An OEM agreement, or original equipment manufacturing agreement, is a contract between two entities, one of which provides products to the other. The entity that receives the products is typically referred to as the "OEM" and they usually produce or market their own brand.
OEM agreements fall in the contract manufacturing space. Examples of OEMs may include car companies like Ford, Honda, and Chrystler, as well as smart phones companies like Apple and Blackberry.
An OEM agreement can be written with various terms, but it often includes provisions for exclusivity, royalties on product sales by either party, and co-branding rights. Most agreements are drafted so that an OEM will manufacture goods in exchange for access to intellectual property owned by the company receiving goods. In some cases there might be a provision requiring minimum production levels from both parties before any royalty payments become due.
Below is a list of common sections included in OEM Agreements. These sections are linked to the below sample agreement for you to explore.
CONFIDENTIAL TREATMENT REQUESTED
This OEM Agreement (the “Agreement”) is made and entered into as of August 14th, 2006 (the “Effective Date”), by and between ANDA Networks, Inc. , a Delaware Corporation with its principal place of business at 1274 Geneva Drive, Sunnyvale, California 94089 (“Supplier”) and Ciena Corporation , a Delaware corporation with its principal place of business at 1201 Winterson Road, Linthicum, Maryland 21090 (together with its affiliates and subsidiaries, “Ciena” and, together with Supplier, the “Parties” and each individually a “Party”).
WHEREAS, Supplier designs, markets and sells certain telecommunications network equipment;
WHEREAS, Ciena designs, markets and sells certain telecommunications network equipment, and has the ability and resources to market, sell and support Supplier’s products; and
WHEREAS, the Parties desire to provide certain of Supplier’s products to Ciena on a private-label OEM basis for Ciena to market, resell and support, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
| 1 | DEFINITIONS |
1.1 “Authorized Account” means an End User or other customer (or any specified subsidiary or operating unit thereof) at which Ciena is authorized to market, sell and support the Products under this Agreement.
1.2 “Documentation” means all documents provided with or in connection with the Products, including but not limited to user and installation manuals, product labeling, and marketing materials for the Products generally available from Supplier.
1.3 “End User” means any person or entity that purchases the Products from Ciena for its own internal use and not for resale or distribution.
1.4 “Exclusive Account” means an Authorized Account at which Ciena has obtained exclusive rights to promote, market, sell and support the Products including software and service contracts, either as set forth in Exhibit B or as appointed in accordance with the procedure set forth in Exhibit B.
1.5 “Products” means Supplier’s EtherReach™ 2000, EtherReach™ 3000 Series, EtherEdge™ 4000 Series, EtherDAX™ 6000, EtherCare™, and EtherView™ EMS products and related Software and all other products set forth on Exhibit A hereto, and any improvements, updates, upgrades or modifications to the same.
1.6 “Software” means the machine-readable object code form of any software developed and/or owned or licensed/sublicensed by Supplier and contained in the Products on Exhibit A hereto, and all revisions and copies thereof.
1.7 “Specifications” means the design, functional, component performance, system performance, compatibility and operational characteristics, form, fit, visual look and features of the Products and compliance and other applicable standards relating to the Products.
