Flextronics Infrastructure Manufacturing Services Agreement

Exhibit 10.10

Confidential Treatment Requested. Confidential portions of this document have been redacted and have been separately filed with the Commission.

*** Confidential material redacted and filed separately with the Commission.

FLEXTRONICS CONFIDENTIAL

Flextronics Infrastructure Manufacturing Services Agreement

This Flextronics Manufacturing Services Agreement (“Agreement”) is entered into this 13th of May, 2011 by and between Violin Memory, Inc. having its place of business at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, (“Customer”) and Flextronics Telecom Systems, Ltd., having its place of business at ▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ (“Flextronics”).

Customer desires to engage Flextronics to perform manufacturing services as further set forth in this Agreement and in applicable SOWs (as defined below) to be attached by mutually agreement. The parties agree as follows:

 

1.	DEFINITIONS

Flextronics and Customer agree that capitalized terms shall have the meanings set forth in this Agreement and Exhibit 1 attached hereto and incorporated herein by reference.

 

2.	MANUFACTURING SERVICES

2.1. Work. Customer hereby engages Flextronics to perform the work (hereinafter “Work”). “Work” shall mean to procure Materials and to manufacture, assemble, and test products (hereinafter “Product(s)”) pursuant to detailed written Specifications. Products can include, as identified in each applicable SOW (as defined below), PCBA-level products (“PCBA Products”), enclosure products (“Enclosures”), and customer configured finished products (“BTO Products”). Products, together with applicable pricing and Specifications, are identified in mutually-agreed upon statements of work (each, a “Statement of Work” or “SOW”), which may also include information such as the site at which the Work shall be performed and other relevant information, and each of which upon execution is incorporated by reference and subject to the terms of this Agreement. The “Specifications” for each Product or revision thereof, shall include but are not limited to ▇▇▇▇ of materials, designs, schematics, assembly drawings, process documentation, test specifications, current revision number, and Approved Manufacturer and Approved Vendor Lists, and shall be maintained and updated in accordance with the terms of this Agreement. The Specifications as provided by Customer (which may be referenced in (or attached to) the applicable SOW or included in Customer’s production data management system) and included in Flextronics’s production document management system are hereby referenced and incorporated herein. This Agreement does not include any new product introduction (NPI) or product prototype services related to the Products (“NPI Services”). In the event that Flextronics agrees to provide such NPI Services, the terms of such services shall be set forth in a SOW which shall be signed by both parties. In case of any conflict between the Specifications and this Agreement, this Agreement shall prevail.

2.2. Engineering Changes. Customer may request that Flextronics incorporate engineering changes into the Product by providing Flextronics with a description of the proposed engineering change sufficient to permit Flextronics to evaluate its feasibility and cost. Flextronics shall proceed with engineering changes when the parties have agreed upon the changes to the Specifications, delivery schedule and Product pricing and the Customer has issued a purchase order for the implementation costs.

2.3. Tooling; Non-Recurring Expenses; Software. Customer shall pay for or obtain and consign to Flextronics any Product-specific tooling, equipment or software and other reasonably necessary non-recurring expenses, to be set forth in Flextronics’s quotation. All software that Customer provides to Flextronics or any test software that Customer engages Flextronics to develop is and shall remain the property of Customer.

2.4. Cost Reduction Projects. Flextronics agrees to seek ways to reduce the cost of manufacturing Products by methods such as elimination of Materials, redefinition of Specifications, and re-design of assembly or test methods. Upon *** of such ways that have *** and ***, *** shall receive *** of the *** for ***, after which, *** shall receive *** of the ***. *** shall receive *** of the *** upon *** of such ways ***.

 

3.	FORECASTS; ORDERS; FEES; PAYMENT

3.1. Forecast and Purchase Orders.

(a) Customer shall provide Flextronics, on a *** forecast indicating Customer’s monthly Product requirements.

 

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Confidential Treatment Requested. Confidential portions of this document have been redacted and have been separately filed with the Commission.

*** Confidential material redacted and filed separately with the Commission.

FLEXTRONICS CONFIDENTIAL

 

(b) Unless a different timeframe is set forth in an SOW, Customer shall on a *** basis provide purchase orders for *** of demand:

(i) For BTO Products, purchase orders to cover the agreed Lead Time by Product, as set forth in the applicable SOW.

(ii) For all other Products, purchase orders for the first *** months of the then-applicable forecast.

Such purchase orders shall be issued in accordance with Section 3.2 below.

3.2. Purchase Orders; Precedence. Customer may use its standard purchase order form for any notice provided for hereunder; provided that all purchase orders must reference this Agreement and the applicable Specifications. The parties agree that the terms and conditions contained in this Agreement shall prevail over any terms and conditions of any such purchase order, acknowledgment form or other instrument.

3.3. Purchase Order Acknowledgement and Acceptance. Flextronics shall acknowledge, in writing, receipt of Customer purchase order within two (2) Business Days of receiving such purchase order. If purchase order receipt is not acknowledged within two (2) Business Days, said purchase order is deemed rejected. Flextronics shall notify customer of purchase order acceptance or rejection within five (5) Business Days of receipt of such purchase order. Purchase Order is deemed rejected if not accepted or rejected within five (5) Business Days of receipt of such purchase order. Flextronics may reject any purchase order: (a) that is an amended order in accordance with Section 5.3 below because the purchase order is outside of the Flexibility Table; (b) if the fees reflected in the purchase order are inconsistent with the parties’ agreement with respect to the fees; (c) if the purchase order represents a significant deviation from the forecast for the same period, unless such deviation is within the parameters of the Flexibility Table; or (d) if a purchase order would extend Flextronics’s liability beyond Customer’s approved credit line.

