EXHIBIT 10.17
CONFIDENTIAL TREATMENT REQUESTED.
CONFIDENTIAL PORTIONS OF THIS DOCUMENT
HAVE BEEN REDACTED AND HAVE BEEN
SEPARATELY FILED WITH THE COMMISSION.
RMR PRODUCTION AGREEMENT
------------------------
This RMR Production Agreement (the "Agreement") is made as of June 14, 2001 (the
"Effective Date") by and between Tadiran Telematics Ltd., a company having its
address at 00 Xxxxxxxxx xx., XXX 000, Xxxxx 00000, Xxxxxx and ARAD Technologies,
a company having its address at 6 Hakarmel st., POB 337, Yokneam Ilit 00000,
Xxxxxx ("Buyer") (jointly - the "Parties"), both duly organized and existing
under the laws of Israel and cooperating according to the terms of Agreement
signed on December 3, 2000 (Cooperation Agreement), and the Escrow agreement
signed June 11, 2001
THE PARTIES THEREFORE AGREE AS FOLLOWS
1. AGREEMENT TO PURCHASE AND SELL
Within the term of this Agreement (thirty two months from the date hereof or
completion of the delivery of *** units, whichever is earlier, in accordance
with exhibit C), Buyer shall purchase from Seller, and Seller shall sell to
Buyer one hundred thousand *** Remote Meter Reading (RMR) units. The buyer
is entitled to place additional orders within the term of this agreement, in
which case the term will be extended accordingly.
2. UNIT SPECIFICATIONS AND CHANGES
2.1 The RMRs shall fully comply with the RMR technical specifications, as set
forth in Exhibit "A" which will be attached hereto and signed by the parties not
later than two weeks upon signature of this agreement (the "Specifications") and
will be an integral part of this agreement. The RMRs shall possess type approval
grants from FCC (USA) and MOC (Israel), as applicable. Possession of both types
approvals are precondition for the delivery of the phase I and following phases
as described in Exhibit "C".
2.2 Subject to provisions of Section 5 below, the Parties may negotiate changes
to the specifications which shall be implemented in a manner that will not
interrupt the then current production of RMRs. The Parties shall determine by
mutual consent the corresponding adjustment in prices and the delivery schedule,
and this Agreement shall be modified in writing accordingly.
3. PURCHASE PRICE/PAYMENT TERMS
3.1 The parties acknowledge that the actual production cost will be established
after performing the ATP of the Pilot System and FCC approval. The price will be
based on the actual "production cost" at that time (which is expected to be
between $ *** to $ *** but in any case not more than $ *** ) plus compensation
according to the paragraph 5 of the Cooperation Agreement.
The compensation mechanism due to value-engineering cost reduction as specified
in paragraph 5 __ of the Cooperation Agreement will be applied below the
production cost of $ *** .
The above prices exclude the technical support cost to be paid in accordance
with paragraph 5 __ of the Cooperation Agreement and additional cost of up to
$ *** to be paid by the buyer for
*** Confidential material redacted and filed separately with the Commission.
the tools and test equipment, developed by seller and/or its subcontractors for
the purposes of cost reduction, subjected to prior approval by the buyer.
3.2 Subject to the provisions of Section 4 below, the Basic Price is Ex -
factory and does not include freight, handling, insurance, and other delivery
costs but includes packaging according to the industrial standard for similar
products.
3.3 Terms of Payment. Terms for the payment of the Purchase Price are as defined
in Exhibit "B" attached hereto.
4. DELIVERY TERMS
4.1 Delivery Schedule. Seller shall deliver the RMRs to Buyer according to
the delivery schedule attached as Exhibit "C " (the "Delivery Schedule").
Signature of this agreement constitutes activation of the first phase order as
specified in Exhibit "C". Orders for the second and third phases will be placed
not later than 20-th of relevant month, at least 4 month in advance before
commencing the delivery of each phase (e.g. before January 20 for delivery in
May). The monthly delivery rate (as set forth in Exhibit "C" or amended by the
Parties) may be increased by buyer by up to 25% or decreased by buyer by up to
50% by means of a 60 days prior written notice. Minimum monthly delivery rates
applicable for each phase will be *** for phase I, *** for phase II and
*** (*) for phase III.
(*) The minimum monthly rate for phase III can be decreased in some months, but
in any case the duration of phase III (delivery of *** units) shall be not
more than 12 months.
4.2 Delivery Point. All RMRs shall be delivered by Seller ex - factory.
4.3 If Seller delays each specific delivery by more than 3 months, Buyer shall
have the rights to cancel the delayed quantity, without prejudice to any rights
that it may have under the provision of this agreement.
