<PAGE> 1
As filed with the Securities and Exchange Commission on December 22, 1999
Registration No. 333-91427
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
TURNSTONE SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<TABLE>
<S> <C> <C>
DELAWARE 3669 77-047640
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
274 FERGUSON DRIVE
MOUNTAIN VIEW, CALIFORNIA 94043
(650) 404-0200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
RICHARD N. TINSLEY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
TURNSTONE SYSTEMS, INC.
274 FERGUSON DRIVE
MOUNTAIN VIEW, CALIFORNIA 94043
(650) 404-0200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
THOMAS C. DEFILIPPS, ESQ. JOHN L. SAVVA, ESQ.
ROBERT F. KORNEGAY, ESQ. ALBERT Y. LIU, ESQ.
TED S. HOLLIFIELD, ESQ. JAMES OEHLER, ESQ.
SANDRA PAK KNOX, ESQ. SULLIVAN & CROMWELL
WILSON SONSINI GOODRICH & ROSATI 1888 CENTURY PARK EAST
PROFESSIONAL CORPORATION LOS ANGELES, CALIFORNIA 90067
650 PAGE MILL ROAD (310) 712-6600
PALO ALTO, CA 94304
(650) 493-9300
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C>
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TITLE OF EACH CLASS PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO AGGREGATE OFFERING REGISTRATION
BE REGISTERED PRICE(1) FEE
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Common Stock ($0.001 par value).. $48,300,000 $13,427(2)
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</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(o) under the Securities Act of 1933.
(2) Previously paid.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
EXPLANATORY NOTE
This Amendment No. 1 to the Form S-1 Registration Statement is being filed
for the sole purpose of filing an additional exhibit.
<PAGE> 3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by Turnstone Systems in
connection with the sale of Common Stock being registered. All amounts are
estimates except the SEC registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 13,427
NASD filing fee............................................. 5,330
Nasdaq National Market listing fee.......................... 22,250
Printing and engraving costs................................ 300,000
Legal fees and expenses..................................... 400,000
Accounting fees and expenses................................ 400,000
Blue Sky fees and expenses.................................. 20,000
Transfer Agent and Registrar fees........................... 10,000
Miscellaneous expenses...................................... 28,993
----------
Total............................................. $1,200,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a corporation
to include in its charter documents, and in agreements between the corporation
and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current law.
Article XI of Turnstone Systems' Restated Certificate of Incorporation
provides for the indemnification of directors to the fullest extent permissible
under Delaware law.
Article VI of Turnstone Systems' Bylaws provides for the indemnification of
officers, directors and third parties acting on behalf of Turnstone Systems if
such person acted in good faith and in a manner reasonably believed to be in and
not opposed to the best interest of Turnstone Systems, and, with respect to any
criminal action or proceeding, the indemnified party had no reason to believe
his or her conduct was unlawful.
Turnstone Systems has entered into indemnification agreements with its
directors and executive officers, in addition to indemnification provided for in
Turnstone Systems' Bylaws, and intends to enter into indemnification agreements
with any new directors and executive officers in the future.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since our incorporation in January 1998, we have issued unregistered
securities to a limited number of persons as described below.
None of these transactions involved any underwriters, underwriting
discounts or commissions, or any public offering, and we believe that each
transaction was exempt from the registration requirements of the Securities Act
by virtue of Section 4(2) thereof, Regulation D promulgated thereunder or Rule
701 pursuant to compensatory benefit plans and contracts relating to
compensation as provided under such Rule 701. The recipients of securities in
each such transaction represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof, and appropriate legends were affixed to the share
certificates and instruments issued in such transactions. All recipients had
adequate access, through their relationships with Turnstone Systems, to
information about Turnstone Systems.
II-1
<PAGE> 4
1. In January 1998, we issued and sold 8,475,500 shares of common stock to
founders at a purchase price per share of $0.001.
2. Pursuant to our 1998 Stock Plan, from inception to September 30, 1999 we
issued and sold an aggregate of 2,844,224 shares of common stock to
certain employees, officers, directors and consultants.
3. On January 12, 1998 and February 27, 1998, we issued and sold a total of
11,680,000 shares of Series A Preferred Stock to a total of 13 investors
for an aggregate purchase price of $5,840,000.
4. On June 1, 1998, in connection with a credit facility, we issued to one
party a warrant to purchase 45,000 shares of our Series A Preferred
Stock for an aggregate exercise price of $22,500.
5. One July 29, 1998, in connection with certain equipment leases, we
issued to one party a warrant to purchase 90,000 shares of our Series A
Preferred Stock for an aggregate exercise price of $45,000.
6. On January 12, 1999 and June 21, 1999, we issued and sold a total of
3,176,930 shares of Series B Preferred Stock to a total of 12 investors
for an aggregate purchase price of $6,195,013.50.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
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<S> <C>
1.1* Form of Underwriting Agreement
3.1A* Certificate of Incorporation of Turnstone Systems currently
in effect
3.1B* Certificate of Incorporation of Turnstone Systems to be in
effect after the closing of the offering made under this
Registration Statement
3.2A* Bylaws of Turnstone Systems currently in effect
3.2B* Bylaws of Turnstone Systems to be in effect after the
closing of the offering made under this Registration
Statement
4.1** Form of Common Stock certificate
4.2* Registration Rights Agreement, dated January 12, 1998 by and
among Turnstone Systems and certain stockholders of
Turnstone Systems named therein, as amended as of January
12, 1999
4.3* Warrant to purchase shares of Series A Preferred Stock of
Turnstone Systems issued to Silicon Valley Bank
4.4* Form of Founder's Restricted Stock Purchase Agreement
entered into as of January 2, 1998 between Turnstone Systems
and each of P. Kingston Duffie, M. Denise Savoie and Richard
N. Tinsley
5.1** Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
10.1* Form of Indemnification Agreement entered into by Turnstone
Systems with each of its directors and executive officers
10.2* 1998 Stock Plan and forms of agreement thereunder
10.3* 2000 Stock Plan and forms of agreement thereunder
10.4* 2000 Employee Stock Purchase Plan and forms of agreement
thereunder
10.5+* Manufacturing Agreement dated as of October 16, 1998,
between Turnstone Systems and A-Plus Manufacturing
Corporation
10.6+*** OEM Purchase Agreement, dated effective as of September 1,
1999, between Turnstone Systems and Lucent Technologies
Inc., as amended as of September 28, 1999
10.7* Sublease dated June 16, 1999, between Turnstone Systems and
Finisar Corporation
</TABLE>
II-2
<PAGE> 5
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
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<S> <C>
23.1* Consent of KPMG LLP, independent auditors
23.2** Consent of Counsel (included in Exhibit 5.1)
24.1* Power of Attorney (see page II-4)
27.1* Financial Data Schedule
</TABLE>
- -------------------------
* Previously filed.
** To be filed by amendment.
*** Filed herewith.
+ Confidential treatment requested.
(b) FINANCIAL STATEMENT SCHEDULES
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
Turnstone Systems hereby undertakes to provide to the underwriters at the
closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification by Turnstone Systems for liabilities arising
under the Securities Act may be permitted to directors, officers and controlling
persons of Turnstone Systems pursuant to the provisions referenced in Item 14 of
this registration statement or otherwise, Turnstone Systems has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act, and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Turnstone Systems of
expenses incurred or paid by a director, officer, or controlling person of
Turnstone Systems in the successful defense of any action, suit or proceeding)
is asserted by a director, officer or controlling person in connection with the
securities being registered hereunder, Turnstone Systems will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
Turnstone Systems hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by Turnstone Systems pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the city of
Mountain View, State of California, on the 22nd day of December, 1999.
TURNSTONE SYSTEMS, INC.
By: /s/ RICHARD N. TINSLEY
------------------------------------
Richard N. Tinsley
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
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<C> <S> <C>
/s/ RICHARD N. TINSLEY President, Chief Executive December 22, 1999
- ----------------------------------------------------- Officer and Director
Richard N. Tinsley (Principal Executive
Officer)
*P. KINGSTON DUFFIE Chief Technology Officer December 22, 1999
- ----------------------------------------------------- and Director
P. Kingston Duffie
/s/ M. DENISE SAVOIE Chief Financial Officer and December 22, 1999
- ----------------------------------------------------- Vice President, Business
M. Denise Savoie Operations (Principal
Financial and Accounting
Officer)
*ROBERT J. FINOCCHIO, JR. Director December 22, 1999
- -----------------------------------------------------
Robert J. Finocchio, Jr.
