EXHIBIT 10.25
SUPPLY AGREEMENT
----------------
THIS SUPPLY AGREEMENT ("Agreement") is made and entered into this 3rd day
of March, 1998, by and between E-Tek Dynamics, Inc., a California corporation
("E-Tek"), and Walsin Lihwa Corporation ("Walsin").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, Walsin is a leading manufacturer of wire and cable in Taiwan, with
strong distribution channels throughout Asia; and,
WHEREAS, E-Tek manufactures fiber optic components and equipment for the
telecommunications and CATV industries, and engages in related R&D; and,
WHEREAS, the parties wish to form a joint venture whereby a third party
Taiwanese company, limited by shares ("JV"), would be created to, among other
things: (i) develop, manufacture and distribute certain fiber optic products;
and, (ii) assume all rights and obligations of Walsin under this Agreement; and,
WHEREAS, in contemplation of forming JV, the parties have entered into a
December 17, 1997 Technical Licensing Agreement ("Licensing Agreement") whereby
JV shall assume all rights and obligations of Walsin as licensee thereunder.
WHEREAS, the parties wish to create a relationship whereby E-Tek shall
purchase from JV (as successor to Walsin) certain of JV's products on the terms
and conditions set forth below.
NOW THEREFORE, for good and valuable consideration, the sufficiency and
receipt of which are hereby acknowledged, the parties hereto agree as follows:
A G R E E M E N T
- - - - - - - - -
1. Supply Orders.
--------------
a. "Supply(ies)" as used herein shall refer to any and all fiber
optic products described in Exhibit A hereto, and to any and all other items,
that are manufactured by Walsin and hereafter ordered by and sold to E-Tek
pursuant to the terms hereof.
b. During the term of this Agreement, E-Tek shall provide Walsin
monthly with forecasts setting forth the quantity and types of Supplies E-Tek
anticipates it will consume during a rolling twelve-month period. These
forecasts will be estimates only, and will not constitute purchase commitments,
except that the quantity of Supplies on any such forecast planned for delivery
within the applicable manufacturing lead time shall be considered firm purchase
obligations. Otherwise, obligations of E-Tek to purchase Supplies will be
established only through purchase orders ("Orders").
c. Throughout the term of this Agreement, E-Tek shall periodically
submit Orders to Walsin for the proposed sale and purchase of certain Supplies;
provided, that nothing herein shall obligate E-Tek to order any Supplies. Each
Order shall specify the type(s) and quantity(ies) of
Page 1
requested Supplies, along with the applicable specifications, and the delivery
date(s) and destination point(s) thereof. An Order may also provide that the
E-Tek name and logo shall be marked on such ordered Supplies. The terms and
conditions of this Agreement shall be incorporated into each and every Order. In
the event of any conflict, differences or inconsistencies between the terms and
conditions of this Agreement and those of any order, quotation, acknowledgment
or any other related document, the terms and conditions of this Agreement shall
govern.
d. No Order shall bind Walsin unless hereafter accepted by Walsin;
provided, that Walsin shall not unreasonably withhold any such acceptance. Any
acceptance or rejection by Walsin of any Order shall be communicated to E-Tek
within five business days of Walsin's receipt of such Order; otherwise, such
Order shall be deemed fully accepted by Walsin.
e. Walsin shall use reasonable commercial efforts to promptly pass
all E-Tek qualification tests for Supplies, and to thereafter produce as many
Supplies as it is capable of manufacturing. Walsin hereby grants to E-Tek a
right of first refusal over any and all other entities (including Walsin) with
respect to Walsin's capacity to manufacture products and fill purchase orders.
E-Tek shall be entitled to exercise such right, if at all, upon its submission
to Walsin of every other monthly forecast, but in no event more than six times
per year, measured from the date E-Tek first exercises such right hereunder.
Should E-Tek ever fail to exercise its first-refusal rights, then Walsin's
exclusive remedy shall be the right to make such uses of its products and
manufacturing capacity as Walsin sees fit.
f. Walsin shall continue to produce the Supplies and make the same
available for sale to E-Tek for at least twelve months from the date Walsin
passes the respective qualification tests. Thereafter, Walsin must provide E-Tek
with at least six months' prior written notice before unilaterally discontinuing
or reducing the production, and/or sale to E-Tek, of any Supplies.
