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EXHIBIT 10.6a
SANMINA CORPORATION
AGREEMENT FOR
ELECTRONIC MANUFACTURING SERVICES
This Agreement between ELASTIC NETWORKS, INC., a Delaware corporation,
(hereinafter referred to as "CUSTOMER"), and SANMINA CORPORATION, a corporation
(hereinafter referred to as "SANMINA") is entered into on February 19, 1999.
Sanmina shall perform manufacturing services for Customer under the terms and
conditions set forth herein.
I. TERM
Unless earlier terminated pursuant to Section XX hereof, this Agreement
shall be in effect for twelve (12) months from the date of this Agreement
(the "INITIAL TERM"). The parties may agree to extend the Initial Term of the
Agreement, for one (1) additional year, at any time prior to the termination
of such Initial Term. The Initial Term and any extension thereof are
collectively hereinafter referred to as the "TERM."
II. SCOPE OF WORK PERFORMED
Sanmina shall manufacture and Test (as defined below) the products
identified in EXHIBIT A under the caption "Products to be Manufactured and
Cost to Customer" (the "PRODUCTS") according to the specifications delivered
to Sanmina and amended from time to time by Customer (the "SPECIFICATIONS").
The documents which comprise the Specifications are listed on EXHIBIT A under
the caption "Description of Specifications." As used herein, "TEST" shall mean
the manufacturing test process that Sanmina shall design and perform on the
Products to ensure the Products conform to Customer's test specifications, as
referred to and listed on EXHIBIT A. Sanmina shall work together with
Customer to design the Test, and Customer shall have the right to approve the
Test prior to first use. In addition, Sanmina shall provide, without charge,
manufacturing engineering services, component engineering services, and an
engineering resource, at mutually agreeable times, at Customer's business
premises. Sanmina shall have the right to limit Customer's use of these
services to a level which is commensurate with the manufacturing activity
levels generated by Customer.
As more fully described in Section III, below, Customer shall be
responsible, under certain circumstances, for the cost of materials,
components, and parts that Sanmina procures or otherwise contracts for (such
items are hereinafter collectively referred to as "PARTS") In order to
manufacture the Products.
Sanmina shall purchase Parts for the Products in accordance with a
vendor list approved by Sanmina and Customer ("AVL"). In the event Sanmina
cannot purchase a Part from a vendor on the AVL for any reason, including
unavailability or commercial unfeasibility of the purchase of such Parts,
Sanmina may purchase such Parts from an alternate vendor with the prior
written consent of Customer.
III. GENERAL PLANNING AND PROCUREMENT PROCESS--CUSTOMER RESPONSIBILITIES
A. On the second business day of every calendar week during the Term
or at other intervals as may be mutually agreed to, Customer shall
provide Sanmina with a rolling forecast of Product requirements for a
period of 52 weeks ("FORECAST"). The Forecast will show requirements on a
weekly basis for the first 16 weeks of the forecast period. The
following months will show requirements on a monthly basis and the last
2 quarters will show requirements on a quarterly basis. The Forecast
shall be used to generate Sanmina MPS based on the planning horizon
outlined in Exhibit "D." Unless otherwise agreed to by Sanmina and
Customer, requirements for
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the initial four-week period will be kept "as is" from the prior Forecast
as "frozen weeks" not subject to change. Customer may unilaterally revise
previously forecast product requirements by 25% for the second four-week
period, 50% for the third four-week period and by any amount for the
remainder of the forecast period in a subsequent Forecast. Customer
requests for changes beyond those allowed for the second and third
four-week periods are subject to Sanimina approval, which shall not be
unreasonable withheld.
B. Sanmina will have discretion to manage manufacturing,
procurement, and inventory levels of Products, Parts, and
work-in-progress, subject to the Inventory Commitment and the approval
of Customer, which approval shall not be unreasonably withheld. As used
herein, "INVENTORY COMMITMENT" means that, in accordance with the
Forecast, Sanmina will maintain inventory levels of two (2) weeks of
finished product, two (2) weeks of work-in-progress (WIP) and four (4)
weeks of raw material; provided that Procurement of Raw Material, units
in WIP and provisioning of Finished Products are to be processed by
Sanmina on a weekly basis in accordance with quantities specified in the
Forecast unless otherwise agreed to by Customer. Any Parts having a
lead-time in excess of eight (8) weeks will be identified to Customer
and purchased separately by Sanmina only with the written approval of
Customer.
