MANUFACTURING AGREEMENT
Exhibit 10.10
MANUFACTURING AGREEMENT
THIS AGREEMENT is made effective as of May 29, 2005 by and between:
FABRINET (CAYMAN ISLANDS), an exempted company existing and duly organised under the law of the Cayman Islands, (hereinafter referred to as “FC”) of the one part; and
FBN NEW JERSEY HOLDINGS CORP., a corporation formed under the laws of the State of Delaware having registered office at 200 Ludlow Drive, Ewing, NJ, (hereinafter referred to as “FBN”) of the other part.
WHEREAS:
FBN is engaged in the business of manufacturing communications products, and related components thereof, and has the capability to manufacture certain related products for FC (hereinafter referred to as the “Products’); and
FC is desirous of contracting with FBN to produce the Products under the terms and conditions set forth herein.
NOW, THEREFORE, the parties do hereby agree as follows:
| 1. | DEFINITION |
In this Agreement, the following terms shall have the following meaning unless otherwise provided:
| “APA” | means the asset purchase agreement executed by and between FBN, FC, and JDS Uniphase Corporation, among others, dated May 27, 2005. | |
| “Ewing Site” | means the premises of FBN where the factory is located at Ewing, New Jersey. | |
| “JDSU Supply Agreement” | means the asset purchase agreement executed by and between FC and JDS Uniphase Corporation, dated November 12, 2004. | |
| “Materials” | means the raw materials from which the Products are manufactured pursuant to this Agreement, including packaging materials. | |
| “Products” | means the communications products and related component described in the List of Products, Annex 1, attached hereto and constituting and integral part hereof, provided that the list of the | |
| Products prescribed therein may be adjust or modify from time to time as agreed upon by the parties. | ||
| “Purchase Order” | means a written Purchase Order issued from time to time in accordance with the provision of Article 2 of this Agreement by FC to FBN specifying the number, type, specification and quantity of the Products required by FC to be manufactured by FBN hereunder, delivery date(s) for such Products and other necessary information in relation to such order as may be considered relevant by FC. | |
| “Representations and Warranties” | means the representations and warranties set out in Clause 7 of this Agreement. | |
| “Specification” | means the manufacturing details of the Products listed at Annex 1, attached hereto. | |
| “Territory” | means the United States of America. | |
| “TSA” | means the transition services agreement executed by and between FC and Emcore Corporation, dated May 29, 2005. | |
| “Vitrocom Site” | means the premises of FBN where the factory is located at Mountain Lakes, New Jersey. | |
| 2. | SCOPE OF MANUFACTURING |
The parties hereby agree that FBN shall produce the Products in the numbers, models, series, designs and Specification as prescribed in the Purchase Order(s) placed by FC with FBN from time to time during the course of this Agreement, subject to the provisions of this Agreement. FBN shall manufacture, produce, package and deliver the Products for FC in the quantities and to the standard as may be stipulated in Purchase Order by FC from time to time during the term of this Agreement.
| 3. | PRODUCTION FEE AND PAYMENT |
| 3.1 | Production fee and production costs – Vitrocom Site |
In consideration of the manufacturing services rendered by FBN’s Vitrocom Site to FC under this Agreement, FC shall pay to FBN an agreed upon fee equal to 8% of the cost of production incurred by FBN at the Vitrocom Site. FC shall also remit to FBN the cost of production, which shall include the cost of Materials procured by FBN, actual labor and overhead cost at the Vitrocom Site (except for any sales expenses, which both parties understand and agree shall be devoted exclusively to Vitrocom Site external sales), and other expenses incurred by FBN at the Vitrocom Site (including shipping). Quarterly adjustments to the production fee, if any, shall be based upon the unit price, volume of purchase,
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cost reductions, changes to the Specification, and improvement of FBN’s yield or process at the Vitrocom Site.
| 3.2 | Production fees – Ewing Site |
The parties acknowledge and agree that FBN intends to wind-down production at its Ewing Site on or about October 30, 2005, per the terms of the APA and the TSA. In consideration of the product pricing terms as detailed in the APA, the TSA, and the JDSU Supply Agreement, and of the manufacturing services rendered by FBN’s Ewing site to FC through the wind down of Ewing Site production, FC shall pay to FBN an agreed upon fee equal to the product pricing FC customers remit to FC under the terms of the APA, TSA, and JDSU Supply Agreement.