*JOHN K. PETERS Director December 22, 1999
- -----------------------------------------------------
John K. Peters
*ANDREW W. VERHALEN Director December 22, 1999
- -----------------------------------------------------
Andrew W. Verhalen
*GEOFFREY Y. YANG Director December 22, 1999
- -----------------------------------------------------
Geoffrey Y. Yang
*By: /s/ RICHARD N. TINSLEY
------------------------------------------------
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 7
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
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<S> <C>
1.1* Form of Underwriting Agreement
3.1A* Certificate of Incorporation of Turnstone Systems currently
in effect
3.1B* Certificate of Incorporation of Turnstone Systems to be in
effect after the closing of the offering made under this
Registration Statement
3.2A* Bylaws of Turnstone Systems currently in effect
3.2B* Bylaws of Turnstone Systems to be in effect after the
closing of the offering made under this Registration
Statement
4.1** Form of Common Stock certificate
4.2* Registration Rights Agreement, dated January 12, 1998 by and
among Turnstone Systems and certain stockholders of
Turnstone Systems named therein, as amended as of January
12, 1999
4.3* Warrant to purchase shares of Series A Preferred Stock of
Turnstone Systems issued to Silicon Valley Bank
4.4* Form of Founder's Restricted Stock Purchase Agreement
entered into as of January 2, 1998 between Turnstone Systems
and each of P. Kingston Duffie, M. Denise Savoie and Richard
N. Tinsley
5.1** Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
10.1* Form of Indemnification Agreement entered into by Turnstone
Systems with each of its directors and executive officers
10.2* 1998 Stock Plan and forms of agreement thereunder
10.3* 2000 Stock Plan and forms of agreement thereunder
10.4* 2000 Employee Stock Purchase Plan and forms of agreement
thereunder
10.5+* Manufacturing Agreement dated as of October 16, 1998,
between Turnstone Systems and A-Plus Manufacturing
Corporation
10.6+*** OEM Purchase Agreement, dated effective as of September 1,
1999, between Turnstone Systems and Lucent Technologies
Inc., as amended as of September 28, 1999
10.7* Sublease dated June 16, 1999, between Turnstone Systems and
Finisar Corporation
23.1* Consent of KPMG, LLP, independent auditors
23.2** Consent of Counsel (included in Exhibit 5.1)
24.1* Power of Attorney (see page II-4)
27.1* Financial Data Schedule
</TABLE>
- -------------------------
* Previously filed.
** To be filed by amendment.
*** Filed herewith.
+ Confidential treatment requested.
<PAGE> 1
EXHIBIT 10.6
LUCENT TECHNOLOGIES INC.
STANDARD OEM PURCHASE AGREEMENT TERMS AND CONDITIONS
(Amended and Restated as of December 9, 1999)
Agreement No. SC11990085
Sheet 1 of 31
Turnstone Systems, Inc.
274 Ferguson Drive
Mountain View, CA 94043
This Agreement is made by and between Lucent Technologies Inc. ("Company")
having an office at 188 Mt Airy Road, Basking Ridge, NJ 07920 and Turnstone
Systems, Inc.("Supplier") having an office at 274 Ferguson Drive, Mountain View,
CA 94043 (hereinafter individually a "Party" and collectively the "Parties").
Company agrees to purchase and Supplier agrees to sell in accordance with the
terms and conditions stated in this Agreement and any attachments to this
Agreement.
WHEREAS, Company wishes to purchase MATERIALs of Supplier's (design and)
manufacture for resale to Company's customers, and
WHEREAS, Supplier desires to sell such materials to Company for resale to
Company's customers,
THEREFORE, the parties agree as follows
1. AGREEMENT EFFECTIVE PERIOD
The term of this Agreement shall commence on, September 1,
1999, and shall, except as otherwise provided in this Agreement,
continue in effect thereafter until August 31, 2002.
2. MATERIAL
"MATERIAL" as used in this Agreement shall mean Supplier's
COPPER CROSSCONNECT Products as listed in APPENDIX A, attached and made
a part of this Agreement. Such MATERIAL is hereby offered for sale by
Supplier and may be purchased by Company in accordance with the terms,
conditions and specifications stated in this Agreement. This Agreement
is a non-commitment agreement and MATERIAL shall be furnished by
Supplier on an as-ordered basis. "Specification(s)" as used in this
Agreement shall mean all of the specifications made part of this
Agreement.
<PAGE> 2
Sheet 2 of 31
3. OPTION TO EXTEND
Company shall have the right to extend the period specified in
the section "AGREEMENT EFFECTIVE PERIOD" for up to twelve (12) months
by giving Supplier at least thirty (30) business days prior written
notice.
Within ten (10) business days of the date of Company's notice
to extend the period, Supplier shall notify Company in writing whether
Supplier proposes to revise the price(s) under this Agreement. If the
parties fail to agree on the revised price(s) within twenty (20)
business days after the date of Supplier's notice, Company's notice of
extension shall be considered withdrawn and prices for outstanding
orders or orders placed during the term of this Agreement shall not be
revised.
4. PRICE AND DISCOUNTS
Prices and discounts shall be based on cumulative purchase
volume as shown in APPENDIX A. Prices and discounts as listed in
APPENDIX A shall remain in effect during the term of this Agreement.
5. COST REDUCTION
Both parties shall endeavor to reduce the costs of MATERIALs
furnished under this Agreement. If design, labor or material cost
reductions result from Company initiated changes or the sharing by
Supplier of other Company supplier agreements, [***] percent ([***]%)
of the cost reduction(s) shall be passed onto Company in the form of
reduced prices, except that if the cost reduction results from Supplier
initiated changes, Supplier shall furnish to Company a complete list of
expenses that Supplier incurred in effecting said cost reduction, if
any. Supplier shall be entitled to receive the benefits of the cost
reduction for the time period required to recover its implementation
expenses.
6. TERMS OF PAYMENT
Net thirty (30) business days from the date of shipment of the
MATERIAL to Company.
7. FORECASTS
Company shall provide Supplier with a twelve (12) month
non-binding forecast submitted to Supplier by the fifth (5th) business
day of each calendar month. Such forecast shall be used by Supplier for
planning purposes only and shall not be deemed a commitment by Company
to purchase the MATERIAL shown in the forecast.
8. FOB
The MATERIAL shall be shipped FOB Supplier's location (or such
other Supplier's location as may be designated by Supplier). Company
shall select the carrier(s) and provide the name(s) of the carrier(s)
and Company's account number(s) with said carriers to Supplier within
thirty (30) days of execution of this Agreement.
- ------
***Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
<PAGE> 3
Sheet 3 of 31
9. FREIGHT CLASSIFICATION
MATERIAL purchased under this Agreement shall be shipped to
Company or Company's customers subject to freight charges appropriate
for goods classified as Data Communication Products. Supplier shall
indicate on the bill of lading that Company's contract rates apply.
10. NON-EXCLUSIVE MARKET RIGHTS
This Agreement neither grants to Supplier an exclusive right
or privilege to sell to Company any or all MATERIALs of the type
described in the MATERIAL section which Company may require, nor
requires the purchase of any MATERIAL or other MATERIALs from Supplier
by Company. Therefore, Company may contract with other manufacturers
and suppliers for the procurement of comparable MATERIALs. In addition,
Company shall, at its sole discretion, decide the extent to which
Company will market advertise, promote, support or otherwise assist in
further offerings of the MATERIAL.
Purchases by Company under this Agreement shall neither
restrict the right of Company to cease purchasing nor require Company
to continue any level of such purchases.
11. SPECIFICATIONS OR DRAWINGS
Supplier's standard commercial specifications are set forth in
the Turnstone Copper CrossConnect CX-100 User's Guide, Revision 1.1, as
amended from time to time in accordance with the procedures set forth
herein. Supplier shall manufacture MATERIAL in accordance with
Specifications, so that MATERIAL conforms to such Specifications.
In accordance with the notification requirements outlined in
Section "MATERIAL CHANGES," Supplier shall provide Company with at
least thirty (30) business days prior written notice of any change to
be made by Supplier in the MATERIAL furnished pursuant to said
Specifications under this Agreement.
If Company, in its sole discretion, does not agree to the
change proposed by Supplier, Company may submit a Modification Request
to address the change. If the Company's Modification Request is not an
acceptable solution, 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 this
Agreement and to terminate any or all purchase orders for MATERIAL
affected by such change.
Supplier shall continue to supply MATERIAL to Company pursuant
to the Specifications for the term of the Agreement. If Supplier is
unable to continue to thus supply or discontinues manufacture of
MATERIAL, Company shall be entitled to one (1) year's advance notice,
provided (i) the discontinuance is at Supplier's election and (ii)
there has been a reasonable amount of purchases during the period
preceding Supplier's notice of discontinuance. Additionally, and if
requested by Company, Company and Supplier shall endeavor to develop an
alternative method of provisioning MATERIAL or
<PAGE> 4
Sheet 4 of 31
Parts, which may include licensing Manufacturing Rights to
Company, subject to mutual agreement between Company and
Supplier.
12. ASSIGNMENT BY SUPPLIER
Supplier shall not assign any right or interest under this
Agreement (excepting solely for moneys due or to become due) without
the prior written consent of Company, provided however, no such consent
shall be required in connection with the sale of all or substantially
all of the assets of Supplier related to MATERIAL or in connection with
any merger, reorganization or sale of Supplier. Supplier shall be
responsible to Company for all Work performed by Supplier's
subcontractor(s) at any tier. In the event of an assignment by
Supplier, Company may terminate this Agreement or an order, in whole or
in part, by written notice to Supplier. In such case, Company's
liability shall be limited to payment of the amount due for work
performed and/or MATERIAL provided by Supplier up to and including date
of termination.
13. ASSIGNMENT BY COMPANY
Company shall have the right to assign this Agreement or an order and
to assign its rights and delegate its duties under this Agreement or an
order either in whole or in part at any time and without Supplier's
consent to (i) any present or future associated entity of Company; (ii)
the, successors and assigns of Company or its present or future
associated entities; or (iii) any other entity resulting from the sale,
reorganization or other transfer of all or part of the assets of
Company or any associated entity. Company shall give Supplier written
notice of any assignment and delegation. The assignment and delegation
shall not affect any rights or duties that Supplier or Company may then
or thereafter have as to equipment, software, services or materials
ordered by Company prior to the effective date of the assignment and
delegation. Upon acceptance of the assignment and delegation and
assumption of the duties under this Agreement or an order, Company
shall be released and discharged, to the extent of the assignment and
delegation, from all further duties under this Agreement or the order
as to equipment, software, services or materials so assigned.
