Exhibit 10.10
NOTE: CERTAIN CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. SUCH OMITTED INFORMATION HAS BEEN MARKED
WITH THE NOTATION "[*****]".
MASTER PURCHASE AGREEMENT
-------------------------
BETWEEN
OPTICAL COMMUNICATION PRODUCTS, INC.
AND
THE FURUKAWA ELECTRIC CO., LTD.
OCTOBER 1, 2003
TABLE OF CONTENTS
1. DEFINITIONS...........................................................4
2. TERM OF AGREEMENT.....................................................6
3. ORDER PROCEDURE.......................................................6
3.1 FORECAST.....................................................6
3.2 PURCHASE ORDER PROCEDURE.....................................6
3.3 RESCHEDULING AND CANCELLATION................................7
4. DELIVERY AND ACCEPTANCE...............................................7
4.1 PACKAGING....................................................7
4.2 SHIPPING, DELIVERY, TITLE AND RISK OF LOSS...................7
4.3 INVOICING....................................................7
4.4 FAILURE TO MEET DELIVERY DATE................................7
4.5 ACCEPTANCE OF PRODUCTS.......................................8
5. PRICE AND TERMS.......................................................8
5.1 PRICE........................................................8
5.2 MOST FAVORED CUSTOMER........................................8
5.3 TIME OF PAYMENT..............................................8
5.3 TAXES........................................................8
6. PRODUCT WARRANTY......................................................8
6.1 SUPPLIER WARRANTY............................................8
6.2 SUPPLIER DISCLAIMER..........................................9
7. CORRECTIVE ACTIONS, INDEMNIFICATION...................................9
7.1 REQUEST FOR CORRECTIVE ACTION................................9
7.2 DEFECTIVE PRODUCTS...........................................9
i
7.3 INJURY, DAMAGE CAUSED BY PRODUCTS...........................10
7.4 INFRINGEMENT INDEMNITY......................................10
8.0 AVAILABILITY AND SUPPORT OF PRODUCTS........................10
8.1 SAFETY STOCK................................................10
8.2 REPORTS.....................................................12
8.3 ADDING AND DELETING PRODUCTS................................12
8.4 PRODUCT CHANGE APPROVAL 12
8.5 AUDIT AND INSPECTION........................................12
9. CONFIDENTIALITY......................................................12
10. DISCLAIMER OF CERTAIN DAMAGES........................................13
11. TERMINATION..........................................................13
12. MISCELLANEOUS........................................................14
12.1 NOTICE......................................................14
12.2 ASSIGNMENT OR SUBCONTRACTING................................14
12.3 FORCE MAJEURE...............................................14
12.4 CHOICE OF LAW...............................................15
12.5 NEGOTIATION, MEDIATION, ARBITRATION.........................15
12.6 PUBLICITY...................................................15
12.7 LEGAL COMPLIANCE............................................15
12.8 AMENDMENTS..................................................15
ii
12.9 NON-WAIVER..................................................15
12.10 AUTHORITY...................................................15
12.11 NON-AGENCY..................................................15
12.12 ENTIRE AGREEMENT............................................16
12.13 SEVERABILITY................................................16
12.14 CONFLICT OR INCONSISTENCY...................................16
12.15 SURVIVAL....................................................16
12.16 COUNTERPARTS................................................16
12.17 HEADINGS....................................................16
12.18 QUALITY STANDARDS AND GOALS.................................16
12.19 ONGOING RELIABILITY TESTING.................................16
12.20 AGREEMENT SIGNATURE APPROVALS...............................17
Appendix 1 - Products, Descriptions, Price Tables.............................18
Appendix 2 - Laser Usage Analysis spreadsheet.................................18
Appendix 3 - Table of Basic Contract Terms....................................18
Appendix 4 - Specifications...................................................18
3
This Agreement, dated as of the lst day of October, 2003 (the "Effective Date"),
together with the Appendices and any documents identified below or referenced
herein (all of which are incorporated by reference and collectively referred to
as the "Agreement"), is entered into by and between Optical Communications
Products, Inc., a Delaware corporation having its principal place of business at
0000 Xxxxxx Xxx., Xxxxxxxx Xxxxx, XX 00000 ("OCP"), and The Furukawa Electric
Co., Ltd., 0-0, Xxxxxxxxxx 0-Xxxxx, Xxxxxxx-xx, Xxxxx 000-0000, ("Furukawa")
* * *
OCP agrees to purchase from Furukawa, and Furukawa agrees to manufacture and
sell to OCP, the Products which OCP and Furukawa agree on and are identified in
Appendix 1 on the terms and conditions set forth in this Agreement. Future
pricing changes must be in writing, submitted as a revision to Appendix 1, and
mutually agreed by both companies.
1. DEFINITIONS
Capitalized terms not defined in context within the Agreement shall have the
respective meanings assigned to them below.
1.1 "Acceptance Date" means, with respect to each Product, the date on which OCP
accepts the Product pursuant to subsection 4.5 of this Agreement.
1.2 "Change Order" means any change to an original Purchase Order described in a
written Change Order referencing the original Purchase Order.
1.3 "Day" means any day of the year, including weekends and holidays.
1.4 "Defective Product" means any Product that fails to conform to the Product
Warranty set forth in Section 6 of this Agreement.
1.5 "Delivery Date" means the date specified by OCP in a Purchase Order on which
a Product is required to be delivered by Furukawa to the destination designated
by OCP.
1.6 "Delivery Location" means the destination designated by OCP in a Purchase
Order to which Furukawa will ship Products.
1.7 "DDP Location" means the location specified in the Table of Basic Contract
Terms set forth in Appendix 3.