1.8 “Triggering Event” shall mean one or more of the following:
| (a) | Supplier’s ceasing to do business; |
| (b) | Supplier’s liquidation or dissolution (including by reason of merger, reorganization or sale or all or substantially all of its assets, where the successor entity or its designee refuses or fails to assume all of Supplier’s obligations under this Agreement); |
| (c) | the filing of a petition for bankruptcy, insolvency or receivership by or against Supplier, which petition, if involuntary, is not dismissed within 60 days after its filing; or |
| (d) | Supplier’s material breach of its obligation to supply Products or provide maintenance or other support services under this Agreement (not due to any force majeure event or any act or omission by Ciena), which breach remains uncured for more than 60 days after receipt of a legal written notice from a duly authorized officer of Ciena. |
| 2 | APPOINTMENT AND BASIC RIGHTS AND OBLIGATIONS |
2.1 Appointment as Authorized Reseller . Supplier hereby appoints Ciena, and Ciena hereby accepts appointment, as an authorized worldwide reseller to purchase Products for its own account and to market, demonstrate, distribute, sell and service Products, directly or indirectly, on an exclusive basis at the Exclusive Accounts and on a non-exclusive basis at the Authorized Accounts, subject to the terms and conditions of this Agreement. The parties hereby acknowledge and agree that Supplier shall not be held in breach of the above rights of exclusivity as they pertain to any of Supplier’s distribution agreements with Verizon, Bell Canada, Rogers and/or All stream in existence as of the Effective Date hereof. Accounts other than those listed in Exhibit B may be added and become authorized, and Authorized Accounts may become Exclusive Accounts, by separate written amendment by the Parties and in accordance with the procedures set forth in Exhibit B. Ciena shall use commercially reasonable efforts to promote the distribution of the Products. Ciena shall set the terms and conditions for resale of the Products, provided that such terms and conditions do not obligate Supplier beyond its obligations set forth in this Agreement without Supplier’s prior written consent.
2.2 Product Branding . Ciena shall promote, market, and sell the Products on a private-label basis, under Ciena’s trade names, trademarks, and logos. Ciena shall provide Supplier all necessary specifications for trademarks, logos, labeling, part numbering, and other desired product graphics, labeling and packaging requirements, and Supplier shall deliver the Products purchased under this Agreement in compliance with Ciena’s branding specifications. Ciena shall reimburse Supplier for non recurring costs for custom product branding, labeling and coding incurred by Supplier, which costs shall not exceed [*] (exclusive of any material changes to form, fit or function of the Products as defined in Telcordia GR-209 due to a specific request of an End User or by mutual agreement of the Parties).
[*]=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.
2.3 Installation, Maintenance, and Support . Ciena shall be responsible for installation, maintenance, and Level I support of the Products (as set forth in Exhibit D ) for its Authorized Accounts. In addition, no later than six months after shipment of the first Product to an Exclusive Account, Ciena shall be responsible for Level II support of the Products (as set forth in Exhibit D ) for such Exclusive Account. Ciena shall contract directly with End Users for the provision of maintenance and support services for the Products. Ciena agrees that Supplier shall not be obligated to provide any maintenance and support services to Ciena and End Users other than those maintenance and support services set forth in Exhibit D without Supplier’s prior written authorization. Supplier shall provide Level II and Level III customer support as set forth in Exhibit D .
2.4 Documentation . Supplier shall provide to Ciena all Documentation, and all material updates and revisions thereto, and any other Product documentation reasonably requested by Ciena to assist Ciena in performing its obligations under this Agreement. Ciena shall reimburse Supplier for non-recurring costs for private-label customization of Supplier Documentation incurred by Supplier, which costs shall not exceed [*] (except for material alterations to the content of the Documentation due to a specific request of an End User or by mutual agreement of the Parties). In the event the Parties develop special or customized Product documentation as required for one or more End Users, the Parties shall mutually agree on the content and share equally the costs of developing such special or customized Product documentation.
2.5 International Sales . Sales of the Products outside the United States shall be in compliance with all U.S. export control and other applicable laws. Ciena may generate foreign language translations of Supplier Product documentation at its expense, provided that, upon request from Ciena, Supplier shall provide foreign language translations of the Documentation, if any, that were or are drafted or commissioned by Supplier or its resellers or distributors in the ordinary course of business. Homologation and other compliance testing costs incurred after the Effective Date shall be paid initially by the party that first sells the Products into the subject country. Should there be additional homologation or certification costs based strictly upon the private label, Ciena shall bear those additional charges. If the other Party thereafter sells the Products into that country based on the prior homologation or compliance test, that party shall promptly reimburse the other party for one-half of the homologation/testing costs, unless otherwise agreed.
2.6 Customer Evaluation and Lab/Demo Equipment . Supplier will provide to Ciena, at the FCA point in accordance with Section 4.1, at no additional charge, with the following Products with related Software for Ciena or End User laboratory or demonstration purposes at both Ciena and End User locations, if and when the same become available by Supplier:
[*]=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.
