Document:

Exhibit
10.20

 

 

Lease
Agreement

 

THIS LEASE AGREEMENT (this “Lease”) is made
and entered into on this 17th day of December, 2004, by and between Red Rock
Partners, LLC, a Kentucky limited liability company whose address is 2718 Uhls
Road, Franklin Kentucky 42134, hereinafter referred to as “LESSOR”, and CWI,
INC., a Kentucky corporation, hereinafter referred as “LESSEE” whose address is
650 Three Springs Road, Bowling Green, KY 42104.

 

Witnesseth:

 

                WHERAS,
the LESSOR is the owner of certain real property (hereinafter sometimes
referred to as the “Real Property”) located at the intersection Page Drive and
Highway 100, Franklin, Simpson County, Kentucky, more particularly described in
Exhibit “A” which is attached hereto and made a part hereof by
reference, and all improvements located on the Real Property, including,
without limitation, the building (the “Building”) outlined on the site plan
attached hereto as Exhibit “A-1” (the Real Property, the Building and
all other improvements now or hereafter existing on the Real Property are
sometimes referred to herein, collectively, as the “Property”);

 

WHERAS, the LESSOR proposes to complete
renovations to the Property by making certain improvements to the Property and
the Building so that it will be suitable by LESSEE for the uses contemplated by
this Lease all in accordance with the specifications set forth in Exhibit “B”
attached hereto and made a part hereof by reference (hereinafter the “LESSOR’S
Work”); and

 

WHERAS, the LESSOR desires to lease a portion
of the Property during the Preliminary Term (as defined below) and the entire
Property during the New Term (as defined below) and LESSEE desires to lease a
portion of the Property during the Preliminary Term and the entire Property
during the New Term pursuant to the terms and conditions of this Lease.

 

NOW, THEREFORE, in consideration of the rents
to be paid by the LESSEE to the LESSOR as hereinafter provided, and the
covenants and agreements hereinafter set forth, to be kept and performed by
both parties hereto, the LESSOR does hereby let, demise and lease the Premises
(as defined below) unto the LESSEE for the Term and LESSOR hereby grants to
LESSEE, its customers, guests, invitees, employees, agents and licensees all
easements, rights and privileges appurtenant thereto, under the following terms
and conditions:

 

1.               PREMISES.  During the Preliminary Term the “Premises”
(herein so called) shall consist of that portion of the Real Property
identified on the Site Plan as the “Initial Premises” and that portion of the
Building consisting of approximately 175,000 square feet and identified on the
floor plan (the “Floor Plan”) attached hereto as Exhibit “A-2” as the
Initial Premises”.  Effective as of the
date (the “New Term Commencement Date”) which is the later to occur of (a)
February 1, 2008 or (b) the date upon which LESSOR delivers the Additional
Premises to LESSEE in the condition required herein and continuing through the
remainder of the Term, the Premises shall also consist of that portion of the
Real Property identified on the Site Plan as the “Additional Premises” and that
portion of the Building identified on the Floor Plan as the “Additional
Premises”.  The portion of the Property
identified on the Site Plan and the Floor Plan as the Initial Premises and the
Additional Premises shall, collectively, constitute the entire Property.  LESSOR represents and warrants that the
Building consists of approximately 250,000 square feet and the Real Property
consists of approximately 33 acres.

 

2.               LEASE TERM.  The primary term (the “Primary Term”) of this
Lease (a) shall commence on the date (the “Commencement Date”) which is the
later to occur of (i) February 15, 2005 or (ii) the date upon which LESSOR
substantially completes LESSOR’S Work and delivers the Premises to

 

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                        LESSEE in
substantially the condition required herein and (b) shall end at midnight on
the last day of the twentieth (20th) Lease Year (as defined below) following
the Commencement Date.  The Primary Term
shall consist of a preliminary term (the “Preliminary Term”) commencing on the
Commencement Date and ending at midnight on the last day of the third (3rd)
Lease Year and a new term (the “New Term”) commencing on the New Term
Commencement Date and ending upon the expiration of the Primary Term.  Notwithstanding anything to the contrary
contained herein, (a) in the event the Commencement Date has not occurred by
February 15, 2005, Lessee shall receive two (2) days free rent for each day
after February 15, 2005 until the Commencement Date occurs and (b) in the event
the Commencement Date has not occurred by March 1, 2005,  LESSEE shall have the right to extend the
Commencement Date to November 1, 2005, in which event the free rent in (a )
above shall be limited to a total of twenty-six (26) days.  In the event LESSEE accepts possession of the
Premises prior to February 15, 2005, the Commencement Date shall be the date
upon which the LESSEE accepts possession. 
For purposes of this Lease, a “Lease Year” shall be defined as
those consecutive twelve (12) month periods during the Primary Term or any
Extension Term ( as defined below), with the first Lease Year commencing on the
Commencement Date and each subsequent Lease Year commencing on the annual
anniversary thereof.  Upon the
establishment of the Commencement Date, LESSOR and LESSEE shall execute a form
of Commencement Agreement acknowledging and agreeing to the Commencement Date.

 

3.               EXTENSIONS.  LESSEE shall have the option of extending
this Lease for two (2) additional terms (hereinafter, collectively referred to
as the “Extension Terms”, or individually as an “Extension Term”)
of five (5) years each on the same terms and conditions as provided
herein.  Notice of the exercise of such
option shall be delivered by LESSEE to LESSOR, in writing, not later than
ninety (90) days prior to expiration of the Primary Term or the then expiring
Extension Term, as applicable.  The
Primary Term and the Extension Terms are sometimes referred to herein,
collectively, as the “Term”.

 

4.               CONSTRUCTION OF LESSOR’S
WORK.  LESSOR shall complete, at
LESSOR’S sole cost and expense, LESSOR’S WORK according to plans and
specifications to be prepared by LESSOR, at LESSOR’S expense, and approved by
LESSEE, such approval not to be unreasonably withheld, conditioned or delayed
(the “Plans”).  The Plans shall be
prepared in accordance with the scope of work attached hereto as Exhibit “B”.  LESSOR’S Work shall be completed in
accordance with the Plans and the scope of work attached hereto as Exhibit “B”
in a good and workmanlike manner and LESSOR shall deliver the Premises to
Tenant in substantially the condition required herein on or before the
Commencement Date.  LESSOR shall utilize
first quality new materials in connection with LESSOR’S Work and complete
LESSOR’S Work in compliance with all applicable laws, ordinances, rules and
statutes.  The LESSEE from time to time,
shall have the right, but not the obligation to inspect the progress of the
construction of LESSOR’S Work.  LESSOR’S
Work shall be deemed substantially completed when, notwithstanding LESSEE’S
possession of the Premises, that (a) LESSOR’S Work has been completed with
the exception of Punchlist Items (as defined below) and (b) a Certificate
of Occupancy, or its equivalent, has been unconditionally issued for LESSEE’S
occupancy of the Premises; provided, however, in the event the portion of
LESSOR’S Work consisting of asphalt paving cannot be completed prior to the
Commencement Date as the result of adverse weather conditions, for purposes
hereof, LESSOR’S Work shall be deemed substantially completed so long as the
area to be paved has been graded and graveled for parking, with the asphalt
paving to be completed as soon as the weather permits.  As used herein, “Punchlist Items” shall mean
minor items which can be completed by LESSOR following the Commencement Date
without interference with LESSEE’S business operations or ability to complete
necessary improvements necessary for LESSEE’S business operations, such as,
without limiting the generality thereof, finish work and painting that would
not interfere with LESSOR’S ability to operate its business in the Premises.

LESSOR hereby consents to
LESSEE constructing all work necessary for LESSEE’S business operations,
including, without limitation, installing racking and fixtures and wiring and
cabling for computer and phone systems (collectively, “LESSEE’S WORK”).  LESSEE shall have access to the Premises
following the full execution of this Lease and prior to the Commencement Date
to complete

 

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LESSEE’S Work and prepare
the Premises for the operation of LESSEE’S business. Notwithstanding anything
to the contrary, LESSEE’S access to the Premises prior to the date upon which
LESSOR completes LESSOR’S Work for the purpose of completing LESSEE’S Work
shall not be deemed an acceptance by LESSEE of possession of the Premises,
provided LESSEE has not begun business operations.  LESSEE shall be deemed to have begun business
operations when LESSEE commences shipping and distributing products from the
Premises.

 

5.               IMPROVEMENT
ALLOWANCE.  LESSOR shall
pay to LESSEE an “Improvement Allowance” (herein so called) in an amount equal
to the amount by which Five Hundred Twenty-Five Thousand and No/100 Dollars
($525,000) exceeds the actual costs incurred by LESSOR in completing LESSOR’S
Work; provided, however, for purposes hereof the cost incurred by LESSOR in
completing LESSOR’S WORK shall in no event be deemed to exceed the Budget
Amount (as defined below) and no individual component of LESSOR’S Work shall be
deemed to exceed the Budget Amount therefor.  
The Improvement Allowance, less a reserve for the anticipated cost for
completing the Punchlist Items, shall be paid by LESSOR to LESSEE within
fifteen (15) days following LESSEE’S delivery to LESSOR of the final list of
Punchlist Items.  Within fifteen (15)
days following completion of the Punchlist Items, LESSOR shall pay to LESSEE
the unused portion, if any, of the reserve for Punchlist Items.  As used herein, the “Budget Amount” shall
mean the amount set forth on Exhibit “B” as the amount budgeted for the
completion of LESSOR’S WORK and the amount budgeted for each individual
component of LESSOR’S Work; provided, however, in the event LESSEE requests any
changes to the scope of LESSOR’S Work set forth on Exhibit “B”, LESSOR
and LESSEE shall mutually agree to a revised budgeted amount (the “New Budget
Amount”) based upon the additions or deletions, as applicable, requested by
LESSEE to the scope of LESSOR’S Work. 
LESSEE shall reimburse LESSOR for the amount of the New Budget Amount
which exceeds Five Hundred Twenty-Five Thousand and No/100 Dollars
($525,000).  Following the completion of
LESSOR’S WORK, LESSOR shall provide to LESSEE copies of all invoices for LESSOR’S
Work evidencing the total cost of LESSOR’S Work.  In addition to the Improvement Allowance,
LESSOR acknowledges that LESSEE is negotiating with certain governmental and
quasi-governmental authorities for certain incentives (the “Incentives”) for
relocating LESSEE’S distribution business to the City of Franklin, Simpson
County, Kentucky.  A portion of the
Incentives may be paid in the form of a reimbursement for certain of the costs
incurred by LESSOR in completing certain portions of LESSOR’S Work.  LESSOR acknowledges and agrees that all such
Incentives shall belong to LESSEE and in the event any of the Incentives are
paid to LESSOR, such Incentives shall immediately be paid by LESSOR to LESSEE.  The Incentives shall be in addition to the Improvement
Allowance payable by LESSOR to LESSEE hereunder and in no event shall the
Incentives reduce the amount of the Improvement Allowance payable by LESSOR to
LESSEE.  If LESSOR fails to pay the
Improvement Allowance or any portion of the Incentives paid to LESSOR as set
forth above, then the unpaid portion thereof shall accrue interest at the
Default Rate (as defined below) until paid and, in addition to all other
remedies available to LESSEE hereunder as the result of a default by LESSOR, at
LESSEE’s option, LESSEE may offset the unpaid portion thereof, and all interest
accrued thereon, against the rent payable hereunder.  As used herein, the “Default Rate” shall mean
the rate of interest equal to the lesser of (i) the maximum rate permitted
by law or (ii) fifteen percent (15%) per anum. 

 

6.               LEASE PRICE.  Commencing on the Rent Commencement Date (as
defined below) and continuing during the Primary Term of this Lease, the LESSEE
shall pay to the LESSOR rent for the use and occupancy of the Premises in accordance
with the attached Exhibit “C” (hereafter the “Base Rent). The Base Rent shall
be based upon a rate equal to $2.75 per square foot contained in the Building
portion of the Premises, subject to increases as set forth herein; provided,
however, for purposes hereof the Building portion of the Premises shall be
deemed not to exceed 175,000 square feet during the Preliminary Term or 250,000
square feet during the New Term.  As used
herein, the Rent Commencement Date shall be the date which is the earlier to
occur of (a) the Commencement Date or (b) the date upon which LESSEE accepts
possession of the Premises.  The rent
shall be paid to LESSOR at the address set forth herein, in advance, on a
monthly basis. In addition to the monthly Base Rent payment, commencing on the
Rent Commencement Date, the LESSEE shall be

 

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                        responsible for
maintaining the Premises, as set forth herein, paying premiums for insurance
required to be maintained by LESSEE hereunder, paying real estate taxes
assessed against the Premises, as set forth herein, and shall pay all sales and
uses taxes levied or assessed against all Rent payments due under this lease
(if any) simultaneously with each payment required hereunder.. Commencing with
the eleventh (11th) Lease Year, the Base Rent shall increase by an
amount equal to the Base Rent for the tenth (10th) Lease Year
multiplied by the percentage increase in the CPI (as defined below) over the
preceding five year period, with such five year period commencing with the
month which is three months prior to the end of the fifth (5th)
Lease Year and ending with the month which is three months prior to the end of
the tenth (10th) Lease Year; provided, however any such increase
shall not exceed ten percent (10%). 
Commencing with the sixteenth (16th) Lease Year, the Base
Rent shall increase by an amount equal to the Base Rent for the fifteenth (15th)
Lease Year multiplied by the percentage increase in the CPI over the preceding
five year period, with such five year period commencing with the month which is
three months prior to the end of the tenth (10th) Lease Year and
ending with the month which is three months prior to the end of the fifteenth
(15th) Lease Year; provided, however any such increase shall not
exceed ten percent (10%).   In the event
LESSEE exercises a right to extend the Term for an Extension Term, the Base
Rent for the applicable Extension Term shall be equal to the Base Rent for the
last year of the immediately preceding Primary Term or Extension Term, as
applicable,  multiplied by the percentage
increase in the CPI over the preceding five year period, with such five year
period commencing with the month which is sixty-three months prior to commencement
of the applicable Extension Term and ending with the month which is three
months prior to the commencement of the applicable Extension Term; provided,
however, any such increase shall not exceed ten percent (10%) .  As used herein, the “CPI” shall mean the “All
Urban Consumer Price Index — United States City average” (1987 = 100) published
by the United States Department of Labor (the “Department”).  In the event the Department ceases publishing
the CPI, LESSOR and LESSEE shall mutually agree upon a comparable index.

 

7.               CONDITIONS OF
PREMISES.  LESSEE shall
have a period of thirty (30) days from the completion of LESSOR’S Work to
provide LESSOR with a list of any Punchlist Items.  LESSOR shall be obligated within a reasonable
amount of time not to exceed thirty (30) days to cure the Punchlist Items.  If LESSOR fails to prosecute such repairs
diligently and continuously until completion, then LESSEE, after providing five
(5) days written notice to Lessor of its intent to do so, may prosecute such repairs
itself and apply the cost of same against the next rent obligations due
hereunder.  This thirty (30) day time
period set forth above shall not apply to latent defects.  LESSOR warrants that, upon completion of LESSOR’S
Work and the delivery of the Premises to LESSEE, the Premises will meet with
all laws, codes, regulations and ordinances in effect at the time the Premises
is delivered by LESSOR to LESSEE.  LESSOR
represents and warrants that the Building and LESSOR’s Work have been
constructed and completed in a first class manner with good workmanship and
guarantees the construction thereof and materials used therein against defects
for a period of twelve (12) months following the Commencement Date, provided
that such time limit shall not apply to latent defects.  After expiration of said twelve (12) month
warranty period, LESSOR shall assign to LESSEE any and all warranties and
guaranties of third parties held by LESSOR with respect to any items LESSEE is
obligated to repair or maintain hereunder, except in the event same are
un-assignable, in which event LESSOR shall enforce same for the benefit of
LESSEE.

