Production Agreement for
Prod IV (Model P-4R) Radio Units
TABLE OF CONTENTS
Section Title
1. DEFINITIONS............................................... 1
2. PRODUCTION SCOPE.......................................... 2
2.1 Production....................................... 2
2.2 Minimum Purchase Amount.......................... 3
2.3 Frequency Variation.............................. 3
2.4 Supplier Relationship............................ 3
2.5 InterDigital Supply.............................. 3
3. ORDER AND ROLLING FORECAST................................ 3
3.1 Rolling Forecast................................. 3
3.2 Purchase Order Requirements ..................... 4
3.2 Additional Requirements.......................... 4
3.3 Forecast Accuracy................................ 4
4. PRICE AND PAYMENT......................................... 4
4.1 Price............................................ 4
4.2 Schedule......................................... 4
4.3 Price Adjustments................................ 4
5. DELIVERY AND TITLE........................................ 5
5.1 Shipping Requirements............................ 5
5.2 Packaging and Other Requirements................. 5
5.3 Product Title.................................... 5
5.4 Delivery Date.................................... 5
6. INSPECTIONS............................................... 5
6.1 ISO Standards.................................... 5
6.2 Inspection Procedure Approval.................... 5
6.2 Outgoing Product Inspection...................... 5
6.3 Incoming Product Inspection...................... 5
6.4 Nonconforming Products........................... 5
6.5 On-Site Inspections.............................. 6
7. CHANGES................................................... 6
7.1 Purchase Orders.................................. 6
7.2 Design Changes................................... 6
8. CONFIDENTIAL INFORMATION.................................. 7
8.1 Designation of Confidential Information.......... 7
8.2 Nondisclosure.................................... 7
8.3 Exceptions....................................... 7
8.4 Limitations...................................... 7
i
8.5 Survival......................................... 7
9. TERM, TERMINATION AND EXPIRATION.......................... 8
9.1 Term............................................. 8
9.2 Termination Without Cause........................ 8
9.3 Termination For Cause............................ 8
9.5 Cancellation..................................... 9
9.6 Return of Confidential Information............... 9
9.7 Survival/Final Delivery.......................... 9
10. WARRANTY.................................................. 9
10.1 Warranty......................................... 9
10.2 Notification/Remedy.............................. 10
10.3 Marking.......................................... 10
10.4 Non-Waiver....................................... 10
10.5 Warranty Limitation.............................. 10
10.6 Title Warranty................................... 10
10.7 LIMITATION....................................... 10
11. OUT-OF-WARRANTY SERVICE................................... 10
12. INSURANCE AND INDEMNIFICATION............................. 10
12.1 Indemnification.................................. 10
12.2 Insurance........................................ 11
12.3 LIMITATION OF LIABILITY.......................... 11
13. INTELLECTUAL PROPERTY..................................... 11
13.1 Pre-Existing Intellectual Property............... 11
13.2 Developed Proprietary Information................ 11
13.3 Third Party Intellectual Property Rights......... 11
14. ARBITRATION............................................... 12
15. FORCE MAJEURE............................................. 12
16. NOTICES................................................... 12
16.1 Notice Requirements.............................. 12
16.2 Receipt.......................................... 13
17. SEVERABILITY.............................................. 13
18. SUBCONTRACTING............................................ 13
19. LIENS..................................................... 13
20. WAIVER.................................................... 13
21. ASSIGNMENT................................................ 13
22. AMENDMENT................................................. 14
23. ENTIRE AGREEMENT.......................................... 14
24. HEADINGS.................................................. 14
ii
25. GOVERNING LAW............................................. 14
26. TAXES..................................................... 14
27. INDEPENDENT CONTRACTOR.................................... 14
28. LABELING ................................................ 14
29. PUBLIC ANNOUNCEMENTS. ................................... 15
iii
PRODUCTION AGREEMENT
THIS PRODUCTION AGREEMENT (the "Agreement"), made and entered into this 1st day
March of 1996 ("Effective Date") by and between INTERDIGITAL COMMUNICATIONS
CORPORATION, a Pennsylvania corporation having its principal place of business
at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, ▇▇▇ (hereinafter referred
to as "InterDigital") and KENWOOD CORPORATION, a Japanese corporation having its
principal place of business at ▇-▇▇-▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇-▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇
(hereinafter referred to as "Kenwood").