C. From time to time Customer may provide to Sanmina a bill of
material with the information necessary to allow Sanmina to provide
Customer with a quotation for prototypes, to include the number of units
needed as a prototype, test procedures, engineering change orders,
estimated production quantities, and an estimated production forecast,
if applicable. Upon receipt of such a bill of material for prototypes,
Sanmina shall provide a quotation to Customer within five (5) business
days, and Customer shall have five (5) business days thereafter to
respond to such quotation.
D. From time to time Customer may provide to Sanmina a bill of
material with the information necessary to allow Sanmina to provide
Customer with a quotation for volume manufacturing, to include the
number of units needed as a prototype, test procedures, engineering
change orders, estimated production quantities, and an estimated
production forecast, if applicable. Upon receipt of such a bill of
material for prototypes, Sanmina shall provide a quotation to Customer
within five (5) business days, and Customer shall have five (5) business
days thereafter to respond to such quotation.
IV. GENERAL PLANNING AND PROCUREMENT PROCESS--SANMINA RESPONSIBILITIES
A. Sanmina will utilize the Forecast to generate a Master Production
Schedule ("MPS") covering a 52 week period. Sanmina will base its
procurement, internal capacity projections and commitments based upon
the MPS.
B. Sanmina will process the MPS through industry-standard MRP
software that will convert the MPS reflecting Customer's Forecasts into
requirements for Parts that are required to make the Products. Sanmina
will off-set the requirements for receipt of Parts by allowing for the
time required to build the Products per the following times:
1. In-Circuit Test/Functional Test--5 Working Days
2. Assembly--7 Working Days
3. Kitting--2 Working Days
4. Material Handling--2 Working Days
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Sanmina will plan and schedule Parts to be at Sanmina's plant (a) eleven
(11) Working Days before the Products are due to ship to Customer where
no Test is required, and (b) sixteen (16) Working Days before the
Products are due to ship to Customer where Test is required. Sanmina
agrees to comply with the manufacturing process outlined by Customer as
the same is described in the Specifications, as it may be amended from
time to time. Sanmina will work with Customer to improve the
manufacturing process to achieve greater quality and cost savings.
C. Sanmina will release (launch) orders to suppliers of Parts based
on the MPS using the eleven (11) and sixteen (16) Working Day periods
described above and appropriate vendor lead time as determined by
Sanmina from time to time.
D. Sanmina, through its MRP System will also issue an instruction
("MRP SIGNAL") to its procurement group to buy a part approximately
seven (7) days before a Product is due to be assembled.
V. COST REDUCTION
A. PARTS COST REDUCTIONS. Reductions in the procurement price of
Parts initiated by Elastic shall be reflected in a lower Product price
using the following process: Elastic will calculate new Product price(s)
based upon the lower Parts price and present the revised Product prices
to Sanmina for approval and acceptance, which shall not be unreasonably
withheld. Elastic shall then generate a Cost Change Order (CCO) which
identifies the changes in cost and the effective date of the change.
Elastic shall further issue Purchase Orders and/or Purchase Order
Revisions as necessary to account for Products to be manufactured using
the inventory of Parts purchased before the effective date of the CCO
and Products to be manufactured using Parts and pricing established in
the CCO.
B. MANUFACTURING COST REDUCTIONS (MCR). MCR initiated by Sanmina
shall be retained by Sanmina. MCR initiated by Elastic shall be
reflected in a lower Product price using the CCO process established
above for processing Parts Cost Reductions.
C. Sanmina shall submit to Customer a monthly non-recurring
engineering report (an "NRE REPORT"), which may contain among other
things various proposed overtime charges, equipment rental or purchases,
additional tools or machine tooling to be used in the manufacturing
process, or cancellation, modification, or other fees proposed to be
incurred by Sanmina. Upon Customer's receipt of an NRE Report, Customer
may (i) send to Sanmina a purchase order authorizing some or all of the
charges outlined therein or (ii) or may approve some or all of such
proposed additional charges by electronic mail or other acceptable
written communication, PROVIDED HOWEVER, that for all NRE Reports
submitted to Customer Sanmina must receive written approval by an
authorized representative of Customer before it may actually incur
charges for the approved NRE Report items listed in such NRE Report.
D. With respect to any tools or tooling authorized in any NRE
Report, the actual cost of such tools shall be deemed a part of
Customer's Total Liability (as defined in Section XX hereof). All such
tools and tooling purchased by Sanmina pursuant to this Agreement shall
remain Customer's property, and Sanmina shall return such tools and
tooling (normal wear and tear expected) to Customer upon request.
