En Cima Appendix_5[1]

uAppendix 5 MEMORANDUM OF AGREEMENT KNOW ALL MEN BY THESE PRESENTS: This agreement made and executed by and between: EN CIMA, INC., a corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with principal place of business at Unit 219 Regalla Park Tower, 150 P. Tuazon Boulevard, Cubao, Quezon City, Metro Manila, represented in this act by its President, ANTHONY MERIEL GARCIA, hereinafter referred to as “EN CIMA”; - and SAINT CLAIRE APPAREL, a business duly owned and existing under and by virtue of the laws of the Philippines, with principal place of business at Obando, Bulacan, represented in this act by its owner, ___________ hereinafter referred to as “SCA”;

WITNESSESTH THAT: WHEREAS, EN CIMA shall, from time to time, need the services of a subcontractor to undertake the manufacturing of all the products in accordance with specification for a specified and limited period of time; WHEREAS, SCA represents that it is a duly registered business corporation engaged in the business of providing aforesaid services; WHEREAS, SCA further represents that it is qualified and has sufficient capital, the necessary manpower, facilities, and equipment to perform the aforesaid services and the capacity to apply the technical inputs and specifications which EN CIMA will require in the performance of the said services; NOW, THEREFORE, for and in consideration of the foregoing premises, and the terms and covenants hereunder stipulated, the parties have agreed and do hereby agree as follows: 1. Nature and Scope of Work SCA undertakes to perform for EN CIMA manufacturing of the Lilliput clothing line in compliance with the quality standards to be provided by EN CIMA.

SCA hereby warrants that it shall maintain strict control in undertaking the work hereunder agreed upon to insure compliance with EN CIMA’s specifications. It is understood that these specifications and instructions, as well as the quantities of the products to be manufactured under this agreement, may be altered and modified upon the sole discretion of EN CIMA. 2. A. SCA Premises / Facilities The manufacturing requirements of EN CIMA as specified in Clause 1 of this Agreement shall be performed at SCA’s premises located at Obando, Bulacan, with the use of its facilities. EN CIMA shall provide SCA with the supply of raw materials, designs and patterns which EN CIMA shall deliver at the SCA facility in Bulacan. Sufficient quantities of raw materials will be delivered monthly to SCA to ensure efficient operation and in order to achieve plant operating efficiency. 2. B. Production Losses A. Product Defects The term product defects include the following: - missing buttons - garment tears - uneven stitch / hemlines All of the above will be for the account of SCA. B. Raw Materials Defects SCA Quality Control should inspect all SCMC incoming raw packaging materials for those of sub-standard quality. Noted sub-standard quality should not be used during production. Except upon prior written agreement as to its disposition and use, all sub-standard materials shall be returned by SCA and accepted by EN CIMA within five days (of delivery) when the sub-standard quality was noted in an inspection by SCA quality control personnel. Except upon the request and/or direction of EN CIMA any use of sub-standard raw materials that will result in product defects will be for the account of SCA. SCA will keep and store EN CIMA’s raw materials in a required storage area. 3. Specifications The products shall be manufactured in accordance with the specifications provided.

4. Permits and Licenses SCA warrants and guarantees that it has the necessary permits and licenses from the authorities to undertake the services covered by this Agreement, and further guarantees that the operation of its equipment and facilities conforms to all the relevant laws, rules and regulations concerning the manufacturing of EN CIMA’s products. 5. Inspection and Manufacturing Operations Subject to prior arrangement with SCA, SCA shall allow EN CIMA’s duly authorized representatives to enter during office hours, its premises where its manufacturing operations are undertaken for the purpose of inspecting the products to ensure SCA’s compliance with the requirements of Clause 1 hereof. 6. Labels and Trademarks: Assumption of Liability The product to be manufacture by SCA shall use only the raw materials provided by EN CIMA as indicated in Clause 2 hereof and shall be labeled in such manner and under such trademark(s) as EN CIMA shall specify from time to time. EN CIMA shall be responsible and hold SCA free from liability for any cause of action arising from complaint or claims of other persons that any product it is manufacturing is an imitation or an infringement of its rights or causing damage to its goodwill in business. 7. Samples To ensure that products are manufactured in accordance with EN CIMA’s specifications, SCA shall, at the request of EN CIMA, provide representative samples of the said products manufactured for EN CIMA’s approval. Such samples may be drawn or obtained by EN CIMA’s authorized representatives from SCA’s premises, subject to prior arrangement with SCA. 8. Planning and Delivery EN CIMA shall advise SCA of its requirements for the manufactured products in accordance with Clause 3 hereof at least fifteen days in advance to enable SCA to fulfill the same delivery time, provided that EN CIMA shall deliver raw materials on time. 9. Warehousing SCA shall provide EN CIMA a warehouse space to store the raw materials. EN CIMA shall pick up the finished products every month and once SCA contacts and confirms them of such. Any storage of the same thereafter will be charged P100/sqm/mo. 10. Contract Price

