<PAGE>
EXHIBIT 10.16
<TABLE>
<CAPTION>
---------------------------------------------- ---------- ------ --------------------- -----------
<S> <C> <C> <C> <C> <C> <C>
APPLICATION DATE REV REVISION RECORD APPROVED
---------------------------------------------- ---------- ------ --------------------- -----------
6/26/87 1
------------------- -------------- ----------- ---------- ------ --------------------- -----------
DASH NEXT ASSY USED ON 7/21/98 2
------------------- -------------- ----------- ---------- ------ --------------------- -----------
N/A DCN 9/11/98 3
------------------- -------------- ----------- ---------- ------ --------------------- -----------
9/29/98 5
------------------- -------------- ----------- ---------- ------ --------------------- -----------
</TABLE>
EXHIBIT A
STATEMENT OF WORK
FOR
MANUFACTURE OF A 24-GHZ RADIO INTEGRATED OUTDOOR UNIT
FOR SUBSCRIBER AND HUB STATIONS
<TABLE>
<CAPTION>
---------------- ------------- ----------- ------------------------------------------------------------------------
JOB APPROVALS DATE
HUGHES NETWORK SYSTEMS, INC.
---------------- ------------- ----------- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ORIGINATOR T. Ho 6/26/98
---------------- ------------- ----------- ------------------------------------------------------------------------
APPROVED:
---------------- ------------- ----------- ------------------------------------------------------------------------
CHECKED: TITLE: EXHIBIT A
SOW FOR MANUFACTURE OF A 24-GHZ RADIO INTEGRATED OUTDOOR
UNIT FOR SUBSCRIBER AND HUB STATIONS
---------------- ------------- ----------- ------------------------------------------------------------------------
SHEET 1 OF 26 52571 NO. HNS-15009
---------------- ------------------------- ----------------------------- ------------------------------------------
</TABLE>
FORM E75A HUGHES NETWORK SYSTEMS
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
24-GHZ ODU SOW COMPANY PROPRIETARY
COPYRIGHT (C) 1997 HUGHES NETWORK SYSTEMS, INC.
NOTICE OF PROPRIETARY INFORMATION
THIS DOCUMENT AND ITS CONTENTS ARE PROPRIETARY TO
HUGHES NETWORK SYSTEMS, INC. AND ARE
INTENDED SOLELY FOR THE INTERNAL USE OF HUGHES NETWORK SYSTEMS, INC.
THIS PUBLICATION AND ITS CONTENTS MAY NOT BE
REPRODUCED OR DISTRIBUTED FOR ANY OTHER PURPOSE
WITHOUT THE WRITTEN PERMISSION OF HUGHES NETWORK SYSTEMS, INC.
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24-GHZ ODU SOW COMPANY PROPRIETARY
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
CHAPTER 1.............................................................................5
INTRODUCTION..........................................................................5
1.1 SCOPE.............................................................................5
1.2 GENERAL REQUIREMENTS..............................................................5
1.2.1 SELLER RESPONSIBILITIES....................................................5
1.2.1 BUYER RESPONSIBILITIES.....................................................6
1.2.3 SPECIFICATIONS.............................................................6
1.3 GLOSSARY..........................................................................7
CHAPTER 2.............................................................................8
DELIVERY REQUIREMENTS.................................................................8
2.1 PROTOTYPE UNITS...................................................................8
2.2 QUALIFICATION UNITS...............................................................8
2.3 PRODUCTION UNITS..................................................................8
2.4 DOCUMENTATION.....................................................................8
2.5 ENGINEERING SUPPORT...............................................................9
2.5.1 DESIGN AND COMPONENT REVIEWS...............................................9
2.5.2 DESIGN VERIFICATION TEST..................................................11
2.5.3 FIRST ARTICLE TESTING.....................................................11
2.6 PRODUCTION SUPPORT...............................................................12
26.1 PRODUCTION TEST FIXTURE REVIEW............................................12
2.6.2 PRODUCTION TEST PLAN......................................................12
2.6.3 MONTHLY FAILURE ANALYSIS..................................................12
2.6 4 NOTIFICATION OF ENGINEERING CHANGES.......................................13
2.6.5 CHANGES IN KEY PROCESSES AND COMPONENTS...................................13
2.6.6 ONGOING RELIABILITY TESTING...............................................13
2.6.7 OUT OF BOX FAILURE RATE...................................................13
2.7 PACKAGING AND SHIPPING REQUIREMENTS..............................................14
2.8 MARKING OF UNITS.................................................................14
2.9 PROCESS AUDITS...................................................................14
2.10 FCC AND UL CERTIFICATIONS AND LISTINGS.......................................14
CHAPTER 3............................................................................15
PROGRAM MANAGEMENT...................................................................15
3.1 MANAGEMENT DESIGNATION...........................................................15
3.2 MEETINGS.........................................................................15
3.3 MONTHLY REPORTS..................................................................15
CHAPTER 4............................................................................16
DOCUMENTATION........................................................................16
4.1 DESIGN DOCUMENTATION.............................................................16
4.2 HARDWARE DOCUMENTATION...........................................................16
4.3 TEST DATA SHEETS.................................................................17
4.4 SUMMARY OF DOCUMENTATION DELIVERABLES............................................17
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<TABLE>
<CAPTION>
<S> <C>
CHAPTER 5............................................................................18
ACCEPTANCE OF THE WORK...............................................................18
5.1 FIRST ARTICLE TESTING............................................................18
5.2 PRODUCTION TESTING...............................................................18
5.3 ACCEPTANCE OF DOCUMENTATION......................................................19