2. Prices.
-------
a. The prices for the Supplies shall be subject to good faith
negotiations and agreement between the parties, and shall be reviewed
semiannually. Walsin shall use reasonable commercial efforts to continually
reduce the unit pricing and discount pricing of the Supplies.
b. E-Tek shall be allowed the full benefit of any and all lower
prices contained in any other agreement that may hereafter be entered into by
Walsin for the sale of Supplies to similar customers in similar quantities as
provided hereunder. Walsin shall notify E-Tek immediately of any such lower
prices, and shall make the same available to E-Tek for as long as such prices
are made available to such other similar customers.
c. E-Tek agrees to pay for all state and local sales and use taxes
imposed by the sale to E-Tek of the Supplies. Wherever applicable, such
liabilities may be added to the invoice as a separate charge or invoiced
separately. E-Tek shall, upon written request of Walsin, provide applicable
sales tax exemption certificates.
3. Payment. Original invoices shall be issued by Walsin to E-Tek upon
-------
delivery of the underlying Supplies. E-Tek shall pay the full amount stated
thereon within thirty days net in United States dollars. Notwithstanding the
foregoing, in the event E-Tek in good faith disputes the contents of any invoice
received from Walsin, E-Tek shall promptly notify Walsin of the same and submit
a
Page 2
detailed statement of its position, along with any supporting documentation.
Payment on any disputed invoice, or applicable portion thereof, shall be
deferred until such dispute is resolved.
4. Delivery; Acceptance.
---------------------
a. Delivery of Supplies shall be C.I.F. E-Tek's premises to a carrier
selected by Walsin. Title to the Supplies shall pass to E-Tek upon delivery to
E-Tek's premises. Walsin is responsible for, and assumes all risk of loss of or
damage to, the Supplies, from any cause, until delivery to E-Tek's premises.
b. Deliveries are to be made both in the quantities and at the times
specified in the underlying Order. All Supplies shall be free from any third
party liens or encumbrances, and E-Tek shall receive good and marketable title
at the time of delivery.
c. Upon receipt of any Supplies hereunder, E-Tek shall promptly
inspect the same. Within thirty days of such receipt, E-Tek shall provide
written notice to Walsin as to whether it accepts or rejects such Supplies in
whole or in part. No Supplies shall be rejected by E-Tek unreasonably.
d. E-Tek may, without penalty, extend the scheduled delivery date of
any Order (and, hence, the corresponding invoice) for a period of up to thirty
additional days; provided, that E-Tek shall have notified Walsin in writing of
such extension no later than fifteen days prior to the original scheduled
delivery date.
5. Configuration Control.
----------------------
a. For purposes of this section, "Modify" shall mean to change,
alter, enhance, upgrade or revise. "Modification" shall refer to the change,
alteration, enhancement, upgrade or revision.
b. Walsin shall not Modify the specifications of any Supply without
the prior written approval of E-Tek.
c. E-Tek may request from time to time that Walsin Modify the
specifications of any Supply. If the implementation of any such Modification
would increase Walsin's obligations hereunder, then Walsin and E-Tek shall in
good faith agree on terms under which Walsin would incorporate the same.
6. Term and Termination.
---------------------
a. The initial term of this Agreement shall commence as of the date
hereof, and shall continue until December 31, 2002. This Agreement may
thereafter be renewed for successive periods of one year each upon the written
consent of the parties consummated at least thirty (30) days prior to the
expiration of the then-current period.
b. Notwithstanding the foregoing, this Agreement shall be terminable
or terminate, as the case may be, prior to the expiration of the initial period
or any renewals thereof, if and when any of the following events occurs:
Page 3
i. Either party may terminate this Agreement upon written notice to
the other party if such other party breaches any material term or condition of
this Agreement and fails to cure the same within sixty (60) days of receipt of
written notice by the nonbreaching party specifying such breach.
ii. Either party may terminate this Agreement by written notice upon
any party's cessation of business, election to dissolve, dissolution,
insolvency, inability to pay debts as they become due, general assignment for
the benefit of creditors, or, upon the filing of any bankruptcy petition,
whether voluntary or involuntary, on behalf of any such party.
7. Patent Warranty and Indemnity.
-----------------------------
a. Walsin warrants that the sale, use, manufacture, integration
and/or lease of the Supplies shall not infringe any patent rights or other
intellectual property rights of any third party (excluding Supplies manufactured
solely under the Patents or Information licensed by E-Tek under the Licensing
Agreement).
b. Walsin shall indemnify and hold E-Tek, its directors,
shareholders, officers, employees, attorneys, agents, subsidiaries and
affiliates (the "Indemnitees") harmless from and against any loss, cost,
liability or expense (including reasonable attorneys' fees) relating to any
claim (excluding only claims made solely against the Patents or Information
licensed by E-Tek under the Licensing Agreement) that the sale, use,
manufacture, integration and/or lease of the Supplies infringes any patent
rights or other intellectual property rights of any third party. The Indemnitee
receiving any such claim shall notify Walsin. Walsin shall be permitted, at
Walsin's expense, to participate in the defense thereof with counsel of Walsin's
own choosing. The Indemnitees shall provide reasonable assistance to Walsin in
the defense of any such claim.
