Broadband Technologies Oem Supply Agreement

EXHIBIT 10.7


**-Certain information omitted and filed separately with the Commission pursuant
to a confidential treatment request under Rule 24b-2 of the Commission.


BROADBAND TECHNOLOGIES OEM SUPPLY AGREEMENT


LUCENT TECHNOLOGIES INC. BROADBAND TECHNOLOGIES, INC. 600 MOUNTAIN AVENUE 4024 STIRRUP DRIVE MURRAY, HILL, NEW JERSEY 07974 DURHAM, NC 27709-3737


BROADBAND TECHNOLOGIES OEM SUPPLY AGREEMENT


LUCENT TECHNOLOGIES INC. BROADBAND TECHNOLOGIES, INC. 600 Mountain Avenue 4024 Stirrup Drive Murray, Hill, New Jersey 07974 Durham, NC 27709-3737


This Agreement, which is effective as of February 4, 1998 (the "Effective Date") is by and between Lucent Technologies Inc. ("Company") and BroadBand Technologies, Inc., ("Supplier") (collectively the "Parties").


WHEREAS, Company wishes to purchase certain Material of Supplier's manufacture for resale to Company's customers and upon completion of certain research and development work, Company may supplement the list of Material subject to this Agreement; and


WHEREAS, Company may provide Company proprietary information and technology to Supplier to enable the design and manufacture of the Materials; and


WHEREAS, Supplier desires to produce and sell such Materials to Company for Company's use, including resale to Company's customers.


NOW THEREFORE, the Parties agree as follows:


1. Introduction


1.1 ATTACHMENTS - The following Attachments are hereby made part of this Agreement:


Attachment 1 Definitions
Attachment 2 Engineering Change Control Procedures


1.2 DEFINITIONS - The terms set out in Attachment 1 which are used in capitalized form in this Agreement, whether in the singular and/or plural form, shall have the meanings set forth in Attachment 1. Additionally, any term defined in the body of this Agreement, which appears in capitalized form, and whether in the singular and/or plural form, shall have the meaning so set out in this Agreement


1.3 EFFECTIVE PERIOD OF AGREEMENT - The term of this Agreement shall commence on the Effective Date and shall, except as otherwise provided in this Agreement, continue in effect for five (5) years.


1.4 MATERIAL - Material is hereby offered for sale by Supplier and may be purchased by Company in accordance with the terms and conditions stated in this


Agreement. This Agreement is a non-commitment agreement and Material shall be furnished by Supplier on an as-ordered basis. The Parties will from time to time identify Material to be sold under this Agreement in Product Letters, which shall identify the Materials, specifications, prices and discounts, packing and labeling requirements, forecast commitment periods and other specific terms regarding the product or component involved. A Product Letter shall not be effective until it is agreed to in writing by both Parties. In the event of a conflict between the terms of a Product Letter and the terms of this Agreement, the terms of the Product Letter shall govern.


1.5 SPECIFICATIONS OR DRAWINGS - The technical specifications set out in Product Letters (referred to herein as "Technical Specifications" or "Specifications") shall govern the Material to be purchased pursuant to this Agreement.


(a) In accordance with the notification requirements outlined in Section 11.12, Supplier shall provide Company with at least thirty (30) days prior written notice of any change affecting conformance with the Technical Specifications proposed to be made by Supplier in the Material furnished pursuant to said Technical Specification under this Agreement. Company shall have a reasonable period of time to determine if the Material that will incorporate the changed specifications will comply with the original specifications for the ordered Material.


(b) If Company, in its sole discretion, does not agree to the change proposed by Supplier, then in addition to all other rights and remedies at law or equity or otherwise, and without any cost to or liability or obligation of Company, Company shall have the right to terminate any or all purchase orders for Material affected by such change.


1.6 DISCONTINUANCE
(a) Supplier shall continue to supply Material to Company pursuant to the Technical Specification for the term of the Agreement and for one year after the expiration of this Agreement. If Supplier is unable to continue to thus supply or discontinues manufacture of Material, Company shall be entitled to one year's advance notice and Company shall have the following options: (i) Company may enter into good faith discussions with Supplier concerning continued supply of Material, which discussions may include identification of any possible purchaser of the product line from Supplier so that Company can pursue continued supply from any such purchaser; (ii) the opportunity for Company to offer to purchase the product line in the event Supplier seeks to sell; and/or (iii) the opportunity for Company to place an end of life purchase order for the discontinued Material, which Supplier will accept during the notice period. "Discontinuance" includes, but is not limited to, changes in the Form, Fit or Function of the Material. Supplier will accept delivery schedules for such Material extending up to six months after such end of life purchase order has been submitted.


