DEVELOPMENT AND SUPPLY AGREEMENT
________________________________
This agreement ("Agreement") is made and entered into this 13 day of April 1993 ("Agreement Date"), by and between Parlex Corporation, a
Massachusetts corporation having a principal place of business at 145 Milk Street, Methuen, MA 01844 ("Parlex"), and Motorola, Inc., a Delaware corporation, by and through its Automotive and Industrial Electronics Group ("AIEG"), having a place of business at 4000 Commercial Avenue, Northbrook, IL 60062 U.S.A. ("Motorola").
WHEREAS, Parlex manufactures and sells flexible substrate assemblies to the AIEG division of Motorola for use in automotive applications; and
WHEREAS, Parlex has the capability of modifying the construction of flexible circuits to lower its cost, the capability of manufacturing and selling assemblies of such modified flexible circuits to AIEG on a long term basis, and the desire to do so; and
WHEREAS, AIEG desires to continue purchasing flexible substrate assemblies from Parlex while Parlex is developing such modified flexible circuits, and desires to replace such purchases with purchases of assemblies constructed of such modified flexible circuits if such assemblies meet AIEG's functional requirements and cost constraints; and
WHEREAS, AIEG desires to purchase flexible substrate assemblies on a long term basis from a supplier that will share productivity and materials savings in the form of price reductions to Motorola.
NOW, THEREFORE, in consideration of the mutual obligations and promises set forth herein, Motorola and Parlex agree as follows:
1.0 Definitions
1.1 Flexible Substrate Assembly: finished assembly consisting of
Acrylic Adhesive-Based Flexible Circuit Construction or New
Flexible Circuit Construction, Rigidizer, and Motorola's circuit
interconnect design.
1.2 Acrylic Adhesive-Based Flexible Circuit Construction: type of
flexible circuit incorporating acrylic adhesive as the bonding
material for attaching copper to dielectric layers, and conforming
to the functional specifications, production prices, and quality
and cycle time initiatives attached hereto as Appendices 1, 5 and
6 respectively.
1.3 New Flexible Circuit Construction: type of flexible circuit
conforming to the functional specifications, production prices,
and quality and cycle time initiatives attached hereto as
Appendices 2, 3 and 6 respectively.
1.4 Rigidizer: Base plate used as stiffener for flexible circuit.
2.0 Development Program
2.1 Development of New Flexible Circuit Construction
2.1.1 Parlex shall develop New Flexible Circuit
Construction, qualify it for Motorola's use in production,
and prepare to manufacture it at its facilities for supply
to Motorola in accordance with the terms of this Agreement.
The Product Qualification Procedure to be followed by Parlex
is attached as Appendix 4. Such development, product
qualification and manufacturing preparation shall be
completed for product launch on or before January 1, 1994.
2.1.2 All development costs shall be borne by Parlex,
with the exception that Motorola will assist in the funding
of equipment necessary to perform processes unique to
Motorola (i.e., equipment that is not usable for any other
customer of Parlex). Parlex shall notify Motorola in advance
of any equipment purchase for which it will request Motorola
assistance in funding. Parlex shall not use any such
equipment to service other Parlex customers.
2.1.3 For a period of one year commencing with the in-
service date of equipment funded by Motorola pursuant to
paragraph 2.1.2, Parlex shall not duplicate such equipment
to service any other Parlex customer. Thereafter, Parlex may
duplicate such equipment to service other Parlex customers
on equitable terms mutually acceptable to Parlex and
Motorola.
2.2 Prototype and Pre-Pilot Assemblies
2.1.1 Parlex shall build prototype and pre-pilot Flexible
Substrate Assemblies incorporating New Flexible Circuit
Construction, as needed by Motorola. Such Flexible Substrate
Assemblies shall be delivered to Motorola for delivery to
customers as samples and for evaluation and testing by
Motorola. The purpose of the prototype evaluation and tests
is to demonstrate the capabilities of the New Flexible
Circuit Construction, and the parties thereby anticipate
that desirable changes to the applicable specifications may
be identified. Any proposed changes to the applicable
specifications shall be made in accordance with paragraph
2.3.
2.2.2 Motorola shall purchase prototype and pre-pilot
Flexible Substrate Assemblies incorporating new Flexible
Circuit Construction at a price equal to four (4) times the
production price stated in Appendix 3 or at a lot charge of
twenty five hundred ($2,500) dollars, whichever is greater.
Such price includes all prototype engineering and tooling
costs, with the exception of electrical test tooling costs
which shall be agreed by the parties. Further, such price is
based on the standard delivery lead-time of four (4) weeks.
The following price premiums shall apply to three week, two
week and one week deliveries: twenty five percent, fifty
percent and one hundred percent, respectively.
