EXHIBIT 10.45
SUPPLY AGREEMENT
The purpose of this document is to define the activities and expectations
related to Acterna's procurement of various assemblies and sub-assemblies from
Dictaphone's Electronic Manufacturing Services Division. Clearly defining these
expectations and working together to achieve them will for a mutually beneficial
partnership between the two companies.
The Supply Agreement (Agreement) is entered into as of the 25th day of
July, 2002 by and between Acterna Cable Networks Division, 0000 Xxxxxxx
Xxx, Xxxxxxxxxxxx, XX 00000 (Acterna) and Dictaphone's Electronic
Manufacturing Services Division, 0000-X. Xxxxx Xx., Xxxxxxxxx, XX 00000
(Supplier) as supplier, desire to enter into Supply Agreement under
which various assemblies will be supplied by the Supplier to Acterna.
ARTICLE 1: DURATION AND SCOPE
1.1 DURATION: This Agreement will take effect upon the first date written above
and will be valid for a period of one year. Thereafter, the Agreement will
be extended for a period of a year and may be terminated by either party
with 90 days prior written notice.
1.2 SCOPE: During the term of this Agreement, Acterna intends to purchase
various assemblies as listed on Exhibit A. This Agreement does not
constitute a purchase order and Acterna is under no obligation to purchase
any products from supplier or purchase and minimum quantities.
ARTICLE 2: PRICING
2.1 Unit pricing will be defined in Attachment "A" and will remain fixed for one
year except as provided for in Article 2.2 through 2.8. The unit pricing
shall include packaging for delivery. The pricing is F.O. B. Supplier's
Florida Factory.
2.2 From time to time, Acterna may introduce new products or issue engineering
change orders to existing products. In such cases, the parties will work in
good faith to establish new pricing for the new or modified products and
such changes shall be reflected in Attachment A.
2.3 Pricing for each Assembly will include cost of assembly labor, test labor,
standard material costs, overhead, and profit. Supplier will supply a
complete cost breakdown on each assembly including costed Xxxx of Materials.
2.4 In the case of any Engineering change orders both parties agree to adjust
pricing on a case-by-case basis. Supplier will provide a cost impact
analysis to be approved in writing by Acterna.
2.5 Supplier agrees to actively pursue process and/or component cost
improvements, which will be passed along to Acterna on a quarterly basis per
2.8.
2.6 Both parties agree to take into account material cost that is the best quote
received by either party from suppliers. Both parties will provide proof of
the applicable price of such specific quote on such components of the same
quantities.
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2.7 Price increases mandated by allocations, product demand, etc. will be
granted only after documented competitive quoting activity has been
presented to Acterna, and written agreement is provided by Acterna. Such
requests will be considered on a quarterly basis.
2.8 100% of any Acterna-driven cost savings will be reflected as lower prices
for the assemblies affected by such cost savings. For the first year 50% of
any Dictaphone-driven cost savings will be reflected as lower prices for the
assemblies affected by such cost savings. For the second and subsequent
years of the savings, 100% of the said Dictaphone-driven cost savings will
be reflected.
2.9 If parties cannot agree on new pricing, then either party shall have the
right to terminate this Agreement without penalty, with six (6) months prior
notice.
ARTICLE 3: PAYMENTS TERMS
3.1 Acterna will pay valid invoices on a Net 45 day basis after receipt of
material. No payment will be made on invalid invoices.
3.2 Supplier reserves the right to stop shipments and /or reduce terms should
valid invoices become past due. Supplier to resume shipments once invoice
payments become current.
3.3 Supplier reserves the right to stop shipments and/or reduce terms (up to
potentially Cash in Advance) in the event that Acterna enters into
bankruptcy protection.
3.4 Acterna agrees to pay any collection fees in the event that the account must
be turned over to a collection agency.
ARTICLE 4: MATERIAL MANAGEMENT
4.1 Supplier shall, within 30 days of Supplier's manufacture start date,
purchase from Acterna's current Contract Manufacturer any material or
components usable in the manufacture of current forecasted assemblies up to
$400K, as directed by Acterna. Supplier to increase the total dollar amount
of excess material they will purchase from Acterna's current Contract
Manufacturer by the total dollar amount of any material Acterna, or current
Contract Manufacturer purchases from Supplier prior to completely exiting
from current Contract Manufacturer, but no longer than three (3) months form
the date of t this agreement. Purchase price to be at, or below, costs shown
in the costed BOMs provided thus far to Acterna by the Supplier. Material
must meet all Acterna requirements (drawing, AVL specification, etc.) and be
in acceptable condition. Dictaphone assumes no responsibility relative to
the quality of this material and it's potential impact on the finished
product. In the event that Acterna fails to purchase sufficient quantities
of finished product within 6 months, Acterna shall be responsible for any
material bought from the current Contract Manufacturer that has not be
consumed. Should the current contract manufacturer not have sufficient
inventory, Supplier is free to purchase material from any other source,
including Acterna.