W I T N E S S E T H
WHEREAS, InterDigital has entered into and believes in the future it will enter
into agreements with customers to supply and/or install communications equipment
in certain locations and within specified period of time, which communications
equipment will include the RF radio units ("Customer Agreements"); and
WHEREAS, time, pricing and performance are the essence of such Customer
Agreements; and
WHEREAS, InterDigital has developed a specification for an RF radio unit to be
incorporated in Prod IV, a subscriber unit, to be supplied under Customer
Agreements; and
WHEREAS, InterDigital and Kenwood have entered into an agreement for the
development of a prototype of the RF radio unit (the "Development Agreement" as
further defined below); and
WHEREAS, Kenwood has expertise in the manufacture of products similar to the RF
radio unit and is desirous of manufacturing RF radio unit for InterDigital; and
WHEREAS, InterDigital desires to engage Kenwood on a non-exclusive basis, but
subject to minimum purchase quantities, to manufacture specified units of the
Product (as hereinafter defined), under and subject to the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and promises contained
herein, and intending to be legally bound, the parties hereto agree as follows:
1. DEFINITIONS
1.1 "Delivery Date" shall mean the date when a quantity of Product (as
hereinafter defined)agreed to and established by InterDigital and
Kenwood as set forth in Section 3.1 is to be loaded on a vessel at the
Shipping Location (as hereinafter defined). Standard Delivery Date
shall be the end of the fifth month after Purchase Order issue.
1.2 "Defect" shall mean any non-conformity of the Product to Engineering
Specifications (as hereinafter defined) or the Pre-Production Model (as
hereinafter defined).
1
1.3 "Development Agreement" shall mean the Development Agreement for the
PROD IV (Model P-4R) Radio Units dated March 1, 1996, as may be amended
from time to time, between InterDigital and Kenwood.
1.4 "Engineering Specifications" shall mean the drawings and specification
documents containing the physical, mechanical, electrical, interface
and protocol specifications of the Product (as hereinafter defined) as
accepted by InterDigital pursuant to the Development Agreement and as
may be amended from time to time as provided herein.
1.5 "Intellectual Property" shall mean any and all patents, patent
applications, trademarks, copyrights, proprietary know-how, trade
secrets, processes, designs, discoveries, innovations, inventions or
other tangible or intangible intellectual property rights.
1.6 "Pre-Production Model" shall mean the final sample of the printed
circuit board for the RF analogue circuitry, which is a part of the
subscriber unit developed by InterDigital, and which is accepted by
InterDigital pursuant to the Development Agreement.
1.7 "Product" shall mean the full assembled circuit card assembly for the
RF analogue circuitry, including all InterDigital Components (as
defined in Section 2.5), which is a part of the subscriber unit
developed by InterDigital, to be manufactured by Kenwood pursuant to
the requirements of this Agreement.
1.8 "Purchase Order" shall mean any firm order for Products issued by
InterDigital to Kenwood during the term of this Agreement.
1.9 "Shipping Destination" shall mean the InterDigital's receiving
warehouse in King of Prussia, Pennsylvania or such other destination in
the continental United States as InterDigital may designate in writing
to Kenwood from time to time.
1.10 "Shipping Location" shall mean the loading port of the Products in
Japan.
1.11 "Outgoing and Incoming Inspection Regulations and Standards" shall mean
the regulations, rules and standards agreed upon by InterDigital and
Kenwood and as may be amended from time to time by agreement of the
parties, to be used by Kenwood to conduct outgoing Product inspection
and by InterDigital to conduct incoming Product inspections. The
initial inspection regulations and standards are attached hereto as
Exhibit "A".
1.12 "Technical Material" shall mean designs, patterns, drawings, plans,
specifications, development processes, worksheets, and any other
information, manuals, documents, notes, letters, records, computer
programs, molds, dies, tooling, equipment and similar property.
1.13 "Work" shall mean the efforts undertaken by Kenwood to manufacture,
ship, and, as necessary, rework, repair or replace Products.
2
2. PRODUCTION SCOPE
2.1 Production. Upon (i)successful development and acceptance of the Pre-
Production Model, Engineering Specifications and production test data
under the Development Agreement, and (ii) the finalization of the
Outgoing and Incoming Inspection Regulations and Standards pursuant to
Section 1.11 hereto, InterDigital shall order and purchase from Kenwood
and Kenwood shall manufacture for and sell to InterDigital Products in
accordance with (i) the Engineering Specification and Pre-Production
Model,(ii) this Agreement and (iii) the schedule established as set
forth in Section 3.1.
2.2 Minimum Purchase Amount. Kenwood agrees to manufacture and deliver and
InterDigital agrees to purchase Fifty Thousand (50,000) units of the
Product prior to December 29, 1997, subject to the parties' termination
rights as set forth in Section 9.
2.3 Frequency Variation. Kenwood shall produce under this Agreement
Products having frequency variation from the Pre-Production Model,
provided, however, that (i) such modified Product shall have been
developed and approved under the Development Agreement, and (ii) the
minimum production quantity per frequency variation shall be no less
than One Thousand (1,000) units of Products. With the exception of
those two conditions, all other provisions of this Agreement shall be
equally applicable to Products with frequency variation.
2.4 Supplier Relationship. As of the Effective Date, Kenwood is
InterDigital's only provider of Products. In the event InterDigital
decides, in its sole discretion, to manufacture Products itself or have
any third party manufacture Products for it, InterDigital shall
promptly advise Kenwood in writing to that effect.
