EXH10-56
Optical Fiber and Preform Supply Agreement
This Agreement is made as of November 1, 1996, between FiberCore Inc.,
a Nevada Corporation with its principal place of business in Sturbridge,
Massachusetts and Middle East Fiber Cable Company ("MEFC") with its principle
place of business in Riyadh, Saudi Arabia.
WHEREAS, MEFC wishes to have from FCI a firm commitment to sell to it a
set quantity of Optical Preforms and/or Fiber for FIVE (5) years; and
WHEREAS, FCI wishes to supply MEFC with a firm FIVE (5) year supply of
Optical Preforms and/or Fiber,
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
Definitions
For the purposes of this Agreement:
i. FiberCore ("FCI" shall mean FiberCore Inc. and its subsidiary FiberCore
Jena GmbH ("FCJ").
ii. "Optical Fiber" means a waveguide, in the form of a filament or fiber with
a glass core suitable for use in communications including any coating
applied concentrically around a single filament in the course of drawing a
preformed glass blank into such filament. The term "waveguide" for the
purpose of this definition means a dielectric transmission medium whose
dimensions and boundary conditions are designed to propagate energy inside
the guide structure in its lengthwise direction. The term "communications"
for the purpose of this definition shall refer to the transmission of any
form of information by the modulation of light waves.
iii. "Preform" means an optical blank in a rod from which optical fiber may be
drawn, suitable for use in the field of optical communications.
iv. Hereinafter, Optical Preforms and Fiber are the "Products".
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ARTICLE 2
Sale and Purchase of Products
2.1 Purchase Commitment: Quantity Changes
MEFC shall purchase from FCI and FCI shall sell to MEFC the quantities of
Products with the Product mix, as provided in Attachment A hereto subject to FCI
available capacity. MEFC can, pursuant to the rolling forecasts described under
Section 2.2, increase or decrease its order of Products shown on Attachment A
for any quarter during the first two years by not more than ten percent (10%)
and during years three through five by not more than 25%, except as may result
from product mix changes under Section 2.5. The aggregate of such changes cannot
exceed (either as a reduction or an addition) ten percent of the total ordered
under Attachment A for the first two years of this Agreement or twenty five
percent for the last three years of this Agreement, except as may result from
product mix changes under Section 2.5. FCI will only accept quantity increases
under this section only to the extent that FCI has sufficient uncommitted
production capacity to meet such increases.
2.2 Annual and Quarterly Rolling Forecasts
During the term of this agreement, on October 1 of each year, MEFC will provide
FCI with a monthly projection of MEFC's requirements for the following calendar
year. On the 10th day of the month preceding each calendar quarter (i.e.
December 10, March 10, June 10 and September 10) MEFC will provide FCI with an
updated forecast by month for the following quarter. However, such forecast
cannot vary in quantity beyond the permitted percentages under Section 2.1.
Also, the product mix for the first month in each such forecast shall be the
product mix FCI ships to MEFC during such first month, except that if such
product differs from Attachment A, the provisions of Section 2.6 shall govern
the applicable product mix for such first month.
2.3 Subsequent Year Increases
In addition to any changes under Section 2.1, if requests in writing between FCI
and MEFC that FCI increase the total quantities (with or without changing the
product mix) contained in Attachment A, FCI and MEFC shall negotiate in good
faith in order to try to reach an agreement regarding the amount of such
increase and the prices for such increased amount. However, any such negotiation
shall be subject to the amount of product, if any FCI then has available for
sale in addition to quantities in Attachment A. These revised quarterly and
yearly amounts would then replace the quarterly and yearly amounts on Attachment
A and in Section 3.2.
2.4 Technical Specifications
The specifications for the Products sold hereunder are attached hereto as
attachment B. As new Products are added to this Agreement under Section 2.3 or
2.6, the specifications for such new
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Products will be agreed to by the parties and included on Attachment B.
2.5 Product Mix
MEFC may request in any three month forecast under Section 2.2 that FCI alter
the Attachment A mixture of the Products for the third month of such forecast.
If in FCI's opinion its production rate to produce the requested amount of the
type of Products to which MEFC wants to change is measurably less than the
production rate to produce the same amount of the type of Products contained in
Attachment A, then FCI will permit MEFC to order product in an amount decreased
as FCI deems appropriate to reflect the lower production rate. Conversely, if
the production rate of product is measurably higher, FCI will permit the product
mix change hereunder if MEFC agrees to take product in an amount in an amount
increased as FCI deems appropriate to reflect the higher production rate.