CHAPTER 6............................................................................20
MILESTONE SCHEDULE...................................................................20
6.1 PHASE I SCHEDULE.................................................................20
CHAPTER 7............................................................................21
QUALITY ASSURANCE....................................................................21
7.1 CONFORMING EQUIPMENT.............................................................21
7.2 QUALITY SYSTEM MANAGEMENT........................................................21
7.3 QUALITY SYSTEM...................................................................21
7.3.1 INCOMING MATERIAL.........................................................21
7.3.2 MATERIAL CONTROL AND HANDLING.............................................22
7.3.3 FABRICATION, ASSEMBLY, AND PRODUCTION TEST................................22
7.3.4 OUTGOING MATERIAL.........................................................22
7.3.5 TOOLING MEASURING AND TEST EQUIPMENT......................................22
7.3.6 WORK INSTRUCTIONS, DOCUMENTATION, AND CHANGE CONTROL......................22
7.3.7 CONTROL OF NONCONFORMING MATERIAL.........................................23
7.3.8 CORRECTIVE ACTION.........................................................23
7.3.9 SAMPLE PLANS..............................................................23
7.3.10 TRAINING..................................................................23
7.4 QA PROGRAM PLAN..................................................................23
7.4.1 CHANGE CONTROL............................................................23
7.4.2 TEST AND INSPECTION.......................................................24
7.4.3 WORKMANSHIP...............................................................24
7.4.4 ELECTROSTATIC DISCHARGE (ESD).............................................24
7.4.5 QUALITY ASSURANCE DATA....................................................24
7.4.6 RECORD RETENTION..........................................................24
7.4.7 METRICS...................................................................25
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<PAGE>
24-GHZ ODU SOW COMPANY PROPRIETARY
CHAPTER 1
INTRODUCTION
1.1 SCOPE
This Statement of Work (SOW) defines the work to be done for Hughes Network
Systems, Inc., (HNS, the Buyer) by Supplier (Supplier, the Seller) in support of
the development, manufacture and test of the 24-GHz Integrated outdoor units
(ODU) for subscriber and hub stations for point-to-multipoint (PMP)
communication system applications. The Unit will be abbreviated as ODU in this
document.
This work will be done in three phases. These are:
Phase I Engineering Development
Phase II Qualification
Phase III Production
1.2 GENERAL REQUIREMENTS
1.2.1 SELLER RESPONSIBILITIES
The Seller shall design, manufacture, test and deliver equipment for use as an
ODU. This equipment shall meet all requirements of the 24-GHz ODU specification.
The buyer will neither accept this equipment or render final payment until all
specifications are met by the seller and demonstrated by testing the product.
Certain documented changes should be acceptable for prototype.
The Seller shall provide documentation for all the Work performed under the SOW.
The documentation will include design documentation, test data, engineering
support documentation, and production support documentation as described in
chapter 4.
The Seller shall provide program management, engineering support, and production
services as defined in chapter 3 and elsewhere in this SOW.
The Seller shall commence on the design of the equipment promptly and shall
supply design documentation and support all program and design reviews. The
Seller shall establish and maintain the necessary program management structure
to accomplish this Work and shall report on progress of the Work in a timely
manner so as to maintain the Work on the agreed upon schedule.
The Seller shall be responsible for and shall provide all personnel and test
equipment to perform his in-plant testing including the Design Verification
Testing, Ongoing Reliability Testing and Production Testing. The Seller will
allow the Buyer to witness any or all of this testing. For the DVT, the Seller
will schedule test activities with the Buyer such that the Buyer may witness
testing.
The Seller shall at the sole option of the Buyer and with the consent of the
Seller, provide the additional equipment and services as indicated herein and as
agreed to from time to time.
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Notwithstanding any consultation and reviews performed by the Buyer, the Seller
shall be solely responsible for meeting all the requirements of this SOW and the
ODU Specification.
The Seller is responsible for providing support personnel and special test
equipment necessary for conducting First Article Testing (FAT) and Manufacturing
Verification Testing (MVT).
1.2.2 BUYER RESPONSIBILITIES
The Buyer is responsible for integrating the Seller's equipment into his own PMP
equipment. He is responsible for complete system testing of the Seller's
equipment with his own system. The Buyer is responsible for providing
specifications defining the ODU and it's interfaces to the PMP indoor unit (IDU)
equipment.
The Buyer shall review all documentation provided by the Seller and will provide
comments on all draft documents in the agreed upon schedule.
The Buyer is responsible for calculating and maintaining Mean Time Between
Failure (MTBF) and Annualized Failure Rate (AFR) data and promptly notifying the
Seller when the units are no longer meeting the specifications. The Buyer is
responsible for calculating and maintaining all out of box failure rates and
promptly notifying the Seller when the equipment no longer meets the
specifications.
1.2.3 SPECIFICATIONS
HNS Document 1026128 defines the Buyer's Technical Specification Source Control
Drawing (SCD) for the ODU. HNS Document 1025231 defines the Buyer's Technical
Specification Source Control Drawing for the ODU antenna.
1.2.4 OTHER FREQUENCY BANDS
The RF Unit design/architecture will take into consideration supporting the
following frequency bands to minimize future modification and to reduce the time
to market. The intention would be as part of the initial architecting effort, an
implementation strategy would be developed for each of these bands. The actual
implementation would then be placed by the development of sufficient market
volume in the respective bands.