2.5 InterDigital Supply. InterDigital shall ship to Kenwood at
InterDigital's cost and risk the duplexers and, if agreed to by the
parties, the High Power Amplifier ("InterDigital Components") which
shall be received by Kenwood at its plant at least sixty (60) days
prior to Delivery Date. Kenwood shall not be liable for (i) failing to
meet Delivery Date to the extent such failure is attributable to
InterDigital's failure to ship InterDigital Components on a timely
basis, or (ii) non-conformity to the Engineering Specifications or
Outgoing and Incoming Inspection Regulations and Standards resulting
from the failure or defect of InterDigital Component. In the event such
failure or defect of InterDigital Component shall be found, Kenwood
will notify InterDigital in writing the detail of failure or defect and
if the failure or defect rate is estimated more than three percent
(3%), Kenwood may stop mass-production and InterDigital and Kenwood
shall find a solution or countermeasure in good faith and re-establish
Delivery Date of Products of stopped production and future production
of products. Kenwood shall be responsible to the failure or damage of
InterDigital Component which result from Kenwood's improper handling,
storage, mounting to the PCB or alignment.
3
3. ORDER AND ROLLING FORECAST
3.1 Rolling Forecast. InterDigital shall at the beginning of each month,
provide Kenwood with (i) a Purchase Order for Products it requires
Kenwood to deliver within 6 months from the date of such Purchase Order
("Delivery Date"), and (ii) a forecast of InterDigital's Product
requirements for the 5 month period following the month in which such
Purchase Order was issued. Kenwood shall provide InterDigital with
written confirmation of receipt of the Purchase Order, including
whether Kenwood can meet the Delivery Date. It is mutually agreed that
the standard production lead-time shall be five (5) months from the
Purchase Order issue date and the standard Delivery Date shall be at
the end of the fifth month.
3.2 Purchase Order Requirements. The Purchase Order shall include the
following information:
(A) Date of issue and purchase order number
(B) Quantity of Product to be delivered
(C) Total price
(D) Required Delivery Date
(E) Shipping instructions and Shipping Destination
(F) Reference to this Agreement
(G) Authorized signature
In the event of a conflict between the Purchase Order and the terms of
this Agreement, this Agreement shall control.
3.3 Additional Requirements. InterDigital may, from time to time, notify
Kenwood in writing if (i) InterDigital's Product requirements exceed
the amount specified in a Purchase Order and (ii) InterDigital desires
Kenwood to supply additional Products. Kenwood will use all reasonable
efforts to meet InterDigital's additional Product requirements.
3.4 Forecast Accuracy. InterDigital shall use reasonable efforts to provide
accurate forecasts of Product requirements. With the exception of the
firm Purchase Orders, and subject to InterDigital's minimum purchase
requirements set forth in Section 2.2 hereto, however, InterDigital
shall have no liability to Kenwood for changes to the Product
forecasts.
4. PRICE AND PAYMENT
4.1 Price. The base price for each unit of Product, excluding HPA mounting,
testing and related adjustment costs, shall be US$ *, FCA (except that
Kenwood shall also pay marine insurance)(Shipping Location)(according
to Incoterms 1990), payable in J(Y) at the exchange rate determined in
Section 4.3 hereto. The additional cost for HPA mounting, testing and
related adjustment shall be subject to agreement between the parties.
4.2 Schedule. InterDigital shall pay Kenwood for Products forty-five (45)
days prior to the Delivery Date.
----------
* Confidential treatment has been requested for the deleted text, which has been
filed separately with the Securities and Exchange Commission.
4
4.3 Price Adjustments. The base price set forth in Section 4.1 shall be
valid during the term of this Agreement; provided, however, that, the
price for units included in each Purchase Order shall be adjusted in
the event that the closing middle exchange rate at New York market as
of the date of such Purchase Order (the "Current Rate"), fluctuates
plus or minus five (5) percent from the base exchange rate
((Y)100/US$)(the "Base Rate"). Both parties shall share equally any
exchange loss or profit by using a new exchange rate for the Purchase
Order quantity by using a calculated exchange rate, which shall be
derived as follows:
Base Rate + Current Rate
------------------------
2
5. DELIVERY AND TITLE
5.1 Shipping Requirements. Kenwood shall ship the Products FCA (except that
Kenwood shall also pay marine insurance)(Shipping Location)(Incoterms
1990). Kenwood shall also arrange for shipping to the Port of
Philadelphia, Pennsylvania, or such other destination as InterDigital
may prescribe in the Purchase Order, such costs (including freight and
importation fees but excluding insurance) to be paid by InterDigital.
Notwithstanding the foregoing, Kenwood shall bear the Risk of Loss to
all Products, work in progress, materials, tools and other things
independent of title until placed on the loading dock at the Shipping
Destination.
