SUPPLY AGREEMENT

Exhibit 10.70

 

CONFIDENTIAL TREATMENT

 

SUPPLY AGREEMENT

 

This Supply Agreement is entered into as of March 18, 2005 (“ Effective Date ”) by Occam Networks, Inc., a Delaware corporation with a principal place of business at 77 Robin Hill Road, Santa Barbara, California 93117 (“ Occam ”), and Tellabs North America, Inc., a Delaware corporation with a principal place of business at 1465 North McDowell Boulevard, Petaluma, California 94954 (“ Tellabs ”), on behalf of itself and its parent, subsidiaries, and affiliates such that each entity will be jointly and severally liable for the obligations of the other entities.

 

Recitals

 

A. The parties are entering into a strategic alliance that involves the licensing of technology, manufacture and supply of products, and a financial investment in Occam by Tellabs. The parties, or their affiliates, previously entered into a Mutual Confidentiality Agreement dated July 27, 2004 and are simultaneously entering into a Manufacturing License Agreement, a Technology License Agreement, a First Restated and Amended Mutual Confidentiality Agreement, a Series A-2 Preferred Stock Purchase Agreement, and a Fourth Amended and Restated Investors’ Rights Agreement (collectively, the “ Ancillary Agreements ”), as well as this Agreement, to implement the strategic alliance.

 

B. This Agreement sets forth the terms by which Tellabs will supply Occam with certain broadband loop carrier products and cabinet products and Occam will supply Tellabs with certain broadband loop carrier products.

 

The parties agree as follows:

 

Agreement

 

1. DEFINITIONS

 

1.1 “ Claim ” is defined in Section 13.1(a).

 

1.2 “ Epidemic Failure ” means the failure of at least two percent (2%), but not less than five (5) in number, of the same Product delivered over the course of a rolling ninety (90) day period containing an identical, repetitive defect in design, materials, or manufacture. The occurrence of an Epidemic Failure will be measured through failure reports (whether internal or installed in the field) or statistical samplings from the field.

 

1.3 “ Exclusive Customer ” is defined in the Manufacturing License Agreement.

 

1.4 “ Exclusivity Period ” is defined in the Manufacturing License Agreement.

 

1.5 “ Lab Trial Milestone ” is defined in the Manufacturing License Agreement.

 

***	Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

CONFIDENTIAL TREATMENT

 

1.6 “ Manufacturing License Agreement ” means the Manufacturing License Agreement entered into by the parties simultaneously with this Agreement.

 

1.7 “ Occam Product ” means an Occam broadband loop carrier product listed as a “BLC Product” in the Manufacturing License Agreement.

 

1.8 “ Orders ” is defined in Section 5.1.

 

1.9 “ Product ” means a Tellabs Product or an Occam Product.

 

1.10 “ Purchase Commitment Milestone ” is defined in the Manufacturing License Agreement.

 

1.11 “ Purchaser ” means a party to this Agreement in its capacity as a purchaser of Products from the other party.

 

1.12 “ Purchaser Indemnified Parties ” is defined in Section 13.1(a).

 

1.13 “ Supplier ” means a party to this Agreement in its capacity as a seller of Products to the other party.

 

1.14 “ Technical Specifications ” means the written technical and functional specification for a Product provided by Supplier.

 

1.15 “ Tellabs Brand ” is defined in the Manufacturing License Agreement.

 

1.16 “ Tellabs BLC ” means a broadband loop carrier product designed by Occam and manufactured by Tellabs under the Manufacturing License Agreement.

 

1.17 “ Tellabs Cabinet ” means a Tellabs cabinet product or retrofit kit listed in Exhibit A .

 

1.18 “ Tellabs Product ” means a Tellabs Cabinet or Tellabs BLC.

 

1.19 “ Territory ” is defined in the Manufacturing License Agreement.

 

2. SCOPE OF AGREEMENT

 

2.1 Sale and Purchase of Products . This Agreement will apply to all purchase orders placed by Purchaser during the term of this Agreement for the purchase of Products. All purchases under this Agreement will be subject to the terms of this Agreement. If the terms of any purchase order, acknowledgment, invoice, confirmation, or similar document conflict with the terms of this Agreement, the terms of this Agreement will apply and will govern, except that the parties may agree to negotiate non-preprinted terms that will be effective if executed by both parties. No other terms will apply to this Agreement or related purchase orders.