NOMINAL BAND ACTUAL FREQUENCY BAND (GHZ) BAND TYPE
------------ --------------------------- ----------
23 GHz 21.2 to 23.6 FCC
21.2 to 23.6 UK
22.0 to 23.6 CEPT
24 GHz 24.25 to 26.5 FCC & DEMS
24.5 to 26.5 CEPT
24.25 to 25.25 ITU-R F.748-2
24.35 to 25.35 P
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24-GHZ ODU SOW COMPANY PROPRIETARY
NOMINAL BAND ACTUAL FREQUENCY BAND (GHZ) BAND TYPE
------------ --------------------------- ---------
26 GHz 24.5 to 27.2 FCC
24.25 to 29.5 ITU-R F.748-2
25.25 to 27.5 ITU-R F.748-2
25.35 to 28.35 P
28 GHz 27.0 to 28.5 FCC
27.5 to 29.5 CEPT
27.5 to 28.35 FCC-LMDS
29.1 to 29.25 FCC-LMDS
31.0 to 31.3 FCC-LMDS
27.5 to 29.5 ITU-R F.748-2
38 GHz 38.6 to 40.0 FCC
36.0 to 40.5 ITU-R F.749-1
37.14 to 37.34 (Tx) A
38.4 to 38.6 (Rx) A
1.3 GLOSSARY
The following Glossary contains definitions for acronyms and abbreviations which
appear in this document.
AFR Annualized Failure Rate
DVT Design Verification Test
ECN Engineering Change Notice
FAT First Article Test
HNS Hughes Network Systems
ODU Outdoor Unit
IDU Indoor Unit
MTBF Mean Time Between Failures
MVT Manufacturing Verification Test
O and M Operations and Maintenance
ORT Ongoing Reliability Testing
OBFR Out of Box Failure Rate
PMP Point-to-Multipoint
SOW Statement of Work
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24-GHZ ODU SOW COMPANY PROPRIETARY
CHAPTER 2
DELIVERY REQUIREMENTS
2.1 PROTOTYPE UNITS
The Seller shall deliver [*] prototype units which will meet all the physical
and electrical requirements of the ODU Specification. Certain documented changes
should be acceptable for prototype. These units will have been subjected to DVT.
These units will be used for functional, and environmental testing and must meet
all the requirements of the ODU specification. The seller is required to upgrade
all prototype units delivered to the buyer to specification compliance described
above if possible. The Buyer and Seller will mutually negotiate a price and
schedule to upgrade prototype units to be specification compliant.
2.2 QUALIFICATION/FIELD TRIAL UNITS
The Seller shall deliver [*] qualification/field trial units. These
qualification units shall be manufactured utilizing processes and materials
which are the same as those to be used in production units. The qualification
units will be used for functional, environmental, performance, safety and agency
compliance testing and must meet all the requirements of the ODU specification
and the SOW. These units will have been subjected to DVT and Production Test
prior to delivery. Qualification is performed by Buyer to establish a
reliability baseline rather than a pass/fail criteria.
2.3 PRODUCTION UNITS
Production units will be delivered according to the delivery schedule to be
specified at the time of order. The production units must meet all requirements
of the ODU Specification and the SOW. Production orders will not commence
delivery prior to successful completion of qualification factory demonstration,
DVT, FAT, and MVT.
2.4 DOCUMENTATION
The Seller shall deliver all the documentation specified in Chapter 4. The
Seller will incorporate comments from the Buyer's review cycle into draft
documentation in order to create final documentation. The Buyer shall have the
right to incorporate any Seller supplied documentation into Buyer's own
documentation. Any such Seller supplied documentation shall be subject to the
article entitled "PROPRIETARY INFORMATION" as set forth in the terms and
conditions.
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THE OMITTED PORTIONS.
<PAGE>
24-GHZ ODU SOW COMPANY PROPRIETARY
2.5 ENGINEERING SUPPORT
The Seller shall provide the following Engineering Support to Buyer during
prototype and qualification phase.
2.5.1 DESIGN AND COMPONENT REVIEWS
o The Seller will conduct [*] formal design reviews in accordance with the
Milestone Schedule in Chapter 6. These reviews may take up to 2 days each
alternating between the Buyer's and Seller's facility or as mutually agreed
to. The informal discussions will be held as required.
These reviews are defined as:
o Preliminary
o Critical
o Final
The Preliminary Design Review (PDR) is held at the outset of the program and is
used to expose and resolve divergent requirements and interpretations of the
product. The Critical Design Review (CDR) occurs after the prototype performance
data has been obtained and the baseline design of the product has been
established. The primary purpose of this design review is to identify and
resolve any problems associated with the design which could lead to development
and/or manufacturing difficulties. The Final Design Review (FDR) occurs after
the engineering development has been completed and just prior to transfer of the
design to manufacturing. The purpose of this review is to ensure the
completeness of the design and documentation such that the product can be
replicated in the manufacturing environment. The Seller will have present staff
with sufficient engineering and manufacturing experience and may reasonably be
expected to answer all questions. Any questions not resolved at the Design
Reviews will be promptly answered by the Seller. The Design Reviews will be held
according to the schedule given in Chapter 6. All materials to be presented at
the Design Reviews will be delivered to the Buyer for review at least SEVEN
(four days before PDR) calendar days prior to beginning of Design Reviews. The
Seller will conduct a Process and Component Review concurrent with each Design
Review meeting. At the Process and Component Review, the Seller will present all
processes and components used in the design. The Seller will designate, subject
to review and mutual agreement by the Buyer, all key processes and components
whose change will require notification to the Buyer and the actions in Section
2.6.4. The review will be held according to the schedule given in Chapter 6.
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THE OMITTED PORTIONS.