5.2 Packaging and Other Requirements. Unless otherwise specified by
InterDigital in writing, Kenwood shall properly pack, box, crate or
prepare all Products for shipment so as to prevent damage in transit
and to ship in accordance with the requirements of common carriers in a
manner to secure lowest transportation cost.
5.3 Product Title. Title to the Product shall pass to InterDigital when the
Product has been placed on the loading dock at the Shipping Location.
5.4 Delivery Date. ALL TIME LIMITS STATED IN THIS AGREEMENT AND IN ANY
PURCHASE ORDER ARE OF THE ESSENCE OF THIS AGREEMENT. Kenwood shall
ensure that Product shipments are made on or before the Delivery Date
as set forth in Section 3.1. Kenwood shall make up delays at its
expense by, among other things, providing additional people and shifts,
as required.
6. QUALITY ASSURANCE/INSPECTIONS
6.1 ISO Standards. Kenwood warrants that it and, to the extent commercially
practicable, its key contractors and suppliers, are certified according
to ISO 9001 and shall remain so at all times pertinent to Kenwood's
performance hereunder.
6.2 Inspection Procedure Approval. Prior to the Kenwood's commencement of
5
Product mass-production, Kenwood and InterDigital shall finalize and
agree upon the Outgoing and Incoming Inspection Regulations and
Standards.
6.3 Outgoing Product Inspection. Kenwood shall inspect the Products in
accordance with the Outgoing and Incoming Inspection Regulations and
Standards. Kenwood, at its sole cost and expense, shall perform any
repairs, rework or modifications to, or provide replacement Products
for, any Products not meeting the Outgoing and Incoming Inspection
Regulations and Standards.
6.4 Incoming Product Inspection. Within thirty (30) days after the Products
are received by InterDigital at the Shipping Destination, InterDigital
shall inspect Products in accordance with the Outgoing and Incoming
Inspection Regulations and Standards. InterDigital has the right to
reject any Products found to have a Defect, except if such Defect is
the result of the failure or defect of an InterDigital Component. Upon
completion of such inspection, InterDigital shall promptly notify
Kenwood of the results of the inspection, including whether or not the
Products are acceptable. InterDigital's acceptance of Products or its
payment therefor shall not relieve Kenwood of any of its obligations
hereunder or impose any duty on InterDigital with regard to the
Products.
6.5 Nonconforming Products. If InterDigital identifies any Defects in
Products ("Nonconforming Products"), Kenwood and InterDigital shall
discuss in good faith the appropriate method for curing the
Nonconforming Products, including whether the Nonconforming Products
should be returned to Kenwood or repaired in the U.S.A., either by
Kenwood or InterDigital; provided, however, that InterDigital, after
such good faith discussions, may elect, in its sole discretion, the
appropriate and reasonable means for curing the Nonconforming Product,
and Kenwood shall promptly undertake such efforts. In all cases, all
the expenses incurred to cure the Defect(s) shall be borne by Kenwood.
6.6 On-Site Inspections. Upon reasonable advance written notice, Kenwood
shall allow InterDigital, its authorized representatives and customers
for the Product to observe and inspect the Work, including materials
and supplies being used, subject to Kenwood's then-existing
confidentiality restrictions and security and safety requirements.
7. CHANGES
7.1 Purchase Orders. InterDigital may cancel, or make reductions, in the
amount of Products included in a Purchase Order, subject to the
cancellation charges set out in Section 9.4. InterDigital may also
defer delivery of Products under a Purchase Order for up to two (2)
months, subject to the following charges and limitations set forth
below:
a) InterDigital may request deferral of Product Delivery by
written request of more than thirty (30) days prior to
mutually agreed Delivery Date ("Original Delivery Date").
B) Kenwood will accept such deferral of Product delivery request
6
if the deferral is up to thirty (30) days from Original
Delivery Date without any charge to InterDigital.
C) In the event the deferral request is for more than thirty (30)
days from Original Delivery Date, Kenwood shall stop
production and a new Delivery date shall be re-negotiated and
established between Interdigital and Kenwood. InterDigital
shall pay Kenwood the delayed interest which shall be
calculated by using annual rate of four (4)percent, number of
deferral days and deferral Product amount.
7.2 Design Changes. Kenwood shall not make any changes to the design of
Product unless authorized in writing by InterDigital; provided,
however, that Kenwood shall promptly advise InterDigital of all
reasonably available technological advances which are known or become
known to Kenwood over the course of performance of its obligations
under this Agreement which may result in the Product having added value
(i.e., better performance, design, material or longer useful life) to
InterDigital. Should InterDigital elect to incorporate such advances,
InterDigital shall do so by written notice to Kenwood, including
whether InterDigital desires Kenwood to first develop a prototype
incorporating such advances. Within thirty (30) days of receipt of such
notice, Kenwood shall notify InterDigital in writing of the cost and
schedule for implementing the advances, including producing a
prototype, such costs to be determined on a comparable basis with those
incurred under the Development Agreement and hereunder. InterDigital
shall promptly notify Kenwood in writing as to whether Kenwood should
proceed with such development.