Sanmina shall identify all such tooling with conspicuous labels or tags
which identify such tools and tooling as the property of Customer, and
shall keep all such tools and tooling free and clear of any and all
liens and encumbrances created by Sanmina or the creditors of Sanmina.
Sanmina shall use the same care with the storage and use of such tools
and tooling as it uses for comparable property owned by Sanmina.
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VI. LIABILITIES FOR PARTS
A. The Parts Sanmina purchases or orders to fulfill its MPS on
behalf of Customer to manufacture the Products shall constitute a
portion of Customer's Total Liability (as defined in Section XX, below)
to Sanmina, PROVIDED that, Customer shall have no liability for Parts in
excess of the Inventory Commitment limit on Parts provided for in
Section IX (B), below, unless Customer had agreed to Sanmina's acquiring
Parts in excess of that permitted in Inventory Commitment. Customer
shall not incur any obligations to pay any amounts constituting
Customer's Total Liability unless and until this Agreement is terminated
for any reason under Section XX, below.
B. Customer's liability for Parts that Sanmina has procured is
further limited to any Parts that:
1. (i) have been ordered per the guidelines above that cannot be
cancelled; or
(ii) ordered per the guidelines above which cannot be
returned, but only to the extent that (a) the cost of such
Parts exceeds $1,000, and (b) Sanmina has made commercially
reasonable and sustained efforts to return the Parts (for at
least four (4) weeks); and
2. (i) cannot be used by Sanmina for any other purpose other
than the manufacture of Products for Customer under this
Agreement.
C. If Sanmina is able to return Parts, subject to a re-stocking or
other fee, such fees shall become part of Customer's Total Liability,
PROVIDED HOWEVER, that Customer's Total Liability attributable to any
such re-stocking and other fees shall not exceed ten percent (10%) of
the actual cost of such returned Parts.
D. The portion of Customer's Total Liability attributable to Parts
will be at the quoted cost agreed between Sanmina and Customer. Any
requirement for Parts having a lead-time in excess of eight (8) weeks
will be identified to Customer in advance and purchased separately by
Sanmina only with the written approval of Customer.
VII. ENGINEERING CHANGES
In the event Customer submits a 'proposed engineering change order'
("PECO") with respect to any Product, Sanmina shall notify Customer of any
impact on the cost and/or scheduled delivery of such Products within three
(3) Working Days of the receipt of Customer's request. Customer may after
sometime submit to Sanmina a formal 'engineering change order' ("ECO") with
respect to the PECO that may or may not contain the exact same information as
the original PECO. Sanmina shall notify Customer again of any impact on the
cost and/or schedule delivery of such Products and any affected Products and
Parts that would be rendered obsolete as a result of the ECO within ten (10)
working days of receipt of the ECO. This ECO will act as the official
document for the change to be effective as of the date written or otherwise
specified in the ECO and may only be cancelled by another ECO. If any payment
is required to execute any ECO, Customer will provide Sanmina with a Purchase
Order. If issuance of an ECO results in a change in Product price, Customer
shall issue CCOs and revised Purchase Orders as required. Any changes in the
cost of the Products resulting from such ECO shall be deemed a part of
Customer's Total Liability as defined in Section XX. Similarly, if Sanmina
has exhausted its obligations under Section VI above to cancel the order for
or return any Parts rendered
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obsolete or excess as a result of such an ECO. Such Parts shall become a part
of Customer's Total Liability but only to the extent specified in Section VI
above.
VIII.PRICING
A. The prices for the Products in effect at the signing of this
Agreement are shown in EXHIBIT A under the caption "Products to be
Manufactured and Cost to Customer". All prices are:
1. in U.S. Dollars;
2. exclusive of any applicable excise an sales taxes now
existing or hereinafter imposed by any applicable taxing authority;
3. exclusive of transportation charges and duty applicable
between the Delivery Point (as defined below) and the ultimate
destination of the products; and
4. inclusive of packaging materials.
B. The prices shall be revised from time to time through issuance of
Cost Change Orders generated by Elastic which may incorporate Parts Cost
Reductions and/or Manufacturing Cost Reductions in accordance with
Section V, the effect of ECOs, and other changes in Parts and
manufacturing costs as may be agreed to by Elastic and Sanmina.