8. Product Warranties. Walsin warrants to E-Tek, for the shorter of either
------------------
eighteen months from the date of delivery of a Supply to E-Tek or twelve months
from the date E-Tek's customer receives a Supply, that such Supply will be free
from defects in materials, design and workmanship, and shall conform to the
applicable specifications as agreed by E-Tek. This warranty is subject to proper
installation, operation and maintenance of the Supplies, and shall not apply to
any Supplies which have been damaged after delivery to E-Tek, or misused,
altered, disassembled or serviced by any person other than Walsin. Warranty
claims shall be made in writing. Walsin's obligation under this warranty is, at
E-Tek's option, to repair, replace or correct any such defect or nonconformity,
or to remove the Supply and refund the purchase price. Any defective or
nonconforming Supply or parts thereof shall be shipped to Walsin's principal
offices with freight and insurance prepaid by Walsin. Replacement Supplies shall
be warranted as set forth above. Defective or nonconforming Supplies that are
repaired or serviced by Walsin shall be warranted as provided in this section
for either the remainder of the original warranty period or ninety days after
such Supplies are redelivered to E-Tek, whichever is later. Walsin makes no
warranties with respect to items not manufactured by Walsin and, to the extent
lawful, assigns to E-Tek any manufacturer's warranties attached to such items.
EXCEPT AS EXPRESSLY STATED ABOVE, WALSIN DISCLAIMS ALL WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
9. Limitation of Liability. IN NO EVENT SHALL WALSIN HAVE ANY LIABILITY TO
-----------------------
E-TEK UNDER ANY CAUSE OF ACTION FOR ANY SPECIAL, INDIRECT OR
Page 4
CONSEQUENTIAL DAMAGES (INCLUDING WITHOUT LIMITATION DAMAGES FOR LOSS OF PROFITS)
THAT RELATE IN ANY WAY WHATSOEVER TO THIS AGREEMENT, WHETHER OR NOT WALSIN HAS
BEEN ADVISED OF THE POSSIBILITY OF ANY SUCH DAMAGES. THESE LIMITATIONS SHALL
APPLY NOTWITHSTANDING THE FAILURE OF THE ESSENTIAL PURPOSE OF ANY LIMITED
REMEDY.
10. Notices. Any notice required or permitted to be given hereunder shall
--------
be in writing, unless otherwise provided herein, shall be delivered either by
overnight mail or by facsimile, and shall be addressed as follows:
If to Walsin: If to E-Tek:
Walsin Lihwa Corporation E-Tek Dynamics, Inc.
00xx Xxxxx 0000 Xxxxx Xxxxxx
117 Section 3 Xxx Xxxx, XX 00000
Xxxx Xxxxx East Road Fax: 000.000.0000
Taipei, Taiwan
Fax: 000.0.000.0000
Any notice given as aforesaid shall be deemed to have been effectively
given and received (i) if sent by overnight mail, on the date of such delivery,
or, (ii) if sent by facsimile, on the date of transmission. Either party may
change its respective address of service or facsimile number by written notice
given as provided above.
11. Relationship of Parties. Walsin and E-Tek are separate and distinct
-----------------------
entities, and nothing contained in this Agreement, nor the performance of
anything contemplated hereby, shall be deemed or construed to constitute such
parties as partners, joint venturers, co-owners or otherwise as participants in
a joint or common undertaking.
12. Indemnities. Walsin and E-Tek shall each indemnify, defend and hold
-----------
harmless the other against and in respect of any and all claims, demands,
losses, costs, expenses, obligations, liabilities, damages, recoveries and
deficiencies that such other party shall incur or suffer by reason of any breach
of any representation, warranty or other term of this Agreement by the
indemnifying party.
13. Construction of Agreement. Walsin and E-Tek each agree that any
-------------------------
statute, rule or doctrine regarding the interpretation of contracts against a
particular party, including California Civil Code Section 1654, shall not apply
to this Agreement.
14. Attorneys' Fees. If any legal action is brought for the enforcement of
----------------
this Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the prevailing party shall be entitled to recover reasonable attorneys' fees and
other costs incurred in that action, in addition to any other relief to which
that party may be entitled.
