OEM Purchase Agreement

EXHIBIT 10.7


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CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R. (S)(S) 200.80(B)(4)
200.83 AND 240.406
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OEM PURCHASE AGREEMENT


THIS AGREEMENT ("Agreement") is entered into and made effective as of December 1, 1998, by and between AUDIOCODES, LTD., a corporation organized under the laws of the State of Israel and having its principal place of business at 4 HaHoresh Road, Yehud, 56470, Israel (hereinafter referred to as "Seller"), and CLARENT CORPORATION, a corporation organized under the laws of the State of California, USA and having its principal place of business at 700 Chesapeake Drive, Redwood City, CA 94063, USA (hereinafter referred to as "Buyer").


1. BACKGROUND AND SUMMARY OF AGREEMENT. Buyer is in the business of producing and marketing Computer systems and software designed to digitize and packetize voice and to transport such packets to a destination over an Internet Protocol (IP network). Seller manufactures and sells products related to the business of Buyer, and Buyer desires to purchase certain products from Seller for resale. Seller agrees to grant, and hereby grants, to Buyer the right to sell the products identified herein during the term of this Agreement, subject to the terms and conditions set forth in this agreement. Seller will sell such products to Buyer, subject to the terms and conditions set forth in this Agreement, to which the parties hereby agree.


2. DEFINITIONS. The following terms, in singular and/or plural form of the same term as and wherever used herein, shall have the meanings set forth in this Article.


2.1 "PRODUCTS" The list of products, software, service and supplies identified and described in the Specifications, including any and all modifications, changes and improvements made to such Products during the term of this Agreement.


2.2 "NEW PRODUCTS" Those products, software and supplies which are added to this Agreement by mutual agreement of the two parties following its execution. When such New Products are added to this Agreement (e.g., as a result of a Purchase Order placed in compliance hereto) then for purpose of this Agreement, such New Products shall be considered "Products".


2.3 "PART" Any component, subassembly or other module of the Products.


2.4 "PURCHASE ORDER" OR "ORDER" Any purchase order issued by Buyer and confirmed by Seller for the purpose of ordering Products or Parts pursuant to this Agreement.


2.5 "SELLER INTELLECTUAL PROPERTY RIGHTS" All United States and foreign patents, applications for patents, copyrights, mask works, trade secrets and other intellectual property rights relating to the design and manufacture of Products and Parts, and which are now or


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hereafter owned, controlled or possessed by Seller, including any such rights licensed to Seller by any third party.


2.6 "3RD PARTIES INTELLECTUAL PROPERTY RIGHTS" All United States and foreign patents, applications for patents, copyrights, mask works, trade secrets and other intellectual property rights relating to the design and manufacture of Products and Parts, and which are NOT now or hereafter owned, controlled or possessed by Seller.


2.7 "SELLER KNOW-HOW" All information and data of Seller (whether confidential or not) which is necessary and sufficient to manufacture, assemble, test, operate, maintain and repair Products and Parts, and which is now or hereafter owned, controlled or possessed by Seller, including all drawings, specifications, test information, software (including source and object code listings and supporting documentation), manuals, basic process steps and vendor lists.


2.8 "SELLER TECHNICAL ASSISTANCE" Assistance provided to Buyer by Seller in making use of the Seller Know-How in the manufacture, assembly, testing, operation, application, maintenance and repair of Products and Parts.


2.9 "SPECIFICATIONS" This OEM Agreement covers AudioCodes' TP-100B, TP- 200B VOIP compression board as more fully described in Exhibit A of this Agreement, the AudioCodes AVP-04 VOIP compression board and other products supplied by Seller to Buyer hereunder.


2.10 "SUBSIDIARY" (a) Any corporation, associated company or other sales or manufacturing entity in which Buyer owns or controls the majority of the outstanding capital or has the right to appoint the majority of the members of the board of directors, and (b) any authorized distributor of Buyer products. Unless the context otherwise requires, "Buyer" as and whenever used herein shall refer to either or both Buyer or any subsidiary of Buyer.


