Exhibit 10.13
SUPPLY AGREEMENT
BETWEEN
MANUFACTURERS' SERVICES SALT LAKE CITY OPERATIONS, INC.
and
3COM CORPORATION
----------
[*] = Information redacted pursuant to a confidential treatment request.
An unredacted version of this exhibit has been filed separately with the
Commission.
TABLE OF CONTENTS
Page
----
1. DEFINITIONS ........................................................... 1
2. PRECEDENCE OF DOCUMENTS ............................................... 3
3. PURCHASE AND SUPPLY COMMITMENT ........................................ 3
4. PURCHASE ORDERS, FLEXIBILITY, RESCHEDULES, CANCELLATIONS .............. 4
5. ROLLING FORECAST ...................................................... 6
6. PURCHASES BY BUYER'S AUTHORIZED AGENTS ................................ 6
7. EXCESS MATERIALS ...................................................... 7
8. OBSOLETE MATERIALS .................................................... 7
9. TERM OF AGREEMENT ..................................................... 7
10. PRODUCTION CAPACITY ................................................... 7
11. FLEXIBILITY CAPABILITY ................................................ 8
12. MATERIALS TRANSFER .................................................... 8
13. PRICING ............................................................... 8
14. DELIVERY .............................................................. 9
15. PACK-OUT, PACKING, MARKING, AND SHIPPING INSTRUCTIONS ................. 9
16. QUALITY STANDARDS AND CERTIFICATION ................................... 9
17. INSPECTION, TESTING, AND ACCEPTANCE ................................... 11
18. RETURN OF PRODUCT ..................................................... 12
19. SUPPORT ............................................................... 13
20. WARRANTY .............................................................. 13
21. PAYMENT ............................................................... 15
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TABLE OF CONTENTS
(continued)
Page
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24 CHANGES .............................................................. 15
23. PROTOTYPING AND ENGINEERING SERVICES ................................. 16
24. INTELLECTUAL PROPERTY RIGHTS ......................................... 17
25. TERMINATION FOR CAUSE ................................................ 18
26. TERMINATION FOR CONVENIENCE .......................................... 18
27. LIMITATION OF LIABILITY .............................................. 19
28. FORCE MAJEURE ........................................................ 19
29. NONASSIGNABILITY ..................................................... 20
30. NOTICES .............................................................. 20
31. COMPLIANCE WITH LAWS ................................................. 21
32. PATENT, COPYRIGHT AND TRADEMARK INDEMNITY ............................ 21
33. CAPACITY PLANNING .................................................... 23
34. GRATUITIES ........................................................... 23
35. INSURANCE AND STATUTORY OBLIGATIONS .................................. 23
36. INSURANCE COVERAGE ................................................... 24
37. CONFIDENTIAL INFORMATION ............................................. 24
38. PUBLIC ANNOUNCEMENTS ................................................. 25
39. COUNTRY OF ORIGIN .................................................... 26
40. PROPERTY FURNISHED BY BUYER .......................................... 26
41. GENERAL .............................................................. 26
EXHIBITS:
Exhibit A - Products and Pricing
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TABLE OF CONTENTS
(continued)
Page
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Exhibit B - Specifications
Exhibit C - Buyers' Pack-Out and Packaging Specifications
Exhibit D - Flexibility Parameters
Exhibit E - Buyer's Affiliates and Authorizing Agents
Exhibit F - Performance Standards
Exhibit G - Build Request Process Flow
Exhibit H - Long Leadtime Authorization Form
Exhibit I - Environmental Warranties
Exhibit J - Statement of Work
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SUPPLY AGREEMENT
THIS SUPPLY AGREEMENT (hereinafter referred to as "the Agreement"), dated
and effective this 27th day of November 1999, ("Effective Date"), and the
schedules attached hereto between
Manufacturers' Services Salt Lake City Operations, Inc., a company
organized and existing under the laws of Delaware and having its principal place
of business at 0000 Xxxx Xxxxxx Xxxxx Xxxxx, Xxxx Xxxx Xxxx, Xxxx 00000
("Seller") on the one hand and
3Com Corporation, a company organized and existing under the laws of
Delaware and having its principal place of business at 0000 Xxxxxxxx Xxxxx,
Xxxxx Xxxxx, Xxxxxxxxxx 00000 ("Buyer") on the other hand. "Seller and Buyer"
are hereinafter also collectively referred to as "Parties" and individually as a
Party.
WHEREAS, Seller agrees to manufacture and sell to Buyer the Products (as
hereinafter defined) and Buyer agrees to purchase from Seller such Products,
subject to the terms and conditions of this Agreement.
1. DEFINITIONS
A. "Affiliate": with respect to any Party, any other party directly or
indirectly controlling, controlled by, or under common control with such Party.
For purposes of this definition, "control" when used with respect to any party,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such party, whether through the
ownership of voting securities, by contract or otherwise; the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
Buyer's Affiliates are identified in Exhibit E, which may be changed by written
notice from Buyer to Seller from time to time.
B. "BOM": Buyer's Xxxx of Materials.
C. Buyer's "Authorized Agent": any of Buyer's Affiliates, or any third
party suppliers, subcontractors or contract manufacturers who desire to purchase
Products or Materials and whose credit worthiness is reasonably acceptable to
Seller, who purchase on a letter of credit basis, or whose payment obligations
are guaranteed by Buyer. Buyer's Authorized Agents are identified in Exhibit E,
which may be changed from time to time by written agreement between Buyer and
Seller.
D. "Days": calendar days unless otherwise specified.
E. "Excess Materials": Unique Materials on hand and ordered consistent
with Buyer's forecast at agreed-upon leadtimes and for which the forecasted use
is in excess of [*]
[*] resulting from Buyer's cancellations, reschedules or other delays or changes
caused by Buyer.
F. "Finished Goods Stockroom": the section of Seller's facility designated
as the area where the Product is delivered to Buyer.
G. "Materials": component line items on the BOM, which are collectively
assembled to produce the Product.
H. "Manufacturing Lead Time": the total aggregate lead time of that
component of the Product having the longest lead time, plus the time necessary
for receiving and inspecting all components for such Product, manufacturing the
Product, and systems integration, test and distribution, all as mutually agreed
upon by the Seller and Buyer.
I. "MRP": Materials requirements planning.
J. "NRE": non-recurring engineering expenses.
K. "Obsolete Materials": Unique Materials on hand and ordered consistent
with Buyer's forecast at agreed-upon leadtimes which can no longer be used for
their designated Product and/or for which there is no forecast for the following
[*]
L. "Performance Standards": those performance standards set forth in
Exhibit F, as may be modified from time to time by mutual written agreement of
the Parties.
M. "Product(s)": the product(s) identified by Buyer's part number or
assembly identification name as more fully described in Buyer's Specifications.
N. "Pull" means a replenishment driven process triggered by customer
consumption whereby Product is manufactured and delivered by Seller based upon
Buyer's replenishment demand, which is generated by actual use, disposition or
consumption of Product by Buyer; the overall objective being to minimize Seller
and Buyer's inventories while enabling greater flexibility and faster response
in fulfilling Buyer's variable replenishment demand.
O. "Build Request" is a document Buyer provides to Seller on an as-needed
basis and serves as a replenishment request. The Build Request indicates, among
other things, the part number(s), quantity(s), delivery date(s), and
destination(s) of the Product(s) being requested.
P. "Pull Product" shall mean Products, which may be purchased by Buyer
under a Pull Purchase Order pursuant to this Agreement, and for which Seller and
Buyer have jointly agreed are to be designated as pull Products.
Q. "Blanket Purchase Order" is Buyer's blanket Purchase Order for a
Product. Blanket Purchase Orders shall reference this Agreement and include the
mutually agreed Price (as defined in Section 13A), but do not bind Buyer or
Seller as to total quantities purchased, delivery dates, or the total dollar
commitment of such Blanket Purchase Order.
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R. "Purchase Order": Buyer's written purchase order form or other format
mutually agreed upon by the Parties and any documents incorporated therein by
reference.
S. "RMA": return material authorization.
T. "Specifications": Buyer's specifications as shown on Exhibit B,
attached, which also hereby by reference include IPC-610B Class 2 workmanship
standards as modified from time to time and the then currently accepted
commercial manufacturing practices.
U. "Unique Materials": Custom (i.e. specifically designed for the
Products) Materials or noncancellable and nonreturnable industry standard
Materials (i.e., that are not available from multiple suppliers or from a single
supplier with multiple customers).
2. PRECEDENCE OF DOCUMENTS
The precedence of documents between Buyer and Seller shall be:
A. This Agreement, as it may be amended in writing by mutual agreement
B. A Purchase Order
C. Buyer's non-binding forecast
3. PURCHASE AND SUPPLY COMMITMENT
A. Buyer agrees that it and its Authorized Agents shall purchase, and
Seller agrees to supply, a minimum of 5,000 production machine hours of
utilization per quarter at Buyer's Q2FY2000 standards on existing equipment as
of the Effective Date for existing Products (or applicable standards as mutually
agreed for new Products or new capital equipment for existing Products) during
the Initial Term of this Agreement. Notwithstanding the foregoing, if Seller
falls to meet the Performance Standards set forth in Exhibit F in all material
respects, or otherwise fails to comply with material obligations hereunder, or
Seller fails to make the minimum commitment available to Buyer in accordance
with Buyer's orders in any quarter due to a Materials shortage or otherwise (not
directly caused by Buyer), Buyer will be under no obligation to reach this
minimum in any quarter of such material noncompliance but will be under this
obligation in subsequent periods if such noncompliance is cured within the
Initial Term. Notwithstanding the foregoing, any failure of Seller to make
minimum commitments available to Buyer in accordance with Buyer's orders in any
quarter shall only relieve Buyer of its obligation to reach its minimum
commitment to the extent of such shortfall provided that Seller makes the
remainder of such commitment available in such quarter in accordance with
Buyer's orders.
B. Any overage in purchase of Products of no more than [*]% that occurs
during any quarter will be credited towards the subsequent quarterly period and
any deficit in purchase of Products of no more than [*]% in any quarter may be
made up in the next quarter to the extent there is not a deficit in such
subsequent quarter. This minimum purchase commitment takes precedence over the
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Flexibility Parameters of Exhibit D; Failure to meet the commitment is subject
to a [*] notice and cure period.