8. CONFIDENTIAL INFORMATION
8.1 Designation of Confidential Information. All information relating to
the Product provided by either party to the other, whether before or
after the date hereof and whether oral or written and transactions
contemplated in this Agreement, shall be and is hereby deemed to be
confidential and proprietary information (hereinafter called
"Confidential Information"). Neither party shall be obligated to
specifically identify any information as to whether the protection of
this Section is desired by any notice, legend, or other action.
8.2 Nondisclosure. A party receiving Confidential Information shall not,
without the prior written consent of the party disclosing such
information, (i) use any portion of the Confidential Information for
any purpose other than in connection with the performance of this
Agreement, or (ii) disclose any portion of the Confidential Information
to any persons or entities other than the employees and consultants of
receiving party, its subcontractor or its affiliated companies, who
reasonably need to have access to the Confidential Information in
connection with the performance of this Agreement; provided, however,
that such employees and consultants shall be informed of the
confidentiality requirements herein and shall be required to execute an
agreement having terms consistent with those provided in this Section
8; and provided further that the receiving party shall be responsible
7
for any breach of the confidentiality requirements by such employee or
consultants.
8.3 Exceptions. Notwithstanding the foregoing, a receiving party shall not
be liable for disclosure of Confidential Information, or part thereof,
if the receiving party can demonstrate that such Confidential
Information:
(A) was in the public domain at the time it was disclosed;
(B) has been known to or in the possession of the party receiving
it at the time of receipt;
(C) is known to the receiving party from a source other than the
disclosing party without breach of this Section by the
receiving party; or
(D) has been disclosed to the government of the receiving party or
its agent in accordance with its order.
8.4 Limitations. Notwithstanding the foregoing, nothing in this Section
shall be deemed to limit or alter InterDigital's rights under Section
13 ("Intellectual Property").
8.5 Survival. The provisions of this Article shall survive termination,
cancellation or expiration of this Agreement for five (5) years from
the date of such termination, cancellation or expiration.
9. TERM, TERMINATION AND EXPIRATION
9.1 Term. This Agreement shall be effective upon the Effective Date and,
unless earlier terminated as provided herein, shall be valid and in
force for a period of two (2) years thereafter. The parties may extend
this Agreement my mutual written agreement.
9.2 Termination Without Cause. Notwithstanding any provision of this
Agreement to the contrary, InterDigital may, after having purchased
50,000 Products from Kenwood and upon thirty days' prior written notice
to Kenwood, terminate this Agreement without cause and liability,
except that InterDigital shall pay Kenwood for all cancellation
charges, as set forth in Section 9.4.
9.3 Termination for Cause. Upon written notice to the other party, a party
may terminate this Agreement as provided below:
(A) for either party at any time, without liability, if the other
party becomes insolvent, or a petition of bankruptcy is filed,
or any similar relief is filed by or against such party, or a
receiver is appointed with respect to any of the assets of
such party, or a liquidation proceeding is commenced by or
against such party;
(B) for either party at any time, without liability, if the other
party fails to correct or cure any material breach of any
covenant
8
or obligation under this Agreement within thirty (30) calendar
days after receipt by such party of a written notice from the
other party specifying such breach; or
(C) for InterDigital if InterDigital has not secured sufficient
Customer Agreements to require Kenwood to produce Products,
even on a sole source basis; provided, however, if
InterDigital has not purchased 50,000 Products from Kenwood,
InterDigital, upon termination, shall pay Kenwood(i) all
cancellation charges, as set forth in Section 9.4, on the
Purchase Orders submitted to Kenwood; and (ii) a "Buyout
Amount" equal to the present value (calculated as of the date
of termination and using a discount rate of 8%) of 10% of the
purchase price for each month's projected Product deliveries
after such termination (excluding any firm Purchase Orders),
with such deliveries being sufficient to make up the
difference between the 50,000 minimum purchase quantity and
the number of units purchased by InterDigital up to the date
of termination, including firm purchases.
9.4 Cancellation. InterDigital may cancel any Purchase Order, in whole or
in part, at any time. In such event, InterDigital shall pay the
following cancellation charges to Kenwood with respect to the canceled
order or part thereof:
Number of Days Between
Notice of Cancellation Cancellation Charge
and Delivery Date Per Unit of Product
---------------------- -------------------
0-90 days Non-cancelable
91-150 days 80%
Over 150 days 0%
(A) Cancellation charges are expressed as a percentage of the
purchase price of a Product that would have been applicable
had it not been canceled. Payment of the applicable
cancellation charges, if any, shall be invoiced by Kenwood and
paid by InterDigital within thirty (30) days of receipt of
such invoice.
(B) Other than the above-stated cancellation charge, and subject
to InterDigital's minimum purchase obligation, InterDigital
shall have no further liability to Kenwood for canceled
orders.