5. REQUEST FOR DEVIATIONS
The Parties may request reasonable deviations from the Specifications in
writing. Requests for deviations must clearly identify the following:
description of the deviation; reference the individual Specification being
deviated; term of deviation, i.e. temporary or permanent; number of RMRs
affected; Effective Date; effect of deviation on any other technical or
performance Specification, including whether, following the deviation, the Unit
remains within the applicable margin or tolerance; anticipated delay, if any, in
Delivery Schedule due to deviation; and reason for deviation. Deviations may be
made only if a written addendum describing the deviations (including the change,
if any, in Delivery Schedule) has been mutually agreed upon and signed by both
parties.
6. WARRANTY
Seller hereby warrants the RMRs to be in compliance with the Specifications and
to be free from defects in materials and workmanship for one year from the date
the RMR-Bs have been delivered to Buyer. The period defined above shall be
referred to as the Warranty Period. Seller
2
*** Confidential material redacted and filed separately with the Commission.
shall have the option of either repairing or replacing RMRs found to be
defective during the Warranty Period. Time to repair or replace shall not exceed
60 days from the date of actual delivery of the item to Seller's facility.
6.1 Buyer acknowledges that the warranty contained in this Section 6 above shall
not apply to damage, deterioration or malfunctions which, after passage of title
to the buyer, are caused by:
6.1.1 The improper removal or installation of RMRs, performed not according the
agreed upon procedure.
6.1.2 Accidents, acts of nature, misuse, abuse, negligence, neglect,
unauthorized product modification or failure to follow proper instruction
procedure by buyer.
6.1.3 Repair or attempted repair by any person not authorized by Seller.
6.2 Buyer also acknowledges that Buyer shall be responsible and shall bear all
costs and charges related to the de-installation of a defective RMRs and
reinstallation of the RMRs, Seller shall bear the cost of shipment of the RMRs
from Buyer to Seller and back.
6.3 THE WARRANTIES CONTAINED IN THIS SECTION 6 AND THOSE COVERED IN TADIRAN
TELEMATICS' CURRENT PRODUCT LIABILITY INSURANCE ARE IN LIEU OF ALL OTHER
WARRANTIES WHETHER ORAL, WRITTEN, OR EXPRESS, IMPLIED OR STATUTORY. EXCEPT AS
MENTIONED ABOVE IN THIS SECTION, SELLER SHALL NOT BE LIABLE FOR ANY BUSINESS
EXPENSES, LOSS OF PROFIT, INCONVENIENCE, OR DAMAGE, INCLUDING DIRECT, INDIRECT,
SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES RESULTING FROM RMR DEFECTS WHETHER
RESULTING FROM BREACH OF WARRANTY OR ANY OTHER LEGAL THEORY. SELLER DISCLAIMS
ALL LIABILITY, WHETHER IN CONTRACT, TORT, WARRANTY OR OTHERWISE TO ANY THIRD
PARTY OTHER THAN BUYER. NOTWITHSTANDING THE ABOVE, SELLER SHALL REMAIN LIABLE TO
BUYER (AND ONLY TO BUYER) UNDER THE ABOVE WARRANTY FOR THE DURATION OF THE
WARRANTY PERIOD, DESPITE PASSAGE OF TITLE TO THE RMRs TO ANY THIRD PARTIES.
7. CONFIDENTIALITY AND PROPRIETARY RIGHTS
Neither party shall, without the prior written consent of the other party, use
(for any purpose other than that contemplated by this Agreement) or disclose or
divulge to any third party the terms and conditions of this Agreement or any
documents, specifications or information, including technical information,
received from the other party under or in connection with this Agreement,
provided, however, that Seller may disclose to third party, including its
employees and subcontractors (provided they have executed an appropriate NDA),
in connection with the manufacture of the RMRs, the documents, specifications or
information received from Buyer, to the extent that in Seller's reasonable
opinion it is necessary for the purposes of this Agreement. At all times Seller
shall retain exclusive proprietary rights in the RMR developed by the Seller
(including design, configurations, drawings, specifications, etc.) but subjected
to the Cooperation Agreement and nothing herein may be construed as granting any
intellectual property rights in the RMR to the Buyer.
3
8. USE OF NAME OR TRADEMARKS
For "stand-alone" RMRs, Seller shall print any name or xxxx requested by Buyer
on the RMRs in addition to the name "Tadiran Telematics". Buyer shall be liable
for an infringement of copyright or trademarks as a result of any name or xxxx
requested by Buyer on the RMRs. If Buyer elects to use another name in addition
to the name "Tadiran Telematics", Buyer shall give Seller such name or xxxx to
be used on the RMRs at least 90 days prior to the delivery date for such RMRs.