3.4. Fees; Changes; Taxes.

(a) The fees shall be agreed by the parties and shall be indicated on the purchase orders issued by Customer and accepted by Flextronics. The initial fees shall be as set forth on the Fee List identified in the applicable SOW (the “Fee List”). If a Fee List is not attached or completed, then the initial fees shall be as set forth in purchase orders issued by Customer and accepted by Flextronics in accordance with the terms of this Agreement.

(b) For any changes to the Specifications or to the supply of Customer Controlled Materials that cause an increase to the cost of the Products, such costs shall be borne by the Customer.

(c) The fees will be reviewed by the parties and updated, if necessary, by the *** of the *** prior to the ***. Any changes and of timing of changes shall be agreed by the parties, such agreement not to be unreasonably withheld or delayed. By way of example only, the fees may be increased if the market price of fuels, Materials, equipment, labor and other production costs, increase beyond normal variations in pricing or currency exchange rates as demonstrated by Flextronics. If any taxes, duties, laws, rules, regulations, court orders, administrative rulings or other governmentally-imposed or governmentally-sanctioned requirements (including, without limitation, mandatory wage increases) result in changes to the costs of performance of any Work hereunder (a “Governmental Change”), then the parties shall, as soon as possible following the identification of such Governmental Change, agree on and implement revised prices to reflect such Governmental Change.

(d) All fees are exclusive of federal, state and local excise, sales, use, VAT, and similar transfer taxes, and any duties, and Customer shall be responsible for all such items. This subsection (d) does not apply to taxes on Flextronics’s net income.

(e) Unless otherwise agreed in a SOW, the Fees List shall be based on the exchange rate(s) for converting the purchase price for Inventory denominated in the Parts Purchase Currency(ies) into the Functional Currency. The fees shall be adjusted, on a monthly basis based on changes in the Exchange Rate(s) as reported on the last Business Day of each month, for the following month to the extent that such Exchange Rates change more than +/- .75% from the prior month (the “Currency Window”). “Exchange Rate(s)” is defined as the closing currency exchange rate(s) as reported on Reuters’ page FIX on the last Business Day of the current month prior to the following month. “Functional Currency” means the currency in which all payments are to be made pursuant to Section 3.5 below. “Parts Purchase Currency(ies)” means U.S. Dollars, Japanese Yen and/or Euros to the extent such currencies are different from the Functional Currency and are used to purchase Inventory needed for the performance of the Work forecasted to be completed during the applicable month.

 

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Confidential Treatment Requested. Confidential portions of this document have been redacted and have been separately filed with the Commission.

*** Confidential material redacted and filed separately with the Commission.

FLEXTRONICS CONFIDENTIAL

 

3.5. Payment and Guaranty. Customer shall pay all invoices for amounts owed pursuant to this Agreement in U.S. Dollars within *** days of the date of the invoice. Customer hereby unconditionally guarantees to Flextronics the full and prompt compliance by all Customer Affiliates with the terms and conditions of this Agreement, whether now existing or later arising (the “Guaranteed Obligations”). This guarantee is absolute, continuing, unlimited and independent and will not be affected, diminished or released for any reason. Customer waives (i) diligence, presentment, demand for payment, protest or notice of any default or nonperformance by any Customer Affiliate, (ii) notice of waivers or indulgences given to any Customer Affiliate and (iii) all defenses, offsets and counterclaims against Flextronics, any right to the benefit of any security or statute of limitations, and any requirement that Flextronics proceed first against a Customer Affiliate or any collateral security and all other suretyship defenses. Until the Guaranteed Obligations have been paid and performed in full, Customer will not enforce any right of subrogation. Customer shall indemnify, defend and hold Flextronics and its affiliates harmless from any and all claims by any Customer Affiliates to the extent that such claims are inconsistent with the terms and conditions of this Agreement. For purposes of this Section, “Customer Affiliates” means Affiliates of Customer that purchase Products from Flextronics or any of its Affiliates.

3.6. Late Payment. If Customer is late with payments, or Flextronics has reasonable cause to believe Customer may not be able to pay, Flextronics may, in its sole discretion and with prior written notice to Customer, undertake any or any combination of the following: (a) stop all Work under this Agreement until assurances of payment satisfactory to Flextronics are received or payment is received; (b) demand prepayment for purchase orders; (c) delay shipments. Customer agrees to provide necessary financial information required by Flextronics from time to time in order to make a proper assessment of the creditworthiness of Customer.

3.7. Letter of Credit or Escrow Account. Upon Flextronics’s request at any time during the term of this Agreement, Customer agrees to obtain and maintain a stand-by letter of credit or escrow account on behalf of Flextronics to minimize the financial risk to Flextronics for its performance of the Work under this Agreement. The stand-by letter of credit or escrow account shall be for a minimum period of time of *** months and shall be for a total amount that is equal to the total value of the risks associated with Inventory, Special Inventory, and the accounts receivable from Customer. The calculation shall be based upon the forecast and purchase orders provided by Customer pursuant to Section 3.1. The draw down procedures under the stand-by letter of credit or the escrow account shall be determined solely by Flextronics. Customer will provide quarterly financial updates and Flextronics shall, in good faith, review Customer’s creditworthiness at least quarterly and may provide more favorable terms once it feels it is prudent to do so.

 

4.	MATERIALS PROCUREMENT; CUSTOMER RESPONSIBILITY FOR MATERIALS

4.1. Authorization to Procure Materials, Inventory and Special Inventory. Customer’s accepted purchase orders shall constitute authorization for Flextronics to procure, without Customer’s prior approval,

(a) Inventory to manufacture the Products covered by such purchase orders based on the applicable Lead Times; and

(b) Special Inventory authorized in writing by Customer; and

(c) Minimum Order Inventory reasonably required to support Customer’s purchase orders.