 

***	Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

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2.2 Tellabs Cabinets . The parties shall mutually agree on the specific cabinet products that Tellabs shall make available to Occam for purchase under this Agreement. The list of such cabinet products shall be set forth in the attached Exhibit A . During the term of this Agreement, Tellabs may choose to inform Occam of new or improved cabinet products which Tellabs is willing to sell to Occam and such products shall then be added to Exhibit A accordingly. Occam may convert existing orders for Tellabs Cabinets to orders for new or improved Tellabs Cabinets.

 

3. PURCHASE RESTRICTIONS

 

3.1 Occam Products . Tellabs may purchase Occam Products (marked with a Tellabs Brand) solely for demonstration, lab testing, product testing and qualification, and FOA purposes associated with Exclusive Customers during the applicable Exclusivity Period.

 

3.2 Tellabs Cabinets . Occam may not resell any Tellabs Cabinets which contain any third party product that competes with any then-existing Tellabs product.

 

4. FORECASTS

 

Throughout the term of this Agreement, Purchaser shall issue a six (6)-month rolling, non-binding forecast to Supplier in writing, to be updated no less frequently than once each month or at such time that Purchaser becomes aware of a substantial change in forecasted quantities, which Supplier shall use in driving its corresponding inventory supply chain of all necessary components and other materials that it uses in manufacturing the Products. Supplier understands and agrees that such forecasts issued by Purchaser are only estimates of required quantities that are issued for convenience and shall not serve to bind Purchaser in any way. Supplier shall use reasonable efforts to accommodate any changes to the rolling forecasts issued by Purchaser. The parties will agree in writing as to the due date for each party in its respective role as Purchaser to issue its first forecast.

 

5. ORDERS

 

5.1 Orders . This Agreement shall govern all purchase orders of Products by the parties (“ Orders ”). All such purchases will be made via written Orders. Such Orders will state unit quantities, unit descriptions, requested delivery dates, and all relevant shipping instructions. Except for these required terms, no additional terms on Orders, order acknowledgements, invoices, or similar documents issued by either party shall serve to alter or add to the terms of this Agreement, unless mutually agreed to by both of the parties in writing.

 

5.2 Acceptance by Supplier . Supplier shall, within five (5) business days after its receipt of an Order, either accept the Order or propose alternatives to the objected-to terms of the Order, with such alternatives, if accepted by Purchaser, to be mutually set forth in a writing signed by both parties. Supplier must accept an Order that specifies a volume within the forecast issued by Purchaser and complies with the applicable lead-time requirements. Otherwise, Supplier must use reasonable efforts to accept each Order. Any Order request by Purchaser that exceeds the volumes set forth in the corresponding forecast issued by Purchaser or the flexibility parameters set forth in Section 5.5 shall be accommodated by Supplier on a commercially reasonable efforts basis. Partial shipment of any Order will be permitted.

 

***	Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

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CONFIDENTIAL TREATMENT

 

5.3 Disposition of Excess Inventory

 

(a) Inventory that is deemed to be usable based upon the latest forecast issued by Purchaser, for a period of zero (0) to three (3) months from the current date will be considered “Normal Production Inventory.” Supplier shall retain this inventory at no charge, for the exclusive benefit of Purchaser and for the purpose of manufacturing the Products. Inventory which is not to be used within three (3) months but which shall be used within six (6) months, based upon Purchaser’s latest forecast, will be considered “Transitional Excess Inventory.” Inventory that is not to be used within six (6) months, based upon the latest forecast issued by Purchaser, shall be deemed “Excess Inventory.” Each calendar quarter, Supplier will determine the amount of Transitional Excess Inventory and Excess Inventory and Purchaser will pay a carrying cost on the average amount over this period, at a rate as set forth in Exhibit E . Purchaser may, at its sole option, choose to take delivery of any such Excess Inventory by providing written notification to Supplier; otherwise, Supplier must use commercially reasonable efforts as to the disposition of such materials, including but not limited to the cancellation or re-scheduling of deliveries of such components from the respective vendors where possible, the negotiation of a re-stocking fee with such vendors, selling the excess components in the open market or the allocation of components to alternate programs, if applicable. Supplier shall obtain Purchaser’s prior written consent prior to selling or re-allocating any such items in any manner whatsoever. In such case, Purchaser shall be liable for the variance between the original component cost plus all reasonable transaction costs related to the acquisition of the part and the price for the part received in the open market, if lower. Only in the event that Supplier has exhausted all commercially reasonable options to dispose of the Excess Inventory, including being unable to sell the excess components in the open market, in each case, Purchaser will pay Supplier for the original component cost plus reasonable transaction costs related to the acquisition, at the beginning of the following calendar quarter. Supplier shall provide Purchaser with reasonable evidence that demonstrates Supplier’s inability to return such Excess Inventory to the respective component suppliers, upon the request of Purchaser. If Supplier later desires to purchase such Excess Inventory items back from Purchaser, Purchaser may sell such items back to Supplier at such amount as is mutually agreed by the parties in writing.