4. PURCHASE ORDERS, FLEXIBILITY, RESCHEDULES, CANCELLATIONS
A. Buyer will provide a minimum of [*] continuous, Blanket Purchase Order
coverage. Blanket Purchase Orders may be submitted in the form of hard copy, by
facsimile, or by electronic transfer if there is an electronic data interchange
("EDI") agreement in place between Buyer and Seller. Purchase Orders will
specify part numbers, quantity, prices, product revisions, requested delivery
dates and delivery locations all of which shall be consistent with the terms
hereof. Any terms or conditions contained in the Purchase Order or in Seller's
acknowledgement or other document which are inconsistent with or in conflict
with the terms and conditions contained in this Agreement or which increase or
impose additional obligations, liabilities, or risks upon the other Party are
hereby expressly rejected and shall have no effect. Blanket Purchase Orders will
be for one part number per purchase order and indicate: (1) agreed-upon purchase
Price; (2) method for shipping, receiving and billing of Product shipped per the
"Build Request Process Flow" method set out in Exhibit G or as otherwise
mutually agreed; and (3) payment terms as defined in this Agreement. Blanket
Purchase Orders quantities are not considered for liability purposes or for use
in Materials planning and forecast requirements. Materials liability is set
forth in Exhibit D. Buyer shall communicate demand for long range and weekly
increments consistent with the Build Request Process Flow set forth in Exhibit G
or as otherwise mutually agreed.
B. Alternatively, Buyer will provide a Blanket Purchase Order [*] at
the agreed-upon Price for the forecasted demand for [*]. Buyer will release
Build Requests for Products on a [*] basis for the quantities to be shipped
the following [*] based upon demand patterns and backlog status. On a
periodic basis at Buyer's discretion, Buyer may issue a Build Request
document to Seller, requesting delivery of Product pursuant to the Build
Request Process Flow set forth in Exhibit G. Such Build Requests shall be
Buyer's only commitment to purchase Products (subject to Section 3 above),
and Seller's only authorization to ship Product to Buyer. A Build Request may
be in electronic or written (including facsimile) form. Seller agrees to
multiple Build Requests per Day.
C. When Buyer issues a Build Request, Products must be scheduled for
delivery at least [*] after Seller's receipt of the Build Request. If Buyer
requests Seller to ship Products in fewer than [*] after Seller's receipt of the
Build Request, Seller agrees to make commercially reasonable efforts to
accommodate Buyer's request.
D. Buyer and Seller agree to, on a [*] basis, reconcile their respective
data records with respect to open Purchase Order quantity the quantity of
Product ordered, shipped and delivered pursuant to Buyer's Build Requests during
the previous [*] period.
E. Seller will use commercially reasonable efforts, and will allocate
excess capacity at the Salt Lake City facility pro-rata based on customer unit
order volume among Buyer and other customers (to the extent Seller does not have
enough capacity to meet Buyer's orders beyond forecast and minimum commitment)
to meet Buyer's requested increases in capacity beyond
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forecasted quantities within the Manufacturing Lead Time subject to Materials
availability, other scheduled manufacturing, and manufacturing capacity. If any
premium, expediting, or other increased charges over quoted costs are required
in order to meet Buyer's increased requirements, they must be approved in
advance by Buyer. Buyer agrees to pay for all such pre-approved costs that
represent out-of-pocket costs incurred by Seller. In addition, Seller commits at
no additional cost to Buyer to comply with the flexibility terms for Materials
and capacity availability as defined below provided that Seller is not obligated
to procure additional capital equipment to meet this obligation:
Materials and Capacity Availability Upside
[*] % Upside
0-2 [*]
2-4 [*]
4-8 [*]
>8 [*]
F. Exhibit D sets forth the allowable outward reschedules, cancellations
and upward flexibility.
G. Changes to Purchase Orders that are permissible under Exhibit D and
changes to its forecasts will be consolidated by Buyer who will take
commercially reasonable efforts to limit its requests to one request per [*]
H. Purchase Orders shall not be considered as accepted until confirmed in
writing by an authorized representative of Seller. Seller shall make
commercially reasonable efforts to confirm Purchase Orders (except by written
mutual arrangement) within [*] after receipt. Notwithstanding the foregoing, if
Seller fails to accept or reject within [*], Seller will be deemed to have
accepted that Purchase Order. No additional or different provisions proposed by
either Party shall apply unless expressly agreed to in writing by both Parties.
Seller will accept Purchase Orders which are consistent with the terms and
conditions of this Agreement.
I. Seller will meet the delivery dates specified by Buyer if such dates
are consistent with the Performance Standards set forth in Exhibit F.
J. On a [*] basis Seller will provide Buyer with a list of all Materials
with leadtimes exceeding [*] for review and mutual approval. Upon mutual
approval, Seller will update the MRP with the mutually agreed current leadtimes.
Any Unique Materials that are required to be purchased beyond mutually agreed
leadtimes requires completion of the "Long Leadtime Authorization Form" set
forth in Exhibit H.
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K. Any Unique Materials item whose cost will change, with inventory or
liability still available, but less than a forecasted [*] production, will
result in a Price change, using a [*] method:
[*]
L. or such other method as mutually agreed.
5. ROLLING FORECAST
Buyer will provide Seller with at least a [*] rolling non-binding
forecast, updated [*]. Buyer authorizes Seller to procure long lead-time
Materials consistent with Section 4J above in accordance with Buyer's forecasts
and flexibility requirements. Buyer further authorizes Seller to purchase
minimum buy items and reel quantities to support economic order quantities and
Materials requirement planning which may exceed authorized forecasts or Purchase
Orders. Seller agrees to inform Buyer of such purchases and Buyer shall have the
right to pre-approved all purchases of Unique Materials ordered in excess of
forecast. Some of Seller's orders to vendors and/or some Materials may be
designated by vendors as non-cancelable or non-returnable. All of these actions
may result in Materials procurement in excess of that required by Buyer's
Purchase Orders and forecasts. Buyer hereby authorizes Seller to make such
purchases as are reasonably necessary to meet Buyer's forecasts. Buyer will be
liable for, and Buyer's liability with respect to the procurement of Materials
will be limited to Excess and Obsolete Materials as set forth in Section 7 and
Section 8 below. For the avoidance of doubt, Seller will be responsible for
managing the disposition and liability of all industry standard Materials at no
expense or liability to Buyer (i.e., all non-Unique Materials). In addition,
Buyer may limit its liability hereunder by specifying to Seller in writing a
maximum amount. If Buyer elects to specify a maximum amount Seller will purchase
only to that amount and will notify Buyer of the impact to Buyer's
forecast/Purchase Orders.
6. PURCHASES BY BUYER'S AUTHORIZED AGENTS
Seller agrees that all of the Buyer's Authorized Agents, wherever located,
shall be entitled to make purchases under this Agreement, and all such
purchases shall apply to the purchase commitments in Section 3, subject to
their credit worthiness being reasonably acceptable to Seller, unless they
purchase on a letter of credit basis or their payments are guaranteed by Buyer.
Any payment timing and credit limitations placed on Buyer's Authorized Agents,
other than those presented in this Agreement, will be agreed upon in writing by
both Parties. Seller agrees to notify Buyer of any credit limitations applicable
to Buyer's Authorized Agents.
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7. EXCESS MATERIALS.
With respect to any Excess Materials on hand, Seller will notify Buyer of
the amount and the cost of such Excess Materials in a consolidated, monthly
report. Buyer shall either (i) pay carrying costs for Excess Materials at a rate
of [*] per month as it ages greater than [*] after receipt of such monthly
notice by Buyer; or (ii) buy all Excess Materials at [*] to be held in bonded
stock for consumption based upon a forecasted demand within the next [*]. Seller
will use reasonable commercial efforts to sell Excess Materials.
8. OBSOLETE MATERIALS
On a [*] basis, Seller will send Buyer a report which states the Materials
that are determined to be Obsolete Materials. Buyer will purchase Obsolete
Materials at [*] plus a [*] Materials acquisition charge. Buyer will provide
Seller a purchase order within [*] of confirmation of obsolescence. Seller will
use reasonable commercial efforts to sell Obsolete Materials.
9. TERM OF AGREEMENT
This Agreement shall become effective upon execution by authorized
representatives of both Parties. This Agreement shall expire twenty-four (24)
months after the date of execution by both Parties ("Initial Term"), unless
this Agreement is terminated earlier pursuant to Section 25 or 26 and shall
be automatically extended for one or more additional successive [*] periods
(each, a "Renewal Term"), unless one Party notifies the other Party in
writing at least [*] prior to the beginning of such additional period that it
desires not to extend. Minimum purchase obligations pursuant to Section 3
shall terminate upon expiration of the Initial Term and shall not be renewed
in any Renewal Term. The Initial Term, along with any Renewal Terms, is
referenced to herein as the "Term" of this Agreement.
10. PRODUCTION CAPACITY
All manufacturing will be conducted at Seller's Salt Lake City, Utah
facility unless otherwise agreed. Seller shall make available the necessary
capacity at such facility to meet Buyer's production requirements, as provided
by Buyer in Sections 4 and 5. Seller will notify Buyer on a [*] basis to confirm
that capacity is available for the forecasted period for the following [*] and
to advise Buyer of any capacity constraints for the remainder of the forecast
period. Buyer agrees to not unreasonably withhold approval of additional
production facilities in the event of extraordinary demand beyond Buyer's
forecasts. However, to the extent Seller does not have sufficient capacity to
meet Buyer's orders beyond forecast and minimum commitments, Seller will
allocate capacity at the Salt Lake City facility pro-rata among Buyer and other
customers, based on customer unit order volumes, and Buyer is under no
obligation to approve the manufacture of Products at any other of Seller's
locations if Buyer determines in its sole discretion that such location does not
meet Buyer's business needs.
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11. FLEXIBILITY CAPABILITY
Buyer may issue change requests for Product quantities and schedule dates,
and Seller shall maintain the necessary capacity to accommodate such changes, in
accordance with the Flexibility Parameters attached as Exhibit D (the
"Flexibility Parameters"). Changes made in accordance with the Flexibility
Parameters will not incur cost or liability for Buyer.
12. MATERIALS TRANSFER
Seller agrees to buy, from time to time, Buyer's on-hand Materials that
are in excess of Buyer's own production requirements and are needed for Seller's
production within the open Purchase order period. Seller also agrees to sell
Materials in excess of Seller's production requirements to Buyer, to any of
Buyer's Authorized Agents or anyone else designated by Buyer whose credit
worthiness is reasonably acceptable to Seller, who purchases on a letter of
credit basis, or whose payment obligations are guaranteed by Buyer. Transfer
quantities and payment terms will be mutually agreed on a case-by-case basis.
