<PAGE> 1
EXHIBIT 10.16
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN REDACTED PROVISIONS OF
THIS AGREEMENT. THE REDACTED PROVISIONS ARE IDENTIFIED BY THREE ASTERISKS
ENCLOSED BY BRACKETS AND UNDERLINED. THE CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
--------------------------------------------------------------------------------
VALUE-ADDED PRODUCT SALES AGREEMENT
by and between
AVNET ELECTRONICS MARKETING, A GROUP OF AVNET, INC.
and
ACCELERATED NETWORKS, INC.
Dated
March 12, 1999
--------------------------------------------------------------------------------
<PAGE> 2
VALUE-ADDED PRODUCT SALES AGREEMENT
This Agreement, effective as of the 12th day of March 1999, by and
between ACCELERATED NETWORKS, INC., having offices at 301 Science Drive,
Moorpark, CA 95021 ("Buyer"), and AVNET ELECTRONICS MARKETING, A GROUP OF AVNET,
INC. having offices at 2211 S. 47th Street, Phoenix, AZ 85034 ("Seller").
1. CONDITIONS OF SALE
Any Products Buyer purchases from Seller during the term of this
Agreement shall be governed by the terms and conditions contained in EXHIBIT A
attached hereto and incorporated herein.
2. DEFINITIONS
(a) Products: Electronic components which have been processed with
various manufacturing services in accordance with specifications prepared by
Buyer. Products are listed in EXHIBIT B.
(b) Manufacturing Services: Services performed in connection with the
electronic components in accordance with specifications prepared by Buyer.
Manufacturing Services may include without limitation, assembly, testing,
processing, programming, fault analysis, repair, and kitting. Seller shall have
the right to subcontract any portion of the Manufacturing Services to a third
party ("Subcontractor"). Seller shall provide Buyer written notice of any
planned change in the selection of the Subcontractor which must be approved by
Buyer. Seller will transfer to Buyer the subcontractor warranties for the
Manufacturing Services which are annexed hereto as EXHIBIT D.
(c) Specifications: The specifications prepared by Buyer which detail
the Manufacturing Services to be performed on the electronic components.
Specifications are attached hereto as EXHIBIT C and such specification may be
modified by Buyer and provided to Seller from time to time and made a part of
this Agreement
3. AGREEMENT TO PURCHASE AND SELL
Buyer agrees to purchase and Seller agrees to sell on the terms and
conditions contained herein, the Products listed on EXHIBIT B and such other
Products as may be mutually designated from time to time. If the parties wish to
add Products to this Agreement, EXHIBITS B and C shall be amended to include
these additional Products in accordance with the procedure outlined in Paragraph
6(c).
4. TERM
This Agreement shall commence on the effective date hereof and shall
continue for a term of one (1) year. This Agreement shall be automatically
renewed for additional one (1) year terms unless sooner terminated in accordance
with the provisions of Paragraph 11 hereof.
1.
<PAGE> 3
5. PRICE
(a) Prices for the Products are set forth in EXHIBIT B as may be
modified upon mutual agreement of the parties. Prices are exclusive of any and
all Federal, State and local sales, use, excise and similar taxes and charges
which shall be the responsibility of Buyer in addition to the purchase of
products.
(b) The Seller agrees to review costs at a minimum of once every 90 days
and pass on to Buyer all price reductions obtained by Seller. This shall include
but not be limited to lowered costs from the component supplier, changes in
assembly costs, reductions in test, increased productivity and cost savings due
to increased volumes. If Seller fails to disclose such cost reductions in a
timely manner (to be defined as 30 days) the Seller agrees to reimburse the
Buyer with these costs within 30 days of Seller's identification (but not later
than the date of Seller's next quarterly cost review). This shall be limited to
only the previous 45 days shipments. In addition if the supplier for any reasons
receives lower costs during the 90 day period between costs reviews the Seller
will pass on these costs to the Buyer forthwith. Such changes will be provided
in writing by Seller and will be deemed to be accepted once a writing (in the
form of a revise purchase order) is received from the Buyer. The Buyer reserves
the right to negotiate further with the Seller if the Buyer deems the costs to
be not of fair market value. All cost reductions will be taken on immediately
upon acceptance on all products undelivered to buyer, this shall include but not
be limited to product in work-in-process at the Seller's subcontractors and
parts in transit to the Seller's subcontractors.