1.8 "Hazardous Condition" means (i) any condition that, under reasonably
foreseeable circumstances, in the course of operation, use or handling of a
Product, could result in damage to property or personal injury, and (ii) any
condition that violates applicable health or safety regulations.
1.9 "Initial "Term" means the period specified in the Table of Basic Contract
Terms set forth in Appendix 3, measured from the Effective Date.
1.10 "Lead Time" means the maximum permitted interval between Furukawa's receipt
of a Purchase Order and the Delivery Date for each Product set forth in Appendix
3.
1.11 "Materials" means any components and other materials comprising or
comprised in Products.
4
1.12 "Order Cancellation Period" means the minimum permitted interval specified
in the Table of Basic Contract Terms set forth in Appendix 3 between (i) receipt
by Furukawa of notice of cancellation of a Purchase Order by OCP and (ii) the
Delivery Date.
1.13 "Order Rescheduling Period" means the minimum permitted interval specified
in the Table of Basic Contract Terms set forth in Appendix 3 between (i) receipt
by Furukawa of notice of rescheduling of a Delivery Date by OCP and (ii) the
original Delivery Date.
1.14 "Product Payment Period" means the maximum period of time for payment of an
invoice by OCP specified in the Table of Basic Contract Terms set forth in
Appendix 3, measured from the Shipment Date.
1.15 "Product Rejection Period" means the maximum period of time for rejection
of a Product by OCP specified in the Table of Basic Contract Terms set forth in
Appendix 3, measured from the date of receipt of the Products by OCR
1.16 "Product Warranty Period" means, with respect to each Product, the period
of time specified in the Table of Basic Contract Terms set forth in Appendix 3,
measured from the Acceptance Date of the Product.
1.17 "Purchase Order" means an order for the purchase of Products that OCP
submits to Furukawa which becomes effective when it is accepted, or deemed
accepted, by Furukawa.
1.18 "Repair or Replacement Period" means, with respect to each Product, the
maximum period of time specified in the Table of Basic Contract Terms set forth
in Appendix 3, for repair or replacement of Products by Furukawa measured from
the receipt by Furukawa of a Defective Product, as that term is defined in
subparagraph 7.2 of this Agreement.
1.19 "Locked Safety Stock" means the quantity of each Product held in Furukawa's
inventory of finished Products exclusively for purchase by OCP. Matching safety
stock numbers will also be purchased and kept by OCP at OCP location, as
identified in Appendix 2 - Laser Usage Analysis spreadsheet.
1.20 "Locked Safety Stock Level" means the quantity of Locked Safety Stock
specified in Appendix 2.
1.21 "Specifications" means, with respect to each Product, the applicable
technical and functional specifications described in Appendix 4 of this
Agreement and any Documentation related to that Product.
1.22 "Pricing Table" refers to the latest negotiated pricing agreed to in
writing by both Furukawa and OCP.
1.23 "Surplus Compensation Procedure" means the payment by OCP to Furukawa of an
amount equal to Furukawa's reasonable direct costs and expenses of labor and
Materials incurred in the production of Products pursuant to this Agreement, net
of all salvage or scrap value, in an amount which shall not, in any
circumstances, exceed the purchase price of the applicable Product, and which is
payable only under the following conditions:
(a) Furukawa will use commercially reasonable efforts to (i) cancel orders
for Materials ordered from its vendors, but not yet received by
Furukawa at the time of cancellation, or (ii) return Materials to the
vendors after receipt if such action would be likely to minimize
compensation payable hereunder by OCP;
(b) Furukawa will furnish to OCP reasonable documentation detailing its
direct costs and expenses.
1.24 Quality Standards- Specifications provided either by OCP as part of a
product specification or as stated by Furukawa in product specifications.
5
2.0 TERM OF AGREEMENT
This Agreement is effective as of the Effective Date for period of the Initial
Term and shall continue in force automatically for successive one-year terms
unless terminated by either party (i) by giving at least thirty days' written
notice to the other party prior to the expiration of the then-current term or
(ii) pursuant to termination provisions set out below.
3.0 ORDER PROCEDURE
3.1 FORECAST
3.1.1 Due to lack of forward visibility provided to OCP from its
customers, OCP shall base its order requirements on past 3 months'
usage trends coupled with actual Material Requirements Planning (MRP)
demand for 4 weeks forward. This information is updated monthly and
listed on the monthly Laser Usage Analysis spreadsheet. OCP shall
submit the Laser Usage Analysis spreadsheet to Furukawa by the 3rd
business day of each month. OCP shall make best effort to provide
Furukawa with a demand forecast for the next 3 months with the first
Laser Usage Analysis spreadsheet of every quarter.
3.2 PURCHASE ORDER PROCEDURE.
3.2.1 Issuance and Acceptance. OCP may issue Purchase Orders to
Furukawa by mail, fax, electronic data interchange, or other mutually agreeable
method. If Furukawa has not delivered to OCP a written acceptance, or a written
explanation of the reasons for rejection, of each Purchase Order within seven
Days after receipt of the Purchase Order, the Purchase Order will be deemed
accepted by Furukawa. Furukawa will not reject a Purchase Order on the basis of
a stated Delivery Date if the Delivery Date is set in accordance with the Lead
Time, and Furukawa will, in any event, use commercially reasonable efforts to
accept each Purchase Order issued by OCP.
3.2.2 Purchase Order Information. To the extent necessary to permit
Furukawa to fulfill the terms of a Purchase Order, Purchase Orders issued by OCP
shall include (i) identification of the Products by reference to its OCP Part
Number and/or Furukawa Part Number, (ii) quantity of Products, (iii) price per
unit of Products (iv) total order price, (v) Delivery Date, (vi) Delivery
Location, and (vii) OCP's Purchase Order number and date.