Prices shall be at Buyer's or Seller's, as the case may be, actual purchase
price for the transferred Materials.
13. PRICING
A. The prices for Products sold pursuant to this Agreement are set out in
Exhibit A to this Agreement (hereinafter referred to as "Prices"). Any change to
the Prices set forth in Exhibit A shall be identified by an amendment to Exhibit
A which must be approved by authorized representatives of both Parties. All
Prices shall be in US Dollars, unless otherwise negotiated and documented in
Exhibit A.
B. Delivery is at Seller's dock or the Seller's Finished Goods Stockroom,
whatever the case may be. Buyer shall pay all applicable out-bound freight
costs, out-bound export costs, including any pre-shipment inspection charges if
mandated by the authorities of the country of exportation, as well as all
out-bound export brokerage, documentation, processing, customs and any other
export fees and taxes for export out of the United States at Buyer's request.
Buyer also agrees to pay all sales and use taxes on Products or Materials sold
to Buyer to Seller's delivery point or furnish Seller with tax exemptions. Both
Parties agree that Prices shall include all costs of the Product manufacture,
including pack-out of finished goods, as well as charges such as packaging,
palletizing, packing, crating, and storage as needed.
C. All Materials shall be purchased from suppliers on Buyer's approved
vendor list (the "AVL") as revised from time to time. Buyer agrees to use
reasonably commercial efforts to have Buyer's suppliers extend to Seller (as
agreed to by the applicable supplier) any and all Buyer negotiated Materials
pricing solely for purchases for Products manufactured under this Agreement.
Buyer will consider requests by Seller to permit such pricing to be extended to
Seller for purchases for Seller's other customers (as agreed to by the
applicable supplier).
D. Any Materials inspection processes that are in place at the
manufacturing facility as of the Effective Date are included in the negotiated
Price. Materials cost reductions negotiated by
8
Buyer with component suppliers will also be factored into Buyer's Materials
cost. Cost reductions negotiated by Seller for Buyer-controlled Materials from
alternate suppliers that are not on Buyer's approved vendor list, but which have
been approved by Buyer for inclusion on the AVL, will be [*] following first
production shipment of such components by the new supplier to Seller, after
which time the cost reduction will be factored fully into Buyer's Materials
cost.
14. DELIVERY
A. Seller will deliver the Product no more than [*] before and [*] after
the agreed delivery date, but if deliveries are delayed by causes beyond
Seller's control, will promptly notify Buyer and may make partial deliveries.
If Seller continues to be unable to meet the agreed delivery date due to
supply constraints, it will provide Buyer a report of such supply constraints
and proposed actions to minimize the impact of these constraints. If delivery
is more than [*] late due to causes entirely within Seller's control, Seller
will pay the incremental cost of expedited shipment. Delivery terms are
Ex-Works (as defined in the International Chamber of Commerce "Incoterms"
1990 edition) from Seller's production facility. Title and risk of loss to
the Product passes to the Buyer at the point of delivery, i.e. Seller's dock
or Sellers' Finished Goods Stockroom.
B. Seller shall segregate and clearly designate the Products as belonging
to Buyer. Seller shall maintain insurance coverage in a form reasonably
acceptable to Buyer to cover risk of loss to the Products until delivery to the
common carrier.
15. PACK-OUT, PACKING, MARKING, AND SHIPPING INSTRUCTIONS
A. All Product shall be finished, packed-out, prepared and packed for
shipment in a commercially reasonable manner with the intent to secure the
lowest transportation rates and meet carrier's requirements and those set forth
in Buyer's Pack-Out and Packaging Specifications which are attached hereto as
Exhibit C.
B. Each shipping container shall be marked to show Buyer's Purchase Order
number, part number, revision level, lot number, quantity contained therein, and
destination. A packing list showing the Purchase Order number shall be included
in each container. Marking on all parts shall be per the Buyer's shipping
specification. Marking shall include date of manufacture, place of manufacture,
Seller's part number and revision number.
16. QUALITY STANDARDS AND CERTIFICATION
A. MANAGEMENT REVIEW PROCESS. The Parties intend to maintain active and
open communications at both the program level and at the strategic level, and
agree to engage in periodic reviews of all applicable activities encompassing
the relationship. Executive representatives from both Parties will meet no less
than [*] to review all major elements of this Agreement and to jointly agree
upon updated performance metrics for this Agreement. Initially, the Parties
intend to rotate these meetings between Seller's locations and Buyer's corporate
facilities in Santa Xxxxx,
9
California. Special attention will be paid to Buyer programs specific to the
host site, although the Parties will also follow a standard agenda covering the
total business. This agenda will include reviewing Buyer future Product roadmaps
and schedules, organizational updates, future manufacturing and process
improvements by Seller's business reviews, and performance metrics reflecting
activities during the period since the last review.
B. PERFORMANCE METRICS. Performance Metrics as set forth in Exhibit F will
include, but are not limited to, the following: (i) total Buyer-Seller business
level; (ii) Seller product quality and yields; (iii) Seller on-time delivery
performance; (iv) Buyer forecast accuracy; (v) Seller inventory summary; (vi)
Buyer EC activity; (vii) lead time characterization; (viii) Seller prototype
on-time delivery and quality performance; and (ix) Seller future/projected
manufacturing/process and cost improvements. Seller agrees to maintain quality
standards, measurement practices, quality reports, and inspection processes as
they exist at the Salt Lake City facility as of the Effective Date subject to
any changes as may be mutually agreed. In addition, Seller will work with Buyer
to develop mutually-agreeable closed-loop quality and corrective action
processes on a going forward basis. Seller shall maintain the quality plan in
effect at the Salt Lake City facility as of the Effective Date. The Parties
shall cooperate to develop a mutually acceptable quality plan incorporating such
existing plan at a minimum on a going forward basis. Upon request of either
Party, the Parties will cooperate to document such plan in writing. The Parties
shall engage in quarterly reviews and weekly conference calls to track
performance and update such plan.
C. Seller agrees that all Products will conform in all material respects
to the Specifications for the part number stated on the BOM or Buyer's Purchase
Order, the Specifications for the manufacture and pack-out of the Products, and
to the workmanship specifications of IPC-610B Class 2 as modified from time to
time, which are set forth in Exhibits B and C, and to the then currently
accepted commercial manufacturing practices. For the avoidance of doubt, as used
in this Agreement "material" includes without limitation any non-conformity that
may cause a customer to return a Product.
D. Seller will supply qualification samples to Buyer upon request. Buyer
shall provide written notification to Seller of the results of qualification
testing of each Product. If the sample is approved by Buyer, then Buyer will be
deemed to have accepted the BOM for the qualification samples and the processes
performed by Seller will be deemed to meet the appropriate Specifications.
E. Buyer shall have the right to purchase spare Materials for the Products
in order to perform internal maintenance, support, and repair and for lab stock
and testing purposes. Such purchases shall be governed by the applicable terms
and conditions set forth in this Agreement.
F. Seller will conform to the requirements of ISO 9002 at all times in
manufacturing the Products hereunder. Seller agrees that it currently is or
will, within twelve (12) months of the Effective Date of this Agreement become
certified under ISO 9002, and during the term of this Agreement will remain ISO
9002 certified. If at any time hereafter certification under ISO 9002 is no
longer generally appropriate, Seller will ensure that it is certified under
another comparable or higher standard which is reasonably acceptable to Buyer.
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G. Seller agrees that it will perform final "out-of-box" testing of a
sample of the Products to verify that the Products conform to the Specifications
in all material respects prior to delivery to Buyer. If any Products in the
sample deviate from the Specifications, Seller shall rework all defective
Products in the lot being sampled to render them compliant with the
Specifications in all material respects. Test methods and test procedures shall
be as currently in place at the Salt Lake City facility or as otherwise agreed
to by both Parties.
H. If Buyer returns defective Products to Seller, Seller agrees to
implement on a prompt basis appropriate actions as necessary to minimize the
possibility that additional defective Products will be delivered to Buyer, and
further agrees as soon as reasonably possible to implement appropriate
corrective actions as necessary to prevent reoccurrence of the defect. Seller
further agrees to conduct a detailed failure analysis and to report the failure
analysis data to Buyer within [*] of receipt of the defective Product at
Seller's location. Seller agrees to preserve and maintain all data associated
with Product failure analysis and corrective actions and to make that data
available to Buyer upon request at no charge provided that Seller shall not be
obligated to preserve and maintain such data beyond the period required by its
ISO 9002 certification or the warranty period for the Products, whichever is
greater. Seller agrees to participate in Buyer's closed-loop corrective action
process.
I. Seller agrees to advise Buyer in writing of any material changes to
manufacturing processes and any changes to Materials, sources of supply, or
process chemistries, test procedures, quality reporting or other major
processes, and to ensure that any such changes do not compromise specifications,
quality, or reliability of Products ordered pursuant to this Agreement. In the
case of changes to Materials or sources of supply, such notice shall be provided
no less than the [*] prior to the effectiveness of such change. Seller may not
make any such changes without prior written approval from Buyer. In the event a
Seller-proposed change fails Buyer's qualification, Seller is obligated to
provide the existing qualified Product until the proposed changed can be
qualified.
17. INSPECTION, TESTING, AND ACCEPTANCE
A. Products purchased pursuant to this Agreement shall be subject to
inspection, testing, and acceptance by Buyer, which shall occur within [*] of
delivery of Product.
B. All Products built by Seller for Buyer will have a specific set of
Product testing procedures and acceptance criteria as currently in place at the
Salt Lake City facility or as otherwise agreed to by both Parties. Upon request
of either Party, the Parties will cooperate to document such procedures and
criteria in writing. Should Products or Seller's processes be found to be
non-conforming, Seller will withhold shipping Product until such non-conformance
is resolved to Buyer's reasonable satisfaction. Buyer will not be responsible
for Products that fail to meet agreed upon acceptance criteria.
C. All Products are subject to Buyer's inspection and test at Buyer's
facility before final acceptance. Buyer has a [*] acceptance period after
delivery. In the event of non-conforming
11
order (i.e. failure to meet Purchase Order or failure to meet warranty), Buyer
has the right to reject the order in whole or in part within such [*] period.