 

8.               ADDITIONAL
PREMISES.  On or before
February 1, 2008, LESSOR shall deliver to LESSEE the Additional Premises in the
condition LESSOR is obligated to deliver the Premises to LESSEE hereunder, with
any demising walls, partitions or fencing separating the Initial Premises from
the Additional Premises removed.  All
representations and warranties contained herein with respect to the Premises
shall be deemed restated and reaffirmed with respect to the Additional Premises
as of the New Term Commencement Date. 
Notwithstanding anything to the contrary contained herein, in no event
shall LESSEE have any obligation to pay rent or any other amounts with respect
to the Additional Premises prior to the earlier of: (i) the date LESSEE accepts
possession of the Additional

 

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                        Premises; or
(ii) the date the Additional Premises is delivered to LESSEE in the condition
required herein.

 

9.               MAINTENCE AND
REPAIR OBLIGATIONS.

 

(a)  Except for the repair and maintenance
obligations of LESSOR hereunder, including, without limitation, LESSOR’s
obligations set forth below and LESSOR’s obligation in connection with a
casualty or condemnation, the LESSEE shall have the absolute responsibility for
maintaining the Premises in good condition and repair during the Term, which
shall include all necessary repairs and replacements, whether covered by
insurance or not.  Notwithstanding the
foregoing, LESSEE’S obligation with respect to the Retention Pond (as defined
below) shall be limited to normal and routine maintenance of the Retention
Pond.

 

(b)  The LESSEE shall maintain the Premises in a
good state of repair and shall upon expiration of the Term return the Premises
to the LESSOR in as good a condition as when received, reasonable and ordinary
wear and tear and damage due to casualty or condemnation excepted. The LESSEE
shall promptly remove debris of all kinds and keep the Premises in a clean and
sanitary condition.

(c)  LESSOR covenants and agrees, at its
expense without reimbursement or contribution by LESSEE, to keep, maintain and
repair or replace, if necessary, the structural systems of the Building,
including, without limitation, the roof, roof membrane roof covering,
load-bearing walls and floor slabs and masonry walls and foundations and (ii)
make any repairs or improvements to the drainage and retention pond constructed
on the Property (collectively, the “Retention Pond”) necessary to cause the
Retention Pond to  comply with any
applicable governmental laws, rules regulations or ordinances or any drainage
or retention plans or agreements applicable to the Property.  Notwithstanding the foregoing, subject to the
waiver of subrogation provisions contained herein, LESSOR shall not be
responsible for any repairs necessary as the result of the negligence of LESSEE
hereunder.  If such repairs are not
completed within thirty (30) days after LESSOR has received notice from LESSEE
of such state of disrepair or if such repairs cannot reasonably be completed
within such thirty (30) day period and LESSOR shall fail to commence such
repairs within ten (10) days after notice and proceed diligently thereafter
then LESSEE may, without waiving any rights or remedies as the result of
any  default by LESSOR, prosecute such
repairs itself, and apply the cost of such repairs against the next maturing
monthly installment or installments of Base Rent due hereunder.  Notwithstanding the foregoing, in the case of
an emergency (such as, without limitation, a leaky roof), in the event LESSOR
is unable to immediately prosecute necessary repairs, LESSEE shall have the
right to immediately prosecute any and all necessary repairs and shall deliver
contemporaneous notification to LESSOR of the emergency and related repairs,
and offset the cost of such repairs against the next maturing monthly
installment or installments of Base Rent due hereunder; provided further that
if contemporaneous notice is not practicable, then LESSEE shall provide such notice
as soon thereafter as reasonably practicable. 
Notwithstanding the obligations of LESSOR provided in this paragraph,
LESSEE’s remedy in the event of damage to its personal property shall be
limited to LESSEE’s separate insurance coverage.

 

10.         INSURANCE
OBLIGATIONS.  During the
Term of this Lease and for any further time that the LESSEE shall hold the
Premises following the expiration of the Term, the LESSEE shall obtain at its
expense, subject to contribution from LESSOR as set forth below, the following
types and amounts of insurance:

 

                                                                              (a)  The LESSEE shall keep the Premises, including
all alterations and additions thereto, insured against loss or damage by fire
or other peril, with all standard extended coverage that may be required by any
first mortgagee, with a reputable and solvent insurance carrier. The insurance
value of the Premises shall be in the amount of EIGHT MILLION DOLLARS

 

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                                                                              ($8,000,000.00)
initially, and shall be reviewed and adjusted every three years thereafter by
the LESSEE and the LESSOR.  LESSEE shall
have unrestricted access to all parts of the Building as well as to any systems
(and contracted vendors) that support the operations of the Building during the
Term. During the Preliminary Term and any period prior to the date LESSOR
delivers the Additional Premises to LESSEE in the condition required herein,
(a) LESSOR shall pay to LESSEE thirty percent (30%) of the premiums paid by
LESSEE for the insurance set forth above, (b) LESSOR shall be responsible for
any increases in the premiums for the Property resulting from the nature of use
for the Additional Premises and (c) the security or fire protections systems
for the Additional Premises shall not be modified or disconnected without the
prior written consent of LESSEE.  Such
amount shall be paid by LESSOR to LESSEE within thirty (30) days following
LESSEE’S delivery of an invoice therefor. 
LESSEE shall have the right to implement and control practices which may
affect the safety and security of the Property.

 

(b)  The LESSEE shall, at its own expense, at all
times during the Term of this Lease, maintain in force a policy or policies of
insurance, written by one or more responsible insurance carries naming LESSOR
as an additional insured, against liability for property loss or injury to or
death of persons occurring in or about the Premises. The liability amount under
such insurance shall not be less than Two Million and No/100 Dollars
($2,000,000.00) for any single occurrence of bodily injury or property damage.

 

(c)  The LESSEE shall maintain and keep in force
all workers’s compensation insurance required by the laws of the State of
Kentucky with respect to the operation of Tenant’s business at the Premises.

 

(d)  In the event the  Premises shall be damaged or destroyed by
fire or other casualty so insured against, except as otherwise set forth
herein, the LESSEE shall claim no interest in any insurance settlement arising
out of any such loss, except loss of the LESSEE’S personal property of whatever
kind, under its own coverage, and LESSEE will execute all documents reasonably
required by LESSOR or the insurance company or companies that may be necessary
for use in connection with settlement of any such loss and to make the proceeds
available to LESSOR for the repair of the Premises..

 

(e)  Should the LESSEE fail to keep in effect and
pay for such insurance as in this section is required to be maintained, the
LESSOR may do so, in which event the insurance premiums paid by the LESSOR
shall become due payable forthwith at twelve (12%) percent per annum interest
and failure of the LESSEE to pay same on demand after written notice shall
constitute a breech of this Lease Agreement. 

 

11.         PROPERTY TAXES.  The LESSEE shall pay all real property taxes
assessed against the Premises during the term of this Lease; provided, however,
during the Preliminary Term and any period prior to the New Term Commencement
Date, LESSOR shall pay to LESSEE thirty percent (30%) of the real property
taxes assessed on the Premises.  Such
amount shall be paid by LESSOR to LESSEE within thirty (30) days following
LESSEE’S delivery of an invoice therefor. LESSOR shall furnish to LESSEE copies
of all tax invoices and receipts which LESSOR receives on the Premises. LESSEE
shall have the right, but not the obligation, to reasonably contest with the
appropriate governing agency any such tax and LESSOR shall cooperate and
provide assistance in connection with any such contest, including, but not
limited to execution of any necessary documents. The expenses of any such
contest, or related matter, shall be the sole responsibility of LESSEE. The
LESSEE shall pay all assessments against its personal property in, on and about
the Premises.  Notwithstanding anything
to the contrary contained herein, with regard to special tax assessments,
LESSEE shall have the right to elect to pay such special assessments over the
longest installment plan allowed by the applicable governmental authority and
LESSEE shall be liable only for those installments of special

 

89

 

                        assessments
coming due prior to the date this Lease is terminated, as and when such
installments come due. 

 

12.         REPRESENTATIONS
AND WARRANTIES.  The LESSOR
covenants, warrants, and represents that (a) it has good fee simple title to
the Property, (b) LESSOR has not received any notice, and does not have any
knowledge, of any eminent domain or similar proceeding which would affect the
Premises, (c) no restrictive covenant, easement, lease or other written
agreement restricts, prohibits or otherwise affects LESSEE’S  rights set forth in this Lease or which would
adversely affect LESSEE’S use of the Premise, (d) it has full right and power
to execute and perform this Lease, (e) the drainage and retention pond
constructed on the Property is and shall be in compliance with any applicable
governmental laws, rules regulations or ordinances or any drainage or retention
plans or agreements applicable to the Property and (f) the LESSEE, upon paying
the rent herein stated and performing the covenants and agreements hereof,
shall have the right to peaceable have, hold, and enjoy the Premises during the
Term of this Lease. The LESSEE further covenants, warrants, and represents that
it has full right and power to execute and perform this Lease Agreement.

 

13.          CONDITION OF
PREMISES.  LESSOR
represents and warrants that the construction of the Improvements shall be
carried on and completed so as to comply with the specifications set forth in “Exhibit
B” attached hereto and that the Improvements shall comply with all general
building code and construction requirements.,

 

14.         USE OF PREMISES.  LESSEE shall have the right to use the
Premises for a Distribution center, which shall include, without limiting the
generality thereof, the storage and distribution of product and all uses
incidental or ancillarty thereto.  During
the Preliminary Term and any period prior to the date the Additional Premises
is delivered to LESSEE in the condition required herein, LESSOR shall not
permit the Additional Premises to be used for (a) any obnoxious or hazardous
use or, (b) the storage of any hazardous, explosive or toxic materials.

•                  INSTALLATION OF
FIXTURES.  The LESSEE
shall make no additions or alterations to the Premises which will detract from
the value of the Building or structurally weaken same. The necessary
installation of LESSE’S equipment and machinery incident to operating its
business shall not be considered as a disallowed addition or alteration of the
Building. The LESSEE may from time to time make nonstructural alterations or
improvements to the Premises, so long as such work is performed in a good and
workman like manner, and so long as LESSEE agrees to return the Premises as
required hereunder upon the expiration of the Term, such alterations or
improvements shall be deemed not to detract from the value of the Building. All
items permanently affixed to the Building by either gluing, cementing, screwing
or otherwise fastening same shall remain with the Premises, except equipment,
machinery, and electrical fixtures originally installed by LESSEE, which shall
remain the property of LESSEE. Any equipment, furnishings or fixtures remaining
in the Premises after expiration of the Lease Term shall, unless removed following
written notice by LESSOR, be deemed abandoned by the LESSEE and shall become
the property of the LESSOR. The LESSEE shall pay and be responsible for the
damage resulting from the removal of any fixture by LESSEE from the Premises.
All fixtures, machinery and equipment which my be placed in, upon or about the
Premises by the LESSEE shall always remain the property of the LESSEE,
irrespective of the manner in which the same may be affixed or attached to the
Premises, and LESSEE shall have the right to remove same when vacating the
Premises or at any time from time to time during the Term of this Lease. The
LESSEE shall have the right to expand, renovate, and alter the décor and
appearance of the Building and appurtenances throughout the Term of this Lease
at their sole expense provided that same do not materially alter or affect the
integrity of the original construction, unless otherwise agreed by the LESSOR.

 

•                  UTILITIES.  All applications and connections for utility
service on the Premises shall be in the name of the LESSEE only, and the LESSEE
shall be solely liable for utility charges as they

 

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                        become due,
including those for sewer, water, gas, electricity and telephone service.  The electricity for the Additional Premises
shall be separately metered by LESSOR and paid by LESSOR during the Preliminary
Term and any period prior to the New Term Commencement Date; provided, however,
to the extent the water and sewer use for the Additional Premises is a minimal
amount which would be used by one individual on a daily basis, the water and
sewer shall not be separately metered and LESSEE shall be responsible for the
entire water and sewer usage at the Property.

 

•                  COMPLIANCE WITH
LAWS.  The LESSEE shall comply with
all local, state and federal laws, rules, regulations, and requirements
applicable to the conduct of its business on the Premises, in particular those
concerning the correction, prevention and abatement of nuisances. The LESSEE
shall promptly comply with all new rules, orders, and regulations of the State
of Kentucky or its insurer applicable to LESSEE’S business, at its own expense,
including the making of any nonstructural alterations for the protection or
extinguishment of fire. The LESSEE shall not permit the Premises to be used for
any disreputable or illegal purpose. 
During the Preliminary Term and any period prior to the New Term
Commencement Date, LESSOR shall maintain the Additional Premises in compliance
with all applicable governmental laws, rules, regulations and ordinances and
shall not permit the Additional Premises to be used for any disreputable or
illegal purpose.

 

•                  DESTRUCTION OF
IMPROVEMENTS

•                                                                  (a) Total
Destruction:  In the event during
the  Term of this Lease, the Premises are
fully destroyed or rendered unfit for their accustomed use (hereinafter “destruction”)
by fire or other casualty, the duties of both parties shall be as follows:

•                  LESSOR shall
commence repair of the Premises within sixty (60) days after such casualty and,
within one hundred eighty (180) days after commencement of such repair, restore
the Premises to substantially the same condition in which the Premises were
immediately prior to the occurrence of the casualty.  From the date of such casualty, until the
Premises is so repaired and restored, Rent and all other charges and items
payable hereunder shall abate in such proportion as the part of the Premises
thus destroyed or rendered untenantable bears to the total Premises.  However, if the Premises is destroyed or
rendered untenantable by fire or other casualty to the extent of more than
thirty percent (30%) of its replacement cost during the last two (2) years of
the Primary Term, or any Extension Term of this Lease, then LESSOR or LESSEE
shall have right to terminate this Lease effective as of the date of the
casualty, by giving written notice of termination to the other within thirty
(30) days of such casualty; provided, however, LESSEE shall have the right to
nullify any LESSOR termination by exercising an option to extend this Lease (if
available) within fifteen (15) days after LESSEE’S receipt of LESSOR’S
termination notice  If said notice of
termination is given within this thirty-day period, this Lease shall
terminate and rent and all other charges shall abate as aforesaid from the date
of such casualty, and LESSOR shall promptly repay to LESSEE any Rent paid in
advance which has not been earned as of the date of such casualty.  In the event that the insurance proceeds are
inadequate to fully repair the Premises then LESSOR, in its discretion, shall
have the right to terminate this Lease; provided, however, LESSEE shall have
the right to nullify any such termination by agreeing to repairs which would be
covered by the insurance proceeds.

•                                  (b) Partial Destruction:  In the event the Premises are partially
destroyed by fire or other casualty or rendered unfit for their accustomed use
during the Term, the LESSOR shall forthwith repair same, beginning repairs as
promptly as reasonably possible after the date of such damage and completing
such repairs within 90 days. A partial destruction shall not void this Lease,
though the LESSEE shall be entitled to a proportionate reduction of the rent
until the Premises are restored, the proportionate reduction to be in a percentage
corresponding to the percentage area of leased space rendered unusable for the
accustomed use by the destruction.

 

•                                  (c) LESSEE Repair.  If LESSOR does not commence the repair and
restoration work required pursuant to this Section as set forth herein, or if
the Premises are not repaired or restored by LESSOR in accordance with all
provisions of this Section, LESSEE shall have the

 

91

 

                        right, at its
option, after ten (10) days written notice to LESSOR, to:  (i) repair and restore the Premises as LESSEE
may deem necessary to reasonably conduct its business in the Premises, at the
sole cost of LESSOR, which costs LESSOR shall pay to LESSEE during the course
of such repairs or restoration within thirty (30) days of receipt of a properly
documented invoice from LESSEE; or (ii) seek to obtain specific performance of
LESSOR’S repair and restoration obligations ; or (iii) terminate this Lease by
written notice to LESSOR without waiving LESSEE’S rights to damages for LESSOR’S
failure to perform its covenants and obligations hereunder.

