License & Supply Agreement

AVANEX CORPORATION

LICENSE AND SUPPLY AGREEMENT



This License and Supply Agreement (the "Agreement") is made and entered into by and between Avanex Corporation, a California corporation wi th principal offices at 42501 Albrae Street, Fremont, California 94538 ("Avanex"), and Concord Micro-Optics, Inc. a California corporation with principal offices at _____________________________ ("CMI"). The parties hereby agree as follows:



1. Sco pe. In order to avoid repetitive negotiations, this Agreement shall apply to all purchase orders placed by Avanex and accepted by CMI (or the JV Co., as defined below) during the Term (as defined below) for the Products described in Exhibit A attached her e to ("Product(s)"), as such Exhibit may be amended from time to time to add products upon the mutual agreement of the parties. This Agreement shall apply to all current or future divisions, subsidiaries, affiliates, locations and operations of Avanex, wher e ver located. It is acknowledged and agreed by the parties that as soon as practicable after the execution of this Agreement, CMI will establish and control a Sino-foreign joint venture company in Tianjin, China (the "JV Co.") organized under the laws of t h e People's Republic of China ("PRC") and that CMI shall, within ten (10) days of the establishment of the JVCo, cause the JV Co. to execute, and its board of directors to ratify, the Acknowledgment and Agreement, in the form set out in Exhibit B attached hereto, pursuant to which the JV Co. shall become a party hereto. CMI and the JV Co. shall be jointly and severally liable for all obligations of CMI contained herein.



2. Term. The term of this Agreement shall commence upon execution of this Agreem ent by Avanex and CMI (the "Effective Date") and shall continue for [*](the "Initial Term"). Subject to a maximum aggregate of [*]), this Agreement shall be automatically renewed for additional [*] (the "Extended Term") unless either party gives written n o tice of termination at least [*] before the end of the Initial Term or any [*] thereof or unless sooner terminated in accordance with the provisions hereof (collectively the "Extended Term"). "Term" shall mean the Initial Term and the Extended Term, if ap plicable.



3. Terms and Conditions.



(a) This Agreement contains the exclusive terms and conditions which apply to all purchases, notwithstanding any purchase order, acknowledgment or other business forms transmitted by CMI, the JV C o. or Avanex. All CMI and JV Co. acknowledgments and invoices must reference this Agreement and the applicable Avanex purchase order.



(b) This Agreement does not constitute a purchase order. Purchases hereunder shall be made only by Avanex 's purchase orders issued by Avanex's purchasing department. Avanex shall be liable under this Agreement only for those Products covered by such purchase orders. [*]



4. Products and Prices.









- ---------- * Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions.

(a) The Products covered by this Agreement and the prices for such Products are as specified in Exhibit A. Prices are set forth in United States Dollars.



(b) CMI represents that to the best of its knowledge this Agreement does not violate provisions of the Robinson-Patman Act.



(c) [*]



(d) The prices set forth in Exhibit A are inclusive of any and all applicable taxes including any PRC and U.S. federal, state and local VAT sales, use and like taxes and any such applicable taxes shall be detailed on CMI's invoice. If Avanex complies with the U.S. statutory resa le tax certificate requirements of states where appropriate, no sales, use or like taxes shall be included in the price.



(e) The parties agree that any new or modified Products will be priced based upon assumed volumes and complexity factors employed in the pricing model of that Product that most closely resembles the new or modified Products to be priced.



5. F.O.B. Point. Unless otherwise specifically provided on the face of the purchase order, Products shall be delivered on an F.O .B. destination basis to the Avanex's designated plant in Fremont, California, at which time title shall pass to Avanex. CMI shall insure and ship such items at Avanex's expense. Orders which are to be drop shipped to Avanex's customers will be designated on the purchase order as F.O.B. CMI, at CMI's manufacturing facility. Avanex will specify carrier, insurer and freight terms.



6. Invoices.



(a) Upon shipment of Products ordered, CMI will submit to Avanex an invoice showing invoice number and date, remit to address, the purchase order number, Avanex part number and revision, quantity of each Product, unit prices, each applicable tax and extended totals.



(b) Avanex shall pay each invoice by the later of:



(i) Payment Due Date which is defined as thirty (30) days after the receipt of invoice, or



(ii) thirty (30) days after receipt of the shipment.



