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EXHIBIT 10.19
MANUFACTURING SERVICES AGREEMENT
This Manufacturing Services Agreement ("Agreement") is entered into by
Pathlight Technology, Inc. ("PATHLIGHT"), 0 Xxxxx Xxxx Xxxxxx, XX 00000, and
XeTel Corporation ("XeTel"), 0000 Xxxxx Xxxxx Xxxx, Xxxxxx, Xxxxx 00000. This
Agreement specifies the terms and conditions which shall apply to the
manufacturing services to be provided by XeTel to PATHLIGHT during the Term of
this Agreement.
1. TERM. This Agreement becomes effective on the later of the signature
dates of the parties, and continues in effect for an initial period of
one year. The Agreement will remain in effect beyond this initial one
year period unless terminated by either party as stipulated in this
Agreement.
2. SERVICES PROVIDED. This Agreement applies to all Purchase Orders and
other communications regarding the service provided unless this
Agreement is explicitly referenced by title and Effective Date with
regard to any exception to these terms and conditions. This Agreement
is not an authorization for XeTel to begin services.
3. DELIVERY
a. XeTel agrees to provide to PATHLIGHT the products ordered
pursuant to a Purchase Order in accordance with the delivery
requirements specified therein, or as modified in paragraph 3e
below, so long as such requested deliveries comply with the
provisions of Section 8. XeTel agrees to use commercially
reasonable efforts to deliver all products on time in
accordance with PATHLIGHT's requested delivery dates. Over a
three (3) month period, products must be delivered, on
average, no more than five (5) days early and no days late
from XeTel's committed delivery date. XeTel agrees that no
individual deliveries shall be more than five (5) days early
or late except in unusual situations beyond XeTel's reasonable
control where deliveries will be made at the earliest
practical time. If XeTel cannot meet its committed delivery
date, XeTel shall promptly notify PATHLIGHT of XeTel's revised
commit date and PATHLIGHT may, at it's option: (i) terminate
this Agreement in accordance with Section 15; (ii) hold XeTel
liable for any premium material, labor, and/or shipping costs
incurred by XeTel as a result of expediting to minimize the
lateness of the delivery; (iii) exercise all other remedies
provided at law, in equity and in this Agreement.
b. Any claims for alleged discrepancies must be given within
thirty (30) days of the shipment or such claim is deemed
waived by PATHLIGHT.
c. If XeTel is unable to meet its delivery commitments and must
allocate its capacity, inventory, test equipment, resources,
use of personnel, etc. that are used to produce products, then
XeTel agrees to: (i) act in good faith; and/or (ii) source
PATHLIGHT's product(s) at any of its manufacturing service
locations provided that such locations maintain the same
approved processes and that Pathlight is afforded a two (2)
week period to approve such manufacturing locations; (iii)
allocate its capacity, inventory, test equipment, resources,
use of personnel, etc. on a pro rata basis to fill PATHLIGHT's
and XeTel's other customers orders. XeTel will, at its sole
discretion, allocate material, equipment and resources
according to the following priorities: (I) emergency
(end-customer down or a safety defect) requirements will be
filled first; and (2) then a fair allocation (such as
first-in, first-out) between manufacturing orders and
non-emergency requirements.
d. XeTel will only deliver the products specified in PATHLIGHT's
Purchase Orders. XeTel further agrees to build no more than
four (4) weeks of finished goods "box level" product at any
given time thus minimizing the potential for high rework
costs.
e. In the event that PATHLIGHT requests XeTel to hold shipments
of completed product for aggregation to enable prompt
shipment of product for order fulfillment, to implement an
engineering change, or for other request, XeTel shall invoice
and hold the product, and
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Pathlight shall take full ownership of and title to the product
on XeTel's manufacturing premises, upon the shipment to a
designated segmented section of XeTel's on-site warehouse or a
third party warehouse upon notification to Pathlight. Such
shipments shall be one-hundred percent complete with respect to
underlying purchase orders. Such shipments are nonreturnable
except for valid warranty claims. Pathlight shall consign its
product to XeTel for any other subsequent requirements. In the
event the holding period for such product exceeds forty-five
days, XeTel, upon notification to Pathlight, is pre-authorized
to transfer Pathlight's inventory to a third party warehouse
or, at Pathlight's direction to Pathlight; XeTel shall make
such transfer and Pathlight shall be invoiced for storage
costs. XeTel shall move product from Pathlight's segmented
warehouse or the third party warehouse upon receipt of separate
instructions from Pathlight. In no event shall payments of
invoices be delayed as a result of these provisions.
