Exhibit 10.6
**-Certain information omitted and filed separately with the Commission pursuant
to a confidential treatment request under Rule 24b-2 of the Commission.
MANUFACTURING AGREEMENT
BETWEEN
LUCENT TECHNOLOGIES INC.
AND
BROADBAND TECHNOLOGIES, INC.
MANUFACTURING AGREEMENT
TABLE OF CONTENTS
CLAUSE
1.0 EFFECTIVE PERIOD OF AGREEMENT
1.1 PREPARATION PERIOD
2.0 MATERIAL
3.0 PRICE
4.0 PAYMENT TERMS
5.0 SHIPMENT
6.0 FORECAST OF MATERIAL
7.0 PURCHASE COMMITMENT
8.0 SHIPPING
9.0 SHIPPING INTERVAL
10.0 FREIGHT CLASSIFICATION
11.0 SPECIFICATIONS OR DRAWINGS
12.0 PURCHASE ORDERS
13.0 ASSIGNMENT
14.0 INTELLECTUAL PROPERTY RIGHTS
15.0 DISTRIBUTION RIGHTS
16.0 CONFIDENTIALITY
17.0 EPIDEMIC CONDITION
18.0 FORCE MAJEURE
19.0 HEAVY METALS AND/OR CFC IN PACKAGING
20.0 IDENTIFICATION
21.0 IMPLEADER
22.0 INDEMNITY
23.0 INFRINGEMENT
24.0 INSIGNIA
25.0 INSURANCE
26.0 INVOICING FOR GOODS
27.0 MARKING
28.0 MONTHLY ORDER AND SHIPMENT REPORTS
29.0 NEW AND CHANGED METHODS, PROCESSES AND EQUIPMENT
30.0 NON-EXCLUSIVE MARKET RIGHTS
31.0 NOTICES
32.0 ENVIRONMENTAL WARRANTY LIMITATION
33.0 ORDERING COMPANIES
34.0 OZONE DEPLETING CHEMICALS
35.0 PACKING, LABELING AND SERIALIZATION
36.0 PAYMENT TERMS
37.0 PRODUCT CONFORMANCE REVIEWS
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38.0 REJECTIONS
39.0 REPAIRS NOT COVERED UNDER WARRANTY
40.0 REPAIR PROCEDURES
41.0 RIGHT OF ENTRY
42.0 SERVICES
43.0 SOFTWARE
44.0 INVOICING FOR STOCK
45.0 SURVIVAL OF OBLIGATIONS
46.0 TAXES
47.0 TIMELY PERFORMANCE
48.0 TITLE AND RISK OF LOSS
48A.0 EQUIPMENT
49.0 TOXIC SUBSTANCES AND PRODUCT HAZARDS
50.0 TERMINATION
51.0 WARRANTY
52.0 EXPORT CONTROL
53.0 OZONE DEPLETING SUBSTANCES LABELING
54.0 INFRINGEMENT
55.0 SEVERABILITY
56.0 CHOICE OF LAW
57.0 DISPUTE RESOLUTION
58.0 BANKRUPTCY AND CHANGE OF CONTROL
59.0 ENTIRE AGREEMENT
60.0 COMPLIANCE WITH LAWS
61.0 COMPLIANCE WITH UNITED STATES CUSTOMS LAWS AND REGULATIONS
62.0 RELATIONSHIP OF PARTIES
63.0 INDEPENDENT AGREEMENT
64.0 COUNTERPARTS
ATTACHMENTS
A CHANGE CONTROL PROCEDURES
Page 3
MANUFACTURING AGREEMENT
This Agreement is entered into and made effective as of February 4, 1998
("Effective Date"), by and between Lucent Technologies Inc., a corporation
organized under the laws of the State of Delaware and having its principal place
of business at 000 Xxxxxxxx Xxxxxx, Xxxxxx Xxxx, Xxx Xxxxxx 00000 ("Lucent"),
and BroadBand Technologies, Inc., a corporation organized under the laws of the
State of Delaware and having its principal office at 0000 Xxxxxxx Xxxxx Xxxxx,
Xxxxxx, Xxxxx Xxxxxxxx 00000-0000 ("BroadBand") (collectively "the Parties").
WITNESSETH:
WHEREAS, Lucent is in the business of, among other things, producing and
marketing telecommunications equipment and related supplies and services; and
WHEREAS, BroadBand manufactures and sells products related to some of the
business of Lucent, and Lucent desires BroadBand to manufacture for Lucent
various Lucent products, pursuant to Lucent specifications, for Lucent to sell
to Lucent's customers, subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises herein set forth and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged by the parties, BroadBand and Lucent agree as follows:
1.0 EFFECTIVE PERIOD OF AGREEMENT - The term of this Agreement shall commence on
the Effective Date, and shall, except as otherwise provided in this Agreement,
continue in effect thereafter for a period of three years from the end of the
Preparation Period as defined herein.
1.1 PREPARATION PERIOD - Promptly after the execution of this Agreement, each
Party will appoint a team of representatives to work together on establishing a
set of procedures to be followed by the Parties in implementing this Agreement.
That team will also agree on the initial Product Letter for Material to be
manufactured pursuant to this Agreement. The initial Product Letter will include
the following information: (a) the identification of the initial Material to be
manufactured by BroadBand for Lucent; (b) the Specifications to be used by
BroadBand in manufacturing that Material; (c) the initial twelve (12) month
forecast for that Material; (d) the per unit price to be charged by BroadBand to
Lucent for the Material identified in the forecast, and the price schedule for
repairs of the Material; (e) the monetary amount of Manufacturing Absorption
associated with each unit of Material in the initial forecast ("the
Manufacturing Absorption Rate"); (f) the warranty period for the Material if
other than five (5) years; (g) identification of test documentation, equipment,
or other information or materials to be provided by Lucent in connection with
the Material; (h) the packaging standards for each item of Material; (i) the
freight classification for each item of Material; (j) the norm for rejection
rates and period of time to achieve quality levels (See Section 50); (k) the
schedule under which Lucent may change its forecast or purchase order quantity
without charge; (l) any long lead time components, custom materials or other
components authorized for procurement by BroadBand;
Page 4
(m) the percentages for failures and defects of Material referenced in the
clause entitled PRODUCT CONFORMANCE REVIEWS; and (n) the identification of the
applicable Lucent quality inspection organization. These tasks will be completed
within ninety (90) days from the Effective Date of this Agreement ("the
Preparation Period"). The document produced by this team will constitute the
first Product Letter under this Agreement. Subsequent Product Letters will
contain the same information as set forth in this Article. Product Letters are
effective only when signed by both Parties.
2.0 MATERIAL - "Material" or "material" as used in this Agreement shall mean the
products described in a Product Letter. Such Material shall be manufactured by
BroadBand pursuant to Lucent specifications set forth in the Product Letter and
will be sold only to Lucent in accordance with the terms, conditions and
specifications stated in this Agreement. Material shall be furnished to Lucent
on an as ordered basis. "Specification(s)" as used in this Agreement shall mean
all of the specifications made part of a Product Letter.
3.0 PRICE - Prices for Material to be manufactured hereunder shall be set forth
in the applicable Product Letter.
4.0 PAYMENT TERMS - Payment for Material shall be due net 30 days from the date
of delivery of the Material to Lucent or receipt of the applicable invoice by
Lucent, whichever occurs later.
5.0 SHIPMENT. - The Material shall be shipped FOB BroadBand's factory. Freight
will be prepaid and billed as a separate item unless directed otherwise by
Lucent.
6.0 FORECAST OF MATERIAL - Lucent will provide BroadBand each month with a
twelve (12) month rolling forecast of the Material it plans to order and have
delivered during each month. The first such forecast will be prepared during the
Preparation Period. Lucent will provide more frequent updates as appropriate.
Consistent with the change order provisions set forth in the clause entitled
"PURCHASE ORDERS", these forecasts shall constitute a commitment by Lucent.
BroadBand agrees to acknowledge receipt of and provide acceptance of forecasts
in writing within ten (10) working days from receipt. Lucent will make
reasonable efforts to provide balanced forecasts and purchase orders for
Material to avoid sharp increases or decreases in production.
7.0 PURCHASE COMMITMENT - Following the end of the Preparation Period, Lucent
shall purchase a volume of Material from BroadBand sufficient to enable
BroadBand to absorb the amounts of the manufacturing costs identified in the
definition of Manufacturing Absorption set forth in Article 7.1 of this
Agreement ("Manufacturing Absorption") shown below, for each indicated period
("Absorption Period"):
******** End of Preparation Period through December 31, 1998
******** January 1, 1999 through June 30, 1999
******** July 1, 1999 through December 31, 1999
******** January 1, 2000 through June 30, 2000
Page 5
******** July 1, 2000 through December 31, 2000
******** January 1, 2001 through May 1, 2001.
-----------
$18 million Total
Purchases will be arranged, to the extent practicable, to provide the same level
of Manufacturing Absorption each quarter. If at the end of the first Absorption
Period, Lucent has not purchased sufficient Material to absorb ************* of
Manufacturing Absorption, Lucent shall pay the deficiency in Manufacturing
Absorption to BroadBand within thirty (30) days of the end of such Absorption
Period. A similar calculation will be made at the end of each subsequent
Absorption Period. If this Agreement is terminated by Lucent other than for
cause or the end of the last Absorption Period is reached without BroadBand
having received eighteen million dollars ($18,000,000) in Manufacturing
Absorption, Lucent shall pay the deficiency to BroadBand within thirty (30) days
of such termination or end of Absorption Period. The Manufacturing Absorption
Rate associated with the initial Material to be manufactured by BroadBand will
be established by the representatives of the Parties during the Preparation
Period. Consistent with the process established by the Parties during the
Preparation Period, the Parties' representatives will meet monthly following the
Preparation Period to establish the Manufacturing Absorption Rate for each unit
of Material identified in Lucent's then current forecast.