<PAGE>
24-GHZ ODU SOW COMPANY PROPRIETARY
2.5.1.1 PRELIMINARY DESIGN REVIEW
The objective of the PDR is to review the design and its implementation. As a
minimum, the following information shall be provided to the Buyer prior to the
PDR.
o An electrical block diagram describing circuit functions along with a
description of inputs, outputs, interfaces and signal flow.
o Table of performance budget by circuit for each major parameter such as
gain, noise figure, intercept point, attenuation, phase shift, distortion
level, frequency response, etc.
o Analysis and circuit performance data which demonstrates the performance
budget of the above item and delineates design margin.
o Schematic with design parameters, component values and dimensions.
o List of adjustments and adjustment method.
o Assembly drawing indicating component layout.
o Indented assembly list or "family tree".
o Assembly Flow Diagram.
o Preliminary test plan which includes: methods, parameters, quantity,
screening tests and test equipment used.
o Complete material breakdown sheet FOR THE MAJOR PARTS delineating each part
item by part number, manufacturer and quantity.
IN ADDITION TO THE DEVELOPMENT SCHEDULE STATED IN THIS SOW, CONTRACTOR SHALL
SUPPLY A PRODUCTION PLAN AND PRODUCTION RAMP-UP SCHEDULE WHICH INCLUDES CAPITAL
EQUIPMENT ORDER AND DELIVERY MILESTONES, STAFF ACQUISITION PLANS AND MILESTONES
AND MATERIAL PROCUREMENT AND DELIVERY SCHEDULES. THE PLANS AND/OR SCHEDULES
REFERENCED HEREIN SHALL BE DELIVERED TO HNS AS SOON AS POSSIBLE BUT NO LATER
THAN THE PRELIMINARY DESIGN REVIEW.
2.5.1.2 CRITICAL DESIGN REVIEW
The objective of the CDR is to verify the specification compliance of the
prototype unit and review the engineering progress made since completion of the
PDR. As a minimum, the Seller shall provide the following information to the
Buyer:
o Mechanical fabrication sketches, assembly sketches, artwork and photo-tools
required for breadboard fabrication.
o Mechanical compliance matrix for product specification which addresses
thermal, structural, weight, environmental, and system interface
considerations.
o Prototype sketches of circuit layouts and assemblies of all circuits
prototyped.
o Electrical compliance matrix with circuit parameter performance data
compliant with product specification and worst case statistical design
analysis which includes component tolerance.
o A complete list of purchased parts and materials specifications.
o Prototype piece part drawings, prototype assembly drawings, and assembly
flow diagrams incorporated into prototype routing.
o Written process procedures listing critical parameters, adjustments and
methods and in process inspections. Processes themselves are Seller
proprietary.
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o Written Quality Plan
o MTBF prediction, reliability analysis which includes semiconductor junction
temperatures, Parts stress analysis, Heat Flow, Parts Derating.
o Implementation plan for production test.
o Completed and approved informally released drawing package.
o DVT test plan
o DVT report
2.5.1.3 FINAL DESIGN REVIEW
The objective of the FDR is to finalize the product design and review the
manufacturing drawing package. As a minimum, the Seller shall provide the
following information to the Buyer:
o Completed and approved parts list
o Full assembly drawings
o Plan for development and schedule for tool drawings for fabrication,
assembly and test fixtures as specified by manufacturing operations.
o Inspection procedures based on the drawing package which defines all
workmanship standards.
o Production test plan for screening and in process tests, acceptance tests
and qualification tests.
o Final data on qualification.
2.5.2 DESIGN VERIFICATION TEST
The DVT will demonstrate that the equipment meets all of the functional and
performance requirements of the technical specifications including environmental
testing as defined in the test plan. DVT typically involves two compliant units.
The Buyer may witness the DVT at the Seller's plant. THEY CAN BE SPLIT INTO TWO
PARTS: PART 1 INCLUDES ELECTRICAL TEMPERATURE AND VIBRATION.
The Seller shall prepare, subject to review and mutual agreement by the Buyer,
the DVT Test Procedures and perform the DVT.
2.5.3 FIRST ARTICLE TESTING
The Buyer will be responsible for conducting FAT. This will consist of
integration testing of the qualification units with the Buyer's system. This
testing will also include external lab testing for compliance with all
requirements including environmental, product safety, and regulatory agencies.
The Buyer shall be solely responsible for conducting all First Article Testing.
In order to expeditiously identify problems, and provide the Seller with direct
feedback on problems identified to be in his equipment and ensure that trial
fixes to problems are correctly installed at the Buyer's facility, the Seller
will provide engineering personnel with sufficient technical background in
support of this testing. These personnel will be available, if required, to
report to the Buyer's facility from the period of the first lot of qualification
equipment until the conclusion of testing by the Buyer of the first lot of
production equipment. It is expected that the Seller's personnel providing this
support will work closely with the Seller's in plant staff to facilitate
inclusion of all required changes in the production units. Seller is not
responsible for support or delays if buyer cannot complete testing on a timeline
required to support Seller's insertion schedule.
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2.5.4 MANUFACTURING VERIFICATION TEST
Following the First Article Process is usually the Manufacturing Verification
Test (MVT). This plan is executed at the beginning of the production process.
This is based on the production test plan developed earlier. The MVT plan
outlines the specific areas to be included. Seller performs MVT using the first
production units.
2.6 PRODUCTION SUPPORT
The Seller's personnel will provide the following production support during
qualification and production phases of the Work.
2.6.1 PRODUCTION TEST FIXTURE REVIEW
Deliverables include the Production Test Plan, Test fixture acceptance procedure
(10x10), Test fixture schematics and/or wiring diagrams, specifications to be
tested, method of testing, test limits to be applied.
2.6.2 PRODUCTION TEST PLAN
Prior to the delivery of the first lot of production units, the Seller shall
prepare for the Buyer, a report indicating the test coverage of his equipment.