4. CREDIT AND PAYMENT TERMS
a. Payments for services performed under this Agreement are due
and payable promptly at net thirty (30) days after date of
invoice, which shall not pre-date the date of shipment as
defined in paragraph 3e above.
b. PATHLIGHT shall provide an irrevocable standby letter of credit
or other security for receivable amounts outstanding and
inventory liability in excess of its credit limit which may be
drawn upon in the event of payment delinquency.
c. If PATHLIGHT becomes delinquent in payments to XeTel, XeTel
may do the following after notifying PATHLIGHT:
i. Charge interest at one and one-half percent (1 1/2%)
per month, but in no event shall the interest
charged be higher than the highest rate for which the
parties may legally contract; and/or
ii. Withhold shipment of products/services until all of
PATHLIGHT's obligations have been brought current.
PATHLIGHT will be given a reasonable amount of time
to bring invoices current prior to being placed on
credit hold. If XeTel elects to withhold shipment,
PATHLIGHT is not relieved of any obligations
hereunder; and/or
iii. Pursue legal remedies to collect the delinquent
payments; and/or
iv. Change credit terms.
d. PATHLIGHT agrees to verbally review Pathlight's quarterly
financial statements with XeTel.
e. XeTel agrees to review Pathlight's credit terms quarterly.
5. COORDINATION. Each party shall designate a Coordinator to represent
that party in the implementation of this Agreement. PATHLIGHT has
identified Xxxxx Xxxxxx, Director of Manufacturing, as its
Coordinator, and XeTel has identified Xxxx Xxxxxxx, Program Manager, as
its Coordinator. Either party may change its Coordinator by written
notice to the other party.
6. ENGINEERING CHANGE ORDERS. PATHLIGHT may initiate Engineering Change
Orders (ECOs); so long as the following procedures are followed:
a. PATHLIGHT shall notify XeTel of the proposed ECO in writing,
including the documentation for the change to support XeTel's
research of the impact of the proposed ECO.
b. XeTel, upon receipt of the notice, will make its best effort
to review all costs impacted within five (5) working days. All
cost impacts and material availability issues will be reviewed
and agreed upon with PATHLIGHT to enable PATHLIGHT to issue a
Purchase Order for the charges prior
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to implementation. In addition, XeTel will charge $150 for
each ECO implementation for design related changes.
c. Emergency ECOs will be implemented immediately at PATHLIGHT's
request and PATHLIGHT will be liable for such costs pertaining
to the emergency ECO.
7. PRICING
a. All XeTel pricing for a particular product/service will be
based on Purchase Order quantities released for the applicable
quarter plus nine (9) month forecast provided by PATHLIGHT.
The Purchase Order(s) and forecast should include a
description of the product/service to be purchased, quantity,
and estimated delivery dates.
b. In order for Pathlight and XeTel to remain competitive in the
market place, Pathlight and XeTel agree to conduct periodic
(not less than quarterly) cost/price reviews throughout each
year. Continual reduction in cost/price will receive on-going
focus during this Agreement. XeTel shall negotiate in good
faith methods of improved productivity, procurement and
processes that can result in on-going cost/price reductions to
Pathlight. As business needs warrant, Pathlight may request
additional cost/price reductions from XeTel during this
Agreement.
c. If the actual quantity of products/services ordered for
delivery during any twelve (12) month period is lower than the
forecasted quantity, PATHLIGHT may be subject to billbacks
based upon the volume dependent pricing provided Pathlight.
XeTel will make its best effort to mitigate material liability
resulting from the volume changes.
d. At any time, in the event of extraordinary increases or
decreases in the market price of fuels, materials,
raw materials, equipment, labor and other production costs,
XeTel and PATHLIGHT can renegotiate in good faith with the
other party the price of goods not yet shipped or services to
be performed. If, in good faith, Agreement is not reached,
either party has the right to terminate the specific
service(s) or the entire Agreement subject to the appropriate
termination/cancellation changes set out in Paragraphs 8 and
15 of this Agreement.
8. PURCHASE ORDERS, FORECASTS, RESCHEDULES, AND CANCELLATIONS
a. Pathlight will provide a twelve (12) month rolling forecast
for the quantities of products that may be required. The
forecast will be issued during each month and will forecast
Pathlight's projected requirements for products for the next
twelve (12) months, which begins on the first day of the next
succeeding month.
b. XeTel agrees to manufacture, supply and deliver products in
accordance with the terms and conditions of this Agreement.