| 3.3 | Invoice |
Each month, or per some other mutually agreed upon period, FBN shall issue an invoice to FC for the production fee and production costs (collectively “Production Fees”), per sections 3.1 and 3.2, for all Products manufactured and delivered under this Agreement during the previous period.
| 3.4 | Term of payment |
FC agrees to pay FBN the Production Fees for each and every lot of the Products -- together with the applicable taxes and any other amount payable hereunder, as mentioned in Sections 3.1 and 3.2, within sixty [60] days from the receiving date of the invoice from FBN.
Late payment shall be subjected to the interest at the rate of fifteen (15%) percent per annum of the unpaid amount until the principle of the Production Fees and the duly interest is paid to FBN in full.
| 3.5 | Currency |
All payments of any amount payable under this Agreement shall be made in U.S. Dollars.
| 3.6 | Means of payment |
FC shall transfer all amounts owed to FBN under the terms of this Agreement into an account designated by FBN.
| 3.7 | Set off |
Unless otherwise agreed upon in writing by both parties, neither the Production Fee nor other expenses payable under this Agreement shall be subject to set off or forfeiture.
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| 4. | MATERIALS |
| 4.1 | Materials supplied by FBN |
FBN shall obtain and utilize Materials available in the Territory and other countries for the manufacture of Product as it deems necessary to achieve certain quality, cost, or volume levels mutually agreed upon between the parties, provided that such Materials shall be of good quality, fit and sufficient for the purpose of manufacturing of the Products, and shall conform to the standards and the specification of FC.
| 4.2 | Material Delay |
FBN shall not be responsible for any costs and expense incurred as a result of any delay or interruption in delivery of the Materials.
| 5. | PURCHASE ORDER |
| 5.1 | Forecast |
On a weekly basis, FC shall provide FBN with a forecast of its anticipated twenty-six (26) weeks requirement for each Product. FC shall endeavour to place Purchase Orders in accordance with such forecast, but shall not necessarily be limited to the terms of such forecast in its placing of Purchase Order.
| 5.2 | Period of purchase order |
When FC desires to order a quantity of the Products, FC shall notify FBN in writing by issuing a Purchase Order for its requirements and specifying therein the types, quantities, the delivery date (“Delivery Date”), destination points, method and carrier to be used. FC shall use its best endeavours to provide Purchase Orders to FBN at least four [4] weeks prior to the Delivery Date.
FBN shall not be bound by any terms or conditions contained in the Purchase Order that are inconsistent with this Agreement, or any of the Annexes hereof, except to the extent mutually agreed upon by the parties in writing.
| 5.3 | Acceptance of Purchase Order |
FBN shall accept and fulfil every Purchase Orders received from FC, provided that the quantity of the Products under such Purchase Order does not exceed the Forecast.
| 5.4 | Delivery |
FBN shall be responsible for delivering of Products on the delivery dates and at the destination as specified in the Purchase Order issued by FC.
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| 6. | EQUIPMENT |
FC shall, at its own expense, provide FBN the manufacturing equipment listed in Annex 2 attached to this Agreement. All other machines and equipment shall be provided by FBN at its own cost.
| 7. | REPRESENTATION AND WARRANTIES OF FC |
| 7.1 | Representation and warranty by FC |
FC hereby represents, warrants and undertakes to and with FBN that it has full corporate power and all requisite lawful authority and governmental approval to enter into and perform under this Agreement according to its terms.