4.2 Supplier agrees to purchase Acterna excess material per Attachment "B"
starting no later than 6 months from the Suppliers manufacturing start date
as required to support Acterna's forecast. Acterna will supply an updated
excess material report each month.
4.3 Acterna will issue a rolling six-month forecast twice per month. However,
Acterna is under no
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obligation to purchase the forecasted finished product quantities.
4.4 In the event Acterna terminated this Agreement or cancels a purchase order
issued under this agreement, Acterna shall be responsible for (i) all
non-cancelable/non returnable (NC/NR) or (ii) custom components purchased by
supplier for the applicable cancelled order or forecast provided that, in
either case, such component was purchased from the manufacturer within the
applicable lead-time for that component at the time of purchase (plus an
additional four weeks) and was identified by Supplier in the monthly
Inventory Report. The list of NC/NR/custom components, their cost and
lead-time must be supplied by product to Acterna for written approval by
Acterna. Approval must be in place prior to initial production of a given
product. Supplier must receive written approval from Acterna for any changes
to this list. All other components listed on the Xxxx of Material will be
deemed as standard material and will be of no liability to Acterna. Cost and
component lead-times are to be supplied on the costed BOM's. The initial
list of NC/NR/custom components is supplied in Attachment "C". Ongoing, al
new NC/NR/custom components will be supplied along with costed BOM.
4.5 Dictaphone must use best efforts to continually reduce lead-times by
negotiation with suppliers, implementation of inventory management programs
(SMI/Kanbans, etc.) to provide maximum delivery flexibility to Acterna.
4.6 Transponders ordered under this Agreement shall be deliverable, upon
request, within three (3) weeks of Supplier's receipt of order. For
assemblies other than Transponders, Acterna agrees to allow four (4) weeks
lead-time, or less, as negotiated by product. Supplier shall maintain
adequate inventory levels and capacity to accelerate deliveries under the
forecast by 30 days.
4.7 Acterna agrees that due dates/lead-times will be extended, if deemed
necessary by Supplier, for those orders that are changed after being issued
to Supplier. Revised due dates will be agreed to, in writing, by Supplier.
ARTICLE 5: DELIVERY
5.1 Acterna will provide to Supplier a list of preferred carriers and the
Acterna account number for each. Supplier will determine the best carrier
for each shipment and charge freight directly to Acterna's account.
5.2 Should expedited shipments be required due to Supplier's failure to meet
previously agree-to shipping dates, Supplier will pay freight.
5.3 Supplier must strive to meet or exceed a 95% on time delivery performance.
Acterna will provide supplier performance data monthly. `On time' is defined
as up to five (5) days early and zero (0) days late.
5.4 Supplier reserves the right to stop shipments should conditions defined in
3.2 or 3.3 exist. The delivery rating will not take into account shipments
held up due to payment issues.
ARTICLE 6: EXCESS INVENTORY
6.1 Prior to discontinuing a product or release of an Engineering change,
Acterna will provide advance information to Supplier. Supplier will evaluate
the change and define the impact relative to obsolete material, effective
date of change, tooling impact, etc. for negotiation and
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disposition by Acterna.
6.2 Supplier must, on a monthly basis, provide a written Inventory Report
identifying all excess inventory including, NC/NR and custom components that
Supplier believes is Acterna's responsibility. `Excess' components are
defined as those with on-hand, or committed balances greater than what is
needed to support current and forecasted demand. `Obsolete' components are
defined as those with no demand whatsoever. Supplier shall provide best
effort to reuse, restock, resell, and return material deemed Acterna
liability at no charge to Acterna. Acterna agrees to absorb any `restocking'
fees that may be incurred by Supplier during these efforts. Supplier will
provide reports on excess, obsolete and Acterna liability for components on
a monthly basis (minimum) or as needed. Upon Supplier providing evidence
that best efforts have been performed and that such material is determined
to be Acterna's liability, Acterna will issue purchase orders on a quarterly
basis to cover the excess and obsolete material at Supplier's standard cost,
or last price paid, whichever is the lowest cost.
6.3 Acterna's initial liability would be for the value of material purchased by
the Supplier from the current Contract Manufacturer. As this material is
consumed, Acterna' liability will be reduced to $250,000. The Supplier will
monitor the level of liability. If Supplier determines that adequate
material cannot be procured to support business levels under the current
liability limit, Acterna agrees to increase this limit in writing.
ARTICLE 7: QUALITY OF GOODS
7.1 Supplier will provide a copy of the Work Instructions for each board, upon
request.
7.2 Supplier's material handling and ESD practices to be approved by Acterna
Quality personnel.
7.3 Each assembly delivered to Acterna will comply with the respective
manufacturing file in the Supplier's control and test procedure in effect at
the time of delivery. Any deviation/change shall be approved by Acterna
prior to application.