(c) At any time during the term of this contract the buyer may request
from the seller (in writing) the Buyer's costs associated with the previous 90
days shipments. This shall be in a standard financial form as mutually agreed.
The data provided will include previous 90 days of sales revenue associated
direct material costs and Avnet's direct labor expenses specific to program.
(d) Prices are firm for the quantities specified. Notwithstanding the
foregoing, if a manufacturer increases Sellers cost of any electronic component
or part, Seller may increase its price(s) of any undelivered Product upon prior
notice to Buyer.
6. ORDERING OF PRODUCTS/DELIVERY
(a) The purchase of Products pursuant to this Agreement shall be
effected by Buyers issuance of its purchase orders to Seller. Such purchase
orders shall reference this Agreement and shall include the description and unit
quantities of Products, applicable prices, and requested delivery dates. All
orders for Products are subject to Seller's acceptance. Seller shall schedule
delivery and initiate shipment of Products to Buyer to meet Buyer's requested
delivery date. If the Seller schedules the delivery date up to five (5) days
later than the Buyer's originally requested delivery date, the Buyer has the
right to reschedule one time within 24 hours of notification from Seller.
(b) Buyer shall schedule and maintain firm order requirements with
Seller for at least sixty 60 day periods. On a monthly basis, Buyer shall also
provide Seller with a non-binding forecast of Buyer's order requirements for a
90 day period's beyond the firm order, period.
2.
<PAGE> 4
(c) All orders for standard products may be cancelled or rescheduled by
Buyer at no charge, provided Buyer notifies Seller in writing at least [***]
prior to the originally scheduled delivery date. Requests for rescheduling
received less than [***] prior to the originally scheduled delivery date may be
accepted at a charge. Neither standard nor non standard Products may be
cancelled once component level material has been committed to the work in
process phase.
(d) All orders for special, custom, value-added and other non-standard
Products, including Products to be assembled in Kit form and non-franchised
Products ("Non-Standard Product") shall be non-cancelable and non-returnable.
(e) Whenever Buyer wishes to purchase Products not currently listed on
EXHIBIT B, the following procedures shall be followed:
1. Buyer shall provide Seller with a Request for Quotation
("RFQ") which incorporates Buyer's Specifications for the additional Products.
2. Seller shall provide Buyer with a written quotation for the
additional Products in response to the RFQ (noting exceptions, where necessary).
3. If Buyer elects to purchase such Products, it shall issue
Seller a written purchase order therefor which shall reference Sellers
quotation, including the Specifications for the Products and contain the items
listed in Paragraph 6.(a) above. Upon Seller's acceptance of the order, EXHIBIT
B AND EXHIBIT C and Specifications shall be deemed to be amended to include the
additional Products.
7. CHANGES
Buyer has the option to request, in writing, changes to any order,
including changes to the Specifications. Seller shall notify Buyer in writing as
to the impact of each such change on the price, delivery schedule and any other
terms within two (2) business days. Such change shall become effective only upon
the signing by both parties in writing (revised Buyer Purchase Order) which
incorporates the agreed upon price and terms of the change.
8. CANCELLATION/RESCHEDULING
(a) All orders for Products are non-cancelable and non-returnable. If
Buyer fails to release or accept scheduled delivery of Products pursuant to
Buyer's purchase orders, Buyer shall be responsible for payment of such Products
upon invoicing by Seller.
----------------
*** Confidential Treatment has been requested for certain redacted
provisions of this agreement. The redacted provisions are identified by three
asterisks, enclosed by brackets and underlined. The confidential portion has
been filed separately with the Securities and Exchange Commission.
3.
<PAGE> 5
(b) Buyer may reschedule delivery of Products, provided Buyer gives
Seller written notice at least [***] prior to the originally scheduled shipment
date and further provided Seller accepts the new delivery schedule. Seller's
acceptance will not be unreasonably withheld.
(c) In no event may orders be rescheduled for shipment more than [***]
after the originally scheduled delivery date.
9. BUYER FURNISHED COMPONENTS/EQUIPMENT
As mutually agreed, Buyer may provide to Seller electronic components
and/or equipment as follows:
(a) Electronic Component If Buyer wishes to provide Seller with any
components required for the production of the Products, Buyer shall specify in
its RFQ those types and quantities of components it shall provide. Seller will
purchase from Buyer components in quantities and prices mutually agreed upon.