14. BANKRUPTCY AND TERMINATION FOR FINANCIAL INSECURITY
Either party may terminate this Agreement by notice in writing:
(i) if the other party makes an assignment for the benefit of
creditors (other than solely an assignment of monies due);
or:
(ii)if the other party evidences an inability to pay debts as
they become due, unless adequate assurance of such ability
to pay is provided within thirty (30) days of such notice.
If a proceeding is commenced under any provision of the United
States Bankruptcy Code, voluntary or involuntary, by or against either
party, and this Agreement has not been terminated, the non-debtor party
may file a request with the bankruptcy court to have the court set a
date within sixty (60) days after the commencement of the case, by
<PAGE> 5
Sheet 5 of 31
which the debtor party will assume or reject this Agreement, and the
debtor party shall cooperate and take whatever steps necessary to
assume or reject the Agreement by such date.
15. CFC PACKAGING
Supplier warrants that all packaging materials furnished under
this Agreement and all packaging associated with MATERIAL furnished
under this Agreement were not manufactured using and do not contain
chlorofluorocarbons. "Packaging" means all bags, wrapping, boxes,
cartons and any other packing materials used for packaging. Supplier
shall indemnify and hold Company harmless for any liability, fine or
penalty incurred by Company to any third party or governmental agency
arising out of Company's good faith reliance upon said warranty.
16. CHOICE OF LAW
This Agreement and all transactions under it shall be governed
by the laws of the State of New Jersey excluding its choice of laws
rules and excluding the Convention for the International Sale of Goods.
Supplier agrees to submit to the jurisdiction of any court wherein an
action is commenced against Company based on a claim for which Supplier
has agreed to indemnify Company under this Agreement.
17. COMPLIANCE WITH LAWS
Each Party and all persons furnished by each Party shall
comply at their own expense with all applicable laws, ordinances,
regulations and codes, including the identification and procurement of
required permits, certificates, licenses, insurance, approvals and
inspections in performance under this Agreement.
18. CONTINUING AVAILABILITY
Supplier shall offer for sale to Company, during the term of
this Agreement MATERIAL conforming to the Specifications set forth in
this Agreement. Supplier further shall offer for sale to Company,
during the term of this Agreement and until [***] ([***]) years after
the expiration of this Agreement, maintenance, replacement, and repair
parts ("Parts") which are functionally equivalent and identical in form
and fit for 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, at 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 the
"WARRANTY" section of this Agreement. The term "Parts" is included in
the term "MATERIAL."
In the event Supplier fails to supply such MATERIAL or Parts
and Supplier is unable to obtain another source of supply for Company,
then Company and Supplier shall endeavor to develop an alternative
method of provisioning MATERIAL or Parts, which may include
manufacturing rights to Company. At that time, both parties shall
mutually
- ------
***Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
<PAGE> 6
Sheet 6 of 31
determine necessary measures required for Company to obtain MATERIAL
under this license.
19. DEFAULT
If either party shall be in breach or default of any of the
terms, conditions or covenants of this Agreement or of any purchase
order, and if such breach or default shall continue for a period of ten
(10) days after the giving of written notice to the party in breach
thereof by the party not in breach, then, in addition to all other
rights and remedies which the party not in breach may have at law or
equity or otherwise, the party not in breach shall have the right to
cancel this Agreement and/or any purchase orders without any charge to
or obligation or liability of the party not in breach.
20. ELECTRONIC DATA INTERCHANGE
If requested by Company, Supplier shall use commercially
reasonable efforts to implement EDI at Supplier's sole expense.
21. EPIDEMIC CONDITION
If during the term of this Agreement and for six (6) months
after the last shipment date of MATERIAL under this Agreement Company
notifies Supplier that an "Epidemic Condition" has occurred, Supplier
shall prepare and propose a Corrective Action Plan ("CAP") with respect
to such MATERIAL within five (5) 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, 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
MATERIAL shipped 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 Specifications provided by
Supplier. The MTBF parameter of MATERIAL is
<PAGE> 7
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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 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 specified in
the section of this Agreement entitled MATERIAL CONFORMANCE REVIEW.
Only major functional and visual/mechanical/appearance defects
are considered for determining Epidemic Condition. MATERIAL could be
either sampled or, a 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
CAP.
(b) Ship all subsequent MATERIAL incorporating the required
modification correcting the defect(s) at no additional charge to
Company; and
(c) Repair and/or replace MATERIAL that caused the Epidemic Condition.
In the event that Company incurs costs due to such repair and/or
replacement, including but not limited to labor and shipping costs,
Supplier shall reimburse Company for such costs. Supplier shall bear
risk of in transit loss and damage for such repaired and/or replaced
MATERIAL.
Supplier and Company shall mutually agree in writing as to the
remedy's implementation schedule. Supplier shall use its best efforts
to implement the remedy in accordance with the agreed-upon schedule.
<PAGE> 8
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If Supplier is unable to develop a mutually agreeable remedy,
or does not adequately take into account the business interests of
Company, as reasonably agreed by the parties, Company may (1) develop
and implement such remedy and, in such case, implementation costs and
risk of in- transit loss and damage shall be allocated between the
parties as set forth in this section, and/or (2) cancel postponed
orders without liability and return all MATERIAL affected by such
Epidemic Condition for full refund, payable by Supplier within thirty
(30) business days after receipt of returned MATERIAL (with risk of
loss or in-transit damage borne by Supplier) and/or (3) terminate this
Agreement without further liability.
22. EXPORT CONTROL
Supplier will not use, distribute, transfer or transmit any
MATERIALs, software or technical information (even if incorporated into
other MATERIALs) provided under this Agreement except in compliance
with U.S. export laws and regulations (the "Export Laws"). Supplier
will not, directly or indirectly, export or re-export the following
items to any country which is in the then current list of prohibited
countries specified in the applicable Export Laws:(a) software or
technical data disclosed or provided to Supplier by Company or
Company's subsidiaries or affiliates; or (b) the direct MATERIAL of
such software or technical data. Supplier agrees to promptly inform
Company in writing of any written authorization issued by the U.S.
Department of Commerce office of export licensing to export or
re-export any such items referenced in (a) or (b). The obligations
stated above in this clause will survive the expiration, cancellation
or termination of this Agreement or any other related agreement.
23. FORCE MAJEURE
Neither party shall be held responsible for any delay or
failure in performance of any part of this Agreement to the extent such
delay or failure is caused by fire, flood, strike, civil, governmental,
or military authority, act of God, or other similar causes beyond its
control and without the fault or negligence of the delayed or non
performing party or its subcontractors. Supplier's liability for loss
or damage to Company's MATERIAL in Supplier's possession or control
shall not be modified by this section. When a party's delay or
nonperformance continues for a period of at least fifteen (15) days,
the other party may terminate, at no charge, this Agreement or an order
under the Agreement.
24. GOVERNMENT CONTRACT PROVISIONS
The following provisions regarding equal opportunity, and all
applicable laws, rules, regulations and executive orders specifically
related thereto, including applicable provisions and sections from the
Federal Acquisition Regulation and all supplements thereto are
incorporated in this Agreement as they apply to work performed under
specific U.S. Government contracts: 41 CFR 60-1.4, Equal Opportunity;
41 CFR 60-1.7, Reports and Other Required Information; 41 CFR 60-1.8,
Segregated Facilities; 41 CFR 60-250.4, Affirmative Action For Disabled
Veterans and Veterans of the Vietnam Era (if in excess of $10,000); and
41 CFR 60-741.4, Affirmative Action for Disabled Workers (if in excess
of
<PAGE> 9
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$2,500), wherein the terms "contractor" and "subcontractor" shall
mean "Supplier". In addition, orders placed under this Agreement
containing a notation that the material or services are intended for
use under Government contracts shall be subject to such other
Government provisions printed, typed or written thereon, or on the
reverse side thereof, or in attachments thereto.
25. HEAVY METALS IN PACKAGING
Supplier warrants to Company that no lead, cadmium, mercury or
hexavalent chromium have been intentionally added to any packaging or
packaging component (as defined under applicable laws) to be provided
to Company under this Agreement and that packaging materials were not
manufactured using and do not contain chlorofluorocarbons. Supplier
further warrants to Company that the sum of the concentration levels of
lead, cadmium, mercury and hexavalent chromium in the package or
packaging component provided to Company under this Agreement does not
exceed 100 parts per million. Upon request, Supplier shall provide to
Company Certificates of Compliance certifying that the packaging and/or
packaging components provided under this Agreement are in compliance
with the requirements set forth above in this section.
26. IDENTIFICATION
Supplier shall not, without Company's prior written consent,
engage in publicity related to this Agreement, or make public use of
any Identification in any circumstances related to this Agreement.
Notwithstanding the foregoing, Company and Supplier agree to issue a
mutually acceptable press release regarding this Agreement as soon as
reasonably possible following execution of this Agreement. Company
consents to Supplier's disclosure only of information relating to this
Agreement as may be required by federal and state securities laws and
regulations. Supplier agrees that the specific terms and conditions of
this Agreement shall not be disclosed, and shall be held confidential.