For and in consideration of the services to be rendered under this Agreement, EN CIMA shall pay SCA the agreed price in this contract. This amount shall be reviewed every year. It is further agreed that all taxes and charges which may be due the authorities, for the services contemplated herein, whether national or local, shall be for the exclusive account of SCA. 11. Invoicing SCA shall bill EN CIMA on the agreed contract price of finished product. An outward receipt will be issued by SCA and countersigned by EN CIMA representatives. EN CIMA shall pay SCA within 15 days from the date of the outward invoice. 12. Accounts and Inventories For purposes of good accounting and defective inventory control, EN CIMA and SCA shall ensure the efficiency and mutual benefits to both parties of the services covered by this Agreement. Moreover, EN CIMA, through its authorized representatives, may during office hours inspect the warehouse of SCA where the raw materials and finished goods are stored, to check the conditions thereof from time to time for accounting and control purposes. 13. Risk of Loss and Damage SCA shall not be liable for the damage to or loss of any of EN CIMA’s raw materials already delivered to SCA’s warehouse, if the damage or loss is due to unforeseen or fortuitous events, as well as, breakdown of equipment or disruption of utility services not resulting from the negligence or direct act of SCA, or any of its agents or employees. SCA, however, shall take appropriate remedial action to minimize any such loss or damages. To ensure full and faithful compliance with its obligations here under, SCA shall secure comprehensive insurance coverage to protect it equipment, facilities and other properties utilized in the performance of its obligations under this agreement. SCA shall likewise observe strict maintenance measures and undertake periodic checkup of its equipment and facilities to prevent or minimize the incident of breakdown. 14. Exclusivity SCA guarantees not to use any quantity of the raw materials hereunder provided by EN CIMA except exclusively for the latter’s requirements of the said products in the form as contemplated in the Agreement. 15. Prohibition Against Sub-Contracting

In no case shall SCA sub-contract the services herein agreed with EN CIMA to a third party without written consent of EN CIMA. 16. Confidentiality SCA agrees to keep confidential design know-how, specifications, and other confidential information and documents which EN CIMA may pass or transmit to SCA and/or which SCA may by itself learn or come into possession with in connection with this Agreement, during and after the effectivity of this Agreement. 18. Termination in Special Circumstances Notwithstanding the agreed period, this agreement may be pre-terminated for cause or causes arising from repeated breaches or violation of the terms and conditions of this Memorandum of Agreement by giving the other a written notice of 90 days prior to the intended date of termination. 19. Products and Materials on Termination In the event of termination of this Agreement, for any reason whatsoever, SCA shall immediately return to EN CIMA all the quantities of the said products whether already finished or not, and all the quantities of raw materials in possession of SCA at the time of the termination. On the other hand, EN CIMA shall pay SCA all amounts due to the latter accruing before effectivity of the termination. 20. Venue of Court Action Any court action that may be instituted by either of the parties arising out of or in connection with any of the provisions of this Agreement shall be filed with the proper courts in Quezon City, Metro Manila or Obando, Bulacan, at the option of the party bringing the suit. IN WITNESS WHEREOF, the parties have signed these present this ___th day of January 2006 at Quezon City, Metro Manila, on the part of EN CIMA, and on ___th day of January 2006 at Obando, Bulacan on the part of SCA. EN CIMA, INC. By:

SAINT CLAIRE APPARELS By:

ANTHONY MERIEL GARCIA President

_________________________ President