 

•                                  (d) MINOR DAMAGE:  Should the Premises suffer damage to a slight
extent such that occupancy and use of the premises for accustomed use are not
materially affected, notwithstanding anything to the contrary contained herein,
the insurance proceeds therefore shall be paid to LESSEE and LESSEE, at its
sole expense shall restore and repair such damage as quickly as possible, but
no reduction in rent shall be allowed.

 

•                                  (e) WAIVER OF SUBROGATION.  LESSOR and LESSEE, and all parties claiming
under them, mutually release and discharge each other from all claims and
liabilities arising from, or caused by any casualty, hazard or other matter,
covered by insurance on the Premises or in connection with property on, or
activities conducted on, the Premises, and waive any right of subrogation which
might otherwise exist in, or accrue to, any person on account thereof.

 

•                  LESSOR RIGHT OF
ENTRY.  The LESSOR, its agents or
representatives, shall have the right to enter the Premises, or any part
thereof, at reasonable times, for the purpose of examining the Premises and
making any repairs or alterations as may be deemed necessary to preserve the
Premises and keep it safe. Except in the case of an emergency, such reentry
shall be preceded by reasonable notice to the LESSEE from the LESSOR.

 

•                  BREACH AND
DEFAULT.

•                                (a) Any one of
the following shall be deemed an event of default and a breach of this Lease by
the LESSEE if it:

•                                                           (1)
Files a voluntary petition in bankruptcy or for reorganization under any
bankruptcy act;

•                                                           (2)
Has an involuntary bankruptcy  proceeding
instituted against it which is not dismissed within sixty (60) days following
the filing therof;

•                                                  (3) Makes an
assignment for the benefit of creditors;

•                                                  (4) Fails to pay
any rent within thirty (30) days of the date due;

•                                                  (5) Has appointed a receiver in
any court preceding to take charge of and                                               manage
the affairs of the LESSEE being conducted upon the Premises, or

•                                                  (6) Fails to perform or comply
with any of the covenants or conditions of                                               this
Lease and does not cure such breach within 30 days after LESSOR has given
LESSEE notice of such breach or if such breach is not capable of cure within
such thirty (30) day period, if LESSEE fails to commence curative actions prior
to the expiration of such thirty (30) day period and diligently prosecute such
curative actions to completion.

•                                (b) Any one of
the following shall be deemed an event of default and breach of this Lease by
the LESSOR if it:

•                                                                  (i)
Fails to perform the duties and obligations called for by this Lease or

•                                                                           (ii)
Breaches any covenants, warranties, or representations required of the LESSOR
by this Lease.

 

•                  REMEDIES ON
BREACH AND DEFAULT.  In the event
of a breach of this Lease by LESSEE by any act set forth in the preceding
paragraph, the LESSOR’S rights shall be as follows:

•                                  (a) To cancel and terminate this
Lease by giving LESSEE at least  ten (10)
days written notice of the cancellation and termination. After such notice,
this lease shall terminate in the same manner and with the same force and
effect as if the date fixed in the notice of cancellation

 

92

 

                        and termination
were the end of the Lease Term, except as to the LESSEE’S, costs, and charges
imposed hereunder.

•                                  (b) In the event of a default by
Lessee in the making of any payment required under the terms of this Lease,
then LESSOR may make such required payment of the LESSEE herein or may otherwise
comply with any agreement, term, or condition required hereby to be performed
by the LESSEE, and the LESSOR shall have the right to enter the Premises for
the purpose of correcting or remedying any such defect and to remain until the
defect has been corrected or remedied. No expenditure by the LESSOR for the
correction or remedy shall be deemed to waive or release the LESSEE’S default
or the LESSOR’S right to take any action as may be otherwise permissible
hereunder in the event of default. Expenses incurred by the LESSOR in
fulfilling the LESSEE’S obligations shall be treated as additional rent and
shall bear interest at the rate of 12 percent per annum from the time incurred
until collection.

•                                  (c)  In the event of a material default by the
LESSEE which is not cured prior to the expiration of any applicable grace or
cure period, LESSOR shall have the right, to reenter the Premises and remove
the property and personnel of the LESSEE and store the property in a public
warehouse or at a place selected by the LESSOR, at the expense of the LESSEE.
After reentry, the LESSOR may re-let the Premises or any part thereof at the
rent and on the terms the LESSOR may choose. If the premises are re-let, the
duties and liabilities of the parties shall be as follows:

•                                                  (i) In addition
to the LESSEE’S liability to the LESSOR for breach of Lease, the LESSEE shall
be liable for all reasonable expenses of re-letting, for performing LESSEE’S
maintenance and repair obligations hereunder, and for the difference between
the rent received by the LESSOR under the new lease agreement and the rental
installment due for the same period under this Lease.  Any re-letting of the Premises shall be
pursuant to the terms of a bona-fide arms length transaction.

 

•                                                  (ii) The LESSOR
shall apply rent received from re-letting the premises first to reduce the
LESSEE’S indebtedness to the LESSOR under this Lease, not including
indebtedness for rent, secondly to the expense of re-letting and making
alterations and repairs, thirdly to the rent due under this Lease, and lastly
to payment of future rent under this Lease as it becomes due.

•                                  (d)  In the event of a default by LESSOR which is
not cured prior to the expiration of any applicable grace or cure period set
forth herein, LESSEE may, in addition to any other remedy available at law or
in equity, at its option, (i) upon written notice, terminate this Lease,
or (ii) incur any expense necessary to perform the obligation of LESSOR
specified in such notice and deduct such expense from the rent or other charges
next becoming due.

 

•                  ATTORNEY’S FEES
AND EXPENSES.  Should the
LESSEE breach any of the material terms of this Lease, particularly the terms
relating to occupancy and payment of the rent, and should the LESSOR incur
attorney’s fees, costs, and other expenses in the connection therewith, then
the LESSEE agrees to reimburse the LESSOR for such reasonable fees, costs and
expenses. Should the LESSOR breach any of the material terms of this lease,
particularly those related to representations, covenants and warranties to
LESSEE, and should the LESSEE incur attorney’s fees, costs, and other expenses
in connection therewith, then the LESSOR agrees to reimburse the LESSEE for
such reasonable fees, costs, and expenses.

 

•                  INDEMNIFICATION.  The LESSOR shall at all times indemnify and
hold the LESSEE harmless against all actions, claims, demands, costs, damages,
or expenses of any kind which may be brought or made against the LESSEE or
which the LESSEE may pay or incur, by reason of the LESSOR’S negligent performance
of, or failure to perform, any of its obligations under this Lease. Nothing
contained in this Agreement shall, however, detract from the LESSOR’S rights to
protection under the public liability insurance policy or policies obtained and
maintained by the LESSEE as hereinabove stated. Likewise, the LESSEE shall at
all times indemnify and hold the LESSOR harmless against all actions, claims,
demands, costs, damages, or expenses which 

 

93

 

                        may be brought
or made against the LESSOR, or which the LESSOR may pay or incur, by reason of
the LESSEE’S negligent performance of, or failure to perform, any of its
obligations under this lease.

 

•                  CONDEMNATION.  In the event all of the Premises are taken or
condemned for any public purpose, this Lease shall terminate as of the date of
such taking, and the award for such taking of the Premises shall belong to the
LESSOR; provided, however, LESSEE shall have the right to pursue its claim for
damages in connection with any eminent domain or condemnation proceeding. In
the event that a portion of the Premises is taken or condemned for any public
use, this Lease shall terminate as to the part taken and shall continue as to
the remainder of the Premises for the balance of the Lease Term, with the rent
reduced in the same ratio as the total value of the Premises after
condemnation; provided, however, in event there is not enough of the Premises
remaining after condemnation for the accustomed use by the LESSEE in its normal
enterprise or the remaining Premises is not sufficient for LESSEE’S business
purpose or needs, then LESSEE shall have the right to terminate this Lease.

 

•                  SUBLEASE AND
ASSIGNMENT.  LESSEE shall
have the right at any time during the Term of this Lease to assign this Lease
or to sublet the Premises in whole or in part, without the written consent of
the LESSOR unless such sublease is in direct conflict with other provisions of
this Lease, and endangers LESSOR’S interest. However in no event shall the
LESSEE, by subleasing or assigning its leased interest, be relieved of the
primary responsibility for payment of the rent and performance of the terms and
conditions imposed upon it hereunder.

 

•                  LAW GOVERNING.  This Lease shall be deemed to have been
entered into in the Sate of Kentucky, and its provisions shall be constructed
in accordance with the laws thereof.

 

•                  MODIFICATIONS.  This Lease may only be changed, amended, or
modified by writing signed by all of the parties hereto. The terms embodied
herein and any subsequent written modifications shall constitute the entire
agreement between the parties.

 

•                  NOTICES.  Any and all notices, consents, or directives
by either party intended for the other shall be either hand-delivered or mailed
by certified mail, return receipt requested, to the following addresses(or to
the last known address specified in writing by the party to whom such notice is
to be given):

 

 

 

 

 

•                  If to the
LESSOR

•                  Red Rock
Partners, LLC

•                  Attention: Kent
Kelley

•                  2718 Uhls Road

•                  Franklin, KY 42134

 

•                  With a copy to:

•                  Greg Betterton,
Esq.

•                  981 Ridgewood
Avenue, #101

•                  Venice, FL
34285

 

•                  If to the
LESSEE:

•                  CWI, Inc.

•                  650 Three
Springs Road

 

94

 

•                  Bowling Green,
HY 42104

•                  Attention:
President

 

•                  With a copy to:

•                  CWI, Inc.

•                  650 Three
Springs Road

•                  Bowling Green,
KY 42104

•                  Attention:
General Counsel

 

•                  Or at such
other address and to such other person or persons as the parties may from time
to time designate.

 

•                    SUBORDINATION, NON-DISTURBANCE AND
ATTORNMENT.

 

•                                  (a)           Upon written
request of LESSOR, LESSEE will in writing, subordinate its right hereunder to
the lien of any mortgage or deed of trust, now or hereafter in force, against
the Premises and to all advances made or hereafter to be made upon the security
thereof; provided, however, that the mortgagee or trustee, as applicable, named
in said mortgage or trust deed shall agree that LESSEE’S peaceable possession
of the Demised Premises and its rights under this Lease will not be disturbed or
diminished on account thereof.

 

•                                  (b)           In the event
(i) any proceedings are brought for foreclosure, or (ii) of the
exercise of the power of sale under any mortgage or deeds of trust, then, upon
any such foreclosure or sale, LESSEE agrees to recognize such beneficiary or
purchaser as LESSOR under this Lease, provided that LESSEE’S right to
possession continues unabated and LESSEE’S rights under this Lease continue
undiminished.

 

                                        (c)           LESSOR agrees
to obtain a Subordination, Non-Disturbance and Attornment Agreement from its
current lender(s) and/or any lender that records a mortgage, deed of trust or
similar security instrument against the Premises prior to the recordation of
the memorandum of lease contemplated herein, if any, in form and substance reasonably
acceptable to LESSEE (“SNDA”), and deliver same to LESSEE within thirty
(30) days from the later of the date hereof or the date of recording such
mortgage, deed of trust or similar security instrument.  If said SNDA from LESSOR’S current lender(s),
if any, is not so delivered, LESSEE may, at its option, terminate this Lease by
written notice to LESSOR

 

                                        (d)           LESSOR
represents and warrants that LESSOR is the current fee simple owner of the
Property, subject to no mortgage, deed or trust or similar security instrument.

 

15.         HAZARDOUS MATERIALS.  LESSOR represents and warrants that to the
best of its knowledge any handling, transportation, storage, treatment or usage
of hazardous or toxic substances (as defined by any applicable government
authority and hereinafter being referred to as “Hazardous Materials”)
that has occurred on the Property was in compliance with all applicable
federal, state and local laws, regulations and ordinances.  LESSOR further represents and warrants that
to the best of its knowledge no leak, spill, discharge, emission or disposal of
Hazardous Materials has occurred on the Property and that the soil,
groundwater, and soil vapor on or under the Property is free of Hazardous
Materials as of the date hereof.  LESSOR
agrees to indemnify, defend and hold LESSEE and its officers, partners,
directors, shareholders, employees and agents harmless from any claims,
judgments, damages, fines, penalties, costs (including attorney, consultant and
expert fees), liabilities (including sums paid in settlement of claims) or loss
which arise during or after the Term, in connection with (a) a breach of the
foregoing representation and warranty and (b) the presence of any Hazardous
Materials present at the Property as of the Commencement Date or, with respect
to the Additional Premises, the New Term Commencement Date. LESSOR acknowledges
and agrees that LESSEE shall have no responsibility or liability with respect
to any Hazardous Materials at the Property which are not present as the result
of the acts of LESSEE, its officers, employees or agents,

95

 

                        or LESSEE’S business
operations at the Property.  LESSOR
hereby releases LESSEE from any claims, judgments, damages, fines, penalties,
costs (including attorney, consultant and expert fees), liabilities (including
sums paid in settlement of claims) or loss which arise during or after the
Term, in connection with the presence or suspected presence of Hazardous
Materials in the soil, groundwater, or soil vapor on or under the Property,
except to the extent such Hazardous Materials are present as the result of the
acts or inaction of LESSEE, its officers, employees or agents, or LESSEE’S
business operations at the Property.LESSEE covenants and agrees that it will not
cause or permit the generation, storage, transportation, disposal, release or
discharge of any hazardous material, hazardous waste, hazardous substance,
solid waste, petroleum product, asbestos or pollutant upon, in, over or under
the Premises and that Subtenant, its assignees, invitees, contractors,
sublessees, transferees or licensees will not become involved in the operation
at the Premises which could lead to the imposition on LESSOR or the Premises of
any liability under the Resource Conservation Recovery Act, 42 USC 6901, et
seq., etc. (“RCRA”), the Comprehensive Environmental Response Compensation and
Liability Act of 1980, 42 USC 9601, et seq., etc. (“CERCLA”), or any other
federal, state or local ordinance, law or regulation regarding environmental
matters or hazardous substances and that LESSEE shall comply with all such
federal, state and local environmental rules, laws and regulations with respect
to the operation of LESSEE’s business operations at the Premises which exist as
of the Commencement Date or as may exist from time to time.  LESSEE does hereby indemnify and hold LESSOR
harmless for all loss, cost or expense including, but not limited to, any
investigation of site conditions or any clean-up, remediation, removal,
restoration work and/or attorneys’ fees and court costs through all trial and
appellate levels as the result of LESSEE’s breach of its obligations as set
forth herein.  The provisions of this Article
31 shall survive any termination of this Lease.  LESSEE shall bear all costs associated with
removal, construction, reconstruction and the like in the event materials
described herein are discovered at any time during the term of this Lease with
respect to hazardous substances caused to be present as a result of LESSEE’s
acts.

16.         ESTOPPEL.  At any time and from time to time either
party, upon request of the other party, will execute, acknowledge and deliver
an instrument, stating, if the same be true, that this Lease is a true and
exact copy of the Lease between the parties hereto, that there are no
amendments hereof (or, if not so, stating what amendments there may be), that
this Lease is then in full force and effect and that, to the best of its
knowledge, there are no offsets, defenses or counterclaims with respect to the
payment of rent reserved hereunder or in the performance of the other terms,
covenants and conditions hereof on the part of LESSEE or LESSOR, as the case
may be, to be performed (or, if not so, setting forth those offsets, defenses
or counterclaims existing) and that, as of such date, no default has been
declared hereunder by either party or, if a default has been declared, such
instrument shall specify same.  Such
instrument will be executed by the other party and delivered to the requesting
party within fifteen (15) days of receipt.