If MEFC accepts FCI's volume change, if any, pursuant to the preceding
paragraph, and if FCI and MEFC agree on the appropriate price change and any
required delivery change resulting from such product mix change, FCI will only
withhold its consent to any such product mix change request if by agreeing to
any such request it would either have to renegotiate a supply agreement with
another customer or it would (in its sole opinion) have to alter unreasonably
its own production schedule. If FCI grants any volume change request hereunder,
this will not serve as a precedent for any future volume change request.
2.6 Most Favored Nations
FCI represents that the total price for the Preforms ordered in Attachment A for
the term (as calculated at the per gram rates under Section 3.2) shall be no
higher than the total term price of any other Preform supply agreement concluded
by FCI (I) of the same supply time lenght as is this Agreement, (ii) of the same
product mix, and in substantially the same percentages, as contained in
Attachment A, (iii) for Preforms of comparable technical specifications and
quantity (on a product by product basis), and (iv) which contains comparable
commercial terms and conditions. If any FCI customer, which has concluded such a
term agreement, makes a change under Secitons 2.1, 2.3 or 2.6, the pricing for
the total amount of each product being ordered for that year including the
amount resulting from the change shall be no higher than FCI at that time has
concluded for the same total amount of this same type of Preform with any such
customer under similar commercial terms and conditions.
FCI also represents that the FOB FCI factory per gram price of any type of
Preform being ordered hereunder ("Agreement Preform") shall at the time of such
order be no higher than any other FOB FCI factory Preform price of FCI Preform
sold at that time ("Non Contract Preform") for delivery in the year if:
i. The delivery time of the Non Contract Preform is the same as the Agreement
Preform;
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ii. The Non Contract Preform is of comparable technical specifications and
quantity as the order of the Agreement Preform; and
iii. The Non Contact Preform is sold for comparable commercial terms-and
conditions as the Agreement preform (excluding those provisions for the
Agreement Preform which are unique to a long term contract).
If MEFC claims an FCI violation of this Section, MEFC and FCI shall agree on a
third party, which shall be given access by FCI (after executing a nondisclosure
agreement) to required FCI documents in order to decide the validity of MEFC's
claim. The decision of the third party as to whether or not there has been a
violation shall be in writing and shall not contain any named reference to any
other FCI customer or other FCI proprietary information. Such decision, absent
manifest error, shall be final. If a decision is rendered negotiations of a
settlement will be initiated.
ARTICLE 3
Prices, Penalties and Payments
3.1 Pricing Schedule
i. Pricing of single-mode fiber (SMF) and single-mode preform (SMP) shall
be set annually and shall be 10% less than prices for equivalent
specifications and quantity as delivered in Saudi Arabia, as quoted by
suppliers in ii below. The market price shall be documented at least 90
days prior to the start of the subsequent year.
ii. Pricing for single mode fiber (SMF) or preform (SMP) shall be based on
price quoted/set by Corning, AT&T, Alcatal or similar reputable
international suppliers.
iii. Prices for 1997 are as follows:
SM Fiber prices are $58.50
SM Preform prices are $1.289 per gram gross weight, without
handles on unyielded basis. Multimode fiber (MMF) prices are
as follows: MMF 625/125 - FDDI grade - $0.175 per meter. These
prices will be subject to change based on FCI material costs.
iv. Prices per above are net on an unyielded basis. Losses due to yield are
the sole responsibility of MEFC. FCI takes no responsibilities or
warrants as to yield. This supersedes any prior agreement to the
contrary. FCI will not be responsible for any losses due to yield
incurred by MEFC and FCI is not obligated to provide any technical
support for MEFC's fiber draw production.
v. Prices are to be reviewed twice a year or as market changes require.
Prices for all years 1998 and beyond are for reference only. Actual
contract prices will be set 90 days prior to beginning of year.
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vi. Price discounts shall be as provided in i.above, however, in no event
shall such discounted prices be less than FCI costs (including
overheads) plus 15%.