3.2.3 Change Orders. Except with respect to rescheduling changes or
cancellation permitted pursuant to subsections 3.3.1 and 3.3.2 below, any
modification of a Purchase Order shall be made pursuant to a written Change
Order executed and agreed to by each party.
3.3 RESCHEDULING AND CANCELLATION.
Rescheduling. OCP may reschedule a Purchase Order line, with written
consent of Furukawa, providing notice is given to Furukawa at least 14
days in advance of ship date on which OCP and Furukawa agree.
3.3.2 Cancellation. OCP shall not cancel a Purchase order without prior
written consent of Furukawa. OCP cannot cancel a Purchase Order within
14 days before Delivery date.
6
4.0 DELIVERY AND ACCEPTANCE
4.1 PACKAGING. Furukawa shall, at no additional charge, package and secure
Products properly in accordance with Specifications and in a manner that will
provide adequate protection against damage during shipment, handling, and
storage under reasonably foreseeable conditions.
4.2 SHIPPING, DELIVERY, TITLE AND RISK OF LOSS
4.2.1 Shipping. Unless agreed by the both parties, Furukawa shall (i) select
the mode of transportation of the Products, (ii) ship to the Delivery Location,
(iii) assure that all subordinate documents bear OCP's Purchase Order number,
(iv) enclose a packing memorandum with each shipment and, when more than one
package is shipped, identify the package containing the memorandum, and (v) xxxx
OCP's Purchase Order number on all packages and shipping papers. If Furukawa as
a means of avoiding a delivery penalty selects a mode of transportation more
expensive than normally necessary, Furukawa will be responsible for the excess
transportation cost.
4.2.2 Delivery. Unless otherwise specified in the Purchase Order, Products
shall be shipped DDP destination with Air Freight, customs, duties and insurance
the responsibility of the Seller.
4.2.3 Title and Risk of Loss. Risk of the Products shall pass from Furukawa
to OCP when the Product is delivered to the destination designated by the OCP.
In the event that the Products are delivered to the OCP before full payment for
the Products, Furukawa is entitled to retain title to the Products until the
Products have been fully paid.
4.2.4 INVOICING. Unless instructed otherwise by OCP, Furukawa shall (i)
render invoices in duplicate or as otherwise specified showing the Purchase
Order number, (ii) render separate invoices for each shipment or Purchase Order,
and (iii) invoice OCP by mailing or otherwise transmitting invoices to the
billing address in the Purchase Order.
4.4 FAILURE TO MEET DELIVERY DATE. If Furukawa fails to deliver all or any
portion of Products on or before the Delivery Date:
(a) Furukawa shall use commercially reasonable efforts to deliver such
Products as soon as possible and to assure that other deliveries are
not delayed, and if other deliveries are expected to be delayed,
Furukawa shall provide OCP with immediate notice identifying those
deliveries along with a written plan for minimizing the expected delays
and resuming timely deliveries; and
(b) In the event that a delivery of Products delays for more than 10
business days after mutually agreed scheduled delivery date, OCP may
cancel purchase order, or any portion thereof, without charge.
(c) Supply Protection. In order to insure continued supply of Products to
OCP and its divisions, Furukawa agrees to make best effort to cooperate
with OCP in the event of a work stoppage at Furukawa's facilities
and/or any example of Force Majeure as specified in section 12.3.
7
4.5 ACCEPTANCE OF PRODUCTS. Furukawa will manufacture and supply each
Product in accordance with the Specifications for the Product, which shall be
reviewed and approved in writing by OCP prior to becoming effective. Unless the
parties otherwise mutually agree in writing, each Product will have the
functionality and other characteristics specified in the applicable
Specifications. OCP will accept or reject the delivered Product within the
Product Rejection Period. In the event that OCP does not reject delivery of the
Product within the Product Rejection Period, the Product will be deemed accepted
by OCP. In the event that the Product appears to comply with the applicable
Specifications, OCP will accept delivery of the Product. In the event that the
Product does not appear to comply with the applicable Specifications, OCP will
reject the Product and Furukawa will replace the Product with a Product, which
complies with its Specifications in accordance with the procedures for
replacement and return of Defective Products specified in subsection 7.2 of this
Agreement. Acceptance of a Product for delivery will not affect any of
Furukawa's warranty, indemnification, or other obligations under this Agreement.
5.0 PRICE AND TERMS
5.1 PRICE. The Products shall be sold at the prices specified in Appendix
1. Such prices shall remain in effect during the term of this Agreement;
provided, however, that Furukawa and OCP will periodically (quarterly) negotiate
changes to the prices and any agreed changes will be included in a written
amendment of this Agreement, signed by an authorized representative of each
party before becoming effective.
5.2 TIME OF PAYMENT. Furukawa will submit invoices to OCP and, unless
otherwise agreed, OCP will pay to Furukawa the net amount stated in each invoice
within the Product Payment Period.
6.0 PRODUCT WARRANTY
6.1 FURUKAWA WARRANTY. Furukawa represents, covenants, and warrants to OCP
as follows:
(a) No prior license or other agreement to which Furukawa is a party or is
bound is violated by, or is inconsistent or conflicts with, the rights
of OCP under, or the terms and conditions of, this Agreement.
(b) Furukawa is either the owner of the Products or is otherwise in
possession of sufficient licensed rights to any of the proprietary
information and intellectual property owned by third parties in and to
the Products to permit Furukawa to sell and furnish the Products to OCP
pursuant to the terms of this Agreement and OCP shall receive the
Products from Furukawa without any restriction whatsoever on the use by
OCP or its customers of the Products.