17.         RECORDING.  At the request of either party, the parties
shall join in the execution of a memorandum or so-called “short-form” of this
Lease for the purpose of recordation. 
Any recording costs associated with the memorandum or short form of this
Lease shall be borne by the party requesting recordation.

18.         TITLE REVIEW.  LESSOR shall provide LESSEE with its most
recent report on title covering the PROPERTY, together with copies of
underlying documents shown as exceptions thereon and a copy of LESSOR’S most
recent survey of the Property within ten (10) days following the date
hereof.  If any title matter would
prohibit or restrict LESSEE’S use of the Premises for the purposes set forth
herein or otherwise materially affect LESSEE’S rights under this Lease, then
LESSEE may, by written notice to LESSOR, terminate this Lease.

19.         LESSEE FINANCING; LIEN
WAIVER.  LESSEE shall have the absolute
right from time to time during the Term hereof and without LESSOR’S further
consent or approval, written or otherwise, to grant and assign a mortgage or
other security interest in LESSEE’S interest in this Lease and all of LESSEE’S
property to LESSEE’S lenders in connection with LESSEE’S financing
arrangements.  LESSOR agrees to execute
such confirmation, certificates and other documents as LESSEE’S

96

 

                        lenders may reasonably
request in connection with any such financing. 
LESSOR hereby waives any contractual, statutory or other lien on LESSEE’S
furniture, fixtures, supplies, equipment and inventory. 

20.         SETTOFF.  LESSOR has subleased from LESSEE certain
property located at 201 Camping World Court, Bowling Green, Kentucky.  In the event LESSOR defaults in the
performance of any obligations under such sublease, LESSEE shall have the right
to offset any amounts owing by LESSOR under such sublease against the rent and
any other obligations of LESSEE under this Lease.

21.         BROKER.  LESSOR and LESSEE represent and warrant one
to the other that they have not had any dealings with any real estate brokers
or agents in connection with the negotiation of this Lease, except for Alex
Nottmeier with Neal Turner Realty (hereinafter, “Broker”).  LESSOR covenants and agrees to pay Broker’s
commission in accordance with a separate agreement by and between LESSOR and
Broker, and further agrees to indemnify LESSEE for all claims and demands made
by Broker.  In addition, LESSOR and
LESSEE agree to indemnify and hold each other harmless from and against any and
all liability and cost which LESSOR or LESSEE, as applicable, may suffer in
connection with any other real estate brokers claiming by, through, or under
LESSOR or LESSEE, as applicable, seeking any commission, fee or payment in
connection with this Lease.

22.         TIME OF THE ESSENCE.  Time shall be of the essence in interpreting
the provisions of this Lease.

23.         FORCE MAJEURE.  If either party hereto shall be delayed,
hindered in or prevented from, the performance hereunder of its obligations by
reason of strikes, lockouts, labor troubles, failure of power, riots,
insurrection, war, acts of God, or other reason of like nature, not the fault
of such party (hereinafter, “Permitted Delay” or “Permitted Delays”),
such party shall be excused for the period of time equivalent to the delay
caused by such Permitted Delay.

24.         OPTION TO
PURCHASE.  DISCUSS

 

•                  MISCELLANEOUS.

•                  (a) Whenever
the words “LESSOR” and “LESSEE” are used herein, they shall be construed to
include their successors, assigns, and legal representatives

•                                  (b) Whenever used herein, the
singular number shall include the plural, the plural shall include the
singular, and the use of any gender shall be applicable to all genders as the
context may require.

•                                  (c) Each party shall pay its own
fees and costs incurred in the negotiation of this Lease

•                                  (d) This Lease may be executed
in duplicate originals and multiple counterparts, with each duplicate to have
the full force and effect of an original document and all counterparts shall
constitute one and the same instrument.

•                                  (e) In the event of the sale of
the Premises by the LESSOR, all rights and obligations of LESSOR shall transfer
to the purchaser and the purchaser shall be deemed to have assumed all such
obligations.

•                                  (f) The LESSEE is totally
responsible for special assessments levied against the    Premises by local, state, and federal agencies which are to be
paid during the Term of the Lease; provided, however, (i) LESSEE may elect to
pay such assessments in the maximum permissible number of installments and only
those installments payable during the Term shall be the obligation of LESSEE
and (ii) LESSOR shall be responsible for thirty percent (30%) of any such
assessments prior to the New Term Commencement Date.

•                                  (g) Should any clause or section
of this Lease be found void or invalid, the remaining portions shall remain in
full force and effect.

 

97

 

In Witness Whereof, the parties have caused
their names to be affixed hereto on the day and year first above written.

 

	
   

  	
   

  	
   

  	
   

  	
  LESSOR: Red Rock Partners,
  LLC

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Kent Kelley

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Kent Kelley

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  LESSEE: CWI, INC.:

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Brent Moody

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Brent Moody

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Senior Vice President

  

 

98EXHIBIT 10.32

 

Manufacturing Services and Supply
Agreement

 

The
Manufacturing Services and Supply Agreement (hereinafter referred to as the “Agreement”),
made effective this 23rd day of May, 2001 (“Effective Date”), by and between:

 

INFOCUS Corporation, an Oregon corporation with
principle place of business located at 27700B SW Parkway Avenue, Wilsonville,
Oregon 97070 USA (herein referred to as “INFOCUS”); and

 

Flextronics Industrial (Melaka) SDN. BHD, a Malaysian
corporation with principle place of business located at Lot 19/20, Kawasan
MIEL, 75350, Melaka, Malaysia and affiliated companies (collectively referred
to as “Flextronics”)

 

Both “INFOCUS” and “Flextronics” hereinafter
collectively referred to as the “Party(s)”

 

RECITALS

 

A.            Whereas,
INFOCUS is engaged in the design, manufacturing, marketing and worldwide sale
of projection systems in the commercial market;

 

B.            Whereas,
Flextronics is engaged in contract manufacturing of electronic products that
have applications in the commercial and consumer markets.  Flextronics desires to manufacture, test and
deliver on behalf of INFOCUS, projector products, service parts and accessories
hereinafter referred to as “Products” and more fully described in the “Product
Specification”.

 

C.            Whereas,
INFOCUS desires to purchase the Products manufactured by Flextronics
specifically for INFOCUS and Flextronics desires to sell said Products to
INFOCUS, and perform certain engineering services related thereto, INFOCUS
pursuant to the terms and conditions of this Agreement; and

 

D.            Whereas,
INFOCUS has relied, and is relying, upon Flextronics stated expertise and
experience in providing certain engineering services and manufacturing, testing
and delivery of high quality complex electronic assemblies.

 

E.             Whereas,
The Parties signed a Memorandum of Understanding dated 3/28/01 and this
Agreement replaces that document.

 

F.             In
the spirit of this agreement, INFOCUS will include Flextronics in any Request
for Quotation (RFQ) for goods and services where applicable and provide for
review requirements for goods and services that Flextronics could provide.  INFOCUS will solely determine the supplier
selection criteria including but not limited to cost, technology, performance,
and other competitive factors. 
Flextronics agrees to work in a cooperative and professional manner with
any new supplier selected by INFOCUS.

 

1

 

G.            Whereas,
manufacturing of INFOCUS “Light Engines”, initially being consigned by INFOCUS
to Flextronics, is anticipated.  Upon the
initiation of manufacturing of Light Engines by Flextronics, both parties will
review and update this agreement as required, in good faith.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the mutual
covenants hereinafter set forth, for other good and valuable consideration,
receipt of which is hereby acknowledged and intending to be legally bound,
INFOCUS and Flextronics agree as follows:

 

Article One - Definitions

 

Capitalized
terms used in this Agreement shall have the meaning given to them below:

 

1.1           “Products”
shall mean all data and video projectors and electronic circuit board
assemblies (herein referred to as ECA’s), and parts of Products (herein
referred to as Service Parts) and accessories with INFOCUS part numbers,
manufactured to meet INFOCUS specifications as more fully described in the
detailed Product Requirements Specification which INFOCUS may purchase from
Flextronics under this Agreement.

 

1.2           “Non-Recurring
Engineering Services and Deliverables” hereto called NRE Services is work
performed by Flextronics in accordance with the terms and conditions of this
agreement and meeting all specifications and milestone schedules contracted for
on separate purchase orders on a project by project basis.  Non Recurring Engineering Services are
generally one-time charges for engineering development, tooling, agency fees
and samples more fully described in the Statement of Work and Development
Schedules detailed in the individual Project Plans.

 

1.3           “Project
Plan” shall mean the plan mutually developed and agreed to by INFOCUS and
Flextronics for the purpose of preparing product and process for manufacture at
Flextronics.  The Project Plan will
include a Statement of Work and Development Schedule, and any other information
required to guide the development activity, such as resource assignments and
responsibilities.  These Project Plans
will be developed on an as needed basis, but will generally be per Product
Platform or Model to be manufactured by Flextronics.

 

1.4           “Product
Platform” shall mean a family of products based on a similar architecture that
will typically contain many common parts and Product Specifications (e.g.,
individual products within a platform will be based on the same technologies
but may vary in resolution or features). 
“Product Model” shall mean a specific group of products, which are
highly similar in performance and features and will contain many common parts,
but may vary in industrial design or minor features.  “SKU” shall mean a specific product with a
unique Bill of Materials.  An example of
a Platform/Model/SKU hierarchy would be the Barracuda platform/the LP350, LP340
and LP340B models/the thin-label OEM customer SKU’s thereof.

 

2

 

1.5           “Development
Schedule” means the schedule for the design and development, manufacturing,
test and qualification of Products for manufacture at Flextronics.  The Development Schedule shall include a
Milestone and Payment Schedule detailing in project purchase orders certain
significant events in the overall Development Schedule that allows the Parties
to evaluate the status of the development and to make payments based on
completion and acceptance of key tasks.

 

1.6           “Business
Days” shall mean those days, from Monday through Friday, which are not declared
as national holidays in the United States or Malaysia

 

1.7           “Calendar
Days” shaft mean all days, Sunday through Saturday, which appear on the
calendar from January 1 through December 31

 

1.8           “Product
Requirements Specification” shall mean collectively but not limited to product
performance specifications, product quality and agency requirements, new
product introduction schedules, and shipping configuration.

 

1.9           “Quality
Plan” shall include all documentation, processes and procedures agreed to by
the parties necessary to manufacture, inspect and accept products, deliver and
service the product.  The Quality Plan
includes:  (a) IQA inspection and ECO
control of material, (b) manufacturing and process procedures, and (c)
manufacturing process control and quality control systems.

 

1.10         “Acceptance
of Product” are the End-of-line audit (EOL) and Out-of-box audit (OOB) used by
Flextronics as final acceptance for Products prior to shipping Products to
INFOCUS.  Once First Customer Ship (FCS)
has been authorized and dock-to-stock (DTS) status has been achieved for a
product model, then final Acceptance of Product can occur at Flextronics
manufacturing location.  INFOCUS will
provide a FCS checklist and DTS approval process as part of the quality plan
for each product model.

 

1.11         “Delivery
Date” shall mean the Required Date on which Products shall be delivered to
INFOCUS designated FOB point as specified on INFOCUS Purchase Orders.

 

1.12         “F.C.A.
(Free Carrier) - Port of Export” shall mean point where seller has delivered
goods, cleared for export and ownership and risk of loss has transferred to
buyer.  Port of Export
to be specified by buyer.

 

1.13         “Service
Parts” shall mean Products or parts of Products, which Flextronics agrees to
sell to INFOCUS for the purpose of providing service for the products.

 

1.14         “Special
Tooling” means any unique tooling required to manufacture Products exclusively
for INFOCUS.

 

1.15         “Prototype
Products” means Products that have been tested by Flextronics and meet substantially
all of the Product Specifications and have been provided to INFOCUS for
correlation and verification testing against agreed to Specifications.

 

3

 

1.16         “Pilot
Production Samples” means those parts submitted to INFOCUS quality department
by Flextronics with required inspection data in order for INFOCUS to compare
Pilot Production Samples against Product Requirements Specification, correlate
Flextronics test reports with INFOCUS inspection data and approve for
manufacturing,

 

1.17         Product
and Process Documentation.  Documentation
provided by INFOCUS, or developed by Flextronics to be used to manufacture
products including:  BOM, AVL, Assembly
drawings, Line layouts, process documentation, quality
and inspection plans, test processes, packaging requirements, amongst others.

 

Article Two - Purpose and Term

 

2.1           Purpose.  The purpose of this Agreement is to set forth
the terms and conditions under which, during the term hereof, Flextronics shall
manufacture certain Products and participate in the Process Development of
Products per Project Plans.  Upon
successful qualification of Flextronics Pilot Production Samples, Flextronics
will manufacture for INFOCUS, and INFOCUS may purchase, Products, Service Parts
and Accessories.

 

Work specifically
undertaken by Flextronics under this agreement, including all specific work,
documents, designs, processes, etc will be used exclusively for the
manufacturing and development of INFOCUS products, with strict adherence to the
NDA referenced in this document. 
Flextronics is free to build other similar type products for other
customers, in any other Flextronics facility other than the one currently being
utilized at the time to build INFOCUS Products.

 

2.2           Scope
of Services to be provided.  Flextronics
shall manufacture, assemble, test and deliver Products that meet agreed to
Specifications provided by INFOCUS. 
Flextronics will purchase material at lead-time per INFOCUS Approved
Manufactures List (AML) necessary to manufacture Products per confirmed INFOCUS
purchase orders.  It is INFOCUS intention
to involve Flextronics in the supplier selection process.  Flextronics is responsible for all inventory
management and quality control of materials used in the production of the Product.  Flextronics agrees to provide incoming
inspection and obtained certificates of compliance (C of C’s) where appropriate
to ensure that only parts conforming to the component specification are used to
manufacture products for INFOCUS. 
INFOCUS may consign certain key components including the component
identified as the Optical Engine. 
Special terms, conditions and responsibilities for consigned materials
are described in Exhibit G.

 

Flextronics will
be responsible for securing and maintaining sufficient plant & equipment
and qualified assemblers, technicians and management to fulfill all obligations
contained in the Agreement.  Flextronics
will provide detailed manufacturing and quality plans that include description
of all processes, equipment, data collection and
reporting required to ensure INFOCUS Products will meet the agreed to
Specifications.  Flextronics agrees to
support Product launch activities with technical support on design for
manufacturability and testability, agency documentation and compliance, quality
and project management support.  If any
requested Product launch support activity is to be considered as non-

 

4

 

standard
New Product Introduction tasks by Flextronics, then any Non Recurring
Engineering charges will be quoted separately.

 

2.3           Operating
Model.  Both INFOCUS and Flextronics will
appoint one or more program managers for its respective project activities to
act as commercial and technical liaison with the other party.  Each party will assign appropriate personnel,
as it shall deem necessary in its sole discretion; provided, however, that each
party shall use its reasonable commercial efforts to perform the activities for
which, by the terms of this Agreement, is responsible.  Both parties shall provide manufacturing,
test and quality engineering support, if needed, at each others facilities as
mutually agreed upon.

 

Flextronics agrees
to work with INFOCUS to further develop the shared operating model in Exhibit E
that includes cross-company processes in the following functional areas:  project management, supply chain planning,
procurement, order management, manufacturing operations, logistics, quality
control, documentation and ECO control, service operations and information
technology (IT).

 

2.4           Term.  Subject to earlier termination as provided
for in Article Eleven, herein, the term of this Agreement shall be from the
date set forth above and continue until terminated by either party. . The terms
and conditions hereof, except price, shall continue in force unless compelling
reason is provided by either party for change, which shall be negotiated in
good faith between the parties no more than once per year.