This report will describe in detail the production test that the Seller will run
which will demonstrate that the production units meet all their requirements and
operate as specified. The Buyer will use this report in planning his total
system testing plan and in analyzing system component failures. This report will
include the Test Plan which will be run in the factory and which will produce
the Test Data Sheets and or electronic submitted with each piece of equipment.
Prior to changing the Test Plan, the Seller must promptly notify the Buyer
indicating the reason for the change in the Plan, from which serial number
forward this change will take effect and provide copies of the updated Test
Plan.
2.6.3 MONTHLY FAILURE ANALYSIS
The Seller will log all equipment returned as failed units both under warranty
and out of warranty, on a monthly basis. The Seller will prepare a written
summary analysis of the failures. The analysis will highlight any "Pattern
Defects" and indicate corrective measures that will be taken in either the
testing process or from a design change.
2.6.4 NOTIFICATION OF ENGINEERING CHANGES
The Seller shall notify the Buyer in writing upon initiation of any significant
Engineering Change Notices (ECNs) which modify the design of the equipment in
any way. The notification shall indicate the nature of the ECN and it's purpose.
The notification shall indicate the shipment lot and serial numbers for which
the ECN becomes effective. As appropriate, all necessary documentation,
including
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Production Test Procedures, will be updated to reflect this ECN. The equipment
will be marked with a visible indicator of the revision level of the Buyer's
specification so that upon inspection, it will be clear as to the revision level
of the equipment. No ECN will be applied to any equipment which will cause it to
be non-compliant with the Technical Specification or the SOW. For each ECN, the
Seller shall provide a recommendation as to whether the Baseline DVT should be
updated and rerun. In the case of any ECN which changes the functional or
performance characteristics of the equipment the Baseline DVT may be rerun at
the Buyer's sole option. The Seller shall update and rerun the Baseline DVT to
demonstrate that the equipment is still compliant with the Technical
Specifications and the SOW. The Buyer shall be provided with any revised
Baseline DVT procedure.
2.6.5 CHANGES IN KEY PROCESSES AND COMPONENTS
With Notification to the buyer, the Seller may substitute comparable, equivalent
during the course of the manufacturing cycle as long as the equipment will
continue to meet all specifications. However, in the case of changes in
processes or components which have been designated as "key processes or
components", the Seller shall rerun the Baseline DVT and submit a written report
indicating the equipment continues to pass the Baseline DVT with the new process
or component being used in the manufacture of the equipment.
2.6.6 ONGOING RELIABILITY TESTING
The Seller shall conduct an Ongoing Reliability Testing Program to be mutually
agreed to by the Buyer where he will monthly randomly select deliverable
equipment is ready for shipment to the Buyer, and test with extended burn-in
such equipment. After testing, the Seller may repackage and deliver the
equipment to the Buyer. The Seller shall notify the Buyer of the results of this
testing and of any changes implemented in his procedures as a result of this
sample testing. ORT is typically [*] at elevated temperature.
2.6.7 OUT OF BOX FAILURE RATE
The Buyer shall maintain records as to the number of units which fail to conform
to the specifications as they are unboxed, as a result of Seller shipment to the
Buyer. [*] OBF shall not exceed a cumulative [*] per delivery order, the Buyer
will notify the Seller in writing and provide the results of his calculation.
The Seller agrees to take steps to improve his manufacturing/testing/shipping
procedures upon receipt of such notification, and shall within 20 WORKING DAYS:
o Analyze the problem
o Prepare and submit an action plan indicating what steps he will take to
remedy the problem
o Promptly initiate corrective action on delivered and
future production units.
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THE OMITTED PORTIONS.
<PAGE>
24-GHZ ODU SOW COMPANY PROPRIETARY
2.7 PACKAGING AND SHIPPING REQUIREMENTS
All equipment shall be delivered to locations identified in writing by the
Buyer. All packages shall be labeled for identification of contents. The Buyer
and Seller assembly numbers along with purchase order number, serial number and
revision level shall appear on each label. The details of the marking
requirements are shown in the specification. For bulk shipments, total
quantities of assemblies shall be entered as a single line item. Accompanying
the shipping document shall be a tabulation of each item and associated serial
numbers, part numbers, and revision levels. Under separate cover, an additional
copy of the shipping document shall be forwarded to the Program Manager as
notification that the shipment has been made.
2.8 MARKING OF UNITS
All units shall be marked as specified in the HNS specification.
2.9 PROCESS AUDITS
The Buyer shall have the right, upon reasonable notice to the Seller and on a
non-interfering basis, to enter the Seller's plant and audit the processes used
to manufacture, test, and ship equipment to the Buyer. The sole purpose of this
Process Audit shall be to ensure high quality of the delivered equipment.
2.10 FCC AND UL CERTIFICATIONS AND LISTINGS
The Buyer, with support from the Seller, is responsible for type acceptance
testing and obtaining the FCC and UL certifications and listings required by the
SCD.
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CHAPTER 3
PROGRAM MANAGEMENT
3.1 MANAGEMENT DESIGNATION
Promptly after signing the Contract, the Buyer and the Seller will both
designate a Program Manager, an Engineering Manager, and a Contract Manager. The
program managers will be the single point of contact for the Contract on all
matters, administration, technical and contractual of the Work. However, no
changes to the contract shall be binding on or undertaken by the Seller or Buyer
unless confirmed in writing by the Contract Managers. The Engineering Managers
will be the only individuals authorized and responsible to represent the Buyer
and the Seller in the definition and interpretation of the technical
requirements of the Contract. The Buyer will take no responsibility for any
action taken by the Seller on the basis of technical direction which causes a
change in price, schedule, Exhibit A, or Exhibit B, unless and until such
direction is approved by the Program Manager and directed by the Contract
Manager, pursuant to the Terms and Conditions.
