EX-10.19 5 dex1019.htm MANUFACTURING AND PURCHASE AGREEMENT CONFIDENTIAL TREATMENT MANUFACTURING AND PURCHASE AGREEMENT
Exhibit 10.19
MANUFACTURING AND PURCHASE AGREEMENT
This Manufacturing and Purchase Agreement (the “Agreement”) is made as of this 5th day of Sept. 2003 (the “Effective Date”), by and between Flash Electronics, Inc., a California corporation (hereafter the “Seller”) located at 0000 Xxxxxxxxx xxxxx, Xxxxxxx, XX 00000, and 3PARdata, Inc (hereafter the “Buyer”) located at 0000 Xxxxxxxxxx Xxxxx, Xxxxxxx, XX 00000.
In consideration of the mutual covenants and representations herein set forth, the Seller and the Buyer agree as follows:
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During the term of this Agreement and subject to the terms and conditions herein, the Seller will provide custom manufacturing services to the Buyer. These services include, but are not limited to, subassemblies and components, material management, assembly of printed circuit boards (the “Products”), final electronic equipment testing, troubleshooting, and rework for the Products. Buyer sells Products on a worldwide basis.
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The term of this Agreement shall commence upon the Effective Date and continue for 12 full calendar months. Thereafter, the Agreement shall automatically renew for successive 12-month periods unless either party gives 90 days’ written notice prior to the anniversary date of its intent to terminate the Agreement. This Agreement may be amended from time to time by written agreement signed by both parties. Notwithstanding the foregoing and subject to the terms and conditions herein, this Agreement may be terminated (i) by either Buyer or Seller for any reason on 90 days prior written notice to the other party; or (ii) upon written notice to the other party at any time any one of the following events occur (a) the other files a voluntary petition in bankruptcy; (b) the other is adjudicated bankrupt; (c) the other makes an assignment for the benefit of its creditors; (d) a court assumes jurisdiction of the assets of the other under any bankruptcy or reorganization act; (e) a trustee or receiver is appointed by a court for all or a substantial portion of the assets of the other; (f) there is a substantial change in the financial
*** | Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. |
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conditions of the other; or (g) the other party is unable to pay its material debts as they become due. In addition, either party shall have the right to terminate this Agreement for breach by the other in the performance of any material obligation of this Agreement, where such breach continues for a period of thirty (30) days after written notice thereof to the other. Both parties’ financial obligations shall survive any termination of this Agreement and Seller shall return to Buyer, at Buyer’s expense, all tooling, equipment, components, drawings, specifications, documentations and supplies that are owned by Buyer.
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4.1.1 Buyer will be liable to Seller for Seller’s restocking charges, transportation charges and other direct charges incurred by Seller, in respect of materials ordered by Seller based on Buyer’s firm orders and not previously delivered to Buyer (“excess components”), on Buyer’s cancellation of purchase orders hereunder or Buyer’s termination of this Agreement (unless Buyer terminates for cause); provided (i) the excess components are in the same condition as when originally purchased by Seller and (ii) that Buyer may, at its option, take delivery of any excess components resulting from such a cancellation or termination. If Buyer decides not to take delivery of excess components, the Seller will make best efforts to sell the excess components in the open market and charge the Buyer for the variance between the original cost and [***] of the agreed upon materials xxxx-up of the part and the price for the part received in the open market, provided, however, that if the variance is more than [***], Buyer’s consent shall be required before Seller may sell any such excess component on the open market. If Seller is unable to sell the excess components in the open market within 30 days or Buyer does not give its consent as required by the previous sentence, and provided the excess components are in the same condition as when originally purchased by Seller, Seller will (i) receive payment from Buyer for the original cost of the part plus [***] the agreed upon materials xxxx-up and (ii) transfer title and deliver the excess components to Buyer, FOB Seller’s facility. Buyer will also be liable to Seller for long lead-time components which are non-cancelable and non-returnable (“NCNR”), as well as any MOQ (Minimum Order Quantity) and MPQ (Minimum Package Quantity) which have been listed on costed BOM’s provided with quote and purchased by Seller (with Buyer’s prior written approval) to cover Buyer’s firm purchase orders hereunder. Seller and Buyer will agree to a list
*** | Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. |
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CONFIDENTIAL TREATMENT
of NCNR items that will be updated by mutual agreement quarterly during the calendar year.