7.1 The term "Manufacturing Absorption", as used in Article 7.0 and elsewhere in
this Agreement, shall mean all costs associated with direct and indirect labor
and related overheads, depreciation of capital equipment, facility amortization,
manufacturing variance and other direct and indirect expenses. The term does not
include direct material acquisition costs.
7.1.1 Direct labor and associated overhead: includes salaries and fringe
benefits of personnel who are manufacturing/testing products;
7.1.2 Indirect labor and associated overhead: includes salaries and fringe
benefits of personnel in support of production, quality, test and process
engineering, documentation, etc.
7.1.3 Direct expenses: expenses associated with the manufacture of the
product (e.g., line scrap, engineering change orders, obsolesence, unique
tools, etc.)
7.1.4 Indirect expenses: associated expense not directly attributable to a
specific product, but nonetheless layered over the operation (e.g.,
facilities, heat, transportation, etc.)
7.1.5 Manufacturing variance: does not include product warranty cost.
Page 6
8.0 SHIPPING - BroadBand shall: (1) ship the Material covered by a forecast or a
purchase order substantially complete unless instructed otherwise; (2) ship to
the destination designated in the purchase order; (3) ship according to routing
instructions given by Lucent; (4) place the Agreement and purchase order number
on all subordinate documents; (5) enclose a packing memorandum with each
shipment and, when more than one package is shipped, identify the package
containing the memorandum; (6) xxxx the purchase order number on all packages
and shipping papers; and (7) not ship Material more than five (5) working days
earlier or five (5) working days later than the agreed upon shipment date
without Lucent's prior written authorization. Adequate protective packing shall
be furnished at no additional charge. Shipping and routing instructions must be
furnished or altered by Lucent in writing. If BroadBand does not make a
reasonable effort to comply with the terms of the purchase order or with
Lucent's written shipping or routing instructions, BroadBand authorizes Lucent
to charge back to BroadBand any increased cost incurred by Lucent as a result of
BroadBand's failure to comply. Lucent agrees to review each shipment upon
receipt for contents and damage and advise BroadBand within fifteen (15)
calendar days of any deficiencies. Unless Lucent notifies BroadBand of
deficiencies within such fifteen (15) day period, the shipment shall be deemed
accepted.
9.0 SHIPPING INTERVAL - The delivery schedule and interval applicable to each
purchase order will be agreed upon by BroadBand and Lucent and set forth in the
purchase order.
9.1 If BroadBand exceeds the delivery intervals then, in addition to all other
rights and remedies at law or equity or otherwise, and without any liability or
obligation of Lucent, Lucent shall have the right to: (a) cancel such purchase
order with regard to the affected Material following the expiration of a five
(5) business day grace period or (b) extend such delivery date to a later date,
subject, however, to the right to cancel as in (a) preceding if delivery is not
made or performance is not completed on or before such extended delivery date.
If Lucent elects to extend such delivery date, BroadBand shall absorb the
difference between the charges to ship via normal transportation and the charges
to ship premium overnight. The grace period will be extended by the amount of
any delay caused by delay in BroadBand receiving parts, information or services
from Lucent or any of its affiliates that Lucent has agreed to provide under the
relevant Product Letter or other writing executed by Lucent.
9.2 If a purchase order is canceled by Lucent pursuant to the above, Lucent
shall have the right to retain or return any or all Material received by or paid
for by Lucent under such purchase order. Within fifteen (15) days of BroadBand's
receipt of returned Material, BroadBand shall reimburse Lucent for the costs of
shipping the Material returned to BroadBand and for any amounts, including
shipping costs, previously paid by Lucent for the Material. Lucent shall pay for
any Material it retains at the prices set forth in the purchase order or a
Product Letter. Lucent shall receive credit for the Manufacturing Absorption
Rate associated with canceled orders.
9.3 If, during the course of this Agreement, BroadBand determines that BroadBand
will no longer be able to ship within the agreed interval, BroadBand shall
immediately notify Lucent's buyer to that effect. BroadBand shall also notify
Lucent's buyer, as soon as it becomes apparent, if BroadBand is unable to meet
the delivery date for an order.
Page 7
10.0 FREIGHT CLASSIFICATION - Material purchased under this Agreement shall be
shipped to Lucent or Lucent's customers subject to freight charges appropriate
for goods classified as set forth in a Product Letter or a purchase order.
BroadBand shall indicate on the xxxx of lading that Lucent's contract rates
apply.
11.0 SPECIFICATIONS OR DRAWINGS - The Product Letters will include manufacturing
specifications (referred to herein as "Technical Specifications" or
"Specifications") for Lucent products to be manufactured by BroadBand. The
Specifications for the Material included on the initial forecast will be agreed
to during the Preparation Period. Specifications for Material to be added to any
subsequent forecast will be agreed upon prior to inclusion of the Material on a
forecast.
In accordance with the notification requirements outlined in the clause
NOTICES, Lucent shall provide BroadBand with at least thirty (30) days prior
written notice of any change proposed to be made by Lucent in the Specifications
for Material to be manufactured by BroadBand under this Agreement.
If the parties do not agree to the change proposed by Lucent, and the
parties are unable to agree on a mutually acceptable modification, Lucent may
opt to continue the purchase of the Material under the agreed upon
Specifications or cancel any existing orders for that Material; provided,
however, that orders for delivery within the period set forth in the applicable
Product Letter during which Lucent may not change its purchase order quantity
may not be canceled without the written agreement of BroadBand. BroadBand may
not unilaterally cease manufacture of Material subject to an accepted purchase
order.
12.0 PURCHASE ORDERS - Purchase orders issued under this Agreement shall be sent
to the following address:
BroadBand Technologies, Inc.
X.X. Xxx 00000
0000 Xxxxxxx Xxxxx Xxxxx
Xxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attention: Customer Logistics Organization
Each purchase order shall specify: (a) description of material, inclusive
of any numerical/alphabetical identification, (b) delivery schedule or dates,
(c) applicable price, (d) location to which the material is to be shipped and
(e) location to which invoices shall be sent for payment. Preprinted terms on
Lucent's purchase order form will be ignored.
Page 8
Lucent may at any time subsequent to the issuance of a forecast or purchase
order under this Agreement change the forecast or purchase order quantity at no
charge in accordance with the schedule set forth in the applicable Product
Letter.
At the option of Lucent, and at any time during the Agreement should
Material covered by a commitment to BroadBand become outdated or replaced by
later technology or newer components, such commitment shall be transferred to
the new technology i.e., Material; provided, however, that such transfer shall
not affect Material scheduled for delivery within the period prior to scheduled
delivery established in the applicable Product Letter within which Lucent may
not amend a purchase order, without the written approval of BroadBand.
For Lucent authorized changes, Lucent's liability if any, for commitments
covering the older technology/components(s) shall be limited to BroadBand's
standard cost (purchase price plus associated overhead in accordance with
BroadBand's standard accounting practices) of all components for the material
ordered by BroadBand and not transferable to the new technology or (not usable
in BroadBand's other operations or saleable to BroadBand's other customers),
less any salvage value thereof. However, no such charges shall be payable if
within sixty (60) calendar days after notice of change, Material equivalent in
kind to that being terminated is ordered by Lucent from BroadBand, and Broadband
has not expended best efforts to reduce Lucent's liability for such material
during said sixty (60) calendar days period. If requested, BroadBand agrees to
substantiate effort and such costs by, for example, submitting supporting
invoices for all material invoiced to Lucent.
BroadBand is authorized by Lucent to procure long lead-time components,
custom materials and/or components that are required to be purchased in large
minimum order quantities (MO's) as indicated in Product Letters. Any amendment
agreed by the parties shall not apply to orders made by BroadBand prior to the
effective date of the amendment, except that an amendment shall apply to prior
orders to the extent that BroadBand fails to take reasonable action to cancel or
reduce an order made prior to the date of the amendment. When possible,
BroadBand shall purchase such items in quantities to meet Lucent's expected
schedule unless otherwise agreed. If Lucent specifies a lead ordering time
longer than sixty (60) working days and/or BroadBand must place a longer-than-90
day firm and irrevocable order for such parts with the approved supplier, Lucent
will be obligated to purchase from BroadBand at BroadBand's cost the parts
required to fill Lucent's purchase order upon the earlier to occur of (i) the
time the purchase order is canceled by Lucent, or (ii) the time this Agreement
terminates, unless Lucent indicates is will honor a purchase order with a
scheduled delivery after the date this Agreement terminates, or (iii) the time
that such parts are no longer required due to changes mutually agreed by both
parties.
BroadBand shall make available to Lucent, upon request, reasonable
quantities of any components used in Material for Lucent's repair activity. Such
components are referred to as "Bench Stock." Reasonable infrequent requests for
quantities of Bench Stock will be sold to Lucent at BroadBand's actual purchase
price.
13.0 ASSIGNMENT - BBT shall not assign any right or interest under this
Agreement (excepting solely for moneys due or to become due) without the prior
written consent of Lucent.
Page 9
Subject to Lucent's right to terminate upon the occurrence of a Change in
Control, a merger or consolidation shall not be deemed to be an assignment. BBT
will provide Lucent with written notice of a merger or consolidation within ten
(10) business days after having knowledge or reasonable expectation of the
merger or consolidation.