IX. SHIPPING NOTIFICATIONS AND INVENTORY
A. From time to time, Customer may deliver a document that specifies
a quantity of Products to be shipped, delivery information, including
the particular shipper and account number for each end-user identified
therein, and the target delivery date for each quantity of Products and
each such end-user (a "SHIPPING NOTIFICATION"). Sanmina shall
acknowledge in writing its receipt of all Shipping Notifications within
1 day thereof, and indicate therein its acceptance or rejection of each
such Shipping Notification, including without limitation the respective
Product order and shipping information given for each end-user
identified therein and whether Sanmina can meet the specified delivery
requirements of each such end-user.
B. Sanmina agrees to carry a supply of Products in inventory
sufficient to satisfy orders for Products represented by Shipping
Notifications for a rolling two-week period, at Sanmina's expense (the
"CONTRACTED SUPPLY"). For any Products carried as inventory in excess of
the Contracted Supply at the request of Customer and beyond inventory
required by the Forecast, Customer agrees to pay one percent (1%) of the
cost of the Products per month, upon Customer's receipt of written
request therefor. Sanmina further agrees to provide Customer with
on-line, real-time access to its inventory management information that
is acceptable to Customer, including without limitation access to serial
numbers and MAC addresses for all Products in inventory using an
inventory management format approved by Customer. Should such inventory
monitoring not be available to Customer at any time and for any reason
during the term of this Agreement Sanmina shall provide Customer with
detailed written reports of Contracted Supply, including Products used
for Advanced Replacement (as defined below) and B Stock (as defined
below).
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X. SHIPPING, DELIVERY, AND ACCEPTANCE
A. Products shall be delivered based upon information contained in a
Shipping Notification. Products will be shipped to the respective
delivery address for each end-user of Customer specified in each
Shipping Notification (i) F.O.B. Sanmina's plant located at the address
specified in EXHIBIT A under the caption "Manufacturing Location"
("DELIVERY POINT"), or (ii) prepaid by Sanmina and charged to Customer
by invoice, or (iii) via a shipper mandated by Customer and charged to a
Customer-provided account with such shipper. Sanmina shall provide
written confirmation of all shipments, including serial numbers, MAC
addresses, waybill numbers, and carrier name, for each shipment. Risk of
loss and title shall pass to Customer when such Products are delivered
to the carrier (whether such carrier is a common carrier, a specified
overnight courier service, or any other delivery service). Products held
or stored by Sanmina at the Delivery Point or any other location shall
be held or stored at the risk and expense of Sanmina, subject to
Sanmina's right to the payment specified in Section IX(B) if Sanmina
holds more than the Contracted Supply of Products. Sanmina shall use
commercially reasonable efforts to deliver the Products according to the
specified shipping instructions and on the agreed upon delivery dates,
all as set forth in the Shipping Notification. In the event Sanmina
becomes aware that it will not meet the delivery schedule. Sanmina shall
immediately notify Customer of anticipated delays, and keep Customer
apprised on a daily basis of the status of the Products. In the absence
of any other specific instructions, Sanmina agrees to comply with the
general delivery schedule set forth on EXHIBIT C for Shipping
Notifications received under this Agreement.
B. The acceptance of a Product is subject to inspection by Customer
and an end user of the Product. Acceptance shall be deemed not to have
occurred until at least forty-five (45) days after delivery to the
carrier. If a Product does not conform to the requirements of a Shipping
Notification or part thereof or to the warranties set forth below, the
entire quantity of Product delivered to such end-user may be returned to
Sanmina at Sanmina's expense. Payment shall not constitute acceptance or
be considered or be deemed a waiver of Customer's right to cancel or
revoke any Shipping Notification or part thereof.
C. Unless otherwise specified by Customer, Sanmina shall ship the
products to the delivery locations specified in the Shipping
Notifications by the method Sanmina deems most advantageous.
D. Sanmina shall perform all administrative actions required to
qualify Products for preferential treatment under the rules of any
applicable trade treaty between Canada and the U.S.A., including,
without limitation, the North America Free Trade Agreement ("NAFTA"). If
a Product qualifies under NAFTA, Sanmina shall prepare and distribute a
NAFTA Exporter's Certificate of Origin according to paragraph A or B
below, whichever applies, and any other documents required. Sanmina
shall respond to NAFTA Exporter's Certificate of Origin questionnaires
and assist Customer in resolving any Product eligibility issues. Sanmina
alone shall bear responsibility for all penalties and costs resulting
from a NAFTA Exporter's Certificate of Origin subsequently being
determined to be invalid.