(c) Title to the Products shipped or sold to OCP will pass to OCP free and
clear of all liens, charges, encumbrances, restrictions, or other third
party rights.
(d) Products will be manufactured from new and unused components.
(e) During the Product Warranty Period, each Product will, under normal use
and service, be free of defects in materials and workmanship and
strictly conform to the Specifications. The warranty provided in this
subsection 6.1(e) is subject only to fulfillment of the following
conditions:
(i) Furukawa's receipt of written notice of a defect from OCP
within, or promptly after, the applicable Product Warranty
Period;
8
(ii) The Products not having been altered or repaired by OCP or
OCP's customer without Furukawa's consent; or
(iii) The alleged defect not being the direct result of mishandling,
improper servicing, or improper operation by OCP or OCP's
customer.
6.2 FURUKAWA DISCLAIMER. EXCEPT FOR THE EXPRESS WARRANTIES AND OBLIGATIONS
STATED HEREIN, FURUKAWA DISCLAIMS ALL OTHER PRODUCT WARRANTIES, WHETHER
EXPRESS OR IMPLIED, INCLUDING ALL IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE.
7. CORRECTIVE ACTIONS, INDEMNIFICATION
7.1 REQUEST FOR CORRECTIVE ACTION. OCP may from time to time issue a
written request for corrective action to Furukawa identifying any event which in
the view of OCP may constitute non-performance of Furukawa's duties or
obligations hereunder, including any chronic or significant Product defect,
non-conformity to Specifications, or other material event evidencing
non-performance (any one or more of which is hereafter referred to as a
"Material Event") which is considered to be within Furukawa's reasonable
control. Furukawa will respond to each such request as follows:
(a) Furukawa will provide to OCP a written initial response to such a
request within five Days following Furukawa's receipt of the request.
Such initial response will serve as Furukawa's acknowledgment of its
receipt of the request and will propose a target date for resolution of
the Material Event identified in the request. The actual target date
will be negotiated in good faith and mutually agreed by Furukawa and
OCP.
(b) On or before the target date proposed by Furukawa in its initial
response, Furukawa will provide to OCP a written report that will set
out in reasonable detail the cause of the Material Event and the action
proposed by Furukawa to correct it.
Furukawa will use its best efforts to take any and all necessary corrective
action, including action proposed in its response to the request, to remedy the
Material Event as soon as practicable.
7.2 DEFECTIVE PRODUCTS. During the Product Warranty Period, Furukawa will
repair or replace, any Defective Product. Upon discovery of a Defective Product
during the Product Warranty Period, OCP will provide to Furukawa a notice of
defect with a request for repair, or replacement the Defective Product within 3
working days of finding the defect. If OCP elects to have Furukawa repair the
defective Product, Furukawa within the Repair or Replacement Period will
complete the repairs. If Furukawa fails to repair the Defective Product within
the Repair or Replacement Period, OCP shall continue to have the right to
require replacement of the Defective Product or a refund or credit of the full
purchase price thereof. If OCP elects to obtain a replacement of the Defective
Product, Furukawa will deliver the replacement Product to a location designated
by OCP within the Repair or Replacement Period. If Furukawa fails to replace the
Defective Product within the Repair or Replacement Period, OCP shall continue to
have the right to require a refund or credit of the full purchase price thereof.
The costs and risk of loss or damage associated with delivering and installing
replacement Products will be borne by Furukawa. Replacement Products delivered
by Furukawa will be subject to all of the terms of this Agreement as it relates
to Products and a new Product Warranty Period will take effect with respect to
the replacement Products. OCP will return Defective Products to Furukawa or to a
place, which must be designated by Furukawa within ten Days after Furukawa's
receipt of the Notice of Defect. The costs and risk of loss or damage associated
with shipping Defective Products to Furukawa will be borne by Furukawa. Refunds
or credits issued for the purchase price of any Defective Products will be
issued within ten Days after Furukawa's receipt of the Defective Products. If
Furukawa replaces a Product or issues a refund or credit to OCP pursuant to a
Notice of Defect and Furukawa subsequently determines and certifies in writing
to OCP that either (i) the returned Product is not
9
defective or (ii) any of the conditions to the Product Warranty specified in
subsection 6.1(e)(ii) or (iii) were not satisfied, then Furukawa will return the
Product to OCP, and OCP will pay for the replacement Product as if it were
purchased pursuant to the terms of this Agreement, the costs associated with
delivering and installing replacement Products, the costs associated with
shipping Defective Products and all costs of handling, inspection, repairs.
OCP's rights of repair, replacement or refund under this Section 7.2 will
survive any expiration or termination of this Agreement irrespective of the
reason for termination. The Product Warranty Period shall not apply to limit
Furukawa's responsibility for the repair, replacement or refund of the purchase
price of any Product with respect to which a defect has been demonstrated to
cause or have caused a Hazardous Condition to exist with respect to any person
or property.
7.3 INJURY, DAMAGE CAUSED BY PRODUCTS. Furukawa will defend, indemnify, and
hold OCP harmless from any and all claims, costs, expenses, damages, or other
liabilities, including reasonable attorneys' fees, arising out of (i) the death
of, or bodily injury to, any person or (ii) the damage, loss, or destruction of,
any property, if, and to the extent that any such death, bodily injury, or
property damage, loss, or destruction is caused by a defect in a Product.