Non-GA Products (Contingent upon BT Award):
[*]=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.
Ciena may purchase additional Products with related Software from Supplier for Ciena or End Users laboratory or demonstration purposes at both Ciena and End User locations at a [*] Supplier’s then-current list price. All demonstration and laboratory units must be used for end-user evaluation and testing functions and not for resale hereunder. Ciena shall have the option, at any time, to ship the Products and related Software back to Supplier, to be updated with all enhancements, updates, upgrades and additions to keep such Products current with Supplier revision levels and current technology. The Parties shall mutually agree upon the allocation of costs of (i) Product certification testing and laboratory charges assessed by End Users, and (ii) providing any additional Product for use as laboratory or demonstration equipment at Ciena’s facilities as requested by End Users.
2.7 Product Development . Supplier shall provide to Ciena, on a quarterly basis (or more frequently as deemed relevant by the Parties), standard Product development roadmaps as specified under Exhibit A and reports (including but not limited to any known risks associated with such developments) and Product marketing strategies. All information provided to Ciena shall be deemed to be “Confidential Information” of Supplier and shall be subject to the provisions of Section 15 herein, In the event that the Parties mutually agree to develop and deliver specific hardware or software features for an End User, issues relating to such specific features, including but not limited to delivery dates and allocation of costs and responsibilities, will be addressed in a separate amendment to this Agreement.
2.8 Ciena Audit Rights . Supplier shall make all commercially reasonable steps to achieve, at its option, either ISO 9000 or TL 9000 registration as soon as possible. Ciena shall have the right with prior written notice to Supplier of no less than 30 days, to inspect during normal business hours the manufacturing process, software development process and quality management system process with respect to the Products at Supplier’s facilities in order that Ciena may satisfy itself that Supplier’s processes and procedures meet specifications (or Supplier has made sufficient progress in achieving ISO 9000 or TL 9000 registration). After Supplier has achieved ISO 9000 or TL 9000 registration Ciena shall have the right to audit Supplier for compliance with these standards. Supplier agrees to develop corrective action plans to address any deficient processes and to use all commercially reasonable efforts to implement those corrective action plans within a reasonable, mutually agreed time frame. If all Supplier processes and procedures meet the above specifications, the costs of the audits shall be borne by Ciena. If Supplier’s processes and procedures are deficient in accordance with the above ISO 9000 or TL 9000 specifications, Supplier shall bear the cost of the audit.
2.9 Product Integration and Interoperability Testing . The Parties will jointly determine when and whether it is appropriate (i) to integrate their respective products (including but not limited to management and control functionality), and (ii) to conduct interoperability testing of their respective products. If it is determined that such integration and/or interoperability testing of products is appropriate, the Parties agree to enter into a separate written integration and/or interoperability agreement that will define the specific rights and obligations of the Parties.
[*]=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.
2.10 Training . Supplier shall provide Product training [*] to Ciena as follows: (i) upon execution of this Agreement, Product training for up to 12 Ciena customer support engineers at the Supplier facility; (ii) a train-the-trainer program for two Ciena instructors sufficient for Ciena to train its own personnel in providing Services for the Products, which program shall be conducted at a location mutually agreeable to the Parties; and (iii) sales training for up to eight Ciena personnel at the Supplier facility. Supplier shall provide an appropriate number of Products for use in such training. Supplier shall provide Ciena with training materials and related Documentation for the above at no charge, which materials may be duplicated by Ciena for internal purposes only; provided, however, that as part of the train-the-trainer program, Supplier shall provide Ciena with reproducible CD-ROM copies of all relevant course materials and related Documentation that may be duplicated by Ciena for delivery of training programs. If training is conducted at a location other than the Supplier facility, Ciena shall pay all reasonable travel and other expenses for the Supplier training personnel. Ciena may purchase additional training from Supplier [*] Supplier’s list price.
2.11 Development and License Agreement . The Parties shall enter into a separate development and license agreement, which shall cover any custom new product development and engineering work required to integrate Supplier’s existing or new products and technology within Ciena’s product family.
| 3 | PURCHASE ORDERS; FORECASTS; DELIVERY INTERVALS |