XeTel shall manufacture and deliver only such products
requested by Pathlight Purchase Orders. XeTel may not consider
a Pathlight Purchase Order as "closed completed" until XeTel
delivers the full quantity called for in the Purchase Order
only for orders where Pathlight has authorized the manufacture
of additional like product to account for yield loss and
Pathlight shall be responsible for any such excess inventory
manufactured. XeTel shall include for consumption any such
excess inventory accumulated into subsequent manufacturing
build plans.
c. Purchase Orders shall be placed a minimum of three (3) months
in advance of delivery time. XeTel will purchase materials in
accordance with the Purchase Order and the forecast based on
the mutually agreed upon lead-time and inventory buy policy
(see Appendix A-XeTel Inventory Buy Policy). PATHLIGHT is
liable for material purchased, particularly non-cancelable
non-returnable (NCNR) and custom/unique items, if there is a
schedule reduction or cancellation. PATHLIGHT is also liable
for all material purchased due to minimum buy quantities
including standard tape and reel quantities.
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Commencing July 1, 2000, in the event that Pathlight requests
an expedited order (versus shipping or order fulfillment
instructions for products in Pathlight's segmented warehouse
to complete final system configurations) within the three
month window; XETEL WILL CHARGE A FEE OF $40 PER EXPEDITED BOM
LINE ITEM, NOT TO EXCEED $1500 EXPEDITE FEE. Any such request
will be accompanied by a purchase order for XeTel to initiate
this process. After receipt of the purchase order covering the
expedite charge, XeTel will make its best effort to meet
Pathlight's requested delivery date and will notify Pathlight
within three (3) business days of its ability to meet such a
requested delivery date including available capacity. Such
charge shall apply independent of XeTel's ability to meet the
expedited delivery date, except where delivery is missed
solely for XeTel's manufacturing performance using standard
manufacturing lead times.
XeTel agrees to supply a material shortage report as necessary
and the following inventory reports on a monthly basis:
On-hand inventory
- On order inventory
- Excess to 5 weeks demand
- Total excess to demand
- Obsolete inventory (no demand)
- Component Supply-Demand Profile (as required)
XeTel agrees to provide other mutually agreed upon standard
informational reports set forth in Appendix E.
d. XeTel agrees to promptly respond to Pathlight's Purchase
Orders no later than two (2) business days after receipt
e. The Purchase Order pack quantity is a single unit and may be
ordered in multiples of one.
f. PATHLIGHT may reschedule deliveries on orders that are due
thirty (30) days or more from the date such change notice is
provided to XeTel provided that:
i. If such reschedule of delivery represents a delay in
shipment, the reschedule cannot be for more than ninety (90)
days from the original delivery date. PATHLIGHT agrees to
provide XeTel an inventory prepayment, net of any previous
unremitted prepayments, BY THE FIFTEENTH DAY OF EACH MONTH
EQUAL TO THE AMOUNT BY WHICH ON-HAND INVENTORY ON THE LAST DAY
OF EACH FISCAL MONTH EXCEEDS THE MATERIAL VALUE FOR ORDERS TO
BE PRODUCED IN THE SUBSEQUENT MONTH.(see the Inventory
Prepayment Timeline Example, detailed in Appendix B). XeTel
agrees to repay Pathlight's prepaid amounts BY THE FIFTEENTH
OF THE MONTH TO THE EXTENT ON-HAND INVENTORY IS BALANCED WITH
PRODUCTION REQUIREMENTS (see the Inventory Prepayment Timeline
Example, detailed in Appendix B). Pathlight agrees to commence
inventory prepayments due to reschedules or cancellations over
the term of this Agreement and its renewals upon XeTel's
reasonable written request. In the event of a schedule
push-out, XeTel agrees to, at Pathlight's expense, carry out
all reasonable actions necessary to minimize Pathlight's
inventory liability including, as allowed by XeTel's
suppliers, rescheduling, returning and/or restocking inventory
to coincide with the new schedule.
ii. There are no more than a maximum of three reschedules
implemented per purchase order and the new delivery cannot be,
in any case, later than ninety (90) days from the original
delivery date stated on the purchase order. Any orders
rescheduled for more than ninety (90) days will be considered
a cancellation and the terms in Paragraph 8g will apply. If a
reschedule represents an acceleration or increase, XeTel will
make its best effort to meet such request, subject to material
availability and manufacturing capacity. Any additional costs,
including but not limited to materials, expedite fees,
purchase price variances and labor incurred by XeTel to
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meet PATHLIGHT's request will be the liability of PATHLIGHT.
