Microelectronics Product Purchase Agreement - Agere Systems Inc. and Lucent Technologies Inc.
Contract No. HO32010023
EXECUTION COPY
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MICROELECTRONICS PRODUCT PURCHASE AGREEMENT
by and between
AGERE SYSTEMS INC.
and
LUCENT TECHNOLOGIES INC.
Dated as of February 1, 2001
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MICROELECTRONICS PRODUCT PURCHASE AGREEMENT
THIS MICROELECTRONICS PRODUCT PURCHASE AGREEMENT ("Agreement"), effective as of
February 1, 2001 (the "Effective Date"), is by and between AGERE SYSTEMS INC. a
Delaware corporation, with offices at 555 Union Blvd., Allentown, Pennsylvania
18103 ("Seller"), and LUCENT TECHNOLOGIES INC., a Delaware corporation, with
offices at 600 Mountain Avenue, Murray Hill, New Jersey 07974 ("Buyer").
1. TERM OF THE AGREEMENT
The term of this Agreement shall commence on the Effective Date and shall expire
on January 31, 2004, unless earlier terminated in accordance with the provisions
hereof (the "Term"). The Term will automatically extend for additional one (1)
year periods unless either party gives at least three (3) months' written notice
prior to the then-effective expiration date of its intention not to extend this
Agreement. The rights and obligations of the parties which by their nature would
continue beyond the termination, cancellation, or expiration of this Agreement,
shall survive such termination, cancellation or expiration.
2. SCOPE OF THE AGREEMENT
During the term of this Agreement, Buyer intends to purchase from Seller and
Seller intends to sell to Buyer the products listed on Attachments A1 and A2, as
may be supplemented by mutual written agreement of the parties from time to
time, and other products that may become the subject of an Order accepted by
Seller during the term of this Agreement (the "Products"). All quotations issued
by Seller and all Orders submitted by Buyer with respect to the Products shall
be deemed to incorporate and be subject to the terms and conditions of this
Agreement. All other terms and conditions contained on any Order form or
correspondence originated by either party are null and void and without effect
notwithstanding acceptance of the Order by Seller. Either party's failure to
object to provisions contained in any communication from the other party shall
not be deemed a waiver of the provisions of this Agreement. When necessary for
purposes of applying different provisions, Product may also be referred to as
"Custom Product," which is Product that is sold only to Buyer and to any Buyer
Subcontractor; or "Standard Product," which is Product that is generally offered
by Seller to the general market.
Buyer and any of its Affiliates in the United States may place or enter into
Orders under this Agreement for the purchase of Products in the United States.
In the event that Buyer wants to procure Products outside the United States,
Orders for Products shall be placed on the appropriate Seller Affiliate in the
Asia Pacific or EMEA Region.
Acceptance of an Order will create a corresponding agreement, incorporating the
terms and conditions of this Agreement, between Buyer or the Buyer Affiliate
placing the Order and the Seller Affiliate accepting the Order. As used herein,
"Seller" refers to Agere Systems Inc. or to the particular Seller Affiliate
accepting the Order.
- In addition to the above procedure, the parties may by mutual agreement
decide that prior to
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submitting or entering into an Order under this Agreement, the non-U.S.
Buyer Affiliate and the relevant Seller Affiliate shall sign a Letter of
Acceptance ("LOA") (in substantially the form set forth in Attachment E)
committing them to utilize the terms and conditions of this Agreement in
any forthcoming procurement of Products in their location, subject to any
modified, additional, or deleted terms as set forth in the LOA. Each LOA
shall state the Seller Affiliate, the non-U.S. Buyer Affiliate, the
applicable Products, and the geographical area to which it applies. Each
LOA will incorporate by reference the master terms and conditions of this
Agreement and will specify any agreed upon changes required by local law or
local operational practice. Such additional terms may include, but shall
not be limited to delivery terms, passage of title, or choice of law.
Notwithstanding the foregoing, any pricing terms shall continue to be
subject to the Most Favored Pricing provision (as defined in Attachment B).
The Parties intend that the terms and conditions of the Agreement shall
apply, except with respect to those mutually agreed upon provisions which
are required to address (1) local laws/regulations or (2) operational
issues resulting from transacting in the particular country identified in
the relevant LOA. Each LOA shall be deemed a separate contract between the
parties who sign it, and each party identified in such LOA shall look only
to the other for performance of their respective obligations under such LOA
and any Order placed pursuant to it. Once an LOA has been executed by the
relevant parties, multiple Orders may be placed under such LOA.
- For deliveries outside of the United States only, should there be a
conflict between the terms and conditions of a LOA and this Agreement, the
terms of the LOA shall prevail. Once an LOA for a specific geographic area
is executed by both parties, Orders may be placed under the LOA following
the procedures set forth herein (unless modified or amended by the relevant
LOA).
- "Affiliate" of any party means an entity that controls, is controlled by,
or is under common control with such Person. As used herein, "control"
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such entity, whether
through ownership of voting securities or other interests, by contract or
otherwise. "Person" means an individual, a general or limited partnership,
a corporation, a trust, a joint venture, an unincorporated organization, a
limited liability entity, any other entity and any governmental authority.