3.2 MEETINGS
The Seller and the Buyer shall hold a bi-monthly Program Review Meeting every
other month until delivery of [*] to review the progress of the Seller on the
Work. The meetings shall alternate between the Buyer's Germantown MD facility
and the Seller's facility. The agenda shall include a report on all milestones,
technical progress and other such topics as may be mutually agreed upon.
The engineering managers may call Technical Review meetings as they deem
necessary to coordinate the details of the design and resolve any technical
issues that may arise. Such meetings will be held at a mutually agreed upon
site.
3.3 MONTHLY REPORTS
The Seller shall submit a Work status report each month to the completion of the
Qualification. The report shall include status information on the Work and shall
include, but not be limited to last's month's accomplishments, problem areas,
projected activities, failure summaries, action items with suspense dates,
schedule variances and coordination requirements and shall include a schedule
for development of all key components during Phase I. ORT results in Subsection
2.6.5 and QA information as described in Subsection 7.4 will also be included in
this report. Copies of this report shall be delivered to the Buyer's Program
Manager no later than the fifth working day of each month.
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[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
24-GHZ ODU SOW COMPANY PROPRIETARY
CHAPTER 4
DOCUMENTATION
The Seller shall deliver Hardware Documentation as part of this SOW. The
documentation shall conform to good commercial practices. The Seller shall
forward all draft documentation to the Buyer Program Manager to implement a
formal review process. Specific comments, suggestions, and directions will be
provided by the Buyer and will be reviewed by the Seller. In case of disapproval
for non-compliance with this SOW, a subsequent review will be required before
approval is issued. In the case of approval with comments, by mutual agreement
update sheets may be provided in place of resubmitting the entire document. The
Buyer will confirm the completion of the document with comments WITHIN 10
WORKING DAYS of receipt of Documents or re-submission of Documents. All
Documentation shall be clearly labeled as DRAFT or FINAL copies. All titles must
either conform to the list of titles given in Section 4.4 unless a cross
reference is provided with the delivery of the Document.
The Seller shall deliver FIVE copies of all Documents.
4.1 DESIGN DOCUMENTATION
At each Design review, the Seller shall represent documentation that indicates
how the hardware will be designed so as to comply with all requirements.
4.2 HARDWARE DOCUMENTATION
The following hardware documentation will be provided as per milestone schedule
in Chapter 6:
o Drawing tree for the ODU.
o Schematics including complete block diagrams and schematics for each
printed circuit board along with all interconnectivity cables and
connectors shall be provided. Component values and identification shall be
legible on all drawings.
o The contents of all programmable devices will be specified.
o A complete parts list for all equipment will be provided. The Seller will
supply a cross reference of Seller part numbers to Vendor part numbers.
o A complete set of assembly drawings.
o Theory of Operation.
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4.3 TEST DATA
Test data shall be submitted for each unit may be in electronic form and or
electronically submitted. They shall make cross reference to the Production Test
Plan and will include the serial number of the unit under test, the acceptable
limits defined in the Test Plan, the recording of the results observed, and the
date the test was performed.
4.4 SUMMARY OF DOCUMENTATION DELIVERABLES
The following summarizes the Documentation to be delivered:
o Monthly Status Reports
o Design Review Materials
o Theory of operation
o Block Diagram
o Assembly Drawings
o Schematics
o Parts Lists
o DVT Procedures
o DVT Report
o Key Components List
o Key Process List
o Manufacturing process and Flow Chart.
o Production Test Coverage Analysis.
o Production Test Plan
o Production Test Data Sheets
o Monthly Failure Analysis
o Appropriate ECNs
o QA plan
o Production Test Fixture equipment list
o Production Test Fixture schematic and/or wiring lists
o List of special jigs or fixtures used to test the equipment
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24-GHZ ODU SOW COMPANY PROPRIETARY
CHAPTER 5
ACCEPTANCE OF THE WORK
Acceptance of the Work will be segmented into the following phases:
o Prototype
o DVT
o First Article Acceptance Testing
o Qualification Testing
o Production Testing
o Acceptance of Documentation
5.1 FIRST ARTICLE TESTING
Upon receipt of the qualification equipment, the Buyer will commence testing the
units for compliance with the Technical Specifications and this SOW as described
in Section 2.5.4. In the event of noncompliance, the areas of deficiency will be
demonstrated to the Seller personnel at the Buyers facility. The Seller will
remedy all areas of non-compliance prior to delivery of the first lot of
production equipment. Delivery of the production units will be contingent on
approval by the Buyer based on successful completion of FAT. The buyer will
regression test the [*] to ensure continued compliance with the Technical
Specifications and the SOW. The Seller shall have the right to witness all
factory based Acceptance Testing. In the event of non-compliance of the [*] with
the Technical Specifications and SOW, the Seller will be notified of the reasons
and, at the Buyers sole option, the Seller shall hold all shipments until such
time that the Seller reasonably demonstrates to the Buyer that the future
production units will be completely in compliance with the Technical
Specifications and SOW.
5.2 PRODUCTION TESTING
Acceptance of the remainder of the production units will be deemed to have
occurred when all the following are accomplished:
o The units have been successfully tested in the factory by the Seller
according to the Production Test Procedure.
o The units have been delivered to the Buyer's site with their test data.
o Successful MVT has occurred and the [*] have been successfully regression
tested.
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[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
24-GHZ ODU SOW COMPANY PROPRIETARY
5.3 ACCEPTANCE OF DOCUMENTATION
The Buyer will review the draft Documentation submitted by the Seller and will
provide comments. Acceptance of the documentation will occur after final
Documentation has been reviewed and all agreed upon comments have been included.