(b) Supplier shall offer for sale to Company during the term of this Agreement and until 5 years after the earlier of discontinuance of the relevant Material or of expiration or termination of this Agreement, maintenance, replacement and repair parts


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("Parts") which are functionally equivalent and identical in Form, Fit and Function to the Material covered by this Agreement. The price for the Material and Parts shall be the price set forth in Supplier's then current agreement with Company for said Material or Parts or, if no such agreement exists, a price agreed upon by Company and Supplier. If the Parties fail to agree on a price, the price shall be a reasonably competitive price for said Material or Parts at the time for delivery. The Material and Parts shall be warranted as set forth in Section 4.1.


2. Orders and Payment


2.1 INVOICING FOR GOODS - Supplier shall: (1) render an original invoice, or as otherwise specified in this Agreement, which shows the order number, through routing and weight; (2) render separate invoices for each shipment within twenty-four (24) hours after shipment; and (3) mail invoices with copies of bills of lading and shipping notices to the address shown on this Agreement or the order. If prepayment of transportation charges is authorized, Supplier shall include the transportation charges from the FOB point to the destination as a separate item on the invoice stating the name of the carrier used.


2.2 MARKING - All material furnished under this Agreement shall be marked for identification purposes in accordance with the Specifications set forth in this Agreement and as follows:


(a) with Supplier model/serial number; and
(b) with month and year of manufacture.


In addition, Supplier shall add any other identification which might be requested by Company such as but not limited to indicia conforming to Company's serialization Plan. Charges, if any, for such additional identification marking shall be as agreed upon by Supplier and Company. This Section does not reduce or modify Supplier's obligations under Section 11.6.


2.3 PACKING, LABELING AND SERIALIZATION - Material purchased, repaired, replaced or refurbished under this Agreement shall be packed, labeled and serialized by Supplier at no additional charge in accordance with Product Letters .


2.4 PAYMENT TERMS - Payment shall be net 30 days from the later of the date of delivery or the date of invoicing for the Material by Company.


2.5 PRICE AND DISCOUNTS - Prices and discounts for Material are set forth in the applicable Product Letters and they shall remain in effect during the term of this Agreement or for the period specified in the applicable Product Letters.


2.6 FORECASTS - Company shall provide Supplier with six (6) month rolling forecasts of Material it believes it will purchase from Supplier. However, said forecasts


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are only provided to assist Supplier in planning its manufacturing activities and they do not commit or bind Company to purchase or the Supplier to supply any Materials, or any quantity of Materials. A forecast only becomes binding upon the Parties when a Purchase Order, as set forth below, is forwarded by Company to Supplier and Supplier duly accepts it and the agreed upon delivery schedule for such Purchase Order is within ninety (90) days, except that such 90-day forecast commitment period may be altered by mutual agreement of the Parties for particular Material described in Product Letters. At such time, any changes to the volume of Materials committed to by the Parties shall be governed by Sections 2.7, 2.8 and 2.9 below.


2.7 PURCHASE ORDERS - Purchase orders issued under this Agreement shall be sent to the following address:


BroadBand Technologies, Inc.
P.O. Box 13737
4024 Stirrup Drive
Durham, North Carolina 27709-3737
ATTN: Customer Logistics Department


This Agreement shall incorporate the typed or written provisions on Company's orders issued pursuant to this Agreement. Printed provisions on Company's orders (except as specified otherwise in this Agreement), boilerplate provisions in electronic orders and all provisions on Supplier's forms shall be deemed deleted. Estimates or forecasts furnished by Company shall not constitute commitments, except as otherwise set forth in this Agreement.


Purchase orders shall specify: (a) description of Material, inclusive of any numerical/alphabetical identification referenced in the price list in this Agreement, (b) delivery date, (c) applicable price, (d) location to which the Material is to be shipped and (e) location to which invoices shall be sent for payment.


Orders consistent with the Company forecast and requesting delivery more than ninety (90) days (or the alternate forecast commitment period specified for particular Material in the applicable Product Letter) from the date the order is received by Supplier will be accepted or rejected by Supplier in writing within five (5) business days from receipt of the order. Orders requesting delivery in less than ninety days and which exceed the forecast shall be deemed accepted unless Supplier provides written notice to the contrary within ten (10) business days from receipt of the order.