9.5 Return of Confidential Information. Upon the expiration or termination
of this Agreement, each party shall return to the other party all
Confidential Information of the other party together with all copies
made therefrom, except to the extent such information is required by
InterDigital to exercise its rights under Section 13.
9.6 Survival/Final Delivery. The following provisions shall survive the
termination or expiration of this Agreement: Article 9.6, Article 10,
Article 12, Article 13, Article 14, Article 17, Article 20, Article 21,
Article 23, Article 24, and Article 25. In addition, any provision of
this Agreement necessary for a party to exercise rights or obligations
arising prior to expiration or termination shall survive such
expiration
9
or termination. Further, in the event of termination (except by
Kenwood for cause), InterDigital shall be entitled, at its option, to
receive delivery of Products for which a Purchase Order was issued
prior to the date of termination.
10. WARRANTY
10.1 Warranty. Kenwood warrants that the Products furnished under this
Agreement comply with the Engineering Specifications, and are free from
defects in material, design and workmanship.(the "Warranty") for a
period of eighteen (18) months commencing from InterDigital's
acceptance of a Product (the "Warranty Period").
10.2 Notification/Remedy. InterDigital shall promptly notify Kenwood of any
Products not meeting the Warranty ("Defective Products"). Kenwood
shall, at its expense, including all costs of transportation to the
Shipping Destination, provide replacements for such Products within 60
days of such notification. The period of Warranty for all replacement
Products shall be eighteen (18) months commencing from InterDigital's
acceptance of the replacement Product. In addition, Kenwood shall pay
InterDigital, as liquidated damages for InterDigital's labor costs
related to Product replacement, * (*) U.S. Dollars for each Defective
Product. Unless otherwise requested by Kenwood, InterDigital shall
return the Defective Product to Kenwood at Kenwood's cost and expense.
Upon receipt of the defective product, Kenwood shall conduct analysis
of cause and report to InterDigital. If Kenwood determines that the
Defective Product is defective on breach of warranty as set forth in
Section 10, all the expenses shall be born as set forth in Section
10.2. If Kenwood determines otherwise and Interdigital agrees (which
agreement shall not be uncommonly with held), InterDigital shall pay
the price of Product and all the relevant expenses incurred for such
replacement including, without limitation, ocean or air freight, import
duty and custom clearance expenses and replacement charge of U.S.
Dollars of each Defective Product.
10.3 Marking. Kenwood will include serial numbers and/or date stamps, as
agreed to by InterDigital, on each Product to facilitate the Warranty
tracking. For all replaced Products, Kenwood shall provide suitable
notice either on the Product or in the Product packaging to permit
warranty tracking of replaced Products.
10.4 Non-Waiver. This Warranty shall survive delivery and shall not be
deemed waived by inspection, acceptance or payment by InterDigital
pursuant to any provision of this Agreement or the Development
Agreement. No representations given to Kenwood by an employee or agent
of InterDigital shall be construed as a waiver of InterDigital's rights
hereunder.
10.5 Warranty Limitation. The Warranty does not extend to Products which
fail or are damaged after delivery to InterDigital due to (i)
InterDigital's improper handling, storage, operation, installation, use
or maintenance thereof,(ii) InterDigital's improper assembly of the
Product or subscriber unit or improper re-adjustment of the Product, or
----------
* Confidential treatment has been requested for the deleted text, which has been
filed separately with the Securities and Exchange Commission.
10
(iii) Products which fail or are damaged due to a cause attribute to an
InterDigital Component or to other circuits or components (other than
the Product) manufactured by InterDigital.
10.6 Title Warranty. Kenwood warrants that all Products, at delivery, are
free and clear of all encumbrances and have fully marketable title.
10.7 LIMITATION. THE WARRANTIES AND ASSOCIATED REMEDIES SET FORTH IN THIS
SECTION ARE EXPRESSLY IN LIEU OF AND INTERDIGITAL WAIVES ALL OTHER
WARRANTIES AND ASSOCIATED REMEDIES, EXPRESSED OR IMPLIED, INCLUDING
WITHOUT LIMITATION, ALL IMPLIED TERMS AND CONDITIONS AND WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
11. OUT-OF-WARRANTY SERVICE
After the Warranty Period, InterDigital may repair Products and
purchase from Kenwood service parts at the prices quoted by Kenwood.
Kenwood shall provide replacement parts and/or Products during the term
of this Agreement and for two years thereafter.
12. INSURANCE AND INDEMNIFICATION
12.1 Indemnification. Either party shall, to the maximum extent permitted by
law, indemnify and hold harmless the other party, its affiliates and
subsidiaries and all offices, directors, employees and agents of such
companies (collectively, "Indemnified Parties"), from against. For and
in respect of any and all claims, investigations, proceedings,
injuries, demands, liabilities, losses, expense, including without
limitation attorney's fees, damages, judgements or settlements arising
out of or resulting from the performance or non-performance under this
Agreement of Either party, anyone directly or indirectly employed by
either party or anyone whose acts either party may be liable. The
obligations under this paragraph shall not be (a) construed to negate,
abridge or otherwise reduce any other rights or obligations of
indemnity which would otherwise exist as to any provisions or limits of
insurance required by this Agreement.
