Warranty Costs For Licensed Production Components Sample Clauses

Warranty Costs For Licensed Production Components. Notwithstanding any other provision in the Agreement, the costs associated with all warranty claims arising out of the sale of Licensed Production Components, whether arising from a VPC warranty as set forth in this Agreement or an LMT warranty as described in the Purchase Order for such Licensed Production Components, shall be paid in the first instance by VPC. To provide funds for such costs, VPC shall include in all of its pricing to LMT for Licensed Production Components a charge equal to five percent (5%) (the “Warranty Charge”) VPC shall establish and maintain a bookkeeping account for a warranty reserve (the “Warranty Reserve”) for tracking the costs of resolving warranty claims arising out of the sale of Licensed Production Components (the “Warranty Claims”). VPC shall credit the Warranty Reserve in the amount of the Warranty Charges received from LMT and shall debit against the Warranty Reserve the costs incurred by VPC in resolving Warranty Claims and the estimated cost of any pending Warranty Claims. All Warranty Charges received by VPC shall be tracked separately for accounting purposes; however, the cash received by VPC may be commingled with other funds of VPC and used by VPC in any manner whatsoever. LMT shall have no interest in the Warranty Charges once they have been paid to VPC and shall have no interest in the Warranty Reserve. At such time as the Warranty Reserve equals or exceeds Five Hundred Thousand Dollars ($500,000), after crediting the costs incurred in resolving all prior Warranty Claims and the estimated cost of pending Warranty Claims, the Parties shall jointly determine, based on the warranty cost experience related to Licensed Production Components and anticipated sales of Licensed Production Components, whether to maintain, increase, or reduce the five percent (5%) Warranty Charge and whether to maintain, reduce, or increase the Warranty Reserve. If the Parties agree to reduce the Warranty Reserve, VPC shall pay LMT an amount equal to two-thirds (66 2/3%) of the reduction. If at any time the Warranty Reserve is insufficient to pay any incurred but uncredited costs of resolving Warranty Claims plus the estimated cost of pending Warranty Claims, the Parties shall promptly pay VPC, on a one-third (1/3) VPC, two-thirds (2/3) LMT basis, which payments shall be credited to the Warranty Reserve, a sum necessary to meet such claims, and VPC may then increase (or decrease) future Warranty Charges until VPC has once again collected F...
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Related to Warranty Costs For Licensed Production Components

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