 

(b) Purchaser will also be liable to Supplier for long lead-time components and components which are non-cancelable and non-returnable (“NC/NR”) which have been purchased by Supplier in accordance with the provisions of Section 5.4. Purchaser will also be liable for restocking charges, transportation charges and other direct charges related to the disposition of long lead-time or non-NC/NR items purchased to cover Purchaser’s forecasted quantities in case of a reduction of forecasted quantities by Purchaser.

 

5.4 NC/NR and Long Lead Time Component Parts . Supplier will submit a list of long lead time (greater than thirteen (13) weeks) and NC/NR components for Purchaser’s approval that Supplier shall update as necessary. Supplier shall review with Purchaser every part designated as NC/NR or considered to be a long lead time component part. Supplier shall not purchase any NC/NR or long lead time components without having obtained the prior written blanket

 

***	Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

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authorization of Purchaser as to the purchase of each such item, even if such items are provided for in Purchaser’s forecasts. In seeking such authorization, Supplier shall make usage of the “NC/NR and Long Lead Time Parts: Blanket Approval Form” as set forth in Exhibit F . All such components must be supported by reasonable documentation, to be made available to Purchaser upon Purchaser’s request.

 

5.5 Changes and Cancellations

 

(a) Deferrals . Purchaser may defer, one time per Order, the shipment of all or part of a shipment of Products that is on order for a period not to exceed thirty (30) days by providing Supplier written notice of such deferral, subject to the following restrictions:

 

 

(b) Changes . Purchaser may at any time subsequent to the issuance of an Order under this Agreement change the Order quantity one time per Order, in accordance with the schedule below. Any change requested by Purchaser beyond the allowable increase parameters set forth in the schedule below shall be accommodated by Supplier on a commercially reasonable efforts basis.

 

 

(c) Cancellations . Purchaser may cancel an Order, or any portion of an Order, scheduled for shipment, and Supplier shall make reasonable efforts to sell any Products cancelled within thirty (30) days of Purchaser’s notice of cancellation to another customer. If Supplier is unable to sell any portion of such cancelled Products within thirty (30) days, Purchaser shall pay cancellation fees as to the unsold quantity. The parties will in good faith agree upon a cancellation fee that approximates the actual cost of the cancellation to Supplier. If the parties are unable to agree on a cancellation fee, the cancellation fee will be based on the number of days in advance of the scheduled shipment date that Purchaser provides written notice of cancellation to Supplier, as follows:

 

 

***	Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

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CONFIDENTIAL TREATMENT

 

6. SHIPPING, PACKAGING, AND DELIVERY

 

6.1 Shipping . All Products will be shipped in the manner specified in each Order issued under this Agreement, as accepted by Supplier.

 

6.2 Packaging

 

(a) Unless otherwise specified by Purchaser, Supplier will package and pack all goods in a manner that is (i) in accordance with good commercial practice, (ii) acceptable to common carriers for shipment at the lowest rate for the particular goods, (iii) in accordance with I.C.C. regulations, and (iv) adequate to insure safe arrival of the goods at the named destination.

 

(b) Supplier will mark all containers with necessary lifting, handling, and shipping information and with Order numbers, date of shipment, and the names of the consignee and consignor.

 

(c) An itemized packing list shall accompany each shipment, which will include (i) prominently, the Order number and (ii) the description, part number, revision level, quantity, and serial numbers of the Products so shipped.

 

6.3 Late Deliveries . Orders issued by Purchaser to Supplier under this Agreement shall be in accordance with Supplier’s established lead times for forecasted quantities. Supplier shall use reasonable efforts to cause the Orders to be shipped on the date specified in the corresponding accepted Order with a tolerance of five (5) business days early, zero (0) days late. If Supplier fails to deliver an Order by the committed date and such failure is directly caused by Supplier and not caused by any acts or omissions of Purchaser nor to events beyond the reasonable control of Supplier, then Supplier will employ accelerated measures such as materials logistics expediting fees, premium transportation costs, or labor overtime required to meet the specified delivery schedule, at no additional cost to Purchaser.