4.2. Supply Chain Management.

(a) Purchases Off Of AVL/AML. Customer shall maintain and provide to Flextronics, an Approved Vendor and Manufacturers List. Flextronics shall purchase the Materials required to manufacture the Product, from vendors and manufacturers on a current AVL and AML.

(b) Customer Controlled Materials. Customer may direct Flextronics to purchase Customer Controlled Materials in accordance with the Customer Controlled Materials Terms. Customer acknowledges that the Customer Controlled Materials Terms shall directly impact Flextronics’s ability to perform under this Agreement and to provide Customer with the flexibility Customer is requiring pursuant to the terms of this Agreement. In the event that Flextronics reasonably believes that Customer Controlled Materials Terms shall create an additional cost that is not covered by this Agreement, then Flextronics shall notify Customer and the parties shall agree to either (a) compensate Flextronics for such additional costs, (b) amend this Agreement to conform to the Customer Controlled Materials Terms or (c) amend the Customer Controlled Materials Terms to conform to this Agreement, in each case at no additional charge to Flextronics. Customer agrees to provide copies to Flextronics of all

 

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Confidential Treatment Requested. Confidential portions of this document have been redacted and have been separately filed with the Commission.

*** Confidential material redacted and filed separately with the Commission.

FLEXTRONICS CONFIDENTIAL

 

Customer Controlled Materials Terms upon the execution of this Agreement and promptly upon execution of any new agreements with suppliers. Customer agrees not to make any modifications or additions to the Customer Controlled Materials Terms or enter into new Customer Controlled Materials Terms with suppliers that shall negatively impact Flextronics’s procurement activities.

(c) Preferred Supplier. Customer shall include Flextronics on AVL for Materials that Flextronics can supply, if Flextronics is competitive with other suppliers with respect to reasonable and unbiased criteria and Flextronics has been approved on the customer’s AVL, Flextronics may then source materials from itself. For purposes of this Section 4.2 only, the term “Flextronics” includes any companies affiliated with Flextronics.

(d) Materials Warranties. Flextronics shall endeavor to obtain and pass through to Customer (without any actual liability for) the following warranties with regard to the Materials (other than the Production Materials): (i) conformance of the Materials with the vendor’s specifications and/or with the Specifications; (ii) that the Materials shall be free from defects in workmanship; (iii) that the Materials shall comply with Environmental Regulations; and (iv) that the Materials shall not infringe the intellectual property rights of third parties.

(e) Inventory Commitments. The parties shall use their respective commercially reasonable efforts to achieve a targeted *** turns of the Inventory per year. These efforts shall include, but not be limited to, improvements in forecasting accuracy, negotiating and implementation vendor managed inventory (VMI) programs, implementing manufacturing cycle time reductions through lean programs, and reducing supplier lead-times. The parties shall review the actual inventory turns during the quarterly business review. If the turns are below the targeted turns, the parties shall outline actions to improve the turns.

4.3. Customer Responsibility for Inventory and Special Inventory. Customer is responsible under the conditions provided in this Agreement for all Materials, Inventory and Special Inventory purchased by Flextronics under this Section 4.

 

5.	SHIPMENTS, SCHEDULE CHANGE, CANCELLATION, STORAGE

5.1. Shipments. Flextronics shall (a) deliver all Products pursuant to the terms of this Agreement suitably packed for shipment in accordance with the Specifications and marked for shipment to Customer’s destination specified in the applicable purchase order, and (b) make such deliveries EXW (Ex works, Incoterms 2000) Flextronics’s manufacturing facility. Risk of loss and title shall pass to Customer upon delivery by Flextronics of the Products to the stated delivery point in accordance with the applicable Incoterm. All freight, insurance and other shipping expenses, as well as any special packing expenses not expressly included in the original quotation for the Products, shall be paid by Customer. In the event Customer designates a freight carrier to be utilized by Flextronics, Customer agrees to designate only freight carriers that are currently in compliance with all applicable laws relating to anti-terrorism security measures and to adhere to the C-TPAT (Customs-Trade Partnership Against Terrorism) security recommendations and guidelines as outlined by the United States Bureau of Customs and Border Protection and to prohibit the freight carriage to be sub-contracted to any carrier that is not in compliance with the C-TPAT guidelines.

5.2. Late Delivery. Flextronics will use commercially reasonable efforts to meet the agreed upon delivery dates. If Flextronics is unable to meet the agreed upon delivery date due solely to causes completely within Flextronics’s control and responsibility, Customer’s sole remedy and Flextronics’s sole liability, is that Flextronics shall pay the fees to expedite the delivery of the affected deliveries pursuant to mutual agreement of the parties.

5.3. Quantity Increases and Shipment Schedule Changes.

(a) Purchase orders may be rescheduled in accordance with the terms outlined in the Flexibility Table below. Flextronics shall acknowledge, in writing, the receipt of Customer’s rescheduled purchase order within two (2) Business Days of receipt of such rescheduled purchase order. If the rescheduled purchase order receipt is not acknowledged within two (2) Business Days, said purchase order is deemed rejected. Flextronics shall notify customer of the reschedule purchase order acceptance or rejection within five (5) Business Days of receipt of rescheduled purchase order. Rescheduled purchase orders are deemed rejected if not accepted or rejected within five (5) Business Days of receipt of such purchase order.