Buyer reserves the right to use contract manufacturers in the production and/or
third party logistics or distributor partners ("Buyer Subcontractors") in the
provisioning of Buyer's products which utilize Products covered under this
Agreement, subject to Seller's approval which shall not be unreasonably
withheld. As a result, Buyer may authorize in writing Seller and, if acceptable,
Seller shall agree in writing to sell and/or ship Products to such approved
Buyer Subcontractors involved in the production and provisioning of Buyer's
products. Any Order issued by a Buyer Subcontractor will be a contractual
relationship between Seller and such Subcontractor, and Seller shall look only
to such Subcontractor for performance of its respective obligations under such
Order unless otherwise agreed in writing. Buyer acknowledges that Seller's
decision whether or not to sell to a particular Buyer Subcontractor, may be
based on credit worthiness of the Buyer Subcontractor, reaching agreement
between Seller and Buyer on responsibility for
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funding support services (e.g., third party logistic partners), and whether or
not the Buyer Subcontractor competes against Seller in the market with respect
to the Products which would be sold to such Buyer Subcontractor. All Product
Orders by Buyer Subcontractors shall be deemed to be, and shall be, pursuant to
the terms and conditions of Sections 1, 2, 4, 5, 6, 7, 8, 9, 11, 12, 13, 14,
15,16, 18, 19, 20, 21, 23, 25, 26, 28, 30, 32, 33, 34, 35, 36, and 42 of this
Agreement. All other provisions will be as separately agreed between the Buyer
Subcontractor and Seller. In addition, any Buyer Subcontractor making a purchase
of Product hereunder will be required to furnish to Seller a letter or other
written document in which the Buyer Subcontractor acknowledges and agrees that
(i) it shall comply with, and all purchases by the Buyer Subcontractor will be
governed by, all applicable terms and conditions of this Agreement shown above
as though it were Buyer, (ii) it shall have no right to purchase Products or to
purchase volumes in excess of Buyer's authorization to the Buyer Subcontractor,
and (iii) it shall use and/or sell Product only to Buyer or for Buyer's account.
3. MINIMUM PURCHASE COMMITMENT
For the period commencing on February 1, 2001 through January 31, 2004, Buyer
agrees to a minimum purchase commitment of Products from Seller that equals a
total commitment of two billion, eight hundred million ($2,800,000,000) broken
down for each twelve month period ("Year") as follows:
Year 1 (February 1, 2001 through January 31, 2002):
USD $800,000,000;
Year 2 ((February 1, 2002 through January 31, 2003):
USD $1,000,000,000;
Year 3 ((February 1, 2003 through January 31, 2004:)
USD $1,000,000,000.
As may be adjusted in accordance with Attachment B, the amounts above
for any Year is referred to herein as the "Annual Commitment."
Buyer and Seller will determine whether Buyer has met an Annual Commitment,
using the credits and other adjustments provided in Attachment B.
4. PURCHASE ORDERS
Purchase orders ("Orders") shall be placed under this Agreement from time to
time by Buyer. All purchases and sales under this Agreement shall be subject
only to the terms and conditions hereof. In the event that the terms of any
Order, Order acknowledgment, invoice, confirmation or similar document conflict
with, or are additional to, the terms of this Agreement, the terms of this
Agreement alone shall apply and shall govern regardless of execution of such
document by one or both parties. Notwithstanding, the parties may agree to
negotiate non-preprinted terms which shall be effective if executed in writing
by both parties. Seller shall accept and acknowledge in
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writing (or electronically) all Orders submitted by Buyer within five (5)
working days after receipt thereof or indicate why an Order cannot be accepted.
Each acknowledgment shall include a shipping date for the Products ordered in
the Order. "Working day or business day" shall mean a regular weekday on which
Seller and Buyer and their respective subcontractors are open for business.
Delivery shall be in accordance with accepted Orders. Minimum order requirements
shall be as set forth on Attachments 1 and 2.
5. PRICING
Seller shall sell Products to Buyer at the prices listed in Attachments A1 and
A2. The pricing process and other related terms are as set forth in Attachment
C.
6. DELIVERY
The following delivery terms apply:
If Buyer (i.e., Order from/invoice party) Seller/Incoterm 2000
is located in:
U.S. Seller U.S./DDP Named Place of
Destination
Asia/Pacific Region Seller Singapore/DDU Named Place of
Destination
EMEA Region Seller U.K. or Seller GmbH/DDP Named
Place of Destination
Shipment will be made in a manner determined by Seller. The above Incoterms
terms are used for convenience only to indicate the party responsible for
freight and duties. Title, risk of loss and taxes are as provided in Sections 7
and 8. Buyer shall be responsible for expenses incurred by Seller where, at
Buyer's request, Seller ships or packs Product in other than its normal manner.
Notwithstanding the foregoing, if Buyer requires shipment using a carrier other
than at Seller's selection, Buyer shall pay for freight from Seller's location
to Buyer's location.
7. TITLE AND RISK OF LOSS
Unless otherwise agreed to by the parties, title and risk of loss or damage to
the Product shall pass to Buyer at the time Seller delivers possession of the
Product to a carrier at Seller's plant or warehouse or other facility (without
regard to notification of shipment or selection of carrier).
8. TAXES PAYABLE BY BUYER
Buyer shall bear all taxes, duties, levies and similar charges (and any related
interest and penalties), however designated, imposed as a result of the
existence or operation of this Agreement, except (i) any tax imposed upon Seller
in a jurisdiction other than the jurisdiction under the laws of which the Seller
was formed (hereinafter referred to as the "Resident
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Jurisdiction") if such tax is allowable as a credit against the Resident
Jurisdiction income taxes of Seller; and (ii) any net income tax imposed upon
Seller by any government entity within Seller's Resident Jurisdiction. In order
for the exception contained in (i) to apply, Buyer must furnish Seller with such
evidence as may be required by the Resident Jurisdiction taxing authorities to
establish that such tax has been paid within thirty (30) days of issuance of
notice by the local taxing authority so that Seller may claim the credit.
If Buyer is required to bear a tax, duty, levy or similar charge pursuant to the
preceding paragraph, Buyer shall pay such tax, duty, levy or similar charge and
any additional amounts as are necessary to ensure that the net amounts received
by Seller hereunder after all such payments or withholdings equal the amounts to
which Seller is otherwise entitled under this Agreement as if such tax, duty,
levy or similar charge did not exist.
Seller shall not collect an otherwise applicable tax if Buyer's purchase is
exempt from Seller's collection of such tax and a valid tax exemption
certificate is furnished by Buyer to Seller.