All cost impacts and material availability issues will be
reviewed and agreed upon with PATHLIGHT prior to XeTel
incurring any such costs. PATHLIGHT will issue a Purchase
Order for any such charges prior to XeTel's implementation.
g. PATHLIGHT may cancel any order scheduled for delivery more
than ninety (90) days from the date such cancellation notice
is given to XeTel, however PATHLIGHT is liable to XeTel for
all material acquired plus handling charges for the cancelled
product. However, XeTel will make its best effort to mitigate
such liability. Prior to Pathlight's payment, Pathlight may
audit XeTel's records at a reasonable time or require XeTel to
provide reasonable documentation and invoices to substantiate
any and all charges to Pathlight under this section. Payment
by Pathlight for the amount pursuant to this section will be
made in accordance with the terms and conditions of this
Agreement.
h. XeTel will provide a "Delivery Increase and Acceleration Plan
Proposal" forty-five days after Pathlight's request, including
all related expenses, to Pathlight, that would allow an
assured supply volume increase (Upflex) to Pathlight at an
increasing monthly rate over a three (3) month period, from
the date of request, to a target of plus 25% to 50% volume of
the then current schedule. If accepted by Pathlight and
implemented by XeTel, this proposal will be signed by both
parties and added as Appendix C "Delivery Increase and
Acceleration Plan" of this Agreement.
9. APPROVED VENDORS LIST. XeTel will follow PATHLIGHT's Approved Vendor
List (AVL) for all component parts purchased on behalf of PATHLIGHT.
PATHLIGHT's AVL must be provided to XeTel in writing prior to any
purchase being made and such AVL should be updated by PATHLIGHT monthly
if there have been any changes to Pathlight's AVL. In the event that
XeTel offers alternatives to PATHLIGHT's AVL, the alternative must be
approved in writing by PATHLIGHT prior to beginning any production at
XeTel's facility on behalf of PATHLIGHT.
10. RELIANCE ON DESIGN(S). PATHLIGHT acknowledges and recognizes that XeTel
must rely on the design that PATHLIGHT furnishes to XeTel to
manufacture the PATHLIGHT product, therefore if the product is
defective due to the inaccuracy of PATHLIGHT design then PATHLIGHT
agrees that XeTel shall be paid its original contracted
price for the product that is defective due to the PATHLIGHT design
error.
11. WARRANTY
THE FOLLOWING ARE IN LIEU OF ALL CONDITIONS OR WARRANTIES, EXPRESS,
IMPLIED, OR STATUTORY, INCLUDING BUT NOT LIMITED TO ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND OF
ANY OTHER WARRANTY OBLIGATION ON THE PART OF XETEL.
a. XeTel warrants the products/services delivered under this
Agreement to be free from defects within the limits of the
test provisions as stated below:
(i) All products delivered will conform to the XeTel
Workmanship Standards (IPC-610A Class II) for a period
of fifteen (15) months from the date of invoice. For
printed circuit board assemblies, in-circuit test is
the minimum electrical test required by XeTel.
(ii) XeTel agrees to extend to Pathlight the same warranty
coverage as that stipulated by the Original Equipment
Manufactures (OEMs) on all materials used in the
manufacture of products for Pathlight.
b. This warranty does not apply to material which becomes
defective due to PATHLIGHT's alteration or repair or to
material which is subjected to misuse, negligence or stress
due to the electrical circuit/system design or malfunction.
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c. Defective goods will be repaired or replaced by XeTel free of
cost, if returned to XeTel within the thirty (30) days after
the end of the warranty period as provided for in this
paragraph 11. Goods returned after this period will be
repaired or replaced for a charge to be negotiated. This
section sets out PATHLIGHT's sole remedies for any defect in
the goods. XeTel and PATHLIGHT must mutually agree if a debit
can be taken against product returned by PATHLIGHT more than
30 days after Pathlight's original receipt of the product. For
products returned by Pathlight within 30 days of the original
shipment by XeTel, Pathlight, to only delay payment of the
original invoice, shall issue a debit memo and XeTel, to only
delay payment of the original invoice, shall issue to
Pathlight a credit for the full amount invoiced by XeTel. Upon
completion of the warranty repair, XeTel shall re-invoice
Pathlight upon XeTel's shipment of the repaired or replacement
products to only restart payment timing. In any event
Pathlight applies a debit memo and XeTel issues a credit to
delay payment of an original invoice, Pathlight remains
responsible for payment of any returned product, once
repaired, and title to such product shall at all times remain
with Pathlight.
d. The foregoing warranties are not transferable and may not be
relied upon or enforced by any person other than PATHLIGHT.
e. XeTel agrees to extend a limited warranty to cover "Epidemic
Defects" for a period of two (2) years beyond the end of the
standard fifteen (15) month warranty period stated above
provided that the product(s) to be returned meets the
following criteria:
(i) A sample of the specific product must regularly pass
ongoing accelerated life-cycle tests, stress testing, ICT,
functional test and other tests as agreed to by XeTel, in
writing, and paid for by Pathlight.