7. Ordering and Delivery.



(a) Avanex shall provi de CMI with a non-binding rolling [*] forecast on a [*] basis of the quantity of each Product desired. Actual Avanex orders shall be submitted by telecopier or in writing on Avanex's standard purchase order form and shall









- ---------- * Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions.

specify the purchase order number, Avanex part number for each Product, quantity of Product desired, the locations to which the Product is to be delivered, and the date or dates desired for delivery of the ordered Product to such locations.



(b) CMI agrees to accept each order for the full quantity of Product ordered. After receipt of a n order from Avanex, CMI shall notify Avanex within seventy-two (72) hours if CMI cannot meet the desired delivery date(s) and will propose alternative delivery date(s). If, within seven (7) business days after notification of any proposed alternative del i very date(s), Avanex does not notify CMI of Avanex's rejection of CMI's alternative delivery date(s), or otherwise reach agreement with CMI on the agreed delivery date, then the order shall be considered confirmed with the alternative delivery date(s) bec o ming the agreed delivery date. CMI's failure to so notify Avanex shall constitute CMI's agreement to Avanex's desired delivery date(s), which will then become the agreed delivery date. CMI shall send Avanex a formal written acknowledgment of each Avanex p u rchase order within five (5) business days. All delivery dates and the terms "deliver" and "delivery" as used herein, shall refer to delivery to Avanex's designated plant in Fremont, California, or in the instance of any order to be drop shipped to Avanex 's customer, delivery by CMI to the freight carrier specified in such order, or if no carrier is specified, to the carrier selected by CMI.



(c) Notwithstanding anything set forth above to the contrary, all Avanex requested delivery dates pr oviding the minimum number of business days lead time specified in Exhibit A of this Agreement for a Product (the "Lead Time") shall be the Agreed delivery date. The Lead Time set forth on Exhibit A may be adjusted by CMI: (i) upon thirty (30) days writte n notice with respect to increases in Lead Times; or immediately upon written notice to Avanex with respect to decreases in Lead Times. CMI agrees to use its best efforts to minimize the Lead Times set forth on Exhibit A.



(d) CMI shall meet the agreed delivery dates and understands that time is of the essence with respect to its performance of its obligations hereunder. CMI agrees that its obligations to use its best efforts include an obligation to diligently monitor its performance agains t its delivery obligations hereunder and agrees that any failure to perform such monitoring obligations shall constitute a material default of this Agreement.



(e) CMI agrees to maintain safety stock of component parts for the quantities of Products set forth on Exhibit C hereto as amended by Avanex from time to time by written notice to CMI.



(f) Certain long lead time components (the "Long Lead Components") are set forth on Exhibit D. Avanex shall update Exhibit D from time to time by written notice to CMI. CMI agrees to use Avanex's forecast of Products volumes and its material planning system to calculate the quantities of such Long Lead Components which should be ordered in advance of Avanex's issuance of a purchase order for Products hereunder in order for CMI to meet the Lead Times set forth on Exhibit A. CMI shall prepare a report setting forth the quantities of such Long Lead Components which must be ordered, the quantities already on order in advance of Avanex's issua nce of purchase orders.



8. Avanex Requested Changes.



(a) Avanex may, at any time, make changes in writing to any of the following:



(i) applicable drawings, designs or specifications,



(ii) method of shipment or packing, and









(iii) place of delivery.



If the change causes an increase in the cost or the time required by CMI for performance of any purchase order issued under this Agreement and CMI so notifies A vanex in writing, then if Avanex wishes such change to be made, an equitable adjustment will be made in the price or delivery schedule or both and the Agreement and/or any applicable purchase order will be modified accordingly in writing. With respect to r ework orders, the parties shall negotiate in good faith to determine the price of such changes. Claims by CMI for adjustment due to an Avanex change order must be made within fifteen (15) days from the date of CMI's receipt of the change order; such perio d may be extended upon the written approval of Avanex.



(a) If Avanex decides to cancel any definitive purchase order, Avanex must give CMI forty-five (45) days' notice before CMI's committed delivery date. If the time period remaining betwe en the then current date and CMI's committed delivery date for a Product is less than forty-five (45) days, Avanex must pay CMI [*] of the canceled amount.



(b) If the time period remaining between the then current date and CMI's committed delivery date for a Product is more than forty-five (45) days, then Avanex may with respect to each purchase order and at no charge make any changes to delivery dates and unit quantities for such Product.



9. Over Shipments. Avanex will pay only for maximum quantities ordered, unless Avanex has issued a change order authorizing an over shipment prior to such delivery by CMI.