All prices mentioned in this Agreement are exclusive of value added taxes,
turnover taxes, sales taxes or similar taxes, including any related interest and
penalties (hereinafter all referred to as "VAT"). In the event that any VAT is
payable on the Products and/or services supplied by Seller to Buyer under this
Agreement, this VAT shall be added to the prices mentioned and shall be for the
account of Buyer. If VAT on the supplies of Seller is payable by Buyer under a
reverse charge procedure (i.e., shifting of liability, accounting or payment
requirement to recipient of supplies), Buyer shall ensure that Seller will not
effectively be held liable for this VAT by the relevant taxing authorities or
other parties. Where applicable, Seller shall use its reasonable commercial
efforts to ensure that its invoices to Buyer are issued in such a way that these
invoices meet the requirements for deduction of input VAT by Buyer, if Buyer is
permitted by law to do so.
Notwithstanding the foregoing, Seller shall be responsible for duties consistent
with the delivery term DDP, for delivery of Product made using such delivery
term in accordance with Section 6.
9. DISPOSITION OF DAMAGED OR NONCONFORMING DELIVERIES
As to discrepancies in quantity of Product which are discovered by Buyer in the
receiving process, Buyer shall (i) complete its normal receiving process on
actual quantity of Product received and (ii) within a reasonable period of time
of receipt of the Product notify Seller (at the notice address set forth herein)
of such discrepancy. Whenever unconcealed loss or damage has occurred to the
Product prior to receipt by Buyer at the Buyer's site, Buyer should mark the
delivery receipt with the appropriate exceptions describing the damage before
signing and request the carrier to inspect the loss or damage and note the
damage or loss on all copies of the delivery receipt. Each copy of the delivery
receipt shall be signed by Buyer and the carrier's agent. Buyer shall within a
reasonable period of time of its receipt of the Product notify Seller of any
concealed loss or damage of which it becomes aware.
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As to incorrect items in shipments of Product which are discovered by Buyer in
the receiving process, Buyer shall promptly contact Seller for direction on
disposition of incorrect item(s). Freight cost to return incorrect items to
Seller will be paid by Seller. Seller shall promptly arrange for replacement
shipment of correct Product.
Buyer shall take care to pack Products that are subject to any returns under
this Agreement in a manner consistent with ensuring adequate protection from
damage while the Product is in transit.
Buyer and Seller agree to cooperate with each other to review and, if necessary,
implement improvements to the above process.
10. FORECASTS
Upon execution of this Agreement, Buyer shall make commercially reasonable
efforts to provide Seller with a non-binding forecast for each Product required
and shall update it on a monthly basis. The forecast shall be a rolling forecast
covering a period of twelve (12) months following the effective date of the
forecast. In order for Supplier to plan efficiently for Buyer's Product Orders,
Buyer will make commercially reasonable efforts to implement a process for
submitting forecasts that reflect the forecasts submitted by Buyer to Buyer
Subcontractors, and ensure that Buyer's forecasted demands can be reconciled
against Orders placed on Seller by Buyer Subcontractors. Buyer will work with
Seller to reconcile any discrepancy in the Buyer forecasts versus Buyer
Subcontractor Orders. Buyer shall submit the forecast so that Seller receives it
at least one week prior to its effective date.
11. FLEXIBLE DELIVERY
During the Term of this Agreement, Buyer may give written notice to Seller
requesting that Seller implement certain forms of "Flexible Delivery
Arrangements", including, but not limited to Blanket Orders, Consignment, Demand
Pull, and Dock-to-Shop for designated Product(s). Such notice shall specify the
particular ordering entity and/or facility location(s), Product, and the
requested implementation date, and the proposed Flexible Delivery Arrangement.
Seller agrees to consider in good faith any such request. Upon agreement by
Seller to implement such Flexible Delivery Arrangement, the parties agree to
negotiate in good faith the terms of such proposed Flexible Delivery
Arrangement. The other terms and conditions of this Agreement shall also apply
to such agreed to Flexible Delivery Arrangement(s); provided, however that if
there is a conflict between the terms and conditions in the Flexible Delivery
Arrangement and the other terms and conditions of this Agreement, the terms and
conditions of such applicable Flexible Delivery Arrangement shall prevail.
12. LATE DELIVERY
Seller shall ship Product in accordance with the acknowledged delivery date of
an accepted Order. In the event Seller fails to deliver Product within ten (10)
days of the acknowledged delivery date, in addition to any other remedies Buyer
may have for Seller's late delivery under this Agreement, Buyer may at its
option, (i) establish a new delivery date for Seller, or (ii) cancel
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the Order, buy product elsewhere which Seller has so failed to deliver, and
deduct from Buyer's Minimum Purchase Commitment the dollar amount for which
commitment has been made elsewhere. If Buyer establishes a revised delivery date
and Seller fails to deliver fully conforming Product by that revised date, Buyer
may cancel the Order, buy product elsewhere which Seller has so failed to
deliver, and deduct from Buyer's Minimum Purchase Commitment the dollar amount
for which commitment has been made elsewhere. Cancellations pursuant to this
Section shall be at no charge to Buyer. Seller shall be responsible for the cost
of any required expedited airfreight related to late or rescheduled delivery due
to Seller's action.
13. RESCHEDULING OR TERMINATION OF ORDERS
Buyer may at any time terminate any or all Orders, or any portion thereof, upon
written notice to Seller. Unless otherwise specified in this Agreement, Buyer's
liability to Seller with respect to such terminated Order or Orders for Standard
Product (not usable in Seller's other operations or salable to Seller's other
customers within a reasonable period of time) shall be limited to:
(i) one hundred percent (100%) of the purchase price as set forth
in this Agreement or applicable Order for the quantities
scheduled to be shipped within four (4) weeks from the written
notice of termination.
Unless otherwise specified in this Agreement, Buyer's liability to Seller with
respect to such terminated Order or Orders for Custom Product (not usable in
Seller's other operations or salable to Seller's other customers within a
reasonable period of time) shall be limited to:
(i) one hundred percent (100%) of the purchase price as set forth
in this Agreement or applicable Order for the quantities
scheduled to be shipped four (4) weeks from the written notice
of termination; plus
(ii) sixty percent (60%) of the purchase price as set forth in this
Agreement or applicable Order for the quantities scheduled to
be shipped between five (5) and six (6) weeks from the written
notice of termination; plus
(iii) forty percent (40%) of the purchase price as set forth in this
Agreement or applicable Order for the quantities scheduled to
be shipped between seven (7) and eight (8) weeks from the
written notice of termination; plus
(iv) twenty percent (20%) of the purchase price as set forth in
this Agreement or applicable Order for the quantities
scheduled to be shipped between nine (9) and twelve (12) weeks
from the written notice of termination.