14.0 INTELLECTUAL PROPERTY RIGHTS - This is not a product development contract.
In the event that Lucent desires BroadBand to perform any product development,
such work is to be performed under a separate agreement. The Parties
acknowledge, however, that from time to time, BroadBand may propose minor
changes to the manufacturing Specifications or other elements of the Materials.
BroadBand agrees that Lucent shall own any such changes approved by Lucent and
incorporated into the Material supplied by BroadBand, including intellectual
property rights thereto or embodied therein, absent express written agreement
otherwise.
15.0 DISTRIBUTION RIGHTS - BroadBand agrees that it will not manufacture
Materials other than for Lucent. BroadBand further agrees that it will not sell
or offer for sale anywhere in the world products which are the same or
essentially the same in external appearance and/or placement of external
controls as Material except for products of its own design and manufacture which
evolve from a project under the Research and Development Services Agreement
between the parties of even date herewith. Nothing in this clause shall restrict
BroadBand from selling or offering for sale any assembly, subassembly, or
component of the product which BroadBand has manufactured pursuant to its own
design specifications or at its own expense. Nothing in this clause shall be
deemed to be in contradiction with the rights of Lucent as stated in the clause
NONEXCLUSIVE MARKET RIGHTS.
16.0 CONFIDENTIALITY - All Information ("Information" means proprietary
specifications, designs, plans, drawings, software, data, prototypes or other
business and /or technical information) provided by either Party to the other
pursuant to this Agreement shall be held in confidence by the receiving Party;
shall be used only for the purpose of performing acts and obligations pursuant
to this Agreement; shall be reproduced only to the extent necessary for that
purpose; and shall not be disclosed by the receiving Party without the prior
written approval of the disclosing Party. The receiving Party may, however,
disclose the Information to its employees, consultants and contractors with a
need to know; provided, that the receiving Party binds those employees,
consultants and contractors to terms at least as restrictive as those stated
herein, advises those employees, consultants and contractors of their
confidentiality obligations, and indemnifies the disclosing Party for any breach
of those obligations. Information shall be subject to the restrictions in this
section if it is in writing or other tangible form, only if clearly marked as
proprietary when disclosed to the receiving Party; or, if not in tangible form,
is of a nature that a reasonable person would conclude is confidential
Information, and the Information is reduced to writing clearly marked as
proprietary, with a copy of the writing being furnished to the receiving Party
within thirty (30) days of the disclosure of the intangible information, and
with the writing containing a notice that the information was previously
provided in intangible form. These restrictions on the use or disclosure of
Information shall not apply to any Information: (i) which is independently
developed by or for the receiving Party; (ii) which is lawfully received free of
restriction from another source; (iii) after it has become generally available
to the public without breach of this Agreement by the receiving party; (iv)
which at the time of disclosure to the receiving Party was known to that Party
free of restriction as evidenced
Page 10
by documentation in that Party's possession; (v) which the disclosing Party
agrees in writing is free of such restrictions; or (vi) which the receiving
Party is required to disclose under applicable laws, rules and regulations,
provided that the receiving Party shall first notify the disclosing Party of
such required disclosure and afford the disclosing party the opportunity to seek
a protective order relating to such disclosure. All Information shall remain the
property of the disclosing Party and shall be returned upon written request or
upon the receiving Party's determination that it no longer has a need for such
Information. The receiving Party may retain one copy of all written materials
returned to provide an archive record of the disclosure.
17.0 EPIDEMIC CONDITION - If, during the term of this Agreement and for one year
after the last shipment date of Material under this Agreement, Lucent notifies
BroadBand that any Material shows evidence of an "Epidemic Condition" caused by
BroadBand's manufacturing and not by any specifications, designs, instructions,
component suppliers or materials provided by or approved by Lucent, BroadBand
shall prepare and propose a Corrective Action Plan ("CAP") with respect to such
Material, addressing implementation and procedure milestones for remedying such
Epidemic Condition(s). BroadBand shall provide the CAP within ten (10) days of
receiving information from Lucent reasonably required to identify and replicate
the problem and prepare the CAP. An extension of this time-frame is permissible
upon mutual written agreement of the parties.
Upon notification of the Epidemic Condition to BroadBand, Lucent shall have
the right to postpone all or part of the shipments of unshipped Material
exhibiting the Epidemic Condition, by giving written notice of such postponement
to BroadBand, pending correction of the Epidemic Condition. Such postponement
shall temporarily relieve BroadBand of its shipment liability and Lucent of its
shipment acceptance liability. Should BroadBand not agree to the existence of an
Epidemic Condition or should Lucent not agree to the CAP, the matter will be
handled in accordance with the clause DISPUTE RESOLUTION.
An Epidemic Condition will be considered to exist when one or more of the
following conditions occur:
(1) Failure reports or statistical samplings show that four (4) percent or more
of Material installed or four (4) percent or more of Material shipped
during any two consecutive months, or four (4) percent or more of the
Material tracked by Lucent's Field Quality Engineering contain a potential
safety hazard (such as personal injury or death, fire, explosion, toxic
emissions, etc.), or exhibit a highly objectionable symptom (such as
emissions of smoke, loud noises, deformation of housing) or other
disconcerting symptoms of this type.
(2) Reliability plots of relevant data indicate that the material has actual
Mean Time Between Failures (MTBF) of less than 80% of the MTBF stipulated
in the Technical Specification. The MTBF parameter of Material is defined
as the total operating or power-on time of any population under observation
("T"), in hours, divided by the total number of critical failures ("n")
that have occurred during the observed period. A critical failure is
defined as a failure to operate per the requirements of the Technical
Specification. The total operating time of a population is the summation of
operating time of individual units in
Page 11
that population. MTBF is expressed as MTBF = T/n. An Epidemic Condition
shall exist when data derived from populations being tracked confirms the
condition with 80% confidence.
(3) Material Dead on Arrival (DOA) failures exceed the Epidemic DOA failure
rate which is defined as 1.2 x DOA specified in the article of this
Agreement entitled PRODUCT CONFORMANCE REVIEW.
Only major functional and visual/mechanical/appearance defects are
considered for determining Epidemic Condition. Material can be either sampled
or, at Lucent's option, 100% audited at Lucent warehouses, factories or Lucent's
customers' locations. If material is sampled, the data must have 80% or better
statistical confidence.
For the purpose of this Agreement, functional DOA shall be defined as any
material that during the test, installation or upon its first use fails to
operate as expected or specified. Visual/mechanical/appearance DOA is defined as
any material containing one or more major defects that would make the material
unfit for use or installation.
An Epidemic Condition shall not include failures due to customer
misapplication, utilization of parts not approved by BroadBand, or chain
failures induced by internally or externally integrated subassemblies.
In the event that BroadBand develops a remedy for the defect(s) that caused
the Epidemic Condition and Lucent agrees in writing that the remedy is
acceptable, BroadBand shall:
(a) Incorporate the remedy in the affected Material in accordance with the
Engineering Change Control procedures set forth in Attachment A to this
Agreement.
(b) Ship all subsequent material incorporating the required modification
correcting the defect(s) at no additional charge to Lucent; and
(c) Repair and/or replace material that caused the Epidemic Condition. In the
event that Lucent incurs costs due to such repair and/or replacement,
including but not limited to labor and shipping costs, BroadBand shall
reimburse Lucent for such reasonable costs. BroadBand shall bear risk of in
transit loss and damage for such repaired and/or replaced material.
BroadBand and Lucent shall mutually agree in writing as to the remedy's
implementation schedule. BroadBand shall use its best efforts to implement the
remedy in accordance with the agreed-upon schedule.
If BroadBand is unable to develop a mutually agreeable remedy, or does not
adequately take into account the business interests of Lucent, as reasonably
agreed by the parties, Lucent may (1) develop and implement such remedy and, in
such case, reasonable implementation costs and risk of in-transit loss and
damage shall be allocated between the parties as set forth in this clause,
and/or (2) cancel postponed orders without liability and return all material
affected by such Epidemic Condition for full refund, payable by BroadBand within
thirty (30) days after
Page 12
receipt of returned material (with risk of loss or in-transit damage borne by
BroadBand) and/or (3) terminate this Agreement without further liability.
18.0 FORCE MAJEURE - Neither party shall be held responsible for any delay or
failure in performance of any part of this Agreement to the extent such delay or
failure is caused by fire, flood, strike, civil, governmental or military
authority, act of God, or other similar causes beyond its control and without
the fault or negligence of the delayed or non-performing party or its
subcontractors. BroadBand's liability for loss or damage to Lucent's material in
BroadBand's possession or control shall not be modified by this clause. When a
party's delay or nonperformance continues for a period of at least thirty (30)
days, the other party may terminate, at no charge, any order affected by the
force majeure condition. In addition, the other party may terminate this
Agreement in the event that a force majeure condition persists for a period of
at least six (6) months within which 50% or more of the Material forecast to be
delivered and paid for during such period is affected. Lucent shall receive
credit for the Manufacturing Absorption associated with the Material for which
orders are canceled by Lucent under this Article.
19.0 HEAVY METALS AND/OR CFC IN PACKAGING - BroadBand warrants to Lucent that no
lead, cadmium, mercury or hexavalent chromium have been intentionally added to
any packaging or packaging component (as defined under applicable laws) to be
provided to Lucent under this Agreement and that packaging materials were not
manufactured using and do not contain chlorofluorocarbons. BroadBand further
warrants to Lucent that the sum of the concentration levels of lead, cadmium,
mercury and hexavalent chromium in the package or packaging component provided
to Lucent under this Agreement does not exceed 100 parts per million. Upon
request, BroadBand shall provide to Lucent Certificates of Compliance certifying
that the packaging and/or packaging components provided under this Agreement are
in compliance with the requirements set forth above in this clause.