1. If an Exporter's Certificate of Origin is prepared
for each shipment, Sanmina shall: (i) retain the original
Exporter's Certificate of Origin in Sanmina's files with
appropriate backup documentation, (ii) attach a copy of the
Exporter's Certificate of Origin to the customs/shipping
documents for the qualifying Product, and (iii) mark these
customs/shipping documents with the legend: "Copy of North
America Free Trade Certificate of Origin attached".
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2. If a blanket Exporter's Certificate of Origin is
prepared, Sanmina shall: (i) retain the original Exporter's
Certificate of Origin in Sanmina's files with appropriate
backup documentation, (ii) mark the customs/shipping documents
for the qualifying Product with the legend: "Copy of blanket
Exporter's Certificate of Origin on file at Customer's customs
offices in Alpharetta, GA (U.S.A.)", and (iii) mail copies of
the Exporter's Certificate of Origin to the following office:
Elastic Networks, Inc.
6120 Windward Parkway
Suite 100
Alpharetta, GA 30005-4185
XI. PAYMENT AND INVOICING
Payment for Products shipped pursuant to and in accordance with Section
X hereof shall be due net forty-five (45) days from invoice date.
Products shall be invoiced when shipped by Sanmina. Sanmina will provide
Customer with a credit limit set at an amount to be determined by
Sanmina, PROVIDED that, at a minimum, such credit limit shall be set at
a level which corresponds to anticipated sales of Products at the level
projected by the Forecast throughout the 45-day permitted payment
period. In the event that Customer exceeds this credit limit or has
outstanding invoices for more than sixty (60) days which are not in
dispute or offset by the amounts due Customers by Sanmina pursuant to
this Agreement, Sanmina will give Customer written notice of its intent
to stop shipments of Products to Customer. Customer shall have ten (10)
days from receipt of such notice to make sufficient payment to bring its
account consistent with terms outlined above. If Customer fails within
the ten (10) day period to make sufficient payment, Sanmina may stop
shipments of Products to Customer until such payment is made.
XII. WARRANTIES
Sanmina warrants to Customer that the Products will at the time of
delivery (a) be new and free and clear of all liens and encumbrances,
(b) conform to the Specifications, and (c) be free from defects in
material and workmanship for a period of twelve (12) months from the
date the Product is first placed into service by an end user (such twelve
(12) month period is hereinafter referred to as the "WARRANTY PERIOD").
This warranty shall survive inspection, acceptance and payment. Sanmina
acknowledges that modification, if any, of the Specifications by it or
its employees or any person other than Customer will constitute a
violation of this warranty.
EXCEPT FOR THE ABOVE EXPRESS WARRANTIES. SANMINA MAKES AND CUSTOMER
RECEIVES NO WARRANTIES OR CONDITIONS ON THE PRODUCTS, EXPRESS,
IMPLIED, STATUTORY, OR OTHERWISE, AND SANMINA SPECIFICALLY
DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
XIII.EXCLUSIONS FROM WARRANTY
A. The foregoing Section XII notwithstanding, no warranty is given
by Sanmina for Parts purchased from third-party vendors ("VENDOR
PARTS"). If Vendor Parts are defective, Sanmina will use best efforts to
resolve the warranty issue on behalf of Customer with the applicable
third-party vendors. The foregoing notwithstanding, in the event Sanmina
is unable to resolve a warranty dispute with a third-party vendor to the
satisfaction of Customer, Customer shall look to the manufacturers of
Vendor Parts for any remedy in respect of defective Vendor Parts. Sanmina
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shall pass the unexpired warranty for such Vendor Parts provided by
third-party vendors or passed on by such third-party vendors from the
original manufacturers through to Customer.
B. The warranty set forth in Section XII shall not apply to any
defect which has been caused by Customer or an end user which arises
from mishandling, misuse, or improper repair.
XIV. REMEDIES UNDER WARRANTY
Any Product that does not conform to the warranty described in Section
XII may be returned to Sanmina. Sanmina shall promptly repair or replace such
defective Products without charge to Customer or any end user of a Product
and, subject to the other terms of this Agreement, shall return such repaired
or replaced Product not later than ten (10) days of its receipt of such
non-conforming Product. Without altering or diminishing Sanmina's obligations
under such warranty for all Products manufactured under this Agreement,
Sanmina shall facilitate and implement Customer's "ADVANCE REPLACEMENT"
program the conditions of which are described in EXHIBIT B hereto. Sanmina
shall designate a specific contact person and telephone number which shall be
exclusively used for Customer's warranty and Advance Replacement, purchases
of Products, calls for Product support, RMA's, and other Product issues.