For "integrated" RMRs (i.e. integrated in the water meter), Buyer shall make an
effort, if it is common to do so, to print the name "Tadiran Telematics" on the
assembled product in a way that this name will be visible to the user.
9. FORCE MAJEURE
If performance by Parties of their obligations hereunder is prevented by Force
Majeure, affecting the activities of any party connected with the sale,
manufacture, supply, shipment or delivery of RMRs, including but not limited to,
acts of God, flood, typhoon, earthquake, tidal wave, landslide, fire, plague,
commotion, strike, labor disturbances, blockade, arrest or restraint of
government, requisition of vessel or aircraft, explosion, war, government
request, guidance, order or regulation or the boycotting of Israeli goods, or
any other unforeseeable causes or circumstances beyond the reasonable control of
specific party, then this party shall not be liable for loss or damage or
failure or delay in performing its obligations under this Agreement; provided,
however, that this party promptly fulfills its obligations under this Agreement
immediately after such force Majeure ceases.
10. COMPLIANCE
10.1 Compliance with Agreement. Parties hereby agree to fully cooperate with
each other and to sell and buy RMRs which fully comply with the terms,
conditions, provisions and Specifications of this Agreement, including the
exhibits attached hereto for price set forth herein to be paid in a timely
manner.
10.2 Compliance with Law. Parties shall be in compliance with and the RMRs shall
be in compliance with all federal, state and municipal regulations governing the
sale and use of the RMRs. The Parties shall cooperate in obtaining necessary
government agency approvals.
10.3 Compliance with Proprietary Rights Requirements. Seller shall retain the
right to use all technology, know-how, copyright, trademark and patent rights
used in producing the electronics parts of RMRs, developed by the Seller,
subject to the Cooperation Agreement.
11. N/A
12. CONTRACT ADMINISTRATION
XXXXX XXXXXXXXX ("Roman") or his duly appointed successor shall administer the
terms of this Agreement on behalf of Buyer, and XXXXX XXXXXX ("Xxxxx") or his
duly appointed successor shall administer the terms of this Agreement on behalf
of Seller.
4
13. NOTICES
Any notice, request or demand required to be made or given hereunder by any
party shall be deemed to be duly given or made upon receipt. The notice, request
or demand must be sent by courier or registered or certified mail, or facsimile
to the respective addresses of the parties set forth below, or at such other
address as has been given by either party to the other in writing in accordance
with the terms of this Agreement.
ARAD technologies.
Xxxxx Xxxxxx
-------------------
Attention: __________
With a copy to: Xxxx Xxxxxx
Tadiran Telematics
00 Xxxxxxxxx Xxxxxx
Xxxxx, 00000 Xxxxxx
Attention: Xxxxx Xxxxxxxxx
With a copy to: Xxxx Xxxxx
14. TERMINATION
Each party shall have the right, as set forth below, to terminate this Agreement
without prejudice to any rights that it may have, whether under the provisions
of this Agreement, in law or in equity or otherwise, upon the occurrence of any
of the following events, hereinafter called "Defaults".
(a) Either party, if the other party defaults in the performance of a material
obligation, provided for in this Agreement; or
(b) Either party, if the other party files a voluntary petition in bankruptcy,
files any voluntary petition seeking any reorganization, arrangement,
readjustment, liquidation, dissolution or similar relief under the present or
any future federal or state bankruptcy or insolvency act; fails to remove an
involuntary petition for a reorganization, arrangement, readjustment,
liquidation, dissolution or similar relief under the present or any future
federal or state bankruptcy or insolvency act within 60 days after the filing of
such petition, or appoints a trustee, receiver or liquidator of its properties.
Notwithstanding the above, a corporate reorganization or spin off not under
bankruptcy or insolvency procedures shall not be considered a default, unless
there is an intention to abandon the business.
The party claiming a Default shall give written notice of termination to the
party alleged to be in Default in accordance with the notice provision set forth
in Section 13. The defaulting party shall have 90 business days in which to
correct any such Default, and failing such, this Agreement shall terminate. If
the defaulting party shall, within ten business days, notify the other party in
writing that it disputes the asserted Default, and the matter cannot be resolved
by mutual
5
agreement of the parties, the matter shall be submitted to dispute resolution
and arbitration procedure as hereinafter provided.