3.2 Letters of Credit
Prior to the first day of each calendar quarter of this Agreement, MEFC shall
establish with a German bank reasonably acceptable to FCI an irrevocable letter
of credit for the value of the immediately following quarterly supply as set
forth in Appendix A including any adjustments to the value under Article 2, in
U.S. Dollars (US$) in favor of FCI/FCJ as the beneficiary under such letter of
credit.
3.3 Letter of Credit Payment Terms
i. All Products sold hereunder shall be paid through draw-downs against
the letters of credit within thirty (30) days after FCI presents
complete shipping documents.
ii. Any Products sold hereunder in excess of the letters of credit total
shall be paid within thirty (30) days after FCI's FOB shipment.
iii. If MEFC fails to accept the annual quantities as set forth in Appendix
A including any adjustments to the value under Article 2 for any
Agreement year, except under the applicability of Section 6.5, FCI
shall be entitled to draw down 50% of the remaining value after 30 days
of the end of the respective year.
iv. All letter of credit payments and direct payments to FCI, shall be
settled within forty-five (45) days of the end of the respective fiscal
year.
3.4 FCI Delivery Penalty
If FCI fails to deliver the annual quantities as set forth in Appendix A
including any adjustments to the value under Article 2 for any Agreement year,
except under the applicability of Section 6.5, FCI shall issue MEFC a credit
equal to the excess the difference in cost which MEFC had to pay compared to
FCI's price to purchase the shortfall from other sources. The credit shall be
applicable to 25% of the value of each shipment in the subsequent year under the
credit is fully used.
i. Force Majeure as defined in 6.5 shall apply as well.
3.5 No Carry backs/Carry forwards
None of the penalties under Section 3.3c) or under Section 3.4 can be calculated
by including shipments in a prior year or a subsequent year, as the case may be
Shipments of the four quarterly letter of credit periods in any one Agreement
year are to be totaled when calculating whether or not any penalties are due.
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ARTICLE 4
Supply
4.1 Delivery
The Products shall be delivered in amounts and in time periods as provided in
Attachment A and Section 2.2 hereof.
4.2 Claims for Missing or Damaged Products
If it is determined by MEFC and FCI that, for reasons attributable to FCI, there
is damage to or shortage in Products supplied by FCI resulting from FCI's
handling of such Products after it was produced by FCI, a return authorization
shall be made and signed by the parties. This signed return authorization shall
serve as the basis for any claims by MEFC against FCI for FCI to give
appropriate credit for such damaged or missing Products and to replace such
Products. MEFC shall only receive such credit or forgiveness for the replacement
Products.
ARTICLE 5
Limited Warranty
5.1 Warranty
i. FCI warrants that at the time of its delivery Products sullied
hereunder will conform to the written specifications identified in
Attachment B to the Agreement.
ii. Products which do not meet the foregoing subsection (a) warranty shall
be deemed defective and FCI will give an appropriate credit for such
defective product to and at its expense replace such product; provided:
(I) that all claims regarding such defective Products are made by MEFC
in writing to FCI (with appropriate samples), in amounts as FCI
requests of such claimed defective Products within ninety (90) days
after FCI's FOB factory shipment date of such Products and, unless FCI
objects to the claim within (30) days of receipt of such claim, the
claim shall be deemed accepted by FCI; (ii) that the defective Products
shall have been maintained by MEFC in accordance with normal operating
procedures as well as any relevant FCI written standards that shall
have been delivered to MEFC and that such product shall not have had
any stage of processing performed on it in cabling such product, and
(iii) that if any repair or alteration to the product has been done,
this is not a cause of the Products being defective.
5.2 Limitation of Warranty
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FCI guarantees and warrants all Products supplied by it under this Agreement
only to the extent set forth in this Article 5. THIS GUARANTEE CONSTITUTES THE
SOLE GUARANTEE OF PRODUCTS PROVIDED BY FCI, AND IS IN LIEU OF ALL OTHER
WARRANTIES (WHETHER WRITTEN, ORAL, OR IMPLIED), INCLUDING BUT NOT LIMITED TO ANY
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR LIABILITY
FOR ANY SPECIAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THE USE OF PRODUCTS.
THERE ARE NO WARRANTIES WHICH EXTEND BEYOND THE DESCRIPTION ON THE FACE HEREOF.