"Identification" means any semblance of any trade name, trademark,
service mark, insignia, symbol, logo, or any other designation, or
drawing of Company or its affiliates. Supplier shall remove or
obliterate any Identification prior to any use or disposition of any
MATERIAL rejected or not purchased by Company.
27. IMPLEADER
Supplier shall not implead or bring an action against Company
based on any claim by any person for personal injury or death to an
employee of Company for which Company has previously paid or is
obligated to pay worker's compensation benefits to such employee or
claimant and for which such employee or claimant could not otherwise
bring legal action against Company.
28. INDEMNITY
28. At Company's request, Supplier agrees to indemnify, defend and hold
harmless Company, its affiliates, employees, successors and assigns
(all referred to as "Company") from and against any losses, damages,
claims, fines, penalties and expenses (including reasonable attorney's
fees) that arise out of or result from: (i) injuries or death to
persons or damage to property, including theft, in any way arising out
of or caused or alleged to
<PAGE> 10
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have been caused by the services performed by, or MATERIAL
provided by Supplier; or
(ii) any failure of Supplier to perform its obligations under this
Agreement. Notwithstanding the foregoing, Supplier's duty of
indemnification pursuant to this article does not arise for loss or
injury caused by:
(i) gross negligence, misuse, abuse of, or accident to the MATERIAL;
(ii) gross negligence by a person other than Supplier or under
Supplier's authority;
(iii) improper or inadequate operation, maintenance, or repair by a
person other than Supplier or under Supplier's authority not in
accordance with this Agreement; (iv) modification to MATERIAL by
Company or a third party in a manner not authorized in writing by
Supplier and not in accordance with this Agreement.
Supplier's obligations pursuant to this article are further subject to
the conditions that Company:
(i) gives Supplier timely notice of any claim or threatened or
actual suit or action;
(ii) gives Supplier sole control of the defense and settlement of such
action, claim or suit and related settlement negotiations; provided
that Supplier may not make any admission of liability on the Company's
behalf, without Company's prior written consent and further provided
that such control shall continue only for so long as Supplier is
defending such claim, suit or action in good faith; and
(iii) reasonably cooperates in the defense and settlement of such
claim, suit or action at Supplier's sole expense.
29. LIMITATION OF LIABILITY
NEITHER PARTY WILL BE LIABLE TO THE OTHER FOR LOST PROFITS,
CONSEQUENTIAL, INDIRECT, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES EVEN
IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
These limitations of liability shall not apply to the Parties
obligations under the clauses INFRINGEMENT, USE OF INFORMATION or
SUPPLIER'S INFORMATION or to any liability arising from or related to
any personal injury (including death) or damage to tangible property
caused by a Party in fulfilling its obligations hereunder.
30. INFRINGEMENT
Supplier shall indemnify and save harmless Company, its
affiliates and their customers, officers, directors, employees (all
referred to in this section as "Company") from and against any losses,
damages, liabilities, fines, penalties, and expenses (including
reasonable attorneys' fees) that arise out of or result from any and
all claims (i) of infringement of any patent, copyright, trademark or
trade secret right, or other intellectual property right, private
right, or any other proprietary or personal interest, and (ii) related
to the subject matter of this Agreement or performance under or in
contemplation of it (an Infringement Claim). If the Infringement Claim
arises solely from Supplier's adherence to Company's written
instructions regarding services or tangible or intangible goods
provided
<PAGE> 11
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by Supplier (Items) and if the Items are not (i) commercial
items available on the open market or the same as such items, or (ii)
items of Supplier's designated origin, design or selection, Company
shall indemnify Supplier. Company or Supplier (at Company's request)
shall defend or settle, at its own expense any demand, action or suit
on any Infringement Claim for which it is indemnitor under the
preceding provisions and each shall timely notify the other of any
assertion against it or any Infringement Claim and shall cooperate in
good faith with the other to facilitate the defense of any such Claim.
31. INSIGNIA
Upon Company's written request, "Insignia", including certain
trademarks, trade names, insignia, symbols, decorative designs or
packaging designs of Company, or evidences of Company's inspection will
be properly affixed by Supplier to the MATERIAL furnished or its
packaging. Such Insignia will not be affixed, used or otherwise
displayed on the MATERIAL furnished or in connection therewith without
written approval by Company. The manner in which such Insignia will be
affixed must be approved in writing by Company in accordance with
standards established by Company. Company shall retain all right, title
and interest in any and all packaging designs, finished artwork and
separations furnished to Supplier. This section does not reduce or
modify Supplier's obligations under the "IDENTIFICATION" and "USE OF
INFORMATION" section.
32. INSURANCE
Supplier shall maintain and cause Supplier's subcontractors to
maintain during the term of this Agreement: (i) Workers' Compensation
insurance as prescribed by the law of the state or nation in which the
Work is performed; (ii) employer's liability insurance with limits of
at least $500,000 for each occurrence; (iii) automobile liability
insurance if the use of motor vehicles is required, with limits of at
least $1,000,000 combined single limit for bodily injury and property
damage for each occurrence; (iv).Commercial General Liability ("CGL")
insurance, ISO 1988 or later occurrence form of insurance including
Blanket Contractual Liability and Broad Form Property Damage, with
limits of at least $1,000,000 combined single limit for bodily injury
and property damage for each occurrence; and (v) if the furnishing to
Company (by sale or otherwise) of MATERIALs or material is involved,
CGL insurance endorsed to include MATERIALs liability and completed
operations coverage in the amount of $2,000,000 per occurrence. All CGL
and automobile liability insurance shall designate Company, its
affiliates, and its directors, officers and employees (all referred to
as "Company") as additional insured. All such insurance must be primary
and non-contributory and required to respond and pay prior to any other
insurance or self-insurance available. Any other coverage available to
Company shall apply on an excess basis. Supplier agrees that Supplier,
Supplier's insurer(s) and anyone claiming by, through, under or in
Supplier's behalf shall have no claim, right of action or right of
subrogation against Company and its customers based on any loss or
liability insured against under the foregoing insurance.
33. INVOICING FOR GOODS
Supplier shall: (i) render original invoice, or as otherwise
specified in this Agreement, showing Agreement and order number,
through routing and weight, (ii)
<PAGE> 12
Sheet 12 of 31
render separate invoices for each shipment within twenty-four (24)
hours after shipment, and (iii) mail invoices with copies of bills of
lading and shipping notices to the address shown on this Agreement or
order. If prepayment of transportation charges is authorized, Supplier
shall include the transportation charges from the F.O.B. point to the
destination as a separate item on the invoice stating the name of the
carrier used.
34. INVOICING FOR STOCKS
If Company requests for reasons other than covered by Section
"FORCE MAJEURE", that shipment be postponed beyond the date shown on a
purchase order, Supplier may invoice Company as of the original
scheduled delivery date for MATERIAL manufactured under this Agreement,
if it has been inspected and approved by Company's designated quality
organization (provided inspection has been specified in this Agreement
or in an order issued under this Agreement).
35. JURISDICTION
Supplier agrees that any action or legal proceeding arising
out of this Agreement shall be brought only in a court of competent
jurisdiction in the United States of America and Supplier expressly
submits to, and accepts the jurisdiction of, any such court in
connection with such action or proceeding and Supplier further consents
to the enforcement of any judgment against it arising therefrom in any
jurisdiction in which it has or shall have any assets.
36. LICENSES
No Licenses, express or implied, under any patents are granted
by either Party to the other Party under this Agreement or order.
37. MARKING
All MATERIAL furnished under this Agreement shall be marked
for identification purposes in accordance with the specifications to be
provided pursuant to this Agreement and as follows:
(a) with Supplier, vendor code 1NH75, model/serial number; and
(b) with month and year of manufacture; and
(c) markings in accordance with the requirements outlined in Company
Specifications KS-23490 and KS 22002, as amended from time to
time, which Supplier has in its possession: and
(d) Common Language Equipment Identification (CLEI) Note: Common
Language and CLEI are trademarks of Bell Communications Research;
and
(e) Company Apparatus code, serial, or model numbers; and
(f) Warranty Eligibility System (WES) tracking information; and
<PAGE> 13
Sheet 13 of 31
(g) Underwriters Laboratories and Federal Communications Commission
markings as appropriate.
In addition, Supplier agrees to add any other identification
which might be requested in writing by Company. Charges, if any for
such additional identification marking shall be as agreed upon by
Supplier and Company prior to the implementation of any change. This
Section does not reduce or modify Supplier's obligations under Section
26 IDENTIFICATION.
38. MONTHLY ORDER AND SHIPMENT REPORTS
Supplier shall render monthly order and shipment reports on or
before the tenth working day of the succeeding month containing the
information required on the Company's monthly order and shipment
reports. These forms will be furnished by Company.
39. NON DISCLOSURE AGREEMENT
Whereas Company and Supplier each expect to disclose to the
other party certain information concerning MATERIALs, business and
strategies which are considered confidential and proprietary and which
neither party wants to disclose to others, they have entered into a Non
Disclosure Agreement dated as of July 21, 1999. This section does not
reduce or modify Supplier's obligations under Section "USE OF
INFORMATION" or Company's obligations under "SUPPLIER'S INFORMATION."