The repurchase price for the components incorporated in the Products shall be
the price paid by Seller, plus handling charges. At Seller's request, Buyer will
repurchase any excess components not required by Seller at the price paid by
Seller. Buyer shall be required to effect warranty repair and/or replacement
with the manufacturer for any component which Seller deems defective.
(b) Equipment Any item of equipment provided by Buyer in connection with
the performance of any Manufacturing Services shall be provided on a rent-free,
loan basis. Title to any such equipment shall remain with Buyer and Buyer shall
insure the equipment in an amount at least equal to the full replacement cost
under an all-risk policy. Seller shall be responsible for loss or damage to the
equipment. Seller shall have the right to designate that the equipment be
delivered, freight prepaid, to Sellers or its Subcontractors plant and used by
either Seller or its Subcontractor. The equipment shall be provided in good
working order and Buyer shall be responsible for maintaining the equipment in
good working order. The Seller shall return any portion of the equipment upon
written notification by Buyer.
The equipment will be returned to Buyer in substantially the same
condition as provided to Seller, less reasonable wear and tear.
10. NOTICES
Any notice provided for or permitted in this Agreement will be deemed to
have been given when mailed postage prepaid by certified mail or registered
mail, return receipt requested, to the party to be notified, at the addresses
set forth above or at such other addresses as the parties may from time to time
designate in writing. Buyer's Manager of Purchasing and Chief Financial Officer
are the designated recipient for delivery of all notices from Seller unless
Buyer notifies Seller otherwise in writing.
----------------
*** Confidential Treatment has been requested for certain redacted
provisions of this agreement. The redacted provisions are identified by three
asterisks, enclosed by brackets and underlined. The confidential portion has
been filed separately with the Securities and Exchange Commission.
4.
<PAGE> 6
11. TERMINATION
(a) The Seller shall give the Buyer at least ninety days prior written
notice of termination without cause and the Buyer shall give the Seller at least
90 days prior written notice of termination without cause. If a party desires
not to renew this Agreement as set forth in Section 4, in case of Seller, the
Seller shall give Buyer 90 days notice, and in case of Buyer, the Buyer shall
give Seller 90 days notice.
(b) This Agreement may be terminated immediately for cause by either
party in the event the other party: (i) shall become insolvent, (ii) ceases to
function as a going concern or (iii) fails to perform any of its obligations
hereunder so as to be in default and fails to cure default within thirty (30)
days after written notice thereof.
(c) Notwithstanding termination of this Agreement, Buyer shall be liable
for payment for all Products pursuant to orders accepted by Seller for a 90 day
period as stated in Section 6B and for all Products delivered prior to or in
transit on the effective date of termination of this Agreement.
12. INDEMNITY AGAINST INFRINGEMENT
Buyer shall indemnify and hold Seller and Subcontractor harmless against
any third party claim alleging that the Seller's sale or Subcontractor's
manufacture of the Products supplied pursuant to this Agreement and in
accordance with Buyer's Specifications, infringes any patent, copyright, mask
work right or other property right of a third party; and Buyer shall defend at
its expense any suit or proceeding against Seller or Subcontractor based upon
such a claim and shall pay all costs and damages awarded against Seller and/or
Subcontractor therein, provided that Buyer is promptly notified by Seller in
writing of the suit or proceeding and, at Buyers expense, is given sole control
of investigation, defense and settlement of said suit or proceeding and all
requested reasonable assistance of Seller and/or Subcontractor (at the expense
of Buyer) for defense of the same. Seller shall pass through to Buyer all
transferable indemnities previously agreed upon in writing and contractually
bound, with Seller, Subcontractor and OEM's.
13. GENERAL
(a) This Agreement contains the entire understanding of the parties with
respect to the subject matter hereof and supersedes all prior agreements
relating thereto, written or oral, between the parties. This Agreement may be
modified only by writings duly signed by authorized representatives of both
parties.
(b) The parties agree that the terms and conditions of this Agreement
shall control, notwithstanding conflicting or additional terms on any purchase
order, sales acknowledgement, confirmation or other document issued by either
party. Where the terms and conditions of this Agreement and Exhibit A hereto
conflict, the terms and conditions of this Agreement shall take precedence.
(c) This Agreement shall be governed by and construed in accordance with
the laws of the State of California, without giving effect to California's
conflicts of laws principles thereof.
5.
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their duly authorized representatives as of the day and
year first above written.
AVNET ELECTRONICS MARKETING, A ACCELERATED NETWORKS, INC.