4.1.2 Seller will obtain Buyer’s prior written approval to purchase any components with lead-times in excess of Buyer’s 3 months purchase orders. Once Seller has obtained Buyer’s approval, Buyer will be liable for these components in accordance with this Section 2.1.
i. | The terms on the face page of Buyer’s purchase order as accepted by Seller; |
ii. | The terms of this Agreement; and |
iii. | The terms of any exhibits to this Agreement. |
4.3 Increase, Rescheduling and Cancellation.
4.3.1 Buyer may increase, decrease or reschedule the quantity of Products specified in a purchase order by delivering to Seller, by mail or facsimile, a written change order in accordance herewith (each, a “Change Order”); provided that no Change Order shall be effective until acknowledged and accepted in writing by Seller but further provided that, if Seller fails to acknowledge or reject a Change Order within ten (10 calendar days after Seller actually received said notice, such Change Order will be deemed accepted.
4.3.2 The schedule of each purchase order can be extended only twice, and the push out time cannot exceed 60 days from the original or once extended commit date. Buyer may only submit a Change Order in accordance with the following parameters unless otherwise agreed in writing by both parties;
Number of Calendar Days’ Advance Notice. | Percentage of Scheduled Shipment that may be Rescheduled (OR Increased or decreased) | |
0-30 days | [***] | |
31-60 days | [***] | |
61-90 days | [***] | |
91 or more days | [***] |
4.3.3 The rescheduling or cancellation of any of Buyer’s purchase orders hereunder shall not affect any installments, or portions thereof, which have already been shipped by Seller.
4.3.4 If Buyer requests that any shipments be rescheduled for more than 60 days at any one time, Buyer shall take ownership of excess material by issuing a purchase order. Buyer has the option to request Seller to (i) hold the excess material [***] or (ii) accept shipment of excess material and pay purchase order.
*** | Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. |
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4.3.5 Buyer may cancel a Purchase Order hereunder in accordance with the foregoing parameters on written notice to Seller; provided that, unless otherwise agreed in writing, Buyer’s cancellation of any purchase order, or any portion thereof, shall be subject to Section 4.1.1 above.
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In any event, if the Specifications described in Section 5.1 above and Seller’s workmanship conflict, the Seller shall notify Buyer in writing and, unless otherwise agreed, the Specifications shall take precedence. The Buyer may change its manufacturing processes upon the Seller’s prior written approval, which shall not be unreasonably refused. The Buyer may further request the Seller to repurchase specific material or parts for the manufacture or assembly of the Products.
Buyer shall provide support in the manufacturing process, including test procedure, troubleshooting guideline and on site training, as agreed in writing between Seller and Buyer. Boards that fail the testing should go through the trouble shooting process. Boards that fail again after trouble shooting will be reviewed with Buyer at a regular bi-monthly meeting. Buyer and Seller will agree on disposition of defective boards within 30 days. If it is determined that the failure is attributed to a design issue (and cannot be repaired within a reasonable period of time), Buyer will take ownership of the board within 60 days.
Neither party is granted any right or interest to the trademarks, xxxx or trade name (collectively, “Marks”) of the other party and neither party may use the other’s Marks without such other party’s prior written consent. Notwithstanding the foregoing, Seller may use Buyer’s Marks solely in the course of assembling the Products in the packaging provided by Buyer as set forth herein and in the Specifications. Seller shall not remove any of Buyer’s Marks from any Product or packaging therefore.
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CONFIDENTIAL TREATMENT
specifications required therefore shall also be supplied by Buyer. In accordance with Section 4.1 above, Buyer shall be liable for any and all NCNR items and all materials and products purchased by Seller in response to Buyer’s firm orders rendered obsolete by such changes. Subject to Section 7, Buyer may propose an increase or decrease in the unit price of any Products and any changes in the applicable manufacturing schedule or process subject to Section 4.3.2 above, provided that Buyer allows [***] Seller to provide feedback on proposed changes. The parties shall make all good faith efforts to agree upon any changes in price, schedule or process [***]. If work-in-process is changed per Buyer’s engineering changes, Seller may ship said products and xxxx Buyer [***] for the labor and material costs caused by such changes. In addition, a processing fee of [***] shall be charged to the Buyer when the number of ECOs processed exceeds [***].