 

Maximum Allowable Variance From Accepted Purchase Order Quantities/Shipment Dates
# of days before Shipment Date on Purchase Order		Allowable Quantity Increases		Maximum Reschedule Quantity		Maximum Reschedule Period
***		***		***		***
***		***		***		***
***		***		***		***
***		***		***		***

 

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Confidential Treatment Requested. Confidential portions of this document have been redacted and have been separately filed with the Commission.

*** Confidential material redacted and filed separately with the Commission.

FLEXTRONICS CONFIDENTIAL

 

Customer may cancel the portion of a purchase order with deliveries schedule for greater than *** from the shipment date without liability or penalty. However, Customer is responsible for NCNR with lead time greater than *** and Special Inventory purchased pursuant to Customer’s purchase order, provided Flextronics has previously notified Customer of all NCNR and Special Inventory in writing. Any decrease in a purchase order quantity is considered a cancellation, unless the decreased quantity is rescheduled for delivery at a later date in accordance with the Flexibility Table. Any purchase order quantities increased or rescheduled pursuant to this Section 5.3(a) may not be subsequently increased or rescheduled.

For any changes (including but not limited to cancellation and reschedules) as described in this section, Customer shall be responsible for Inventory liability is set forth in Section 5.4(a) and the costs set forth in section Section 5.4(b).

(b) Flextronics shall use reasonable commercial efforts to meet any quantity increases, which are subject to Materials and capacity availability. All reschedules or quantity increases outside of the Flexibility Table require Flextronics’s approval, which, in its sole discretion, may or may not be granted. If Flextronics agrees to accept a reschedule to pull in a delivery date or an increase in quantities and if there are extra costs to meet such reschedule or increase, then Customer shall be liable for such extra costs.

(c) Any delays in the normal production or interruption in the workflow process caused by Customer’s changes to the Specifications or failure to provide sufficient quantities or a reasonable quality level of Customer Controlled Materials where applicable to sustain the production schedule, shall be considered a reschedule of any affected purchase orders for purposes of this Section 5.3 for the period of such delay.

(d) Products that have been ordered by Customer and that have not been picked up in accordance with the agreed upon shipment dates shall be considered cancelled and Customer shall be responsible for such Products in the same manner as set forth Section 5.3.

5.4. Cancellations; Purchases of Excess and Obsolete Inventory and Cancellations.

(a) Except as provided under the terms of section 5.3, Customer may not cancel all or any portion of Product quantity of an accepted purchase order without Flextronics’s prior written approval. If Customer does not request prior approval, or if Customer and Flextronics do not agree in writing to specific terms with respect to any approved cancellation, then Customer shall pay Flextronics Monthly Charges for any such cancellation, calculated as of the first day after such cancellation for any Product or Inventory or Special Inventory procured by Flextronics to support the original delivery schedule. In addition, if Flextronics notifies Customer that any Product (or partially completed Product) subject to such cancellation has remained in Flextronics’s possession for more than ***, then Customer shall immediately purchase from Flextronics such Product at the established fees for such Products (or a pro-rata proportion thereof for any applicable work-in-progress).

(b) Notwithstanding anything else in this Agreement, Customer shall be responsible for the following:

(i) Excess Inventory.

A. Carrying Charges. At the end of every calendar month, Flextronics shall report the Excess Inventory. After a validation period, which shall not exceed ***, Customer shall pay Flextronics a carrying cost fee equal to the ***.

B. Purchase of Excess. On a monthly basis, Customer shall purchase Excess Inventory that has been Excess Inventory for at least ***, as identified by Flextronics in each monthly report, at a price equal to the ***.

(ii) Obsolete Inventory. At the end of every calendar month, Flextronics shall report the Obsolete Inventory. After a validation period, which shall not exceed ***, Customer shall purchase the Obsolete Inventory at a ***.

 

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Confidential Treatment Requested. Confidential portions of this document have been redacted and have been separately filed with the Commission.

*** Confidential material redacted and filed separately with the Commission.

FLEXTRONICS CONFIDENTIAL

 

(iii) Aged Inventory. At the end of every calendar month, Flextronics shall report the Aged Inventory. After validation, which shall not excess ***, Customer shall purchase the Aged Inventory at a price equal ***.

Prior to invoicing Customer for the amounts due pursuant to (ii) and (iii) of this section, Flextronics shall use commercially reasonable efforts for a period not to exceed ***, to return unused Inventory and Special Inventory and to cancel pending orders for such Inventory, and to otherwise mitigate the amounts payable by Customer. Flextronics will not invoice Customer for the *** to *** of *** until *** provided Flextronics can *** in this program’s ***. For avoidance of doubt, *** shall *** for *** regardless of whether the ***.

Flextronics shall ship the Inventory and Special Inventory paid for by Customer under this section to Customer promptly upon said payment by Customer. In the event Customer does not pay in ***, Flextronics shall be entitled to dispose of such Inventory and Special Inventory in a commercially reasonable manner and credit to Customer any monies received from third parties. Flextronics shall then submit an invoice for the balance amount due and Customer agrees to pay said amount in ***.

(c) For changes (including but not limited to cancellation and reschedules) that are not consistent with the Flexibility Table, Customer shall be responsible for the following costs in addition to the charges set forth in Sections 5.4(a) and (b) above:

(i) any vendor cancellation charges incurred;

(ii) expenses incurred by Flextronics related to labor and equipment specifically put in place to support the purchase orders and forecasts that are affected by such reschedule or cancellation (as applicable), provided expenses incurred by Flextronics related to labor and equipment have been identified and approved in writing by Customer; and

(iii) the cost of unwinding any currency hedging contracts entered into by Flextronics that are affected by such reschedule or cancellation (as applicable) (it being understood that Flextronics shall provide Customer with a credit for any gain received by Flextronics as a result of such unwinding).