7.4 INFRINGEMENT INDEMNITY. Furukawa will defend, indemnify and hold OCP
harmless from any and all claims, costs, expenses, damages or other liabilities,
including reasonable attorneys' fees, which are the result of patent, trademark
or copyright infringement claims or claims based on misappropriation of trade
secret rights arising out of, or relating to, the use, transfer, sale or resale
of the Products. OCP will notify Furukawa, in writing, in the event of any such
claim and grant to Furukawa the right, at Furukawa's expense, to control the
defense thereof, including the right to settle any such claim or suit on terms,
which will not adversely affect OCP. If the use, transfer, sale or resale of any
of the Products by OCP constitutes an infringement or is enjoined, Furukawa
will, at its own expense and option, (i) procure for OCP the right to continue
using, transferring and reselling such Products, (ii) modify such Products so
that it becomes noninfringing, while strictly conforming to the applicable
Specifications, or (iii) replace such Products with noninfringing substitutes,
while strictly conforming to the applicable Specifications. The obligations of
Furukawa under this subsection 7.4 will survive the expiration or termination of
this Agreement and the Product Warranty Period.
7.5 NO LIABILITY FOR DAMAGES. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE
LAW, IN NO EVENT SHALL FURUKAWA AND ITS SUPPLIER BE LIABLE FOR ANY DAMAGES
WHATSOEVER (INCLUDING WITHOUT LIMITATION, SPECIAL, INCIDENTAL, CONSEQUENTIAL, OR
INDIRECT DAMAGES FOR PERSONAL INJURY, LOSS OF BUSINESS PROFITS, BUSINESS
INTERRUPTION, LOSS OF BUSINESS INFORMATION, OR ANY OTHER PECUNIARY LOSS) ARISING
OUT OF THE USE OF OR INABILITY TO USE THIS PRODUCT, EVEN IF SUPPLIER HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN ANY CASE, FURUKAWA AND ITS
SUPPLIERS' ENTIRE LIABILITY UNDER ANY PROVISION OF THIS AGREEMENT SHALL BE
LIMITED TO THE AMOUNT ACTUALLY PAID BY OCP FOR THE PRODUCT.
8.0 AVAILABILITY AND SUPPORT OF PRODUCTS
8.1 SAFETY STOCK.
There may be situations in a product's life where the demand in a
particular quarter was unexpectedly low. Furukawa is protected because OCP would
have to purchase any unused safety stock, which is remaining at Furukawa at the
end of every quarter, within 3 business days after the end of the quarter based
on the safety stock formula described in section 8.1.1.1. At the eventual end of
a product's life, Furukawa would again be protected because OCP would have to
purchase any unused safety stock amounts, which is remaining at Furukawa at the
end of that final quarter, within 3 business days after the end of the quarter.
At the time of termination of this agreement by either party,
10
OCP shall purchase any unused safety stock amounts, unless the termination
occurs by Furukawa's failure, breach of this Agreement, or any status as
described in subsection 11(b).
OCP and Furukawa are to keep in stock, respectively, over and above
demand, the "locked safety stock levels" as listed on the Laser Usage Analysis
(LUA) spreadsheet, shown in Appendix 2. The approximate safety stock level for
each part number shall be the calculated average monthly usage over the past 3
months (12 weeks).
8.1.1 OCP PURCHASE OF LOCKED SAFETY STOCK
8.1.1.1 PURCHASE OF LOCKED SAFETY STOCK.
There may be examples when a particular laser's demand suddenly decreases below
the calculated "locked" safety stock levels. To prevent undue carrying costs at
FEC, OCP will agree to purchase the balance of the locked safety stock amount at
FEC based on the formula below:
Example:
"Locked" safety stock level is 500. OCP and Furukawa must keep 500
respectively, in stock above and beyond demand. "Locked" safety stock level for
the next quarter is 200. In this example, the amount OCP would be liable to
purchase would be 500 - 200 = 300 pcs and the price for those 300 pcs would be
the price of the laser as of the lst day of the recently ended quarter. For
example, if the quarter-end month is September and it is determined that OCP
must buy some unused FEC safety stock; the price OCP must pay is the price that
was established at the beginning of that quarter. If FEC does NOT have the
safety stock available for shipment, OCP does not have to purchase this safety
stock. It is the responsibility of FEC to provide information on the safety
stock levels to OCP via the LUA report update schedule. Furukawa is required to
replenish the safety stock level within 2 weeks. If Furukawa cannot meet this
requirement, it should inform OCP as to the reasons and provide a recovery plan.
8.1.1 FREQUENCY OF REVIEW OF LOCKED SAFETY STOCK VALUES
"Locked" Safety stock levels are to be reviewed at the end of each quarter by
OCP. By allowing FEC to release any unused safety stock every 12 weeks, it
limits the carrying costs incurred by Furukawa. OCP is to analyze the usage
rates and adjust the safety stock levels every 12 weeks to ensure proper safety
stock levels are in place most closely matching the current business conditions.
OCP CAN REQUEST FURUKAWA, IN WRITING, TO CARRY MORE SAFETY STOCK THAN THE
CALCULATIONS REQUIRE, HOWEVER OCP UNDERSTANDS THE RISK INVOLVED WITH MAKING THIS
REQUIREMENT.
8.1.2 LUA SPREADSHEET
o Within 3 business days after the end of a quarter, OCP is to
submit new "locked" safety stock numbers on the LUA
spreadsheet and submit to Furukawa.
o Within 3 business days after this event, Furukawa is to
acknowledge receipt of the revised LUA spreadsheet, list its
current safety stock inventory for each part number on the
spreadsheet and submit them to OCP via e-mail. If Furukawa
cannot meet the new safety stock requirements, it should
inform OCP as to the reasons and provide a recovery plan.