 

Article Three - Product and
Process Development

 

3.1           Products
or Deliverable items in the Product and Process Development phase include but
are not limited to feasibility reports and design studies, analysis of
specifications and creation of designs or modification to existing designs,
creation of CAD design files, drawings, assembly and test documentation and
bills of materials, fabrication and procurement of tooling, equipment and
assembly and test fixtures, and delivery of engineering Prototypes and pilot
production samples.  Flextronics will
maintain all manufacturing processes, Product inspection and test documentation
and software and make available to INFOCUS as requested.  For each Product Platform or Model to be
manufactured by Flextronics, INFOCUS and Flextronics will mutually develop and
agree to a Project Plan.  Flextronics
shall, in a competent and professional manner, perform on behalf of INFOCUS,
the non-recurring engineering services and provide all deliverable items
described in any Statement of Work and contracted for on separate purchase
orders, in accordance with the agreed to Development Schedules and, as
applicable, shall develop Products that fully comply with the Specifications.

 

3.2           Non-Recurring
Engineering fees and Capital Equipment Spending.  Each party will bear their own expenses
necessary to comply with the Agreement except those expressly documented and
agreed to in waiting or identified as part of the Milestone and Payment
Schedule.  Flextronics to provide a
detailed list of Non-Recurring Engineering (NRE) fees and Capital Equipment
spending for custom equipment used to support the manufacturing of the
Products.  INFOCUS agrees to review
Flextronics request for cost sharing of initial project start up costs that are
not part of the Flextronics standard

 

5

 

manufacturing
operations and negotiate a non-recurring fee for those start up costs that are
unique to the manufacturing of the Product and specifically requested by
INFOCUS.

 

3.3           Flextronics
shall satisfactorily complete performance of the task listed in each
Development Schedule (tasks are more particularly described in the applicable
Statement of Work) and shall use its reasonable commercial efforts to adhere to
the development deadlines and delivery dates set forth in each such Development
Schedule, Flextronics, shall perform the tasks within its control, and / or
deliver the items specified in each Development Schedule within ten (10) days
after the applicable deadline specified in each such Development Schedule.

 

3.4           In
exchange for Flextronics satisfactory and timely performance of the development
tasks described in the Statement of Work in accordance with the Development
Schedule, INFOCUS shall pay to Flextronics the sum set forth in the associated
Milestone and Payment Schedule.  Each
installment of the *

 

3.5           * 
INFOCUS to solely determine acceptance of any goods or service
provided.

 

3.6           In
the event that Flextronics is for any reason within its control unable to
satisfactorily complete any of the tasks listed in the Milestone Schedule,
Statement of Work or provide Pilot Production Samples to INFOCUS in accordance
with the Milestone Schedule that are determined by INFOCUS to be fully
conforming to the agreed to deliverables, then INFOCUS reserves the right to
terminate the specific Product Development Project after paying the acceptable
tasks completed to date. .

 

3.7           Tools,
Fixtures, Jigs and Equipment.  Tools,
Dies, Jigs, Equipment and other miscellaneous items belonging to INFOCUS
(hereinafter called “Production Tooling”) are being loaned to Flextronics for
the manufacturing of Products covered in this agreement.  Flextronics to provide scheduled maintenance,
calibration, and repair of all Production Tooling at a cost to be negotiated in
good faith or amortized into the unit costs. 
The full list of Production Tooling belonging to INFOCUS is shown in
Exhibit H.

 

Flextronics
agrees with INFOCUS on the following conditions:

a)             Any
tooling paid for by INFOCUS shall be and remain the sole properties of
INFOCUS.  In addition, any Production
Tooling supplied and loaned to Flextronics shall remain the sole property of
INFOCUS.  INFOCUS may require the return,
or transfer to a third party this Production Tooling to which Flextronics shall
comply.

b)            Flextronics
shall maintain and repair these Production Tooling in
good working condition at all times and shall be responsible for their
safekeeping.  Where required, costs of
upkeep and maintenance will be reviewed jointly and negotiated accordingly.

c)             Location
for the use of Production Tooling must be specified to INFOCUS and there should
not be a change of location without prior consent of INFOCUS.

 

*Certain information on this page has been omitted and filed separately
with the Commission.  Confidential
treatment has been requested with respect to the omitted portions.

 

6

 

d)            All
Production Tooling shall not be rented out, sold or presented to third party
and Flextronics shall not act in any manner that would infringe or may have the
possibility of infringing the ownership of INFOCUS.

e)             Flextronics
undertakes to maintain proper separate book records for Production Tooling
belonging to INFOCUS and providing adequate certification that the Production
Tooling belong to INFOCUS so that in the event of
reorganization, bankruptcy or any other legal proceedings involving
Flextronics, the Production Tooling will not be subject to seizure and can be
returned to INFOCUS without any complications.

f)             In
case of damage or loss of Production Tooling as a result of negligence on
Flextronics part, Flextronics shall be responsible for replacement thereof.

g)            Any
modifications, repairs that need to be done on the Production Tooling must be
communicated to INFOCUS and its consent given before Flextronics can proceed
with such modifications, repairs on the Production Tooling.

h)            Flextronics
will obtain any and all export/import licences to import/export the Production
Tooling into and from Singapore and Malaysia, during the term of and upon the
termination or expiration of this Agreement.

i)              Assist
in obtaining duty and sales tax exemption for the import/export of the
Production Tooling into and from Singapore and Malaysia, during the term and
upon the termination or expiry of this Agreement.

j)              Flextronics
shall return the Production Tooling to INFOCUS in good working condition
immediately when so required.

k)             X-Factory
Software:  A standard off-the-shelf
software product “X-Factory” will be modified to meet the specific needs
of the INFOCUS line at Flextronics.  The
customizations will be performed by IDS-Gintic, a 3rd party.  Flextronics shall pay IDS-Gintic directly for
this customization and INFOCUS shall reimburse Flextronics for such
payment.  INFOCUS shall have the right to
move or re-deploy the basic X-Factory software along with the
customizations, with INFOCUS having the responsibility of obtaining the
appropriate basic license for such move or redeployment from X-Factory.  At INFOCUS request, Flextronics,
agrees to transfer to INFOCUS all materials to permit INFOCUS to exercise the
above rights, including the right to use and modify the customizations.

 

l)              Flextronics
to abide by Intellectual Property requirements as called out in
Article 14.2

 

3.8           IT
Systems Support.  Flextronics agrees to
facilitate the communication and system logic links of specific IT functions
and data bases with INFOCUS systems including but not limited to quality and
shop floor control systems, documentation and ECO control systems and inventory
and order management systems. 
Flextronics will conform to Information Technology best practices to
ensure the security of intellectual property both residing at Flextronics and
communicated externally to/from INFOCUS, and to conform to the service level
agreement specified in Exhibit I.

 

7

 

Article Four - Production

 

4.1           Product
Conformance.  All Products delivered by
Flextronics to INFOCUS hereunder shall be in complete conformance with the
Product and Process Documentation controlling the procurement, manufacture,
test, packaging and preparation for shipment. 
Products shall be tested and processed in accordance with the agreed to
Quality and Manufacturing Plans.  “Product
Requirements Specifications” are provided for reference only and will not be
considered part of the acceptance criteria by INFOCUS.

 

4.2           Additional
Products.  INFOCUS may add Products
hereunder by submitting Product Requirements Specifications and forecasts to
Flextronics.  Both parties shall
negotiate pricing in good faith in a timely manner and all other terms and
conditions contained herein shall apply to such Products.

 

4.3           Product
Discontinuance.  During the term of this
Agreement, Flextronics may not discontinue the manufacture of any Product or
make any changes to any Product or manufacturing process therefore without the
prior express written consent of INFOCUS. 
If total production units fall below those in the cost model, INFOCUS
agrees to review manufacturing location, pricing, and ongoing viability of this
agreement in good faith.

 

4.4           Product
Requirements Specification.  Product
Requirements Specification (PRS) documents will be provided as required to support the development, procurement, manufacture, test,
packaging, and preparation for shipment of the Products.  All PRS documents will be identified as “controlled
documents” and will be maintained and revised according to procedures that
conform to ISO9000 requirements at both Flextronics and INFOCUS
facilities.  INFOCUS Document Control
department will provide Flextronics with original PRS and supporting documents
in hard copy and electronic format.  All
working copies of specifications and uncontrolled documents, which may be used
by Flextronics, are not considered the approved Specifications.  As specified in Project Plans, Flextronics
will be responsible for the preparation of certain manufacturing and quality
processes and procedures.  Upon approval,
these documents will be come part of the Quality Plan, and subject to the same
document control procedures as INFOCUS provided PRS documents.  In general, Flextronics will be responsible
for developing product manufacturing and quality process procedures subject to
INFOCUS approval.

 

4.5           Strategic
and Non-Strategic Suppliers.  Flextronics
will purchase materials to manufacture product for INFOCUS per the INFOCUS
Approved Manufacturers List (AML). 
Certain material and service providers will be identified by INFOCUS in
Exhibit F as “Strategic Suppliers”. 
For these Strategic Suppliers, INFOCUS will maintain strategic account
management responsibilities, such as contracts, pricing, quality and business
performance feedback and management, corrective and remedial action management,
etc.  For these designated strategic
suppliers, Flextronics shall, perform certain tactical duties, as directed by
INFOCUS.  These duties shall generally
include purchasing per the INFOCUS-supplier contract, performing incoming
inspections, and tracking and providing supplier quality and business
performance data

 

8

 

per
INFOCUS request.  For non-strategic
suppliers, Flextronics will be responsible for all aspects of the supplier
management, subject to the approval of the supplier by INFOCUS.

 

Article Five — Forecasts,
Purchase Orders and PO Acknowledgments

 

5.1           Forecast
Schedules.  In each month during this
Agreement, INFOCUS will deliver to Flextronics a minimum of six (6) month
forecast for the Product:  Two months
forecasts and purchase orders are subject to the cancellation and rescheduling
provisions of the Agreement for the current month and second mouth, and Four
(4) months forecasts for the third through sixth months following the date of
the forecast.  INFOCUS liability to
purchase orders and forecasts will be limited to those called out in this
agreement for finished goods, work in process, and materials on order or in
stock.

 

These forecasts
will specify Product Model and weekly quantities for the 1st 8 weeks
of the forecast and the Product Model and monthly quantities for later portions
of the forecasts.  INFOCUS does not agree
hereunder to any minimum purchase amount over any part of the Term of this
Agreement or make any representation as to the success of business, now or in
the future.  All commitments for
purchases of Products by INFOCUS hereunder shall be made only upon issuance of
a Purchase Order pursuant to Article 5.3.

 

5.2           Weekly
Releases.  On Wednesday of each week,
INFOCUS shall provide a weekly release to Flextronics, which shall specify the
subsequent week’s build and ship plan with quantity by SKU and ship-to
location.  The Delivery Date shall be no
later than the Friday of the week after (i.e., l1 business days from the
release date).  Flextronics shall, within
(3) three business day of receipt, acknowledge and honor, based upon material
availability any INFOCUS Weekly Release.

 

5.3           Purchase
Orders.  For the 1st 8 weeks, INFOCUS
shall submit requirements for the Products on monthly blanket Purchase Orders,
which shall contain the following information: 
(a) SKU and description of the Products purchased, (b) quantity
purchased; and (c) prices of the Products purchased.  All Purchase Orders issued by INFOCUS
hereunder shall be governed exclusively by the Terms and Conditions of this
Agreement.  Terms and conditions on the
back of the INFOCUS purchase orders are not applicable.

 

5.4           Purchase
Order Acknowledgments.  Flextronics
shall, within three (3) business days of receipt, acknowledge and honor any
INFOCUS Purchase Order for Products issued during the term of this Agreement
which (a) requests Delivery Dates no earlier than the agreed upon lead time
periods and (b) is otherwise in accordance with the terms and conditions of
this Agreement.  Flextronics shall also
use its best efforts to honor INFOCUS Purchase Orders for Products, the
provisions of which do not fully comply with the terms of Article 5.3 and 5.5.

 

5.5           Lead
Time (LT).  Flextronics agrees that
delivery lead-time to procure raw materials, manufacture and deliver completed
Products is forty-five (45) days.  Some
raw materials have lead-times longer than forty-five calendar (45) days.  Lead-times for all key components and
components that have (i) lead-time greater than 30 days, (ii) non-cancelable
and non-returnable, or (iii) have Minimum Order Quantity will be identified in

 

9

 

Exhibit C.  The Parties agree that the total lead time
stated as forty-five (45) calendar days shall equal the Flextronics raw
material lead time (“A”) plus internal production lead time and outside
processing (“B”) plus delivery lead time (“C”) of Product to FOB point in
accordance with INFOCUS Purchase Orders.

 

Under this
agreement, Flextronics is not required speculate on materials and will procure  all materials
to the lead-times and in quantities of the forecast provided by INFOCUS.  INFOCUS liability for raw materials will
extend to standard lead-time items where they cannot be consumed into
production units when Flextronics has acted in proper fashion to secure
materials per the latest forecast or purchase orders.  INFOCUS will also be liable for all materials
called out in exhibit “C” where Flextronics purchased materials to extended
lead-times as stipulated or in quantities listed plus cycle times.

 

“A”
weeks             +              “B”
weeks             +              “C” weeks             =              “X”
weeks

Material LT                           Production
LT                      Delivery
LT                           Total
LT

 

5.6           Purchase
Order Flexibility.  Flextronics agrees to
provide INFOCUS with maximum purchase order flexibility while limiting INFOCUS’
exposure to raw materials, work in process, and allowing INFOCUS delivery
rescheduling of the Product necessary to maintain optimal finished goods
levels.  Flextronics will purchase
material at lead-time to support INFOCUS confirmed purchase orders.  Flextronics will also purchase long-lead
components that have been agreed to by the Parties and shown in Exhibit C and
support INFOCUS latest forecast.  In the
event a confirmed purchase order is cancelled by INFOCUS then Flextronics
agrees to use reasonable and diligent efforts to mitigate the cost to INFOCUS
by disposing of any excess non-proprietary material though one of the following
means; (1) where possible, re-allocating all common material for use by other
Flextronics customers in other manufacturing facilities, (2) returning excess
material to supplier, or (3) selling excess non-proprietary material to 3rd
party where 3rd party will fully reimburse the original purchase
price or if less than original purchase price is paid, then INFOCUS will pay
the difference to Flextronics including agreed to material burden.

 

5.7           Purchase
Order Flexibility.  Flextronics will
provide INFOCUS the following flexibility for the (1st two months)
Purchase Orders and (four months) forecast with the material liability
referenced in Article 5.9

 

10

 

Reschedule & Cancellation Matrix

 

 

	
   

  	
   

  	
  Reschedule

  	
   

  	
   

  	
   

  
	
  Days*

  	
   

  	
  Product

  	
   

  	
  SKU

  	
   

  	
  Cancellation

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1-10

  	
   

  	
  0

  	
  %

  	
  0

  	
  %

  	
  0

  	
  %

  
	
  11-20

  	
   

  	
  0

  	
  %

  	
  25

  	
  %

  	
  0

  	
  %

  
	
  21-30

  	
   

  	
  0

  	
  %

  	
  50

  	
  %

  	
  50

  	
  %

  
	
  31-40

  	
   

  	
  0

  	
  %

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  41+

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  	
  100

  	
  %

  

 

*Days
= Business Days

 

INFOCUS may also
request Flextronics to modify the delivery schedule of the Products at other
rates; in such event both parties agree to accommodate the other’s request to
the best of their ability.

