Provide a continuation starting with 'section 4. Delivery and Shipping. The ... ', given this agreement: 2. Technology Access Fee. Manufacturer will pay Subcontractor One Million and No/100 USD ($1,000,000) (the "Technology Access Fee"). The Technology Access Fee will be paid in two equal installments of $500,000 each. The first installment will be due thirty (30) days following the Effective Date and the second installment will be due sixty (60) days following the Effective Date.
3. Orders for Manufacturer's Products to be Manufactured by Subcontractor
3.1 Purchase Orders: Excess Inventory. Manufacturer shall provide to Subcontractor a purchase order setting forth the proposed quantity of Manufacturer's Products to be purchased by Manufacturer and delivery dates, which purchase order will be subject to written acceptance by Subcontractor. All purchase orders are non-cancellable, and the Manufacturer shall pay for the purchaser orders as follows: (i) for purchase orders for less than or equal to a total of five hundred (500) units in any given calendar month, payment of fifty percent (50%) of Product Cost (as defined below) shall be made in full at the time the order is placed and the remaining balance paid in full before the Manufacturer's Products are shipped; and (ii) for purchase orders for more than five hundred (500) units in any given calendar month, payment of one hundred percent (100%) of Product Cost shall be made in full at the time the order is placed. Manufacturer's purchase orders accepted by Subcontractor and any forecast provided to Subcontractor by Manufacturer will constitute authorization for Subcontractor to procure product components to manufacture the Manufacturer's Products covered by such purchase orders based on their lead times. Subcontractor will advise Manufacturer of the lead time of components contained within their order and any forecast and Manufacturer will pay for the components prior to the Subcontractor placing orders for the components.
3.2 Contract Formation: Acceptance and Entire Agreement. Each time Manufacturer submits an order for Manufacturer's Products and Subcontractor accepts the order or ships the ordered Manufacturer's Products to Manufacturer, a new contract is formed consisting of this Agreement, the quantities and delivery dates specified in the order and the prices then offered by Subcontractor. ACCEPTANCE OF MANUFACTURER'S ORDER IS EXPRESSLY LIMITED TO THE TERMS AND CONDITIONS OF THIS AGREEMENT, NOTWITHSTANDING ANY ORAL OR WRITTEN STATEMENT MADE BY MANUFACTURER, AND DOES NOT IN ANY WAY WHATSOEVER CONSTITUTE ACCEPTANCE OF MANUFACTURER'S TERMS AND CONDITIONS EXCEPT AS SET FORTH IN THE TERMS OF THIS AGREEMENT. NO TERMS AND CONDITIONS CONTAINED IN ANY PURCHASE ORDER FORM, WHETHER PROVIDED BY MANUFACTURER OR SUBCONTRACTOR, WILL BECOME A PART OF THE CONTRACT AND THIS CONTRACT WILL GOVERN ALL PURCHASES. Manufacturer's acceptance of or payment for Manufacturer's Products that Manufacturer has not ordered creates a contract comprised of this Agreement, the quantities of Manufacturer's Products accepted or paid for, and the prices then offered by Subcontractor. This Agreement shall constitute the entire agreement with respect to any contract formed and shall not be altered, amended, supplemented or canceled without the express written agreement of both Manufacturer and Subcontractor.
3.3 Product Prices. Pricing shall be the actual cost of the manufacturing of each Manufacturer's Product plus the proportional allocation of the costs of Subcontractor's manufacturing, engineering, and supply chain overhead, as mutually agreed by the Parties (the "Product Cost"). Title of the product will transfer to the Manufacturer at the shipping dock of the manufacturing facility. Manufacturer will be responsible for shipping costs. Manufacturer shall pay any taxes incurred in the manufacture of Manufacturer's Products, including any taxes incurred as a result of purchasing components or maintaining inventory. In addition to the Royalties paid under this Agreement to the Subcontractor, Manufacturer shall pay any other third-party royalties for technology that are required to manufacture the Manufacturer's Products for their intended purpose. As of the date of this Agreement neither Party is aware of any third-party royalties for technology that Manufacturer would be liable to pay. Subcontractor will provide Manufacturer with documentation substantiating any Product Cost variance upon request.