(ii) Product(s) covered under the standard fifteen (15) month
warranty that malfunction or fail solely due to workmanship
defects that do not conform to the IPC-610A Class II
Workmanship Standards will be measured and recorded by
Pathlight and verified by XeTel. If the recorded defect rate
meets or exceeds 4% for the same exact defect due to
workmanship on product(s) produced in a given quarter (the
first quarter runs from April 1, 1999 through June 30, 1999,
the second quarter runs from July 1, 1999 through September
30, 1999, etc.) then XeTel agrees to repair or replace at no
charge to Pathlight any product(s) manufactured in that same
quarter that malfunctions or fails due to the exact same
defect for a period not to exceed two (2) years beyond the end
of the standard fifteen (15) month warranty period. XeTel will
also conduct a thorough investigation into failure root cause
and with Pathlight's concurrence, implement corrective action.
(iii) Not withstanding the above, XeTel shall not be liable
for other failure mechanisms and factors including, but not
limited to, component defects, printed circuit board defects,
product upgrades, design or other factors or failure
mechanisms.
(iv) Any and all product recalled and returned to XeTel due to
Epidemic Defects solely from XeTel's assembly workmanship
shall be treated as consigned inventory. Consequently, XeTel
will not issue a credit to Pathlight for product returned for
purposes defined in this section.
(v) In the event an epidemic failure solely from XeTel's
assembly workmanship is not found, XeTel shall be compensated
for all actual and reasonable costs associated in item (ii)
above.
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12. QUALITY AND WORKMANSHIP. All work performed by XeTel for PATHLIGHT's
product shall conform to IPC-610A Class II, or as per other mutually
written agreed upon standards provided by Pathlight. XeTel agrees to
the Shipped Product Quality Levels (SPQL) for the initial products to
be provided to PATHLIGHT by XeTel as indicated below:
Product Description Allowable SPQL
------------------- --------------
1FC-4DS & 2FC-4DS 5000 ppm
The SPQL for additional products will be agreed between PATHLIGHT and
XeTel and reflected in updates to Appendix D.
13. RETURN MATERIAL AUTHORIZATION. If product is found to be defective per
this Agreement, PATHLIGHT will notify XeTel and XeTel will provide a
Return Material Authorization (RMA) number prior to PATHLIGHT returning
the product. XeTel will make all reasonable efforts to provide an RMA
number within twenty four (24) hours. XeTel agrees to conduct root
cause analysis and provide corrective action for all defective products
as defined in the XeTel Corrective Action Procedure XOP0000041. XeTel
agrees to supply Pathlight with a Corrective Action number per
XOP0000041 within 24 hours following a request for corrective action.
14. PATHLIGHT REPRESENTATIONS, WARRANTIES, AND INDEMNIFICATION. PATHLIGHT
hereby represents and warrants, and also acknowledges that XeTel is
relying on such representations and warranties, that the design(s) for
PATHLIGHT's product(s) which PATHLIGHT furnished to XeTel is the
original creation of PATHLIGHT or PATHLIGHT has obtained such rights
from the original creator to disclose the design(s) to XeTel and also
that the manufacture of this product by XeTel will not violate or
infringe upon any patent, trade secret, copyright or any other
proprietary or other right of any third party. PATHLIGHT also agrees to
defend, indemnify, and hold XeTel, its officers, directors, employees
and agents harmless from and against any losses, costs (including
attorney's fees), claims, demands, actions, damages, expenses,
liabilities, or injuries arising out of or in any way related to any
alleged infringement of any patent, trade secret, copyright, or other
proprietary or other right of any third party relating to the product
design.
15. TERMINATION.
a. After an initial period of twelve (12) months, either party
may terminate by written notice this Agreement for convenience
with one hundred twenty (120) days notice.
b. Either party may terminate by written notice this Agreement
for cause if i. any material or unreasonable default and/or
unreasonable breech by the other party remains uncured
for more than thirty (30) days after receipt of such notice,
during this 30 day period this agreement shall remain in
force, or ii. if the other party files or has filed against it
any bankruptcy, insolvency or receivership proceeding and any
such petition has not been withdrawn or dismissed within 60
days, during this 60 day period this agreement shall remain in
force only if Pathlight's liabilities to XeTel are paid when
due and it has been agreed by any and all creditors that any
such payments to XeTel are not preferred payments. The written
notice shall specify the conditions constituting the default
and the corrective action, if any, to cure such default.
c. In the event of termination, PATHLIGHT shall be liable for: 1)
direct cost of scheduled work-in-process for PATHLIGHT, 2)
direct cost of all inventory required for this work, 3) direct
cost of all non-cancelable Purchase Orders, 4) cancellation
and/or restocking charges on Purchase Orders placed on behalf
of PATHLIGHT, and 5) labor costs expended in procuring
(including rescheduling and/or cancellation), handling
(including internal restocking), preparing and/or processing
material associated with PATHLIGHT's products/services. XeTel
will pay for packaging expenses and PATHLIGHT will pay for
freight expenses.
d. In the event of termination, each party shall prepare for an
orderly termination of this Agreement and return to the owning
party its materials, equipment, records, and specifications.