Sanmina shall maintain the RMA system database for Customer. Sanmina shall
issue monthly reports to Customer that detail the number of calls received,
the number of Advance Replacement Products shipped, the number of Products
returned to Sanmina, and a summary of Test results on returned Products.
Sanmina shall make use of the test results on returned Products to evaluate
the reliability of Parts and possible improvements in the manufacturing
process. Sanmina shall provide Customer a monthly report showing the root
cause analysis for each RMA.
XV. OUT OF WARRANTY REPAIRS
Sanmina shall provide Advance Replacement services to purchasers
of Products, who participate in Customer's annual support program
("Elastic Extended Warranty and Support Program" or other such program).
Customer will pay Sanmina for all out of warranty repairs and out of
warranty Advance Replacement in accordance with Exhibit A hereto under
the caption "Spares and Replacement Pricing." Sanmina shall maintain
levels of spare and replacement Parts and Products inventory sufficient
to provide either next day shipment or same day premium service if
requested by Customer, and shall maintain levels of repaired Products as
agreed upon by both parties ("B STOCK"). Customer may monitor the levels
of B Stock in the same manner as that provided in Section IX(B) for
maintenance and reporting of inventory, and Sanmina agrees to limit or cease
adding to B Stock inventory levels upon receipt of written instructions from
Customer.
XVI. CONFIDENTIALITY; INTELLECTUAL PROPERTY
For purposes of this Section XIV, "OWNER" means the party disclosing
Proprietary Information, whether such party is Customer or Sanmina,
"RECIPIENT" is the party receiving Proprietary Information, whether such party
is Customer or Sanmina, "PROPRIETARY INFORMATION" means, collectively,
Confidential Information and Trade Secrets, "CONFIDENTIAL INFORMATION" means
any data or information obtained from one party hereunder and provided to the
other party, that is valuable to its owner and not generally known by the
public, including without limitation, any data or information defined herein
as a Trade Secret, but which is determined by a court of competent
jurisdiction not to rise to the level of a trade secret under applicable law,
and "TRADE SECRETS" means information without regard to form which: (a)
derives economic value, actual or potential, from not being generally known
to, and not being readily ascertainable by proper means by other persons who
can obtain economic value from its disclosure or use, and (b) is the subject
of efforts that are reasonable under the circumstances to maintain its
secrecy.
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Customer and Sanmina acknowledge and agree that during the term of this
Agreement each party will have access to and disclose to the other
Proprietary Information. Sanmina acknowledges that the Products contain
Proprietary Information of Customer. Each party acknowledges that the loss of
competitive advantage due to unauthorized disclosure or unauthorized use of
Owner's Proprietary Information will cause great injury and harm to the
Owner. Recipient covenants and agrees that it shall not, without the prior
written, consent of Owner, or as set forth herein, directly or indirectly,
(i) disclose, divulge, distribute, publish, reproduce, decompile, reverse
engineer, transmit or transfer to others Owner's Proprietary Information, or
any portions thereof, by any means or in any form, (ii) make use of the
Proprietary Information other than as expressly permitted under this
Agreement, or (iii) disclose, in whole or part, any of Owner's Proprietary
Information to any individual, entity or other person, except to those of
Recipient's employees or representatives who (a) require access for
Recipient's authorized use of Owner's Proprietary Information, and (b) are
bound to comply with use and non-disclosure restrictions substantially the
same as those stated in this Agreement. Recipient shall cause its employees
and representatives to execute appropriate confidentiality agreements. If an
unauthorized use or disclosure occurs, Recipient will immediately notify
Owner and assist Owner in recovering Owner's Proprietary Information and
prevent its subsequent unauthorized use or dissemination. The restrictions
set forth herein shall continue (i) with respect to the Trade Secrets for as
long as such information continues to be a Trade Secret under applicable law,
and (ii) with respect to Confidential Information, for a period of five (5)
years from the date of expiration or termination of this Agreement.