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24-GHZ ODU SOW COMPANY PROPRIETARY
CHAPTER 6
MILESTONE SCHEDULE
The following is the milestone schedule for the Work:
6.1 SCHEDULE
<TABLE>
<CAPTION>
TASK DATE DUE
<S> <C> <C> <C> <C> <C> <C>
[*]
</TABLE>
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FORM E75A HUGHES NETWORK SYSTEMS
[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
24-GHZ ODU SOW COMPANY PROPRIETARY
CHAPTER 7
QUALITY ASSURANCE
7.1 CONFORMING EQUIPMENT
Production equipment shall conform in all aspects to the Technical Specification
SCD and this SOW and shall successfully complete acceptance testing to the
current Production Test Procedure. In addition, production equipment shall
conform to the Seller's quality standards for products of a like nature. All
work in progress documentation and finished products shall be subject to
examination, evaluation, and source inspection by the Buyer or at test
inspection locations designated by the Seller at any reasonable time and with
prior notice during the time of this agreement. Notwithstanding any such
preliminary inspection, all products are subject to final inspection after
delivery has been made. Unless otherwise specified in the contract or purchase
order, the Seller is responsible for the performance of all inspection
requirements as detailed in the specifications or SOW. The Seller may use his or
her own, or any other, facility suitable for the performance of these
inspections unless directed otherwise by the buyer.
7.2 QUALITY SYSTEM MANAGEMENT
Administration of the quality system shall be vested in a manager who has
sufficient authority to ensure that quality requirements are met consistently.
The quality system shall:
o Be based on the Seller's process flow and provide flow charts
o Be documented
o Ensure that quality is controlled in all operations affecting supplied
products, including manufacturing support activities and all other
manufacturing activities
o Monitor quality trends to ensure the prevention, or early detection and
correction, of conditions leading to discrepancies
o Provide quality goals for all operations
o Provide complete records of all in process deviations and of all final
inspection
o Define and implement corrective actions
7.3 QUALITY SYSTEM
7.3.1 INCOMING MATERIAL
The Seller shall be responsible for ensuring all production supplies and service
from another supplier conform to these requirements.
o Clear and complete purchase specifications shall be provided to the
Seller's suppliers.
o Purchase shall be made from suppliers qualified by the Seller per Seller's
drawings.
o The quality of incoming material and services shall be monitored.
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o Discrepant material shall be detected early and corrective action taken.
o Records to confirm these activities and/or corrective actions shall be
maintained.
7.3.2 MATERIAL CONTROL AND HANDLING
Material shall be handled and stored as to prevent damage or deterioration.
7.3.3 FABRICATION, ASSEMBLY, AND PRODUCTION TEST
o All critical operations or processes shall be measured utilizing
statistical techniques.
o All manufacturing personnel and support personnel shall be trained. All
appropriate manufacturing personnel shall be certified to soldering
processes and shall be evaluated periodically.
o Complete work instructions appropriate to the circumstances shall be
available at each work station.
o Testing and inspection of work in process shall be done to assure
compliance with finished product requirements.
o Operation sheets shall be archived for at least a one-year. These records
shall indicate test and inspections performed, and any nonconformances
detected during assembly and test/inspection operations.
7.3.4 OUTGOING MATERIAL
The Seller shall be responsible for ensuring that all material and services
supplied to the Buyer conform to these requirements:
o Material and services shall be monitored to ensure compliance with
requirements.
o Corrective action shall be taken when necessary.
o Records shall be maintained showing the identity of material evaluated, the
quantity tested, the test results, and corrective actions taken. These
records shall be maintained for at least one year.
o Provide the Buyer upon request, results of outgoing material evaluations
and audits.
7.3.5 TOOLING MEASURING AND TEST EQUIPMENT
All tooling, measuring and test equipment used for process control and the
acceptance of the product shall be calibrated on a scheduled basis. Calibration
standards shall be maintained and regularly calibrated with standards that are
traceable to the US National Institute of Standards. In countries other than the
US, a National Standards Laboratory whose standards are compared with the
International or US Standards may be utilized. Records to support the
calibration system shall be maintained by the Seller.
7.3.6 WORK INSTRUCTIONS, DOCUMENTATION, AND CHANGE CONTROL
Seller shall:
o Prepare and maintain current work instructions and product documentation
affecting quality for all functional areas and ensure their use.
o Implement changes to work instructions and product documentation so that
the intended changes are accomplished
o Comply with all specifications, drawings, and purchase order information
provided by the buyer.
o Transmit all pertinent information, specifications, and drawings to the
Seller's suppliers.
o The Seller shall submit to the Buyer "Key Process or Component changes".
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7.3.7 CONTROL OF NONCONFORMING MATERIAL
The Seller shall establish and maintain a system for the control of
nonconforming material. As a minimum, the system shall have the following
elements:
o The means for identifying and segregating nonconforming material from the
good material. Hold areas shall be established for the storage of the
nonconforming material prior to disposition.
o A procedure for disposing of nonconforming material.
o Corrective action to prevent recurrence.
o Records for nonconforming material including material identification,
source of material, discrepancies, disposition, and corrective action.
Records and controls shall support disposition decisions.
7.3.8 CORRECTIVE ACTION
The Seller shall establish and maintain an effective program of corrective
action on discrepancies. Records shall be established and maintained describing
the discrepancy observed, frequency, corrective action, evaluation of corrective
action, date and serial number of the effectiveness of the corrective action.