15. DECREASE OF QUANTITIES AND TERMINATION OF PRODUCTION
Buyer may decrease the total quantity of the RMRs he has undertaken to purchase
under Section 1.1 above under the following conditions:
15.1 Buyer must give Seller prior written notice of Buyer's election to decrease
the quantities of RMRs TO BE delivered under this Agreement ("Decrease Notice")
by choosing not to exercise orders of phase II or phase III as defined on
Exhibit "C". Notwithstanding the above, upon signature of this agreement, Buyer
may not decrease the first phase quantity under *** units, including already
the units addressed in the paragraph 9 of the Cooperation Agreement. In
addition, Buyer may not decrease the second phase quantity of additional ***
units upon placing the order of the second phase and the third phase quantity of
additional *** units upon placing the order of the third phase in accordance
with the provisions of paragraph 4.1.
15.2 Should the consequences of Decrease Notice require any changes in overall
delivery schedule, the Parties shall determine a new delivery schedule by mutual
consent.
15.3 Buyer shall compensate Seller in the amount of US$ *** per each RMR,
canceled in accordance with Sub-sections 15.1 and 15.2 above.
16. ISRAELI LAW
This Agreement shall be governed by and construed in accordance with the laws of
the state of Israel as the same or any succeeding provision of law may be in
effect from time to time. For the purposes of any dispute between the parties,
this Agreement shall be construed as if all parties were resident and doing
business in Israel. If there are any ambiguities in the Agreement, such
ambiguities shall not be construed against either party on the basis of who
drafted the documents.
17 DISPUTE RESOLUTION
17.1 Disputes arising out of or relating to this Agreement, or the breach,
termination, or invalidity thereof, shall be settled in accordance with the
applicable dispute resolution provisions set forth in Para. 17.2 below.
Notwithstanding anything to the contrary contained in this paragraph 17.1,
neither party may terminate the Agreement nor pursue any remedies for its
material breach first having given the breaching party written notice of the
material breach and an opportunity to cure such breach within forty-five (45)
days of the receipt of such written notice.
17.2 Dispute Resolution and Arbitration
(a) If one or more disputes arise between the parties with respect to the
obligations and responsibilities of either party under this Agreement, any such
dispute shall be resolved in accordance with the process described in this
Section 17.2, provided, however, that if either party determines that
provisional relief (e.g. a temporary restraining order or preliminary
injunction) is required to provide temporary relief, nothing herein shall
prevent the aggrieved party from
6
*** Confidential material redacted and filed separately with the Commission.
applying to a court for provisional relief. An application for provisional
relief to a court shall not relieve either party of its obligation under this
section 17.2, and shall not alter the power of the arbitrator to determine the
rights and obligations of the parties under this Agreement.
(b) The parties shall attempt to select a mutually acceptable arbitrator. If,
however, after 30 days of the declaring of a dispute and the suggestion of a
candidate for arbitrator, the parties are unable to agree upon an arbitrator who
is willing to accept the appointment, the arbitrator shall be selected by the
President of the Israeli Bar Association, whose selection shall be binding upon
the parties.
(c) The arbitrator's fee and all other incidental costs incurred during the
arbitration process will be shared equally between the parties.
(d) The arbitrator shall be neutral and impartial, and shall use the laws of the
State of Israel to resolve the dispute between the parties.
(e) The arbitrator shall control the procedural aspects of the arbitration. The
parties shall cooperate fully with the arbitrator at all times.
(f) The arbitrator shall, in consultation with the parties, fix the agenda for
all meetings.
(g) Each party may be represented by counsel, who shall be authorized to
recommend settlement options to their principals. Each party shall bear their
attorney's fees.
(h) The arbitration shall be conducted expeditiously and shall be completed in
less than 180 days from the date the arbitrator was selected. Each
representative shall make every effort to be available for meetings, and the
arbitrator shall ensure that he is able to devote all the time necessary to
quickly and effectively render an arbitration judgment.
(i) The entire arbitration shall remain confidential. The parties or the
arbitrator shall not disclose information regarding the process, including
settlement terms, unless the parties agree otherwise.
The arbitrator may obtain assistance and independent expert advice with the
agreement of and at the expense of the parties.
(j) The arbitrator shall not be liable for any good faith act or omission in
connection with his role as arbitrator.
(k) The arbitration shall take place in Tel-Aviv, Israel.
(l) The arbitrator's decision shall be final and binding upon both parties.
18. MISCELLANEOUS PROVISIONS
18.1 Successors. This Agreement shall be binding upon and inure to the benefit
of the parties and their respective executors, heirs, legal representatives,
successors and assigns.