 

5.8           PO
Cancellation.  Furthermore, INFOCUS may
cancel its orders in the following manner with material liabilities as per
Article 5.9

 

Reschedule & Cancellation Matrix

 

	
   

  	
   

  	
  Reschedule

  	
   

  	
   

  	
   

  
	
  Days*

  	
   

  	
  Product

  	
   

  	
  SKU

  	
   

  	
  Cancellation

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1-10

  	
   

  	
  0

  	
  %

  	
  0

  	
  %

  	
  0

  	
  %

  
	
  11-20

  	
   

  	
  0

  	
  %

  	
  25

  	
  %

  	
  0

  	
  %

  
	
  21-30

  	
   

  	
  0

  	
  %

  	
  50

  	
  %

  	
  50

  	
  %

  
	
  31-40

  	
   

  	
  0

  	
  %

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  41+

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  	
  100

  	
  %

  

 

*Days
= Business Days

 

5.9           Overall
Materials Liability.  In the event of
INFOCUS cancellation of purchase orders where allowed by this agreement,
decrease of forecasted materials for special or long lead-time inventory,
cancellation of this agreement or any other event where Flextronics acting with
prudent materials management techniques, and acting on agreed upon instructions
from INFOCUS and through no fault of its own, Customer will pay Flextronics for
Products, Inventory, and Special Inventory associated with attachment “C”
affected by the cancellation as follows: 
(i) 100% of the current price for all finished Products in
Flextronics’ possession, (ii) 105% of the cost of all Inventory and
Special Inventory in Flextronics’ possession and not returnable to the vendor
or usable for other customers, whether in raw form or work in process, less the
salvage value thereof, and (iii) 102.5% of the cost of all Inventory and
Special Inventory (attachment “C”) on order and not cancelable, (iv) any
vendor cancellation charges incurred with respect to

 

11

 

Inventory and
Special Inventory (attachment “C”) accepted for cancellation or return by the
vendor.

 

5.10         Allocation
of shortage materials and factory capacity. 
Flextronics agrees to fulfill all conforming INFOCUS purchase orders
according to the terms of this Agreement. 
In the event suppliers place certain components on allocation,
Flextronics agrees to notify INFOCUS immediately and work diligently to assure
proper allocations for INFOCUS production are achieved.

 

5.11         Control
of Consigned Material.  By mutual written
agreement, the parties may agree that INFOCUS purchase certain component parts
(“Consigned Part”) in support of Flextronics solely for use in the production
of Products for INFOCUS.  In the event of
such agreement, Exhibit G will define the terms, conditions and
responsibilities for these consigned materials including but not limited to
INFOCUS visibility to inventory balances, inventory transactions and reconciliation,
and Flextronics responsibilities for manufacturing shrinkage, damaged or lost
inventory and FIFO control of Consigned Parts.

 

5.12         Performance
Measures.  Both parties agree to track
and measure the overall performance of the combined INFOCUS and Flextronics
supply chains, and discuss mutual performance and corrective or remedial
actions at periodic business reviews.  Key Performance Indicators and targets to be agreed upon, and to
include measures of Quality, Flexibility, Delivery and Cost.

 

Article Six – Prices and Payment Terms

 

6.1           Prices.  Prices for all Products purchased during the
term hereof shall be as initially set forth in the pricing schedule established
in Exhibit A, hereto.  Purchases by any
INFOCUS location shall be counted in determining price and quantity pursuant to
Exhibit A.  Subsequent pricing shall
be set in accordance with Article 6.4 and 6.5 hereof.

 

6.2           *

 

6.3           Most
Favored Pricing.  From time to time,
Flextronics shall offer to sell or sell any products comparable to the Products
covered under this Agreement to any other customer at an overhead and profit
structure which is lower for the same, substantially the same or a lesser
quantity than the purchase price then in effect hereunder, Flextronics shall
immediately notify INFOCUS in writing and the purchase price hereunder shall,
from the date of such lower offer or sale, be reduced to such lower price for
all comparable quantities including Backlog under orders not yet paid for by
INFOCUS and under orders thereafter placed by INFOCUS.  Such benefits will only be extended if all
business aspects remain consistent with that of INFOCUS including:  volume, material content to sell price ratio,
flexibility model, warranty requirements, support and overhead requirements,
and other contractual cost driving arrangements.

 

*Certain information on this page has been omitted and filed separately
with the Commission.  Confidential
treatment has been requested with respect to the omitted portions.

 

12

 

6.4           Price
Review.  INFOCUS may further request a
price decrease based on market conditions, manufacturing economies of scale,
lower material costs, currency rate fluctuations, or any other reasonable
factors at any time with formal price negotiations to be conducted every six
(6) months at a mutually agreeable time and location.  Upon receiving such request, Flextronics will
consider the proposal and negotiate a mutually agreeable resolution in good
faith.  With respect to the initial
products including LP340B, LP350V, C7 SVGA and C7 XGA, the parties expect, * .  Flextronics and INFOCUS agree to implement an
aggressive price reduction program that targets specific areas of the Product
that shall include but is not limited to a pass-through to INFOCUS of “Cost
Savings” derived from manufacturing efficiency improvements, quality
improvements and material cost savings. 
Accordingly, Flextronics agrees to pass all cost savings to INFOCUS as
price decreases for the Product realized in shipments to INFOCUS and based upon
the incentive program agreed to by both parties.  INFOCUS achieved cost reductions will be
implemented as soon as practical with cost savings being passed along
consistent with the savings achieved. 
Flextronics achieved cost reductions will remain with Flextronics for
three (3) months as incentive, after which the cost savings will be passed
along to INFOCUS.

 

6.5           Payment
Terms.  Flextronics quotation for each
Product is in US Dollar, F.C.A. (Free Carrier) — Port of Export * .  Flextronics to pay export
taxes and provide all documentation necessary for INFOCUS to export the
product.

 

All payments for
undisputed invoices will be made by INFOCUS to Flextronics by wire transfer * .  The Parties agree to review all payment
disputes in a timely manner and work to resolve each dispute in a mutually
satisfactory manner.

 

6.6           Packaging.  Prices for Products include packing,
labeling, part marking and cartage. 
Flextronics agrees that all Product packaging shall comply with the
specifications set forth in the specific packaging specification for the model
to be shipped.  Flextronics may be asked
to provide drawings / sketches of shipping containers and palletization plan
for each product shipped to INFOCUS. 
Flextronics shall use its best effort to ensure that all items delivered
hereunder are packed in such a manner that they will not be damaged during
shipment using commercial carriers. 
Flextronics will comply with INFOCUS approved packaging specifications
and will be liable for product damage caused by any failure to comply with the
packaging specifications

 

6.7           Capital
Equipment spending for commercially recognized equipment and software that may
be required for electronic manufacturing and could be integrated as part of in-line
assembly and test stations or located within the factory and is used to support
an increase in manufacturing capacity or capabilities of the Products is to be
considered part of Flextronics normal cost of business expenses.  Additional Capital Equipment required as
determined by both parties to increase capabilities beyond those identified to
support the initial manufacturing requirements which increase the cost base,
will warrant a

 

*Certain information on this page has been omitted and filed separately
with the Commission.  Confidential
treatment has been requested with respect to the omitted portions.

 

13

 

subsequent
review by both parties of the pricing formulas being utilized, and appropriate
adjustment made.  Simply said, increasing
capital equipment expenditures for commercially available equipment of similar
types used by Flextronics to support current processes, capabilities and
technologies should not have an impact on Product pricing.  Capital Equipment spending for commercially
available product specific equipment (tooling, jigs, fixtures) and software
that is agreed by both parties to be amortized within the price of Products
sold to INFOCUS to be considered part of the Tooling described in the
Manufacturing Rights provision in Article 13. 
Any hardware, software, tooling or equipment purchased by INFOCUS
through an NRE payment or amortization into product cost as an overhead fee,
shall be the property of INFOCUS, and INFOCUS shall have the right to duplicate
or relocate any such items, in so long as it does not impede Flextronics
performance to this Agreement.  Tooling
or NRE charges amortized into the unit price which are not fully depreciated at
the end of the of the program will be the responsibility of INFOCUS, payment to
be made within 30 days from the last shipments of the program that includes
depreciation and prior to shipment to INFOCUS.

 

Article Seven - Delivery,
Inspection and Product Acceptance

 

7.1           F.C.A.
(Free Carrier) - Port of Export and Freight Forwarder.  The purchase price for Product(s), spare
parts and accessories sold by Flextronics to INFOCUS will be quoted F.C.A.
(Free Carrier) - Port of Export as specified by INFOCUS using freight forwarder
specified by INFOCUS, in U.S. dollars. 
Flextronics will be responsible for preparing each shipment, all export
taxes and fees, providing supporting documentation for export clearance,
required to deliver Products to F.C.A. (Free Carrier) - Port of Export.  Responsibility of seller for delivery of
product is defined by ICC Incoterms 2000.

 

7.2           Early
Delivery.  INFOCUS reserves the right, at
its option and without liability, to (a) refuse to accept delivery of
Products that are more than five (5) business days in advance of the agreed
upon Delivery Date and, if delivered, to return such Products to Flextronics,
at Flextronics expense, for subsequent Delivery to INFOCUS upon such Delivery
Date, or (b) retain any early delivered Products and hold Flextronics
invoice until the date it would otherwise have been due if Delivery had been
made on the Delivery Date.

 

7.3           Critically
Late Products.  Delivery Delays of
products, releases hereunder which are scheduled for shipment by Flextronics
more than seven (7) calendar days past the agreed to delivery schedule are
considered critically late by INFOCUS. 
At INFOCUS option, Flextronics shall pay the differential between the
standard freight and premium air freight and any reasonable expedite charges to
accelerate the delivery of critically late Product to INFOCUS receiving dock
destination provided the Delivery Delay is substantially within the control of
Flextronics.

 

7.4           Delivery
Delays.  Flextronics will notify INFOCUS
immediately of any issues arising that will prevent continuous flow of products
to INFOCUS and work diligently to remedy those issues immediately.  Delinquent shipments will require corrective
actions and review during the quarterly business reviews.  It is in Flextronics best interest to
continue

 

14

 

the
timely flow of products through the factory and INFOCUS sole remedy for chronic
delays should be to cancel this agreement.

 

INFOCUS may also
deem chronic delays substantially within the control of Flextronics as a
Material breach and thereby enable INFOCUS to terminate this Agreement pursuant
to Article 11 if not corrected within 30 days of notification of potential
breach

 

7.5           Quality
Plan and Acceptance of Products.  INFOCUS
quality target is to accept only Products fully conforming to the Product
Requirements Specification.  INFOCUS
responsibility is to provide proper manufacturing documentation and to approve
Flextronics developed Manufacturing and Process and
quality plan documentation to allow for the Product Specifications to be
meet.  Flextronics to provide formal
quality plan for each Product that includes manufacturing process and
capability metrics, product certification, in process and final test
procedures, data collection, data reporting and quality control procedures for
the manufacturing process that could be used to accept / reject Products.  Flextronics agrees to provide INFOCUS access
to process and quality data via web enabled , minimum
of once per day of data and or transaction, with the goal being real time-web
enabled access.  The Parties will
mutually agree to the process and quality data format and content provided and
timeline – target by Jan 1, 2002.

 

Quality plans must
be agreed upon prior to initial production shipments.  Flextronics agrees to provide technical
assistance to INFOCUS for implementing the quality plan including but not
limited to building appropriate test fixtures (contracted as part of the
product development process) for use at INFOCUS facility and correlating
between INFOCUS and Flextronics test facilities.

 

7.6           Inspection
and Process Verification.  Flextronics
shall manufacture the Products to the Manufacturing and Process Documentation
and quality control standards established by INFOCUS and mutually agreed to by
the Parties.  Flextronics shall inspect
all Products prior to shipment to INFOCUS to determine whether such Products
meet the agreed upon process controls, test yields, End-of-line audits and
Out-of-box audits.

 

INFOCUS may also
perform specific incoming inspection and Out-of-box audits at INFOCUS
facilities to determine whether such Products meet the agreed to Manufacturing and Process Documentation.  Such inspection tests shall be completed by
INFOCUS within thirty (30) calendar days after receipt of Product at INFOCUS
facility, and any Product(s) failing such incoming inspection tests shall be
subject to corrective action and if found to be a workmanship defect, corrected
by Flextronics as outlined in Article 7.7

 

It is the
intention of the Parties to have final product acceptance done at the
manufacturing site provided these activities can be implemented within a
reasonable period of time after completion of pilot production on any given
model including but not limited to: 
(1) Products to be qualified by INFOCUS in accordance with
corporate quality plan, (2) Equivalent test capabilities and methods are
in place at Flextronics manufacturing location necessary to perform
Environmental Stress Screening tests with good correlation to INFOCUS
manufacturing parameters, and (3) INFOCUS has

 

15

 

implemented
a comprehensive source inspection program within the manufacturing location

INFOCUS alone
shall determine if the Products meet such Quality Plans.  INFOCUS alone shall determine if the Products
have successfully passed End-of-line audits and Out-of-box audits.  Failure of any Product to meet the Quality
Plan shall solely determine INFOCUS right to reject such Products.

 

7.7           Source
Verification.  INFOCUS or its authorized
agent shall perform reasonable source verifications and quality assurance
audits at Flextronics plant, but this shall in no way relieve Flextronics of
its obligation to deliver conforming Products in accordance with specified
Delivery Dates or waive INFOCUS right of incoming inspection and acceptance tests
at destination as set forth in Article 7.6. 
Source verifications shall be made at a time agreed upon by both
parties.  Flextronics agrees to provide a
suitable office space within the Flextronics manufacturing facility with
telephone and IT network capabilities for two (2) INFOCUS employees or INFOCUS
designated representatives.

 

7.8           Request for RMA.  If
INFOCUS believes that any shipment lot of the PRODUCT has failed the incoming
inspection or should be rejected by INFOCUS due to defects in workmanship as
specified in the manufacturing and process documentation, INFOCUS will give
Flextronics a written notice, giving sufficient details of such failure or
rejection.  In such an event, Flextronics
will be entitled to receive at its expense, a reasonable number of samples of
failed PRODUCT to enable Flextronics to make its own inspection.  Return Material Authorizations (“RMA”) will
be provided within two (2) business days of an INFOCUS request.  In the event that Flextronics disagrees with
INFOCUS rejection or judgment that a given lot has failed inspection for
defects attributed to workmanship, the parties will meet immediately (in person
or telephonically) to, in good faith, discuss and resolve the disagreement.

 

Should a lot be
rejected, Flextronics and INFOCUS will agree upon one of the following remedies
at INFOCUS’ sole option, which will be carried out by Flextronics within ten
(10) calendar days.

(i)            Repair the defective
units on site at INFOCUS at Flextronics expense.

(ii)           Return product or
subassemblies freight prepaid, to Flextronics for repair.

(iii)          *
units of the PRODUCT, which are non-conforming, and which INFOCUS chooses to
make repair.

 

Because of
critical customer shortages, Parties may agree solely at INFOCUS option to
repair the defective product at an INFOCUS facility.  The Parties will agree to the necessary
repairs to bring the Products into compliance with the Manufacturing and
Process Documentation.

 

7.9           Credit
for returns.  INFOCUS is authorized to
take an immediate credit for defective Product if it has already paid for said
Product and once an RMA is issued. 
Flextronics may re-invoice the Product when it is repaired or
replaced.  After Flextronics has issued

 

*Certain information on this page has been omitted and filed separately
with the Commission.  Confidential
treatment has been requested with respect to the omitted portions.

 

16

 

the
credit or INFOCUS has taken a credit for the rejected Product, Flextronics may
request INFOCUS to return the Product to any location at Flextronics own cost.

 

7.10         Replaced
Products.  Flextronics reserves the
right, at its discretion, to promptly repair or replace Product found to be
defective or Product found to be missing components or accessories, with new
Product shipped to INFOCUS facility entirely at Flextronics expense.  Any Product returned to Flextronics will be
returned to INFOCUS facility within thirty (30) calendar days of Flextronics
receipt.  INFOCUS may cancel the
replacement purchase order for any unit not returned within thirty (30)
calendar days.  In the event a specific
Product is repaired and fails incoming inspection again; parties will meet to
discuss the failure and determine if it is required to be replaced with new
Product or repaired.  All Products
replaced by Flextronics hereunder shall be subject to INFOCUS inspection and
acceptance in accordance with the provisions of this Article 7 including full
warranty upon acceptance by INFOCUS.