3.4 Cost Reductions. Potential Product Cost reductions as a result of materials pricing will be reviewed and implemented periodically as mutually agreed and passed on to the Manufacturer. Product Cost reductions resulting from engineering changes or other changes, initiated by Manufacturer, that would impact either Product Costs or process changes at Subcontractor will be implemented at an agreed upon time. Manufacturer will be responsible for their proportionate share of any Product Cost reduction that is a result of engineering investment by the Subcontractor. If the Manufacturer does not pay its proportionate share, the Manufacturer will pay the Product Cost as if the cost reduction had not been made (i.e., the Product Cost prior to the cost reduction as if the cost reduction were not made). The Subcontractor will list the new Product Cost and a line item for engineering investment that accounts for the difference.
3.5 Royalties. In addition to paying the Product Costs of Manufacturer's Products, Manufacturer shall also pay to Subcontractor the following royalty payments (each a "Royalty" and collectively the "Royalties") for each of Manufacturer's Product purchased under this Agreement. Royalties shall be paid 50% at time of shipping and the remaining balance of 50% due in 15-days after the Manufacturer's Products have shipped from the manufacturing facility. a) Non-Rechargeable Products. For Manufacturer's Products that are non-rechargeable, Manufacturer shall pay Subcontractor a Royalty equal to the higher of (i) eighty percent (80.0%) of the Product Cost; and (ii) $80 per unit. b) Rechargeable Products. For Manufacturer's Products that are rechargeable, Manufacturer shall pay Subcontractor a Royalty equal to the higher of (i) one hundred percent (100.0%) of the Product Cost; and (ii) $100 per unit. 3.6 Zounds' Products and Manufacturers Products Built to Manufacturer's Specifications. Subject to Section 7 below, Subcontractor agrees to manufacture Manufacturer's Products (i) that are identical to Zounds' Products allowing Manufacturer to utilize Subcontractor's existing product designs and features and/ or (ii) to specifications provided by Manufacturer from time to time with approval of such changes by Subcontractor. Any advice given by Subcontractor to Manufacturer before or after delivery of Products built to Manufacturer's specifications is based solely upon the information available to Subcontractor, and the use of such advice by Manufacturer is solely and entirely at Manufacturer's own risk. Manufacturer represents and warrants that it has independently determined the fitness, need, usefulness, and applicability of the Manufacturer's Products built to Manufacturer's specifications it has ordered and does not rely on any representation of Subcontractor in that regard.
3.7 Engineering Services and Design Changes. Manufacturer may elect to utilize Subcontractor's design engineering resources (the "Engineering and Design Services") to further customize Manufacturer's Products. The cost of Engineering and Design Services to be paid by Manufacturer will be agreed to in a written document setting forth the scope, timing and other terms of such Engineering and Design Services executed by the Parties prior to any services being provided by Subcontractor. Subject to the written agreement of the parties with respect to any resulting change in price, delivery schedule and other terms, Subcontractor will accept design changes (i.e., Engineering Change Orders or "ECO's") according to Manufacturer's instructions.
3.8 Tooling, Setup and Non-Recurring Engineering ("NRE") Charges. Subcontractor agrees to provide Manufacturer with a quote for any one-time tooling, setup or NRE charges payable by Manufacturer as a result of a change in design requested by Manufacturer, change in minimum quantity requirements by Manufacturer as originally quoted by Subcontractor, or an addition to the Manufacturer's Products purchased under this Agreement requested by Manufacturer. If Manufacturer elects to proceed with the design change, minimum quantity requirements change or addition as specified in Subcontractor's quote, Manufacturer will provide Subcontractor with written acceptance of Subcontractor's quoted terms.
3.9 Inventory Reports. Subcontractor agrees to report its inventory position to Manufacturer on a monthly basis, including the following information: quantity of raw material, work in process and any open orders that cannot be cancelled to the supplier lead time. The report will specifically identify any material on hand or on order where the quantity exceeds the agreed three (3) month forward looking forecast plus safety stock as agreed upon by Subcontractor and Manufacturer. The Subcontractor and Manufacturer will review inventory levels and safety stocks quarterly.