5.5. No Waiver. For the avoidance of doubt, Flextronics’s failure to invoice Customer for any of the charges set forth in this Section does not constitute a waiver of Flextronics’s right to charge Customer for the same event or other similar events in the future.

 

6.	PRODUCT ACCEPTANCE AND EXPRESS LIMITED WARRANTY

6.1. Product Acceptance. The Products delivered by Flextronics shall be inspected and tested as required by Customer within *** of receipt at the “ship to” location on the applicable purchase order. If Products do not comply with the express limited warranty set forth in Section 6.2 below, Customer has the right to reject such Products during said period. Products not rejected during said period shall be deemed accepted. Customer may return defective Products, freight collect, after obtaining a return material authorization number from Flextronics to be displayed on the shipping container and completing a failure report. Rejected Products shall be promptly repaired or replaced, at Flextronics’s option, and returned freight pre-paid. Customer shall bear all of the risk, and all costs and expenses, associated with Products that have been returned to Flextronics for which there is no defect found.

6.2. Express Limited Warranty. This Section 6.2 sets forth Flextronics’s sole and exclusive warranty and Customer’s sole and exclusive remedies with respect to a breach by Flextronics of such warranty.

(a) Flextronics warrants that the Products shall have been manufactured in accordance with the applicable Specifications and shall be free from defects in workmanship for a period of *** from the date of shipment. Flextronics warrants its Production Materials are in compliance with Environmental Regulations.

(b) Notwithstanding anything else in this Agreement, this express limited warranty does not apply to, and Flextronics makes no representations or warranties whatsoever with respect to: (i) Materials and/or Customer Controlled Materials; (ii) defects resulting from the Specifications or the design of the Products; (iii) Product that has been abused, damaged, altered or misused by any person or entity after title passes to Customer; (iv) first articles, prototypes, pre-production units, test units or other similar Products; (v) defects resulting from tooling, designs or instructions produced or supplied by Customer , or (vi) the compliance of Materials or Products with any Environmental Regulations. Customer shall be liable for costs or expenses incurred by Flextronics related to the foregoing exclusions to Flextronics’s express limited warranty.

 

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Confidential Treatment Requested. Confidential portions of this document have been redacted and have been separately filed with the Commission.

*** Confidential material redacted and filed separately with the Commission.

FLEXTRONICS CONFIDENTIAL

 

(c) Upon any failure of a Product to comply with this express limited warranty, Flextronics’s sole obligation, and Customer’s sole remedy, is for Flextronics, at its option, to promptly repair or replace such unit and return it to Customer freight prepaid. Customer shall return Products covered by this warranty freight prepaid after completing a failure report and obtaining a return material authorization number from Flextronics to be displayed on the shipping container. Customer shall bear all of the risk, and all costs and expenses, associated with Products that have been returned to Flextronics for which there is no defect found.

(d) Customer shall provide its own warranties directly to any of its end users or other third parties. Customer shall not pass through to end users or other third parties the warranties made by Flextronics under this Agreement. Furthermore, Customer shall not make any representations to end users or other third parties on behalf of Flextronics, and Customer shall expressly indicate that the end users and third parties must look solely to Customer in connection with any problems, warranty claim or other matters concerning the Product.

6.3. Epidemic Failure. During the term of this Agreement, Flextronics shall repair or replace any affected Products for any Epidemic Failure due to any workmanship related cause that could have been identified at the time of manufacture through the Customer specified inspection and test procedures. An Epidemic Failure will be considered to exist when return rate data indicates that *** percent (***%) of Product shipped during any *** consecutive months has been proven to exhibit the substantially same major functional, mechanical, or appearance defect. Flextronics and Customer will agree to a reasonable plan and allocation of costs to carry out the repair or replacement of affected Product shipped during said *** period. Upon agreement, Flextronics will pay any claims for *** if the problem is a result of a breach by Flextronics of its express limited warranty set forth in Section 6.2.

6.4 No Representations or Other Warranties. FLEXTRONICS MAKES NO REPRESENTATIONS AND NO OTHER WARRANTIES OR CONDITIONS ON THE PERFORMANCE OF THE WORK, OR THE PRODUCTS, EXPRESS, IMPLIED, STATUTORY, OR IN ANY OTHER PROVISION OF THIS AGREEMENT OR COMMUNICATION WITH CUSTOMER, AND FLEXTRONICS SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OR CONDITION OF MERCHANTABILITY, TITLE OR FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT.

 

7.	INTELLECTUAL PROPERTY LICENSES

7.1. Licenses. Customer hereby grants Flextronics a limited, non-exclusive license during the term of this Agreement to use Customer’s patents, trade secrets and other intellectual property and all derivatives thereof (“Customer’s IPR”) solely in connection with and to the extent as necessary to manufacture the Products exclusively for Customer and to otherwise perform Flextronics’s obligations under this Agreement. Customer retains all right, title and interest to Customer’s IPR except as Customer permits Flextronics use in accordance with this Section. All Customer’s IPR remains Customer’s Confidential Information.

7.2. No Other Licenses. Except as otherwise specifically provided in this Agreement, each party acknowledges and agrees that no licenses or rights under any of the intellectual property rights of the other party are given or intended to be given to such other party.

7.3. IPR Ownership. All intellectual property rights existing prior to the Effective Date will belong to the party that owned such rights immediately prior to such date (“Pre-Existing Intellectual Property Rights”). Neither party will gain, by virtue of this Agreement, any rights of ownership of the Pre-Existing Intellectual Property Rights owned by the other.