 

6.4 Import and Export . Supplier will provide all available information that is reasonably necessary or useful for Purchaser to obtain any export or import licenses required for Purchaser to ship or receive Products, including, but not limited to, certificates of origin, manufacturer’s affidavits, Buy America qualification, and U.S. Federal Communications Commissions identifier, if applicable. Supplier shall use reasonable efforts to provide this information within ten (10) business days after receiving Purchaser’s written request.

 

***	Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

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CONFIDENTIAL TREATMENT

 

7. PRICE AND PAYMENT

 

7.1 Price . The price for each Product is listed in Exhibit B and is stated in U.S. dollars. All prices are FCA origin [INCOTERMS 2000].

 

7.2 Taxes . All amounts due under this Agreement are payable in full by Purchaser to Supplier without deduction and are net of taxes (including any withholding tax). In addition to such amounts, Purchaser will pay sums equal to taxes (including, without limitation, sales, withholding, value-added, and similar taxes) paid or payable, however designated, levied, or based on amounts payable to Supplier under this Agreement or on the use or possession of the Product by Purchaser or a customer of Purchaser under or in accordance with the provisions of this Agreement, but exclusive of United States federal, state, and local taxes based on Supplier’s net income. If Supplier has the legal obligation to collect such taxes, the appropriate amount shall be added to Purchaser’s invoice (itemized separately) and paid by Purchaser unless Purchaser provides Supplier with a valid tax exemption certificate, authorized by the appropriate taxing authority.

 

7.3 Payment Terms . Supplier will invoice Purchaser with each shipment and payment terms will be the full invoiced amount payable within thirty (30) days after the date of the invoice (i.e., net 30 payment terms) unless the invoice is disputed in accordance with Section 7.4, in which case payment will be due as specified in Section 7.4. No invoice will be issued by Supplier until the Products covered by the invoice are shipped to Purchaser, with the exception that in the event that Purchaser causes Supplier to delay shipment, Supplier may issue such invoice as of the originally scheduled date of shipment if Supplier was ready, willing, and able to ship the Products as of the originally scheduled date.

 

7.4 Disputed Invoices . If Purchaser in good faith believes that the invoiced amount of payment under an invoice is incorrect, Purchaser may dispute the invoice by providing Supplier, within thirty (30) days after the date of the invoice, with a detailed written notice of the amount that Purchaser is disputing and Purchaser’s reasons for disputing the invoice. If Supplier receives Purchaser’s written notice of dispute within the thirty (30)-day period, Purchaser’s obligation to pay the disputed portion of invoiced amount will be suspended until the dispute is resolved in accordance with this Section 7.4. The undisputed portion of the invoiced amount is still due within thirty (30) days after the date of the invoice. The parties must use good faith and diligent efforts to resolve the dispute within twenty (20) days of Supplier’s receipt of Purchaser’s written notice of dispute. If the parties are unable to resolve to the dispute within the twenty (20)-day period, the parties will submit the dispute to a third party arbitrator for resolution within sixty (60) days of Supplier’s receipt of Purchaser’s written notice of dispute. Each party will submit its arguments and evidence to the arbitrator in writing and the arbitrator will render a decision, within the specified time period, based on the written materials presented by the parties. The arbitrator’s decision must specify the amount to be paid by Purchaser, if any, under the invoice and which party will bear the costs of the arbitration. The decision of the arbitrator is final and binding on the parties. Payment of the amount specified by the arbitrator is due within five (5) business days after the decision of the arbitrator is issued.

 

***	Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

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CONFIDENTIAL TREATMENT

 

7.5 Audit

 

(a) During the term of this Agreement and for three years thereafter, Supplier will keep current, complete, and accurate records regarding the calculation of prices under this Agreement, including records showing the Cost (as defined in Exhibit B ) of Products. Upon not less than five (5) business days prior written notice from Purchaser, and not more frequently than once per calendar year, Supplier will provide such materials, to the extent necessary or useful to Purchaser to verify that Supplier has charged the correct price for all Products under this Agreement. If requested by Purchaser, a senior Supplier executive shall certify in writing that the materials provided to Purchaser are current, complete, and accurate.