7.3.9 SAMPLE PLANS
The Seller may use statistical sampling as a method of quality control provided
the resulting products meet all Buyer requirements. Sampling plans and their,
applications shall be based upon sound mathematical principles and the sampling
procedures shall be properly documented. Procedures and sampling records shall
be maintained by vendor for the buyer's audits and reviews.
7.3.10 TRAINING
All Seller personnel doing work which affects the quality of supplied products
to the Buyer shall be trained in the correct procedures for doing their jobs.
7.4 QA PROGRAM PLAN
The Seller shall establish and maintain a Quality Assurance (QA) Program Plan
based on good commercial practices. The program shall be described in a QA plan
to be submitted to the Buyer for review and approval prior to the start of
production. The plan shall include but not be limited to the following.
7.4.1 CHANGE CONTROL
Configuration control to assure continuous compliance with form, fit, and
function of the product, and to provide traceability relative to change in
design, material, processes, and prior notification when changing vendors and/or
subcontractors. The Seller shall implement a process for control and approval of
all ECNs. The Buyer shall be notified for all ECNs involving "Key Components or
Processes". As a minimum, the following documents and processes shall be
controlled - parts lists, SCDs, Manufacturing.
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process documents, design drawings, assembly drawings, test procedures, shipping
and packaging procedures and QA procedures.
7.4.2 TEST AND INSPECTION
Production Test procedures and inspection methods shall be designed to achieve
an outgoing quality level of [*]. The Buyer reserves the right to witness Final
Inspection and Production Test at the Seller's facility. All testing and
inspections witnessed shall be in accordance with the Buyer approved procedures.
7.4.3 WORKMANSHIP
The Seller's QA program shall provide adequate standards for the quality of
workmanship. These standards shall address the acceptance criteria for all
manufacturing processes used in the manufacture of products for the Buyer. These
standards shall be available for review by the Buyer. Deficiencies and conflicts
identified by Buyer shall be addressed by the Seller to the mutual agreement of
both parties.
7.4.4 ELECTROSTATIC DISCHARGE (ESD)
The Seller's ESD plan shall also provide that personnel are aware and that
facilities provide adequate protection from possible damage to equipment during
manufacture and shipment, and to refrain from the use of static generating
material in packing or packaging. An ESD Audit may be conducted by the Buyer as
part of the initial quality audit. The Seller agrees to implement changes or
improvements in his ESD controls as may be necessary. Any change shall be
mutually agreed upon by the Seller and Buyer.
7.4.5 QUALITY ASSURANCE DATA
The Seller's QA data collection plan shall provide that a system is in place
which documents and collects failure and inspection reject/accept data, repair
actions in house and for products returned for repair, in or out of warranty.
The Seller shall provide to the Buyer this information as part of the Monthly
Failure Analysis.
7.4.6 RECORD RETENTION
Quality Control Records, including those resulting from production testing shall
be maintained by the Seller and made available to the Buyer on request for a
period of ONE YEAR following completion of this order.
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[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
24-GHZ ODU SOW COMPANY PROPRIETARY
7.4.7 METRICS
The quality of process and products pursuant to this Agreement shall be measured
with the following metrics:
7.4.7.1 MANUFACTURING TEST/INSPECTION YIELD
Manufacturing yields are calculated with:
# Units_without_repair
Y = --------------------- X 100
Total # Units_tested
Yields are defined:
o Monthly
o For each unit tested
o For each test listed in Seller Test Plan
7.4.7.2 SHIPMENT INTEGRITY
Shipment integrity insures that all products and documentation required by an
order are in fact shipped. The objective is to have an average of [*] of
shipment in a year. The metric is calculated monthly with:
Shipment_errors_received_by_Buyer_per_month
S = ------------------------------------------- X 100
Number_corresponding_items_received
The threshold which may allow the Buyer to hold shipment is [*]. Seller shall
remedy defects in shipment integrity immediately after notification by Buyer. If
the Seller ships the missing Product or Documentation within 2 working days of
the Buyer's notification, the shipment will not be deemed delayed.
7.4.7.3 OUT-OF-BOX FAILURE
OBF is defined as defects in "Out-of-Box" products characterized by the
following criteria:
o Non-conformance to Technical Specification or SOW.
o Missing part of a product affecting form, fit, or functionality.
o Defect in installability (Fails to install in Buyer Equipment)
o Module power on self test failure
o Off-line diagnostic failure
o System failure caused by the unit in a certified hardware configuration.
These defects are detected by visual inspection and mutually agreed tests
performed by the Buyer. The objective is [*]. OBF is calculated monthly with:
Defective_parts_received_by_Buyer_per_month
OBF = ------------------------------------------- = X 100
Total_number_of_parts_shipped_per_month
The threshold which allows the Buyer to require a hold in shipments is [*]. The
Buyer shall begin to calculate the OBF with the first delivery of production
units.
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
24-GHZ ODU SOW COMPANY PROPRIETARY
7.4.7.4 ANNUALIZED FAILURE RATE
AFR describes the rate at which failures occur in equipment installed at the
Buyer's Client sites.
[*]
AFR = [*]
[*]
Failures are defined as the number of units returned to the Buyer from client
sites due to a failure in the Seller's equipment in any given month.
AFR Installed Base is defined as the Total Number of Buyer's client sites
operating in the same month. In the case of any unusual trend of failures on any
Product, the Buyer and Seller will mutually agree on an action plan to
investigate the causes and solve the problem if appropriate.
The Buyer will put in place a tracking mechanism to monitor the failure rates of
the Product under warranty for its total client base, results of which shall be
provided to the Seller on a monthly basis. The maximum allowable AFR is defined
in the Technical Specification. AFR will be calculated beginning with the first
shipment of production units.
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[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