At all times during the Term hereof Customer shall own all
intellectual property constituting Proprietary Information relating to the
manufacturing and related services contemplated by this Agreement, including
without limitation all intellectual property conceived, created, developed,
or reduced to practice by or on behalf of Customer in the course of its
performance under this Agreement. For purposes of this Agreement,
"intellectual property" includes without limitation any invention, discovery,
patent, utility model, service, copyright, industrial design or integrated
circuit topography right, or any rights whatsoever in processes, techniques,
improvements, modifications, computer software and related data, or any other
tangible or intangible right or privilege of any nature relating to any of
the above, in all cases applicable all over the world whether registered or
not.
XVII. INDEMNIFICATION BY CUSTOMER
Customer agrees to defend, indemnify, and hold harmless Sanmina from
and against any and all third party claims, demands, liabilities, damages,
losses, awards, suits, proceedings, causes of action, and costs (including
reasonable legal fees and expenses) in respect of any claim that the Products
infringe any existing United States copyright or patent of any third party
issued no later than the date of this Agreement, PROVIDED that: (i) Sanmina
provides Customer with prompt written notice of the initial claim and filing
of the lawsuit relating thereto; (ii) Sanmina permits Customer to assume the
entire claim to select legal counsel and to defend, compromise, or settle the
lawsuit in Customer's sole discretion; and (iii) Sanmina provides Customer
with all available information, assistance, authority, and cooperation to
enable Customer to defend, compromise, or settle the claim or lawsuit. This
Section sets forth the sole and exclusive remedy of Sanmina against Customer
and the complete liability of Customer with respect to any claim against
Sanmina for infringement of the Products on the intellectual property rights
of any person. The maximum liability of Customer under this Section XVII
shall not exceed the amounts paid to Sanmina in respect of Shipping
Notifications over the six (6) months immediately preceding the date of the
claim of infringement.
XVIII. INDEMNIFICATION BY SANMINA
Sanmina shall indemnify and save Customer and, if applicable, each of
Customer's respective customers harmless from any liability or claim
(including, without limitation, the costs and reasonable
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attorney's fees in connection therewith) (a) that may be made by Customer or
any third party for injury, including death, to persons or damage to property
which is caused by Sanmina's acts or omissions or defects in the manufacture of
the Products, OR (b) that may be made by Customer or third party (such as an
owner or director of Customer) arising out of a breach by Sanmina of this
Agreement, including without limitation the Confidentiality provisions of
this Agreement.
Sanmina shall maintain during its performance under this Agreement
General Liability Insurance, including contractual, products liability and
broad form vendors' endorsement with the limits adequate in the judgment of
Customer to protect Customer's interest. Upon the written request of Customer
from time to time, Sanmina shall deliver evidence of such insurance and in
the event the amount of such insurance is not reasonably satisfactory to
Customer, Sanmina shall procure additional coverage as reasonably requested
by Customer. Such insurance shall be primary and non-contributory with
respect to any insurance which Customer may have.
XIX. QUALITY, INSPECTION, AND REPORTING
Customer will have the right at all reasonable times, upon reasonable
advance notice, to visit Sanmina's plant to inspect the work performed on the
Products. Inspection of the work shall not relieve Sanmina of any of its
obligations under the Agreement or accepted Shipping Notifications. Sanmina
shall provide Customer with all mutually agreed upon quality reports at
agreed upon intervals. Sanmina reserves the right to restrict Customer's
access to the plant or any area within it as reasonably necessary to protect
confidential information of Sanmina or its other customers. Customer and
Sanmina will implement a joint quality improvement program that will develop
and implement a continuous quality improvement.
XX. TERMINATION
Either party may, without penalty, terminate this Agreement upon
ninety-(90) days written notice to the other party in either one of the
following events:
A. The other party materially breaches this Agreement and such
breach remains uncured for sixty (60) days following written notice of
breach given by the non-breaching party;
B. The other party becomes involved in any voluntary or involuntary
bankruptcy or other insolvency petition or proceeding for the benefit of
its creditors, and such petition, assignment or proceeding is not
dismissed with sixty (60) days after it was filed.
Additionally, Customer may terminate this Agreement for any reason
without penalty upon ninety (90) day's written notice to Sanmina. Upon any
termination hereunder, Sanmina shall provide Customer within five (5) Working
days of termination with a complete accounting of Customer's Total
Liabilities at the date of termination, supported by detailed reports of all
inventories of Products, Parts, work-in-progress, and raw materials ordered
and received and ordered but not received. Within five (5) Working days of
its receipt of Sanmina's accounting report of Customer's Total Liabilities,
Customer shall notify Sanmina of any disputed costs or charges listed as
Customer's Total Liabilities by Sanmina. Customer agrees to be liable only
upon termination for a maximum of two (2) weeks of finished product, two (2)
weeks of work-in-progress, and four (4) weeks of raw materials, plus any
Customer authorized procurement of long lead time raw materials ("Total
Liability"). Customer shall pay all undisputed charges in net forty-five (45)
days. Customer shall have the right to offset the amount Sanmina owes to
Customer against Customer's Total Liability otherwise due to Sanmina under
this Agreement.