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Seller shall itemize for Buyer all of the process tooling, assembly tools and test fixtures necessary or appropriate for Seller to manufacture the Products hereunder (the “NRE Items”). Buyer shall issue a purchase order to Seller for all NRE Items prior to Seller’s purchase thereof provided that Buyer’s obligation to remit firm monthly purchase orders during the term hereof under Section 4.1 above shall be modified to take account of the lead time to purchase and install all NRE Items. If Buyer fails to issue a purchase order for the NRE Items in a timely manner, thereby delaying production, the Product delivery dates set forth on any pending purchase orders shall be appropriately adjusted.
At Buyer’s option, Buyer may ship to Seller on a consignment basis for Seller’s use during the term hereof Buyer-approved tooling and test fixtures which constitute all or a portion of the NRE Items, subject to each party’s execution of a consignment agreement. Upon termination of this Agreement, Seller shall ship to Buyer F.O.B. Seller’s manufacturing facility, at Buyer’s expense, all NRE Items paid for by Buyer and consigned to Seller hereunder. Notwithstanding the foregoing, process tooling, assembly tools and test fixtures and all intellectual property rights herein and thereto which are developed solely at Seller’s expense (and without use of or reference to any of Buyer’s confidential and/or proprietary information or Buyer’s instructions or intellectual property rights) in connection with Seller’s performance of this Agreement shall be the property of the Seller. All intellectual property produced, improved, or developed by Buyer in connection with the design, manufacture or assembly of the Products shall be owned exclusively by Buyer. Ownership of any intellectual property developed by Seller shall vest with Buyer, if so developed at Buyer’s expense or based on Buyer’s confidential and/or proprietary information or Buyer’s instruction or intellectual property rights.
Buyer and Seller will come to an agreement on the costs of initial set up of any special facilities (for example, power requirements other than standard 11OV, special dedicated structures, etc) needed to support the manufacturing of the Buyer’s Product at the Seller’s plant.
*** | Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. |
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CONFIDENTIAL TREATMENT
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7.1.1. Standard costs shall be reviewed quarterly by the parties.
7.1.2 Quarterly cost reductions shall take effect in the new quarter, subject to the consumption of higher-priced material either in stock, or with purchase orders.
7.1.3 Single component cost reductions shall take effect in the next following new quarter.
7.1.4 Due to component market conditions (lead-times and allocations), certain materials and components must be purchased at higher than standard costs. Seller shall obtain Buyer’s prior written approval before incurring these higher costs. Subject to the foregoing, Seller shall invoice Buyer for such increased costs.
7.1.5 Seller will invoice purchase price variance (PPV) on a monthly basis, based on Seller’s receiving report.
7.1.6 Purchases with a PPV of [***] per line item will require Buyer’s prior written consent.
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*** | Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. |
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by the Seller and shall be implemented on Buyer’s written approval thereof.
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9.1 See new Section 17 below.
9.2 All Products shall be subject to inspection and acceptance by Buyer at its expense within ten (10) business days after Buyer receives such Products from Seller. The Buyer shall inspect the delivered Products and notify Seller of its acceptance or rejection of the Products in writing within ten (10) business days. If the Buyer fails to inspect and accept the Products within the time frame as set forth in this Section 9.2, the Buyer shall waive its rights to claim the existence of any obvious defect or damage by inspection due solely to mishandling during shipping.
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On a breach by Seller of any of the foregoing warranties, and subject to any indemnification set forth below, Seller’s sole liability and Buyer’s exclusive remedy therefor shall be as follows: (i) Buyer shall return the affected Product(s) to Seller, at Seller’s expense, in accordance with the Return Materials Authorization (“RMA”). Seller shall, at its sole discretion and at its expense,
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as quickly as possible, repair or replace any defective Products returned by Buyer during the Warranty Period and shall ship the repaired or replacement Products to Buyer, at Seller’s expense. . The unexpired warranty period, plus any time that the Product was in Seller’s possession for repair or replacement, shall apply to the returned Product. If there is no defect found on the product returned, Seller should charge Buyer a reasonable fee to cover the labor and based on an agreed upon labor rate.