Pathlight's "Equipment" shall include all tooling and
equipment directly provided to XeTel by Pathlight, and all
tooling manufactured and/or acquired by XeTel in support of
services to be provided by XeTel to Pathlight (including but
not limited to the ICT tooling and software) that has been
invoiced to and paid for by Pathlight.
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16. CONFIDENTIALITY/NON-DISCLOSURE
a. All information obtained by either party in connection with
this Agreement and which is identified as confidential or
proprietary to the other party shall be maintained in
confidence.
Pathlight and XeTel shall not, without first obtaining the
written consent of the other party, publicize or otherwise
disclose the fact that the parties have furnished or
contracted to furnish the work to be performed specified
herein, or the terms, conditions and subject matter of this
Agreement, except as may be required to perform the
requirements of this Agreement or by law or government rule or
regulation. If either party is compelled to make a disclosure
due to government rule or regulation, such disclosure shall be
limited to the extent required and the party shall have an
opportunity to review the information prior to disclosure.
Notwithstanding the foregoing, such review shall not make the
reviewing party responsible for the content of the disclosure.
XeTel may reference Pathlight as a customer however may not
disclose the existence and terms of this Agreement without
first receiving written permission from Pathlight.
c. Each party agrees not to disclose to the other party the
confidential or proprietary information of others.
d. Within thirty (30) days after the termination or expiration of
the Agreement, both parties shall forward to the other party
all confidential information belonging to the other party
which may be in its possession. Thereafter, both parties shall
make no further use, either directly or indirectly, of any
such confidential information.
e. The only rights or licenses which either party may claim as
being granted hereunder are those which are expressly granted
hereunder, and no rights or licenses are conveyed to either
party or to any third party by implication, waiver or
estoppel.
17. LIMITATION OF LIABILITY. IN NO EVENT SHALL XETEL BE LIABLE TO PATHLIGHT
FOR SPECIAL, COLLATERAL, INDIRECT, EXEMPLARY, INCIDENTAL OR
CONSEQUENTIAL DAMAGES FOR BREACH OR ANY OTHER PROVISIONS OF THIS
AGREEMENT, INCLUDING WITHOUT LIMITATION, THOSE PROVISIONS REGARDING
WARRANTIES, GUARANTEES, INDEMNITIES, AND PATENT INFRINGEMENT, SUCH
DAMAGES TO INCLUDE BUT NOT BE LIMITED TO, COSTS OF REMOVAL AND
REINSTALLMENT OF GOODS OR ITEMS, LOSS OF GOOD WILL, LOSS OF PROFITS, OR
LOSS OF USE. THIS LIMITATION WILL APPLY EVEN IF XETEL HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES.
IN NO EVENT SHALL PATHLIGHT BE LIABLE FOR SPECIAL, COLLATERAL,
INDIRECT, EXEMPLARY, INCIDENTAL OR CONSEQUENTIAL DAMAGES FOR BREACH OR
ANY OTHER PROVISIONS OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION,
THOSE PROVISIONS REGARDING WARRANTIES, GUARANTEES, INDEMNITIES, AND
PATENT INFRINGEMENT, SUCH DAMAGES TO INCLUDE BUT NOT BE LIMITED TO,
COSTS OF REMOVAL AND REINSTALLMENT OF GOODS OR ITEMS, LOSS OF GOOD
WILL, LOSS OF PROFITS, OR LOSS OF USE. THIS LIMITATION WILL APPLY EVEN
IF PATHLIGHT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
18. FORCE MAJEURE. Neither party shall be liable for any delay in
performance or failure to perform, in whole or in part, when due to
labor dispute, strike, war or act of war (whether an actual declaration
is made or not), insurrection, riot, civil commotion, act of public
enemy, accident, fire, flood, or other act of God, act of any
government authority, judicial action, or similar causes beyond the
reasonable control of such party. If an event of force majeure occurs,
the other party shall be immediately notified. XeTel agrees to perform
its obligations, as soon as practical, after the conditions causing the
delay and/or failure have subsided.