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Certain obligations, terms, and provisions of this Agreement, including
without limitation sections XVI, XVII, and XVIII and the respective
obligations therein, shall survive termination of this Agreement.
XXI. LIMITATION OF LIABILITY
IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY SPECIAL, INDIRECT,
CONSEQUENTIAL, OR INCIDENTAL DAMAGES, HOWEVER CAUSED AND ON ANY THEORY
OF LIABILITY, ARISING IN ANY WAY OUT OF THIS AGREEMENT. THIS LIMITATION
WILL APPLY EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES, AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE
OF ANY LIMITED REMEDY PROVIDED HEREIN.
XXII. MISCELLANEOUS
A. TRADEMARKS AND TRADE NAMES. Neither this Agreement not the sale
of Products hereunder to Customer shall be deemed to give either party
any right to use any of the other party's trademarks or trade names
without such other party's specific, written consent.
B. COMPLIANCE WITH GOVERNMENTAL LEGAL REQUIREMENTS. Sanmina shall
comply with the provisions of all applicable federal, state, and local
laws, regulations, rules, and ordinances applicable to transactions
governed by this Agreement, including without limitation those applying
to FCC certification and UL clearance, and other similar governmental
and safety certifications or approvals. Should the Products fail to
meet such applicable approvals, standards, or regulations, other than
as a result of pending applications or actions with respect to the
issuance thereof, Sanmina [may/must] cease production until such
applicable qualifications are met without causing breach of this
Agreement.
C. GOVERNING LAW. This Agreement will be governed by and
interpreted under the laws of the State of Georgia, without reference
to conflict of laws principles.
D. JURISDICTION. For any dispute arising out this Agreement, the
parties consent to personal and exclusive jurisdiction of and venue in
the state and federal courts within Fulton County, Georgia and the
Northern District of Georgia, respectively.
E. CURRENCY. All references to dollar amounts are to U.S. Dollars.
F. ENTIRE AGREEMENT; ENFORCEMENT OF RIGHTS. This Agreement sets
forth the entire agreement and understanding of the parties relating to
the subject matter herein and therein and merges all prior discussions
between them. No modification of or amendment to this Agreement, nor
any waiver of any rights under this Agreement, will be effective unless
in writing signed by the party to be charged. The failure by either
party to enforce any rights thereunder will not be construed as a
waiver of any rights of such party.
G. ASSIGNMENT. The rights and liabilities of the parties hereto
will bind and incur to the benefit of their successors, executors or
administrators. Sanmina may not assign or delegate its rights and
duties under this Agreement without prior written the consent of
Customer.
H. NOTICES. Any required notices thereunder will be given in
writing at the address of each party set forth above, or to such other
address as either party may substitute by written notice to
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the other in the manner contemplated herein and will be deemed served
when delivered by facsimile or mail or when tendered in person.
I. FORCE MAJEURE. Neither party will be liable to the other for any
default thereunder if such default is caused by an event beyond such
party's control, including without limitation acts or failures to act of
the other party, strikes or labor disputes, component shortages,
unavailability of transportation, floods, fires, governmental
requirements and acts of God (a "FORCE MAJEURE EVENT"). In the event of
threatened or actual non-performance as a result of any of the above
causes, the non-performing party will exercise commercially reasonable
efforts to avoid and cure such non-performance. Should a Force Majeure
Event prevent a party's performance thereunder for a period in excess of
thirty (30) days, then the other may elect to terminate this Agreement
by written notice thereof.
J. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original and all of which
together will constitute one instrument.
IN WITNESS WHEREOF, this Agreement has been executed as of the date and year
first above written.
SANMINA CORPORATION ELASTIC NETWORKS, INC.
Signed: /s/ Signed: /s/ Larry R. Hurtado
-------------------------- ------------------------------
Name: Name: Larry R. Hurtado
-------------------------- ------------------------------
Title: Title: VP, Development/Operations
-------------------------- ------------------------------
Date: Date: 10/04/99
-------------------------- ------------------------------
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