| 7.2 | Representations and warranties by FBN |
FBN hereby represents, warrants and undertakes to and with FC that:
| (i) | to the best of its knowledge, it is capable of manufacturing the Products in accordance with the Specifications to be provided by FC, in the quantities, to the standards and within the time contemplated by this Agreement as of the capacity forecasted pursuant to section 5.1, herein; and |
| (ii) | it has in its possession of every manufacturing license, product registration and other government license, approval of every description and all the tools, personnel and equipment required to manufacture the Products itemised in Annex 1 pursuant to the terms of this Agreement; and |
| (iii) | it has full corporate power and all requisite lawful authority and governmental approvals to enter into and perform this Agreement according to its terms; and |
| (iv) | at all time of the continuance of this Agreement, it shall not transfer, convey its cause any encumbrances to the Equipment provided by FC and any of the Materials; and |
| (v) | FBN and its affiliates, shareholders, directors, officers, contractors and employees, will not, directly or indirectly, develop, manufacture, sell or market any optical communications devices to or for any entity other than FC for two years from the effective date of this Agreement, or, in the case of shareholders, directors, officers, contractors and employees, for one year after any of the aforementioned personnel separates from FBN, whichever is greater. |
| (vi) | FBN will promptly secure written and duly executed confidentiality and non-compete agreements from all of its affiliates, shareholders, directors, officers, contractors and employees that contain the non-competition terms of section 7.2(v). |
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For purposes of this section 7.2(v), the term “shareholder” shall not include FC.
| 8. | DELIVERY AND ACCEPTANCE |
| 8.1 | Delivery of the Products |
All the Products to be supplied hereunder shall be delivered by FBN on a C.I.F. (Cost, Insurance and Freight) basis at the port or any other place as FC may designate and shall notify FBN thereof in advance.
| 8.2 | Delivery of Materials |
All the Materials to be supplied to FBN under this Agreement shall be delivered to FBN as FBN may designate. FBN shall take all measures required to comply with the customs clearance and transportation of the Materials supplied by FC.
| 8.3 | Risk of loss and damage |
FC shall be responsible for and assumes all risk of losses or damages to the Materials and Products delivered to or from the Site or any destination, from any cause during the transportation of such Materials and Products.
| 9. | DELAY OF DELIVERY |
If FBN fails to complete the delivery of the Products by the Delivery Date stipulated in the Purchase Order due to its own negligence or fault, FC shall be entitled to cancel all or any delayed portion of the Products. Such cancellation shall not cause any prejudice to any other rights of FC under this Agreement or applicable laws.
| 10. | INTELLECTUAL PROPERTIES |
FC hereby grants to FBN a non-exclusive and non-transferable license to use the technical information, know how, techniques, processes, and work instructions related to the design and manufacture of the Products in the Territory under this Agreement.
Without any charge on FBN, FC shall provide reasonable training, at a place designated by FC, to help facilitate the manufacture of the Products by FBN.
Each party shall indemnity the other party against all claims, cost, or any expenses arising out of the infringement of the intellectual property rights attributable to the first party in relation to the manufacturing or the design of the Products, provided that promptly after such claim, the latter party must inform the first party and fully cooperate with such defense.
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| 11. | DUTIES AND COVENANTS OF FBN |
At all times during the continuance of this Agreement, FBN shall:
| 11.1 | Manufacturing |
Carefully and faithfully exercise all reasonable skill, care, workmanlike manner to the highest professional standards, due diligence and best effort, in the performance of its duties in accordance with the Purchase Orders given to it under this Agreement. FBN further agrees to strictly adhere to the Specifications and also with such other instructions from FC as may be given from time to time including keeping and maintaining the Materials in accordance with recognized international standards and specifications.
| 11.2 | Compliance |
At all times in manufacturing, packaging and delivery of the Products, observe and conform to the laws, rules, regulations, ordinances, terms and conditions of licenses (if any), and instruction of FC (if any).
| 11.3 | Confidentiality |
During the period of this Agreement and after its termination, FBN shall keep confidential and not use, disclose or make available to any other person or entity any part or whole of the confidential information related to the affairs or business of FC, unless prior written consent to such use or disclosure is granted by FC. In addition, FT shall be solely responsible for all use, supervision, management and control of all FC information and shall ensure that any confidential information of FC is, at all times, protected from access, use or misuse or destruction by any unauthorised person or entity;
| 11.4 | Maintenance of Equipment and Materials |
At all time during the term of this Agreement, FBN shall maintain and keep the Equipment provided by FC in good repair and fit for use in the manufacturing of Product for FC, solely at FBN’s expense. FBN shall promptly notify FC in writing of any material defects in any Equipment. The expense of repairing any such defects shall be borne by FC, except in the case where such damage or defect is attributable to misuse or recklessness of FBN or its employee, in which case the repair expense shall be borne by FBN.
| 11.5 | Maintain Capacity |
Maintain manufacturing capacity throughout the term of this Agreement in accordance with the twenty-six week forecasts provided by FC.