D. Upon [*] notice, Buyer shall have the right to perform vendor
qualifications and/or on-site inspections at Seller's manufacturing facilities
during Seller's normal business hours. If an inspection or test is made on
Seller's premises, Seller shall provide Buyer's inspectors with reasonable
facilities and assistance at no additional charge. In the event that any on-site
inspection of the Products indicates that the Products do not conform to the
requirements of this Agreement, Seller shall not ship such Products to Buyer
until such nonconformity has been corrected to Buyer's reasonable satisfaction
and Buyer has approved shipment of such Products in writing. This does not
preclude, prevent or limit Buyer's right to perform acceptance testing at
Buyer's facilities.
18. RETURN OF PRODUCT
A. In the event Buyer detects non-conforming Products prior to acceptance,
a Non-Conforming Materials Report (NCMR) and/or a Corrective Action request
(CAR) shall be provided to Seller and Seller shall submit an initial response to
such CAR within [*] after receipt. Seller must provide a Return Materials
Authorization (RMA) within [*] after receipt of request for an RMA from Buyer.
B. Buyer may reject and return any defective Product to Seller at Seller's
expense. Seller agrees to reimburse Buyer all reasonable and actual freight and
handling costs associated with return of any defective Product. Seller will
return conforming Products freight prepaid as per the following schedule to
Buyer or issue appropriate credit no later than [*] or as mutually agreed by
both Parties, from the date Seller receives the defective Product.
RMA Ouantity Days
------------ ----
[*] [*]
[*] [*]
[*] [*]
Any Product returned to Seller, which, after inspection and testing by Seller,
is found to be free of defects shall be subject to a "No Defect Found Charge" as
specified in Exhibit A. However, Seller will waive any NDF Charges on Products
returned for repair, if returned Products result in an NDF rate not exceeding
[*] of the monthly unit volume. For an NDF rate greater than [*] but not more
than [*] the Parties will mutually agree upon allocation of the NDF Charge.
C. If pending the analysis of returned Products by Seller Buyer is in
urgent need of Product, Buyer may issue a Purchase Order to replace the Products
to which the CAR pertains. Seller will expedite such Purchase Order at Buyer's
request and, if requested by Buyer, will ship the order by.
12
premium transport as specified by Buyer, All costs of expedited handling of such
Purchase Order and any premium transport specified by Buyer shall be borne by
Buyer, unless there is a defect that is the fault of the Seller, in which case
it will be borne by Seller.
19. SUPPORT
Buyer may request reasonable on-site support from Seller, which Seller
shall provide, to solve problems with rejected shipment batches of Product as
well as to validate Buyer's inspection methodology. All costs will be borne by
the Party incurring them.
20. WARRANTY
A. WARRANTY. Subject to Section 20E below, Seller makes the following
warranties to Buyer:
(i) The Product will conform in all material respects to
the Specifications and the Materials will conform in all material respects to
the supplier's specifications for such Materials for a period of [*] from the
date of delivery to Buyer;
(ii) The Products will be free from defects in Seller's
workmanship and in Materials and meet the mutually-agreed testing criteria for a
period of fifteen (15) months from the date of delivery to Buyer;
(iii) All Products and Materials delivered under this
Agreement shall comply with the environmental warranties set forth in Exhibit I;
(iv) All Products and Materials delivered under this Agreement
shall be free and clear of any liens or encumbrances, and at the time of
delivery Seller shall have all rights necessary to transfer title to such
Products and Materials to Buyer;
(v) The Materials are Year 2000 ready such that they are
capable of correctly processing, providing, receiving and displaying date data,
as well as capable of exchanging accurate date data with all Products with which
the Materials are used within and between the twentieth and twenty-first
centuries; and
(vi) The Products and all Materials provided to Buyer under
this Agreement (other than those purchased from Buyer) are new products and do
not contain anything used, refurbished or reconditioned.
B. REPAIR OR REPLACEMENT. In the event that any Product fails to comply
with the warranties set forth in Section 20A above, Seller shall, at its
expense, correct any such defect by repairing or replacing such defective
Product in Seller's discretion subject to Buyer's reasonable approval. Buyer
shall return to Seller such defective Products and Materials to Seller's
designated facility pursuant to the RMA procedure set forth in Section 18 above.
The repaired or replaced item will be shipped to Buyer no later than ten (10)
business Days from receipt of the defective Product at
13
Seller's facility subject to Materials availability. If repair or replacement is
not possible due to unavailability of needed Materials within the time required
by Buyer, at Buyer's option Seller will issue a refund in the form of a credit
to Buyer in an amount equal to the purchase Price of the defective Products that
Seller is unable to repair or replace. Replacement and/or repaired Products
shall be warranted for the [*].
C. EPIDEMIC DEFECT RATE. In addition to Section 20A above, Seller
agrees to repair or replace, at no charge to Buyer, any Epidemic Defects
found to exist in any of the Products at any time prior to [*] after the date
of delivery to Buyer of the affected Products. As used herein, "Epidemic
Defects" shall mean a product field failure for which Seller is responsible
pursuant to the warranty in Section 20A at a rate of [*] or more occurring
with the same or related Products with the same cause as measured during the
warranty period. In the case of any Epidemic Defects, Seller and Buyer shall
jointly agree regarding which of the following options to pursue, at Seller's
expense; (i) [*] no such corrective action is sufficient.
D. INDEMNIFICATION. If Seller discovers a material breach of any of the
representations and warranties in Section 20A, Seller shall promptly notify
Buyer of such breach in writing. In addition to repairing or replacing such
Products or Materials pursuant to Section 20B above; Seller shall defend,
indemnify and hold harmless Buyer and its officers, directors, employees,
agents, representatives, successors and assigns from any third-party claims,
liabilities, losses, demands or judgments arising from the breach of any of
Seller's representations and warranties set forth in Section 20A(iii) or (iv).
E. WARRANTY EXCLUSIONS.
Buyer will have no claim against Seller under the Product warranties set
forth in Section 20A, and Seller shall have no liability under Section 20A to
the extent that such claims are made for a Product defect:
(a) resulting from defective Buyer-supplied Materials;
(b) resulting from specific instructions provided by
Buyer in writing or electronically, covering design or test data,
Specifications, quality requirements, diagnostics, manufacturing processes or
other processes or Product descriptions; or
(c) that is caused by Buyer or anyone other than Seller
or its agents through misuse, excessive shock, accident, fire, or improper
maintenance procedures, improper storage, or modification by Buyer or anyone
other than Seller.
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Notwithstanding Section 20A above, Seller's sole liability under this
Section 20 with respect to Materials shall be to use reasonable commercial
efforts to obtain such warranties for Materials from its suppliers of Materials.
All warranties obtained by Seller on the Materials shall, if possible, be
assigned to Buyer at no additional cost. To the extent such warranties are not
assignable to Buyer at no additional cost to Seller, Seller shall at Buyer's
written request use reasonable commercial efforts to enforce such warranty
against the supplier, and Seller shall provide the benefits of such enforcement
to Buyer (subject to reimbursement of attorney's fees as provided below). In the
event that after using reasonable commercial efforts, Seller's initial efforts
to enforce such warranty against the Materials vendor are unsuccessful, Buyer
will reimburse Seller for the reasonable costs of pre-approved (by Buyer)
outside legal counsel to enforce such warranties. If Seller is successful in
such enforcement, Seller will repair the affected Products with the
non-defective, replacement Materials, if applicable, at no cost to Buyer to the
extent that such labor costs are included in the warranty. To the extent that
labor costs are not included in such warranty, upon request from Buyer, Seller
will repair the affected Products with the non-defective replacement Materials
at Seller's standard costs.
F. WARRANTY DISCLAIMER. THE FOREGOING EXPRESS WARRANTIES AND REMEDIES ARE
EXCLUSIVE AND ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, EITHER IN
FACT OR BY OPERATION OF LAW, STATUTORY OR OTHERWISE, INCLUDING WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ALL OF WHICH ARE HEREBY
DISCLAIMED.
21. PAYMENT
A. Payment shall be made by Buyer net [*] from the receipt of invoice or
the date of delivery of Product, whichever is later. All payments shall be made
without any discount whatsoever. Seller shall submit the invoices to the address
indicated by Buyer.
B. Unless otherwise specified in Exhibit A or agreed to in writing by the
Seller and the Buyer, payment shall be in U.S. Dollars.
22. CHANGES
A. The Parties recognize that from time to xxxx Xxxxxx will request or
will be requested by Buyer to implement Engineering Change Orders (hereinafter
referred to as "ECOs"). The following outlines the proper procedure for such:
(i) Seller Requested Changes. Seller is to notify Buyer in
writing of proposed ECOs no less than [*] and will, if so requested, provide
Buyer with samples. The notification shall include the proposed Product
changes, anticipated price changes and implementation date. Notification
shall also include the appropriate documentation to support Buyer's
investigation of the impact of this proposal. Buyer will review the
feasibility of the implementation of the proposed ECO. If lead-time or new
costs are required for the ECO, lead time and new Prices will be reviewed.
Buyer is to advise Seller of its decision with respect to the proposed ECO
within [*] after receipt of Seller's written notifica-
15
tion, Buyer will not be liable for any Excess or Obsolete Materials arising as a
direct result of such Seller ECO.
(ii) Buyer Requested Changes. Buyer agrees to notify Seller
in writing of all proposed ECOs. This notification will include the
appropriate documentation to support Seller's investigation of the impact of
this proposal. Seller is to report to Buyer within [*] of Buyer's request the
feasibility of the implementation of the ECO and if reasonably feasible, the
estimated charges that would be incurred for obsolete work-in-process
Materials, raw Materials, and on-order Materials. Buyer will review the labor
and Materials costs and impact for the implementation of the ECO. If new
Materials are required for the ECO, lead-time and new Product Price will be
reviewed and mutually agreed upon.
(iii) Buyer is to notify Seller in writing within [*] after
receipt of Seller's cost report of its decision as to the proposed ECO,
associated costs, and the implementation dates. Seller will execute an agreed
ECO per a mutually agreed upon phase-in plan, and will use reasonable
commercial efforts to meet Buyer's requested dates.
B. No ECO's shall be made by Seller without Buyer's prior written
approval, which may be withheld in Buyer's sole discretion.
23. PROTOTYPING AND ENGINEERING SERVICES
A. PROTOTYPE SERVICES. Buyer may engage Seller to render prototyping
services in connection with Products to be manufactured hereunder. In the event
that Buyer desires to engage Seller to render such services, the Parties shall
execute a Statement of Work which shall be in the form attached hereto as
Exhibit J or as otherwise mutually agreed, which shall include a description of
the services to be rendered, any milestones or delivery dates or other terms
relevant to such engagement.