Seller will render invoice to Buyer for any termination charges, and Buyer shall
pay Seller in accordance with Section 17.
If Buyer terminates an Order for Product and then reorders the same Product
within thirty (30) days of such termination, with delivery of the Product
scheduled within ninety (90) days of the
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original acknowledged delivery date of the terminated Order, then Buyer will
receive credit for any termination fees paid to Seller, based on the quantities
reordered. Notwithstanding the foregoing, no credit will apply in the case of
any reorders where the terminated Order had been (1) previously rescheduled, or
(2) a reorder of a previously terminated Order.
Upon such termination, Seller shall work co-operatively with Buyer, at Buyer's
request for orderly transfer of the terminated Product to Buyer or to Buyer's
designated third party in a mutually established schedule and procedure so as to
minimize impact to Buyer and Seller. Upon termination, Seller shall promptly
return all Buyer proprietary or proprietary restricted information related to
the terminated Order to Buyer.
Buyer may, without liability, reschedule Orders, or any portion thereof, by
providing written notice of reschedule (via facsimile or EDI) to Seller at least
thirty (30) calendar days prior to the scheduled ship date, provided however,
that in no event shall any reschedule extend the delivery date to more than
ninety (90) days out from Seller's original acknowledged delivery date. Seller
agrees to negotiate in good faith any request by Buyer for reschedule that is an
exception to the limits established above.
Any payment by Buyer under this Section 13 will be considered as liquidated
damages and will not be viewed as a penalty.
Any payments made by Buyer under this Section will be applied to the Minimum
Purchase Commitment.
14. WARRANTY
Seller warrants the Product as a production item ("Item"), but not related
services or prototypes of any such Items, to be free from defects in material
and workmanship and in conformance with the written specification furnished by
or agreed to by Seller. If any failure to conform to such specification
("Defect") is suspected in any such Items, Buyer, after obtaining a Returned
Material Authorization number from Seller, shall ship suspected defective
samples of the Items to Seller, following Seller's instructions regarding the
return. No Item will be accepted for repair, replacement, credit or refund
without the written authorization of Seller and in accordance with Seller's
instructions. Seller shall analyze the failures, making use, when appropriate,
of technical information provided by Buyer relating to the circumstances
surrounding the failures. Seller will verify whether any Defect appears in the
Items. If Seller determines that the returned Items are not defective, Buyer
shall pay Seller all costs of handling, inspection, repairs and transportation
at Seller's then prevailing rates. Seller shall, at Seller's option, either
repair or replace any Defective Item with the same or equivalent Item without
charge at Seller's manufacturing or repair facility, or credit or refund the
purchase price, provided: (i) Buyer notifies Seller in writing of the claimed
Defect within a reasonable time period after Buyer knows or reasonably should
know of the claimed Defect, (ii) Seller's examination of the Items discloses
that the claimed Defect actually exists and (iii) unless a different warranty
period is specified on Attachments A1 or A2, the defect appears within twelve
(12) months from the date of shipment
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of the Item. In the event of a replacement, Seller shall ship the replacing
Items FCA point of origin, freight prepaid to Buyer's destination. Any replaced
Item shall become Seller's property. The method of disposition of any replaced
Items will be as mutually agreed by both parties in writing. In no event shall
Seller be responsible for deinstallation or reinstallation of any Item or for
the expenses thereof other than as set forth in Attachment D of this Agreement.
Repairs and replacements covered by the above warranty are warranted to be free
from Defects as set forth above except that the Defect must appear (i) within
three (3) months from the date of repair or replacement or (ii) prior to the
expiration of the warranty period, whichever is later. Inspection and acceptance
of Items by Buyer and/or payment therefor shall not relieve Seller of
responsibilities hereunder.
The above warranty does not apply to, and Seller makes no warranties with
respect to Items that are software programs, experimental products, prototypes
or units from risk lots (all of which are provided "AS IS") or to Items which
have been subjected to misuse, neglect, accident or abuse or operating or
environmental conditions that deviate from the parameters established in
applicable specifications; or have been improperly installed, stored,
maintained, repaired or altered by anyone other than Seller; or have had their
serial numbers or month and year of manufacture or shipment removed, defected or
altered. This warranty does not extend to any system into which an Item is
incorporated. This warranty applies only to Buyer and may not be assigned or
extended by Buyer to any of its customers or other users of the Items. Seller
will not accept any returns from Buyer's customers or users of Buyer's products.
As used herein "risk lots" refers to production units of Custom Product ordered
by Buyer prior to formal production approval.
Seller does not recommend the use of any of its Products for medical or life
support applications wherein a failure or malfunction of the Product may
directly threaten life or cause injury and Seller will not knowingly sell its
Products for such use except pursuant to a written exception to this policy
granted on a case-by-case basis. No warranty is made with respect to any such
medical or life support use of any Product.
EXCEPT AS STATED IN THIS SECTION, SELLER, ITS SUBSIDIARIES AND AFFILIATES,
SUBCONTRACTORS AND SELLER'S SUPPLIERS MAKE NO WARRANTIES, EXPRESS OR IMPLIED,
AND SPECIFICALLY DISCLAIM ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. BUYER'S SOLE AND EXCLUSIVE REMEDY SHALL BE SELLER'S
OBLIGATIONS AS SET FORTH ABOVE.
15. PRODUCT CHANGES
Seller shall provide Buyer with at least ninety (90) days prior written notice
of any changes proposed to be made by Seller (i) in the Product or in
manufacturing processes, that will affect form, fit or function of the Product,
or (ii) in the sites of manufacturing of the Product. In regard to Seller's
manufacturing processes, Buyer also reserves the right to perform periodic
quality audits, surveys, and evaluations, including, but not limited to,
analysis of each manufacturing or assembly position for acceptability of
procedures and equipment calibration, as well as evaluation of quality
control/quality assurance and data collection and analysis procedures. In no
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event shall Seller be required to provide proprietary information to Buyer in
connection with such audits, surveys and evaluations.