3. PURCHASE ORDERS


3.1 PLACEMENT OF PURCHASE ORDERS, FORECASTS. Seller agrees to sell Products to Buyer in accordance with the terms and conditions of this Agreement. Specific quantities of Products shall be ordered by Buyer for purchase by the placement of Purchase Orders that shall be confirmed by Seller. Buyer shall, no later than 30 days prior the end of each calendar quarter, use commercially reasonable efforts to provide to Seller a six (6) month rolling forecast of specific quantities of Products that Buyer intends to order during each month during the forecast period. No such forecast shall be binding on Buyer, such binding obligations only to be in the form of confirmed Purchase Orders submitted by Buyer to Seller. In the event of any discrepancy between the terms of any confirmed Purchase Order and this Agreement, the terms of the confirmed order shall govern.


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3.2 ACCEPTANCE OR REJECTION OF PURCHASE ORDERS. Seller agrees to accept or reject in writing (such writings to include faxes and messages transmitted by electronic mail), within [***] business days of receipt by Seller Purchase Orders placed by Buyer in conformance with the terms of this Agreement. If no such written confirmation or rejection is received by Buyer during such [***] day period, it shall be deemed as if not accepted by Seller. All Purchase Orders shall specify as a minimum the following information: (i) the Product name (ii) the software revision number (iii) number of Product units (iv) targeted delivery date.


3.3 CANCELLATION OF PURCHASE ORDERS. Buyer may cancel confirmed Purchase Order or portion thereof up to a total of [***] of the Product units, on all outstanding Purchase Orders, (i) without charge or penalty [***] or more days prior to the scheduled delivery date of that Purchase Order, or (ii) upon payment of a charge equal to [***] of the invoice price of the canceled Products if more than [***] days and less then [***] days prior to the scheduled delivery date of that Purchase Order. Buyer may not cancel any Purchase Order or portion thereof less than [***] days prior to the scheduled delivery date of that Order, except as may be specifically set forth elsewhere. Buyer may terminate any Purchase Order in whole or in part upon written notice to Seller, without incurring any liability or cost, in the event that any Product (including software or peripherals for such Product) covered by such Purchase Order is delayed as to delivery for thirty (30) days or more beyond the scheduled delivery timetable at the time the Purchase Order is placed except if such delay is caused by conditions that are beyond the control of Seller and in such event the thirty day period shall be extended by an additional period not to exceed 30 additional days, or in the event the scheduled release of software or upgrades for such product, as published by Seller, is delayed by ninety (90) days or more.


3.4 RESCHEDULING OF PRODUCTS. Buyer may increase the quantity of Products ordered under any Purchase Order by [***], provided notice of such increase is given to Seller at least [***] days prior to the scheduled delivery date. Buyer may defer all or part of the Products ordered under any Purchase Order for as long as [***] days beyond the scheduled delivery date, provided notice of such deferral is given to Seller at least [***] days prior to the scheduled delivery date and provided that the total number of Product units on all outstanding Purchase Orders, requested for reschedule is less than [***] of the total umber of units. If Products rescheduled under this Paragraph 3.4 are subsequently canceled, cancellation charges provided for in Paragraph 3.3 above shall be based on the original scheduled delivery date.


3.5 LIMITED SUPPLY; OTHER SOURCES. If Seller is unable to completely fill
- Buyer's Purchase Order due to limited supply of Products, or for any other reason, Seller shall give Buyer's Purchase Order "most-favored customer status" (i.e., provide Buyer with a percentage of its Purchase Order no lower than that provided any other customer of Seller).


4. PRICES


4.1 PRODUCT AND PART PRICES. The price for Products purchased hereunder shall be as agreed to by the parties in writing and specified in a given Purchase Order or other document.


______________ [***] The designated material has been omitted pursuant to an application for
confidential treatment and the omitted information has been filed
separately with the Securities and Exchange Commission.