Company may at any time subsequent to the issuance of a purchase order under this Agreement change the purchase order quantity at no charge in accordance with the schedule below:


Number of Days Prior to Allowable Increase/Decrease
Scheduled Shipment Date (% of P.O. Quantity)


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0-90 (or 0-alternate forecast 0% 0%
commitment period)


91-greater (or alternate forecast 100% 100%
commitment period-greater)


Company will make reasonable efforts to provide forecasts and purchase orders for Material that avoid sharp increases or decreases in production.


2.8 SHIPPING - Supplier shall: (1) ship the Material covered by this Agreement or order complete unless instructed otherwise; (2) ship to the destination designated in the Agreement or order; (3) ship according to routing instructions given by Company; (4) refer to this Agreement and the order number on all subordinate documents; (5) enclose a packing memorandum with each shipment and, when more than one package is shipped, identify the package containing the memorandum; and (6) mark the Agreement and order number on all packages and shipping papers. Adequate protective packing shall be furnished at no additional charge. Shipping and routing instructions may be furnished or altered by Company without a writing. All deliveries will be FOB Supplier's factory. If Supplier does not comply with Company's written shipping or routing instructions, Supplier authorizes Company to deduct from any invoice of Supplier (or to charge back to Supplier), any increased costs incurred by Company as a result of Supplier's noncompliance.


2.9 SHIPPING INTERVAL - The delivery schedule applicable to each purchase order will be set forth in the purchase order.


If Supplier does not deliver by the delivery date specified in the applicable purchase order, then in addition to all other rights and remedies at law or equity or otherwise, and without any liability or obligation of Company, Company shall have the right to: (a) cancel such purchase order following the expiration of a five (5) business day grace period, or (b) extend such delivery date to a later date, subject, however, to the right to cancel as in (a) preceding if delivery is not made or performance is not completed on or before such extended delivery date. If Company elects to extend such delivery date, Supplier shall absorb the difference between the charges to ship normal transportation and the charges to ship premium overnight.


If a purchase order is canceled by Company pursuant to the above, Company shall have the right to retain or return any or all material received by or paid for by Company under such purchase order. Within fifteen (15) days of Supplier's receipt of returned material, Supplier shall reimburse Company for the reasonable costs of shipping the material returned to Supplier and for any amounts, including shipping costs, previously paid by Company for the Material. Company shall pay for any Material it retains at the prices set forth in the applicable Product Letters, less applicable discounts which shall be applied on the basis of the quantity specified in the purchase order.


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If, during the course of this Agreement, Supplier determines that Supplier will no longer be able to ship within the above interval, Supplier shall immediately notify Company's buyer to that effect. Supplier shall also notify Company's buyer, as soon as it becomes apparent, if Supplier is unable to meet the delivery date for an order. However, nothing contained in this paragraph shall waive Company's rights as set forth above in this Section.


2.10 TITLE AND RISK OF LOSS - Title and risk of loss and damage to Material purchased by Company under this Agreement shall vest in Company when the Material has been delivered at the FOB point. If this Agreement or an order issued pursuant to this Agreement calls for additional services to be performed after delivery, Supplier shall retain title and risk of loss and damage to the Material until the additional services have been performed. If Supplier is authorized to invoice Company for Material upon shipment or prior to the performance of additional services, title to Material shall vest in Company upon payment of the invoice, but risk of loss and damage shall pass to Company when the additional services have been performed.


2.11 TITLE TO MATERIAL FURNISHED BY COMPANY -In the event that Company provides components to Supplier for use in Material ("Components"), or provides Supplier with capital equipment, such as a test facility ("Capital Goods") Supplier acknowledges and agrees that Company has and shall have at all times all right, title and interest in Components or Capital Goods furnished directly or indirectly to Supplier by Company under this Agreement. Supplier shall, within ten (10) days of receipt of the Components or Capital Goods, notify Company in writing of any claims for quantity variation or quality problems in the Components or Capital Goods furnished to Supplier. Supplier assumes responsibility for any loss or damage to such Components or Capital Goods and shall be liable for the full and actual value of the Components or Capital Goods. Supplier shall store the Components or Capital Goods safely, indoors in protected areas approved by Company at Supplier's facility. If Supplier removes all or any part of the Components or Capital Goods from one building to another, Supplier shall continue to be responsible for loss and damage and Supplier shall give Company at least ten (10) business days advance notice, in writing, of the removal except when the removal is required during Supplier's manufacturing process or to protect the Components or Capital Goods from damage or loss.