 

Article Eight - Warranty

 

8.1           Express
warranty.  In addition to the acceptance
procedures described in Article 7 above, Flextronics hereby warrants that each
Product including service parts, accessories and lamps supplied hereunder are
free and clear of all liens, encumbrances, security interests and other claims,
and further warrants from the time of delivery for six (6) months, (“Warranty
Period”) thereafter will be:

(i)            manufactured in
accordance with the agreed to Manufacturing and Process Documentation free from
defects in workmanship.

(iii)          all material used to manufacture the Products has been
inspected using reasonable commercial practices and is conforming to the agreed
to IQC standards.

 

8.2           INFOCUS
Warranty Obligation for the Product. 
INFOCUS agrees to provide both In and Out of warranty servicing of the
Product worldwide that are returned to INFOCUS or an Authorized Service Center
(ASC) for repair.  The repair process for
In Warranty servicing called “Same Unit Repair” is where the customer owned
product is repaired and returned per contract terms.

 

INFOCUS will be
responsible for “customer” side of the warranty repair process including but
not limited to these activities;

(a)           technical support,

(b)           issuing return material authorizations (RMA’s),

(c)           freight to and from the customer,

(d)           validating warranty entitlement,

(e)           receiving and inspecting RMA return for customer damage,

(f)            technician initial diagnosis and repair,

(g)           replacing defective components and materials,

(h)           returning defective components and materials, except optical
engines provided by INFOCUS, to Flextronics for repair or replacement.  (This process step to be more fully described
below),

(i)            Repacking
and shipping repaired Product to customer.

 

17

 

8.3           Flextronics
Warranty Obligation for the Products shipped to INFOCUS.  In addition to the expressed warranties
stated above, Flextronics agrees to repair or replace all defective components
and materials, except the optical engines provided by INFOCUS, returned by
INFOCUS from the warranty repair process. 
Flextronics is not obligated to repair or replace customer damaged or
lost components and materials.  If any
component failure rate exceeds 2%, parties will work together with supplier to
obtain replacement materials to be provided by supplier and if not materials
will be paid for by INFOCUS.  If any
single component failure causes collateral material damage to other components
or the product as a whole, materials will be paid for by INFOCUS, so long as
components meet Manufacturing and Process Documentation as provided in Section
7.5 Flextronics will repair or replace defective components and materials
within thirty (30) calendar days after receipt at Flextronics designated repair
depot.  INFOCUS will provide appropriate
level of documentation including product serial number and statement of defect
condition.

 

INFOCUS or an ASC
while making repair on customer owned products will replace defective
components and materials with new components and materials supplied from
INFOCUS services parts inventory. 
INFOCUS will aggregate defective components and materials within the
regional business units and request RMA instructions from Flextronics on a
monthly basis.  Flextronics will provide
RMA numbers and shipping instructions within three (3) working days after
INFOCUS makes a formal request.  INFOCUS
will pay shipping costs.

 

INFOCUS agrees to
work with Flextronics on any pass through warranty claims to the component
manufacturer or material provider by making introductions and providing
supporting documentation.  Flextronics
will not be held responsible and the product rejection will not attributed to Flextronics when calculating quality data and
reports.

 

It is the intent
of Flextronics to establish a repair service center in North America and
Europe, to eliminate the need to freight returns to and from Malaysia.  Operational Date to be
established during 1st QBR, July 2001.

 

8.4           INFOCUS
will provide a quarterly summary report showing all repairs made during the
period.  The report will include; model
number, model serial number, completion date of warranty service, description
of failure conditions, parts required to make repair for each In-Warranty
repair.  Flextronics agrees to actively
participate in the review and corrective actions required.

 

8.5           Should
Flextronics become aware of any quality issues, design or manufacturing defect,
or other issues, whether Flextronics or supplier-related, which may impact
Flextronics compliance with the Product Specifications hereunder, then Flextronics
will promptly notify INFOCUS of the nature of such issues and provide the known
technical details.  INFOCUS reserves the
right to suspend product shipments until resolution of above issue.

 

8.6           No
Defect Found.  If Flextronics is unable
to find any defect, or reproduct a malfunction, (a “Defect”) in a component or
material returned by INFOCUS under warranty after

 

18

 

using
reasonable efforts to do so, the parties shall cooperate in good faith to find
the cause of such Defects and take remedial measures.  INFOCUS will use reasonable commercial
efforts to ensure that only “known defective” Products are returned to
Flextronics as part of a warranty claim. 
Parties to agree to a reasonable quantity of “No Fault
Detected” returns that are inadvertently returned to Flextronics as a
percentage of all returns for a given model.  INFOCUS agrees to reimburse freight costs
associated with NDF returns for any quantity exceeding the agreed to
percentage.

 

8.7           Epidemic
Failure.  It at any time prior to six (6)
months after the delivery date by Flextronics of a lot, three and one half
percent (3.5%) or more of the Product should fail for any cause; and if such
failure(s) should appear to have resulted from the workmanship, components or
materials, or improper manufacture or assembly of the Product (hereinafter
called “Epidemic Failure”), INFOCUS will promptly inform Flextronics of the
nature of such failure, providing the known technical details at that time, and
INFOCUS and Flextronics agree to diligently work together in good faith to
promptly resolve these issues.  This
warranty shall survive any inspection, delivery, or acceptance of the Products
or any payment for the Products by INFOCUS

 

8.8           If
the cause of such Epidemic Failure is Flextronics’ workmanship, or improper
manufacture or assembly of the Product as specifically defined in the
Manufacturing and Process documentation, then Flextronics will accept
responsibility for the epidemic failure of the Product and work with INFOCUS in
a proactive and professional manner to remedy the situation and minimize
adverse impact to INFOCUS customers.  The
Parties will work together on a recovery plan that addresses the repair and replacement
of the affected Product within a reasonable time frame and allocates the cost
to carry out the recovery plan based on degree of responsibility.  Flextronics agrees to reimburse INFOCUS for
cost of any epidemic failure not to exceed $60.00 per unit per product,
associated with the epidemic failure, if INFOCUS chooses to repair the defects
at its own facilities or ASC.  Or,
Flextronics will accept return of defective Products, repair products and pay
shipping costs to INFOCUS distribution location.

 

8.9           Flextronics
agrees that the terms and conditions of this warranty will be no less favorable
to INFOCUS than those extended by Flextronics to any other purchaser of the
similar Products for customers who’s terms and
conditions of business are substantially similar.  Any limitations contained in this Article 8
will not serve to limit Flextronics legal liability to INFOCUS for product
liability as specifically called our in this contract.

 

8.10         The
Parties will mutually agree to any public disclosure of the epidemic failure or
product recall notification.

 

Article
Nine – Service Parts

 

9.1           Service Parts.  During the term of this Agreement
Flextronics shall supply INFOCUS under separate purchase orders with Service
Parts for the purpose of enabling INFOCUS and its customers to supply and
maintain Products purchased hereunder.

 

19

 

All service parts
to have permanent part marking with INFOCUS part number and manufacturing date
code using INFOCUS UPC barcode standard as defined in Service Part Requirements
documentation.  Smaller parts may require
‘bag and tag’ part marking.  INFOCUS
service organization to list of service parts required for each model and
INFOCUS to issue purchase order to Flextronics for the procurement of said
parts.

 

9.2           Availability
of Service Parts.  For the models of the
Products purchased by INFOCUS from Flextronics, Flextronics and make available
under separate purchase orders, concurrently with the Product, suitable
replacement parts (hereinafter referred to as the “Service Parts.  INFOCUS will provide rolling six (6) month
forecast for all service parts and purchase these service parts at
lead-time.  Flextronics will provide
pricing and lead-time for all service parts identified by INFOCUS customer
service department.

 

Service
parts that are provided by Flextronics as a “purchased part” from a 3rd
party supplier will be sold to INFOCUS at cost plus markup percent to cover
handling costs, purchase order administration and profit.  Service parts that are “manufactured parts”
by Flextronics with value add (labor costs) will be sold to INFOCUS at actual
costs including material cost and labor plus mark up percent to cover handling
costs, purchase order or work order administration and profit.  Service Parts that are ordered concurrently
while a product is in production will have a lower markup percent then Service
Parts that are ordered after discontinuance of mass production of a product or
model.  Service Parts that are forecast
and ordered after discontinuance of mass production of a product or model will
be prices based on actual costs for the lost size ordered.

 

*

 

9.3           Flextronics
will promptly notify INFOCUS in writing whenever a spare part manufacturer
announces “end-of-life” for a spare part. 
Flextronics will facilitate INFOCUS purchase of estimated requirements
for said part(s) beyond the period of time in which Flextronics is required to
stock parts for ongoing production requirements.  INFOCUS and Flextronics will work in a
cooperative effort to determine the most economic order quantity and when to
make last time buys for purchased parts and manufactured parts based on such
factors as cost to manufacture, component and material availability and
inventory carrying costs.

 

9.4           In
so far as alternative service parts are identical to or better than the
original service parts in respect of performance, reliability, do not affect
appearance, structural dimensions and/or interchangeability or service parts,
Flextronics may supply alternative service parts only with the approval of INFOCUS.

 

9.5           Subject
to termination conditions in Section Eleven (11), Flextronics will offer a last
time buy opportunity for all Service Parts for all Products purchased by
INFOCUS over the term of this Agreement. 
Within forty-five (45) calendar days after notice of termination of this
Agreement and upon offering the last time buy opportunity then Flextronics will

 

*Certain information on this page has been omitted and filed separately
with the Commission.  Confidential
treatment has been requested with respect to the omitted portions.

 

20

 

have
no other obligation to provide Service Parts to INFOCUS.  Flextronics will use reasonable commercial
effort to make the Service Parts available at the least cost possible for
standard delivery lead-times. 
Flextronics will also make introductions to the 3rd party
suppliers of these Service Parts as requested by INFOCUS so INFOCUS could
continue to purchase these parts as required.

 

Article Ten - Product Changes

 

10.1         Flextronics
Changes.  Flextronics shall not make any
changes that affect the form, fit or function of any Product, tooling or
specifications without the prior written approval of INFOCUS.  Upon approval by INFOCUS such changes shall
be documented and incorporated into the Product Specifications and
Manufacturing and Process documents.  In
addition, Flextronics may not change Flextronics manufacturing site or process
for Products or an INFOCUS specification part component supplies (plastic, PCB,
etc.) manufacturing site for purchased materials without the prior written
approval of INFOCUS.  Flextronics is
encouraged to initiate such change requests for the purposes of improving cost,
quality, delivery or flexibility.  In the
event of such change requests, Flextronics will provide INFOCUS documentation
detailing the changes and justifications, and INFOCUS shall use reasonable
commercial efforts to evaluate the requests and not unreasonably withhold
approval.

 

10.2         INFOCUS
Changes.  INFOCUS reserves the right at
any time to change any one or more of the Product specifications or to specify
new Products to be produced hereunder. 
In the event of such specification changes, Flextronics will provide
INFOCUS documentation sufficient to INFOCUS to justify any price changes,
whether increases or decreases, and any Delivery date or lead-time changes.

Such new Products
or modified Products shall be counted in determining price and quantity
pursuant to Exhibit A.

 

INFOCUS will pay
for all Materials rendered excess or obsolete, due to any accepted change (ECO)
per the materials liability clause as stated in Article 5.9

 

Article Eleven - Termination

 

11.1         Termination
For Cause. 
INFOCUS may terminate this Agreement with the specified materials
liability as called out in Article 5.9 of this agreement, effective upon
written notice of termination to Flextronics in any one of the following
events:

 

(a)           Flextronics
materially breaches this Agreement and such breach remains uncured for thirty
(30) days following written notice of breach by INFOCUS; or

(b)           causes set forth in Article 15.6 delay Flextronics
performance for more than thirty (90) days; or

(c)           a
petition for relief under any bankruptcy legislation is filed by or against
Flextronics, or Flextronics makes an assignment for the benefit of creditors,
or a receiver is appointed for all or a substantial portion of Flextronics
assets, and such petition, assignment or appointment is not dismissed or
vacated within thirty (30) days or

 

21

 

11.2         Termination
Without Cause. 
INFOCUS or Flextronics may terminate this Agreement, in whole or in
part, at any time without cause upon 90 days written notice to either
party.  Upon receipt of such notice,
unless otherwise directed by INFOCUS, Flextronics shall (1) stop work
pursuant to this Agreement to the extent specified in INFOCUS notice,
(2) terminate all subcontracts and orders that relate to terminated work,
(3) place no further orders for materials, and (4) complete the work
in progress for non-terminated work which is not subject to this Agreement in
accordance with the provisions of the governing Agreement.  INFOCUS will be liable for all materials as
called out in Article 5.9 of this agreement.

 

11.3         INFOCUS
Liability Upon Termination.

In the
event INFOCUS terminates this Agreement with or without cause,

INFOCUS liability
shall be limited to work property continued pursuant to Article 11.2, INFOCUS
shall have the right to audit Flextronics records relating thereto.

(b)           Material
Liabilities as called out in Article 5.9

(c)           Any
and all tooling or capital costs previously agreed to in writing, to amortize
into the unit prices, and not fully depreciated as called out in Article 3.2,
3.7, and 3.8.

 

11.4         Survival.  The provisions of this Agreement, shall, to
the extent applicable, survive the termination hereof.

 

Article Twelve – Manufacturing
Rights

 

12.1         Manufacturing
License.  Except for inventions,
discoveries and improvement arising out of the utilization of Flextronics own
intellectual property relating to all aspects of process technology which shall
be own solely by Flextronics, INFOCUS shall own all rights in the intellectual
property associated with the Products including, without limitation,
specifications, process documentation, test/manufacturing equipment furnished
or specified by INFOCUS, and all technology, trade secrets, and know how
attending the Products and the manufacturing and testing thereof.  Upon expiration or termination of this Agreement
for cause or upon INFOCUS exercise of its manufacturing rights Flextronics
shall, at INFOCUS request, promptly deliver to INFOCUS all “Tooling” described
as component fabrication, manufacturing and assembly tooling, test fixtures and
jigs, documentation and procedures, software programs and other relevant
information necessary for INFOCUS to manufacture the Products.  INFOCUS shall be responsible for reasonable
freight costs from Flextronics manufacturing facilities.  Flextronics shall be responsible, at its sole
expense, for dismantling and packaging the Tooling so that Tooling is delivered
in good order and ready for shipment. 
Upon request by INFOCUS, Flextronics shall promptly deliver to INFOCUS,
copies of all design documents.

 

Article Thirteen –
Indemnification

 

13.1         Patent
Indemnity.  Flextronics agrees to the
extend that any suit, claim or proceeding arises due to Flextronics supplied
technology, designs, parts, processes or know how, at Flextronics’ expense, to
defend and indemnify INFOCUS and its customers in any suit,

 

22

 

claim or proceeding
brought against either, alleging that Flextronics supplied technology related
to process or manufacturing hereunder infringes any patent, copyright,
Intellectual Property or other proprietary right, provided Flextronics is
promptly notified with 10 business days, given assistance required, and
permitted to control the defense and or negotiation for settlement.  Further, Flextronics agrees to pay any
judgment in such suit claim or proceeding, including reasonable attorneys’
fees, but Flextronics shall have no liability for settlement or costs incurred
without its consent.  In the event
INFOCUS or any of its customers is enjoined from using, leasing or selling any
Product, Flextronics shall, at its option and expense (a) obtain the right to
enable such use, lease or sale, or (b) modify the design of the Product so that
it no longer infringes, but remains substantially equivalent, or as a last
resort (c) substitute substantially equivalent non-infringing Products. If none
of the foregoing can be accomplished within a reasonable time, Flextronics
shall accept a return form INFOCUS of the infringing Products and fully refund
to INFOCUS the original purchase price paid therefore by INFOCUS.

