Section 4.3 of this Agreement prior to making any changes.
	 
	H.	 	VUZIX may discontinue manufacture of any models of the Products or Key Components offered
hereunder only upon three (3) months prior notice to RESELLER. RESELLER may place end-of-life
POs for Products or Key Components and spare parts during this period. VUZIX will accept
delivery schedules for end-of-life spare parts, Products, and Key Components up to three (3)
months after such end-of-life PO has been placed, and will have

Page 27 of 32

 

 

	 	 	no obligation to supply spare parts or discontinued Key Components thereafter other than for
the duration of applicable warranty.
	 
	I.	 	Vuzix shall keep commercially reasonable records of all quality measures implemented by VUZIX
and related documentation, such as, but not limited to test results and root cause analysis
for a period of at least two (2) years from the last delivery of the relevant Products to
RESELLER.
	 
	J.	 	For purposes such as Product safety notification, operational problem correction and contact
compliance, RESELLER will use commercially reasonable efforts to maintain records of
second-tier RESELLER and/or customer purchases within the Territory, which should at a minimum
must include such purchaser’s name, address, phone number, date of sale, Product numbers,
quantities, serial numbers, and shipment address.
	 
	K.	 	For operational purposes in supporting the provision of warranty services to customers within
the Territory, the parties will periodically negotiate the setup of adequate replacement
Products and/or Key Component inventories so that individual warranty servicing and shipping
costs may be minimized. Such activities can include the shipment of replacement parts and/or
Products to the RESELLER, including the provision of extra (no-charge) warranty inventory that
could be included with each RESELLER shipment or handled by separate shipments periodically.
Any inventories of warranty spare parts or Products will be monitored by the parties and
adjusted periodically to provide an adequate level of timely customer support regarding
warranty items and overall warranty support costs.

Page 28 of 32

 

 

SCHEDULE F

WARRANTIES (for VUZIX current Product line)

This Warranty will be identical to Vuzix’ standard US warranty subject to required changes
to make the warranty in compliance with local law in the Territory.

Important Safety Instructions

Follow these safety instructions when using or handling your VUZIX Video Eyewear to reduce
the risk of fire, electric shock, and injury to persons and property.

1. READ ALL OF THE INSTRUCTIONS AND SAFETY INFORMATION PROVIDED BEFORE USING THIS PRODUCT.

2. Use the product only for its intended use, as described in this manual.

3. Close supervision is needed when this product is by or near children.

4. Children under the age of seven (7) are still learning to focus and track with their
eyes. Their vision is still immature. For these reasons, THIS PRODUCT SHOULD NOT BE USED BY
CHILDREN UNDER THE AGE OF SEVEN (7).

5. A very small portion of the population may experience epileptic seizures when viewing
certain kinds of flashing lights or patterns that are commonly present in our daily
environment. These persons may also experience seizures while watching some kinds of
television pictures or playing certain video games on regular monitors, including the use
of a display system such as this. These effects can be increased due to the large size of
the video screens in this device. Therefore consult a physician if you have any epileptic
condition before using this device or if you experience any of the following symptoms while
using this device: altered vision, muscle twitching, other involuntary movements, loss of
awareness of your surroundings, mental confusion, and/or convulsions.

6. Immersive video, whether viewed on a regular TV, a movie theater screen or a VUZIX video
display, can potentially have adverse effects on the user including motion sickness,
perceptual after effects and disorientation, and decreased postural stability and eye
strain. Take frequent breaks to lessen the potential of these effects, as is commonly
suggested for other items, such as keyboards and computer monitors, that you may tend to
fixate or concentrate on. If your eyes show signs of fatigue or dryness or if any of the
above symptoms is noted, immediately discontinue use of this device and do not resume using
it for at least 30 minutes after the symptoms have fully subsided.

7. Permanent or temporary hearing loss or impairment can result from excessive volume
levels emitted from the headphones. Always adjust the volume to a safe level BEFORE wearing
the product or headphones.

8. Always be aware of the world around you. This product will immerse you in realistic
sights and sounds, possibly causing you to forget about the real world around you and the
threats to your well being and the well being of others. DO NOT use this product near
stairs, balconies, or other things that can be tripped over, run into, knocked down or
fallen over. This product should only be used while you are seated and never while using
sharp or potentially dangerous objects, operating any form of mechanical device, driving
motor vehicles, or performing any act that normally requires you to see what you are doing.