20.0 IDENTIFICATION - BroadBand shall not, without Lucent's prior written
consent, engage in publicity related to this Agreement, or make public use of
any Identification in any circumstances related to this Agreement.
"Identification" means any semblance of any trade name, trademark, service xxxx,
insignia, symbol, logo, or any other designation or drawing of Lucent
Technologies or its affiliates. BroadBand shall remove or obliterate any
Identification prior to any use or disposition of any material rejected or not
purchased by Lucent. Lucent recognizes that BroadBand is a public company and
that some disclosure of this Agreement by BroadBand may be required by
applicable law.
21.0 IMPLEADER - Neither party shall implead or bring an action against the
other based on any claim by any person for personal injury or death to an
employee of the other party for which the other party has previously paid or is
obligated to pay worker's compensation benefits to such employee or claimant and
for which such employee or claimant could not otherwise bring legal action
against the other party.
22.0 INDEMNITY - At Lucent's request, BroadBand agrees to indemnify, defend and
hold harmless Lucent, its affiliates, customers, employees, successors and
assigns (all referred to as "Lucent") from and against any losses, damages,
claims, fines, penalties and expenses (including reasonable attorney's fees)
that arise out of or result from: (1) injuries or death to persons or
Page 13
damage to property, including theft, in any way arising out of or caused or
alleged to have been caused by the work or services performed by, or material
provided by BroadBand or persons furnished by BroadBand; or (2) assertions under
Workers' Compensation or similar acts made by persons furnished by BroadBand.
BroadBand agrees to indemnify, defend (with counsel selected by Lucent) and
hold Lucent and Lucent's affiliates and the directors, officers, shareholders,
employees, tenants, contractors, assigns and successors and their affiliates
harmless from any claims (including without limitation third-party claims for
personal injury or real or personal property damage), actions, administrative
proceedings (including informal proceedings), judgments, damages, punitive
damages, penalties, fines, liabilities (including sums paid in settlement of
claims), interest or costs, including attorneys' fees (including any fees and
expenses incurred in enforcing this indemnity), consultant fees, and expert fees
sought from or asserted against Lucent in connection with the presence,
suspected presence, release, suspected release, or threat of release of any
Hazardous Substance, whether into the air, soil, surface water or groundwater at
any and all of the manufacturing facilities owned, operated and/or leased by
BroadBand.
23.0 INFRINGEMENT - BroadBand shall indemnify and save harmless Lucent, its
affiliates and their customers, officers, directors, and employees (all referred
to in this clause as "Lucent") from and against any losses, damages,
liabilities, fines, penalties, and expenses (including reasonable attorneys'
fees) that arise out of or result from any and all claims (1) of infringement of
any patent, copyright, trademark or trade secret right, or other intellectual
property right, private right, or any other proprietary or personal interest,
and (2) related to the manufacturing processes used by BroadBand in
manufacturing Material under this Agreement (an "Infringement Claim"). If the
Infringement Claim arises solely from BroadBand's adherence to Lucent's written
instructions regarding services or tangible or intangible goods provided by
BroadBand ("Items") and if the Items are not (1) commercial items available on
the open market or the same as such items, or (2) items of BroadBand's
designated origin, design or selection, Lucent shall indemnify BroadBand. Lucent
or BroadBand (at Lucent's request) shall defend or settle, at its own expense
any demand, action or suit on any Infringement Claim for which it is indemnitor
under the preceding provisions and each shall timely notify the other of any
assertion against it of any Infringement Claim and shall cooperate in good faith
with the other to facilitate the defense of any such Claim.
24.0 INSIGNIA - Upon Lucent's written request, "Insignia", including certain
trademarks, trade names, insignia, symbols, decorative designs or packaging
designs of Lucent, or evidences of Lucent's inspection will be properly affixed
by BroadBand to the material furnished or its packaging. Such Insignia will not
be affixed, used or otherwise displayed on the material furnished or in
connection therewith without written approval by Lucent. The manner in which
such Insignia will be affixed must be approved in writing by Lucent in
accordance with standards established by Lucent. Lucent shall retain all right,
title and interest in any and all packaging designs, finished artwork and
separations furnished to BroadBand. This clause does not reduce or modify
BroadBand's obligations under the IDENTIFICATION and USE OF INFORMATION clauses.
Page 14
25.0 INSURANCE - BroadBand shall maintain and cause BroadBand's subcontractors
to maintain during the term of this Agreement: (1) Workers' Compensation
insurance as prescribed by the law of the state or nation in which the work is
performed; (2) employer's liability insurance with limits of at least $500,000
for each occurrence; (3) automobile liability insurance if the use of motor
vehicles is required, with limits of at least $1,000,000 combined single limit
for bodily injury and property damage per occurrence; (4) Commercial General
Liability ("CGL") insurance, ISO 1988 or later occurrence form of insurance,
including Blanket Contractual Liability and Broad Form Property Damage, with
limits of at least $1,000,000 combined single limit for bodily injury and
property damage per occurrence; and (5) if the furnishing to Lucent (by sale or
otherwise) of material or construction services is involved, CGL insurance
endorsed to include products liability and completed operations coverage in the
amount of $5,000,000 per occurrence. All CGL and automobile liability insurance
shall designate Lucent Technologies Inc., its affiliates, and its directors,
officers and employees (all referred to in this clause as "Lucent") as
additional insured. All such insurance must be primary and non-contributory and
required to respond and pay prior to any other insurance or self-insurance
available. Any other coverage available to Lucent shall apply on an excess
basis. BroadBand agrees that BroadBand, BroadBand's insurer(s) and anyone
claiming by, through, under or in BroadBand's behalf shall have no claim, right
of action or right of subrogation against Lucent and its customers based on any
loss or liability insured against under the foregoing insurance. BroadBand and
BroadBand's subcontractors shall furnish prior to the start of Work certificates
or adequate proof of the foregoing insurance, including if specifically
requested by Lucent, endorsements and policies. In the event that BroadBand
changes insurers, BroadBand will notify Lucent of such change. Insurance
companies providing coverage under this Agreement must be rated by A-M Best with
at least an A- rating.
26.0 INVOICING FOR GOODS - BroadBand shall: (1) render original invoice, or as
otherwise specified in this Agreement, showing Agreement and order number,
through routing and weight; (2) render separate invoices for each shipment
within twenty-four (24) hours after shipment; and (3) mail invoices with copies
of bills of lading and shipping notices to the address shown on this Agreement
or order. If prepayment of transportation charges is authorized, BroadBand shall
include the transportation charges from the FOB point to the destination as a
separate item on the invoice stating the name of the carrier used.
27.0 MARKING - All Material furnished under this Agreement shall be marked for
identification purposes in accordance with the Specifications set forth in a
Project Letter to this Agreement and as follows:
(a) with Lucent model/serial number; and
(b) with month and year of manufacture.
In addition, BroadBand shall add any other identification which might be
reasonably requested by Lucent such as but not limited to indicia conforming to
Lucent's serialization plan. Charges, if any, for such additional identification
marking shall be as agreed upon by BroadBand and Lucent. This clause does not
reduce or modify BroadBand's obligations under the IDENTIFICATION clause.
Page 15
28.0 MONTHLY ORDER AND SHIPMENT REPORTS - BroadBand shall render monthly order
and shipment reports on or before the fifth working day of the succeeding month
containing the information reasonably required on report forms furnished by
Lucent.
29.0 NEW AND CHANGED METHODS, PROCESSES AND EQUIPMENT - BroadBand shall keep
abreast of major developments in BroadBand's industry and promptly advise Lucent
of any developments which might affect the production of any material under this
Agreement.
If during the term of this Agreement BroadBand's costs are reduced by using
improvement from (1) the adoption of new production methods, processes,
techniques, or materials; or (2) the use of additional, new, or different
equipment or facilities, prices shall be reduced by agreement of the parties to
fairly reflect such reduction.
30.0 NON-EXCLUSIVE MARKET RIGHTS - This Agreement does not grant to BroadBand an
exclusive right or privilege to sell to Lucent any or all products of the type
described in the MATERIAL clause which Lucent may require. Therefore, Lucent may
contract with other manufacturers and suppliers for the procurement of
comparable products. In addition, Lucent shall, at its sole discretion, decide
the extent to which Lucent will market advertise, promote, support or otherwise
assist in further offerings of the material. Purchases by Lucent under this
Agreement shall neither restrict the right of Lucent to cease purchasing nor
require Lucent to continue any level of such purchases.
31.0 NOTICES - Any notice or demand which under the terms of this Agreement or
under any statute must or may be given or made by BroadBand or Lucent shall be
in writing and shall be given or made by confirmed facsimile, or similar
communication or by express mail or overnight courier addressed to the
respective parties as follows:
To Lucent: Lucent Technologies Inc.
0000 Xxxx Xxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000-0000
Attention: Access Engineering Director
With a copy to: Lucent Technologies Inc.
Address: 00 Xxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Page 16
Attention: Access Product Management Vice
President
To BroadBand: BroadBand Technologies, Inc.
Address: X.X. Xxx 00000
0000 Xxxxxxx Xxxxx Xxxxx
Xxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attention: Chief Financial Officer
Such notice or demand shall be deemed to have been given or made when received.
The above addresses may be changed at any time by giving prior written notice as
above provided.
32.0 ENVIRONMENTAL WARRANTY LIMITATION - The warranties and indemnities of
BroadBand in the clauses INDEMNITY, OZONE DEPLETING CHEMICALS and TOXIC
SUBSTANCES AND PRODUCT HAZARDS shall not apply to materials provided by Lucent
or manufactured by another supplier to a Lucent specification.