10.3 Limitation of Liability. EXCLUDING CLAIMS OR DAMAGES ARISING OUT OF ONE PARTY’S MISAPPOPRIATION OF THE OTHER PARTY’S INTELLECTUAL PROPERTY OR CONFIDENTIAL INFORMATION OR SUBJECT TO INDEMNICATION UNDER SECTION 11 BELOW, UNDER NO CIRCUMSTANCE SHALL EITHER PARTY BE LIABLE TO THE OTHER, OR TO ANY OTHER PERSON, FOR SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES BASED UPON BREACH OF WARRANTY, BREACH OF CONTRACT, TORT, STATUTORY CLAIM OR ANY OTHER LEGAL THEORY PERTAINING TO ITS PERFORMANCE UNDER THIS AGREEMENT.
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Excluding claims to the extent covered by Section 11.1 above or Section 11.2 below, Seller shall indemnify, defend and hold Buyer harmless from and against any personal injury claims, damages, claims, actions and liability suffered or incurred by Buyer (including attorney’s fees) resulting from Seller’s negligence, failure to manufacture Products in conformance with Specifications or default of this Agreement.
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Buyer shall indemnify, defend and hold Seller harmless from and against any and all claims, damages and liability suffered by Seller resulting from personal injury and/or property damage to third parties, including without limitation Seller’s employees, due to defects in the design of any Product or the Specification or in any specific component incorporated into a Product at the express direction of the Buyer (including any such incorporated made in express compliance with specific Product Specifications.)
Buyer further agrees to indemnify, defend and hold Seller harmless from any claims, demands, causes of action, liabilities or damages, including attorneys’ fees, arising from or relating to any claim that products manufactured by Seller herein, including any xxxx, symbol, feature or part thereon, infringe any trademark right.
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Each party shall have and maintain, during the term hereof and for three (3) years thereafter, product liability insurance with [***] policy limits and automobile liability insurance with policy limits and coverage reasonably adequate to cover all perils customarily protected against in performing its obligations hereunder. Each party shall provide the other party with a certificate of insurance on request.
*** | Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. |
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It is understood and agreed that the terms of this Agreement are confidential, and no news release, advertisement or public announcement, or denial or confirmation of the same, concerning any part of the subject matter of this Agreement shall be made by either party hereto without the prior written consent of the other party in each instance except to the extent that such disclosure is needed in any action or proceedings enforce or interpret the Agreement or its terms or provisions. Further, the parties hereto acknowledge that, during the term hereof, they may become aware of confidential, secret or proprietary information pertaining to the other party and its operations (including, without limitation, information with respect to bidding, pricing, suppliers and customers or lists thereof, research, development and engineering, and internal operations, inventory control, data processing, technical data, trade secrets, and other procedures and systems) (“Confidential Information”) and that disclosure of such information would materially and adversely affect the affected party. Each party hereto agrees to maintain such Confidential Information and not to disclose any such Confidential Information to any person, firm or other entity, or to utilize the same in any manner or form, except as may be expressly required by the terms and conditions of this Agreement. The foregoing obligations of confidentiality shall not apply to any Confidential Information that the receiving party can show is or was: (i) Already known to the receiving at the time of disclosure without obligation of confidentiality; (ii) Independently developed by the receiving party without use of or access to the Confidential Information; (iii) Approved for disclosure by the disclosing party beforehand and in writing; (iv) Publicly known without breach of this Agreement; (v) Lawfully received by receiving party from a third party without obligation of confidentiality; (vi) Required to be disclosed by applicable law or order of a court, tribunal or other governmental agency; provided, however, that the receiving party shall promptly notify the disclosing party in writing of such requirement, and shall cooperate with the disclosing party to minimize the scope of any such disclosure, and in the obtaining of a confidentiality, protective or similar order. Notwithstanding anything to the contrary, the confidentiality provisions set forth in this Section 13 shall survive any termination of this Agreement.
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Either party may freely assign this Agreement without the prior consent of the other party in connection with a transfer of all or substantially all of its business or assets, whether by corporate reorganization, acquisition, sale of assets or merger. Subject to the foregoing, neither party may assign this Agreement in whole or in part without the prior written consent of the other party, which will not be unreasonably withheld.
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the parties relating to the subject matter of this Agreement. Any waiver of any provision of this Agreement must be in writing and signed by the party alleged to have waived such provision, and any single waiver shall not operate to waive subsequent or other defaults. The unenforceability of any provision of this Agreement shall not affect the remaining provisions or any portions thereof.