B. OTHER ENGINEERING SERVICES. The Parties acknowledge that Buyer may
desire to engage Seller for other engineering services relating to the Products.
If Seller agrees to such engagement, the Parties shall execute a Statement of
Work in the form attached hereto as Exhibit J or as otherwise mutually agreed
and which shall include a description of the services to be rendered and any
milestones or delivery dates or other terms relevant to such engagement.
C. PERFORMANCE METRICS FOR SERVICES. Specific performance metrics for
Seller for a specific service may be set forth in the corresponding Exhibit J or
as otherwise mutually speed. Where none is set forth, Seller shall use
reasonable efforts to provide services in accordance with the policies,
procedures and practices in effect before the date hereof and shall exercise the
same care and skill as it exercises in performing similar services for itself.
D. PAYMENT TERMS. Prices for services shall be set forth in the applicable
Exhibit J. Seller shall invoice Buyer on a monthly basis for all charges for
services rendered pursuant to this Agreement. Such invoices shall be accompanied
by reasonable documentation or other reasonable
16
explanation supporting such charges. Buyer shall pay Seller for all services
provided hereunder within [*] after receipt of an invoice therefor.
24. INTELLECTUAL PROPERTY RIGHTS
A. BUYER OWNERSHIP. Except as set forth in Section 24B below, Buyer shall
exclusively own all right, title and interest in all results and proceeds of the
services rendered by Seller hereunder (the "Services"), including without
limitation, in any work of authorship, mask work, idea, design, concept,
technique, invention or discovery, whether or not patentable or registerable
("Assigned Inventions"), and Seller hereby irrevocably transfers and assigns to
Buyer all right, title and interest, including without limitation all IP Rights,
in the Assigned Inventions. As used herein, "IP Rights" shall mean all
copyrights, maskwork rights, patents and other intellectual property or
proprietary rights. In addition, the Parties expressly agree to consider as
works made for hire those works ordered or commissioned by Buyer which qualify
as such in accordance with the copyright laws. For all of the Assigned
Inventions, Seller agrees to provide documentation satisfactory to Buyer to
assure the conveyance of the Assigned Inventions to Buyer. The Assigned
Inventions shall be kept in confidence by Seller and shall be used only in
performing this Agreement and may not be used for other purposes except upon
such terms as may be agreed upon between the Parties in writing. Seller also
agrees to acquire from its employees, agents and contractors, rights and
covenants as to assure that Buyer shall receive the rights provided for in this
Section 24A.
B. SELLER OWNERSHIP. Seller shall exclusively own all IP Rights in all
know-how, technology, processes, procedures, ideas and concepts developed by
Seller or its employees, agents, affiliates or contractors in the course of
manufacturing the Products, any modifications, enhancements, improvements to the
manufacturing processes for the Products, and any other idea, design, concept,
technique, invention or discovery related to the manufacture of the Products
during the Term of this Agreement ("Manufacturing Standards"). For the avoidance
of doubt, (i) Buyer shall retain all IP Rights to all manufacturing processes,
know-how and other information and materials provided by Buyer to Seller after
the Effective Date of this Agreement to manufacture the Products or perform the
Services ("Buyer IP"). and (ii) Seller shall retain all IP Rights to all
manufacturing processes, know-how, and other information owned by Seller or
developed by Seller other than in connection with the performance of this
Agreement.
C. LICENSE GRANTS. In consideration of Seller's obligations under this
Agreement, Buyer hereby grants Seller a non-exclusive, non-transferable,
royalty-free fully-paid license for the Term of this Agreement to use the Buyer
IP, but solely for the purpose of manufacturing and servicing the Products for
Buyer and any of Buyer's Authorized Agents who purchase under this Agreement,
unless otherwise notified in writing by Buyer. Seller hereby grants to Buyer a
non-exclusive, royalty-free, fully-paid license to use the Manufacturing
Standards in connection with the manufacture of Products by or for Buyer and to
make, have made and distribute the Products manufactured using the Manufacturing
Standards. Upon request from Buyer, Seller shall provide Buyer with such
documents reasonably necessary for Buyer to document and duplicate the
Manufacturing Standards for the Products.
17
D. BUYER TRADEMARKS. Buyer authorizes Seller to affix and apply the Buyer
Trademarks to the Products as directed by Buyer for the sole purpose of
manufacturing the Products pursuant to this Agreement. Seller shall not use
Buyer Trademarks for any other purpose and only in such manner as to preserve
all rights of Buyer. Seller acquires no right to Buyer Trademarks by its use and
all uses by Seller of the Buyer Trademarks will inure to Buyer's sole benefit.
As used herein, "Buyer Trademarks" means those trademarks, trade names, service
marks, slogans, designs, distinctive advertising, labels, logos, and other
trade-identifying symbols as are or have been developed and used by Buyer or any
of its subsidiaries or affiliate companies and which Buyer owns or has the right
to use.
E. Nothing herein shall be deemed to modify the ownership, license or
other terms of the Intellectual Property License Agreement of even date herewith
between Buyer and Manufacturers' Services Limited ("MSL") or the Asset Purchase
Agreement dated as of November 19, 1999, between Buyer, on the one hand, and
Seller and MSL, on the other hand (the "Asset Purchase Agreement").
25. TERMINATION FOR CAUSE
This Agreement or any Purchase Order may be terminated immediately for
cause by either Party upon notice to the other Party for the following:
(i) the other Party makes a general assignment for the benefit
of creditors, or a receiver or similar officer is appointed to take charge of
any of the other Party's assets;
(ii) the other Party enters into any composition with
creditors or is subject to an order made or resolution passed for it to be wound
up or for the appointment of a judicial manager;
(iii) the other Party ceases to carry on its business or
operations;
(iv) a bankruptcy or similar petition is filed by or against
the other Party, and in the case of an involuntary petition, the proceeding is
not dismissed within sixty (60) Days; or
(v) the other Party fails to meet the Performance Standards
set forth in Exhibit F; or
(vi) the other Party fails to perform any material obligation
under this Agreement, and such failure is not cured within thirty (30) Days of
notice thereof.
26. TERMINATION FOR CONVENIENCE
Either Party may terminate this Agreement or any Purchase Order after
expiration of the Initial Term without cause by giving at least [*] written
notice to the other Party. Upon expiration or termination of this Agreement for
any reason, Seller will take commercially reasonable steps to reduce its
liability to vendors. Seller and Buyer may propose specific actions to be taken
in
18
this regard, and if they are unable to reach agreement after a reasonable time,
Buyer will pay Seller an amount equal to the liability for cancelled orders as
set forth in Exhibit D. If the Parties agree to have Seller seek to re-stock or
re-market any Unique Materials, Buyer will compensate Seller for its reasonable
costs, which shall include but not be limited to, cancellation or restocking
charges, costs of preparation and packaging of assemblies or Materials for
shipment to Buyer or any third party authorized by Buyer, and costs of
terminating any open Purchase Orders or contracts which had been authorized by
Buyer. Buyer will have no liability with respect to the payment for non-Unique
Materials.
27. LIMITATION OF LIABILITY
EXCEPT WITH RESPECT TO DAMAGES TO THIRD PARTIES UNDER INDEMNIFICATION
OBLIGATIONS OR WITH RESPECT TO BREACH OF CONFIDENTIALITY OBLIGATIONS, NEITHER
PARTY SHALL BE LIABLE TO THE OTHER UNDER ANY CONTRACT, STRICT LIABILITY,
NEGLIGENCE OR OTHER THEORY FOR ANY INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES
INCLUDING WITHOUT LIMITATION LOST PROFITS IN CONNECTION WITH THE SUBJECT MATTER
OF THIS AGREEMENT OR ANY PURCHASE ORDER IRRESPECTIVE OF WHETHER SUCH PARTY HAD
ADVANCE NOTICE OR KNOWLEDGE OF THE POSSIBILITY OF SUCH DAMAGES. NOTWITHSTANDING
THE FOREGOING, THIS SECTION SHALL NOT LIMIT EITHER PARTY'S LIABILITY FOR INJURY
TO A PERSON OR RELIEVE BUYER'S LIABILITY TO PAY SELLER WHEN DUE THE PRICE FOR
PRODUCTS DELIVERED.
28. FORCE MAJEURE
Neither Party shall be liable hereunder by reason of any failure or delay
in the performance of its obligations hereunder (except for the payment of
money) on account of strikes, shortages, riots, insurrection, fires, flood,
storm, explosions, earthquakes, telecommunications outages, acts of God, war,
governmental action, or any other cause which is beyond the reasonable control
of such Party and could not have been avoided by the exercise of reasonable
prudence. In the event of the occurrence of any force majeure event, the
affected Party shall notify the other Party immediately in writing of its
invocation of this Section 28, and each Party's obligations hereunder (except
for the payment of money) to the other shall be suspended for the duration of
such force majeure event; provided, however, that the affected Party shall be
obligated to use its commercially reasonable efforts to restore performance
hereunder as soon as reasonably practicable, and provided, further, that if such
event continues for more than [*] in the aggregate in any [*] period, the
non-affected Party shall have the tight to terminate this Agreement at any time
upon written notice to the other Party. Seller's performance under this
Agreement in meeting delivery commitments shall be excused until such time as
Seller commences building and delivering Products or initial SAP implementation
is accepted by Seller, such acceptance not to be unreasonably withheld, provided
that, for the avoidance of doubt, such excuse does not constitute a force
majeure event.
19
29. NONASSIGNABILITY
Neither Party may, directly or indirectly, in whole or in part, whether by
operation of law or otherwise, assign or transfer this Agreement, or any rights
or obligations hereunder, without the other Party's prior written consent, and
any attempted assignment, transfer or delegation without such prior written
consent shall be voidable at the sole option of such other Party.
Notwithstanding the foregoing, each Party (or its permitted successive assignees
or transferees hereunder) may assign or transfer this Agreement as a whole
without consent to an entity that succeeds to all or substantially all of the
business or assets of such Party. Without limiting the foregoing, this Agreement
will be binding upon and inure to the benefit of the Parties and their permitted
successors and assigns.
Notwithstanding the foregoing, Seller shall have the right upon written
notice to Buyer to assign this Agreement to a wholly-owned (direct or indirect)
subsidiary of Seller's ultimate parent, such arrangement not to affect the
guarantee by Manufacturers' Services Limited of this Agreement.