33.0 ORDERING COMPANIES - Lucent or any affiliated corporation, partnership, or
venture, both U.S. and foreign, as may be designated in writing by Lucent, may
order under this Agreement. For the purpose of this Agreement, the term "Lucent"
shall mean the corporation or other entity which enters into or issues a
contract or order under this Agreement. An affiliated corporation, partnership,
or venture is an entity, a majority of whose voting stock or ownership interest
is owned directly or indirectly by Lucent. Any contract or order issued under
this Agreement will be a contractual relationship between Lucent and BroadBand
and BroadBand shall look only to Lucent for performance of Lucent's obligations
under such contract or order.
34.0 OZONE DEPLETING CHEMICALS - Subject to the clause ENVIRONMENTAL WARRANTY
LIMITATION, BroadBand hereby warrants that it is aware of international
agreements and pending legislation in several nations, including the United
States, which would limit, ban and/or tax importation of any product containing,
or produced using ozone depleting chemicals ("ODCs"), including
chloroflurocarbons, halons and certain chlorinated solvents. BroadBand hereby
warrants that the material furnished to Lucent will conform to all applicable
requirements established pursuant to such agreements, legislation and
regulations, and the material furnished to Lucent will be able to be imported
and used lawfully (and without additional taxes associated with ODCs not
reported to Lucent by BroadBand as set forth in this clause) under all such
agreements, legislation and requirements. BroadBand also warrants that it is
currently reducing, or if BroadBand is not the manufacturer of the material, is
currently causing the manufacturing vendor to reduce and will, in an expeditious
manner, eliminate, or, as
Page 17
applicable, have its manufacturing vendor eliminate the use of ODCs in the
manufacture of the material.
If the material furnished by BroadBand under this Agreement is manufactured
outside the United States, BroadBand shall, upon execution of this Agreement,
and at any time that new products are added to this Agreement or changes are
made to the material furnished under this Agreement, complete, sign and return
to Lucent the attached ODC Content Certification. The ODC Content Certification
must be signed by BroadBand's facility manager, corporate officer or his
delegate.
The term "ODC content" on the ODC Content Certification means the total pounds
of ODC used directly in the manufacture of each unit of material. This includes
all ODCs used in the manufacturing and assembly operations for the material plus
all ODCs used by BroadBand's vendors and any other vendors in producing
components or other products incorporated into the material sold to Lucent.
BroadBand is responsible to obtain information on the ODC content of all
components and other products acquired to manufacture the material and to
incorporate such information into the total ODC content reported to Lucent;
provided however, that BroadBand should not include in the ODC content those
components or other products which are manufactured in the United States.
BroadBand hereby warrants to Lucent that all information furnished by BroadBand
on the ODC Content Certification is complete and accurate and that Lucent may
rely on such information for any purpose, including but not limited to providing
reports to government agencies or otherwise complying with applicable laws.
BroadBand shall defend, indemnify and hold Lucent harmless of and from any
claims, demands, suits, judgments, liabilities, fines, penalties, costs and
expenses (including additional ODC taxes as provided for in paragraph one of
this clause and reasonable attorney's fees) which Lucent may incur under any
applicable federal, state, or local laws or international agreements, and any
and all amendments thereto by reason of Lucent's use of reliance on the
information furnished to Lucent by BroadBand on the ODC Content Certification or
by reason of BroadBand's breach of this clause. BroadBand shall cooperate with
Lucent in responding to any inquiry concerning the use of ODCs to manufacture
the material or components thereof and to execute without additional charge any
documents reasonably required to certify the absence or quantity of ODCs used to
manufacture the material or components thereof.
35.0 PACKING, LABELING AND SERIALIZATION - Material purchased, repaired,
replaced or refurbished under this Agreement shall be packed, labeled and
serialized by BroadBand at no additional charge in accordance with the packaging
standards agreed in the applicable Product Letter. In developing the packaging
standards, the representatives of the Parties will consider OEMPS No. 101
"Packing and Shipping Requirements," X-20587 "Specification Requirements for
Package Content Identification Label," and KS-23490 "Product Bar Code, Serial
and Comcode Label".
36.0 PAYMENT TERMS - Invoices shall be paid in accordance with the terms in this
Agreement, and due dates for payment shall be computed from the date of receipt
of invoices by Lucent.
Page 18
37.0 PRODUCT CONFORMANCE REVIEWS - All Material is subject to a Product
Conformance Review ("Review") prior to shipment. BroadBand shall notify Lucent's
designated quality inspection organization when Material is ready for such
Review. BroadBand may ship Material without a Review but Lucent may perform such
Review prior to shipment by giving BroadBand notice to that effect, in which
event BroadBand shall notify Lucent's designated quality inspection organization
when material is ready for such Review. BroadBand will provide, without charge,
any production testing facilities and personnel required to perform or assist in
the Review as specified in the applicable Quality Program Specification or other
quality specification provided under this Agreement or order. Lucent's Reviews
as set forth above may only be waived by written notification from Lucent's
designated quality inspection organization.
Any major failure, detected in Lucent's acceptance inspection, shall be
considered as Dead on Arrival (DOA) which exceeds the percentages set forth in a
purchase order or Product Letter for functional failures and for total
(functional and visual/mechanical) defects in the material delivered in any one
month interval. DOA values (AOQL) specified in this Article shall be consistent
with the AQL levels agreed to for the material.
38.0 REJECTIONS - If Lucent rejects any or all of the Material not conforming to
Specifications and/or drawings covered by this Agreement, Lucent may, in
addition to all its other rights and remedies at law or equity, exercise one or
more of the following remedies: (1) return rejected material for full credit at
the price charged plus transportation charges from BroadBand's plant and return;
or (2) accept a conforming part of any shipment; or (3) have rejected material
replaced by BroadBand at the purchase price stipulated in this Agreement. Should
Lucent select option (1), it will receive credit for the Manufacturing
Absorption associated with the rejected Material. If the Material rejected is
all or part of the last scheduled shipment of that type of Material by
BroadBand, Lucent shall return the Material to BroadBand and allow BroadBand a
reasonable opportunity to repair and re-deliver the Material before exercising
any other remedy.
39.0 REPAIRS NOT COVERED UNDER WARRANTY - In addition to repairs provided for in
the WARRANTY clause, BroadBand shall provide repair service on all Material
ordered under this Agreement during the term of this Agreement and until five
(5) years after the last delivery of the related Material by BroadBand. Material
to be repaired under this clause will be returned to a location designated by
BroadBand, and, unless otherwise agreed upon by BroadBand and Lucent, BroadBand
shall ship the repaired Material which meets the Specifications set forth in the
SPECIFICATIONS OR DRAWINGS clause and all other Specifications within fifteen
(15) calendar days of receipt of the defective or non-conforming Material. With
the concurrence and scheduling of Lucent, repair may be made by BroadBand on
site.
If Material is returned to BroadBand for repair as provided for in this
clause and is determined to be beyond repair, BroadBand shall so notify Lucent.
If requested by Lucent, BroadBand will sell to Lucent a replacement at the price
set forth in BroadBand's then current agreement with Lucent for said Material
or, if no such agreement exists, at a price agreed upon by BroadBand and Lucent.
If the parties fail to agree on a price, the price shall be a reasonably
competitive price for such Material at the time for delivery. Further, if
requested by Lucent,
Page 19
BroadBand shall take the necessary steps to dispose of the unrepairable Material
and pay to Lucent the salvage value, if any.
Replacement and repaired Material shall be warranted as set forth in the
WARRANTY clause.
This Agreement does not grant BroadBand an exclusive privilege to repair
any or all of the Material purchased under this Agreement for which Lucent may
require repair; and Lucent may perform the repairs or contract with others for
these services. In addition, BroadBand authorizes Lucent and any qualified
repairer with whom Lucent may contract to perform repairs on all Material
purchased under this Agreement.
All transportation costs of and in transit risk of loss and damage to
Material returned to BroadBand for repair under this clause will be borne by
Lucent and all transportation costs of and in transit risk of loss and damage to
such repaired or replacement Material returned to Lucent will be borne by
Lucent.
Price schedules for repairs under this clause are listed in the applicable
Product Letter.
40.0 REPAIR PROCEDURES - Lucent shall furnish the following information with
Material returned to BroadBand for repair: (a) Lucent's name and complete
address; (b) name(s) and telephone numbers(s) of Lucent's employee(s) to contact
in case of questions about the Material to be repaired; (c) ship-to address for
return of repaired Material if different than (a); (d) a complete list of
Material returned; (e) the nature of the defect or failure if known; (f) RMA
number previously obtained from BroadBand and (g) whether or not returned
Material is in warranty. BroadBand's customer service representative shall be
contacted concerning any questions that may arise concerning repair.
Material repaired by BroadBand shall have the repair completion date
stenciled or otherwise identified in a permanent manner at a readily visible
location on the Material and the repaired Material shall be returned with a tag
or other papers describing the repairs which have been made.
All invoices originated by BroadBand for repair services must be clearly
identified as such, and must contain: (1) a reference to Lucent's purchase order
for these repair services, (2) a detailed description of repairs made by
BroadBand and the need therefor, and (3) an itemized listing of parts and labor
charges, if any. Replaced parts will, upon request, be available for inspection
by or returned to Lucent. Further, the provisions of the INVOICING and SHIPPING
clauses, other than provisions relating to transportation charges with respect
to Material repaired under warranty, shall apply to BroadBand's return to Lucent
of repaired Material.