19. RELATIONSHIP OF PARTIES. XeTel shall be deemed to be an independent
contractor of PATHLIGHT and therefore not an agent or employee of
PATHLIGHT. PATHLIGHT acknowledges that XeTel may from time to time use
additional subcontractors to complete the product and hereby gives
approval to XeTel to use such
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other subcontractors so long as XeTel first advises Pathlight of the intention
to use any such additional subcontractors, and provides Pathlight two weeks to
accept or reject any such proposed additional subcontractors. Pathlight's
approval of any such additional subcontractors shall not be unreasonably
withheld. XeTel is an independent contractor and is not an agent of Pathlight
for any purpose whatsoever.
XeTel is solely responsible for the acts of its employees and agents,
including any acts or omissions, and shall hold harmless, defend and
indemnify Pathlight against all claims based on acts of its employees
or agents.
Pathlight is an independent contractor and is not an agent of XeTel
for any purpose whatsoever. Pathlight is solely responsible for the
acts of its employees and agents, including any acts or omissions, and
shall hold harmless, defend and indemnify XeTel against all claims
based on acts of its employees or agents.
20. INSURANCE. XeTel shall maintain comprehensive general liability
insurance for claims for damages because of bodily injury or death and
property damage caused by or arising out of acts or omissions of its
employees.
21. WAIVER. No failure or delay on the part of either party hereto in
exercising any right or remedy under the Agreement shall operate as a
waiver thereof; nor shall any single or partial exercise of any such
right or remedy. No provision of the Agreement may be waived except in
writing signed by such party granting the waiver. The waiver by either
party of any instance of the other party's noncompliance with any
obligation or responsibility herein shall not be deemed a waiver of
subsequent instances or of either party's remedies for such
noncompliance.
22. TAXES. PATHLIGHT shall be responsible for and pay all taxes or other
similar transaction costs imposed on XeTel by any jurisdiction as a
result of or in connection with the services performed or products
provided by XeTel hereunder excluding, however, XeTel's taxes based
upon net income, capital or net worth of XeTel.
23. SEVERABILITY. If any term or provision of this Agreement or the
application of this Agreement to any person, entity or circumstance is
found to be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remainder of this
Agreement shall not be affected, but shall be valid and enforceable as
if the invalid term, condition or provision were not a part of this
Agreement.
24. PARTIES BOUND. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors, and assigns where
permitted by this Agreement.
25. SUPERSEDING EFFECT
a. This Agreement, including all attachments, constitutes the
entire Agreement between the parties with respect to the
subject matter hereof, and supersedes all previous
communications, representations, understanding and Agreements,
either oral or written, between the parties or any official or
representative hereof. This Agreement shall be modified only
in writing and signed by authorized representatives of the
parties.
b. Any term, condition and/or provision of PATHLIGHT's Purchase
Order or other documentation which is in any way inconsistent
with or in addition to these terms shall not be binding upon
XeTel unless accepted by XeTel in writing. The submission of a
Purchase Order to XeTel or retention by PATHLIGHT of any
goods or services delivered hereunder shall be conclusively
deemed acceptance of the terms hereof. XeTel's failure to
object to terms contained in any communication from PATHLIGHT
will not be an acceptance thereof or a waiver of the terms
hereof.
10
26. NON-ASSIGNMENT. This Agreement may not be assigned without prior
written Agreement and approval of the other party. Both parties agree
not to unreasonably withhold such assignment. The sale by Pathlight of
all or substantially all of its assets or any form of merger shall not
be considered such an assignment however, XeTel reserves the right to
approve the credit worthiness of the acquiring company and to modify
credit terms prior to commencement of the transaction; such approval
and credit terms shall be made in writing.
27. APPLICABLE LAW. This Agreement shall in all respects be governed by and
construed in accordance with the laws of the State of Texas. The
exclusive jurisdiction for any legal proceeding arising from this
Agreement shall be the courts of Texas. If any legal action is
necessary to enforce the terms of this Agreement, the prevailing party
shall be entitled to reasonable attorney's fees in addition to any
other relief to which that party may be entitled. This provision shall
be construed as applicable to the entire Agreement.
28. YEAR 2000 READINESS. XeTel shall take reasonable steps to ensure that
all mission critical applications and operating environments used by
XeTel will be in readiness by the year 2000. XeTel shall take
reasonable steps to ensure its suppliers will be able to perform their
material obligations beyond the year 2000.
There can be no assurance that the systems of other companies on which
XeTel's systems rely will be converted on a timely basis or that such
failure by another company to convert would not have an adverse
effect on XeTel's systems.
29. NOTICES. All required or permitted notices to be given under this
Agreement will be in writing and deemed received: 1) three days after
mailing if sent by certified mail, return receipt requested, or 2) on
the date confirmation is received if sent via facsimile transmittal
to the party at the address provided below and followed by certified
mail or personal delivery 3) on the date received when sent via Federal
Express or other overnight carrier with signed receipt requested.