 

8.	TERM AND TERMINATION

8.1. Term. The term of this Agreement shall commence on the date hereof above and shall continue for three (3) years thereafter until or unless terminated as provided in Section 8.2 (Termination) or 10.8 (Force Majeure). After the expiration of the initial term hereunder (unless this Agreement has been terminated), this Agreement shall be automatically renewed for separate but successive one-year terms unless either party provides written notice to the other party that it does not intend to renew this Agreement ninety (90) days or more prior to the end of any term.

8.2. Termination. This Agreement may be terminated by either party (a) for convenience upon six (6) months written notice to the other party, or (b) if the other party defaults in any payment to the terminating party and such default

 

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Confidential Treatment Requested. Confidential portions of this document have been redacted and have been separately filed with the Commission.

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continues without a cure for a period of thirty (30) days after the delivery of written notice thereof by the terminating party to the other party, (c) if the other party defaults in the performance of any other material term or condition of this Agreement and such default continues unremedied for a period of thirty (30) days after the delivery of written notice thereof by the terminating party to the other party, or (d) pursuant to Section 10.8 (Force Majeure).

8.3. Effect of Expiration or Termination. Expiration or termination of this Agreement under any of the foregoing provisions: (a) shall not affect the amounts due under this Agreement by either party that exist as of the date of expiration or termination, and (b) as of such date the provisions of Sections 5.3, 5.4, and 5.5 shall apply with respect to payment and shipment to Customer of finished Products, Inventory, and Special Inventory in existence as of such date, and (c) shall not affect Flextronics’s express limited warranty in Section 6.2 above. Termination of this Agreement, settling of accounts in the manner set forth in the foregoing sentence shall be the exclusive remedy of the parties for breach of this Agreement, except for breaches of Section 6.2, 9.1, 9.2, or 10.1. A section of this Agreement shall survive any termination or expiration of this Agreement if the context and purpose of such section would indicate that it is intended to survive.

8.4. Upon the expiration or termination of this Agreement for any reason, Flextronics shall cease all further manufacturing of the Product(s) and use of Customer’s IPR licensed hereunder. Within thirty (30) Business Days from the effective date of termination, Flextronics will return to Customer all Customer Confidential Information and Customer’s IPR. Termination of this Agreement for any reason shall not affect the obligations of either party which exist as of the date of termination.

 

9.	INDEMNIFICATION; LIABILITY LIMITATION

9.1. Indemnification by Flextronics. Flextronics agrees to defend, indemnify and hold harmless, Customer and all directors, officers, employees, and agents (each, a “Customer Indemnitee”) from and against all claims, actions, losses, expenses, damages or other liabilities, including reasonable attorneys’ fees (collectively, “Damages”) incurred by or assessed against any of the foregoing, but solely to the extent the same arise out of third-party claims relating to:

(a) any actual or threatened injury or damage to any person or property caused, or alleged to be caused, by a Product sold by Flextronics to Customer hereunder, but solely to the extent such injury or damage has been caused by the breach by Flextronics of its express limited warranties related to Flextronics’s workmanship and manufacture in accordance with the Specifications only as further set forth in Section 6.2;

(b) any infringement of the intellectual property rights of any third party but solely to the extent that such infringement is caused by a process that Flextronics uses to manufacture, assemble and/or test the Products; provided that, Flextronics shall not have any obligation to indemnify Customer if such claim would not have arisen but for Flextronics’s manufacture, assembly or test of the Product in accordance with the Specifications; or

(c) noncompliance with any Environmental Regulations but solely to the extent that such non-compliance is caused by a process or Production Materials that Flextronics uses to manufacture the Products; provided that, Flextronics shall not have any obligation to indemnify Customer if such claim would not have arisen but for Flextronics’s manufacture of the Product in accordance with the Specifications.

9.2. Indemnification by Customer. Customer agrees to defend, indemnify and hold harmless, Flextronics and its affiliates, and all directors, officers, employees and agents (each, a “Flextronics Indemnitee”) from and against all Damages incurred by or assessed against any of the foregoing to the extent the same arise out of, are in connection with, are caused by or are related to third-party claims relating to:

(a) any failure of any Product (and Materials contained therein) sold by Flextronics hereunder to comply with any safety standards and/or Environmental Regulations to the extent that such failure has not been caused by Flextronics’s breach of its express limited warranties set forth in Section 6.2 hereof;

(b) any actual or threatened injury or damage to any person or property caused, or alleged to be caused, by a Product, but only to the extent such injury or damage has not been caused by Flextronics’s breach of its express limited warranties related to Flextronics’s workmanship and manufacture in accordance with the Specifications only as further set forth in Section 6.2 hereof; or

(c) any infringement of the intellectual property rights of any third party by any Product except to the extent such infringement is the responsibility of Flextronics pursuant to Section 9.1(b) above.

 

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9.3. Procedures for Indemnification. With respect to any third-party claims, either party shall give the other party prompt notice of any third-party claim and cooperate with the indemnifying party at its expense. The indemnifying party shall have the right to assume the defense (at its own expense) of any such claim through counsel of its own choosing by so notifying the party seeking indemnification within thirty (30) calendar days of the first receipt of such notice. The party seeking indemnification shall have the right to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the indemnifying party. The indemnified party shall not, without the prior written consent of the indemnifying party, agree to the settlement, compromise or discharge of such third-party claim.