Company may inspect, inventory and authenticate the account of the Components or Capital Goods during Supplier's normal business hours. Supplier shall provide Company access to the premises wherein all such Components or Capital Goods are located. The Components shall be kept segregated in an area marked "PROPERTY OF LUCENT TECHNOLOGIES". For purposes of this Section, the term " Lucent Technologies " shall be deemed to mean Lucent Technologies Inc. or the Lucent Technologies Inc. affiliated or associated company which owns the Components or Capital Goods, as applicable.


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Supplier shall use the Components or Capital Goods only in the manufacture of Material furnished to Company or otherwise in performing under this Agreement.


Supplier shall not allow any security interest, lien, tax lien or other encumbrance (collectively referred to as "Encumbrance") to be placed on any Components or Capital Goods. Supplier shall give Company immediate written notice should any third party attempt to place or place an Encumbrance on such Components or Capital Goods. Supplier shall indemnify and hold Company harmless from any such Encumbrance. Supplier shall, at Company's request, promptly execute a "protective notice" UCC-1 form and all other documents reasonably necessary to enable Company to protect its interest in such Components or Capital Goods. The Parties agree that this Agreement shall constitute the security agreement required by the UCC of the appropriate state.


The obligations assumed by Supplier with respect to the Components or Capital Goods are for the protection of Company's property. If Supplier defaults in carrying out Supplier's obligations under this Agreement, then, at no cost to Company and upon five (5) working days notice to Supplier, Company may cancel this Agreement with regard to affected Materials or withdraw all or any part of the Components or Capital Goods, or both. Supplier shall, at Company's option, return to Company or hold for Company's disposition any and all of such Components or Capital Goods (including any scrap produced as a by-product) in Supplier's possession at (a) the completion of the order, (b) expiration, cancellation or termination of this Agreement, or (c ) the withdrawal of Components or Capital Goods, as provided above


3. Services


3.1 SERVICES - Visits by Supplier's representatives or its suppliers' representatives for inspection, adjustment or other similar purposes in connection with Material purchased under this Agreement shall for all purposes be deemed "Work under this Agreement" and shall be at no charge to Company unless otherwise agreed in writing between the Parties.


3.2 TECHNICAL SUPPORT AND TRAINING - At the time a purchase order is entered into by the Parties, they shall determine, negotiating in good faith, the level and extent of technical support appropriate for the Material ordered. However, the Parties hereby agree that the Company shall be entitled to a mutually agreed upon level of ongoing technical support, which shall include field service and assistance, and they further agree that the availability or performance of this technical support service shall not be construed as altering or affecting Supplier's obligations as set forth in Section 4.1 or elsewhere provided for in this Agreement. Further, Supplier shall provide instructors and the necessary instructional material to provide a mutually agreed upon level of training sufficient to train Company's instructors in the installation, planning and practices, operation, maintenance and repair of the Material.


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4. Warranty and Limitation of Liability


4.1 WARRANTY - Supplier warrants to Company and Customer, as defined in this Section, that hardware, including firmware, furnished hereunder will be new, free from defects in design, material and workmanship and will conform to and perform in accordance with the Specifications for a period of *********** after delivery, and that software furnished will conform to and perform in all material respects with the Specifications for a period of ************* after delivery; provided, however, that if significant software defects are discovered, equating to Severity Levels 1 or 2, Company may require a software fix from Supplier for up to ***************** from delivery.


If Material furnished contains one or more manufacturer's warranties that are assignable, Supplier hereby assigns such warranties to Company and Customers. Supplier warrants that at the time of delivery to Company such Material shall be free of any security interest or any other lien or any other encumbrance whatsoever. All warranties shall survive inspection, acceptance and payment. Different warranty periods may be specified in the applicable Product Letters.


Defective or non-conforming Material will, at Supplier's option, either be returned to Supplier for repair or replacement, at no cost to Company, with risk of in-transit loss and damage borne by Supplier and freight paid by Supplier, or be repaired or replaced by Supplier on Company's or Company's customers' site or another site designated by Company at no cost to Company. Unless otherwise agreed upon by Supplier and Company, Supplier shall complete repairs and ship the repaired Material within ten (10) working days of receipt of defective or non- conforming Material, or at Company's option, ship replacement Material within ten (10) working days after verbal notification is given Supplier by Company.