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Guidelines for such prices are contained in Exhibit B hereto. Seller further confirms that the prices to be provided for products purchased hereunder shall be at least as favorable as those offered to any other customer of Seller purchasing the same products according to similar terms and equivalent or lesser quantities. In the event that Seller makes more favorable prices available to another customer as aforesaid, Seller agrees to (i) promptly notify Buyer of such offer and (ii) at Buyer's request, apply such prices to any and all outstanding but undelivered Purchase Orders for Products.


5. LEAD TIME, SHIPMENT AND PAYMENT


5.1 LEAD TIME FOR PRODUCTS. Buyer will use commercially reasonable efforts to place Purchase Orders for Products of quantities not exceeding [***] units and not less than [***] units in any calendar month, thirty (30) days in advance of the required delivery date thereof, unless a shorter Lead Time is mutually agreed to as to Products covered under specific Purchase Orders. Purchase Orders for Products of quantities exceeding [***] units shall be placed by Buyer sixty (60) days in advance of the required delivery date.


5.2 SHIPMENT. All Products purchased and shipped under this Agreement shall be FOB Seller's factory (EX Works). The products will be shipped, at Buyer's expense, to Buyer's customer's destination or to a Buyer location, each as specified by Buyer, so as to be received, allowing for normal transit times, in accordance with the delivery schedule specified on the corresponding Purchase Order. It is agreed that Seller shall not be responsible for any delays in shipping the Products and its only obligations shall be to provide the Products for shipment on the agreed upon date. If Shipment is late due to Seller's fault (more than 10 days) , Seller shall ship by air freight or other mode specified by Buyer, at Seller's expense. Seller shall provide all documentation necessary to accomplish shipment to such designated locations. Buyer shall be responsible for all shipping expenses and fees, including import fees, duties or taxes incurred in obtaining Products from Seller and shipping the same and the parties shall provide reasonable documentation and assistance to each other in order to accomplish shipment and receipt of Products. Buyer shall utilize its export licenses for purposes of exporting the Products outside the United States. Buyer agrees to acquire and comply with all necessary export licenses from the United States Department of Commerce.


5.3 MODE OF SHIPMENT. The mode of shipment shall in each instance be by surface transportation unless otherwise specified by Buyer on the Purchase Order. In the absence of specific instructions, Seller will select the surface carrier for shipment.


5.4 RISK OF LOSS. Risk of loss and damage shall pass from Seller to Buyer upon delivery by Seller to the common carrier or to Buyer's representative at the FOB point described in Paragraph 5.2 above, and all claims for damage thereafter shall be filed by Buyer directly with the carrier.


______________ [***] The designated material has been omitted pursuant to an application for
confidential treatment and the omitted information has been filed
separately with the Securities and Exchange Commission.


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5.5 PACKAGING. All Products shall be packed by Seller in accordance with Seller's packaging procedure, as well as other requirements set forth in the Specifications. Each box shall contain Products ordered under a single Purchase Order, but multiple boxes may be placed in a larger container.


5.6 INSURANCE. Buyer shall have the responsibility to pay for insurance against all risks as of the date of delivery of the Products or the date of the shipment of the Products, as the case may be. However, at the request of Buyer, Seller shall make arrangements for purchase of insurance or supply required information, as Buyer may direct, to either Buyer or to Buyer's insurance carrier so as to ensure that Buyer will have timely information to effect insurance coverage.


5.7 PAYMENT. It is understood and agreed that the terms of payment for all Products purchased under this Agreement shall, be net [***] days from the date of invoice, or as otherwise agreed to by the parties for a given Purchase Order


5.8 TITLE. Title of any of the Products not transferred to Buyer's customers under a bonafide purchase order issued by such customer to Buyer shall be retained by Seller until full payment of any order is completed and only upon full payment as aforesaid shall the title to the Products be transferred to the Buyer.