9. This product may be tethered to a power outlet and cables may extend between components.
Be careful that these cords do not tangle around you or pose a potential threat to the
safety of others.

10. Do not disassemble this product. If service work is required, contact VUZIX using the
Support contact information shown in this manual.

11. Do not pull or yank on the cable, kink any of the cables or tie them in sharp or tight
knots. Do not hang the product or allow it to be suspended by any of its cables. To
disconnect cables, pull on the cable connector. Cables damaged by such actions are not
covered by the product’s limited warranty.

Page 29 of 32

 

 

12. Do not drop, strike, or cause any portion of the product to be struck or shaken
aggressively. Such actions may damage the product and void your warranty.

13. Save these instructions.

Immediately unplug the product from external power sources if:

•      The power adaptor, power cord or USB cord is damaged or frayed.

•      Liquid has been sprayed, splashed or poured on the product.

•      Any component of the product has been dropped or damaged.

•      The product exhibits any distinct change in performance.

Battery Safety Instructions

•      Batteries contain toxic materials. Do not burn, disassemble, mutilate, or puncture the
batteries.

•      Do not dispose of batteries in a fire.

•      Dispose of batteries in a method that is consistent with your local laws and regulations.

Vuzix Hardware Product Limited Warranty

	 	 	Vuzix warrants that your Vuzix hardware product shall be free from defects in material and
workmanship for the length of time specified in the Warranty Period (one year), beginning
from the date of purchase. If your Vuzix hardware product is used for commercial purposes
(including rental or lease) the Warranty Period shall be reduced to ninety (90) days from
date of purchase. Except where prohibited by applicable law, this warranty is
nontransferable and is limited to the original purchaser and does not apply to anyone else,
including anyone to whom you later make any transfer or sale. This warranty gives you
specific legal rights, and you may also have other rights that vary under local laws, some
of which are not affected by the warranties in this Limited Warranty.
	 
	 	 	This Limited Warranty does not cover, and no warranty of any kind is provided with respect
to any subjective or aesthetic aspects of the hardware product. Vuzix does not warrant that
the operation of the product will be uninterrupted or error-free. The limited warranty
stated above is the only warranty made to You and is provided in lieu of all other express
or implied warranties and conditions (except for any non-disclaimable implied warranties
that exist), including any created by any other documentation or packaging. No information
or suggestions (oral or in a record) given by Vuzix, its agents, affiliates, dealers or
suppliers or its or their employees or agents, shall create a warranty or condition or
expand the scope of this Limited Warranty.
	 
	 	 	Any software distributed with the hardware product by Vuzix with or without the Vuzix brand
name is not covered under this Limited Warranty. Refer to the licensing agreement
accompanying the software (viewable upon its installation), for details of your rights with
respect to its use.
	 
	 	 	Remedies
	 
	 	 	Vuzix’s entire liability and your exclusive remedy for any breach of warranty shall be, at
Vuzix’s option, (1) to repair or replace all or part of the hardware, 2) exchange the
hardware with a product that is new or which has been manufactured from new or serviceable
used parts and is at least functionally equivalent to the original product, or (3) to
refund the price paid by You less reasonable depreciation based on your actual use,
provided that the hardware is returned to the point of purchase or such other place as
Vuzix may direct with a copy of the sales receipt or dated itemized receipt. Except where
prohibited by applicable law, all shipping and handling costs associated with transport
(including packaging) for warranty service shall be at your expense. Vuzix may, at its
option, use new or refurbished or used parts in good working condition to repair or replace
any hardware product. Any replacement hardware product will be warranted for the remainder
of the original warranty period or thirty (30) days, whichever is longer or for any
additional period of time that may be applicable in your jurisdiction. This warranty does
not cover problems or damage resulting from (1) Acts of God, power surge, misuse,

Page 30 of 32

 

 

	 	 	abuse, negligence, accident, wear and tear, mishandling, misapplication, or other causes
unrelated to defects in the hardware device (2) any unauthorized repair, modification,
tampering or disassembly; (3) improper operation or maintenance, usage not in accordance
with product instructions or connection to improper voltage supply; or (3) use of
consumables, such as replacement batteries, not supplied by Vuzix except where such
restriction is prohibited by applicable law or (4) use of the products in connection with
any hardware or software other than recommended by Vuzix in the documentation accompanying
the product.
	 