40. NON WAIVER
The failure of either party at any time to enforce any right
or remedy available to it under this Agreement or otherwise with
respect to any breach or failure by the other party shall not be
construed to be a waiver of such right or remedy with respect to any
other breach or failure by the other party.
41. NOTICES
Any notice given or demanded which under the terms of this
Agreement or under any statute must or may be given or made by Supplier
or Company shall be in writing and shall be given or made by confirmed
facsimile, or similar communication or by certified or registered mail
addressed to the respective parties as follows
To Company: Lucent Technologies Inc.
Global Procurement Organization
188 Mt. Airy Road
Room C222
Basking Ridge, NJ 07920
Attn.: Kevin R. Hazzard
-OR-
<PAGE> 14
Sheet 14 of 31
To Supplier: Turnstone Systems, Inc.
274 Ferguson Avenue
Mountain View, CA 94043
Attn: Contracts Administration
Such notice or demand shall be deemed to have been given or
made when sent by facsimile, or other communication or when deposited,
postage prepaid in the U.S. mail.
The above addresses may be changed at any time by giving prior
written notice as above provided.
42. OPERATING SYSTEM SOFTWARE
The term MATERIAL includes any software (operating program in
machine readable form and related documentation) and storage media
therefor normally embedded in the MATERIAL. Title to the software,
including copyright, shall remain in Supplier. The party having title
to the MATERIAL shall have title to the software storage media. For the
life of the MATERIAL listed in this Agreement, Supplier grants to
Company and any subsequent purchaser, lessee or other end user
(referred to collectively in this section as "end user") a
non-exclusive license to use said software on the MATERIAL on which it
was delivered. Company and any subsequent end user may copy the
software for use on such MATERIAL with which it was originally
delivered and for archival purposes, but shall not knowingly reproduce
either the original software for distribution to others.
43. OZONE DEPLETING CHEMICALS
Supplier hereby warrants that it is aware of international
agreements and pending legislation in several nations, including the
United States, which would limit, ban and/or tax importation of any
MATERIAL containing, or produced using ozone depleting chemicals
("ODCs"), including chlorofluorocarbons, halons and certain chlorinated
solvents. Supplier hereby warrants that the MATERIAL furnished to
Company will conform to all applicable requirements established
pursuant to such agreements, legislation and regulations, and the
MATERIAL furnished to Company will be able to be imported and used
lawfully (and without additional taxes associated with ODCs not
reported to Company by Supplier as set forth in this section) under all
such agreements, legislation and requirements. Supplier also warrants
that it is currently reducing, or if Supplier is not the manufacturer
of the MATERIAL, is currently causing the manufacturing vendor to
reduce and will, in an expeditious manner, eliminate, or, as
applicable, have its manufacturing vendor eliminate the use of ODCs in
the manufacture of the MATERIAL.
If the MATERIAL furnished by Supplier under this Agreement is
manufactured outside the United States, Supplier shall, upon execution
of this Agreement, and at any time that new MATERIALs are added to this
Agreement or changes are made to the MATERIAL furnished under this
Agreement, complete, sign and return to Company the
<PAGE> 15
Sheet 15 of 31
attached ODC Content Certification. The ODC Content Certification must
be signed by Supplier's facility manager, corporate officer or his
delegate.
The term "ODC content" on the ODC Content Certification means
the total pounds of ODC used directly in the manufacture of each unit
of MATERIAL. This includes all ODCs used in the manufacturing and
assembly operations for the MATERIAL plus all ODCs used by Supplier's
vendors and any other vendors in producing components or other
MATERIALs incorporated into the MATERIAL sold to Company.
Supplier is responsible to obtain information on the ODC
content of all components and other MATERIALs acquired to manufacture
the MATERIAL and to incorporate such information into the total ODC
content reported to Company. Provided however, that Supplier should not
include in the ODC content those components or other MATERIALs which
are manufactured in the United States. Supplier hereby warrants to
Company that all information furnished by Supplier on the ODC Content
Certification is complete and accurate and that Company may rely on
such information for any purpose, including but not limited to
providing reports to government agencies or otherwise complying with
applicable laws. Supplier shall defend, indemnify and hold Company
harmless of and from any claims, demands, suits, judgments,
liabilities, fines, penalties, costs and expenses (including additional
ODC taxes as provided for in paragraph one of this section and
reasonable attorney's fees) which Company may incur under any
applicable federal, state, or local laws or international agreements,
and any and all amendments thereto by reason of Company's use of
reliance on the information furnished to Company by Supplier on the ODC
Content Certification or by reason of Supplier's breach of this
section. Supplier shall cooperate with Company in responding to any
inquiry concerning the use of ODCs to manufacture the MATERIAL or
components thereof and to execute without additional charge any
documents reasonably required to certify the absence or quantity of
ODCs used to manufacture the MATERIAL or components thereof.
44. OZONE DEPLETING SUBSTANCES LABELING
Supplier warrants and certifies that all MATERIAL and other
MATERIALs, including packaging and packaging components, provided to
Company under this Agreement have been accurately labeled, in
accordance with the requirements of 40 CFR, Part 82 entitled
"Protection of Stratospheric Ozone, Subpart E- The Labeling of
MATERIALs Using Ozone Depleting Substances."
45. 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 specifications PKG-91NJ1045
"Packaging, Packing, Palletization, Labeling and Marking Requirements
for Material being Delivered to Lucent Technologies Manufacturing and
Distribution Locations", and KS-23490 "MATERIAL Bar Code, Serial and
Comcode Label," as changed from time to time with Supplier's written
<PAGE> 16
Sheet 16 of 31
approval.
All electronic plug-ins shipped separately from their
associated frames or mountings must be packaged using Electrostatic
Shielded Packaging. Electrostatic Shielded Packaging is defined herein
as packaging that meets the applicable requirements for `ELECTROSTATIC
SHIELDING TYPE' packaging as prescribed in Electronic Industries
Association (EIA) Interim Standard IS-5-A (`Packaging Material
Standards for ESD Sensitive Items').
Supplier will package MATERIAL individually (except for small
parts, such as screws) with appropriate protective material to
guarantee safe arrival (e.g., plug-in boards should be in static
controlled packaging and/or padded cartons). Bulk packaging of MATERIAL
and parts is acceptable if agreed to by both parties. Each box will
contain MATERIAL or parts ordered under a single purchase order, but
multiple boxes may be placed in a larger container. Supplier will, when
so requested by Company and without additional charge, provide and
affix to each MATERIAL packaging, bar code labels as Company will
specify.
46 POINT OF SALE INFORMATION
Company shall provide Supplier, on a monthly basis, data on
the location of Company's customers who purchase Supplier's MATERIAL
pursuant to this Agreement for the purpose of Supplier compensating
Supplier's sales personnel.
47. MATERIAL CHANGES
Supplier shall provide Company with at least thirty (30) days,
prior written notice of any change proposed to be made in accordance
with this Agreement, or in the Specification and documentation covered
by this Agreement that would impact upon: (i) reliability, (ii)
requirements of the Specification, or (iii) form, fit or function (as
defined below).
The only exception will be in those cases where an extremely
hazardous or unsatisfactory condition requires immediate action. In
such cases, verbal notification shall be made, followed by Supplier's
immediate written confirmation. Procedures for reporting MATERIAL
changes are described in the "MATERIAL Change Notice Procedure" section
of the Bellcore "Generic Requirements for Product Change Notices,"
GR-209-CORE, Issue 3, September 1998.
Supplier shall submit changes to the following address:
Lucent Technologies Inc.
Room 3A-415C
200 Schulz Dr.
Red Bank, NJ 07701
Attn.: Norman I. Ginsburg
<PAGE> 17
Sheet 17 of 31
If, as mutually agreed by Company and Supplier, sufficient
changes have been made to warrant a MATERIAL re-qualification, such
re-qualification will be performed at no cost to Company unless
otherwise agreed. MATERIAL shall be in accordance with the latest
information stated or referenced in the Specification.
If the plan for MATERIAL Change is not accepted by Company, 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 this Agreement and
to terminate any or all orders for MATERIAL affected by such change.
Notwithstanding the above, Supplier shall continue to provide the
current MATERIAL for a period of twelve (12) months from the date the
change is effective.
48. MATERIAL CONFORMANCE REVIEWS
Supplier shall, utilizing documented procedures specified
herein, make such tests and inspections as are necessary to insure that
MATERIAL meets all technical requirements of the MATERIAL
specification. Supplier shall provide, without charge, any production
testing facilities and personnel required to inspect the MATERIAL under
Quality Program Specification (QPS) No. 40.030, as changed from time to
time with Supplier's written approval. Company reserves the right to
inspect MATERIAL prior to shipment from Supplier or Supplier's
subcontractor(s). Such inspection shall be conducted by Company's
Engineering and Environmental Technologies (EE&T) organization
utilizing a 0.65% Acceptability Level (AQL) sampling plan as described
in QPS 40.030. If MATERIAL fails inspection, Supplier agrees to pay for
all re-inspection costs. Inspection requirements may be waived only by
written notification from Company's Engineering and Environmental
Technologies (EE&T) organization. In the event that any or all work
under this Agreement is subcontracted to another Supplier, Company
reserves the right to conduct the aforementioned inspections at the
subcontractors facilities.
49. MATERIAL DOCUMENTATION
Supplier shall furnish, at no charge, MATERIAL documentation,
and any succeeding changes thereto, as described in the Technical
Specification. Company may use, reproduce, reformat, modify and
distribute such MATERIAL documentation, subject in each instance to
Supplier's prior review and written approval, which approval shall not
be unreasonably withheld.