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| 11.6 | Indemnification |
Indemnify, defense and hold harmless FC from any and all liabilities, damages, claims or actions arising out of or in connection with any of the following matters:
| (i) | the performance by FBN of services to be provided hereunder; |
| (ii) | the failure of FBN, or its employees, agents, or assigns, to comply with applicable laws or regulations; |
| (iii) | any claims made against FC due to any cause attributable to and/or arising from willful or negligent error or omission in or of any act of FBN, its employees or representative; or |
| (iv) | any Product liabilities. |
| 11.7 | Quality control |
Before the delivery of any of the Products, FBN shall test the Products per the instructions of FC to ensure the quality and compliance of the Products to the Specifications.
At all reasonable times, FBN shall permit FC or its authorised representatives to inspect the process of the production and materials used in the manufacture of Products.
| 11.8 | Supply of sample |
Supply FC, upon request, with random samples of the Products manufactured in compliance with the Purchase Order at FBN’s expense.
| 11.9 | Use of Materials and FC’s Equipment |
Use the Materials and FC’s Equipment only for the production of Products for FC and only for production under this Agreement.
| 11.10 | Manufacturing Records |
At its own expense, make available to FC, upon the request of FC, all records related to the production of Products under this Agreement, including manufacturing and test data.
| 11.11 | Liability |
Be responsible for any loss and damages of the Products and Materials in the manufacturing, configuration and testing process.
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| 12. | CONFIRMATION OF ACCEPTANCE |
Within seven (7) days from the date FC receives the Products, FC shall complete a defects analysis of the Products.
| 13. | NON-COMPLIANCE OF PRODUCTS |
If FC determines, in its sole discretion, that there is any intrinsic design or manufacturing defect in any Product causing inoperative, hazardous or unsatisfactory condition or performance, FBN shall promptly, at its own expense, remove the Product from the delivery site and refund to FC the Production fee for the defective units.
In the case where more than twenty (25%) percent of all units of the Products shipped within the period of delivery are defective or not in compliance with the Specifications, FC may reject such Products and FBN shall be liable for any cost and expense paid or incurred in connection with the delivery and return of such Product from FC to FBN.
| 14. | FORCE MAJEURE |
Neither party shall be deemed in breach of any provision of this Agreement or liable for any delay or failure in the performance of any obligation or the exercise of any right under this Agreement nor for any loss or damage (including direct or consequential loss or damage) therefrom, if such performance or exercise is prevented or hindered by any order or act of governmental or local authorities, the event of Act of God, flood, fire, accident, war, strike, riot, embargo, disaster, fire or Force Majeure, provided that the party of which the performance of duty under this Agreement is effected therefrom shall promptly give notice to the other party of such occurrence and endeavor to minimise the effects thereof.
| 15. | OWNERSHIP |
The ownership of the Materials supplied by FC, the Products, technical information and know how in manufacturing of the Products and the Equipment supplied by FC as listed in the Annex 2 shall at all times remain with FC.
| 16. | TERM AND TERMINATION |
| 16.1 | Term |
This Agreement shall become effective on the date first above written and continue in effect for a period of three (3) years unless earlier terminated according to Section 16.2.
The Term of this Agreement shall be automatically renewed per the terms of Section 16.3.
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| 16.2 | Events of termination |
Notwithstanding the provision of Section 16.1, the following provisions shall apply upon the following events.
| (i) | Should FC fails to pay the Production Fee to FBN within thirty days of such fee becoming due and owing, FBN may notify FC in writing of such failure and shall be entitled to terminate this Agreement if FC fails to pay the outstanding balance in full within fifteen days after such written notice. |
| (ii) | FC may immediately terminate this Agreement by sending written notice of its intent to terminate by registered mail upon the occurrence of any of the following events: |
| (a) | FBN’s failure to obtain or maintain any license, permit, registration or approval required in connection with FBN’s performance. |
| (b) | Any change in ownership or control of FBN or the sale of substantially all of the assets of FBN to any third party. |
| (iii) | Should either party be adjudicated bankrupt or insolvent, the other party may terminate this Agreement. |
| (iv) | If either party breaches a material term or condition of this Agreement and fails to rectify such default within thirty (30) days from the date such party receives the notice from the other party requesting such defaulting party to rectify the default, the other party may immediately terminate this Agreement by giving a written notice to the party in default. |
| 16.3 | Renewal |
This Agreement will be automatically renewed for successively one-year period, unless FC notify FBN in writing within 90 days prior to the renewal date of its intention to terminate this Agreement or FBN notifies FC in writing within 180 days prior to the renewal date of its intention to terminate this Agreement.