GROUP OF AVNET, INC. ("Buyer")
("Seller")
By: /s/ Steve L. Larson By: /s/ Frederic T. Boyer
--------------------------------- ------------------------------
Authorized Signature Authorized Signature
Name: Steve L. Larson Name: Frederic T. Boyer
--------------------------------- ------------------------------
Printed or Typed Printed or Typed
Title: Director, Customer Contracts Title: Chief Financial Officer
--------------------------------- -----------------------------
Date: 3/18/99 3/16/99
--------------------------------- ----------------------------
6.
<PAGE> 8
EXHIBIT A
SALES TERMS AND CONDITIONS
1. Deleted
2. PAYMENT
(a) Payment for Products shall be [***] (subject to mutually agreed upon
product pricing) days Buyer's receipt of such product. Seller will EDI 810 to
Buyer all invoices on date of such invoices which will be no earlier than
Seller's date of shipment of product corresponding to such invoices. Seller may
in its sole discretion at any time and from time to time change the terms of
Buyers credit, require payment in cash before shipment of any or all of the
Products specified herein. Buyer agrees to submit such financial information
from time to time as may be reasonably requested by Seller for the establishment
and/or continuation of credit terms.
(b) Checks are accepted subject to collection and the date of collection
shall be deemed the date of payment.
(c) On any undisputed invoice not paid by maturity date, Buyer shall pay
Seller, interest starting on the maturity date at the annual rate of 18% or, if
lower, the maximum rate allowable by law, Seller's costs of collection
(including reasonable attorneys' fees).
(d) Buyer agrees to pay the entire net amount of each undisputed invoice
rendered by Seller pursuant to the terms of each such invoice without offset or
deduction.
3. DELIVERIES/TITLE
(a) Delivery of the Products to a carrier shall constitute delivery to
Buyer, and risk of loss shall thereupon pass to Buyer; Delivery route shall be
the election of Seller unless specifically designated, in writing, by Buyer.
4. FREIGHT
(a) Unless otherwise agreed to in writing, the F.O.B. point shall be
Seller's designated facility and the amount of all transportation charges from
Sellers location shall be paid to Seller by Buyer in addition to the purchase
price of the Products.
(b) Seller needs to notify Buyer's Manager of Purchasing (at 301 Science
Dr., Moorpark, CA 95021) of shipments in excess of [***] per shipment at least
three (3) business days prior to shipment in order that buyer can insure
shipment for potential loss. Shipment to be held until acknowledgement of
notification by Buyer to Seller that shipment exceeds [***] threshold.
----------------
*** Confidential Treatment has been requested for certain redacted
provisions of this agreement. The redacted provisions are identified by three
asterisks, enclosed by brackets and underlined. The confidential portion has
been filed separately with the Securities and Exchange Commission.
Exhibit A-1.
<PAGE> 9
5. FORCE MAJEURE
Neither party shall be liable for failure to fulfill its obligations
contained herein or for delays in delivery due to causes beyond its reasonable
control, including, but not limited to, acts of God, acts or omissions of the
other party, acts or omissions of civil or military authority, Government
priorities, material shortages, fire, strikes, floods, earthquakes, epidemics,
quarantine restrictions, riots, war, and delays in transportation. The time for
performance of any such obligation shall be extended for the time period lost by
reason of the delay, not to exceed 90 days at which time, by mutual agreement,
the unaffected party may terminate this Agreement without further obligation.