Nothing herein shall prohibit Seller from granting in favor of its lenders
a security interest in any accounts receivable by Seller from Buyer under this
Agreement.
30. NOTICES
A. All notices, reports, requests, acceptances, and other communications
required or permitted under this Agreement shall be in writing and shall
reference this Agreement. They will be deemed delivered:
(i) When delivered in person, or
(ii) When sent by confirmed telex or acknowledged facsimile or
acknowledged e-mail except that the communications referred to in Sections 20E,
25, 26, 28, 29, or 32 may not be sent by e-mail, or
(iii) One Day after having been sent by commercial overnight
courier with written verification of receipt or,
(iv) Five Days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or upon actual
receipt thereof, whichever occurs first. An acknowledged e-mail communication or
fax shall be deemed to be a communication in writing. All communication will be
sent to the receiving Party as follows or to such address that the receiving
Party may designate pursuant to this Section.
If to Seller: Manufacturers' Services Salt Lake City Operations, Inc.
0000 Xxxx Xxxxxx Xxxxx Xxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Vice President
20
with a copy to: Manufacturers' Services Limited
000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Attention: General Counsel
and to Rod Michael, VP of Corporate Accounts
xxx.xxxxxxx@xxxxxxxx.xxx
If to Buyer: 3COM CORPORATION
0000 Xxxxxxxx Xxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxx, Senior Director, Worldwide Contract
Manufacturing
Xxxxx_Xxx@0Xxx.xxx
with a copy to: 3COM CORPORATION
0000 Xxxx Xxxxxxx Xxxx
Xxxxx Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxx, Vice President, Supply Chain
Operations
Xxxx_Xxxxxx@0Xxx.xxx
with a copy to: 3COM CORPORATION
0000 Xxxxxxxx Xxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: General Counsel
Fax No. (000) 000-0000
31. COMPLIANCE WITH LAWS
Seller agrees that its performance under this Agreement shall comply with
all applicable laws including without limitation laws governing its relationship
with its employees, agents or subcontractors. Buyer agrees that its performance
under this Agreement shall comply with all applicable laws including without
limitation laws governing its relationship with its employees, agents or
subcontractors.
32. PATENT, COPYRIGHT AND TRADEMARK INDEMNITY
A. Indemnity by Seller. Seller will, at its expense, defend, indemnify and
hold Buyer, its Affiliates, officers and directors harmless from any costs,
expenses (including reasonable attorney's fees), losses, damages, court
judgments or awards or liabilities (collectively, "Damages") incurred as a
result of any claim that any Service or Product provided by Seller to Buyer
pursuant to this Agree-
21
ment infringes or is alleged to infringe any patent, copyright, trade secret,
trademark mask work right or other proprietary right(s) of a third party, but
solely to the extant such infringement or alleged infringement arises out of or
relates to a Seller Responsibility; provided that Seller is promptly notified by
Buyer, rendered reasonable assistance by Buyer (at Seller's expense) and
permitted to control the defense or settlement of such claim. As used herein,
"Seller Responsibility" means any aspect of the manufacture of the Products or
performance of the Services that is not specifically required in writing by
Buyer in its specified designs, Materials, processes or other instructions and
with respect to which there is a non-infringing alternative available to
implement such requirements, or any deviations from such requirements by Seller
or its agents. For the avoidance of doubt, a Seller Responsibility occurs with
respect to any discretionary action by Seller in the manner of implementing
Buyer's requirements if a non-infringing alternative exists. Without limiting
the foregoing, such indemnification shall not apply to infringing combinations
to the extent arising from the combination of the Product with other items in
which the combination was not performed by Seller or its agents or from claims
for infringement to the extent arising from changes to the Products not made by
Seller or its agents.
B. Indemnity by Buyer. Buyer will, at its expense, defend, indemnify and
hold Seller and its Affiliates, officers and directors harmless from Damages
incurred as a result of any claim that any Product or Service provided by Seller
to Buyer hereunder infringes or is alleged to infringe any patent, copyright,
trade secret, trademark, mask work right or other proprietary right(s) of a
third party, except to the extent that such infringement or alleged infringement
arises out of or relates to a Seller Responsibility, and except to the extent
Seller has indemnification coverage from the applicable supplier with respect to
any Buyer-Specified Materials Infringement Claim; provided that Buyer is
promptly notified by Seller, rendered reasonable assistance by Seller (at
Buyer's expense) and permitted to control the defense or settlement of such
claim. Such indemnification shall not apply to infringing combinations arising
from the combination of Buyer's requirements with other items that are not
Buyer's requirements.
C. Buyer-Specified Materials Infringement Claim. Seller will use
reasonable commercial efforts to obtain indemnification protection covering
Seller (and Buyer if possible) from its suppliers of Buyer-Specified Materials
for any claim that the Buyer-Specified Materials provided by suppliers infringes
or is alleged to infringe any patent, copyright, trade secret, trademark, mask
work, or other proprietary right(s) of a third party (a "Buyer-Specified
Materials Infringement Claim"), and Seller will use reasonable commercial
efforts to pass through to Buyer any indemnification protection that is so
obtained. As used herein, "Buyer-Specified Materials" means any Materials that
are specifically required in writing by Buyer and with respect to which there is
no non-infringing alternative available to implement such requirement. Where
Seller has obtained indemnification protection from a supplier of
Buyer-Specified Materials and is unable to pass through such indemnification
protection to the Buyer and a Buyer-Specified Materials Infringement Claim is
made against Buyer, Seller agrees that it will indemnify Buyer for Buyer's
Damages incurred as a result of such Buyer-Specified Materials Infringement
Claim, but such indemnification by Seller shall be provided only to the extent
Seller is able to obtain indemnification from such supplier using reasonable
commercial efforts and after application of such indemnification amount against
Damages incurred by Seller in connection with such Buyer-Specified Materials
Infringement Claim.
22
All reasonable costs of outside counsel pre-approved by Buyer to enforce such
indemnification protection from such supplier of Materials, to the extent
incurred in respect of Seller's indemnification of Buyer under this Section 32C,
shall be reimbursed by Buyer.
D. Additional Obligations. Should the use of any Product by Buyer or its
customers be enjoined because of a Seller Responsibility, Seller shall (or in
the event Seller wishes to minimize its potential liability hereunder arising
from an infringement claim based on a Seller Responsibility, Seller may) either
(i) substitute a fully equivalent non-infringing unit of the Product for each
affected unit of the Product sold to Buyer; (ii) modify the infringing Product
so that it no longer infringes but remains functionally equivalent (iii) obtain
for Buyer, at Seller's expense, the right to continue to make, use and sell the
Product; or if none of the foregoing is feasible (iv) refund to Buyer the
purchase price paid therefor and accept return of the infringing Products.
33. CAPACITY PLANNING
A. Seller agrees to review forecasts provided by Buyer and advise Buyer if
Seller anticipates that it will be unable to achieve the requested volumes.
Buyer's volume forecasts will be provided to Seller according to Section 5.
Seller may from time to time request Buyer to review Buyer's forecast and advise
of any changes and Buyer will do so. Seller agrees to provide Buyer with either
1) confirmation of feasibility of the forecast received, or 2) notice of
specific feasibility issues with the forecast received within [*] of receiving
said forecast.
B. If Buyer's rolling forecast exceeds Seller's available maximum capacity
for Buyer, Seller shall advise Buyer of the limitations in the capacity and
provide a response in writing as described in the Purchase Order and rolling
forecast articles.
34. GRATUITIES
Each Party represents and warrants that it has not offered or given and
will not offer or give any employee, agent, or representative of the other Party
any gratuity with a view toward securing any business from the other Party or
influencing such person with respect to the business between the Parties.
35. INSURANCE AND STATUTORY OBLIGATIONS
If either Party's work under this Agreement requires access to any of the
other Party's premises or the premises of the other Party's buyers, suppliers,
or locations where the other Party conducts business, or with material or
equipment furnished by the other Party, both Parties shall take all necessary
precautions to prevent the occurrence of any injury to persons or property
during the progress of such work and, except to the extent that such injury is
due to the other Party's negligence or willful misconduct, each Party shall
indemnify the other Party against all loss which may result in any way from any
negligence or willful misconduct of the Party, its employees, servants, agents,
or subcontractors, and each Party shall maintain such insurance as shall protect
the other Party from such risks and from any statutory liabilities arising
therefrom and shall provide evidence of such insurance to the other Party upon
request.
23
36. INSURANCE COVERAGE
A. Seller will provide evidence of product liability insurance in a form
reasonably acceptable to Buyer in the amounts of [*] per occurrence and [*]
aggregate per year, will maintain in effect such insurance for a period of [*]
after termination of such Agreement, and will provide Buyer with a certificate
of insurance.
B. Buyer will provide evidence of product liability insurance in a form
reasonably acceptable to Seller in the amounts of [*] per occurrence and [*]
aggregate per year, and will maintain in effect such insurance for a period of
[*] after termination of such Agreement and will provide Seller with a
certificate of insurance.
37. CONFIDENTIAL INFORMATION
A. "Confidential Information" means any information: (i) disclosed by one
Party (the "Disclosing Party") to the other (the "Receiving Party"), which, if
in written, graphic, machine-readable or other tangible form is marked as
"Confidential" or "Proprietary," or which, if disclosed orally or by
demonstration, is identified at the time of initial disclosure as confidential
and is summarized in writing and similarly marked and delivered to the Receiving
Party within thirty (30) Days of initial disclosure; (ii) which at the time it
is disclosed is or should reasonably be known by the Receiving Party to be
proprietary or confidential information of the Disclosing Party, or (iii) which
is otherwise deemed to be "Confidential Information" by the terms of this
Agreement. Notwithstanding the foregoing, Buyer's Confidential Information shall
include without limitation all Specifications of the Product. As used in this
Section 37A, the terms "Receiving Party" and "Disclosing Party" may be
understood to include, as appropriate under the circumstances, 3Com or its
subsidiaries or Palm or its subsidiaries, as applicable, and MSL or the MSL
Affiliates.