11
o By the 3rd business day of each month, OCP is to submit an
updated LUA spreadsheet to Furukawa. This update shall include
current quantity on hand, current quantity on order, MRP
demand for 4 weeks out and any other pertinent information.
The spreadsheet shall contain a column that clearly shows
whether OCP has enough parts on hand and/or on order to
maintain the agreed locked safety stock amount at OCP. If any
such number in this field shows a needed quantity to order,
OCP shall take immediate steps to get a new P.O. placed to
Furukawa.
o Furukawa is to disclose an updated safety stock status of its
parts to OCP by the 6th business day of each month. This
information is to be populated in the correct column on the
LUA spreadsheet and submitted via e-mail.
o Furukawa is to utilize this data to analyze trends in OCP.
o Every 90 days, the locked safety stock levels will be analyzed
and any new levels will be established by OCP. If any safety
stock level increases by a factor of more than two, then
Furukawa's written consent is required before the new locked
safety level becomes effective.
8.1.3 REDUCTION OF LOCKED SAFETY STOCK AMOUNT
If, during the middle of a quarter, OCP wishes to reduce the "locked"
safety stock amount, it can do so only if Furukawa agrees to the
request in writing. Generally, this would be acceptable if FEC did not
have any safety stock on hand and no product in work in process (WIP).
8.2 REPORTS. Upon the written request of OCP, Furukawa will provide to OCP
such delivery information as may be reasonably requested by OCP,
including the projected Shipment Date, the Delivery Date required by
the Purchase Order, and the projected actual date of delivery of
Products, identified by Purchase Order number and Product Part Number.
8.3 ADDING AND DELETING PRODUCTS. From time to time Furukawa and OCP may
mutually agree in writing to amend this Agreement to add a Product.
Furukawa may from time to time delete a Product from this Agreement.
Furukawa shall be required to give one-year prior notice for such
deletion. Delivery Date of last shipment of the deleted Product cannot
be beyond 90 days after the expiration of the one-year period.
8.4 PRODUCT CHANGE APPROVAL
Furukawa must inform OCP of any changes to any such products and must
obtain OCP's approval.
8.5 AUDIT AND INSPECTION. During the term of this Agreement, and upon not
less than five Days' prior written notice to Furukawa, OCP will have the right
to audit and reproduce for its analysis any of Furukawa's quality and purchasing
records relating to the performance of this Agreement. Furukawa will keep such
records for at least five years. OCP will also have the right to inspect at
OCP's expense, Furukawa's manufacturing and/or distribution facilities for
Products or for any Materials or components thereof supplied by third party
suppliers. Both parties must agree to details of such a planned audit or
inspection. At OCP's request, Furukawa will provide a technically qualified
employee to assist OCP in any such audit or inspection.
9. CONFIDENTIALITY
During the term of this Agreement, either party (the "Acquiring Party") may have
the opportunity to acquire and/or obtain access to, with the prior written
consent of the other party, Confidential Information relating to Products of the
other party and its subsidiaries and affiliates (collectively, the "Disclosing
Party") through discussions with employees
12
and independent contractors of the Disclosing Party. "Confidential Information"
means all confidential and/or proprietary information and trade secrets
developed by a party, or with respect to which a party acquires knowledge in
connection with the performance of its obligations under this Agreement, during
the term of this Agreement and thereafter, including the existence, subject
matter, and contents of this Agreement, the Specifications and any marketing
strategies, technical information, product development information, pricing
information, acquired in the course of performance of this Agreement. Each party
will keep confidential Information strictly confidential. The Acquiring Party
shall neither disclose Confidential Information of the Disclosing Party to any
third party, nor permit Confidential Information of the Disclosing Party to be
disclosed to any contractor, employee or agent not involved directly with the
performance of its obligations under this Agreement, except with the Disclosing
Party's prior written consent. The Acquiring Party will take every reasonable
precaution to protect the confidentiality of Confidential Information of the
Disclosing Party in a manner consistent with the efforts exercised by it with
respect to the Acquiring Party's own confidential information of like kind or
importance, and shall exercise due care in the enforcement of this obligation.
The covenants of this Section 9 will not apply to information which (i) can be
demonstrated to have been known to the Acquiring Party prior to the Effective
Date, (ii) is later obtained by the Acquiring Party from another source, (iii)
is in, or enters into, the public domain, in each case, without violation of
this Agreement or any other confidentiality or nondisclosure agreement or
obligations, or (iv) is required to be disclosed pursuant to the order of a
court or regulatory agency acting within its authority. The Acquiring Party
shall take all actions reasonable and necessary to ensure that its employees and
contractors are advised of, and bound by, the terms of this Agreement. The
Acquiring Party's obligations under this Section 9 shall survive the termination
or expiration of this Agreement.
10. DISCLAIMER OF CERTAIN DAMAGES
EXCEPT WITH RESPECT TO FURUKAWA'S INDEMNIFICATION OBLIGATIONS UNDER SUBSECTIONS
7.3 AND 7.4 OF THIS AGREEMENT AND THE OBLIGATIONS OF THE PARTIES UNDER SECTION 9
ABOVE, NEITHER PARTY SHALL HAVE ANY LIABILITY TO THE OTHER FOR INCIDENTAL,
CONSEQUENTIAL, INDIRECT, SPECIAL, OR PUNITIVE DAMAGES, OR FOR ANY LOSS OF
PROFITS, BUSINESS OR SAVINGS, EVEN IF THE INDEMNIFYING PARTY IS, OR HAS BEEN,
INFORMED OF THE POSSIBILITY OR EXISTENCE OF SUCH DAMAGES.