6. SELLER'S LIMITED WARRANTY AND LIMITATION OF LIABILITIES
Seller warrants to Buyer that Products purchased hereunder will conform
to the applicable manufacturer's specifications for such Products and that any
value-added work performed by Seller on such Products will conform to applicable
Buyers specifications relating to such work. Seller makes no other warranty,
express or implied, with respect to the Products. IN PARTICULAR, SELLER MAKES NO
WARRANTY RESPECTING THE MERCHANTABILITY OF THE PRODUCTS OR THEIR SUITABILITY OR
FITNESS FOR ANY PARTICULAR PURPOSE OR USE OR RESPECTING INFRINGEMENT. However,
Seller will transfer to Buyer whatever transferable warranties and indemnities
Seller receives from the manufacturer of the Products. With respect to Products
which do not meet applicable manufacturers specifications and with respect to
value-added work by Seller which does not meet applicable Buyers specifications,
Seller shall either (1) repair such Products, or (2) replace such Products;
provided, however, if Seller is unable to repair or replace despite commercially
reasonable efforts, Seller shall refund Buyer's purchase price of such Products
(without interest) along with acceptable evidence of purchase, within fifteen
(15) months from the date Buyer returns the Product(s) to Seller transportation
charges prepaid. Buyer shall return such Products to Seller from date of
delivery, transportation charges prepaid. NEITHER PARTY SHALL IN ANY EVENT BE
ENTITLED TO, AND NEITHER PARTY SHALL BE LIABLE FOR INDIRECT, SPECIAL, INCIDENTAL
OR CONSEQUENTIAL DAMAGES OF ANY NATURE INCLUDING, WITHOUT BEING LIMITED TO, LOSS
OF PROFIT, PROMOTIONAL OR MANUFACTURING EXPENSES, OVERHEAD, INJURY TO REPUTATION
OR LOSS OF CUSTOMERS. BUYER'S RECOVERY FROM SELLER FOR ANY CLAIM SHALL NOT
EXCEED BUYER'S PURCHASE PRICE FOR THE PRODUCTS IRRESPECTIVE OF THE NATURE OF THE
CLAIM, WHETHER IN CONTRACT, TORT, WARRANTY, OR OTHERWISE. THE LIMITATION OF
LIABILITY IN THE PRECEDING SENTENCE SHALL NOT APPLY TO BREACH OF CONFIDENTIALITY
OBLIGATIONS UNDER SECTION 9. OF THIS EXHIBIT A.
7. PRODUCT RETURNS
(a) Buyer is deemed to have accepted the Products unless written notice
of rejection is given within a reasonable time, which is agreed to be within
thirty (30) days after receipt. Buyer waives any right to revoke acceptance
thereafter:
Exhibit A-2.
<PAGE> 10
(b) No return of Products will be accepted by Seller without a return
material authorization number (RMA No.) which Seller may not unreasonably
withheld. Unused Product must be complete with all packing materials and
documentation. Seller agrees to absorb freight costs for properly returned
items. If returned Products are claimed to be defective, a complete description
regarding the nature of the defect must be included with all returned Products.
All items not eligible for credit will be returned to Buyer, transportation
collect. Seller agrees to turnaround all RMAs to buyer in ten (10) business
days, and such product to Buyer freight prepaid using all reasonable effort.
8. Deleted.
9. CONFIDENTIALITY
(a) If either party hereto receives from the other party written
information which is marked "Confidential" and/or "Proprietary" the receiving
party agrees not to use such information except in the performance hereof, nor
disclose such information to any third party, excluding Seller's sub-contractors
and OEM's, without mutual consent, and to treat such information in the same
manner as it treats its own confidential information. Confidential information
that is disclosed orally or visually shall be confirmed as confidential or
proprietary in writing within twenty (20) days after such disclosure. The
obligation to keep information confidential shall not apply to any such
information that has been disclosed in publicly available sources; is already in
the rightful possession of the party receiving the confidential information
without an obligation of confidentiality; or is required to be disclosed by
operation of law. Except as otherwise provided herein, the obligation not to
disclose or use confidential information shall be for a period of four (4) years
after the termination hereof.
(b) Information obtained by Seller from a secured area on Buyer's
Intranet web site shall be deemed confidential information.
10. USE OF PRODUCTS IN LIFE SUPPORT AND NUCLEAR APPLICATIONS
Products sold by Seller are not designed for use in life support or
nuclear applications. Seller's customers using or selling Products for use in,
life support or nuclear applications do so at their own risk, agree that Seller
and the manufacturer of Products are not liable, in whole or in part, for any
claim or damage arising from such use, and agree to fully indemnify Seller and
the Manufacturer from and against any and all damages, loss, cost, expense or
liability arising out of or in connection with the use or performance of
Products in life support or nuclear applications.
11. ADVICE
If technical advice is offered or given in connection with the use of
any Products it will be as an accommodation to Buyer and without charge and
Seller shall have no responsibilities or liabilities whatsoever for the content
or use of such advice.
Exhibit A-3.
<PAGE> 11
12. SOFTWARE
Computer software, if any, is transferred by Seller to Buyer pursuant to
a single user license the royalty, terms and conditions of which are set forth
on or in the container in which such software is packaged.