6. TAXES


6.1 TAXES NOT INCLUDED. Product and Part prices as provided for in this Agreement are exclusive of all applicable federal, state or local sales, use, property, excise or similar taxes that may be levied upon Seller as a result of sale or delivery of any Product sold under this Agreement. All such taxes shall be assumed and paid by Buyer. If a resale certificate or other such document of exemption is required in order to exempt the sale of Products from any such taxes, Buyer shall furnish Seller, at Seller's request, with such a certificate or document prior to shipment by Seller.


7. PROGRAM MANAGERS, PRODUCT QUALIFICATION AND ACCEPTANCE PROCEDURE AND
QUALITY ASSURANCE


7.1 APPOINTMENT OF PROGRAM MANAGERS. Each party shall designate a Program Manager who shall be responsible for all communications with the other party, including those relating to product qualification under Article 8 and inspection, testing and quality control procedures under Article 9.


7.2 ESTABLISHING PRODUCT VERIFICATION TEST (PVT) PROCEDURE. At least sixty (60) days prior (or other such date as may be mutually agreed) to the first scheduled shipment to Buyer of any New Products, Seller and Buyer shall confer, through their respective Program Managers, and agree on a Product Verification Test (PVT) Procedure. Such PVT Procedure


______________ [***] The designated material has been omitted pursuant to an application for
confidential treatment and the omitted information has been filed
separately with the Securities and Exchange Commission.


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shall establish the procedures for qualification testing (Paragraph 8.1), ongoing inspection and testing (Paragraph 9.1), acceptance, inspection and testing (Paragraph 9.2) and facility surveys (Paragraph 9.3). Buyer and Seller agree that the PVT procedure may be accomplished pursuant to the Development Agreement entered into by them.


7.3 QUALITY ASSURANCE. Seller shall implement and maintain such quality assurance standards as are reasonably feasible to produce and deliver to Buyer Products that are defect-free, as well as to meet any other quality and reliability standards agreed to between the parties.


8. PRODUCT QUALIFICATION


8.1 QUALIFICATION TESTING. Qualification testing of any New Products manufactured by Seller for sale to Buyer shall be conducted and completed prior to the first scheduled shipment of New Products to Buyer. Seller shall make available 3-5 units of such New Products to Buyer for such testing at no additional charge to Buyer. Such testing shall occur, at the option of Buyer, either at Seller's facility or on the premises of Buyer and shall be at the expense of the party on whose premises the testing is conducted. Qualification testing shall determine the acceptability of the New Product in accordance with the Specifications, and shall be conducted in accordance with the PVT Procedure. Upon written agreement of Seller and Buyer that the qualification tests have been successfully completed, the initial deliveries of production units of the New Product shall commence in accordance with the scheduled shipment established by issued Purchase Orders.


8.2 QUALIFICATION TESTING OF NEW SOFTWARE RELEASES. Seller shall provide to Buyer any new releases of software produced by Seller no later than immediately following the first customer availability of such software (FCA).


9. INSPECTION, ACCEPTANCE TESTING AND QUALITY CONTROL STANDARDS


9.1 ONGOING INSPECTION AND TESTING. Notwithstanding the successful completion of qualification testing under Article 8, all Products shall be subject, at either Seller's facility or at Buyer's premises, to further inspection, acceptance testing and review for conformance to ongoing quality control standards as may be established in the Specifications, PVT Procedure and other standard industry practices and procedures.


9.2 ACCEPTANCE INSPECTION AND ACCEPTANCE TESTING. All Products shall be subject to acceptance inspection and testing by Buyer, at Buyer's election, on Buyer's premises, or at a location selected by Buyer (including the premises of any customer of Buyer). The inspection and testing shall be in accordance with the PVT Procedure and other quality control procedures and tests agreed upon by the parties at such times as Buyer shall determine. Any of the Products delivered to Buyer shall be deemed accepted if not rejected by Seller during a 15 day period, due to non conformity with the ongoing quality control standards as may be established in the Specifications or PVT Procedure.


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9.3 FACILITY SURVEYS. Buyer reserves the right to review, during regular business hours and following reasonable notice to Seller, Seller's physical facilities and Seller's quality control procedures, both prior to first Product deliveries and periodical ...