FCI's liability to MEFC whether in contract or tort or under any other legal
theory arising out of warranties, representations, instructions or defects from
any cause shall be limited exclusively to replacing defective Products as
provided in Section 5.1. FCI shall not be liable for special, consequential or
indirect damage such as the loss of capital, use, substitute performance,
production, profits, or claims of customers.
FCI makes no guaranty against and shall not be liable regarding any damage to
Products cabled, installed, operated or maintained negligently in any manner or
otherwise not due to FCI's fault. FCI shall be allowed a reasonable period to
investigate any MEFC claim for defective Products, and shall be given access to
relevant records and data for this purpose.
ARTICLE 6
MISCELLANEOUS PROVISIONS
6.1 FCI's Bank Account
Unless and until changed by FCI, all payments due FCI from MEFC under this
Agreement shall be made to the bank account of FiberCore Jena GmbH, at the
following address:
BERLINER BANK
FILIALE ERFURT
WEIMARISCHE STRASSE 46
99099 ERFURT, GERMANY
6.2 Address
Formal communications under this Agreement, except of an ongoing technical
nature, shall be in writing addressed as follows:
If to FiberCore Jena GmbH
(By mail) FiberCore Jena GmbH
Goschwitzer Strasse 20
7
D-07745 Jena-Burgau
GERMANY
(By fax) 49-3611-677334
Attn: Lothar Brehm
If to MEFC
(By mail) P.O. Box 60536
Riyadh 11555
Saudi Arabia
(By fax) 966-1-478 7973
Attn: Hashem Al Huneidi
For ongoing technical/commercial communications:
If to FCI: Dr. Dau Wu (Technical)
If to FCI: Charles DeLuca (Commercial)
174 Charlton Road
P.O. Box 206
Sturbridge, MA 10566 USA
Tel.: 1 508 347-7744
Fax.: 1 508 347-2778
The date of such reports, payments and other notices shall be the date of
mailing if sent by certified or registered mail and shall be the date of receipt
if transmitted in any other manner.
6.3 Assignability
Neither party may assign any of its right or privileges hereunder without the
prior written consent of the other and any attempted assignment shall be void,
except to a successor in ownership of all or substantially all the assets of the
assigning party's operations and upon condition that such successor shall assume
the performance of all the terms and conditions of this Agreement to be
performed by the assigning party.
6.4 Terminability for Default
If any payment due and payable under this Agreement continues to be past due
ninety (90) days after written notice thereof from FCI to MEFC the FCI supply
commitment hereunder shall become terminable at FCI's option. If there is a
default of any other material provision of this Agreement and such default is
not cured within ninety (90) days after written notice from the non-defaulting
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party, then the non-defaulting party may at its option terminate this Agreement;
provided that any payment obligations that have already arisen shall not be
terminated. The rights granted under this paragraph shall be in addition to any
other rights, claims or damages which a non-defaulting party hereto may have be
law.
6.5 Force Majeure
If the performance of this Agreement or of any obligation hereunder, other than
the payment of the purchase price for the Products delivered hereunder, is
prevented, restricted or interfered with by reason of acts of God, civil
disorders, strikes, governmental act, wars or, without limiting the foregoing,
by any other cause not within the control of the party, then the party so
affected, upon giving prompt notice to the other party, shall be excused from
such performance to the extent of such prevention, restriction or interference;
provided that the party so affected shall use its best efforts to avoid or
remove such causes or nonperformance and shall continue performance hereunder
with the utmost dispatch whenever such causes are removed. If FCI's performance
hereunder is delayed for from three (3) to six (6) months due to force majeure,
MEFC may purchase Products from a third party (and shall be entitled to letter
of credit reductions for such purchases).
If a party's performance hereunder is delayed for more than six (6) months due
to force majeure, the other party shall be entitled to terminate this Agreement
without any further liability to the defaulting party.
6.6 No Waiver
Failure of a party to this Agreement to terminate this Agreement or pursue any
other remedy available to it following breach of this Agreement by the other
party or failure by such other party to comply with any provision hereof shall
not be deemed to constitute a waiver by such first mentioned party of any of its
defenses, rights or causes of action arising form such or any future breach or
noncompliance of the same or different nature.
6.7 Governing Law
This Agreement shall be governed and construed in accordance with the laws of
the State of Massachusetts except for conflicts of law principles.