13. GENERAL
(a) No rights, duties, agreements or obligations hereunder may be
assigned or transferred by either party without the prior written consent of the
other. The obligations, rights, terms and conditions hereof shall be binding
upon and inure to the benefit of the parties hereto and their successors and
assigns.
(b) The waiver of any breach of any term, condition or covenant hereof
or default under any provision hereof shall not be deemed to constitute a waiver
of any other term, condition, or covenant contained herein or of any subsequent
breach or default of any kind or nature.
(c) Any provision hereof which is prohibited or unenforceable in any
jurisdiction Shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof in that jurisdiction or affecting the validity or
unenforceability of such provision in any other jurisdiction.
Exhibit A-4.
<PAGE> 12
EXHIBIT B
[***]
---
[***] Confidential treatment has been requested for all 14 pages of this
exhibit. The redacted provisions are identified by three asterisks, enclosed by
brackets and underlined. The confidential portion has been filed separately with
the Securities and Exchange Commission
Exhibit B-1.
<PAGE> 13
Exhibit C
[AVNET iMS
Integrated Material Services][AVNET Logo]
--------------------------------------------------------------------------------
AVNET IMS
STATEMENT OF WORK
--------------------------------------------------------------------------------
Note to the user: This document is to be utilized for informational purposes in
the event a Customer has not established a statement of work. It is not intended
to be utilized as a contractual standard, but rather an example of typical
statement of work elements.
--------------------------------------------------------------------------------
REV 1.3 MARCH 12, 1999
PURPOSE
This Statement of Work identifies applicable requirements by Accelerated
Networks (hereafter referred to as the Buyer) and Avnet (hereafter referred to
as the Seller) on this procurement.
REFERENCE DOCUMENTS
The following documents and specifications form a part of this SOW.
SPECIFICATIONS DOCUMENTS
-------------- ---------
Buyer's Packaging Specifications Exhibit A - Terms and Conditions
Exhibit B - Parts List
Exhibit C - Bill of Materials
EXCEPTIONS
Any exception or change to this Statement of Work will be mutually agreed to and
must be approved in writing by both parties prior to implementation.
PACKAGING
All parts shall be packaged according to the manufacturer's minimum packaging
quantity unless otherwise specified. ESD sensitive components shall be packaged
in accordance with EIA625
Exhibit C-1.
<PAGE> 14
guidelines. Non-ESD sensitive components shall be shipped in the packaging
received from the OEM. Any special packaging requirements shall be listed by
Buyer in Buyer's Packaging Specifications.
PCBA packaging will be in accordance with EMSI providers supplied specification
or standard unless otherwise requested and identified by a Buyer supplied
specification.
NON-CONFORMING MATERIAL
Seller shall inform the Buyer, in writing, of any component material that is
received by Seller from an OEM which is found to be non-compliant to the Buyer's
specification and cannot be resolved by the Seller. Permission to ship
non-conforming material to Buyer shall be expressed in the form of written
authorization from Buyer to Seller.
CORRECTIVE ACTION
If Seller receives a corrective action request from Buyer, the Seller is
requested to provide an acknowledgment of receipt within two (2) business days.
Upon the receipt of a corrective action request from the Buyer, the Seller shall
review and implement measures to prevent further occurrence. The Seller will
notify Buyer in writing within ten (10) days Upon the implementation of the
corrective action plan.
ENGINEERING CHANGE PROCESS
The Seller shall be an active participant in the Buyer's Engineering Change
Process (ECP). Buyer shall express fit, form, function, process or project scope
change requests in writing to Seller. Such changes may include, but not be
limited to: part number, packaging and labeling changes. Seller will provide
change response in forty-eight (48) hours which shall include any applicable
cost impact to Buyer resulting from requested change. Seller shall not take
action on any change request until written acceptance of Seller's response to
Buyer has been received by Seller. Dependent on the change, a revision to
applicable documents will be submitted in writing from the Buyer to the Seller
(SOW, ASL, BOM, PO). Buyer shall submit to Seller a cover page with each
purchase order revision summarizing the change.
CONTRACT MANUFACTURER
The first pass yield is targeted at [***]. With the addition of debug the
expected yield should increase [***]. The forecast will include an overage to
compensate the failures from the first pass. Buyer shall issue purchase order
for upside coverage required by Seller in meeting 100%
----------------
*** Confidential Treatment has been requested for certain redacted
provisions of this agreement. The redacted provisions are identified by three
asterisks, enclosed by brackets and underlined. The confidential portion has
been filed separately with the Securities and Exchange Commission.