	 	 	How to Obtain Technical Support
	 
	 	 	Technical support is defined as assistance with questions on issues about the Vuzix
hardware product. Technical support for hardware and its software is available for the
first ninety (90) days from date of product purchase. Your dated sales or delivery receipt,
showing the date of purchase or lease of the product, is your proof of the purchase or
lease date. You may be required to provide proof of purchase or lease as a condition of
receiving software technical support. The addresses and technical service contact
information for Vuzix can be found in the documentation accompanying your product and on
the web at our global site: www.vuzix.com.
	 
	 	 	How to Obtain Warranty Support
	 
	 	 	Vuzix is the warrantor under this Limited Warranty. Before submitting a warranty claim, we
recommend you visit the support section at www.Vuzix.com for technical assistance. Warranty
claims cannot be processed through the point of purchase and any other product related
questions should be addressed directly to Vuzix. The addresses and customer service contact
information for Vuzix can be found in the documentation accompanying your product and on
the web at our global site at www.vuzix.com, which will also identify any Vuzix subsidiary
or branch serving your country and its local address. You may also write to: Vuzix Sales
Support, 75 Town Centre Drive, Rochester, NY 14623, USA.
Limitation of Liability
	 
	18.3	 	VUZIX SHALL NOT BE LIABLE FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES
WHATSOEVER, INCLUDING BUT NOT LIMITED TO LOSS OF PROFITS, REVENUE OR DATA (WHETHER DIRECT OR
INDIRECT) OR COMMERCIAL LOSS FOR BREACH OF ANY EXPRESS OR IMPLIED WARRANTY ON YOUR PRODUCT
EVEN IF VUZIX HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. VUZIX’s maximum liability
under this limited warranty is limited, at Vuzix’s option, to the amounts originally paid by
you for the applicable hardware product or the cost of repair or replacement of any hardware
components that malfunction in conditions of normal use during the applicable warranty period.
Some jurisdictions do not allow the exclusion or limitation of special, indirect, incidental
or consequential damages, so the above limitation or exclusion may not apply to you, but the
remainder of this Limited Warranty shall remain in full force and effect.
	 
	 	 	Duration of Implied Warranties
	 
	 	 	EXCEPT TO THE EXTENT PROHIBITED BY APPLICABLE LAW, ANY IMPLIED WARRANTY OR CONDITION OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE ON THIS HARDWARE PRODUCT IS LIMITED IN
DURATION TO THE LIMITED WARRANTY PERIOD STATE ABOVE FOR YOUR PRODUCT. Some jurisdictions do
not allow limitations on how long an implied warranty lasts, so the above limitation may
not apply to you. Please note that in the European Union, any warranty period less than two
years shall be increased to two years except in the case of use for commercial purposes.

Page 31 of 32

 

 

     SCHEDULE G

List all IP protection applied for by VUZIX within the Territory for current and future
Products – as of June 30, 2009. New applications and issues are to be updated at least once
each calendar year.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Matter	 	Type	 	App Number	 	File Date	 	Pat/Reg Number	 	Issue Date	 	Status	 	Title
	82
	 	 	D	 	 	 	200530016861.0	 	 	30-May-05	 	ZL200530016861.0	 	24-Oct-06	 	ISSUED	 	VIRTUAL DISPLAY EYEGLASSES
	85
	 	 	D	 	 	 	 	 	 	30-May-05	 	 	200530016863.X	 	 	25-Oct-06	 	ISSUED	 	PORTABLE VIRTUAL DISPLAY
	[*****]
	 	 	[***]	 	 	 	[*****************]	 	 	 	[*************]	 	 	 	 	 	 	 	 	 	 	FILED	 	 	[*****************]	 
	[*****]
	 	 	[***]	 	 	 	[*****************]	 	 	 	[*************]	 	 	 	 	 	 	 	 	 	 	FILED	 	 	[*****************]	 
	[*****]
	 	 	[***]	 	 	 	[*****************]	 	 	 	[*************]	 	 	 	 	 	 	 	 	 	 	FILED	 	 	[*****************]	 
	[*****]
	 	 	[***]	 	 	 	[*****************]	 	 	 	[*************]	 	 	 	 	 	 	 	 	 	 	FILED	 	 	[*****************]	 
	[*****]
	 	 	[***]	 	 	 	[*****************]	 	 	 	[*************]	 	 	 	 	 	 	 	 	 	 	FILED	 	 	[*****************]	 
	[*****]
	 	 	[***]	 	 	 	[*****************]	 	 	 	[*************]	 	 	 	 	 	 	 	 	 	 	FILED	 	 	[*****************]	 
	[*****]
	 	 	[***]	 	 	 	[*****************]	 	 	 	[*************]	 	 	 	 	 	 	 	 	 	 	FILED	 	 	[*****************]	 
	[*****]
	 	 	[***]	 	 	 	[*****************]	 	 	 	[*************]	 	 	 	 	 	 	 	 	 	 	FILED	 	 	[*****************]	 
	[*****]
	 	 	[***]	 	 	 	[*****************]	 	 	 	[*************]	 	 	 	 	 	 	 	 	 	 	FILED	 	 	[*****************]	 
	227
	 	 	U	 	 	 	 	 	 	13-May-98	 	ZL 98109836.3	 	12-Jan-05	 	ISSUED	 	Video Image Viewing Device and Method
	 