 

(b) If Purchaser’s review of the materials provided by Supplier reveals an excessive price for a Product, Supplier will promptly refund the difference in price in order to comply fully with the terms of this Agreement unless Supplier disputes Purchaser’s finding in accordance with Section 7.5(c). If the amount of excessive price is five percent (5%) or greater, Supplier will promptly reimburse Purchaser for its reasonable costs of conducting its review of the materials provided by Supplier.

 

(c) If Supplier in good faith disputes in writing Purchaser’s finding of an excessive price for a Product within five (5) business days of Supplier’s receipt of Purchaser’s request for payment, then the parties will agree on a mutually acceptable independent third party auditor to audit Supplier’s records. Supplier will provide the auditor with access to all records and personnel that the auditor requests to verify the price charged for Products under this Agreement. The auditor’s determination will be final and binding on the parties. If the auditor determines that Supplier charged an excessive price for a Product, then Supplier will promptly refund the difference in price to Purchaser to comply fully with the terms of this Agreement and will be responsible for the cost of the auditor. If the auditor determines that Supplier did not charge and excessive price for Products under this Agreement, then Purchaser will be responsible for the cost of the auditor.

 

8. PRODUCT MARKING

 

8.1 Occam Products . Occam will mark each Occam Product ordered by Tellabs as specified by Tellabs with Tellabs trademarks. Tellabs will reimburse Occam, at such time and materials rate set forth in Exhibit E , for its efforts associated with marking the Occam Products as specified by Tellabs.

 

8.2 Tellabs BLCs . Tellabs will mark each Tellabs BLC that it manufactures that is ordered by Occam as specified by Occam with Occam trademarks. Occam will reimburse Tellabs, at such time and materials rate set forth in Exhibit E , for its efforts associated with marking the Tellabs Products as specified by Occam.

 

9. SUPPLY CONTINGENCIES

 

9.1 Allocation . Supplier will use reasonable efforts to maintain the ability to supply all Products that Purchaser orders under this Agreement. If the supply of any Product will be

 

***	Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

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adversely affected for any reason, Purchaser’s Orders, subject to normal lead-time requirements and Supplier’s acceptance in accordance with Section 5.2, will be filled according to an allocation plan no less favorable than that provided to any other customer of Supplier on a pro rata basis. Supplier will promptly notify Purchaser in writing upon determining that Supplier’s output of the Product will not be sufficient to meet all of Purchaser’s requirements for any period as specified in Purchaser’s forecasts.

 

9.2 Discontinuance . If production by Supplier or the availability of any Product covered by this Agreement is to be permanently discontinued at any time during the term of this Agreement, Supplier will give Purchaser at least one hundred eighty (180) days prior written notice of such discontinuance, during which time Supplier will accept orders from Purchaser for a reasonable quantity of “last time buy” deliveries of such Product at the prices set forth in this Agreement. Such “last time buy” deliveries shall be made on a non-cancelable and non-returnable basis.

 

9.3 Alternate Source

 

(a) Purchaser will have the opportunity to negotiate the purchase of Products directly from one or more of Supplier’s contract manufacturers, as a backup source of supply upon the occurrence of one of the events described in Section 9.3(b).

 

(b) Supplier will authorize and provide the requisite information to the respective contract manufacturers to enable them to supply the Products directly to Purchaser as required under this Section 9.3, subject to Purchaser’s and the contract manufacturers’ ability to agree on the applicable terms and conditions of such supply.

 

(c) The opportunity to make direct purchases from Supplier’s contract manufacturers will be triggered upon the occurrence of one of the following events: (i) Supplier ceases to conduct business in the normal course; (ii) Supplier files or is the subject of the filing of a petition for relief for bankruptcy under the laws of any nation, makes a general assignment for the benefit of creditors, or appoints or has appointed a general receiver or trustee in bankruptcy for Supplier’s business or property; or (iii) Supplier fails to supply any Product to Purchaser as required under this Agreement and Supplier fails to cure or remedy the failure within thirty (30) days after notice of the failure from Purchaser.

 

9.4 Use of Third Party Manufacturers . Neither party is prohibited from using the same third party contract manufacturers, licensors, or suppliers as the other party to manufacture and supply its own products. Neither party will prohibit or limit its third party contract manufacturers, licensors, or suppliers from providing products or services to the other party.