Notwithstanding any other provisions of this Agreement, if Buyer, in its sole
discretion, does not agree to the change proposed by Seller, Buyer shall have
the right to terminate any or all Orders for Product affected by such change
without further obligation and shall have the right to buy elsewhere Product and
to deduct from Buyer's commitment under this Agreement to Seller the quantity
for which commitment has been made elsewhere. Seller shall use commercially
reasonable efforts to facilitate a timely, smooth transition to an alternate
component, if available.
Notwithstanding anything contained herein to the contrary, Seller reserves the
right to manufacture the Product in any facility qualified by Seller.
16. DISCONTINUANCE OF PRODUCT
Seller shall provide Buyer at least twelve (12) months written notice that any
Product covered by this Agreement is to be manufactured discontinued. Buyer may
place Orders for such Product at the prices set forth in this Agreement during
this twelve (12) month period and Seller shall fill such Orders even if such
twelve (12) month period extends beyond the term of this Agreement. Delivery
schedules for this Product shall be negotiated by the parties at time of Order
placement, but delivery will not extend beyond eighteen (18) months from date of
notice of discontinuance unless Seller agrees otherwise. Notwithstanding the
foregoing, to the extent that an alternative product meeting Buyer's functional
and cost requirements is reasonably available and can be qualified within six
(6) months, as determined by Buyer, then notice of discontinuation may be
reduced to six (6) months. Any Product for which a notice of discontinuation has
been received by Buyer, shall be considered a Custom Product solely for purposes
of Section 13, Cancellation and Rescheduling, effective as of receipt of such
notice.
Seller recognizes that continuity of supply of Custom Product is a critical
concern of Buyer. Therefore, in the event Seller elects to discontinue supplying
Custom Product, the parties agree to consider in good faith reasonable
alternatives that may be available in addressing Buyer's concerns. In no event
will this provision be construed as requiring the broadening of the scope of any
licenses of intellectual property entered into between the parties by separate
written agreement as of the Effective Date.
17. PAYMENT TERMS
Buyer shall pay the invoiced amount within thirty (30) days from the date of
Seller's invoice. Prices shall be quoted and invoices shall be rendered and paid
in United States currency unless agreed to otherwise by the parties.
18. SOFTWARE
No title or other ownership rights in any software, including related
documentation or any licensed Product or any copies thereof shall pass to Buyer
under this Agreement or any
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performance hereunder. Use of software in connection with purchase of certain
Products hereunder may require execution of separate software license
agreements.
Buyer agrees that it will not alter any notices on, prepare derivative works
based on, or reproduce, reverse engineer, disassemble or decompile any software
embodied in licensed Products or recorded in the purchased Products furnished
under this Agreement. Buyer's right to further distribute software embedded in
Products furnished hereunder is limited solely to purposes in connection with
incorporating such Products into Buyer products for resale to its customers.
19. INTELLECTUAL PROPERTY INDEMNITY
(a) With respect to any claim alleging that the installation, normal use,
or sale of any Product (including its related documentation) furnished under
this Agreement is an infringement of any patent, copyright, mask work or
trademark or a misappropriation of a trade secret, Seller will, subject to the
conditions and exceptions stated below: (i) at its option, defend or settle such
claim, at its expense, (ii) reimburse Buyer for any reasonable costs incurred at
Seller's written request (including reasonable attorneys' fees) relating to such
claim; and (iii) pay damages and costs assessed by final judgment of such claim
against such Product.
(b) If Buyer's or its customer's installation, sale or use of a Product
(including its related documentation) shall be enjoined or, in Seller's opinion
is likely to be enjoined, Seller shall have the right, at any time and at its
option and expense to: (i) procure for Buyer or its customer the right to
continue installation, sale or use of any such Product; or (ii) replace any such
Product with a non-infringing substitute; or (iii) modify any such Product
provided or to be provided to be free of the infringement; or (iv) if the
Product is still in the possession of Buyer and has not yet been incorporated
into any other product by or for Buyer, and as long as return is feasible and
commercially reasonable, require return of such Product and refund or credit to
Buyer any amount(s) paid to Seller for Product. Exercise of any of the options
(i) through (iv) above shall release Seller of any further liability to Buyer
and Buyer's customer. In no event shall Seller's liability under this Section
19(b) exceed the amount(s) paid by Buyer to Seller to purchase the allegedly
infringing Product or the amount necessary to obtain the rights to use, install
or sell such Product.
(c) Seller's obligations hereunder are conditioned upon: (i) Buyer giving
Seller written prompt notice of any such claim; (ii) Seller having full and
complete control of the defense and/or settlement thereof, including appeals;
and (iii) Buyer cooperating fully with Seller to facilitate the defense or
settlement of such claim.
(d) If any action or proceeding shall be brought in connection with any
liability or claim to be indemnified under this Agreement, Seller shall keep
Buyer apprised as to the status of the defense or settlement of such action or
proceeding.
(e) Notwithstanding the foregoing, Seller shall have no obligation under
this Section 19, and Buyer shall (except with respect to item (ii) below)
defend, indemnify and save harmless Seller
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and its Sellers and affiliated companies, under the terms provided herein, from
all costs, expenses, liabilities and claims, for any such claim, action,
proceeding or suit alleging infringement: (i) arising from Seller's compliance
with specifications, modifications, drawings, designs or instructions furnished
by, or on behalf of, Buyer; or (ii) arising as a result of the combination,
operation or use of any Product (including documentation) furnished hereunder,
or any component thereto, with item(s) not furnished by Seller or furnished by
Seller but which combination was not recommended by Seller; or (iii) arises from
adherence to instructions to apply Buyer's trademark, trade name or other
company identification; or (iv) resides in item(s) (including software) that is
furnished by Buyer to Seller for use under this Agreement; or (v) is based upon
modification made by Buyer of any Product or component thereof (including
software and documentation).