Company shall reproduce Supplier's copyright notice contained
in any documentation reproduced without change by Company. For
documentation, which is reformatted or modified by Company, Company
shall have the right to place only Company's own copyright notice on
the reformatted or modified documentation. It is the intent of the
parties that Company's copyright notice shall be interpreted to protect
the underlying copyright rights of Supplier to the documentation to the
extent such underlying rights are owned by Supplier.
<PAGE> 18
Sheet 18 of 31
50. PURCHASE ORDERS
Purchase orders issued under this Agreement shall be sent to
the following address:
Turnstone Systems, Inc.
274 Ferguson Avenue
Mountain View, CA 94043
FAX: (650) 428-0200
Attn.: Customer Service
Purchase orders shall specify: (i) description of MATERIAL,
inclusive of any numerical/alphabetical identification referenced in
the price list in this Agreement, (ii) delivery date, (iii) applicable
price, (iv) location to which the MATERIAL is to be shipped and (v)
location to which invoices shall be sent for payment.
51. REGISTRATION AND RADIATION STANDARDS
When MATERIAL furnished under this Agreement is subject to
Part 68, Part 15 or any other part of the Federal Communication
Commission's Rules and Regulations, as may be amended from time to time
(hereinafter "FCC Rules"), Supplier warrants that such MATERIAL
complies with the registration, certification, type-acceptance and/or
verification standards of the FCC Rules including, but not limited to,
all labeling, customer instruction requirements, and the suppression of
radiation to specified levels. Supplier shall also establish periodic
on-going compliance retesting and follow a Quality Control program,
submitted by Company, to assure that MATERIAL shipped complies with the
applicable FCC Rules. Supplier shall indemnify and save Company
harmless from any liability, fines, penalties, claims or demands
(including the costs, expenses and reasonable attorney's fees on
account thereof) that may be made because of Supplier's noncompliance
with the applicable FCC Rules. Supplier shall defend Company, at
Company's request, against such liability, claim or demand.
In addition, should MATERIAL which is subject to Part 15 of
the FCC Rules, during use generate harmful interference to radio
communications, Supplier shall provide the Company information relating
to methods of suppressing such interference and pay the cost of
suppressing such interference or, at the option of Company, accept the
return of the MATERIAL and refund to Company the price paid for the
MATERIAL less a reasonable amount for depreciation, if applicable.
To the extent that MATERIAL furnished under this Agreement is
also subject to FCC Rules governing the use of the MATERIAL as a
component in a system as identified in Supplier's Technical
Specifications, Company shall be responsible for compliance with the
applicable FCC Rules governing the system. Supplier shall fully
cooperate with Company, by providing technical support and information,
and, upon written request from Company, shall modify MATERIAL to enable
Company to ensure ongoing compliance with the FCC Rules. Company shall
pay any increase in Supplier's costs and/or expenses
<PAGE> 19
Sheet 19 of 31
resulting from Company's request to modify MATERIAL to enable Company
to comply with the FCC Rules.
Nothing in this section shall be deemed to diminish or
otherwise limit Supplier's obligations under the "WARRANTY" section or
any other section of this Agreement.
52. INSPECTION OF MATERIAL
Company may perform a visual and functional inspection of
MATERIAL received prior to acceptance or rejection, and may refuse to
accept MATERIAL which does not conform to the specifications of this
Agreement. Company agrees to conduct such inspection within [***]
([***]) days. If, after [***] ([***]) calendar days from the date of
delivery by Supplier, Company has not rejected MATERIAL by providing
written notice to Supplier, it will be deemed accepted by Company. For
purposes of this provision, functional and visual inspection shall have
the same meaning as in paragraph 21 herein; i.e., confirmation that the
MATERIAL does not contain one or more major defects that would make the
MATERIAL unfit for use or installation, or that, during test, the
MATERIAL operates as specified. The above shall not limit Supplier's
obligations under the clauses WARRANTY and EPIDEMIC CONDITION.
Company may only reject MATERIAL which has failed the above
visual and/or functional inspection. Company's sole remedies upon
rejection of MATERIAL are: (1) return rejected MATERIAL for full credit
at the price charged plus delivery charges; or (2) have rejected
MATERIAL replaced by Supplier at the purchase price stipulated in this
Agreement. Supplier shall incur all transportation costs and assume
in-transit risk of loss and damage of all MATERIAL returned under this
provision to Supplier.
53. RELEASES VOID
Neither party shall require (i) waivers or releases of any
personal rights or (ii) execution of documents which conflict with the
terms of this Agreement, from employees, representatives or customers
of the other in connection with visits to its premises and both parties
agree that no such releases, waivers or documents shall be pleaded by
them or third persons in any action or proceeding.
54. REPAIRS NOT COVERED UNDER WARRANTY
In addition to repairs provided for in the "WARRANTY" section
Supplier shall provide repair service on all MATERIAL ordered under
this Agreement during the term of this Agreement. MATERIAL to be
repaired under this section will be returned to a location designated
by Supplier, and unless otherwise agreed upon by Supplier and Company,
Supplier shall ship the repaired MATERIAL which meets the
Specifications set forth in the "SPECIFICATIONS OR DRAWINGS" section
and all other Specifications within 10 business days of receipt of the
defective or non-conforming MATERIAL. With the concurrence and
scheduling of Company, repair may be made by Supplier on site.
If MATERIAL is returned to Supplier for repair as provided for
in this section and is determined to be beyond repair, Supplier shall
so notify Company. If requested by
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***Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
<PAGE> 20
Sheet 20 of 31
Company, Supplier will sell to Company a replacement at the price set
forth in Supplier's then current agreement with Company for said
MATERIAL or, if no such agreement exists, at a price agreed upon by
Supplier and Company. If the parties fail to agree on a price, the
price shall be a reasonably competitive price for such MATERIAL at the
time for delivery. Further, if requested by Company, Supplier shall
take the necessary steps to dispose of the unrepairable MATERIAL and
pay to Company the salvage value, if any. Replacement and repaired
MATERIAL shall be warranted as set forth in the "WARRANTY" section.
This Agreement does not grant Supplier an exclusive privilege
to repair any or all of the MATERIAL purchased under this Agreement for
which Company may require repair; and Company may perform the repairs
or contract with others for these services.
All transportation costs of and in transit risk of loss and
damage to MATERIAL returned to Supplier for repair under this section
will be borne by Company and all transportation costs of and in transit
risk of loss and damage to such repaired or replacement MATERIAL
returned to Company will be borne by Company.
Repairs performed under this section will be charged on a Time
and Materials basis as according to Supplier's then current Time and
Material charges.
55. REPAIR PROCEDURES
Company shall furnish the following information with MATERIAL
returned to Supplier for repair: (a) Company's name and complete
address; (b) name(s) and telephone numbers(s) of Company's employee(s)
to contact in case of questions about the MATERIAL to be repaired; (c)
ship-to address for return of repaired MATERIAL if different than (a);
(d) a complete list of MATERIAL returned; (e) the nature of the defect
or failure if known; and (f) whether or not returned MATERIAL is in
warranty. Supplier shall, within ten (10) days of the execution of this
Agreement, provide a written notice to Company specifying (i) the
name(s) and telephone number(s) of the individual(s) to be contacted
concerning any questions that may arise concerning repair, and (ii) if
required, any special packing of MATERIAL which might be necessary to
provide adequate in-transit protection from transportation damage.
MATERIAL repaired by Supplier shall have the repair completion
date stenciled or otherwise identified in a permanent manner at a
readily visible location on the MATERIAL and the repaired MATERIAL
shall be returned with a tag or other papers describing the repairs
which have been made.
All invoices originated by Supplier for repair services must
be clearly identified as such, and must contain: (i) a reference to
Company's purchase order for these repair services, (ii) a detailed
description of repairs made by Supplier and the need therefor, and
(iii) an itemized listing of parts and labor charges, if any. Replaced
parts will, upon request, be available for inspection by or returned to
Company. Further, the provisions of the "INVOICING" and "SHIPPING"
sections, other than provisions relating to
<PAGE> 21
Sheet 21 of 31
transportation charges with respect to MATERIAL repaired under
warranty, shall apply to Supplier's return to Company of repaired
MATERIAL.
56. RIGHT OF ENTRY
Each party shall have the right to enter the premises of the
other party during standard business hours with respect to the
performance of this Agreement, including an inspection or a Quality
Review, subject to all plant rules and regulations, clearances,
security regulations and procedures as applicable. Each party shall
provide safe and proper facilities for such purpose. No charge shall be
made for such visits. It is agreed that prior notification will be
given when access is required.
57. SAFETY CERTIFICATION
All MATERIAL purchased under this Agreement shall be designed
to be in compliance with the applicable Underwriters Laboratories
(UL)and Canadian Standards Association (CSA) rules and regulations. It
is agreed that Supplier shall be responsible for filing the required
documents to obtain compliance with said Underwriters Laboratories
Standards and Canadian Standards. Supplier shall be responsible for
making the MATERIAL available for testing.
58. SECTION HEADINGS
The headings of the sections in this Agreement are inserted
for convenience only and are not intended to affect the meaning or
interpretation of this Agreement.
59. 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.