41.0 RIGHT OF ENTRY - Each party shall have the right to enter the premises of
the other party during normal business hours with respect to the performance of
this Agreement, subject to all plant rules and regulations, clearances, security
regulations and procedures as applicable. Each party shall provide safe and
proper facilities for such purpose
Page 20
42.0 SERVICES - Visits by BroadBand's representatives or its suppliers'
representatives for inspection, adjustment or other similar purposes in
connection with Material purchased under this Agreement shall for all purposes
be deemed "Work under this Agreement" and shall be at no charge to Lucent unless
otherwise agreed in writing between the parties.
43.0 SOFTWARE - Should there be any Software or Firmware other than of Lucent's
design included in the Materials to be manufactured by BroadBand, the Parties
will agree on appropriate license language in a Product Letter.
44.0 INVOICING FOR STOCK - If Lucent requests, for reasons other than covered by
the FORCE MAJEURE clause, that shipment be postponed beyond the date shown on a
purchase order, BroadBand may invoice Lucent as of the original scheduled
delivery date for Material manufactured under this Agreement, if it has been
inspected and approved by Lucent or its authorized agent. If Lucent does not
complete inspection within five (5) working days, BroadBand may deliver its
invoice to Lucent for payment.
45.0 SURVIVAL OF OBLIGATIONS - The obligations of the parties under this
Agreement and any purchase order issued pursuant to this Agreement, which by
their nature would continue beyond the termination, cancellation or expiration
of this Agreement or purchase order, including, by way of illustration only and
not limitation, those in the clauses IDENTIFICATION, INFRINGEMENT, REPAIRS NOT
COVERED UNDER WARRANTY, CONFIDENTIALITY, INSURANCE, and WARRANTY, shall survive
termination, cancellation or expiration of this Agreement or purchase order.
46.0 TAXES - Lucent shall reimburse BroadBand only for the following tax
payments with respect to transactions under this Agreement unless Lucent advises
BroadBand that an exemption applies: state and local sales and use taxes, as
applicable. Taxes payable by Lucent shall be billed as separate items on
BroadBand's invoices and shall not be included in BroadBand's prices. Lucent
shall have the right to have BroadBand contest any such taxes that Lucent deems
improperly levied at Lucent's expense and subject to Lucent's direction and
control.
47.0 TIMELY PERFORMANCE - If BroadBand has knowledge that anything prevents or
threatens to prevent the timely performance of the work under this Agreement,
BroadBand shall promptly notify Lucent's Representative thereof and include all
relevant information concerning the delay or potential delay.
48.0 TITLE AND RISK OF LOSS - Title and risk of loss and damage to Material
purchased by Lucent under this Agreement shall vest in Lucent when the Material
has been delivered at the FOB point.
48A.0 EQUIPMENT - The cost for custom tools, test facilities, mechanical
fixtures, stencils or other equipment identified in a Product Letter
("Equipment') required by BroadBand to manufacture the Material for Lucent shall
be borne by Lucent and billed by BroadBand as incurred by BroadBand. All
Equipment so purchased by Lucent, upon reimbursement by Lucent to BroadBand,
shall be the property of Lucent and shall not be included in any calculation of
Manufacturing Absorption.
Page 21
All Equipment purchased by Lucent, either through BroadBand or consigned to
BroadBand, for use by BroadBand must be used for Lucent purposes only. BroadBand
agrees to keep such Equipment in good working condition and will advise Lucent
of problems, needed repairs and life expentancy in a resolvable timeframe to
avoid business interruption. Lucent will be responsible for repairs other than
regular maintenance. Lucent will assign an Equipment part number for
identification purposes which BroadBand agrees not to remove. Lucent reserves
the right to request BroadBand to return Lucent-owned Equipment upon demand.
BroadBand agrees not to deface, cover, otherwise conceal any tag, label or other
indicator of Lucent's ownership on the Equipment. BroadBand also agrees not to
relocate the Equipment to a manufacturing location not authorized to produce
product for Lucent. BroadBand shall execute and allow Lucent to file with
appropriate government offices any documents Lucent deems appropriate to
evidence and protect Lucent's ownership of such Equipment.
49.0 TOXIC SUBSTANCES AND PRODUCT HAZARDS - Subject to the clause ENVIRONMENTAL
WARRANTY LIMITATION, BroadBand hereby warrants to Lucent that, except as
expressly stated elsewhere in this Agreement, all material furnished by
BroadBand as described in this Agreement is safe for its foreseeable use, is not
defined as a hazardous or toxic substance or material under applicable federal,
state or local law, ordinance, rule, regulation or order (hereinafter
collectively referred to as "law" or "laws"), and presents no abnormal hazards
to persons or the environment. BroadBand also warrants that it has no knowledge
of any federal, state or local law, that prohibits the disposal of the material
as normal refuse without special precautions except as expressly stated
elsewhere in this Agreement. BroadBand also warrants that where required by law,
all material furnished by BroadBand is either on the EPA Chemical Inventory
compiled under Section 8 (a) of the Toxic Substance Control Act, or is the
subject of an EPA-approved pre manufacture notice under 40 CFR Part 720.
BroadBand further warrants that all material furnished by BroadBand complies
with all use restrictions, labeling requirements and all other health and safety
requirements imposed under federal, state, or local laws. BroadBand further
warrants that, where required by law, it shall provide to Lucent, prior to
delivery of the material, a Material Safety Data Sheet which complies with the
requirements of the Occupational Safety and Health Act of 1970 and all rules and
regulations promulgated thereunder.
BroadBand shall defend, indemnify and hold Lucent harmless for any expenses
(including, but not limited to, the cost of substitute material, less
accumulated depreciation) that Lucent may incur by reason of the recall or
prohibition against continued use or disposal of material furnished by BroadBand
as described in its Agreement whether such recall or prohibition is directed by
BroadBand or occurs under compulsion of law. Lucent shall cooperate with
BroadBand to facilitate and minimize the expense of any recall or prohibition
against use or disposal of material directed by BroadBand or under compulsion of
law.
BroadBand further shall defend, indemnify and hold Lucent harmless of and
from any claims, demands, suits, judgments, liabilities, costs and expenses
(including reasonable attorney's fees) which Lucent may incur under any
applicable federal, state or local laws, and any and all amendments thereto,
including but not limited to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980; the Consumer Product Safety Act of 1972;
the Toxic Substance Control Act; Fungicide, Rodenticide Act; the Occupational
Safety and Health Act; and
Page 22
the Atomic Energy Act; and any and all amendments to all applicable federal,
state, or local laws, by reason of Lucent's acquisition, use, distribution or
disposal of material furnished by BroadBand under this Agreement.
50.0 TERMINATION -
a) Either party may terminate this Agreement upon sixty (60) days prior
written notice to the other party for failure of such other party to
fulfill any of its material obligations hereunder; provided, however, if
during the period of such notice the other party shall have remedied such
failure, this Agreement shall continue in full force and effect as it would
have had such failure not occurred.
b) Should Material experience rejection rates by Lucent beyond the norm
established in a Product Letter, Lucent may terminate this Agreement with
respect to such Material. The effect of such a termination will be to
proportionately reduce Lucent's obligation respecting Manufacturing
Absorption set forth in Clause 7.0. The proportionate reduction associated
with any such rejection shall be calculated in accordance with the
following:
1. Each item of Material will be assigned a weighting in the relevant
Product Letter. To do so, the expected annual percentage of
Manufacturing Absorption will be identified and the expected
percentage of the term of this Agreement that the Material will be
manufactured by BroadBand will be defined. The weight assigned to the
Material will be calculated by multiplying the two percentages
together. ************************************************************
**********************************************************************
2. BroadBand will have the period of time identified in a Product Letter
for that Material to achieve the quality level set forth in the
Product Letter.
3. If BroadBand is unable to achieve the quality level within the time
period or to maintain the quality level (with respect to the reject
rate norm), Lucent may terminate its obligation for that Material and
receive credit for the associated Manufacturing Absorption.
**********************************************************************
**********************************************************************
Should the cumulative reductions of the Manufacturing Absorption obligation
pursuant to this clause reach nine million dollars, Lucent shall be
entitled to terminate this Agreement with no further obligation to
BroadBand.
c) In the event of a Change in Control of BroadBand or a reasonable
expectation of a Change in Control of BroadBand, BroadBand shall provide
notice to Lucent of such actual or expected Change in Control event within
ten (10) business days of the knowledge or reasonable expectation of the
Change in Control event. Upon the effective date of a Change in Control,
Lucent shall have the right to terminate this Agreement by giving BroadBand
written notice of its intention to terminate at least ninety (90) days
prior to the termination date specified in the termination notice. The
Parties understand and agree that if Lucent elects to exercise its
Page 23
right to terminate, then such termination shall apply on a going forward
basis, but shall not apply to past purchase orders that are completed or to
current purchase orders that are firm and binding commitments of Lucent.