(f) The sale of any Product by Seller shall not in any way confer upon
Buyer, or upon anyone claiming under Buyer, any license (expressly, by
implication, by estoppel or otherwise) under any patent claim of Seller or
others covering or relating to any combination, machine or process in which such
Product is or might be used, or to any process or method of making such Product.
(g) Notwithstanding any other provision in this Agreement, Seller's total
liability to Buyer for all claims, actions, proceedings or suits alleging
infringement of intellectual property rights because of, or in connection with,
any items furnished pursuant to this Agreement shall be limited to the specific
undertakings contained in this Section 19.
20. EXCLUSIVE REMEDIES AND LIMITATIONS OF LIABILITY
A. For purposes of the exclusive remedies and limitations of liability set
forth in this Section, Seller shall be deemed to include Agere Systems Inc., and
its subsidiaries and Affiliates and the directors, officers, employees, agents,
representatives, subcontractors and Seller's suppliers of each of them; and
"damages" shall be deemed to refer collectively to all injury, damage, loss or
expense incurred.
B. Seller's entire liability and Buyer's exclusive remedies against Seller
for any damages caused by any Product Defect or failure, or arising from the
performance or non-performance of any work, regardless of the form of action,
whether in contract, tort including negligence, strict liability or otherwise
shall be:
For infringement, the remedies set forth in the Section entitled Intellectual
Property Indemnity;
For failure of Product or work performed, the remedies stated in the Section
entitled Warranty;
For failure to deliver or for delays in delivery of production quantities,
Seller shall have no liability unless the delivery is delayed by more than ten
(10) days by causes not attributable either to Buyer or to conditions beyond
Seller's reasonable control as set forth in Section 21, in which case Buyer
shall have the right, as its sole remedy, to terminate the Order without
incurring termination charges and deduct from Buyer's Minimum Purchase
Commitment the dollar amount for which commitment has been made elsewhere;
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For bodily injury or death to any person proximately caused, Buyer's right to
proven direct damages; and
For claims other than set forth above, Seller's liability to Buyer shall be
limited to direct damages that are proven in an amount not to exceed $500,000
per occurrence.
C. Except as otherwise expressly provided in this Agreement, neither party
shall be liable for incidental, indirect, special, exemplary or consequential
damages, including but not limited to lost profits, savings or revenues of any
kind, whether or not such party has been advised of the possibility of such
damages. This provision shall survive failure of an exclusive remedy.
21. EXCUSE OF PERFORMANCE
Except for Buyer's obligation to make timely payments when due, 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,
explosion, war, strike, embargo, government requirement, civil or military
authority, act of God, inability to secure material due to a world-wide
shortage, nature or the public enemy, act or omission of carriers or any other
causes beyond its reasonable control.
22. NOTICES
Except as provided below, all notices, requests, demands and other
communications required or permitted to be made hereunder shall be in writing
and shall be deemed duly delivered against a signed receipt for same, sent via
e-mail with confirmation of receipt, sent via facsimile with a confirmation
retained by the sending party, sent by registered or certified mail, return
receipt requested, first class postage prepaid, or sent by nationally recognized
overnight delivery service, addressed to the parties at the addresses below or
to the addresses to be exchanged from time to time during the term of this
Agreement for the particular kind of notice to be sent.
Notwithstanding the foregoing, in the event of any notice of breach or
termination of this Agreement, the following provision shall apply:
All notices or other communications under this Agreement regarding breach or
termination of this Agreement shall be in writing and shall be deemed to be duly
given when (a) delivered in person or (b) deposited in the United States mail or
private express mail, postage prepaid, addressed as follows:
If to Seller, to: Agere Systems Inc.
2 Oak Way, Berkeley Heights, N.J. 07922
Attn: Kenneth W. Dorushka
Vice President, Sales to Lucent Technologies
with a copy to: Agere Systems Inc.
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2 Oak Way, Berkeley Heights, N.J. 07922
Attn: Richard Bleicher
Corporate Counsel
If to Buyer to: Lucent Technologies Inc.
283 King George Rd., Warren, NJ 07059
Attn: Michael B. Fahrney
Senior Manager, Purchasing
with a copy to: Lucent Technologies Inc.
Mt. Hope Church Rd & I85,
PO Box 20046, Greensboro, NC 27420
Attn: Barbara L. Stewart
Corporate Counsel
Any party may, by notice to the other party, change the address to which such
notices are to be given.
23. SHIPPING DOCUMENTATION; INVOICING
Seller will continue to ship Product with the kind of accompanying information
and documentation that has been normally provided to Buyer from Seller as of the
Effective Date of this Agreement. Seller and Buyer agree to cooperate with each
other to the extent that any changes may be requested by either party in
connection with such matters. Invoice to Buyer will be rendered upon shipment,
unless otherwise agreed in writing.
Seller shall provide Buyer with a valid, accurately completed Exporters'
Certificate of Origin prior to the first shipment of Product sufficient to be
used by Buyer as proof of eligibility for any duty preferential treatment
programs for which Buyer has advised Seller. Seller further agrees to provide
full and reasonable cooperation to Buyer for substantiation of preferential duty
program claims, responses to customs inquiries, or other treaty claims that
arise out of Product provided under this Agreement or Order. Seller shall notify
Buyer in writing prior to making any pricing or sourcing changes for Product
which may affect the application of preferential duty treatment programs,
subject to Buyer having advised Seller of the programs for which preferential
treatment have been requested.
24. DUTY DRAWBACK AND OFFSET CREDITS
Buyer reserves the right to claim duty drawback on all purchases from Seller,
and Seller shall cooperate by providing the necessary certificates of Delivery
or in instances where the imported Product received further processing, shall
furnish certificates of Manufacture and Delivery on all Product which may be
subject to drawback.
Orders issued pursuant to this Agreement are placed with the expectation of
current and/or anticipated future Offset and Localization obligations of Buyer
or its Affiliates or their
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designated assignees to the customer country government that requires the
provision of Offset and Localization. Seller agrees to assist Buyer and its
Affiliates or their designated assignees in any reasonable efforts to secure
offset credit from the customer country government in an amount equal to the
value of the Orders placed under this Agreement.