2.3 Changes to Specifications or Qualification Procedure
Changes to the applicable specifications or Product
Qualification Procedure may be requested in writing by either
party. Changes requested by Parlex shall be submitted by use of a
Supplier Request for Engineering Change Notice (SREA). Any such
request shall set forth the nature of the proposed change(s) and
the effects thereof, including function, performance, reliability,
availability, development and tooling costs, production prices,
cycle time and quality. Any changes must be mutually agreed to in
writing by the parties to implementation.
2.4 Development Review Meetings
Three months after the Agreement Date, and at quarterly
intervals thereafter until completion of development,
knowledgeable representatives of Motorola and Parlex shall meet to
review Parlex's progress in its development of New Flexible
Circuit Construction under this Article 2.0.
3.0 Supply Program
3.1 Production Commitment
Parlex shall manufacture Flexible Substrate Assemblies in
accordance with Motorola's circuit interconnect design and
Rigidizer and assembly requirements. Parlex shall be capable of
manufacturing Flexible Substrate Assemblies incorporating New
Flexible Circuit Construction for sale to Motorola in compliance
with paragraph 3.2 on and after January 1, 1994. Testing for
continuity of the circuit interconnect design shall be performed
by Parlex in accordance with current Interconnecting and Packaging
Electronic Circuits (IPC) specifications.
3.2 Purchase and Sale Commitments
3.2.1 During the term of this Agreement, Parlex shall
sell to Motorola, and Motorola shall purchase from Parlex, *
percent of AIEG's requirements for Flexible Substrate
Assemblies.Motorola's purchase obligation in this paragraph
3.2 shall be limited to the extent that any purchaser of
flexible substrate assemblies, or products incorporating
flexible substrate assemblies, from AIEG has approved
another supplier of flexible substrate assemblies as of the
Agreement Date or requires another supplier or multiple
suppliers of flexible substrate assemblies in the future.
3.2.2 Motorola may request Parlex to sell Flexible
Substrate Assemblies to one or more Motorola customers. If
so, Parlex shall sell to any such Motorola customer its
requirements for Flexible Substrate Assemblies on terms
acceptable to Parlex, except that warranty and price shall
be identical to that herein provided. The volume of Flexible
Substrate Assemblies purchased from Parlex by any such
Motorola customer shall be considered, for the purpose of
volume pricing only, to be purchases by Motorola and the
price to Motorola (and any such customer(s)) shall
correspond to the price for the total volume purchased.
* Confidential information has been omitted and filed separately with the
Commission.
3.3 Price
The price of the Flexible Substrate Assemblies shall
conform to the production volume price schedules, attached as
Appendices 3 and 5. Unit prices invoiced to Motorola shall be
based on Motorola's estimate of its anticipated purchase volume
for that calendar year of production. If Motorola purchases for
the year a quantity corresponding to a unit price different than
the unit price at which it was invoiced, Motorola's contract unit
price shall be retroactively adjusted accordingly and Motorola or
Parlex, as the case may be, shall pay to the other party the
difference between the amount invoiced and the amount due for the
number of units actually shipped.
3.4 Purchase Terms and Conditions
Motorola shall issue purchase orders and/or releases for
all prototype and production Flexible Substrate Assemblies
purchased hereunder. Each Motorola purchase order shall specify
the circuit interconnect design ordered. Only the terms and
conditions contained in this document and in Motorola's standard
purchase order and release forms current at the time of purchase
shall apply to such purchases pursuant to this Agreement. To the
extent of any inconsistency or conflict between this Agreement and
the terms and conditions of such purchase order or release, this
Agreement shall control. Any terms and conditions contained in
Parlex's acknowledgment forms or elsewhere shall not change, alter
or add to these terms and conditions in any way and shall be of no
effect.
3.5 Exclusivity and Licenses
3.5.1 Parlex agrees not to sell to customers selling
products in the automobile industry the New Flexible Circuit
Construction developed hereunder for Motorola, or
substantially identical derivative flexible circuit, for one
year following the initial sale to Motorola of production
Flexible Substrate Assemblies incorporating the New Flexible
Circuit Construction, without first obtaining Motorola's
written permission.
3.5.2 Parlex grants Motorola a paid up, royalty free,
perpetual, non-exclusive, sublicensable license to make,
have made, use and sell under any patents or other
intellectual property rights for any new inventions
conceived or reduced to practice by Parlex jointly with
Motorola during and pursuant to new development work
performed under this Agreement for the New Flexible Circuit
Construction to be developed and delivered to Motorola under
this Agreement, and Parlex also grants to Motorola an
equivalent license under any new Parlex copyright rights for
new works of authorship which arise during and pursuant to
the development work performed, by Parlex, jointly with
Motorola, for the New Flexible Circuit Construction to be
developed and delivered to Motorola under this agreement.