15. Arbitration. Any and all disputes, claims or controversies, whether of
------------
law or fact and of any nature whatsoever, arising from, respecting, or relating
to, this Agreement shall be decided through binding arbitration. If E-Tek
initiates the arbitration, then such arbitration shall be conducted in Taipei,
Taiwan in accordance with the rules of the Commercial Arbitration Association
Page 5
of Taiwan. If Walsin initiates the arbitration, then such arbitration shall be
conducted in San Jose, California in accordance with the rules of the American
Arbitration Association. Any controversy concerning whether an issue is
arbitratable shall be determined by the arbitrator, but such arbitrator may not
limit, expand or otherwise modify the terms of this Agreement. The parties,
their respective representatives, and the arbitrator shall, unless otherwise
required by applicable law or ordinance, hold the existence, content, and result
of the arbitration in confidence. The arbitrator shall be able to decree any and
all relief of an equitable or legal nature, subject to the limitations on
liability provided in this Agreement. The decree or judgment of an award
rendered by the arbitrator shall be conclusive and binding, and may be entered
in any court having jurisdiction thereof. The parties may engage in discovery,
and the arbitrator may decide all discovery disputes. The arbitrator shall give
effect to the applicable statutes of limitations in determining any claim. The
fees and expenses of the arbitrator shall initially be split evenly between the
parties, and each party shall initially bear its own costs in any arbitration
proceeding; provided, however, that the arbitrator shall award the prevailing
party its reasonable attorneys' fees and costs (including the fees and expenses
of the arbitrator) incurred therein. The institution and maintenance of any
civil action for judicial relief or for a provisional or ancillary remedy shall
not constitute a waiver of the right of either party to submit the dispute to
arbitration.
16. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York (excluding laws and principles
relating to the conflict of laws), as if made, executed and performed within
that State.
17. Confidentiality.
----------------
a. "Confidential Information" as used herein shall mean all
confidential information of one party ("Discloser") that has been, is, or may
hereafter be, disclosed to or obtained by the other party ("Recipient"), and
shall include but not be limited to Discloser's (i) business, development and
marketing plans and/or proposals, (ii) customer lists, (iii) prices (except
where publicly disclosed) and pricing strategies, (iv) research, (v) training
methods, (vi) inventions, processes and specifications, (vii) compilations of
information (including without limitation studies, records, reports, drawings,
memoranda, drafts and any other related information), (viii) trade secrets and
any and all other proprietary information whether embodied in Discloser's
products or otherwise, and, (ix) any and all other ideas, concepts, strategies,
suggestions and recommendations relating without limitation to any of the
foregoing or to any products or services offered or developed, or to be
developed or proposed to be developed by Discloser. Recipient acknowledges and
agrees that Discloser is the owner of all such Confidential Information, any and
all copies thereof, and any and all copyrights, trade secrets, patents,
trademarks, and other intellectual property rights therein or associated
therewith.
b. To come within the protections of this Agreement, any information
or data of Discloser (i) must be reasonably believed by Discloser to contain
Confidential Information at the time of disclosure; (ii) if in writing, must be
stamped "Confidential" or contain some other similar designation at the time of
disclosure; or, (iii) if disclosed orally or if embodied in any component or
device, must be identified as constituting Confidential Information at the time
of disclosure, and such identification must thereafter be confirmed in a writing
sent to Recipient within ten business days of such disclosure.
Page 6
c. For a period of five (5) years following disclosure to it of any
of Discloser's Confidential Information, Recipient shall not, without first
obtaining Discloser's written consent, (i) disclose such Confidential
Information or any portion thereof to any person, firm, corporation or other
entity, (ii) attempt to or assist others to develop, produce, market or sell any
product based on or utilizing such Confidential Information, (iii) make any
other use of such Confidential Information in any way or for any purpose, or,
(iv) reverse engineer, decompile or disassemble any of Discloser's products, or
any portion thereof.
d. Recipient agrees that all Confidential Information disclosed by
Discloser to Recipient in tangible form is and shall remain Discloser's
property, shall not be copied by Recipient without Discloser's prior written
consent, and shall be returned to Discloser (along with any copies) immediately
upon request therefor or upon the termination of this Agreement, whichever is
first to occur.
e. Notwithstanding any other provision in this Paragraph, Recipient
will not be liable under this Agreement for the disclosure of any of Discloser's
Confidential Information if such Confidential Information (i) is already known
to Recipient at the time of its disclosure without any wrongful conduct on
Recipient's part, (ii) is or becomes publicly known other than through a breach
by Recipient of any agreement with Discloser, (iii) is received by Recipient
from a third party if that third party has not violated the terms of any
agreement or understanding with Discloser, or (iv) is required to be disclosed
by law and Recipient has taken all reasonable steps to protect the
confidentiality of such Confidential Information.
f. Recipient acknowledges that a remedy at law for any breach of this
Paragraph would not be adequate relief, and therefore agrees that Discloser
shall be entitled to injunctive relief in case of any such breach or threatened
breach by Recipient.
g. Notwithstanding any other provision hereof, the parties agree that
no license, by implication or otherwise, is granted under this Agreement or
through any disclosure contemplated hereby.