11. TERMINATION
Either party may terminate this Agreement, in whole or in part, by written
notice to the other, without further obligation to the other, if:
(a) The other party fails to perform any material provision of
this Agreement, and fails to cure the failure within thirty
Days after receipt of notice thereof.
(b) The other party becomes insolvent, bankruptcy, liquidation or
dissolution, or makes an assignment for the benefit of
creditors, proceedings in voluntary or involuntary bankruptcy,
bankruptcy or any law shall be instituted on behalf of or
against the said party, or a receiver or similar officer is
appointed to take charge of all or part of such party's
assets. This could be the result of voluntary or involuntary
bankruptcy, liquidation or dissolution.
(c) An event of force majeure occurs in accordance with the
provisions of subsection 12.3 of this Agreement, and
performance by either party is delayed for more than ninety
days.
13
12. MISCELLANEOUS
12.1 NOTICE.
12.1.1 Delivery. Any notice or demand which under the terms of this
Agreement or under any statute must be given or made by Furukawa or OCP shall be
in writing and shall be given or made by fax or similar communication or by
certified or registered mail or by a reputable express delivery service
addressed to the respective parties as follows:
To: Optical Communications Products, Inc.
0000 Xxxxxx Xxx.
Xxxxxxxx Xxxxx, XX 00000
Attention: Xxxx Xxxxxx
To: The Furukawa Electric Co., Ltd.
0-0, Xxxxxxxxxx 0-Xxxxx, Xxxxxxx-xx,
Xxxxx 000-0000 Xxxxx
Attention: Xxxxx Xxxxxx
12.1.2 Effectiveness. Such notice or demand shall be deemed to have
been given or made when sent by fax or upon receipt when sent by other means.
The above addresses may be changed at any time by giving thirty Days prior
written notice as provided above.
12.2 ASSIGNMENT OR SUBCONTRACTING. Neither party may assign this Agreement
nor may any duties or obligations of either party under this Agreement be
delegated to any other party or subcontractor without the prior written consent
of the other Party, which shall not be unreasonably withheld. Notwithstanding
the foregoing, either party shall have the right, without the written consent of
the other, to assign this Agreement to a Financially Responsible Affiliate or to
a Financially Responsible successor in ownership of substantially all the assets
of the assigning party if the Affiliate or successor expressly assumes in
writing the terms and conditions hereof and the obligations of the assigning
party under this Agreement. "Affiliate" means any person, company, firm, or
corporation controlling, controlled by, or under common control with, the party
of reference. "Financially Responsible" means having sufficient financial,
operating and personnel resources to carry out the party's obligations under
this Agreement reliably and without otherwise materially adversely affecting its
viability or its ability to carry out its obligations to third parties.
12.3 FORCE MAJEURE. Neither Furukawa nor OCP shall be held responsible for
any delay or failure in performance of any part of this Agreement to the extent
that such delay or failure is caused by fire, flood, explosion, war, strike,
embargo, government requirement, civil or military authority, act of God, or any
other similar causes beyond the control of Furukawa or OCP ("Condition"). If any
such Condition occurs, the party delayed or unable to perform shall give
immediate notice to the other party describing the nature of the condition and
its anticipated effect upon performance.
14
12.4 CHOICE OF LAW. This Agreement shall be governed by and construed in
accordance with the laws of Japan (excluding it rules regarding conflict of
laws).
12.5 NEGOTIATION, MEDIATION, ARBITRATION. Any dispute arising out of, or
relating to, this Agreement shall be exclusively settled in the Tokyo District
Court of Japan with respect to all controversies arising from the interpretation
and performance with this Agreement.
(a) Negotiation. The parties shall attempt in good faith to resolve any
dispute arising out of, or relating to, this Agreement promptly by
negotiation between executives who shall have sufficient authority to
sign a binding settlement agreement.
(e) Tolling. All applicable statutes of limitation and defenses based upon
the passage of time shall be tolled while the procedures specified in
this subsection 12.6 are pending. The parties will take such action as
may be required to effectuate such tolling.
(f) Enforcement Costs. If any legal action or other proceeding is brought
for the enforcement of any of the terms of this Agreement, the
prevailing party will be entitled to recover reasonable attorneys' fees
and other costs incurred in the action or proceeding in addition to any
other relief to which it may be entitled.
12.6 PUBLICITY. Each party agrees to submit to the other party all
advertising, sales promotion, press releases and other publicity efforts
relating directly or significantly to this Agreement. Both parties further agree
not to publish or use such advertising, sales promotion, press releases, or
publicity efforts without the other party's prior written consent, which shall
not be unreasonably denied. The foregoing shall not apply to internal
announcements, newsletters or information on electronic "bulletin boards"
intended solely for the dissemination of information to a party's employees.
12.7 LEGAL COMPLIANCE. Each party covenants and represents to the other that
it has complied, and will comply, with the provisions of all applicable state
and federal laws and regulations and will use its best efforts to comply with
all local and municipal regulations.
12.8 AMENDMENTS. No Change Order or amendment of this Agreement shall be
effective unless it is in writing and signed by duly authorized representatives
of both parties.
12.9 NON-WAIVER. A party's failure at any time to enforce any of the
provisions of this Agreement or any right or remedy available hereunder or at
law or equity, or to exercise any option herein provided, will in no way be
construed to be a waiver of such provisions, rights, remedies or options or
affect the validity of this Agreement. The exercise by either party of any
rights, remedies or options provided hereunder or at law or equity shall not
preclude or prejudice the exercising thereafter of the same or any other rights,
remedies or options.
12.10 AUTHORITY. Each party represents that it has full power and authority
to enter into and perform this Agreement, and the person signing this Agreement,
on behalf of each, has been properly authorized and empowered to enter into this
Agreement, understands it, and agrees to be bound by it.