9.4. Sale of Products Enjoined. Should the use of any Products be enjoined for a cause stated in Section 9.1(b) or 9.2(c) above, or in the event the indemnifying party desires to minimize its liabilities under this Section 9, in addition to its indemnification obligations set forth in this Section 9, the indemnifying party’s sole responsibility is to either substitute a fully equivalent Product or process (as applicable) not subject to such injunction, modify such Product or process (as applicable) so that it no longer is subject to such injunction, or obtain the right to continue using the enjoined process or Product (as applicable). In the event that any of the foregoing remedies cannot be effected on commercially reasonable terms, then, all accepted purchase orders and the current forecast shall be considered cancelled and Customer shall purchase all Products, Inventory and Special Inventory as provided in Sections 5.3 and 5.4 hereof. Any changes to any Products or process must be made in accordance with Section 2.2 above. Notwithstanding the foregoing, in the event that a third party makes an infringement claim, but does not obtain an injunction, the indemnifying party shall not be required to substitute a fully equivalent Product or process (as applicable) or modify the Product or process (as applicable) if the indemnifying party obtains an opinion from competent patent counsel reasonably acceptable to the other party or otherwise provides reasonable assurances that such Product or process is not infringing or that the patents alleged to have been infringed are invalid.

9.5. No Other Liability. EXCEPT WITH RESPECT TO A PARTY’S OBLIGATIONS OF INDEMNIFICATION PURSUANT TO THIS SECTION 9 OR A BREACH OF SECTION 10.1 BELOW, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY “COVER” DAMAGES (INCLUDING INTERNAL COVER DAMAGES WHICH THE PARTIES AGREE MAY NOT BE CONSIDERED “DIRECT” DAMAGES), OR ANY INCIDENTAL, CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES OF ANY KIND OR NATURE ARISING OUT OF THIS AGREEMENT OR THE SALE OF PRODUCTS, WHETHER SUCH LIABILITY IS ASSERTED ON THE BASIS OF CONTRACT, TORT (INCLUDING THE POSSIBILITY OF NEGLIGENCE OR STRICT LIABILITY), OR OTHERWISE, EVEN IF THE PARTY HAS BEEN WARNED OF THE POSSIBILITY OF ANY SUCH LOSS OR DAMAGE, AND EVEN IF ANY OF THE LIMITED REMEDIES IN THIS AGREEMENT FAIL OF THEIR ESSENTIAL PURPOSE.

THIS SECTION 9 STATES THE ENTIRE LIABILITY OF THE PARTIES TO EACH OTHER CONCERNING INFRINGEMENT OF PATENT, COPYRIGHT, TRADE SECRET OR OTHER INTELLECTUAL PROPERTY RIGHTS.

9.6 CAP ON LIABILITY. EXCEPT WITH RESPECT TO FLEXTRONICS’S OBLIGATIONS OF INDEMNIFICATION PURSUANT TO THIS SECTION 9 OR BREACH OF SECTION 10.1 BELOW, NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, FLEXTRONICS’S TOTAL LIABILITY TO CUSTOMER HEREUNDER SHALL BE SUBJECT TO AN AGGREGATE CAP IN ACCORDANCE WITH THE FOLLOWING: FLEXTRONICS’S MAXIMUM ANNUAL AGGREGATE LIABILITY TO CUSTOMER SHALL IN NO EVENT EXCEED AN AMOUNT EQUAL TO 1% OF THE TOTAL GROSS AMOUNTS ACTUALLY PAID TO FLEXTRONICS BY CUSTOMER DURING THE IMMEDIATELY PRECEDING CALENDAR YEAR.

 

10.	MISCELLANEOUS

10.1. Confidentiality. Each party shall refrain from using any and all Confidential Information of the disclosing party for any purposes or activities other than those specifically authorized in this Agreement. Except as otherwise specifically permitted herein or pursuant to written permission of the party to this Agreement owning the Confidential Information, no party shall disclose or facilitate disclosure of Confidential Information of the disclosing party to anyone without the prior written consent of the disclosing party, except to its employees, consultants, parent company, and subsidiaries of its parent company who need to know such information for carrying out the activities contemplated by this Agreement and who have agreed in writing to confidentiality terms that are no less restrictive than the requirements of this Section. Notwithstanding the foregoing, the receiving party may disclose Confidential Information of the disclosing party pursuant to a required legal process,

 

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subpoena or other court process only (i) after having given the disclosing party prompt notice of the receiving party’s receipt of such process and (ii) after the receiving party has given the disclosing party a reasonable opportunity to oppose such process or to obtain a protective order. Subject to each party’s right to maintain copies of Confidential Information in accordance with such party’s reasonable record-keeping requirements (and provided further that such information shall be used only as required by law or in connection with this Agreement), Confidential Information of the disclosing party in the custody or control of the receiving party shall be promptly returned or destroyed upon the earlier of (i) the disclosing party’s written request or (ii) termination of this Agreement. Confidential Information disclosed pursuant to this Agreement shall be maintained confidential for a period of three (3) years after the disclosure thereof, except that the existence and terms of this Agreement shall be confidential in perpetuity.

10.2. Use of Flextronics and Customer Name is Prohibited. The existence and terms of this Agreement are Confidential Information and protected pursuant to Section 10.1 above. Accordingly, neither party may use the other party’s name or identity or any other Confidential Information in any advertising, promotion or other public announcement without the prior express written consent of the respective party.

10.3. Entire Agreement; Severability. This Agreement and applicable SOWs constitutes the entire agreement between the Parties with respect to the transactions contemplated hereby and supersedes all prior agreements and understandings between the parties relating to such transactions. If the scope of any of the provisions of this Agreement is too broad in any respect whatsoever to permit enforcement to its full extent, then such provisions shall be enforced to the maximum extent permitted by law, and the parties hereto consent and agree that such scope may be judicially modified accordingly and that the whole of such provisions of this Agreement shall not thereby fail, but that the scope of such provisions shall be curtailed only to the extent necessary to conform to law.