6.8 Arbitration
Any dispute or claim arising out of or relating to this agreement, which cannot
be settled between the parties within six (6) months, shall be finally settled
under the "Rules of Conciliation and Arbitration" of the International Chamber
of Commerce by one or more arbitrators appointed in accordance with such rules.
Any such proceeding shall beheld in London, UK. FCI and MEFC hereby agree that
process in connection therewith mailed to it at its office by registered mail,
return receipt requested, shall be effective and valid to obtain jurisdiction
over either.
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6.9 Entire Agreement, Headings
This Agreement, with all Attachments hereto, constitutes the entire agreement
between the parties with respect to its subject matter. All prior or
contemporaneous oral and written agreements, memoranda and representations (and
any subsequent purchase order, purchase order confirmation, or similar document
relating to sales hereunder of Products) are superseded by this Agreement.
Headings used in this Agreement are only for convenience and are not to be used
in the interpretation of the Agreement.
6.10 Amendments
This Agreement may be amended only by a subsequent writing signed by authorized
representatives of both parties, indicating an intent to amend the Agreement.
6.11 Taxes
MEFC shall pay, or reimburse FCI, for any sales, use or similar taxes (including
interest and penalties caused by MEFC) arising out of any sales of Products
resulting from this Agreement; except that MEFC shall have no obligation to pay
any such taxes or amounts that are based upon FCI's net income from this
Agreement.
6.12 Severability
If any provision of this Agreement is held invalid or unenforceable, the
remaining provisions shall not be affected thereby, and the parties shall in
good faith attempt to amend this Agreement to eliminate such invalidity or
unenforceability.
6.13 Advertising
Each party hereto agrees not to use the name of the other party in the first
party's advertising regarding Products without the second party's prior written
consent.
6.14 Export Control
MEFC acknowledges that it is aware that these Products are subject to the Export
Administration Regulations administered by the country of export, and that such
Products require a validated export license before they can be re-exported.
6.15 Confidentiality
MEFC and FCI agree that all confidential commercial and technical information
provided hereunder to the other party (which the transmitting party designates
in writing as being confidential) will be kept confidential by the receiving
party (using the same standard of care as the receiving party uses to protect
its own similar confidential information); and shall not be sold to or disclosed
in any other
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manner to any third party by the receiving party for a period of five (5) years
commencing on the date when the transmitting party delivers such information to
the receiving party. The preceding sentence shall not apply to:
a. Information which at the time of disclosure hereunder is in the public
domain;
b. Information which after disclosure hereunder is published or otherwise
becomes part of the public domain through no fault of the receiving party
but only after it is published or comes into the public domain;
c. Information which the receiving party can document through written records
as having been in its possession at the time of its disclosure to the
receiving party hereunder; and
d. Information which has been or may in the future be disclosed or delivered
to the receiving party by any third party which does not have an obligation
to the transmitting party to refrain from disclosing such information.
The obligations under this paragraph 6.15 shall survive the termination of this
Agreement for any cause whatsoever.
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The parties agree that FCI pricing information contained herein, as well as the
other provisions of this Agreement, are confidential and may not be disclosed by
MEFC to any third party.
6.16 Preference for Additional Requested Supply
If MEFC decides that it needs to purchase Products for delivery in addition to
the amounts it is able to purchase under this Agreement submit to FCI a request
for such additional amount. If FCI determines at that time that it has adequate
available capacity for such requested additional deliveries, MEFC shall have a
first preference to purchase such additional Products for a price and other
commercial terms and conditions negotiated at that time. However, the amount
that MEFC may purchase on such preferential basis shall be proportionate to all
the requests for preferential additional supplies, from customers with similar
five year supply agreements, which have not been resolved at the time of a
request hereunder. Such proportion shall be the total value of the applicable
years older under Attachment A in this Agreement compared to such total value
under all the other agreements requesting preferential additional supplies at
this same time.
ARTICLE 7
TERM
7.1 Time Periods of Deliveries
This Agreement shall be for deliveries of Products, in quantities as provided
hereunder, from January 1, 1997 through December 31, 2001.
****
The parties have caused this Agreement to be signed by their duly authorized
representatives in a manner legally binding upon the parties.
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FiberCore, Inc.
Signature /s/ Charles Deluca
Date March 13, 1997
MID EAST FIBER CABLES
By General Manager
Signature /s/ Hashem Al-Henaidi
Date: March 13, 1997
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