Flash Electronics, Inc.: | Buyer: | |
0000 Xxxxxxxxx Xxxxx | 0XXXxxxx, Xxx | |
Xxxxxxx, XX 00000-0000 | (address as above) | |
Attn: Xxxx Xxxxxx |
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15.7 Advertising and Publicity. No advertising, press release or other publicity by Seller or Buyer shall display or contain any trademarks or references to the other party or its customers without such other party’s prior written consent.
15.8 Checks marked “Payment in Full”. Conditioned upon Seller’s continued performance of all its obligations hereunder, Seller may accept and deposit any checks marked “Payment in Full” or words to the like effect without waiving its right to payment in full hereunder UNLESS BUYER SHALL GIVE WRITTEN NOTICE TO SELLER, SPECIFYING THE AMOUNT IN DISPUTE AND THE BASIS THEREFOR AND STATING THAT THE CHECK IS BEING TENDERED AS FULL PAYMENTSe11er shall furnish Buyer with any information required during the term of this Agreement to enable Buyer to comply with the requirements of any government agency concerning the sale and use of the Products.
15.9 Attorneys’ fees and costs. If any action or proceeding is brought to enforce or interpret the terms or provisions of this Agreement, the prevailing party shall be entitled to an award of reasonable attorneys’ fees and costs.
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Notwithstanding anything in this Agreement to the contrary, all Buyer’s property shall be clearly segregated and identified as the sole property of Buyer, and maybe provided to a third party by Seller only after obtaining prior written approval from Buyer. Seller shall bear all costs for damages that may occur to Buyer’s property while in Seller’s possession. Seller shall use Buyer’s property only for fulfilling the performance of this Agreement. Upon Buyer’s request, or upon the expiration or termination of this Agreement, Seller shall return all Buyers’ property to Buyer in good condition, normal wear and tear excepted.
Buyer hereby grants to Seller a non-exclusive, royalty-free, nontransferable license to use Buyer’s intellectual property embodied in any of Buyer’s property provided to Seller, for the sole purpose of: (i) manufacturing and providing Product(s) hereunder for sale to Buyer under this Agreement, and (ii) providing warranty and support services for the Product(s) to Buyer under this Agreement.
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CONFIDENTIAL TREATMENT
17.2 Manufacturing Site(s). Seller shall manufacture Products only at the manufacturing sites qualified by Buyer.
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Notwithstanding anything in this Agreement to the contrary, all tooling produced or obtained for the Products delivered hereunder (if any) and paid for by Buyer shall become and remain the property of Buyer at the time payment in full is received for the tooling by Seller. Such tooling shall be used by Seller only for the benefit of Buyer, and shall be delivered to Buyer upon request. If Buyer requests the return of any tooling from Seller and Seller determines the return of such tooling prevents Seller from providing the Products to Buyer, then Seller shall inform Buyer in writing, and Buyer and Seller shall negotiate a mutually acceptable resolution.
Buyer, at its sole discretion, may consign to Seller, items, including, but not limited to, materials and/or equipment relating to the production and/or testing of the Products at Seller’s location. The material and/or equipment shall be utilized by Seller only for the production and/or testing of the Products. Buyer shall assist Seller in installing the materials and/or equipment and shall provide training and maintenance instructions, if requested by Seller or required by Buyer. Buyer shall be responsible for repairing, upgrading, replacing and/or maintaining the materials and/or equipment consigned to Seller. However, Seller shall provide routine maintenance.
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Seller represents that it will pursue this Agreement to the best of its ability and in the best interest of Buyer, and Buyer represents that it will cooperate with Seller in reaching the objectives of this Agreement. Seller will appoint a project manager for the duration of this Agreement and will require Buyer to establish one person to coordinate all activities through. In the event that the project manager is not operating in the best interest of Buyer, then Buyer shall contact Seller to discuss Agreement-related concerns and/or complaints.
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CONFIDENTIAL TREATMENT
FLASH ELECTRONICS, INC. | BUYER | |||||||
3PARdata, Inc. | ||||||||
/s/ X. Xxxx | /s/ Xxxx Xxxxxx | |||||||
Name: | X. Xxxx | Name: | Xxxx Xxxxxx | |||||
Title: | President FUSA | Title: | Vice President |
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