10. Early Shipments and Late Shipments. For Products delivered five (5) or more days before or seven (7) or more days after the agreed delivery date, Avanex may:



(a) Return such Products to CMI (or to the JV Co., as the case may be) freight collect,



(b) Accept such Products with payment based upon the agreed delivery date and not the date of receipt by Avanex, or



(c) In the event of late shipments, charge CMI (or the JV Co., as the case may be) a late delivery fee equal to [*] of the agreed delivery amount for each full week of delay.



11. Modifications to Agreed Delivery Dates. CMI shall at all times use its best efforts to deliver the unit quantity of Products to be delivered to Avanex on the agreed delivery date. If, after employing such best efforts, CMI first determines that it will be unable to deliver the u n it quantity of Products to be delivered to Avanex on the Agreed delivery date, then CMI shall notify Avanex within twenty-four hours of such determination, and the parties will negotiate in good faith new agreed delivery date, predicated on CMI's continue d use of such best efforts, for such Product(s). Any partial deliveries resulting from such re-scheduling shall be separately invoiced by CMI and paid for by Avanex without regard to subsequent deliveries.



12. [*]









- ---------- * Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions.

13. Packing, Shipping Documents and Markings.



(a) Shipping materials and practices must meet or exceed general industry standards and must be adequate to protect the Products from damage, contamination, or degradation during shipment and during unpacking at the destination. Electrostatic Discharge (ESD) protection must extend to intermediate container level. Intermediate containers shall contain no loose packing materials or Styrofoam.



(b) Shipments of Product having multiple date codes at the intermediate container level must have the unit containers organized to afford easy identification and separation, Therefore:



(i) unit containers may not contain mixed date

codes;



(ii) intermediate containers may not contain more

than two (2) date codes; and



(iii) shipments may not contain more than five (5)

date codes.



(c) Intermediate containers shall be marked with a label on the end listing:



(i) CMI's name, part number, part description;



(ii) total quantity of Product in the container, date

code(s) by quantity; and



(iii) Avanex's part number and purchase order number



(d) The maximum acceptable weight for the shipping container is 45 pounds. Skids or pallets must be used with containers that are unsuitable for manual handling.



14. Acceptance and Quality.



(a) Avanex may inspect the Products, materials and components held by JV Co. for Avanex at JV Co.'s facilities during JV Co.'s regular business hours. Avanex and its representatives shall observe all reasonable security and h andling measures of the JV Co. while on JV Co.'s premises.









(b) CMI covenants to Avanex that Products sold to Avanex will meet or exceed Avanex's product qualification requirements. Subject to the provisions of Section 14(f) below, CMI w ill provide the following types of quality inspections in accordance with its own published manual and, when applicable, Avanex provided specifications, drawings and other such documentation:



(i) incoming material inspections;



(ii) in-process inspections;



(iii) vendor control; and



(iv) final inspection.



(c) CMI may not make parts substitutions without the prior written approval of Avanex. CMI shall direct all such requests for parts substitutions to Avanex's Contract Administrator, as set forth below.



(d) Avanex may inspect, and based upon the results of such inspection, reject or accept Products delivered hereunde r in a reasonable period of time. Any Products rejected shall be returned to CMI (or JV Co.) upon Avanex's receipt of a return materials authorization ("RMA") for such return. CMI shall issue RMA numbers within two (2) business days. Avanex shall return P r oducts in the original shipping container, if possible; otherwise Avanex shall use a similar shipping container and such container shall be marked with the RMA number. CMI shall repair or replace such rejected Products within five (5) business days. With respect to Products to be repaired or replaced, the date determined in the prior sentence shall be deemed an Agreed Delivery Date for purposes of this Agreement, subject to modification in accordance with Section 11 hereof.



(e) Personnel de signated by Avanex may freely communicate with designated personnel of CMI (or JV Co.) with respect to technical assistance and exchanges of information. Avanex's designated personnel shall, as reasonable, provide technical assistance and answer questions for JV Co. personnel from time to time, provided, however, that such communication shall not permit CMI to deviate from any of its obligations under this Agreement.



15. End of Term Orders. Purchase orders placed by Avanex prior to the termination of this Agreement for which the Agreed delivery date are after the termination of this Agreement but not more than sixty (60) days after the end of this Agreement shall continue to be governed by the terms and conditions of the Agreement.