Exhibit C-2.
<PAGE> 15
yield target. Buyer shall take delivery of all product manufactured against
issued purchase order/forecast.
FORECAST METHODOLOGY
Buyer shall provide schedule and maintain firm order requirements with Seller
for a minimum of ninety (90) day periods. On a monthly basis, Buyer shall
provide Seller with a forecast (MRP) update of Buyer's order requirements for
ninety (90) day periods beyond the firm order period. This shall be done via a
flat file. The Buyer's forecast will be PCBA level. If the Buyer request Seller
to provide material upside coverage and or long lead-time component support
beyond firm order or forecast period, that upside will be identified in this
Statement of Work and will be inclusive in the monthly forecast quantity. In the
event of an unforeseen increase above and beyond the forecast and upside
requirement, Buyer and Seller agree to negotiate the cost of premium freight
and/or unit cost price variance resulting from this unforeseen demand.
If the Buyer wishes to purchase product not listed on the forecast, BOM,
purchase order or parts list, Buyer shall provide Seller with a Request for
Quotation (RFQ) which incorporates the Buyer's specifications for the additional
product. Seller shall provide Buyer with a written quotation and will note any
exceptions taken where applicable.
MATERIAL PROCUREMENT and DELIVERY
PRICING
Pricing strategy will be mutually agreed upon between Buyer and Seller and will
be identified in Exhibit B to the contract, bill of materials / parts listing,
applicable to this program.
ORDERING OF PRODUCT
BUYER SHALL PROVIDE SELLER WITH HARD COPY BILL OF MATERIALS AS WELL AS, DISK
FORMAT TO BE UTILIZED IN THE QUOTATION STAGE.
The Seller is responsible for assuring that all supplies and services procured
from selected Suppliers conform to the PO. Supplier selection shall be based
upon the Approved Supplier Listing (ASL). Whenever the procurement package
requires suggested source of supply, the use of this source shall be considered
mandatory and designated on the ASL as a single source Supplier. In the event
that a Buyer specified, single source of supply has been disapproved by the
Buyer, the Buyer will provide written notice and a revised ASL will be issued.
The Seller may submit an alternate source for Buyer consideration and approval.
Any new Buyer direction that affects a sole source part number will be subject
to price, initial Supplier lead times and allocations.
Exhibit C-3.
<PAGE> 16
Seller ensures that [***] of backlog material is in the pipeline or in place
based on the latest rolling Buyer forecast to maintain on-time delivery. This
material will be lead time dependent based upon most recent forecast supplied.
Seller will provide all reasonable efforts to secure additional supply of
material on a case-by-case basis as agreed to by both parties. Buyer shall issue
to Seller a separate purchase order covering all product that is in excess of
[***] leadtime. Seller shall identify this product on Exhibit B, parts list.
Seller will review and react to demand changes to Buyer's forecast on a monthly
basis so that any changes are facilitated with the Suppliers on a timely basis.
Seller will review and respond with any insupportable deliveries to the forecast
within forty-eight (48) hours if the information is sent electronically or
within ninety-six (96) hours of receipt if the forecast is sent manually.
Seller's pipeline shall be subject to material lead times with Seller exerting
all reasonable effort to minimize potential delivery times.
LIABILITY AND EXCESS PRODUCT
Seller will notify Buyer in writing of any liability excess product that has not
been used within a sixty (60) day period. Seller will require a purchase order
from Buyer on liability product held in wait over sixty (60) days. All standard
product not used will be stock rotated back into Seller corporate inventory. A
snapshot report of inventory position will be provided to Buyer on a weekly
basis.
DELIVERY
Delivery will be, to the Buyer's designated location via agreed upon carriers as
stated in the. Buyer's purchase order. The delivery schedule shall be in
accordance with the Buyer's forecast. The trigger method designating material
release from Seller to Buyer shall be scheduled purchase order release date. The
Buyer retains the right to adjust purchase order delivery schedules as required,
with approval from the Seller. Notification from Buyer to Seller to adjust
purchase order schedules will occur in written form unless otherwise agreed to
by both parties.
INVOICING
Seller shall submit invoices to Buyer on a daily basis unless otherwise agreed
to in writing by Seller. The invoice shall include the PCBA number, quantity,
description, purchase order number and extended price totals.