12.2 Insurance. Each party shall secure and maintain insurance commensurate
with the obligations and potential liabilities arising under this
Agreement. Each party shall, upon the request of the other party,
provide a description of the coverage secured, including deductibles,
exclusions, term, and policy limits.
12.3 LIMITATION OF LIABILITY. NEITHER PARTY SHALL BE LIABLE TO THE OTHER
PARTY FOR LOST PROFITS, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY
OTHER KIND INCURRED ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT.
13. INTELLECTUAL PROPERTY
13.1 Pre-Existing Intellectual Property. Except as provided in Section 13.2,
nothing contained in this Agreement will be deemed to grant to either
party, either directly or by implication, estoppel or otherwise, any
11
title, ownership, license, or any interest whatsoever in, of or to
Intellectual Property or Technical Material of the other party, whether
existing prior to the Effective Date or developed thereafter.
13.2 Developed Proprietary Information. The Technical Material supplied or
made specifically by Kenwood (or its contractors) under this Agreement
and any Intellectual Property hereunder developed, produced or created
by Kenwood (or its contractors) (collectively "Developed Information")
shall be the joint property of InterDigital and Kenwood, subject to the
following terms and conditions:
(A) InterDigital may use, sell, license, or otherwise transfer the
Developed Information without any accounting to Kenwood;
provided, however, that InterDigital shall notify Kenwood of
any license, sale, or other transfer of the Developed
Information to a third party;
(B) Kenwood may use the Developed Information for only the
manufacture of Products for InterDigital;
(C) InterDigital shall have the right to apply for any patents
arising out of Developed Information, in Kenwood and
InterDigital's name. Kenwood shall execute all documents
reasonably required for such applications. InterDigital shall
provide Kenwood with advance copies of significant patent
application filings for review and comment and will consider
such comments in good faith. InterDigital and Kenwood shall
share equally the cost of such patent filings; provided,
however, that Kenwood may elect not to have joint ownership in
such patents in which event Kenwood shall assign all of such
patent rights to InterDigital and execute all documentation
required for InterDigital to obtain patent protection in its
name and at its sole expense.
(d) Developed Information shall not include knowledge,
manufacturing process or designs or products developed,
produced, or created by Kenwood (or its contractors) prior to
the commencement of the Work or other than in conjunction with
the Work.
13.3 Use of Third Party Intellectual Property Rights. In manufacturing the
Product, Kenwood shall not use or rely on any method, process, product
or other tangible or intangible element requiring the payment of
royalties without the express written consent of InterDigital. To the
extent that InterDigital consents to Kenwood's use of any license or
other right under any patents or patent application to perform the Work
or develop, manufacture or supply the Products under this Agreement,
Kenwood shall pay all royalties and license fees required pursuant
thereto.
14. ARBITRATION
Any controversy, dispute, or claim arising out of or relating to this
Agreement, any modification or extension hereof, or any breach hereof
(including the question whether any particular matter is arbitrable
12
hereunder) which has not been settled after a meeting of the parties in
a good faith effort to resolve their differences shall be resolved
exclusively by arbitration under the Rules of Conciliation and
Arbitration of the International Chamber of Commerce by three
arbitrators chosen in accordance with said rules unless the parties
agree to use fewer arbitrators. The arbitration shall take place in
Paris, France and shall be conducted in English. The award of such
arbitration shall be final and binding on both parties.
15. FORCE MAJEURE
If either party's performance of this Agreement is interfered with by
reason of any circumstance beyond the reasonable control of the party
affected, including without limitation, war (whether an actual
declaration thereof is made or not), sabotage, insurrection, rebellion,
riot or other act of civil disobedience, act of a public enemy, failure
or delay in transportation, failure of or delay in performance of
InterDigital's or Kenwood's obligations under this Agreement due to act
of any government or any agency or subdivision thereof, judicial
action, labor dispute, fire, accident, explosion, epidemic, storm,
flood, earthquake, or other Act of God, or shortage of labor , fuel,
raw material, or machinery, then the party affected shall be excused
from such performance, but only for the period of time occasioned by
such event. A party claiming a force majeure shall notify the other
party within 10 working days of such force majeure event, providing the
type of event, the expected delay, and the efforts being taken to
minimize such delay. If any such interference extends for more than
Ninety (90) days, both parties shall discuss to seek for the best
course of action.