7.4 Supplier will only purchase components from approved manufacturers as
supplied by Acterna. Any deviation or substitutes must be authorized by
Acterna via a formal ECN or TDA prior to purchase. Supplier will not be held
responsible for using components that have been removed from Acterna's
approved manufacturers listing if Supplier was not notified in writing of
the specific changes.
7.5 Upon reasonable notice, Supplier shall permit Acterna to conduct a quality
audit of the production facilities.
7.6 Workmanship must be to the latest revisions of IPC610 specification.
7.7 Rework must be performed to the latest revision of IPC610, or IPC7221.
7.8 Significant changes in yields, or test data must be communicated to
Acterna's Quality Management.
7.9 Acterna agrees to supply a sufficient number of functional test stations to
support demand based on agreed-upon test times, target yield rates, and
Supplier working two shifts.
ARTICLE 8: WARRANTY
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8.1 Supplier warrants all products for one (1) year, from date of delivery, for
any workmanship related defects. Supplier will use reasonable efforts to
repair or replace in-warranty returns, at Supplier cost, within 5 working
days of receipt of rejected product.
8.2 Acterna will provide sufficient failure analysis descriptions to Supplier
for product that is rejected by Acterna.
8.3 Supplier's "Return Material Authorization" process will be followed in the
event that product is to be returned for either in-warranty or
out-of-warranty work.
ARTICLE 9: ENGINEERING FILES
9.1 The Engineering files for the assemblies to be manufactured by Supplier are
Acterna's property and shall be provided by Acterna to Supplier. The
Engineering files contain technical specifications, xxxx of materials,
software, Gerber files, Fabmaster extractions, drawings, and firmware
required fore each assembly.
9.2 Subsequent technical revision will be based on engineering files updated and
supplied by Acterna.
9.3 The test specifications to be used for Acterna's PCB assemblies are those
included in the Engineering files.
9.4 The parties will establish a procedure to manage Engineering change orders.
ARTICLE 10: CONSIGNMENT
10.1 Equipment, tools, test fixtures, or any product supplied to Supplier by
Acterna on other than a charge basis or paid for by Acterna as part of the
NRE for this product will be held by Supplier on consignment. Upon
completion of this Agreement they will be returned to Acterna or otherwise
accounted for satisfactorily. Unless otherwise agreed, Supplier, at its
expense, will insure all such items for the reasonable value thereof
against loss or damage of any kind. Supplier shall be responsible for
normal and routine maintenance of Acterna consigned equipment. Acterna will
be responsible for the cots associated with calibration of any Acterna
supplied equipment that requires and outside service. Supplier offers to
coordinate this activity as part of Supplier's existing calibration
program.
ARTICLE 11: CONFIDENTIALITY
11.1 Acterna and Supplier acknowledge that technical and/or marketing
information received from either party during the term of this Agreement
may be confidential and that disclosure to third parties may be injurious.
A non-disclosure agreement will be put into place between Acterna and
Supplier on the date of this Agreement.
ARTICLE 12: TERMINATION
12.1 Acterna will have the right to terminate this Agreement in the following
instances:
a. Assemblies do not meet Quality levels and Supplier is not able to
correct the problem, within one month from Acterna's written
notice for such corrective action.
b. More than 10% of deliveries are overdue with more than one (1)
working day due to reasons other than Force Majeure as defined in
Article 13 below. Delays must be solely due to issues under the
Supplier's control.
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c. Pricing does not meet Acterna targets in order to maintain
competitiveness in the market.
12.2 In any case, either party will have the right to terminate this Agreement
with 90 days prior written notice.
ARTICLE 13: FORCE MAJEURE
13.1 Neither party shall be liable to the other for non-performance or delay in
performance due to causes not reasonably within its control; including but
not limited to, acts of civil and military authority, including courts and
regulatory agencies, acts of God, war, riot or insurrection, blockages,
embargos, sabotage, epidemics, fires, floods; strikes, or other labor
difficulties, provided such labor difficulties do no arise from inequitable
labor practices. In the event of a delay resulting from any such causes,
the time of performance hereunder shall be extended for a period of time
reasonably necessary to overcome the effect of such delays.
ARTICLE 14: BUSINESS REVIEWS
14.1 Acterna and Supplier agree to have quarterly business reviews beginning
four (4) months after the Agreement is finalized. The intent of these
reviews is to provide an opportunity to identify issues and opportunities,
and then develop action plans to resolve any issues or to take advantage of
identified opportunities.
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ACTERNA BY:
Signature/Date /s/Xxxxx Xxxxx
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Name in printed letters Xxxxx Xxxxx
Title Purchasing Manager
DICATPHONE BY:
Signature/Date /s/Xxxxx Xxxxx 7/25/02
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Name in printed letters Xxxxx Xxxxx
Title Sr. V.P., Operations
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