10.4. Amendments; Waiver. This Agreement may be amended only by written consent of both parties. The failure by either party to enforce any provision of this Agreement shall not constitute a waiver of future enforcement of that or any other provision. Neither party shall be deemed to have waived any rights or remedies hereunder unless such waiver is in writing and signed by a duly authorized representative of the party against which such waiver is asserted.

10.5. Independent Contractor. Neither party shall, for any purpose, be deemed to be an agent of the other party and the relationship between the parties shall only be that of independent contractors. Neither party shall have any right or authority to assume or create any obligations or to make any representations or warranties on behalf of any other party, whether express or implied, or to bind the other party in any respect whatsoever.

10.6. Expenses. Each party shall pay their own expenses in connection with the negotiation of this Agreement. All fees and expenses incurred in connection with the resolution of disputes shall be allocated as further provided in Section 10.11 below.

10.7. Insurance. Flextronics and Customer agree to maintain appropriate insurance to cover their respective risks under this Agreement with coverage amounts commensurate with levels in their respective markets. Customer specifically agrees to maintain insurance coverage for any finished Products or Materials the title and risk of loss of which passes to Customer pursuant to this Agreement and which is stored on the premises of Flextronics.

10.8. Force Majeure. In the event that either party is prevented from performing or is unable to perform any of its obligations under this Agreement (other than a payment obligation) due to any act of God, acts or decrees of governmental or military bodies, fire, casualty, flood, earthquake, war, strike, lockout, epidemic, destruction of production facilities, riot, insurrection, Materials unavailability, or any other cause beyond the reasonable control of the party invoking this section (collectively, a “Force Majeure”), and if such party shall have used its commercially reasonable efforts to mitigate its effects, such party shall give prompt written notice to the other party, its performance shall be excused, and the time for the performance shall be extended for the period of delay or inability to perform due to such occurrences. Regardless of the excuse of Force Majeure, if such party is not able to perform within ninety (90) days after such event, the other party may terminate the Agreement.

10.9. Successors, Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns and legal representatives. Neither party shall have the right to assign or otherwise transfer its rights or obligations under this Agreement except with the prior written consent of the other party, not to be unreasonably withheld. Notwithstanding the foregoing, Flextronics may assign some or all of its rights and obligations under this Agreement to an affiliated Flextronics entity.

 

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10.10. Notices. All notices required or permitted under this Agreement shall be in writing and shall be deemed received (a) when delivered personally; (b) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (c) one (1) day after deposit with a commercial overnight carrier. All communications shall be sent to the addresses set forth above or to such other address as may be designated by a party by giving written notice to the other party pursuant to this section.

10.11. Governing Law; Disputes Resolution; Waiver of Jury Trial.

(a) This Agreement shall be governed by and interpreted in accordance with the laws of the state of California and the parties hereby consent to the personal and exclusive jurisdiction and venue of the California state courts and the Federal courts located in Santa ▇▇▇▇▇ County, California. Notwithstanding the foregoing, except with respect to enforcing claims for injunctive or equitable relief, any dispute, claim or controversy arising from or related in any way to this Agreement or the interpretation, application, breach, termination or validity thereof, including any claim of inducement of this Agreement by fraud will be submitted for resolution by binding arbitration in accordance with the Comprehensive Arbitration Rules & Procedures of JAMS. The arbitration will be held in Santa ▇▇▇▇▇ County, California and it shall be conducted in the English language. Judgment on any award in arbitration may be entered in any court of competent jurisdiction. Notwithstanding the above, each party shall have recourse to any court of competent jurisdiction to enforce claims for injunctive and other equitable relief.

(b) IN THE EVENT OF ANY DISPUTE BETWEEN THE PARTIES, WHETHER IT RESULTS IN PROCEEDINGS IN ANY COURT IN ANY JURISDICTION OR IN ARBITRATION, THE PARTIES HEREBY KNOWINGLY AND VOLUNTARILY, AND HAVING HAD AN OPPORTUNITY TO CONSULT WITH COUNSEL, WAIVE ALL RIGHTS TO TRIAL BY JURY, AND AGREE THAT ANY AND ALL MATTERS SHALL BE DECIDED BY A JUDGE OR ARBITRATOR WITHOUT A JURY TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW. To the extent applicable, in the event of any lawsuit between the parties arising out of or related to this Agreement, the parties agree to prepare and to timely file in the applicable court a mutual consent to waive any statutory or other requirements for a trial by jury.

10.12. Even-Handed Construction. The terms and conditions as set forth in this Agreement have been arrived at after mutual negotiation, and it is the intention of the parties that its terms and conditions not be construed against any party merely because it was prepared by one of the parties.

10.13. Controlling Language. This Agreement is in English only, which language shall be controlling in all respects. All documents exchanged under this Agreement shall be in English.

10.14. Counterparts. This Agreement may be executed in counterparts.

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their duly authorized representatives as of the Effective Date.

 

Violin Memory, Inc.						Flextronics Telecom Systems, Ltd.
Signed:		/s/ ▇▇▇▇▇ ▇▇▇▇▇▇				Signed:		/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Print Name:		▇▇▇▇▇ ▇▇▇▇▇▇				Print Name:		▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title:		VP, Manufacturing and Operations				Title:		Director
		10-25-2012

 

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Confidential Treatment Requested. Confidential portions of this document have been redacted and have been separately filed with the Commission.

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Exhibit 1

Definitions

 

 

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Confidential Treatment Requested. Confidential portions of this document have been redacted and have been separately filed with the Commission.

*** Confidential material redacted and filed separately with the Commission.

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Confidential Treatment Requested. Confidential portions of this document have been redacted and have been separately filed with the Commission.

*** Confidential material redacted and filed separately with the Commission.

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