16. NOTICES
16.1 Notice Requirements. Any notices required to be given under this
Agreement shall be sent by registered air mail, facsimile or hand
delivery to the other party at the address listed below:
To InterDigital:
----------------
INTERDIGITAL COMMUNICATIONS CORPORATION
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, ▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Tel: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
To Kenwood:
-----------
KENWOOD CORPORATION
▇-▇▇-▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇-▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
13
Attn: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Tel: ▇▇-▇▇▇▇-▇▇▇▇
Fax: ▇▇-▇▇▇▇-▇▇▇▇
16.2 Receipt. Notices given pursuant to Section 16.1 shall be deemed to have
been received Five (5) business days after sending in the case of
registered air mail and at the time of receipt of the receiving party
in the case of hand delivery and facsimile, unless earlier confirmed by
the receiving party.
17. SEVERABILITY
In the even that, for any reason, any portion of this Agreement shall
be determined to be illegal, unlawful or unenforceable, the remaining
provisions of this Agreement shall, nevertheless remain in full force
and effect and this Agreement shall be construed as if the illegal,
unlawful or unenforceable provisions were not contained herein.
18. SUBCONTRACTING
Kenwood shall not subcontract any of the Work without the express
written consent of InterDigital. Kenwood's use of subcontractor's shall
not relieve Kenwood of its obligations hereunder and Kenwood shall be
liable to InterDigital for all the acts and omissions of any
subcontractor as if such act or omissions were made by Kenwood.
19. LIENS.
Kenwood shall not make nor permit to be made any attachments to the
Product, or components thereof, of liens, encumbrances or claims for
labor or material. Kenwood shall promptly remove and shall protect and
hold InterDigital harmless from all such claims, liens and encumbrances
arising from the manufacture, assembly and transit of the Product.
20. WAIVER
Any failure of either party to enforce at any time or for any period,
any provisions of thus Agreement shall not be construed as a waiver of
such provisions or of the right of the party thereafter to enforce each
and every provision.
21. ASSIGNMENT
This Agreement shall not be assignable by either party without the
prior written consent of the other party; provided, however, that
either party may assign this Agreement to a subsidiary or affiliate of
the assigning party by written notice to the other party.
22. AMENDMENT
This Agreement shall not be amended, altered, or modified except by an
instrument in writing duly executed by the parties hereto.
14
23. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement of the parties hereto
with respect to the subject matter hereof, and it supersedes all prior
oral or written agreements, commitments, or understandings with respect
to the matters provided for herein.
24. HEADINGS
Section headings contained in this Agreement are inserted for
convenience of reference only, shall not be deemed to be a part of this
Agreement for any purpose, and shall not in any way define or affect
the meaning, construction, or scope of any of the provisions hereof.
25. GOVERNING LAW
This Agreement sets forth the rights and obligations of the parties
hereto, and any claims or disputes relating thereto, shall be governed
by and construed in accordance with the laws of the State of New York.
Each party irrevocably submits to the jurisdiction of the courts of the
state or country of the other party solely for the purposes of
requiring the other party to submit to arbitration as required
hereunder and for enforcing any award granted thereunder. Process may
be served on either party by certified or registered U.S. mail or by
globally recognized express mail service.
26. TAXES.
It is understood than no taxes, assessments, excises, duties,
impositions or licenses will be levied, assessed or imposed on Kenwood
by the U.S. Government on account of the Work or the Products. If,
however, any such taxes, assessments, excises, duties, impositions, or
licenses are levied, assessed or imposed on Kenwood by the U.S.
Government on account of the Work or the Products, (excluding taxes on
income) they shall be borne by InterDigital and all payments owing to
Kenwood hereunder shall be net of any such taxes, levies or charges
required to be withheld with respect to such payments.
27. INDEPENDENT CONTRACTOR
In making and performing this Agreement, InterDigital and Kenwood act
and shall act at all times as independent contractors and nothing
contained in this Agreement shall be construed or implied to create an
agency, joint venture, partnership or employer and employee
relationship between InterDigital and Kenwood.
28. LABELING
At InterDigital's request, Kenwood shall place appropriate notices or
labels on all Products, and component parts thereto, being manufactured
for InterDigital pursuant to this Agreement to indicate ownership by
InterDigital. To the extent reasonably possible, the Product, and
component parts thereto, shall be stored separately from other
inventory
15
and conspicuously marked with labels indicating ownership by
InterDigital.
29. PUBLIC ANNOUNCEMENTS.
Except as may be required by law, neither party shall issue any press
release or make or cause to be made any public disclosure of this
Agreement without the prior written consent of the other party.
[SIGNATURES ON NEXT PAGE]
17
IN WITNESS WHEREOF, and intending to be legally bound, the undersigned parties
have duly executed this Agreement in duplicate effective on the day first
written above.
INTERDIGITAL COMMUNICATIONS CORPORATION
Attest
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ By /s/ ▇▇▇▇ ▇▇▇▇▇
------------------------------- -----------------------------------
Title General Manager
KENWOOD CORPORATION
Attest
/s/ D. Ahasui By /s/ ▇. ▇▇▇▇▇▇▇▇
-------------------------------- -----------------------------------
Title General Manager
Strategic Business Development
Department, R & D Division
17