B. Confidential Information Exclusions. Confidential Information will
exclude information that the Receiving Party can demonstrate is: (i) now or
hereafter, through no unauthorized act or failure to act on Receiving Party's
part, in the public domain; (ii) known to the Receiving Party from a source
other than the Disclosing Party (including former employees of the Disclosing
Party) without an obligation of confidentiality at the time Receiving Party
receives the same from the Disclosing Party, as evidenced by written records;
(iii) hereafter furnished to the Receiving Party by a third party as a matter of
right and without restriction on disclosure; (iv) furnished to others by the
Disclosing Party without restriction on disclosure; or (v) independently
developed by the Receiving Party without use of the Disclosing Party's
Confidential Information. Nothing in this Agreement shall prevent the Receiving
Party from disclosing Confidential Information to the extent the Receiving Party
is legally compelled to do so by any governmental investigative or judicial
agency pursuant to proceedings over which such agency has jurisdiction;
provided, however, that prior to any such disclosure, the Receiving Party shall
(a) assert the confidential nature of the Confidential Information to the
agency; (b) immediately notify the Disclosing Party in writing of the agency's
order or request to disclose; and (c) cooperate fully with the Disclosing Party
in protecting against any such disclosure and/or obtaining a protective order
narrowing the scope of the compelled disclosure and protecting its
confidentiality.
24
C. Confidentiality Obligation. The Receiving Party shall treat as
confidential all of the Disclosing Party's Confidential Information and shall
not use such Confidential Information except as expressly permitted under this
Agreement. Without limiting the foregoing, the Receiving Party shall use the
same degree of care and means that it utilizes to protect its own information of
a similar nature, but in any event not less than reasonable ease and means, to
prevent the unauthorized use or the disclosure of such Confidential Information
to third parties. The Confidential Information may be disclosed only to
employees or contractors of the Receiving Party with a "need to know" who are
instructed and agree not to disclose the Confidential Information and not to use
the Confidential Information for any purpose, except as set forth herein;
provided, however, in the case of Buyer, the term "employees or contractors of a
Receiving Party" shall include employees and contractors of Buyer and its
Authorized Agents (but with respect to Authorized Agents who are not Affiliates
disclosure shall be limited to the extent necessary to enable such Authorized
Agents to purchase under this Agreement). The Receiving Party shall have
appropriate written agreements with any such employees or contractors sufficient
to comply with the provisions of this Agreement. A Receiving Party may not
alter, decompile, disassemble, reverse engineer, or otherwise modify any
Confidential Information received hereunder and the mingling of the Confidential
Information with information of the Receiving Party shall not affect the
confidential nature or ownership of the same as stated hereunder.
D. Confidentiality of Agreement. Each Party agrees that the terms and
conditions, but not the existence, of this Agreement will be treated as the
other Party's Confidential Information and that no reference to the terms and
conditions of this Agreement or to activities pertaining thereto may be made in
any form of press release or public statement without first consulting with the
other Party; provided, however, that each Party may disclose the terms and
conditions of this Agreement: (i) as may be required by law; (ii) to legal
counsel of the Parties; (iii) in connection with the requirements of an initial
public offering or securities filing; (iv) in confidence, to accountants, banks,
and financing sources and their advisors; (v) in confidence, in connection with
the enforcement of this Agreement or rights under this Agreement; or (vii) in
confidence, in connection with a merger or acquisition or proposed merger or
acquisition, or the like.
E. No Confidential Information of Other Parties. Each Party represents and
warrants to the other that it has not used and shall not use in the course of
its performance hereunder, and shall not disclose to the other, any confidential
information of any third party, unless it is expressly authorized in writing by
such third party to do so.
F. Required Disclosure. In the event the Receiving Party is required to
disclose the Disclosing Party's Confidential Information pursuant to the order
or requirement of a court, administrative agency, or other governmental body,
the Receiving Party shall provide prompt notice thereof to the Disclosing Party
and shall use its reasonable efforts to obtain a protective order or otherwise
prevent public disclosure of such information.
38. PUBLIC ANNOUNCEMENTS.
Seller and Buyer agree to consult with each other before issuing any press
release or making any public statement with respect to this Agreement prior to
the Closing Date (as such term is
25
defined in the Asset Purchase Agreement) and, except as may be required by
applicable law will not issue any such press release or make any such public
statement prior to such consultation. Seller and Buyer agree that the initial
press release to be jointly issued by the Parties with respect to the
transactions contemplated by this Agreement shall be in the form heretofore
agreed.
39. COUNTRY OF ORIGIN
For each Product purchased under this Agreement, Seller shall furnish
Buyer with country of origin (manufacture), by quantity and part number (Buyer's
and Seller's).
40. PROPERTY FURNISHED BY BUYER
Any tools, drawings, specifications, or other Materials furnished by Buyer
for use by Seller in its performance under this Agreement or any Purchase Order
issued hereunder shall be identified and shall remain the property of Buyer and
shall be used by Seller only in its performance hereunder and Seller shall, at
Buyer's expense, take such action as Buyer may reasonably request to give full
legal effect to Buyer's rights therein. Such property shall be returned to Buyer
at Buyer's cost, upon request, to destination specified by Buyer in good
condition, except for normal wear and tear. Buyer shall maintain, or pay to
maintain, any Buyer-owned property in use by Seller.
41. GENERAL
A. Any obligations and duties which, by their nature, extend beyond the
expiration or earlier termination of this Agreement, including Sections 18, 20,
24, 26, 27, 30, 32, 36, 37, 40, and 41 (collectively, the "Surviving
Obligations") shall survive any such expiration or termination and remain in
effect. Termination shall not relieve any Party from its liability for breach.
B. If any provision or provisions of this Agreement shall be held to be
invalid, illegal or unenforceable, such provision shall be enforced to the
fullest extent permitted by applicable law and the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby. Any waiver of any kind by a Party of a breach of this
Agreement must be in writing, shall be effective only to the extent set forth in
such writing and shall not operate or be construed as a waiver of any subsequent
breach. Any delay or omission in exercising any right, power or remedy pursuant
to a breach or default by a Party shall not impair any right, power or remedy
which either Party may have with respect to a future breach or default.
C. To the extent the laws of the United States are applicable, Seller
hereby gives assurance to Buyer that it shall not export, re-export or otherwise
disclose, directly or indirectly, technical data received from Buyer or the
direct product of such technical data to any person or destination when such
export, re-export or disclosure is prohibited by the laws of the United States
or regulations of a Department of the United States. This Agreement is
considered to be Buyer and Seller Confidential Information.
D. The entire agreement between the Parties is incorporated in this
Agreement and Exhibits, and it supersedes all prior discussions and agreements,
both oral and written, between the Parties
26
relating to the subject matter hereof. This Agreement can be modified only by a
written amendment duly signed by persons authorized to sign agreements on behalf
of both Parties, and shall not be supplemented or modified by any course of
dealing or trade usage. Variance from or addition to the terms and conditions of
this Agreement in any Purchase Order, or other written notification from Seller
will be of no effect. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective when each party hereto shall have received a counterpart
hereof signed by the other party hereto.
E. Exhibits specified in this Agreement shall be attached hereto and by
this reference are made a part hereof. The following is a list of exhibits so
incorporated:
Exhibit A: Products and Pricing and No Defect Found Charge
Exhibit B: Specifications and IPC 610B Class 2
Exhibit C: Buyer's Pack-Out and Packaging Specifications
Exhibit D: Flexibility Parameters
Exhibit E: Buyer's Affiliates and Authorized Agents
Exhibit F: Performance Standards
Exhibit G: Build Request Process Flow
Exhibit H: Long Leadtime Authorization Form
Exhibit I: Environmental Warranties
Exhibit J: Statement of Work
F. The construction, validity, and performance of this Agreement and any
Purchase Order issued under it shall be governed by the laws of the State of New
York. The United Nations Convention on Contracts for the International Sale of
Goods is hereby expressly excluded from application to this Agreement.
G. Each of the Parties agrees that all actions, suits or proceedings
arising out of or based upon this Agreement or the subject matter hereof shall
be brought and maintained exclusively in the state or federal courts located in
the State of New York. Each of the parties by execution hereof (i) hereby
irrevocably submits to the jurisdiction of the state and federal courts located
in the Borough of Manhattan, City of New York, State of New York for the purpose
of any action, suit or proceeding arising out of or based upon this Agreement or
the subject matter hereof and (ii) hereby waives to the extent not prohibited by
applicable law, and agrees not to assert, by way of motion, as a defense or
otherwise, in any such action, suit or proceeding, any claim that it is not
subject personally to the jurisdiction of the above-named court, that it is
immune from extraterritorial injunctive relief, that his or its property is
exempt or immune from attachment or execution, that any such action, suit or
proceeding may not be brought or maintained in the above-named court should be
dismissed on the grounds of forum non conveniens, should be transferred to any
court other than the above-named court, should be stayed by virtue of the
pendency of any other action, suit or proceeding in any court other than the
above-named court, or that this Agreement or the subject matter hereof may not
be enforced in or by the above-named court. Each of the parties hereto hereby
consents to service of process in any such suit, action or proceeding in any
manner permitted
27
by the laws of the State of New York, agrees that service of process by
registered or certified mail, return receipt requested, at the address specified
in or pursuant to Section 30 hereof is reasonably calculated to give actual
notice and waives and agrees not to assert by way of motion, as a defense or
otherwise, in any such action, suit or proceeding any claim that service of
process made in accordance with Section 30 hereof does not constitute good and
sufficient service of process. The provisions of this Section 41G shall not
restrict the ability of any party to enforce in any court any judgment obtained
in the state or federal courts located in the State of New York. [*]
H. Buyer and Seller agree to conduct joint quarterly business reviews with
Senior Management of both Parties for the purpose of reviewing the ongoing
operational performance of Buyer and Seller as it relates to this Agreement,
discuss anticipated business conditions, corrective and preventive action plans
as necessary and appropriate respective strategic business decisions.
28
IN WITNESS, the authorized representatives of the Parties have executed this
Agreement.
For the Buyer: For the Seller:
/s/ Xxxxx X. Xxxxxxx /s/ Xxxxxx X. Xxxxxxx
----------------------------------------- --------------------------------------
Signature Signature
Name: Xxxxx Xxxxxxx Name: Xxxxxx X. Xxxxxxx
----------------------------------- --------------------------------
Title: Senior Vice President Title: President
Manufacturing Operations --------------------------------
----------------------------------
11/27/99 11/27/99
----------------------------------------- --------------------------------------
Date Date
MSL hereby joins this Agreement for the purposes set forth in this
paragraph. MSL hereby guarantees to Buyer the performance by Seller of the
obligations of Seller under this Agreement, and, in the event of default by the
Seller of any such obligations, MSL agrees to perform all such obligations as if
MSL were Seller under this Agreement (subject to any limitations which would
apply if MSL were Seller under this Agreement), and to indemnify and hold
harmless Buyer from any loss, costs or damages arising out of any failure of the
Seller to perform any such obligations (subject to any limitations which would
apply if MSL were Seller under this Agreement).