 

10. TECHNICAL SUPPORT AND IPTV SOLUTION DEVELOPMENT

 

10.1 Technical Support . Supplier and Purchaser will have the technical support obligations set forth in Exhibit C .

 

***	Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

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10.2 IPTV Solution Development . Tellabs and Occam shall make commercially reasonable efforts to jointly define, design, and market an IPTV solution that integrates products developed and marketed by Occam into existing Tellabs cabinet deployments.

 

11. PRODUCT CHANGES

 

11.1 Supplier-Proposed Product Changes . Supplier shall notify Purchaser in writing of any substitutions or modifications to the Products’ Technical Specifications. Supplier shall provide written notice of any such change in the form of an Engineering Change Order (ECO). The ECOs from Supplier shall provide the following information:

 

(a) Supplier part number and corresponding Purchaser marketing and hardware number with revisions;

 

(b) Firmware number with revision;

 

(c) Applicable software version number;

 

(d) Detailed reason for the change; and

 

(e) Class of change per the following Bellcore specifications:

 

(i) Class A changes are required to correct product deficiencies such as safety or fire hazards, electrically or mechanically inoperative product, operational or design defects that cause higher than the Supplier’s advertised product failure rates on a per unit basis or cause adverse telephone company or subscriber reaction.

 

(ii) Class AC changes have the same characteristics as Class A changes but are required only for specific applications or locations to be identified by Supplier’s customer service. This class is also used on software ECOs to indicate that the software is intended for specific customers.

 

(iii) Class B changes are made to incorporate improvements in design resulting in better operation, improved testing and maintenance, longer life, service improvements, cost reductions to the RBOC, and addition of new features. Field upgrades may be done at the customer’s expense.

 

(iv) Class D changes are made to incorporate minor new features and design improvements that do not affect the existing functionality. They also make other minor service improvements or enhance test capabilities not sufficient to be Class B. Class D changes shall not affect compatibility, telephone company cost, or use of the product.

 

(v) Other changes are minor changes for cost reduction or manufacturing yield improvements that do not affect the product identifier.

 

***	Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

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11.2 Purchaser-Requested Product Changes . Purchaser may request that Supplier implement certain changes to a Product in writing. Supplier will implement the Purchaser-requested product change if the parties are able, acting reasonably and in good faith, to agree on the terms under which Supplier will implement the changes, including the payment of reasonable NRE charges or a revised price. If the parties are unable to agree, then Supplier will not be required to implement the Purchaser-requested product change.

 

12. REPRESENTATIONS AND WARRANTIES

 

12.1 Authority . Each party represents and warrants to the other party that (a) this Agreement has been duly executed and delivered and constitutes a valid and binding agreement enforceable against such party (and, with respect to Tellabs, against its parents, subsidiaries, and affiliates) in accordance with its terms; (b) no authorization or approval from any third party is required in connection with such party’s execution, delivery, or performance of this Agreement; and (c) the execution, delivery, and performance of this Agreement does not violate the laws of any jurisdiction or the terms or conditions of any other agreement to which it is a party or by which it is otherwise bound.

 

12.2 Product Warranties

 

(a) Supplier warrants to Purchaser that each hardware component of each Product will be free from defects in design, materials, or manufacture (except that Tellabs only warrants that Tellabs BLCs will be free from defects in materials or manufacture) that cause the Product to not meet its Technical Specifications for fifteen (15) months from the date of shipment by Supplier to Purchaser. If a Product fails to conform to the warranty in this Section 12.2(a), Supplier will, at its option, (i) repair the Product, or (ii) replace the Product. Product returns will be handled in accordance with the procedure set forth in Section 12.2(c). All Products repaired by Supplier and replacement Products furnished by Supplier under this warranty will be warranted for the remainder of the warranty period set forth in this Section 12.2(a).

 

(b) Supplier warrants to Purchaser that each software component of each Product will be free from defects in design, materials, or manufacture that cause the Product to not meet its Technical Specifications for fifteen (15) months from the date of shipment by Supplier to Purchaser. If a Product fails to conform to the warranty in this Section 12.2(b), Supplier will, at its option, (i) repair the Product, or (ii) replace the Product. All Products repaired by Supplier and replacement Products furnished by Supplier under this warranty will be warranted for the remainder of the warranty period set forth in this Section 12.2(b).

 

(c) If a Product is to be returned to Supplier, Purchaser will, at its expense, return the Product in accordance with Supplier’s instructions. If Suppli