The parties execute this Agreement to be effective on the later of the dates
referenced below.
XeTel Corporation Pathlight Technology, Inc.
By: /s/ XXXXXXX XXXXXXXXX By: /s/ XXXXX X. XXXXXX, XX.
--------------------------- ---------------------------
Name: Xxxxxxx Xxxxxxxxx Name: Xxxxx X. Xxxxxx, Xx.
Title: Senior Vice President & CFO Title: C.O.O. & C.F.O.
XeTel Corporation Pathlight Technology, Inc.
0000 Xxxxx Xxxxx Xxxx 0 Xxxxx Xxxx
Xxxxxx, XX 00000 Xxxxxx, XX 00000-0000
Date: 5/12/00 Date: 4/27/00
--------- ---------
11
APPENDIX A
XETEL'S INVENTORY BUY POLICY
Based on this Agreement, XeTel will procure material intended for use in
Pathlight's products. This procurement activity is designed to support product
scheduled in compliance with Pathlight's Purchase Orders and forecast delivered
to XeTel in accordance with this Agreement. XeTel's inventory buy policy is
to only order components for which Pathlight is liable and thus, XeTel will not
purchase any speculative inventory. The methodologies listed below outline
XeTel's overall procurement patterns; however, on individual parts this may
vary depending on the terms and conditions, as well as packaging constraints,
offered by the supplier and/or Original Equipment Manufacturer (OEM) (examples:
minimum buy quantities and tape & reel sizes).
XeTel utilizes an A, B, C procurement strategy whereby the "A" items represent
approximately eighty percent (80%) of the material value of the product, "B"
items represent approximately fifteen percent (15%) of the material value of
the product and "C" items represent five percent (5%) of the material value of
the product. All material items are profiled in XeTel's MRP system and scheduled
for delivery as stated below:
MATERIAL NUMBER OF DAYS PRIOR NUMBER OF DAYS PRIOR
CLASS TO BUILD DATE TO PRODUCT SHIPMENT DATE
-------- -------------------- ------------------------
A 5 20
B 10 25
C 10-20 25-40
Additionally, XeTel will lot-size "B" and "C" items to minimize procurement and
handling activity. The "A" items will not be lot-sized except as required by the
supplier. Supplier and OEM delivery and quality history will also be taken into
account when profiling components.
XeTel will receive permission from Pathlight prior to purchasing any component
which has a cost higher than that defined in the applicable product(s) quote.
This Purchase Price Variance (PPV) can be paid, by Pathlight, in a lump sum or
amortized into an adjusted sell price for the associated product(s).
00
XXXXXXXX X
INVENTORY PREPAYMENT TIMELINE EXAMPLE
FEBRUARY MARCH APRIL
---------------------------- -------------------------------- ------------------------
WK1 WK2 WK3 WK4 WK1 WK2 WK3 WK4 WK5 WK1 WK2 WK3 WK4
NORMAL Parts (A) 30 days
RECEIPT & rcvd Parts
SHIP CYCLE $100K ship Net 30
NORMAL PAY XeTel Customer
CYCLE pays pays
vendors XeTel
-----------------------------------------------------------------------------------------------------
FEBRUARY MARCH APRIL
---------------------------- -------------------------------- -----------------------------
WK1 WK2 WK3 WK4 WK1 WK2 WK3 WK4 WK5 WK1 WK2 WK3 WK4
CUSTOMER New
SCHEDULES Old ship scheduled
SHIP DATE date ship date
PREPAY (C) $100K
SCHEDULE (B) Excess Inv. prepayment
= $100K due
Look at demand within 5 week window
Demand is zero in this example
-----------------------------------------------------------------------------------------------------
(A) "A" components, 80% of inventory, are received 20 days prior to ship
date.
(B) XeTel calculates excess by comparing on-hand inventory to 35 day
(5 week) outlook on demand. Five week outlook report is available
every Monday morning.
(C) Customer prepay covers cash outlay to vendors due to reschedule.
NOTE: XeTel will credit prepaid dollars toward invoice due when shipments resume
13
APPENDIX C
DELIVERY INCREASE AND ACCELERATION PLAN
14
APPENDIX D
SPQL COMMITMENTS
00
XXXXXXXX X
OTHER INFORMATIONAL REPORTS
Percent Lots Rejected
Scrap rates via Fourth Shift MPR
Process changes via Manufacturing Build Packets
Corrective Action and Failure Analysis via CAR System Report
ICT first and second pass yield
Board Level Functional Test (FCT) Yield statistics
System Level Functional Test (FCT) Yield statistics