 

13.2         Process
Indemnity.  Flextronics shall, at its
expense, defend and indemnify INFOCUS and its customers in any suit, claim or
proceeding brought against either alleging that Flextronics design or
manufacture of any Product was the cause of any damage or injury to the person
or tangible property of any third party, provided Flextronics is promptly
notified, given assistance required, and permitted to direct the defense.  Further, Flextronics agrees to pay any
judgment in such suit, claim or proceeding, including reasonable attorney’s
fees, but Flextronics shall have no liability for settlement or costs incurred
without its consent.

 

Article Fourteen – NDA,
Intellectual Property and Secrecy Agreement

 

14.1         Confidentiality
Agreement.  INFOCUS and Flextronics
signed a mutual Confidentiality Agreement dated 2/1/01.  Furthermore, the Manufacturing Agreement
between INFOCUS and Flextronics Melaka (formerly Dovatron International) was
signed on 6/25/96.  The Manufacturing
Agreement contains provisions for non-disclosure of proprietary and
confidential information and assignment of this agreement to any
successors.  While the terms of this
Agreement shall take precedence, these confidentiality agreements shall
continue in effect and become part of this Agreement.

 

14.2         INFOCUS
Rights.  INFOCUS shall own all rights in
the intellectual property associated with the Products including, without
limitation, specifications, process documentation, test/manufacturing equipment
furnished or specified by INFOCUS, and all technology, trade secrets, and know
how attending the Products and the manufacturing and testing thereof.

 

14.3         Flextronics
Rights.  Flextronics acknowledges and
agrees that it shall obtain no ownership interest in any of the technology,
trade secrets, or know how attending the Products, Key components and the
manufacturing and testing thereof, or in any of the components delivered by
INFOCUS except that Flextronics shall obtain title to any such components
purchased by Flextronics. , without limiting the generality of the foregoing,
including without limitation, Flextronics shall at all time retains it
ownership in its own

 

23

 

intellectual
property, process technology, trademarks, copyrights, trade secrets and
know-how.

 

14.4         Protection.  Flextronics shall take appropriate measures
to protect INFOCUS proprietary rights in the Products, component parts and
designs and INFOCUS trademarks, copyrights, patents, trade secrets and know-how
relating to the Products.

 

14.5         Non-Use.  Flextronics shall not use or disclose any
INFOCUS intellectual property except in furtherance of the Project and in
accordance with the terms of this Agreement. 
Flextronics shall not directly or indirectly reverse engineer any
components for the Products supplied by INFOCUS.

 

14.6         Confidentiality.  Both Parties agree to maintain all
information and intellectual property provided by either party in confidence
and not to disclose such information to any other person or use such
information for any purpose other than in connection with this Agreement,
without either party prior written consent.

 

14.7         Secrecy
Agreement.  INFOCUS shall provide
Flextronics with Know How list in Exhibit D, including trade secrets, designs,
equipment, technologies, processes and inventions associated therewith, all in
accordance with this Agreement.  INFOCUS
is providing the Know How to Flextronics for the sole purpose of allowing
Flextronics to perform its obligations under this Agreement.  Except as specifically
provided in this Agreement, Flextronics shall have no right to use or deal in
any way with the Know How. 
Nothing in this Agreement shall be interpreted or construed as granting
Flextronics any ownership interest in or rights to the Know How and Flextronics
hereby acknowledges that the Know How and all modifications or improvements
thereto, constitute the sole and exclusive property of INFOCUS.  Flextronics acknowledges and agrees that it
shall obtain no ownership interest in any of the technology, trade secrets, or
know how attending the Products. 
Furthermore, Flextronics represents and warrants that it has appropriate
agreements in place with all its employees, consultants, contractors and
suppliers, providing for non-disclosure and non-use of the INFOCUS Know-How,
and that Flextronics will enforce such agreements to the fullest extent in
order to protects the INFOCUS Know How from misuse.

 

During the term of
this Agreement Flextronics agrees not to provide final assembly “Box Build” of
projector products for any direct competitor of INFOCUS at the same Flextronics
manufacturing facility used to manufacture INFOCUS Products.  Upon termination of the Agreement,
Flextronics agrees to not provide final assembly “Box Build” of projector
products for any direct competitor of INFOCUS for a period of 3 months from the
same facility as that used for the production of INFOCUS Products.

 

Article Fifteen – General
Provisions

 

15.1         Technical
Assistance.  Flextronics agrees to
provide technical assistance to INFOCUS in effecting resolutions to Product
quality problems encountered by INFOCUS. 
In addition, Flextronics agrees to maintain failure analysis data on all
Products returned to Flextronics

 

24

 

for
repair or replacement and to make such analysis available to INFOCUS upon
INFOCUS request.

 

15.2         Responsibilities
of the Parties.  Except as provided in
this Agreement, each of the parties hereto shall conduct the work to be
performed hereunder as an independent contractor and not as an agent or employee
of partner of the other party hereto. 
Subject to the terms and conditions of this Agreement, each party shall,
at its sole discretion, choose the means to be employed and the manner of
carrying out its obligations hereunder.

 

15.3         Assignment.  Except for assignment with Flextronics
affiliates and subsidiaries, Flextronics shall not assign any of its rights or
obligations under this Agreement to any person without the prior written
consent of INFOCUS.  Any purported
assignment in violation of this provision shall be void.  INFOCUS shall have the rights to assign this
Agreement with the prior consent of Flextronics, for financial review not to be
unduly withheld.

 

15.4         Release
of Information.  Neither party shall
publicly announce the terms or existence of this Agreement or advertise or
release any publicity in regards to this Agreement without securing the prior
written consent of the other party, which shall not be unreasonably withheld.

 

15.5         Notices.  Any notice required or permitted to be given
under this Agreement shall be in writing and shall be deemed valid and
sufficient if delivered in person, dispatched by regular mail or delivered by
fax (provided the original is thereafter promptly dispatched by regular mail)
to the following:

 

To INFOCUS:                       In Focus
Systems, Inc.

27700B SW Parkway Avenue

Wilsonville, Oregon 97070 U.S.A.

 

Attention: Legal Department

Fax Number: (503) 685-8838

 

To Flextronics:                      Flextronics
Industrial (Melaka) SDN.BHD

Lot 19/20, Kawasan MIEL,

75350, Melaka, Malaysia

 

Attention:  Michael Ng, General Manager

Fax Number: 60-6

 

15.6         Force
Majeure.  With the exception of payment
for Product delivered in conformance with this Agreement, each party shall have
no obligation or liability whatsoever arising out of or in connection with any delay
or failure to perform any of its covenants or obligations under this Agreement,
or any loss or damage incurred by the other party as a result thereof, if such
delay or failure is caused, in whole or in part, either directly or indirectly,
by act of God, fire, war, riot, civil insurrection, accident, embargo,
governmental priority, strikes or other labor trouble, order of any court or
government, or

 

25

 

any
other occurrence, act, cause or thing beyond the control of that party.  In the event that such a delay by Flextronics
continues for more than thirty (90) days, INFOCUS may, at its sole option,
either (a) terminate this Agreement under Article 12.1 including the provisions
of 5.9, or (b) suspend its obligations under this Agreement during the period
of delay and cancel outstanding delinquent Purchase Order subject to Article
5.9

 

Flextronics
to maintain their disaster recovery plan (Exhibit J) in a sufficient manner to
minimize disruption to INFOCUS business at the current monthly shipping rates.  The Parties agree to review the disaster
recovery plan every six (6) months as part of the quarterly business review
(QBR) process.  In any case of Force
Majeure, both parties will seek to use another Flextronics facility as 1st
remedy.

 

15.7         Disclaimer
of Damages, Warranties, and Liabilities.

 

NOTWITHSTANDING
ANYTHING HEREIN TO THE CONTRARY, NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR
ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES (INCLUDING,
BUT NOT LIMITED TO, LOST REVENUES OR PROFITS) ARISING OUT OF ANY BREACH OF THIS
AGREEMENT, OTHER THAN SUCH DAMAGES ARISING OUT OF ANY BREACH RELATING TO
CONFIDENTIAL INFORMATION, INVENTIONS OR INTELLECTUAL PROPERTY RIGHTS.

 

EACH PARTY HEREBY
DISCLAIMS ANY EXPRESS, IMPLIED OR STATUTORY WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.

 

Other than as may
be provided herein, each party shall be liable for any cost, expense or
liability incurred by it in the performance, and in anticipation of the
performance, of its obligations under this Agreement.

 

15.8         Insurance.  Flextronics shall maintain adequate casualty
and loss insurance with a reputable insurance company reasonably acceptable to
INFOCUS for all risks at replacement cost of INFOCUS’ tooling, fixtures and
equipment at Flextronics facilities and Flextronics supplier’s facilities.  The insurance amount shall cover the actual
value of all inventory including material, work-in-process and finished goods,
tooling and fixtures currently in use.

 

Flextronics shall
provide INFOCUS with documentation of its insurance coverage... Flextronics shall
exercise due diligent to renew the insurance policy upon its expiry.  Flextronics shall assign all proceeds for any
causality claims under the foregoing to INFOCUS.  Flextronics shall pay cost of liability
insurance at any Flextronics facilities and for any potential liability of
Flextronics

 

15.9         Compliance
with Laws.  Flextronics agrees to comply
with, at its expense, all applicable Federal, State and local laws, regulations
and ordinances necessary to permit the manufacture, sale and distribution of
the Products, the importation of components from INFOCUS, and the exportation
of finished Products to INFOCUS.  Flextronics
shall

 

26

 

promptly
notify INFOCUS in writing of any charge of non-compliance raised against
INFOCUS or Flextronics during the execution of this Agreement.

 

15.10       Headings.  The headings and titles of the Articles and
Sections of this Agreement are inserted for convenience only and shall not
affect the construction or interpretation of any provision.

 

15.11       Modifications
of this Agreement.  This Agreement,
together with the other Definitive Agreement(s) and the Exhibits thereto, sets
forth the entire understanding and agreement between the parties as to the
subject matter hereof and thereof and supersedes any previous communications,
representations or agreements, either oral or written, with respect to the
subject matter hereof or thereof.  The
English-language version of this Agreement shall be the governing version.  Neither party shall be bound by any
modification of this Agreement unless such modification is in writing and
signed by an authorized representative of the party to be bound thereby.

 

15.12       Severability.  If any provision of this Agreement is held
invalid by any law, rule, order or regulation of any government,
or by the final determination of any state or federal court, such invalidity
shall not affect the enforceability of any other provision not held to be
invalid.

 

15.13       Omissions.  Any delay or omission by either party to
exercise any right or remedy under this Agreement shall not be construed to be
a waiver of any such right or remedy or any other right or remedy hereunder.  All of the rights of either party under this
Agreement shall be cumulative and may be exercised separately or concurrently.

 

15.14       Non-material
Provisions.  Should any non-material
provision of this Agreement be judicially declared invalid, unenforceable or
void, such declaration shall not have the effect or invalidating or voiding the
remainder of this Agreement, and the remaining provisions of this Agreement
shall continue in full force and effect as if such invalid, unenforceable or
void provision had not been included herein or therein.

 

15.15       Governing
Law and Forum.  This Agreement shall be
governed and construed in all respects in accordance with the laws of the State
of California.  Any settlement between
the parties or judgment issued in arbitration may be enforced in any court
having jurisdiction over the matter.

 

15.16       Arbitration.  All differences and disputes arising
hereunder will be settled amicably between the parties in good faith.  If however, such disputes cannot be resolved
to the full satisfaction of the both parties promptly but in any event not
later than thirty (30) days from the time a complaint is notified from one
party to the other, either party may seek Arbitration.

 

Any controversy,
claim or dispute between the parties arising out of this Agreement shall be
settled exclusively and finally by arbitration in accordance with the
Commercial Arbitration Rules (“Rules”) of the American Arbitration Association
(“AAA”) except to the extent that the Rules conflict with the provisions of the
Agreement. and excluding the 1980 United Nation
Convention of contracts governing the International Sale of Goods.

 

27

 

15.17       Entire
Agreement.  This Agreement and all
Exhibits hereto constitute the entire understanding between INFOCUS and
Flextronics for the sale and purchase of Products hereunder and supersede any
prior communications, oral or written, relating to the subject matter
hereunder.  A copy of such Exhibits is
attached hereto.

 

15.18       All
Exhibits A through H of this Agreement are hereby incorporated and made a part
of this Agreement.

 

 

	
  INFOCUS Corporation

  	
   

  	
  Flextronics International Limited

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
							

 

28

 

ADDENDUM       to
InFocus-Flextronics Manufacturing Agreement Dated                    

 

Addendum Effective Date:                                       

Addendum Expiration Date:                                    

 

WHEREAS, the Flextronics and
InFocus, have entered into a Manufacturing Agreement (hereinafter called “Agreement”)
that was originally effective the                             .

 

WHEREAS, both parties wish to
create an addendum to the Agreement to cover a specific situation involving the
manufacture of LP350s, (hereinafter Addendum).

 

THEREFORE, for valuable
consideration, the adequacy and receipt of which are hereby acknowledged, the
parties agree as follows:

 

1.     PRE-ESTABLISHED
TERMS

 

All terms and
conditions of the Agreement remain in full force and effect and apply to this
Addendum, unless specifically modified below. 
In case of conflict between modification herein and the original
Agreement, the terms and conditions of this Addendum will at all times take
precedence over the original terms and conditions.

 

2.     AGREEMENT
ADDITIONS.

 

1.     Flextronics will provide a
final build of LP350s at a reduction of 50% on the Flextronics Value add
portion.

 

2.     Flex is authorized to keep
100 LP350s for internal Flextronics consumptions.

 

3.     These units will come off the
tail end of manufacturing of the LP350s.

 

4.     These units will be without
InFocus Warranty.

 

5.     All accessories (ceiling
mounts and travel cases) will be sold separately from the units and are
purchasable from InFocus.

 

In Witness Whereof, each party’s duly authorized
representative has executed this Addendum.

 

	
  Flextronics

  	
   

  	
  InFocus Corporation

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
														

 

29

 

Spares Pricing

 

As acknowledged and agreed to on May 9, 2002 InFocus
has expanded procurement of spares and accessories, therefore it has become
necessary to refine the spares and accessories pricing model for specific
higher cost items.  The following pricing
model will become effective as of                        

 

	
  Item

  	
   

  	
  Production 

  Status

  	
   

  	
  Costing
  Model

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LampAssys

  	
   

  	
  IN

  	
   

  	
  BOM cost, assembly * .

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  OUT

  	
   

  	
  Updated BOM cost, assembly * . Minimum order quantities will be enforced.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ECAs

  	
   

  	
  IN

  	
   

  	
  Current production quote model.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  OUT

  	
   

  	
  Updated BOM cost, assembly and * .

  
	
   

  	
   

  	
   

  	
   

  	
  Minimum Order Quantities will be enforced, and
  orders less * .

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Power Supplies

  	
   

  	
  IN

  	
   

  	
  BOM cost plus *
  .

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  OUT

  	
   

  	
  Updated BOM *
  .

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Engines &

  	
   

  	
  IN

  	
   

  	
  BOM cost, assembly (if applicable) and * .

  
	
  Engine Assys

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  OUT

  	
   

  	
  Updated BOM cost, assembly (if applicable) and * .

  

 

The original spares and accessories pricing model
outlined in the master agreement governs all other parts

not
specified hereto.

 

In Witness Whereof, each
party’s duly authorized representative has executed this Addendum.

 

	
  Flextronics

  	
   

  	
  InFocus Corporation

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
														

 

*Certain information on this page has been omitted and filed separately
with the Commission.  Confidential
treatment has been requested with respect to the omitted portions.

 

30

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