12.11 NON-AGENCY. Each of the parties shall perform its obligations under
this Agreement as an independent contractor. Nothing herein contained shall be
deemed to create an agency, joint venture or partnership relationship between
them.
15
12.12 ENTIRE AGREEMENT. This Agreement, together with the Appendices,
constitutes the entire agreement between OCP and Furukawa relating to the
subject matter of this Agreement. It does not, however, supersede, modify, or
terminate any nondisclosure agreement in effect between the parties.
12.13 SEVERABILITY. In the event that any one or more of the provisions
contained herein shall, for any reason, be held to be unenforceable in any
respect, such unenforceability shall not affect any other provision of this
Agreement, but this Agreement shall then be construed as if such unenforceable
provision or provisions never had been contained herein. However, in the event
any such provision is considered an essential element of this Agreement, the
parties shall promptly use their best efforts to negotiate a substitute
provision.
12.14 CONFLICT OR INCONSISTENCY. Any conflict or inconsistency in the terms
of any of the following documents will be resolved in the following order of
priority: (i) this Agreement, (ii) a Purchase Order, (iii) a Release.
12.15 SURVIVAL. Expiration or termination of this Agreement for any reason
will not release either party from any liabilities or obligations set out in
this Agreement which (a) the parties have expressly agreed will survive any such
expiration or termination, or (b) by their nature would be intended to be
applicable following any such expiration or termination.
12.16 COUNTERPARTS. This Agreement may be executed simultaneously in any
number of counterparts, each of which will be deemed an original, but all of
which together will constitute a single instrument.
12.17 HEADINGS. The inserted headings are for convenient reference only and
will not be used to construe or interpret this Agreement.
12.18 QUALITY STANDARDS AND GOALS - OCP will establish objective measures of
quality (such as incoming inspection rejections, parts per million,
scrap, delivery, etc.) and quality goals. OCP will establish reporting
requirements regarding the fulfillment of such quality goals. OCP
administers a Furukawa Certification Program. As part of this program,
Furukawa may become disqualified from OCP's Approved Vendor List, if
Furukawa is unable to meet and maintain certain performance criteria
(i.e. On Time Delivery, Excessive Defects etc.).
12.19 ONGOING RELIABILITY TESTING- Furukawa will establish an ongoing
reliability test process (program) for the products supplied to OCP, OCP will
provide Furukawa with its quality assurance requirements for each product (i.e.
Failures In Time Rate (F.I.T.), Mean Time To Failure (M.T.T.F.) etc.). Furukawa
will notify OCP to any quality related problems within 72 hours of discovery
that compromise product quality or fail to meet agreed to product
specifications.
16
Executed by the parties designated below as of the Effective Date.
OPTICAL COMMUNICATION PRODUCTS, INC. THE FURUKAWA ELECTRIC CO., LTD.
By: /s/ Xxxxxxxx Xxxxxxxxxx By: /s/ Xxxxx Xxxxxxx
--------------------------------- ----------------------------
Name: Xxxxxxxx Xxxxxxxxxx Name: Xxxxx Xxxxxxx
------------------------------- --------------------------
Title: Chief Operating Officer Title: General Manager, OD Dept.
------------------------------- -------------------------
Date: 10/01/03 Date: 10/01/03
-------------------------------- --------------------------
Signed at: California, USA Signed at: Yokohama, Japan
-------------------------- ---------------------
17
Appendix 1
Products, Descriptions, Price Tables
[*****]
Appendix 2
LUA spreadsheet
[*****]
Appendix 3
Table of Basic Contract Terms
-------------------------------------- -----------------------------------------
Effective Date 10-01-03
-------------------------------------- -----------------------------------------
Initial Term One Year
-------------------------------------- -----------------------------------------
Product Payment Period Net 45 Days
-------------------------------------- -----------------------------------------
Order Rescheduling Period 14 Days with Furukawa's consent
-------------------------------------- -----------------------------------------
Order Cancellation Period 14 Days with Furukawa's consent
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
Forecast Monthly update on LUA (4 weeks ahead)
-------------------------------------- -----------------------------------------
Safety Stock Yes
-------------------------------------- -----------------------------------------
DDP Location Optical Communication Products, Inc.
0000 Xxxxxx Xxx., Xxxxxxxx Xxxxx,
XX 00000 X.X.X. and
Optical Communication Products, Inc.
Bury St. Edmunds, Ventura House,
Kempson Way, Suffolk UK XX000XX,
Xxxxxx Xxxxxxx
-------------------------------------- -----------------------------------------
Minimum Order Quantities None
-------------------------------------- -----------------------------------------
Product Rejection Period 30 Days
-------------------------------------- -----------------------------------------
Product Warranty Period 1 Year
-------------------------------------- -----------------------------------------
Repair or Replacement Period 30 business Days
-------------------------------------- -----------------------------------------
Lead Time 3 months
-------------------------------------- -----------------------------------------
Appendix 4
Specifications
Specifications of the Products, including any components or spare parts embedded
in the Products, to be furnished by Furukawa and reviewed and approved in
writing by OCP prior to becoming effective. Purchasing to supply either the
specifications or a reference indicating where the specs can be located. The
Specifications will always include the following statement: "No Class 1 ozone
depleting substance is used in the manufacture of or is incorporated in, the
Products or, if any such substance is used in the manufacture of, or is
incorporated in, the Products, then each such Product is properly labeled
pursuant to applicable federal law. "
[*****] Material is confidential and has been omitted and filed separately with
the Securities and Exchange Commission.
18