With respect to any new inventions conceived or reduced to
practice solely by Parlex during and pursuant to new
development work performed under this agreement for the New
Flexible Circuit Construction to be developed and delivered
to Motorola under this agreement, Parlex agrees to grant to
Motorola a royalty-bearing, non-exclusive license on terms
and conditions to be reasonably negotiated by the parties.
The above licenses do not include rights for inventions or
works of authorship developed prior to or separately with
respect to development work performed under this Agreement
for the New Flexible Circuit Construction to be developed
and delivered to Motorola under this Agreement.
3.6 Service and Replacement
3.6.1 At Motorola's request, Parlex shall sell to
Motorola Flexible Substrate Assemblies necessary to satisfy
Motorola's current service and replacement requirements for
such Flexible Substrate Assemblies at the current applicable
production prices plus any actual cost differential for
packaging and manufacturing.
3.6.2 For a period of ten (10) years after Motorola
completes its purchases of Flexible Substrate Assemblies,
Parlex shall sell to Motorola Flexible Substrate Assemblies
necessary to satisfy Motorola's past model service and
replacement requirements at the last applicable production
prices plus actual cost differentials for packaging and
manufacturing. Motorola and Parlex will negotiate in good
faith with regard to Parlex's continued manufacture and sale
to Motorola of service and replacement Flexible Substrate
Assemblies beyond the tenth year.
3.7 Emergency Manufacturing Rights
In the event that Parlex is unable or may be unable to
deliver to Motorola production quantities of the Flexible
Substrate Assemblies to be supplied hereunder for any reason,
including a force majeure, and such inability continues or may
continue for more than a commercially reasonable period of time,
or if Parlex discontinues its manufacture of such Flexible
Substrate Assemblies for any reason, Parlex will grant Motorola
emergency manufacturing rights and transfer sufficient information
and tooling to Motorola to allow Motorola, at no cost for use of
Parlex's intellectual property rights, to have the Flexible
Substrate assemblies to be provided hereunder made by Motorola or
made for Motorola by a third party manufacturer. Motorola shall
request such rights and information from Parlex by notice to
Parlex as provided herein for notices. These emergency
manufacturing situation shall be under reasonable terms and
conditions mutually agreed to by Parlex and Motorola, and such
rights shall cease when Parlex can demonstrate that it is capable
of delivering production quantities of flexible substrate
Assemblies to the provided hereunder to Motorola at competitive
prices. Further, these emergency manufacturing rights and the
transfer of information acquired by Parlex from Polyonics and
which Parlex may not disclose to third parties.
3.8 Supplier Objectives
During term of this Agreement, Parlex shall comply with
the quality and cycle time initiatives stated in Appendix 6.
4.0 Post-Development Improvement of New Flexible Circuit Construction
Three months after product launch of the New Flexible Circuit
Construction, and at quarterly intervals thereafter, knowledgeable
representatives of Motorola and Parlex shall meet to review Parlex's
progress in making further technological improvements to the New
Flexible Circuit Construction.
5.0 Engineering Support
During the term of this Agreement, Parlex shall provide Motorola
with reasonable engineering support for the design and manufacturing of
Flexible Substrate Assemblies as needed by Motorola. Such support shall
be at Parlex's expense and shall be provided to AIEG engineering and
manufacturing facilities worldwide.
6.0 Confidential Information
All exchanges of information between the parties pursuant to the
present agreement shall be made in accordance with the terms and
conditions of the Mutual Non-Disclosure Agreement, attached hereto as
Appendix 7. The parties further agree that the term of said agreement
shall be coextensive with the term of this Agreement.
7.0 Release of News, Information and Advertisement
Neither party shall, without the prior written consent of the
other, release any information to which the Agreement applies nor make
any news releases or public announcements relating to the terms of this
Agreement. However, the foregoing sentence shall not be construed as
prohibiting either party from acknowledging that Motorola and Parlex
have entered into this Agreement nor shall it be construed as
prohibiting communication among employees of Parlex and Motorola
necessary to fulfill the parties' respective obligations under this
Agreement.
8.0 Limitation of Liability
Neither party shall be liable to the other for any incidental,
indirect, special or consequential damages whatsoever arising out of,
caused by or related in any way to the development, purchase of the
possibility of such damages. The parties expressly agree that the
limitations on incidental, consequential, special or indirect damages
set forth herein are agreed allocations of risk constituting in part the
consideration for this Agreement, and that such limitations shall
survive the determination of any court of competent jurisdiction that
any remedy provided herein or available at law fails of its essential
purpose.
9.0 Term
This Agreement shall commence on the Agreement Date and shall
extend for a term of three (3) years, unless sooner terminated as
provided herein. No less than sixty (60) days prior to the end of each
year of this Agreement, the parties shall declare their intentions to
add an additional one year to the term. If the Parties agree to such
extension, the term of this Agreement shall be so extended ...