25. PACKING, LABELING AND SERIALIZATION
Packing, labeling and serialization of shipping packages will continue to be
performed consistent with the way it has normally been provided to Buyer from
Seller as of the Effective Date of this Agreement. Seller and Buyer agree to
cooperate with each other to the extent that any changes may be requested by
either party in connection with such matters.
26. MARKING
All Product furnished under this Agreement shall be marked for identification
purposes in accordance with the Product and packaging Specifications as set
forth by the Buyer or elsewhere in this Agreement and as follows: (a) with part
number/serial number; and (b) with month and year of manufacture.
27. NONDISCLOSURE AGREEMENT
During performance of this Agreement, the parties may disclose or furnish to
each other proprietary or proprietary restricted marketing, technical, or
business information, including, without limitation, products and/or software
("information"), relating to the subject of this Agreement.
Information provided in tangible form shall be clearly marked as proprietary or
proprietary restricted. With respect to any integrated circuits, any technical
information, including but not limited to circuit layout, design, or software,
embedded in any such device is proprietary information notwithstanding the
absence of any proprietary marking on such device. Information provided orally
will be considered proprietary or proprietary restricted if the disclosing party
says it is proprietary or proprietary restricted at the time of oral disclosure
and summarizes it in a proprietary or proprietary restricted writing provided to
the other party within twenty (20) days of the oral disclosure. Pricing to
Lucent shall be deemed proprietary restricted information notwithstanding that
such information is not in writing or if in writing is not marked proprietary
restricted.
The receiving party shall: (a) hold information in confidence using the same
degree of care as it normally exercises to protect its own proprietary
information or proprietary restricted information, (b) restrict disclosure and
use of information to employees (including any contractors or consultants) with
a need-to-know, and not disclose it to any other parties, (c) advise those
employees, contractors and consultants of their obligations with respect to the
information, (d) not copy, duplicate, reverse engineer or decompile information,
(e) use the information only in furtherance of performance under this Agreement,
and (f) upon expiration or termination of this Agreement, return all information
to the disclosing party or at the request of
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the disclosing party, destroy such information.
The receiving party shall have no obligation to keep confidential information
that: (a) was previously known to it free of any confidentiality obligation, (b)
was independently developed by it, (c) is or becomes publicly available other
than by unauthorized disclosure, (d) is disclosed to third parties by the
disclosing party without restriction, or (e) is received from a third party
without violation of any confidentiality obligation.
If a party is faced with legal action or a requirement under government
regulations to disclose or make available proprietary or proprietary restricted
information received hereunder, such party shall forthwith notify the furnishing
party and, upon request of the latter, cooperate in contesting such action or
requirement at the requesting party's expense. Neither party shall be liable for
damages for any disclosure or unauthorized access pursuant to legal action or
government regulations or for inadvertent disclosure, access, or use if the
customary degree of care as it uses with respect to its own proprietary or
proprietary restricted information has been exercised and if, upon discovery of
such inadvertent disclosure, access, or use the furnishing or receiving party
has endeavored to prevent any further (inadvertent or otherwise) disclosure or
use.
Except for the receiving party's obligation to keep confidential Buyer pricing
information, the obligations imposed by this Section shall survive for a period
of five (5) years after termination or expiration of this Agreement. The
obligations imposed by this Section with respect to Buyer internal pricing
information shall survive termination or expiration of this Agreement.
28. EXPORT CONTROL
The parties acknowledge that any Products, software, and technical information
(including, but not limited to, services and training) provided under this
Agreement are subject to U.S. or other applicable export laws and regulations
and any use or transfer of such Products, software, and technical information
must be authorized under those laws and regulations. The parties agree that they
will not use, distribute, transfer, or transmit the Products, software, or
technical information (even if incorporated into other products) except in
compliance with U.S. export regulations. If requested by either party, the other
party also agrees to sign written assurances and other export-related documents
as may be required for the exporting party to comply with U.S. or other
applicable export regulations.
29. ASSIGNMENT
Neither party shall assign this Agreement or any rights or obligations hereunder
without the prior written consent of the other party, which consent shall not be
unreasonably withheld, except that either party may assign this Agreement or any
rights or obligations hereunder to an entity which acquires all or substantially
all of that party's assets which relate to performance under this Agreement. Any
attempted assignment without the other party's consent shall be void and
ineffective.
30. CHOICE OF LAW
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The parties are familiar with New York commercial law, have been guided by New
York commercial law in their negotiation of this matter, and desire to avoid
uncertainty and disputes concerning the law that will govern the Agreement
between the parties. Each party conducts substantial business in the State of
New York. Accordingly, the parties expressly intend and agree that the
construction, interpretation, and performance of the Agreement and all
transactions under it shall be governed by the laws of the State of New York,
excluding its choice of law rules and excluding the Convention for the
International Sale of Goods.
31. DISPUTE RESOLUTION
Senior management of either party may, upon notice and within five (5) business
days of receipt of a notice from the other party elect to utilize a non-binding
resolution procedure whereby each presents its case before a panel consisting of
two (2) senior executives of each of the parties and, if such executives can
agree upon such an individual, a mutually acceptable neutral advisor. If a party
elects to use the procedure set forth in this Section, the other party shall
participate. The hearing shall occur no more than ten (10) business days after a
party serves notice to use the procedure set forth in this Section. If the
matter cannot be resolved by such senior executives, the neutral advisor, if one
has been agreed upon, may be asked to assist such senior executives in
evaluating the strengths and weaknesses of each party's position on the merits
of their dispute. The parties shall each bear their respective costs incurred in
connection with the procedure set forth in this Section, except that they shall
share equally the fees and expenses of the neutral advisor, if any, and the cost
of the facility for the hearing.
32. PUBLICITY; IDENTIFICATION
Any disclosure of the terms and conditions of this Agreement shall be made only
with the prior written agreement of both parties. Each party shall submit to the
other all proposed copy of advertising and publicity material relating to the
disclosure of this Agreement.