| 16.4 | Consequence of termination |
Unless otherwise agreed by the parties, any confidential information of any party obtained by the other party as a result of the relationship developed by the parties and reduced to writing under this Agreement, shall be kept confidential to the parties and shall not be disclosed or used otherwise. The provisions of this Section 16.4 shall survive the termination of this Agreement.
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| 17. | ASSIGNMENT |
This Agreement shall inure to the benefit of and shall be binding upon the parties hereto and their successors. This Agreement may not be assigned by FBN. Any attempt by FBN to assign or otherwise convey any of its rights or obligations under this Agreement, whether voluntary or by operation of law, shall be void and no force and effect without the prior written consent of FC.
| 18. | GOVERNING LAW |
This Agreement shall be governed and construed in accordance with the laws of the State of California.
| 19. | MISCELLANEOUS |
| 19.1 | Notice |
Any notice or other communication to be given hereunder shall be delivered by hand, registered mail or sent by facsimile transmission to the addresses indicated as follows:
| (a) | In the case of FC, to: |
FABRINET (CAYMAN ISLANDS)
c/o Fabrinet (USA)
4104 24th Street, #345
San Francisco, CA 94114
USA
Attention: General Counsel
Facsimile No: (815) ###-###-####
| (b) | In the case of the FBN to: |
FBN NEW JERSEY HOLDINGS CORP.
200 Ludlow Drive
Ewing, NJ
USA
Attention: Managing Director
***@***
w/courtesy copy to ***@***
Either party may change the address or facsimile number or the name of the person for whose attention notices are to be addressed by serving a notice to the other in accordance with this Section 19.1. All notices given in accordance with this Section shall be deemed to have been served as follows:
| (a) | if delivered by hand, or registered mail at the time of receive; or |
| (b) | if communicated by facsimile at the time of transmission, or |
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| (c) | if the day on which a notice would be deemed to have been served under this provision is not a business day, the relevant notice shall instead be deemed to have been served on the next following business day. |
All notices or communications under or in connection with this Agreement shall be in the English language.
| 20.2 | Severability |
If any of the provision of this Agreement becomes invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired.
| 20.3 | Modification |
This Agreement may be amended only by an instrument in writing signed by duly authorised representatives of each of the parties.
| 20.4 | Relationship |
Nothing in this Agreement shall be deemed to constitute a partnership between the parties nor constitute either party the agent of the other party for any purpose. Neither of the parties has authority to pledge, and neither party shall pledge, the credit of the other party for any fees, costs or expenses connected with this Agreement.
| 20.5 | Expenses |
Each of the parties shall pay its own costs, charges and expenses incurred in connection with the preparation and implementation of this Agreement and the transactions contemplated by it.
| 20.6 | Waiver |
Any waiver of right or remedy under this Agreement shall be effective only if it is in writing and signed by or on behalf of the party entitled to exercise such right or remedy. Any delay or failure of a party in exercising any right or remedy under this Agreement shall not constitute a waiver of the rights or remedies and no single or partial exercise of the right or remedy under this Agreement or otherwise shall prevent any exercise of any other right or remedy.
| 20.7 | Counterpart |
This Agreement is made in duplicate, each of which shall be an original and held by each party, but all counterparts shall together constitute one and the same instrument.
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IN WITNESSES WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorised representatives, effective as of the day and year first above written
FABRINET, an exempted company formed
under the laws of the Cayman Islands
| /s/ Mark J. Schwartz |
| Mark J. Schwartz, Secretary |
FBN NEW JERSEY HOLDINGS CORPORATION, a corporation formed
under the laws of the State of Delaware
| /s/ Harpal Gill |
| Dr. Harpal Gill, President |
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ANNEX 1
LIST OF PRODUCTS
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ANNEX 2
LIST OF EQUIPMENT
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