A Change in Control occurs upon any one of the following circumstances or
events:
(i) The stockholders of a Party ("Acquired Party") approve a transaction,
including, without limitation, a merger or consolidation (however
denominated or effectuated), with an Acquiror, including, without
limitation, a merger or consolidation, or series of transactions with the
same Acquiror ("Combination"), and immediately after such transaction(s)
less than 60% of the combined voting power of the then-outstanding
securities of the Acquired Party or the Acquiror, will be held in the
aggregate by the holders of securities entitled, immediately prior to such
Combination, to vote generally in the election of directors of the
Acquired Party ("Voting Securities");
(ii) The stockholders of the Acquired Party approve the sale or transfer of all
or substantially all of its assets to any other Person or entity, and less
than 60% of the combined voting power of the then-outstanding Voting
Securities of such Acquiror immediately after such transaction will be
held in the aggregate by the holders of the Voting Securities of the
Acquired Party immediately prior to such sale;
(iii) An Acquiror acquires in one or a series of transactions beneficial
ownership of more than 40% of the outstanding shares of Voting Securities
of a Party;
(iv) The stockholders of a Party approve a plan of complete liquidation or
dissolution of the Party;
(v) Any Acquiror obtains direct or indirect Control (as herein defined) over a
party and, in Lucent's reasonable judgment, such Control may threaten
Lucent's interests. For the purposes of this subsection, the term
"Control" shall mean the possession directly or indirectly of the power to
direct or cause the direction of the management or policies of a Party,
whether through the ability to exercise voting power, by contract or
otherwise;
(vi) At any time, Continuing Directors (as herein defined) shall not constitute
at least 50% of the members of the Board ("Continuing Director" means (i)
each individual, who has been a director of the Party for at least twelve
(12) consecutive months before such time and (ii) each individual who was
nominated or elected to be a director of the Party by at least a majority
of the Continuing Directors at the time of such nomination or election);
or
(vii) Any other transaction which has the effect of causing the substantive
changes in the Acquired Party described in any of the preceding
paragraphs.
For the purposes of this Section, the term "Acquiror" shall mean one
person or entity, or two or more persons and/or entities constituting a
"group" for purposes of the Securities Exchange Act of 1934, as amended.
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51.0 WARRANTY - BroadBand warrants to Lucent that Material furnished will be new
and free from defects in material and workmanship and will conform to the
Specifications, drawings and samples set forth in this Agreement. These
warranties extend for *********** from the date of delivery to Lucent unless
otherwise agreed by the Parties in a Product Letter or other writing.
If Material furnished contains one or more manufacturer's warranties that
are assignable, BroadBand hereby assigns such warranties to Lucent. BroadBand
warrants that at the time of delivery to Lucent such Material shall be free of
any security interest or any other lien or any other encumbrance whatsoever. All
warranties shall survive inspection, acceptance and payment.
Defective or non-conforming Material will, at BroadBand's option, either
be returned to BroadBand for repair or replacement, at no cost to Lucent, with
risk of in-transit loss and damage borne by BroadBand and freight paid by
BroadBand, or be repaired or replaced by BroadBand on Lucent's or Lucent's
customer's site or another site designated by Lucent at no cost to Lucent.
Unless otherwise agreed upon by BroadBand and Lucent, BroadBand shall complete
repairs and ship the repaired Material within 10 working days of receipt of
defective or non-conforming Material, or at Lucent's option, ship replacement
Material within 10 working days after verbal notification is given BroadBand by
Lucent. BroadBand shall bear the risk of in-transit loss and damage and shall
prepay and bear that cost of freight for shipments to Lucent of repaired or
replaced Material.
If Material returned to BroadBand is determined to be beyond repair,
BroadBand shall promptly so notify Lucent and, unless otherwise agreed to in
writing by BroadBand and Lucent, ship replacement Material without charge within
ten (10) days of such notification.
Replacement Material shall be warranted as set forth above in this
WARRANTY clause. Any Material which is repaired, modified, or otherwise serviced
by BroadBand shall be warranted as provided in this WARRANTY clause for the
remainder of the warranty period (based upon the date repair, modification or
other service is completed and accepted by Lucent) or ninety (90) days after the
Material is returned to Lucent, whichever is later.
LUCENT'S SOLE AND EXCLUSIVE REMEDY FOR BREACH OF A WARRANTY CONTAINED IN
THIS ARTICLE SHALL BE BROADBAND'S OBLIGATION TO REPAIR, REPLACE, CREDIT, OR
REFUND AS SET FORTH IN THIS AGREEMENT, EXCEPT THAT THE FOREGOING LIMITATION ON
REMEDIES FOR BREACHES OF WARRANTIES SHALL NOT LIMIT THE REMEDIES OF LUCENT OR
ANY OTHER CAUSE OF ACTION FOR PERSONAL INJURY INCLUDING DEATH AND TANGIBLE
PROPERTY DAMAGE CLAIMS.
NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY INCIDENTAL,
CONSEQUENTIAL, OR ANY OTHER INDIRECT LOSS OR DAMAGE, INCLUDING, WITHOUT
LIMITATION, LOST REVENUES OR LOST PROFITS OF ANY PERSON OR ENTITY, ARISING OUT
OF THIS AGREEMENT OR ANY OBLIGATION RESULTING THEREFROM, WHETHER IN AN ACTION
FOR OR ARISING OUT OF BREACH OF CONTRACT, FOR TORT, OR ANY OTHER CAUSE OF
ACTION. EXCEPT FOR PERSONAL INJURY INCLUDING DEATH,
Page 25
BROADBAND'S ENTIRE LIABILITY FOR DIRECT DAMAGES RESULTING FROM ANY CLAIM OR
LOSS, DAMAGE, OR EXPENSE FROM BREACH OF A WARRANTY CONTAINED IN THIS ARTICLE
SHALL IN NO EVENT EXCEED THE REPAIR OR REPLACEMENT COST, LICENSE FEE, OR
PURCHASE PRICE, AT BROADBAND'S OPTION OF THE ITEM OR SERVICE THAT DIRECTLY GIVES
RISE TO THE CLAIM. NO ACTION OR PROCEEDING UNDER THIS ARTICLE AGAINST BROADBAND
MAY BE COMMENCED MORE THAN THIRTY-SIX (36) MONTHS AFTER THE CAUSE OF ACTION
ACCRUES.
52.0 EXPORT CONTROL- BroadBand will not use, distribute, transfer or transmit
any products, software or technical information (even if incorporated into other
products) provided under this Agreement except in compliance with U.S. export
laws and regulations (the "Export Laws"). BroadBand will not, directly or
indirectly, export or reexport the following items to any country which is in
the then current list of prohibited countries specified in the applicable Export
Laws:(a) software or technical data disclosed or provided to BroadBand by Lucent
or Lucent's subsidiaries or affiliates; or (b) the direct product of such
software or technical data. BroadBand agrees to promptly inform Lucent in
writing of any written authorization issued by the U.S. Department of Commerce
office of export licensing to export or reexport any such items referenced in
(a) or (b). The obligations stated above in this clause will survive the
expiration, cancellation or termination of this Agreement or any other related
agreement.
53.0 OZONE DEPLETING SUBSTANCES LABELING - BroadBand warrants and certifies that
all products, including packaging and packaging components, provided to Lucent
under this Agreement have been accurately labeled, in accordance with the
requirements of 40 CFR Part 82 entitled "Protection of Stratospheric Ozone,
Subpart E - The Labeling of Products Using Ozone Depleting Substances."
BroadBand agrees to indemnify, defend and save harmless Lucent, its officers,
directors and employees.
54.0 INFRINGEMENT - Lucent shall indemnify and save harmless BroadBand, its
affiliates and their customers, officers, directors, and employees (all referred
to in this clause as "BroadBand") from and against any losses, damages,
liabilities, fines, penalties, and expenses (including reasonable attorneys'
fees) that arise out of or result from any and all claims (1) of infringement of
any patent, copyright, trademark or trade secret right, or other intellectual
property right, private right, or any other proprietary or personal interest
related to the Specifications for the Material, and (2) related by circumstances
to the existence of this Agreement or performance under or in contemplation of
it (an Infringement Claim). Lucent or BroadBand (at Lucent's request) shall
defend or settle, at Lucent's expense any demand, action or suit on any
Infringement Claim for which Lucent is indemnitor under the preceding provisions
and each shall timely notify the other of any assertion against it of any
Infringement Claim and shall cooperate in good faith with the other to
facilitate the defense of any such Claim. Broadband shall similarly indemnify
and save harmless Lucent from any Infringement Claim associated with BroadBand's
manufacturing or other processes.
55.0 SEVERABILITY - If any of the provisions of this Agreement shall be invalid
or unenforceable, such invalidity or unenforceability shall not invalidate or
render unenforceable this entire Agreement, but rather this entire Agreement
shall be construed as if not containing the
Page 26
particular invalid or unenforceable provision or provisions, and the rights and
obligations of the parties shall be construed and enforced accordingly.
56.0 CHOICE OF LAW - This Agreement and all transactions under it shall be
governed by the laws of the State of New Jersey excluding its choice of laws
rules and excluding the Convention for the International Sale of Goods.
BroadBand agrees to submit to the jurisdiction of any court wherein an action is
commenced against Lucent based on a claim for which BroadBand has agreed to
indemnify Lucent under this Agreement.
57.0 DISPUTE RESOLUTION (a) The following procedures shall apply to any dispute
or disagreement between the Parties or any of their Related Parties (i.e., such
Party's wholly owned subsidiaries, and the respective divisions, heirs,
successors and assigns of such Party and its wholly owned subsidiaries) arising
out of this Agreement.
(b) First:
(i) either Party may give written notification of such dispute or
disagreement to the other Party and
(ii) the Parties shall communicate with each other promptly with a
view to resolving such dispute or disagreement within 21 days (or such
extended period as the Parties agree is appropriate in any case) after
such written notification is given.
(c) The giving of any notice regarding any dispute or disagreement under
this Section 10.1 shall toll the running of all applicable statutes of
limitation until the later of (i) 90 days following the giving of such notice or
(ii) 30 days following the termination of discussions between the Parties
concerning such dispute or disagreement.