Neither Seller nor Buyer shall use any identification of, or reference to, any
code, drawing, specification, trade name, trademark, trade device, insignia,
service mark, symbol, or any abbreviation, contraction, or simulation thereof,
of the other party in any advertising or promotional efforts without such other
party's prior approval.
Notwithstanding the foregoing, Buyer gives Seller permission to list Buyer as
one of Seller's customers.
33. SEVERABILITY
If any provision or part hereof shall be held to be invalid or unenforceable for
any reason, then the meaning of such provision or part hereof shall be construed
so as to render it enforceable to the extent feasible. If no feasible
interpretation would save such provision or part hereof, it shall be severed
here from, but without in any way affecting the remainder of such provision or
any other provision contained herein, all of which shall continue in full force
and effect unless such
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severance effects such a material change as to render the Agreement
unreasonable.
34. NON-WAIVER
No course of dealing or failure of either party to strictly enforce any term,
right or condition of this Agreement shall be construed as a waiver of such
term, right or condition.
35. COMPLIANCE WITH LAWS
Each party, its agents, contractors and subcontractors shall comply in
performance under this Agreement with all applicable local, state, federal,
regional and international laws, ordinances, regulations and codes, standards,
directives and international conventions and agreements (collectively "law(s) or
Law(s)"), including, without limitation, those relating to (i) the
identification and procurement of required permits, certificates, licenses,
insurance, approvals and inspections and (ii) Product content requirements or
restrictions applicable to the sale or distribution of Products manufactured by
Seller and supplied to Buyer.
Seller shall use commercially reasonable efforts to ensure that its activities
in performance of this Agreement and an Order placed pursuant to this Agreement
shall not put Buyer in violation of any United States or applicable foreign
customs laws, statutes, or regulations. Seller agrees to assist Buyer to ensure
that Buyer can import the Product into the United States in accordance with all
United States Customs laws, statutes, and regulations, and in support of this
assistance, Seller agrees to follow Buyer's directives, if any, which may be
attached to and made part of this Agreement. When requested by Buyer, Seller
agrees to assist Buyer with importing and exporting Product between non-United
States jurisdictions.
36. RESPONSIBILITY FOR EMPLOYEES
The personnel of a party ("visiting party") shall, while on the premises of the
other party ("host party"), comply with the host party's rules and regulations
with regard to safety and security. The host party shall provide a written copy
of such rules and regulations to the personnel of the visiting party. The
visiting party shall have full control over its personnel and shall be entirely
responsible for their complying with the host party's rules and regulations. The
visiting party shall indemnify and hold the host party harmless from any claims
or demands including the costs, expenses and reasonable attorney's fees on
account thereof, that may be made by (i) anyone for injuries to persons or
damage to property resulting from the negligent or willful acts or omissions of
the visiting party's personnel; or (ii) the visiting party's personnel under
Worker's Compensation or similar laws. The visiting party shall defend the host
party against any such claim or demand.
37. ENVIRONMENTAL COMPLIANCE
Attachment F sets forth the provisions concerning compliance with the
environmental, health and safety obligations of the parties.
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38. MINORITY AND WOMEN OWNED BUSINESS ENTERPRISES
Buyer's policy is that Minority and Women-Owned Business Enterprise ("MWBE")
shall have the maximum practicable opportunity to participate in the performance
of this Agreement. Seller agrees to use its good faith efforts to award
subcontracts to carry out this policy consistent with the efficient performance
of this Agreement. Seller agrees that MWBEs will be fairly considered as
subcontractors and suppliers under this Agreement.
39. SPECIFICATIONS OR DRAWINGS
The following technical specifications and other information (a copy of each is
in Seller's possession), as changed from time to time with Seller's written
approval, are hereby made part of this Agreement.
- Quality Program Specification No. QPS 61.344 (latest issue) - SUPPLIER
MANAGEMENT OF SEMICONDUCTORS (SUPPLEMENT A FORMS PART OF THIS
SPECIFICATION)
- Quality Program Specification No. QPS 20.166 (latest issue) -
PRODUCT/PROCESS CHANGE, SUPPLIER/MANUFACTURER DISCONTINUED AVAILABILITY AND
PRODUCT ALERT NOTIFICATIONS FOR PRODUCT SUPPLIED TO LUCENT TECHNOLOGIES
In the event of a conflict between the technical specifications and other
information referred to above, and the main body of this Agreement, the main
body of this Agreement will control.
40. ATTACHMENTS
The following attachments are hereby made a part of this Agreement:
Attachment A1 - SEMICONDUCTOR PRODUCTS
Attachment A2 - OPTOELECTRONIC DEVICES
Attachment B - Minimum Purchase Order Adjustments
Attachment C - Pricing Process
Attachment D - Additional Warranty Provision
Attachment E - Sample Form Letter of Acceptance
Attachment F - Environmental, Health and Safety Obligations
Attachment G - Goals and Aspirations
41. NONBINDING GOALS AND ASPIRATIONS
The parties agree that they will each strive to attain certain mutual goals and
aspirations set forth in Attachment G ("Goals and Aspirations"). The parties
expressly agree that these Goals and Aspirations are merely a statement of
present intentions, are nonbinding, and that there will be no recourse by either
party if the other party fails to achieve any of the Goals and Aspirations.
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42. ENTIRE AGREEMENT
The terms and conditions contained in this Agreement supersede all prior oral or
written understandings between the parties and shall constitute the entire
agreement between the parties with respect to the subject matter of this
Agreement. This Agreement shall not be modified or amended except by a writing
signed by Buyer and Seller.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year above written.
LUCENT TECHNOLOGIES INC. AGERE SYSTEMS INC.
By: /s/ JOSE A. MEJIA By: /s/ JOHN T. DICKSON
---------------------- --------------------------------
Name: Jose A. Mejia Name: John T. Dickson
Title: Chief Supply Title: President and Chief Executive Officer
Date: February 1, 2001 Date: February 1, 2001
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