MSL hereby expressly waives (a) diligence, presentment, demand for
payment, acceptance or protest under this Agreement; (b) discharge due to the
disability of Seller with respect to its obligations under this Agreement; (c)
any requirement that Buyer exhaust any right, power or remedy or proceed against
Seller or any other person that may be liable for any obligations of Seller
hereunder and (d) notice of acceptance of its obligations under this Agreement
and notice of non-performance by Seller. MSL specifically agrees that it shall
not be necessary or required, and MSL shall not be entitled to require, that
Buyer (i) file suit or proceed to assert any claim for personal judgement
against Seller in respect of any obligations hereunder, (ii) make any effort at
collection, enforcement or recovery of all or any part of any obligations
hereunder from Seller; or (iii) exercise or assert any other right or remedy to
which Buyer is or may be entitled in connection with any such obligations
hereunder. Following the Effective Date, Seller and Buyer may amend or modify
this Agreement, or settle or comprise any claim hereunder or thereunder, without
consent of or notice to MSL. MSL assumes all responsibility for keeping apprised
of the financial condition of Seller and its performance under this Agreement.
To the extent any of the following are deemed applicable, MSL expressly waives,
to the extent permitted by law, the benefit of California Civil Code Sections
2809, 2810, 2819, 2839, 2845, 2848, 2849, 2850, 2899 and 1432. MSL further
agrees to be bound by Section 41G in connection with disputes arising under this
Agreement. MSL hereby represents and warrants to Buyer that it has all requisite
power and authority to join this Agreement for the limited purposes stated in
this paragraph and perform its obligations pursuant to this Agreement. MSL's
29
obligations hereunder shall survive any termination of this Agreement with
respect to the Surviving Obligations and any liability of Seller arising out
of the terminated Agreement.
For MSL:
/s/ Xxxxx X. Xxxxx
------------------------------
Signature
Name: Xxxxx X. Xxxxx
------------------------
Title: Chief Executive Officer
-----------------------
11/27/99
------------------------------
Date
30
EXHIBIT A
PRODUCTS AND PRICING AND NO DEFECT FOUND CHARGE
PRICING
Prior to the end of each [*], or as mutually agreed by both parties, the
Parties will conduct a review of the unit price of the Xxxx of Material (BOM)
for each Product manufactured hereunder. Any price reductions in the unit
price of the Product's BOM that Buyer controls that is in excess of what
Buyer would have otherwise attained that results from Seller's negotiations
of Materials cost or design or design or other improvements originated by
Seller [*]. [*] associated with [*] will be [*]. Any price reductions in the
Product's BOM that Buyer controls that are a result of normal takedown rates
in the market or are initiated by Buyer [*]. During such meetings the Parties
will, in addition to reviewing the previous [*] takedowns, also review
projections for the next [*].
Pricing will be done at a SKU or Product level.
Prices for Products will be set [*] for the subsequent [*] and will be
established based on the following approach:
Buyer Controlled Materials - Prices for Buyer Controlled Materials will
be provided by Buyer, and [*]. If it is expected that [*] will [*] then a [*]
will be used. In any event, any [*] on Buyer Controlled Materials [*] subject
to [*] at a Materials level.
Seller Controlled Materials - Prices for Seller Controlled Materials
will be established by applying the [*]. The [*] for these Materials are the
[*] for such Materials.
Value Add - Prices for the [*] following the Closing [*] are shown in
[*]. Prices for the [*] will be established by applying [*].
[*]
SKU Price = [*]
A-1
For Products not produced in [*] but produced in a [*], the pricing on
Seller Controlled Materials and Value Add will be computed [*]. [*] on the
Seller Controlled Materials may be [*] prior to the start of the [*].
Pricing on new Products:
Prices on new Products will be established as follows:
Buyer Controlled Materials - [*]
Seller Controlled Materials - [*]. New Materials to be negotiated.
Value Add - [*]
[*]
From time to time, [*] may be put in to [*]. The Value Add price per
unit [*].
If the Product is deemed by both Parties to be unlike any other in the SLC
factory then the pricing will be determined on a [*] unless otherwise mutually
agreed by both parties.
Example,
[*]
This approach applies if the Product is required to meet load commitments.
A-2
SKU Price = [*].
PRICE REDUCTIONS
Required [*] for the Initial Term of the Agreement are set forth in
Table A-1 (provided that such required [*] shall be subject to [*]. For the
avoidance of doubt, it shall not be [*].
A-3
[*]
A-4
[*]
[*]
A-5
Definitions: o "Buyer Controlled" Materials under this Exhibit A shall
mean those Materials in the BOM [*].
o "Seller Controlled" Materials under this Exhibit A shall
mean those Materials in the BOM [*].
o Value Add - Encompasses all [*]
o Materials prices are [*]
[*] ABOVE THRESHOLD LEVEL
Within any given [*] if Buyer's [*] set forth below, then [*].
The exception to this [*] is if the [*] were due to [*].
[*]
A-6
3COM PRODUCTS MANUFACTURING AND PACK-OUT
All products falling in the following categories and families
MMD
[*]
MD
[*]
A-7
EXHIBIT B
SPECIFICATION AND IPC610B CLASS 2
Specifications shall be the existing specifications for the Products in
use at the Salt Lake City facility, or as otherwise mutually agreed. Upon
request from either Party, the Parties will mutually agree on additional
documentation of such Specification.
B-1
EXHIBIT C
BUYER'S PACK-OUT AND PACKAGING SPECIFICATIONS
Specifications shall be the existing specifications for the Products in
use at the Salt Lake City facility, or as otherwise mutually agreed. Upon
request from either Party, the Parties will mutually agree on additional
documentation of such Specification.
C-1
EXHIBIT D
FLEXIBILITY PARAMETERS
Cancellation and Change Schedule:
A. Cancellations:
Buyer may cancel Purchase orders at any time with the following liability:
[*]
Excess and Obsolete Materials are subject to the charges as described in
Sections 7 and 8.
B. Outward Reschedules:
Days before scheduled Delivery Date Allowable percentage of Reschedules
----------------------------------- -----------------------------------
[*] [*]
Flexibility Reschedules: Buyer and Seller will mutually determine the
amount of materials to be held in inventory to provide flexibility. Seller will
drive initiatives to create Product and component flexibility through innovative
Demand Pull signals that trigger demand to build product based upon Seller sales
order activity. This demand signal will be used as a pull signal throughout the
Seller's manufacturing process. The SMT line should be triggered to build upon
demand and trigger pulling raw components into the factory from a VMI model.
Days before
scheduled delivery
date Committed flexibility
------------------ -----------------------------------------------------
[*] [*]
Buyer and Seller will review all options available and any premiums
required to provide Buyer both expedited replenishment and maximum upward
flexibility.
D-1
EXHIBIT E
BUYER'S AFFILIATES AND AUTHORIZED AGENTS
Affiliates: None
Authorized Agents: None
E-1
EXHIBIT F
PERFORMANCE STANDARDS
Performance Standards for the [*] following the Effective Date shall be
[*], or as otherwise mutually agreed. Upon request from either Party, the
Parties will mutually agree on additional documentation of such Performance
Standards. Performance Standards for [*] shall be mutually agreed by the
Parties prior to the commencement of the [*] following the Effective Date and
shall include [*]
F-1
EXHIBIT G
BUILD REQUEST PROCESS FLOWCHART
BUILD REQUEST
PROCESS FLOW
[*]
EXHIBIT H
LONG LEADTIME AUTHORIZATION FORM
The following is a sample of the long leadtime authorization form to be
completed by Seller and submitted to Buyer for approval in accordance with
Section 4J. The parties may amend this form upon mutual agreement.
In accordance with Section 4J of the Supply Agreement dated as of November
27 1999, between Seller and Buyer, Seller requests authorization from Buyer to
order Materials beyond the quoted leadtime plus [*] period based on unique
circumstances for the following devices.
Affected Buyer division:
Buyer Part Number:
Description of material:
Affected assemblies:
Name of supplier(s) of material:
Reason, justification for requested authorization:
New order leadtime period requested:
Duration of this long leadtime authorization:
Seller
By:_________________________________________________
Print Name:_________________________________________
Title:______________________________________________
Date:_______________________________________________
Approved:
____________________________________________________
Buyer
By:_________________________________________________
Print Name:_________________________________________
Title:______________________________________________
Date:_______________________________________________
H-1
EXHIBIT I
ENVIRONMENTAL WARRANTIES
To the extent the Products manufactured at the Salt Lake City facility are
compliant with the following as of the Effective Date and with respect to any
changes made by Seller after the Effective Date, Seller represents and warrants
to Buyer that upon and after the Effective Date of this Agreement:
(i) Seller will not provide any Product to Buyer which has come into
physical contact with: (i) a Class I substance, as defined in Article 611 of the
Federal Clean Air Act (the "Act"), during any portion of the manufacturing
process; or (ii) a Class II substance, as defined in the Act and Title 40, Code
of Federal Regulations, Article 82 (the "Code"), during any portion of the
manufacturing process, where there has been a determination by the U.S.
Environmental Protection Agency that there is a substitute product or
manufacturing process for such product which does not rely on the use of such
Class II substance, that reduces overall risk to human health and the
environment, and that is currently or potentially available, in accordance with
the Code.
(ii) Buyer shall not be subjected to any warning or labeling requirements
regarding a Class I substance or a Class II substance pursuant to the Act or any
regulation promulgated under the Act, as a result of any Product provided by
Seller to Buyer under this Agreement. Seller shall comply with applicable
environmental regulations involving recyclable packaging to the extent such
packaging is not specified by Buyer.
(iii) The Products will not contain or be manufactured using ozone
depleting substances including without limitation chloroflourocarbons, halons,
methylchloroforms and carbon tetrachlorides.
In the event that the Salt Lake City facility is not compliant with any of
the foregoing as of the Effective Date, the Parties will work to develop and
implement a plan to achieve compliance on a going-forward basis.
I-1
EXHIBIT J
STATEMENT OF WORK
PROTOTYPING SERVICES:
[*]
Buyer expects some ongoing small runs of builds (typically [*] units) for
component qualification purposes (using production boards). Buyer expects to
give [*] notice, have turnaround time of [*], and pay [*] premium on top of
normal information cost. Urgent [*] turn requests for the same purposes will be
paid at [*] premium on top of normal information cost.
J-1