	 	 	[***]	 	 	 	[*****************]	 	 	 	[*************]	 	 	 	 	 	 	 	 	 	 	TBD	 	 	[*****************]	 
	 
	 	 	[***]	 	 	 	[*****************]	 	 	 	[*************]	 	 	 	 	 	 	 	 	 	 	TBD	 	 	[*****************]	 
	 
	 	 	[***]	 	 	 	[*****************]	 	 	 	[*************]	 	 	 	 	 	 	 	 	 	 	TBD	 	 	[*****************]	 
	 
	 	 	[***]	 	 	 	[*****************]	 	 	 	[*************]	 	 	 	 	 	 	 	 	 	 	TBD	 	 	[*****************]	 

 

			
	D = Design Patent
	 
	U = Utility Patent
	 
	T = Trademark

Page 32 of 32exv10w23

Ex 10.23

Amendment No. 1

to the

Amended and Restated Fiscal Advisory Fee Agreement

This Amendment No. 1 (this “Amendment”) to the Amended and Restated Fiscal Advisory Fee Agreement,
dated November 12, 2009 (the “Agreement”), is entered into by and among Vuzix Corporation (the
“Company”), Canaccord Capital Corporation (“Canaccord”) and Bolder Investment Partners, Ltd.
(“Bolder” together with Canaccord, the “Advisors,” and collectively with the Company, the
“Parties”), effective as of December 1, 2009 (the “Effective Date”).

RECITALS

WHEREAS, pursuant to the Agreement, the Company has agreed to issue to the Advisors a fiscal
advisory fee (the “Fiscal Advisory Fee”) equal to 1% of the aggregate number of shares of the
Company’s common stock outstanding as of the date of closing of the Company’s initial public
offering (the “Payment Shares”); and

WHEREAS, in order to comply with Rule 5110 of the Financial Industry Regulatory Authority, Inc.
(“FINRA”), the Parties have agreed to limit the number of shares issuable to Canaccord pursuant to
the Fiscal Advisory Fee to 25% of the maximum number of Payment Shares issuable under the
Agreement, not to exceed 699,282 shares of the Company’s common stock.

NOW THEREFORE, the Parties to this Amendment hereby agree as follows:

	1.	 	Section 4. Section 4 of the Agreement shall be amended to read as follows:
“Each of the Advisors will be entitled to receive 25% of the Payment Shares. In addition,
the Corporation may allocate all of the remaining 50% of the Payment Shares to Bolder and
Canaccord at its sole discretion; provided however, that the aggregate number of Payment
Shares allocated to Canaccord under this Agreement shall not exceed 699,282 shares of the
Company’s common stock.”
	 
	2.	 	Force and Effect. Except as explicitly amended by this Amendment, the Agreement
shall remain unchanged and in full force and effect.

[Signatures on Following Page]

 

 

IN WITNESS WHEREOF, the Parties have executed and delivered this Amendment as of the Effective
Date.

	 	 	 
	VUZIX CORPORATION
	 	 
	 
	 	 
	Per:
	 	 
	 
	/s/ Paul J. Travers
	 	 
	 
	 	 
	Authorized Signatory
	 	 
	 
	 	 
	CANACCORD CAPITAL CORPORATION
	 	 
	 
	Per:
	 	 
	 
	 	 
	/s/ David Rentz
	 	 
	 
	 	 
	Authorized Signatory
	 	 
	 
	 	 
	BOLDER INVESTMENT PARTNERS, LTD.
	 	 
	 
	 	 
	Per:
	 	 
	 
	/s/ Paul Woodward
	 	 
	 
	 	 
	Authorized Signatory

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00166-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00166-of-00352.parquet"}]]