16. [Intentionally Omitted]



17. [Intentionally Omitted]



18. Risk of Loss or Damage. CMI shall be responsible for any loss or damage to Product due to CMI's failure to properly preserve, package, or handle the Product. In addition, notwithstanding any prior inspection, and only with respect to Products delivered to Avanex's designated plant in Fremont, California: (i) CMI will bear all risk of loss, damage or destruction to the ordered Products until delivery to Avanex; and (ii) CMI will also bear the risk of loss with respect to any Products rejected by Avanex and returned to CMI, except that Avanex will be responsible for any damage to rejected or unaccepted Product occasioned by the willful misconduct or negligence of its employees acting within the scope of their employment.



19. Import/Export and Product Licenses.









(a) CMI shall provide all information under its control which is necessary or useful for Avanex to obtain any export or import licenses required for Avanex to ship or receive Product(s), including, but not limited to, U.S. customs certificates of delivery, affidavits of origin, and U.S. Federal Communications Commissions identifier, if applicable.



(b) With respect to Product(s), each party shall comply with export laws enacted by its respective government, and the regulations thereunder.



(c) CMI shall be solely responsible for obtaining any and all licenses required for production of Products in China, and CMI covenants to use its best efforts to obtain such licenses in a prompt manner. CMI shall be responsible for submitting executed versions of this Agreement to the relevant government authorities in the PRC for approval under the Regulations of the People's Republic of Chin a for the Administration of Technology Import Contracts and for registration under the Provisional Measures for the Administration of Trade in Connection with the Import of Technology and Equipment. CMI shall promptly deliver to Avanex satisfactory evidenc e that the approval and registration have been obtained.



20. New Process Inclusion. CMI agrees to keep Avanex informed of any new process(es) or improvements to existing process(es) involved in the production of Products.



21. Qualification . CMI shall ensure that all Products delivered hereunder meet Avanex's Product and test specifications as set forth in Exhibit E and the Bellcore standard, as applicable. CMI shall ensure that the JV Co. shall receive ISO 9002 certification within [*] mon ths of its establishment, but in no event later than [*]. CMI shall also ensure that the JV Co. complies with all PRC law in its operations including, without limitation, the Labor Law of the PRC and other employment regulations.



22. Correlation. A t Avanex's option, correlation of test programs/procedures between Avanex and CMI shall be completed prior to Avanex's first customer shipment ("FCS") of an Avanex product containing Product. In the event of a conflict between test results, Avanex's test method, programs and analysis shall prevail. Details and specific procedures of the correlation plan between Avanex and CMI will be as mutually defined and agreed to by the parties.



23. Programs and Services. It is the intention of the parties hereto to negotiate in good faith and to enter into an agreement for the programs and services described hereunder.



(a) Avanex wishes to develop with CMI a Dock to Stock Program. Such program shall be designed to supply Avanex with Products that meets established quality levels and to eliminate incoming inspection.



(b) Avanex wishes to develop with CMI a Just In Time delivery program ("JIT"). The JIT shall be designed to supply Avanex with the Products at the time at which Avan ex requires such Products so as to reduce the inventory which Avanex and/or CMI are required to retain in order to meet Avanex's Products needs.



24. CMI's Communication and Report to Avanex. CMI shall establish an information infrastructure that a llows Avanex freely assess the JV Co's cost, production and inventory information via electronic data exchange as soon as CMI commences production for Avanex. CMI shall prepare and deliver to Avanex a Quarterly Report containing the following information for each Product by ordering location:



(a) Product;



(b) quantity ordered during the quarter;









- ---------- * Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions.

(c) total quantity shipped;



(d) date of each shipment with quantity, dollar amount, ship to; and



(e) quantity on back order.



Such Quarterly Reports shall be delivered to Avanex within thirty (30) days after the end of each calendar quarter during the term of this Agreement.



25. Transfer of Information. In connection with this Agreement, Avanex shall provide CMI with information necessary to produce the Products. Such information transfer shall take place in the manner set forth in Exhibit F attached hereto. CMI acknowledges that all information to be transferred to it by Avanex pursuant to this Section 25 is Proprietary and Confidential Information (as defined below) of Avanex subject to the obligations of Confidentiality in Section 26.



26. Confidential Information.



(a) CMI acknowledges that information which Avanex may disclose to CMI (or JV Co.) in a tangible fo rm marked "Confidential," "Proprietary" (or with similar legend), or that is disclosed orally and confirmed in writing as confidential w ...