(d) Second, if at the end of the 21 day period referenced in Section
57.0(b)(as it may be extended) such dispute or disagreement has not been
resolved to the satisfaction of both parties, either Party may request in
writing that such dispute or disagreement be the subject of non-binding
mediation. Following such request, the Parties shall endeavor in good faith
promptly to identify a single person (who shall be a person with experience and
good reputation) who shall assist the Parties in discussing such dispute or
disagreement and in attempting to reach a mutually acceptable business
resolution. Such mediation process shall terminate not later than 30 days
following the request therefor (or such extended or shorter period as the
Parties agree is appropriate). All applicable statutes of limitation shall be
tolled during the period of mediation.
(e) Third, if at the end of the 30 day period referenced in Section
57.0(d) (as it may be extended or shortened) such dispute or disagreement has
not been resolved to the satisfaction of both parties, either Party (the
"complainant") may commence binding arbitration by giving the other Party (the
"respondent") notice in writing (the "initiating notice") setting forth in
reasonable detail the nature of its claim and the relief requested stating that
the complainant is invoking the procedures set forth in this Section 57.0(e) and
(f) and naming the complainant's representative on the Arbitration Panel (as
defined below). Within 21 days of receipt of an initiating notice, the
respondent shall give the complainant notice in writing (the "response") setting
forth in
Page 27
reasonable detail: (1) the basis of its response to the claim; (2) the nature of
any counterclaim it has against the complainant arising from the same set of
facts and circumstances that gave rise to the original claim; (3) any other
counterclaim that Party wishes to bring at that time (although the Party has no
obligation to bring such counterclaims at that time); (4) the relief requested;
and (5) naming the respondent's representative on the Arbitration Panel. The two
representatives shall select a third person who is mutually acceptable to them.
If the representatives fail to make such selection within 21 days, the
complainant and the respondent shall each replace its representative with a new
representative and the new representatives shall be subject to the preceding
sentence and this sentence. Once a third person is selected, such person
together with the representatives of the complainant and the respondent shall
form the Arbitration Panel. The date upon which the Arbitration Panel is formed
shall be the "Commencement Date".
(f) The Arbitration Panel shall conduct proceedings to determine the
merits under applicable law of the claims set forth in the initiating notice and
the response. The proceedings shall be administered by JAMS/Endispute in
accordance with its Comprehensive Arbitration Rules and Procedures in effect as
of the Effective Date, subject to the following additional rules:
(i) the proceedings shall take place in New York City;
(ii) the Arbitration Panel (including, if necessary, any
replacement(s) to the Arbitration Panel) shall be selected as set forth in
Section 57.0(e);
(iii) the available relief shall include damages, injunctive relief
and equitable relief to the extent allowed under the applicable law, this
Agreement and any other agreement between the parties;
(iv) the parties shall attempt in good faith promptly to agree on
the nature and extent of any discovery in connection with the arbitration,
provided that, in the absence of such agreement, discovery shall be
governed by JAMS/Endispute's Comprehensive Arbitration Rules and
Procedures. In addition, the applicable law with respect to privilege and
other protections from disclosure, including the work product doctrine
shall apply;
(v) the final decision of the Arbitration Panel (the "Award") shall
be issued within six months of the Commencement Date (the date of issuance
of the Award being the "Award Date") and must be joined by at least two
members of the Arbitration Panel;
(vi) each party to the proceedings shall pay its own costs in
connection with the proceedings, including the costs and expenses of its
representative on the Arbitration Panel, and the parties shall share
equally the other costs of the proceedings, including the fees of the
third member of the Arbitration Panel, except that the prevailing party
shall be entitled to recover its attorneys' fees incurred in prosecution
thereof.
(g) In accordance with the Federal Arbitration Act, 9 U.S.C. ss.1 et seq.,
the Award shall be final and binding and judgment thereon may be entered by any
state or federal court having jurisdiction thereof.
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(h) Nothing in this Section 57.0 shall be construed to preclude either
party from seeking injunctive relief in a court of competent jurisdiction to
prevent imminent irreparable harm. The dispute resolution procedures set forth
herein shall be stayed pending disposition of any application for such relief.
The Parties agree that a court of competent jurisdiction may consider the merits
of any claim that is subject to the dispute resolution procedures set forth
herein to the extent necessary to resolve any permissible application for
injunctive relief.
58.0 BANKRUPTCY AND CHANGE OF CONTROL If a proceeding is commenced under any
provision of the United States Bankruptcy Code, voluntary or involuntary, by or
against either party, and this Agreement has not been terminated, the non-debtor
party may file a request with the bankruptcy court to have the court set a date
within sixty (60) days after the commencement of the case, by which the debtor
party will assume or reject this Agreement, and the debtor party shall cooperate
and take whatever steps are necessary to assume or reject the Agreement by such
date. If a bankruptcy proceeding results in a Change In Control, the provisions
in this Agreement pertaining to Change In Control shall govern.
59.0 ENTIRE AGREEMENT - This Agreement shall constitute the entire agreement
between the parties with respect to the subject matter of this Agreement and
shall not be modified or rescinded, except by a writing signed by BroadBand and
Lucent. The provisions of this Agreement supersede all contemporaneous and prior
oral and written agreements, communications or understandings of the parties
with respect to the subject matter of this Agreement.
60.0 COMPLIANCE WITH LAWS - BroadBand shall, in the manufacture and sale of the
Material to Lucent, and in all other performance under the provisions of this
Agreement, fully comply with all applicable federal, state, local and other
governmental laws and regulations.
61.0 COMPLIANCE WITH UNITED STATES CUSTOMS LAWS AND REGULATIONS - BroadBand
shall ensure that its activities in performance of this Agreement shall not put
Lucent in violation of any United States Customs laws, statutes, or regulations.
BroadBand agrees to assist Lucent in every way necessary to ensure that Lucent
can import the Material into the United States in accordance with all applicable
customs laws, statutes, and regulations, and in support of this assistance,
BroadBand agrees to follow Lucent's directives, if any, which may be attached to
and made part of this Agreement.
62.0 RELATIONSHIP OF PARTIES - The relationship of the Parties as established
under this Agreement shall be and remain one of independent contractors, and
neither Party will at any time or in any way represent itself as being a dealer,
agent or other representative of the other Party or as having authority to
assume or create obligations or act in any manner on behalf of the other Party.
Further, it is understood and agreed that the Parties to this Agreement are not
partners or joint venturers.
63.0 INDEPENDENT AGREEMENT - Breach by a Party of any other agreement between
the Parties shall not constitute a breach of this Agreement, unless the same
conduct independently breaches this Agreement. A breach of this Agreement shall
not constitute a breach
Page 29
of any other agreement between the Parties, unless the same conduct
independently breaches such other agreement.
64.0 COUNTERPARTS - This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed in duplicate by their respective authorized representatives.
BROADBAND TECHNOLOGIES, INC. LUCENT TECHNOLOGIES INC.
By: By:
Title: Title:
Date: Date:
Page 30
ATTACHMENT A
MANUFACTURING AGREEMENT
ENGINEERING CHANGE CONTROL PROCEDURES
"Product Changes" shall be administered in accordance with Xxxx
Communications Research document GR 209 CORE, Issue 2, January 1996, titled
"Generic Requirements for Product Change Notices," which is incorporated herein
by reference.
Supplier may make changes to MATERIAL, modify drawings, or make changes to
manufacturing specifications, provided the changes, modifications, or
substitutions DO NOT have an impact on the performance, reliability, Form, Fit,
or Function of the MATERIAL without prior notification to Company. Supplier
shall maintain written records of all such changes, and make these records
available for Company's review upon request.
For such changes or modifications which DO have an impact on performance,
reliability, Form, Fit, or Function, Supplier shall identify each such change or
modification in accordance with the classifications contained in the above Xxxx
Communications Research document via a Product Change Notification (PCN) form.
The Company shall immediately acknowledge receipt of the PCN to the
address/contact as stated on the PCN form and shall have thirty (30) calendar
days to advise Supplier if the proposed change or modification is unacceptable.
If Company notifies Supplier as required herein, that the proposed change or
modification is unacceptable, Supplier shall not implement such change or
modification. Company may reject any MATERIAL offered by Supplier which has been
changed or modified in a manner unacceptable to Company.
If Company has not notified Supplier that the change or modification is
unacceptable within thirty (30) calendar days following issuance of the Change
Notification, Supplier shall implement the change or modification as described
in the Change Notification.
If during the review of a proposed PCN, which has a classification of
either A or AC, issued by Supplier during the Warranty period of the affected
MATERIAL, the Company determines that implementation of the PRODUCT CHANGE will
cause the Company to incur "unreasonable expenses" such as, but not limited to,
expenses resulting from escorting Supplier's personnel to numerous Company
locations containing affected MATERIAL or repeated product changes to the same
item of MATERIAL within a one (1) year time period, the Company shall so notify
Supplier, in writing, prior to the implementation of such PRODUCT CHANGE.
Page 31
Upon such notification, the Company and Supplier shall jointly determine
the implementation procedure which will utilize the Supplier's and/or Company's
personnel in the most cost effective manner.
If Supplier and the Company conclude the agreed to implementation
procedure will probably cause the Company to incur "unreasonable expenses", the
Company and Supplier shall jointly determine the likely extent of such expenses
and agree, in writing, to a "not to exceed" estimate for such expenses. In no
event shall such estimate exceed the Company's purchase price for the MATERIAL
to be changed. The Company shall track and record all such expenses associated
with the PRODUCT CHANGE. Upon completion of its efforts, the Company shall
submit to Supplier, for reimbursement by Supplier, an invoice of the Company's
"unreasonable expenses" within forty-five (45) calendar days after the Company's
receipt of such invoice.
Issuing a Class A or AC product Change Notification shall not constitute
an agreement to provide such a change, but shall be construed as a
recommendation by the Supplier that the change is absolutely necessary.
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