----------------
*** Confidential Treatment has been requested for certain redacted
provisions of this agreement. The redacted provisions are identified by three
asterisks, enclosed by brackets and underlined. The confidential portion has
been filed separately with the Securities and Exchange Commission.
Exhibit C-4.
<PAGE> 17
PROGRAMMING
Component programming data will be provided to Seller in the form of a Master
and a Disk. Seller shall provide to Buyer, first articles on all new programs
which will require signed approval by Buyer prior to production. The programming
of the components will be completed 7 days prior to kit release.
CANCELLATION/RESCHEDULING
All orders for standard products may be canceled or rescheduled by the Buyer at
no charge provided Buyer notifies Seller in writing at least [***] prior to the
release of kits to the EMSI provider. Requests for cancellation or rescheduling
received less [***] prior to the originally scheduled delivery date may be
accepted at a charge to be determined in writing by the Seller.
All orders for special, custom, value-added and other non-standard products,
including franchised special or custom product, shall be non-cancelable and
non-returnable. Additionally, once product has entered the Work-In-Process stage
it shall be considered non-cancelable and non-returnable. Non-cancelable and
non-returnable product will be identified as such on Exhibit B and on each PCBA
BOM supplied to Buyer by seller which shall be signed as acknowledgement by
buyer.
MATERIAL MANAGEMENT / BUSINESS REVIEW
The Seller may appoint and identify to the Buyer a Material/Program Manager
specifically charged with the responsibility of accomplishing the overall
program effort.
Seller shall be required to participate in and support program review meetings
at intervals, minimally once per quarter, throughout the period of performance
of this agreement as deemed appropriate by the Buyer. These meetings shall
provide an overview of the Buyer and Sellers overall performance, issues,
schedule status, forecast accuracy, inventory position and reports presented by
various disciplines within both parties organization. Special reviews shall take
place in the form of a once per week conference call between Buyer, Seller, and
the EMSI provider. If it is determined that a high risk situation exists, a
special review may take place at the request of any party, at any time. Dates
and locations of such meetings shall be determined by mutual agreement.
----------------
*** Confidential Treatment has been requested for certain redacted
provisions of this agreement. The redacted provisions are identified by three
asterisks, enclosed by brackets and underlined. The confidential portion has
been filed separately with the Securities and Exchange Commission.
Exhibit C-5.
<PAGE> 18
DEFINITION OF ACRONYMS
SOW Statement Of Work
BOM Bill Of Material
PCBA Printed Circuit Board Assembly
EMSI Electronics Manufacturing Services Industry
OEM Original Equipment Manufacturer
PO Purchase Order
MRP Material Release Planned
Exhibit C-6.
<PAGE> 19
Exhibit D
MANUFACTURING SERVICES AGREEMENT
AMENDMENT NUMBER TWO
WARRANTY FOR ACCELERATED NETWORKS
--------------------------------------------------------------------------------
This Agreement Amendment effective as of this 2nd day of March, 1999, by and
between A-Plus Manufacturing Corporation with offices; at 2381 Bering Drive,
Milpitas, CA 95131 ("Subcontractor") and Avnet Inc. by and through its Avnet IMS
division with offices at 2211 South 47th Street, Phoenix, AZ 85034
("Contractor").
Attachment B (Subcontractor Warranty) shall be revised as follows:
A-Plus Manufacturing Corporation warrants that all products/services provided by
it: (a) shall be of good quality and workmanship and free from workmanship
defects, (b) shall conform to all specifications., drawings, description
furnished, specified or adopted by Buyer for a period of 15 months from the date
of shipment.
This amendment #2 supercedes amendment #1 dated 1/26/99.
All other terms and conditions of the Manufacturing Services Agreement, signed
October 25, 1996, shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have duly Executed this Agreement effective as
of the date first above set forth.
<TABLE>
<S> <C>
Avnet Inc., A-Plus Manufacturing Corporation
--------------------------------------------- ------------------------------------------------
by and through its Avnet IMS division (Subcontractor)
By: /s/ John Sanders By: /s/ Bill Yee
------------------------------------ ----------------------------------------
Name: John Sanders Name: Bill Yee
--------------------------------- --------------------------------------
Typed or Printed Typed or Printed
Title: Director, SBM Title: Senior VP Operations
----------------------------------- ---------------------------------------
Date: 3-8-99 Date: 3-4-99
----------------------------------- ---------------------------------------
</TABLE>
Exhibit D-1.