If Material returned to Supplier or made available to Supplier on site for repair as provided for in this Section is determined to be beyond repair, Supplier shall promptly so notify Company and, unless otherwise agreed to in writing by Supplier and Company, ship replacement Material without charge within ten (10) days of such notification.


Replacement Material shall be warranted as set forth above in Section 4.1. Any Material which is repaired, modified, or otherwise serviced by Supplier shall be warranted as provided in Section 4.1 for the remainder of the warranty period (based upon the date repair, modification or other service is completed and accepted by Company) or ninety (90) days after the Material is returned to a customer of Company, whichever is later.


EXCEPT AS SET FORTH ABOVE, SUPPLIER DISCLAIMS ALL WARRANTIES, EXPRESS AND IMPLIED, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY AND/OR FITNESS FOR A PARTICULAR PURPOSE.


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4.2 LIMITATION OF LIABILITY - NEITHER PARTY SHALL BE LIABLE FOR ANY INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, OR FOR LOSS OF PROFITS, REVENUE OR DATA, WHETHER IN AN ACTION IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.


5. Quality


5.1 EPIDEMIC CONDITION - If, during the term of this Agreement and for five years after the last shipment date of Material under this Agreement, Company notifies Supplier that Material shows evidence of an "Epidemic Condition," Supplier shall prepare and propose a Corrective Action Plan ("CAP") with respect to such Material within ten (10) working days of such notification, addressing implementation and procedure milestones for remedying such Epidemic Condition(s). An extension of this time-frame is permissible upon mutual written agreement of the Parties.


Upon notification of the Epidemic Condition to Supplier, Company shall have the right to postpone all or part of the shipments of unshipped Material exhibiting the epidemic condition, by giving written notice of such postponement to Supplier, pending correction of the Epidemic Condition. Such postponement shall temporarily relieve Supplier of its shipment liability and Company of its shipment acceptance liability. Should Supplier not agree to the existence of an Epidemic Condition or should Company not agree to the CAP, then Company shall have the right to suspend all or part of its unshipped orders without liability to Company until such time as a mutually acceptable solution is reached.


An Epidemic Condition will be considered to exist when one or more of the following conditions occur:


(1) Failure reports or statistical samplings show that four (4) percent or
more of Material installed or four (4) percent or more of Material
shipped during any two consecutive months, or four (4) percent or more
of the Material tracked by Company's Field Quality Engineering contain
a potential safety hazard (such as personal injury or death, fire,
explosion, toxic emissions, etc.), or exhibit a highly objectionable
symptom (such as emissions of smoke, loud noises, deformation of
housing) or other disconcerting symptoms of this type.


(2) Reliability plots of relevant data indicate that the Material has
actual Mean Time Between Failures (MTBF) of less than 80% of the MTBF
stipulated in the Technical Specification. The MTBF parameter of
Material is defined as the total operating or power-on time of any
population under observation ("T"), in hours, divided by the total
number of critical failures ("n") that have occurred during the
observed period. A critical failure is defined as a failure to operate
per the requirements of the Technical Specification. The total
operating time of a population is the summation of operating time of
individual units in that


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population. MTBF is expressed as MTBF = T/n. An Epidemic Condition
shall exist when data derived from populations being tracked confirms
the condition with 80% confidence.


(3) Material Dead on Arrival (DOA) failures exceed the Epidemic DOA
failure rate which is defined as 1.2 x DOA rate specified in the
applicable Product Letter.


Only major functional and visual/mechanical/appearance defects are considered for determining Epidemic Condition. Material can be either sampled or, at Company's option, 100% audited at Company warehouses, factories or Company's customers' locations. If Material is sampled, the data must have 80% or better statistical confidence.


For the purpose of this Agreement, functional DOA shall be defined as any Material that during the test, installation or upon its first use fails to operate as expected or specified. Visual/mechanical/appearance DOA is defined as any Material containing one or more major defects that would make the Material unfit for use or installation.


An Epidemic Condition shall not include failures due to customer misapplication, utilization of parts not approved by Supplier, or chain failures induced by internally or externally integrated subassemblies.


In the event that Supplier develops a remedy for the defect(s) that caused the Epidemic Condition and Company agrees in writing that the remedy is acceptable, Supplier shall:


(a) Incorporate the remedy in the affected Material in accordance with
Company's Engineering Change Control procedures as set forth in
Attachment 2;


(b) Ship all subsequent Material incorporating the required modification
correcting the defect(s) at no a ...