60. SEVERABILITY
If any of the provisions of this Agreement shall be invalid or
unenforceable, such invalidity or unenforceability shall not invalidate
or render unenforceable the entire Agreement, but rather the entire
Agreement shall be construed as if not containing the particular
invalid or unenforceable provision or provisions, and the rights and
obligations of Supplier and Company shall be construed and enforced
accordingly.
61. SHIPPING
Supplier shall: (i) ship the MATERIAL covered by this
Agreement or order complete unless instructed otherwise, (ii) ship to
the destination designated in the Agreement or order, (iii) ship
according to routing instructions given by Company, (iv) place the
Agreement and order number on all subordinate documents, (v) enclose a
packing memorandum with each shipment and, when more than one package
is shipped, identify the package containing the memorandum; and (vi)
mark the 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
<PAGE> 22
Sheet 22 of 31
Company without a writing. If Supplier does not comply with the terms of
the FOB section of the Agreement or order or with Company's shipping or
routing instructions, Supplier authorizes Company to deduct from any
invoice of Supplier (or to charge back to Supplier), any increased cost
incurred by Company as a result of Supplier's noncompliance.
62. SHIPPING INTERVAL
The delivery schedule applicable to each purchase order will
be agreed upon by Supplier and Company and set forth in the purchase
order. (Note: Supplier has indicated that MATERIAL can usually be
shipped an average of [***] business days after receipt of Company's
purchase order for forecasted demand; however, in no event shall the
delivery interval exceed [***] business days after receipt of purchase
order.)
If Supplier exceeds the above maximum interval 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, 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) business days of Supplier's receipt of returned
MATERIAL, Supplier shall reimburse Company for the 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
APPENDIX A, less applicable discounts which shall be applied on the
basis of the quantity specified in the purchase order.
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.
63. STORAGE OF PAID FOR STOCK
Subject to the section "OPERATING SYSTEM SOFTWARE", Company
has and shall have at all times all right, title and interest in all
MATERIAL invoiced to Company in accordance with the section "INVOICING
FOR STOCKS". Such MATERIAL shall be referred to in this section as
"Company Property." Supplier shall store such Company Property without
cost to Company at Supplier's A-Plus Manufacturing Corp. 2381 Bering
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***Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
<PAGE> 23
Sheet 23 of 31
Drive San Jose, CA 95131 facility and ship such Company Property as
ordered by Company. In addition, Supplier shall:
(i) Be responsible for the safekeeping of the Company
Property, assume all risks of loss or damage to the same and be liable
for the full actual value of such Company Property. In case of removal
of all or any part of the Company Property from one building to
another, Supplier's responsibility for loss or damage shall continue
and Supplier shall give Company at least ten (10) days advance notice
in writing of the removal, except when the removal is required to
comply with Company's shipping orders or to protect the Company
Property from loss or damage.
(ii) Permanently mark or if impracticable to do so then affix
labeling stating that the Company Property is the "PROPERTY OF LUCENT
TECHNOLOGIES INC." For purposes of this section, the term "LUCENT
TECHNOLOGIES INC." shall be deemed to mean Company or the Company
affiliated or associated company which owns the tooling, as applicable.
(iii) Store the Company Property safely, indoors in protected
areas approved by Company. Store the Company Property segregated from
other property in sections of Supplier's plant marked Property of
Company.
(iv) Deliver the Company Property only to Company or Company's
designated customers in accordance with Company's orders or upon
Company's demand, FOB Supplier's plant without additional charge for
removal, packing, or crating.
(v) Supplier shall not allow any security interest, lien, tax
lien or other encumbrance (collectively referred to as "encumbrance")
to be placed on any Company Property. Supplier shall give Company
immediate written notice should any third party attempt to place or
place an encumbrance on such Company Property. 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 Company Property. This Agreement shall
constitute the security agreement required by the UCC of the
appropriate state.
(vi) Company may inspect, inventory, and authenticate the
account of the Company Property during Supplier's normal business
hours. Supplier shall provide Company access to the premises where all
such Company Property is located.
The obligations assumed by Supplier with respect to the
Company Property 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 twenty-four (24) hours
notice to Supplier, Company may cancel this Agreement in whole or in
part or withdraw all or any part of the Company Property, or both.
Supplier shall, at Company's
<PAGE> 24
Sheet 24 of 31
option, return to Company or hold for Company's disposition any or all
of such Company Property in Supplier's possession.
64. SUPPLIER'S INFORMATION
Company shall view as Supplier's property any document, print,
tape, disc, tool, or other tangible information-conveying or
performance-aiding article owned or controlled by Supplier and
identified by Supplier as proprietary/confidential either in writing or
orally. The aforementioned material and information may be identified
by Supplier as proprietary/confidential verbally and shall be followed
up by written notice from Supplier to Company. Company shall, at no
charge to Supplier, and as Supplier directs, destroy or surrender to
Supplier promptly at its request any such article or any copy of such
Information. Company shall keep Information confidential and use it
only in performing under this Agreement and obligate its employees,
subcontractors and others working for it to do so, provided that the
foregoing shall not apply to information previously known to Company
free of obligation, or made public through no fault imputable to
Company.
65. SURVIVAL OF OBLIGATIONS
The obligations of the parties under this Agreement which by
their nature would continue beyond the termination, cancellation or
expiration of this Agreement shall survive termination, cancellation or
expiration of this Agreement.
66. TAXES
Company shall reimburse Supplier only for the following tax
payments with respect to transactions under this Agreement unless
Company advises Supplier than an exemption applies: state and local
sales and use taxes, as applicable. Taxes payable by Company shall be
billed as separate items on Supplier's invoices and shall not be
included in Supplier's prices. Company shall have the right to have
Supplier contest any such taxes that Company deems improperly levied at
Company's expense and subject to Company's direction and control.
67. TECHNICAL SUPPORT
Company will be the primary interface to the customer and
will provide Tier 1, Tier 2 and Tier 3 technical customer support.
Supplier will provide Tier 4 technical customer support. "Tier
4" means the fourth of four levels of technical customer support and
addresses issues escalated from Tier 3 when either the source of the
issue cannot be identified, or the issue is identified and must be
addressed by the manufacturer of the MATERIAL. Tier 4 technical
customer support will be provided 24 hours a day, 7 days a week via
telephone to Company's support personnel at no charge. Supplier's
response time shall be within 30 minutes on Monday through Friday, 9 am
- 6pm (Central Time), and within 2 hours at all other times. Nine (9)
months after the effective date of this Agreement and every six months
thereafter, Supplier may request a review of Company's Tier 4 support
requests that Supplier believes do not fit into the category of support
issues as defined in this Section. Company shall be given a
<PAGE> 25
Sheet 25 of 31
reasonable cure period to correct any problem areas identified in the
review before re-opening the Tier 4 compensation provision of this
Section.
Company shall be entitled to ongoing technical support,
including field service and assistance and technical support in the
development of customer proposals, provided, however, 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 the WARRANTY Section or elsewhere provided for in this
Agreement.
It is the intent of this Agreement that the Supplier shall
provide initial training and ongoing occasional updates. Charges for
field service technical support, will be based on Supplier's then
current standard charges for such services.
68. TERMINATION OF PURCHASE ORDER
Company may at any time terminate any portion or the total
quantity of any purchase order(s) placed under this Agreement.
Company's liability to Supplier with respect to such termination shall
be limited to (i) Supplier's purchase price of all components for the
MATERIAL (not usable in Supplier's other operations or salable to
Supplier's other customers), plus (ii) the actual costs incurred by
Supplier in procuring and manufacturing MATERIAL (not usable in
Supplier's other operations or salable to Supplier's other customers)
in process as of the date of giving notice of termination, less (iii)
any salvage value thereof. However, no such termination charges will be
invoiced if, within sixty (60) days of notice of termination, MATERIAL
equivalent in kind to that being terminated is ordered by Company. If
requested, Supplier shall substantiate such cost and price with proof
satisfactory to Company.
69. TIMELY PERFORMANCE
If Supplier has knowledge that anything prevents or threatens
to prevent the timely performance of the Work under this Agreement,
Supplier shall immediately notify Company's Representative thereof and
include all relevant information concerning the delay or potential
delay.
70. TITLE AND RISK OF LOSS
Title (other than software) and risk of loss and damage to
MATERIAL including software purchased by Company under this Agreement
or an order issued pursuant to 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 including, but not limited to, unloading,
installation, or testing to be performed after delivery, Supplier shall
retain title and risk loss and damage to the MATERIAL until the
additional services have been performed. If Supplier is authorized to
invoice Company for MATERIAL prior to shipment or prior to the
performance of additional services, title to MATERIAL (other than
software) 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.
<PAGE> 26
Sheet 26 of 31
71. TOXIC SUBSTANCES AND MATERIAL HAZARDS
Supplier hereby warrants to Company that, except as expressly
stated elsewhere in this Agreement, all MATERIAL furnished by Supplier
as described in this Agreement is safe for its foreseeable use, is not
defined as a hazardous or toxic substance or material under applicable
federal, state or local law, ordinance, rule, regulation or order
(hereinafter collectively referred to as "law" or "laws"), and presents
no abnormal hazards to persons or the environment. Supplier also
warrants that it has no knowledge of any federal, state or local law,
that prohibits the disposal of the MATERIAL as normal refuse without
special precautions except as expressly stated elsewhere in this
Agreement. Supplier also warrants that where required by law, all
MATERIAL furnished by Supplier is either on the EPA Chemical Inventory
compiled under Section 8 (a) of the Toxic Substance Control Act, or is
the subject of an EPA-approved pre manufacture notice under 40 CFR Part
720. Supplier further warrants that all MATERIAL furnished by Supplier
complies with all use restrictions, labeling requirements and all other
health and safety requirements imposed under federal, state, or local
laws. Supplier further warrants that, where required by law, it shall
provide to Company, prior to delivery of the MATERIAL, a Material
Safety Data Sheet which complies with the requirements of the
Occupational Safety and Health Act of 1970 and all rules and
regulations promulgated thereunder.