7
18.2 Assignment. Parties shall not assign, transfer or sell any of their rights
hereunder to any third party without the prior written permission of the other
Party. No rights hereunder shall devolve by operation of law or otherwise upon
any assignee, receiver, liquidator, trustee or other party. The RMRs delivered
hereunder shall be manufactured only by Tadiran Telematics Ltd., its legitimate
assigns, Tadiran Telematics Ltd's subcontractors, or as specified in Escrow
agreement.
18.3 No Waiver. Failure of either party to insist upon strict performance of any
of the terms, conditions, provisions or Specifications within this Agreement
(including the exhibits), or the delay in exercising any of its remedies, shall
not constitute a waiver of such terms conditions, provisions or Specifications
or a waiver of any default thereof nor the remedy of such default.
18.4 Survival of Obligations. Each party's obligations under this Agreement
which, by their nature, would continue beyond termination or expiration of this
Agreement, including by way of illustration only and not limitation, any Section
related to confidentiality, warranty and indemnification, shall survive
termination or expiration of this Agreement by either party for any reason.
18.5 Remedies. Except as specifically set forth in this Agreement, all remedies
available to either party for breach of this Agreement are cumulative, and may
be exercised concurrently or separately, and the exercise of any one remedy
shall not be deemed an election of such remedy to the exclusion of other
remedies.
18.6 Headings. The paragraph headings used in this Agreement are for convenience
of reference only, and shall not in any way limit or amplify the terms and
provisions hereof, nor enter into the interpretation of this Agreement.
18.7 Binding Agreement. The persons executing this Agreement on behalf of the
parties have been duly and validly authorized to do so, and this Agreement is a
valid and binding obligation of the parties.
18.8 Severability. If any term of this Agreement shall be unlawful, void or
unenforceable, such term shall be deemed omitted to the extent prohibited or
invalid, but the remainder of this Agreement shall not be invalidated and shall
be given effect as far as possible. If any term hereof is found by a court or
arbitrator to be over-broad, such term shall be limited to the extent required
to make it enforceable.
18.9 Modification. This Agreement may not be modified, supplemented or otherwise
changed except by a written instrument executed by both parties.
18.10 Attorney's Fees. If any action or proceeding (judicial or non-judicial) is
brought to interpret any term or provisions of this Agreement, the prevailing
party shall be entitled to costs and reasonable attorney's fees in addition to
any other relief to which it is entitled.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE SIGNED THIS AGREEMENT AS OF THE DAY
AND YEAR FIRST ABOVE WRITTEN.
Arad Technologies
By /s/ Illegible
------------------
------------------
Tadiran Telematics
By: /s/ Xxxx Xxxxx
/s/ Xxxxx Xxxxxxxxx
8
EXHIBIT B
---------
TERMS OF PAYMENT
A down payment of $ *** will be provided within 30 days from of this
agreement. This down payment will be added to the payment of $ *** already
provided by the buyer for the initial purchase of LLI components.
In addition, a revolving irrevocable Letter of Credit of $ *** will be issued
by the buyer with in 30 days the signature of the agreement. The letter of
Credit serves only as guarantee for payments for ordered and shipped RMRs. It
dose not serve for any compensation for unordered phases or units not shipped.
The accumulative down payment of $ *** and the Letter of Credit will remain
in force during the term of the agreement and will be serve as a payment for the
last delivery. The L/C will be canceled after the payment for last delivery.
The payment will be made 60 days upon delivery. In the Israeli market the
payment terms will be coordinated, based on the market requirements.
*** Confidential material redacted and filed separately with the Commission.
EXHIBIT C
---------
DELIVERY SCHEDULE
The RMR units will be delivered as follows:
1. *** Pilot units - supplied.
2. *** prototype units - 2 weeks upon signature of this agreement. These units
will not yet possess FCC type approval.
3. *** pre-production units - 2 weeks upon signature of this agreement. These
units will not yet possess FCC type approval.
4. Buyer shall perform Acceptance Testing and shall approve the prototype and
pre-production units according to the ATP specified in the Exhibit A, no later
than 60 days after delivery of prototype and pre-production units.
5. Phase I order: deliveries of minimum *** units per month for the period of
8 months, starting 2 month upon approval of pre-production and prototype units
by buyer.
6. Phase II order: deliveries of minimum *** units per month for the period of
8 months immediately following the completion of the deliveries of Phase I.
7. Phase III order: deliveries of *** units per month for the period of 9
months immediately following the completion of the deliveries of Phase II. The
duration of this *** units' phase may be extended up to 12 months with
according adjustment of monthly delivery rate.
*** Confidential material redacted and filed separately with the Commission.