18. Severability. If any term or provision of this Agreement shall be held
-------------
invalid or unenforceable to any extent, the remainder of this Agreement shall
not be affected and each other term and provision shall be valid to the fullest
extent permitted by law.
19. Headings. The paragraph headings contained in this Agreement are for
--------
reference only, and shall not be construed as substantive parts of the
Agreement.
20. Entire Agreement: Modification: Waiver. This Agreement constitutes the
--------------------------------------
entire agreement between the parties with respect to the subject matter
contained herein and supersedes any and all prior and contemporaneous
agreements, representations and understandings. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by the
parties. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision, whether or not similar, nor
shall any waiver constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party to be charged.
21. Binding Effect: Assignment. This Agreement shall be binding on and
---------------------------
shall inure to the benefit of the parties and their respective representatives,
successors and permitted assigns:
Page 7
provided, however, that, except for transfers made by operation of law, or as
provided in subparagraph 26.a.(iii), no party shall have the right to transfer
or assign any rights or obligations under this Agreement without first obtaining
the other party's written consent. Any attempted assignment in violation of this
provision shall be void.
22. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall constitute an original and all of which shall be one and the same
instrument.
23. Further Assurances. Each party agrees to execute and deliver such
-------------------
other and further documents, and perform such other and further acts, as are or
may become necessary or convenient to effectuate and carry out the intent and
purposes of this Agreement.
24. Survival Of Provisions. The respective rights, duties and obligations
----------------------
of the parties pursuant to paragraphs 7, 8, 12, 14-17, and 26, among others,
shall survive any expiration or termination of this Agreement.
25. Time of Essence. Time shall be of the essence of this Agreement.
---------------
26. Conditions Precedent.
---------------------
a. This Agreement and all rights and obligations hereunder are
subject to the satisfaction of the following conditions precedent:
(i) E-Tek and Walsin shall have agreed upon the Business
Plan (as defined in the JV agreement between the parties).
(ii) Walsin shall have assigned completely to JV, and JV
shall have accepted from Walsin, all of Walsin's rights, licenses, duties and
obligations under the Licensing Agreement, and JV shall have agreed to assume
all the same; it being understood and agreed that no licenses or rights under
the Licensing Agreement shall thereafter remain in Walsin.
(iii) Walsin shall have assigned completely to JV, and JV
shall have accepted from Walsin, all of Walsin's rights, duties and obligations
under this Agreement, and JV shall have agreed to assume all the same; it being
understood and agreed that no rights under this Agreement shall thereafter
remain in Walsin.
(iv) E-Tek shall have entered into a distributorship
agreement with either Walsin, or an affiliate or designee thereof that is
acceptable to E-Tek, to develop demand for and sell certain of E-Tek's products
nonexclusively in the People's Republic of China and, after January 1, 1999,
exclusively in Taiwan.
(v) All governmental approvals that are necessary for the
formation of JV and all related agreements (including the Taiwanese governmental
approval of E-Tek and its investor-designees as foreign investors) shall have
been obtained, and such approvals shall not be conditioned upon, or materially
alter or affect, this Agreement, JV or any related agreement.
b. All of the foregoing conditions precedent must occur by June 18,
1998, (except for item 26.a.(iv), which must occur by March 3, 1998, and item
26.a.(i) which must occur by March
Page 8
13, 1998) or else this Agreement becomes null and void. The parties shall engage
in good faith discussions to attempt to satisfy the foregoing conditions
precedent; however, neither party is obligated to conclude the Business Plan or
any agreement(s) relating to the proposed formation of the JV, or to continue
any discussions. No obligations shall arise under this Agreement unless and
until the Business Plan is finalized by the stated due date to the satisfaction
of each party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
WALSIN LIHWA CORPORATION E-TEK DYNAMICS, INC.
By: /s/ Yu-Xxx Xxxxx By: /s/ Xxxxxxx X. Xxxxxxxxxxx
------------------------- ---------------------------
Yu-Xxx Xxxxx, Xxxxxxx X. Xxxxxxxxxxx
President President and CEO
Page 9