Supplier shall defend, indemnify and hold Company harmless for
any expenses (including, but not limited to, the cost of substitute
material, less accumulated depreciation) that Company may incur by
reason of the recall or prohibition against continued use or disposal
of MATERIAL furnished by Supplier as described in its Agreement whether
such recall or prohibition is directed by Supplier or occurs under
compulsion of law. Company shall cooperate with Supplier to facilitate
and minimize the expense of any recall or prohibition against use or
disposal of MATERIAL directed by Supplier or under compulsion of law.
Supplier further shall defend, indemnify and hold Company
harmless of and from any claims, demands, suits, judgments,
liabilities, costs and expenses (including reasonable attorney's fees)
which Company may incur under any applicable federal, state or local
laws, and any and all amendments thereto, including but not limited to
the Comprehensive Environmental Response, Compensation and Liability
Act of 1980; the Consumer MATERIAL Safety Act of 1972; the Toxic
Substance Control Act; Fungicide, Rodenticide Act; the Occupational
Safety and Health Act; and the Atomic Energy Act; and any and all
amendments to all applicable federal, state, or local laws, by reason
of Company's acquisition, use, distribution or disposal of MATERIAL
furnished by Supplier under this Agreement.
72. TRAINING
Supplier will provide instructional Source Material, at no
charge, that can be used by Company to generate Customer Training
materials. Supplier will provide two (2) train-the-trainer courses, at
no charge, for Company's personnel at a level mutually agreed upon so
that Company will be able to effectively market and support Supplier's
MATERIAL.
<PAGE> 27
Sheet 27 of 31
Additional courses will be made available to Company at
Supplier's then current rates. The training will include, but not be
limited to the MATERIAL's features, competitive information, target
markets and selling strategies, as well as technical aspects of the
MATERIAL to enable Company to properly configure Supplier's MATERIAL to
operate with Company's MATERIALs and provide technical support.
73. USE OF INFORMATION
Supplier shall view as Company's property any idea, data,
program, technical, business or other intangible information, however
conveyed, and any document, print, tape, disc, tool, or other tangible
information-conveying or performance-aiding article owned or controlled
by Company, and provided to, or acquired by, Supplier under or in
contemplation of this Agreement (Information). Supplier shall, at no
charge to Company, and as Company directs, destroy or surrender to
Company promptly at its request any such article or any copy of such
Information. Supplier shall keep Information confidential and use it
only in performing under this Agreement and obligate its employees,
subcontractors and others working for it to do so, provided that the
foregoing shall not apply to information previously known to Supplier
free of obligation, or made public through no fault imputable to
Supplier.
74. VARIATION IN QUANTITY
Company assumes no liability for MATERIAL produced, processed
or shipped in excess of the amount specified in this Agreement or in an
order issued pursuant to this Agreement.
75. WARRANTY
Supplier warrants to Company that MATERIAL furnished will be
new, free from defects in design, material and workmanship and will
conform to and perform in accordance with the Specifications. These
warranties shall continue for a period of twelve (12) months from the
date of acceptance by Company, but in no event more than 13 months from
the date of shipment.
Supplier also warrants to Company that services will be
performed in a first class, workmanlike manner. In addition, if
MATERIAL furnished contains one or more manufacturer's warranties,
Supplier hereby assigns such warranties to Company. 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.
Defective or non-conforming MATERIAL will 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. . Unless otherwise agreed upon by Supplier and Company,
Supplier shall complete repairs and ship the repaired MATERIAL within
ten (10) business days of receipt of defective or non- conforming
MATERIAL, or at Company's option, ship replacement MATERIAL within ten
(10) business days after verbal notification is given Supplier by
Company. Supplier shall bear the risk of in-transit
<PAGE> 28
Sheet 28 of 31
loss and damage and shall prepay and bear that cost of freight for
shipments to Company of repaired or replaced MATERIAL.
If MATERIAL returned to Supplier 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, Supplier shall ship replacement MATERIAL without
charge within ten (10) business days of such notification.
Replacement MATERIAL shall be warranted as set forth above in
this "WARRANTY" section. Any MATERIAL which is repaired, modified, or
otherwise serviced by Supplier shall be warranted as provided in this
"WARRANTY" section 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) business days after the MATERIAL is
returned to a Customer, whichever is later.
If Supplier is unable to find any defect or nonconformity, the
material will be returned to Company at Company's expense.
EXCEPT FOR THE WARRANTIES EXPRESSLY SET FORTH IN THIS
AGREEMENT, SUPPLIER MAKES NO OTHER WARRANTIES REGARDING THE MATERIAL,
ANY SOFTWARE INCORPORATED THEREIN OR ANY SERVICES PROVIDED THEREWITH
AND HEREBY DISCLAIMS ANY AND ALL SUCH OTHER WARRANTIES, EXPRESS, OR
IMPLIED OR STATUTORY, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR PARTICULAR PURPOSE, WHICH ARE HEREBY
EXCLUDED. SUPPLIER'S LIABILITY UNDER THE WARRANTY SHALL BE LIMITED TO A
REFUND OF THE COMPANY'S PURCHASE PRICE OR REPAIR OF THE MATERIAL. IN NO
EVENT SHALL SUPPLIER BE LIABLE FOR THE COST OF PROCUREMENT OF
SUBSTITUTE GOODS BY THE COMPANY OR FOR ANY SPECIAL, CONSEQUENTIAL OR
INCIDENTAL DAMAGES FOR BREACH OF WARRANTY.
76. YEAR 2000 WARRANTY
With respect to all Material, Equipment, Services and Software
provided to Company under this Agreement, Supplier warrants to Company
that: (i) the operation of such deliverables on or after January 1,
2000, without limitation as to date, shall in no way be different from
their operation prior to that date; and (ii) such deliverables will be
able to process, store, record and present data containing dates in the
Year 2000, and thereafter without limitation as to date, in the same
manner as data containing dates prior to the Year 2000. Supplier
further warrants that to the extent its internal systems impact its
relationship with Company, such systems also comply with the foregoing
warranties. Upon request by Company, Supplier agrees to: (i) provide
written certification of the foregoing warranties to Company; and (ii)
allow Company to reasonably verify compliance with these warranties.
<PAGE> 29
Sheet 29 of 31
77. ENTIRE AGREEMENT
This Agreement shall incorporate the typed or written
provisions on Company's orders issued pursuant to this Agreement and
shall constitute the entire agreement between the parties with respect
to the subject matter of this Agreement and the order(s) and shall not
be modified or rescinded, except by a writing signed by Supplier and
Company. Printed provisions on the reverse side of
Company's orders (except as specified otherwise in this Agreement) and
all provisions on Supplier's forms shall be deemed deleted. Estimates
or forecasts furnished by Company shall not constitute commitments. The
provisions of this Agreement supersede all contemporaneous oral
agreements and all prior oral and written communications, and
understandings of the parties with respect to the subject matter of
this Agreement.
Accepted (Date): December 9, 1999
TURNSTONE SYSTEMS, INC. LUCENT TECHNOLOGIES INC.
By: /s/ Richard N. Tinsley By: /s/ Kevin R. Hazzard
----------------------------- --------------------------
Name (Print): Richard N. Tinsley Name (Print): Kevin R. Hazzard
Title: CEO Title: Buyer-Specialist
ATTACHMENT - The following Attachment is hereby made part of the Agreement:
Appendix A Turnstone Copper CrossConnect Price Guide
<PAGE> 30
TURNSTONE COPPER CROSS CONNECT PRICE GUIDE
<TABLE>
<CAPTION>
LUCENT MANUFACTURER LIST
COMCODE PART NO. PRODUCT DESCRIPTION PRICE [***] [***] [***]
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
408129344 CSX100-23 Copper Xconn Loop Management Sys w/4 line cards $28,970.00 $[***] $[***] $[***]
- ---------------------------------------------------------------------------------------------------------------------------------
408165728 600003 Module, L140 Line card, 25 pair $3,395.00 $[***] $[***] $[***]
- ---------------------------------------------------------------------------------------------------------------------------------
408165736 600004 Module, P100 Processor card $8,795.00 $[***] $[***] $[***]
- ---------------------------------------------------------------------------------------------------------------------------------
408172948 600000 23" Chasis, for Copper Xconn base system $6,595.00 $[***] $[***] $[***]
- ---------------------------------------------------------------------------------------------------------------------------------
600001 19" Chasis, for Copper Xconn base system $6,295.00 $[***] $[***] $[***]
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* [***]
** [***]
*** [***]
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
LUCENT MANUFACTURER LIST
COMCODE PART NO. PRODUCT DESCRIPTION PRICE [***]
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
600026 Module, M101 Central Office Management Card $ 2,495.00 $ [***]
- -----------------------------------------------------------------------------------------------------------
</TABLE>
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