EXHIBIT 99.1
Confidential Treatment Requested
[*] Redacted Text
McDATA Corporation
MANUFACTURING AND PURCHASE AGREEMENT
"McDATA"
McDATA Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
"SCI"
SCI Technology, Inc.
d.b.a. SCI Systems, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
The Effective Date of this Manufacturing and Purchase Agreement shall be:
December 14, 2001.
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(to be completed by ▇▇▇▇▇▇)
The following identified documents are incorporated herein by reference.
__X___ Manufacturing and Purchase Agreement
__X___ Appendix 1 - Products
__X___ Appendix 2 - Production Quote Model
__X___ Appendix 3 - Price Matrix
__X___ Appendix 4 - SCI Contract Quality Requirements
This Agreement and the Appendices identified above, constitutes the entire
agreement between McDATA and SCI with respect to the subject matter hereof,
and supersedes all prior and contemporaneous oral or written
representations, proposals or agreements between the parties concerning the
subject matter of this Agreement. In the event of any conflict between the
terms of this Agreement and of any Appendix, the terms of the Appendix
shall govern.
Accepted and agreed to by: Accepted and agreed to by:
McDATA Corporation (McDATA) SCI Technology, Inc.,
d.b.a SCI Systems, Inc. (SCI)
Signed: /S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Signed: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
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(Authorized Signature) (Authorized Signature)
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
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Title: Vice President of Manufacturing Title: Vice President/Plant Manager
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Date: December 13, 2001 Date: December 13, 2001
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TABLE OF CONTENTS
1. SCOPE .....................................................................1
2. DEFINITIONS .....................................................................1
3. PRODUCTS .....................................................................2
3.1 Products .....................................................................2
3.2 Product Specifications........................................................2
3.3 Quality and Reliability Assurance.............................................2
3.4 Identification of Products and Trademark Rights...............................2
4. MANUFACTURE OF PRODUCTS................................................................2
4.1 Manufacture of Products.......................................................2
4.2 Manufacturability of McDATA Design............................................2
4.3 Manufacture in Accordance with Specifications.................................3
4.4 Location and Qualification of Manufacturing Operations........................3
4.5 Approved Supplier List and Manufacturer's Parts List..........................3
4.6 McDATA Engineering Change Orders..............................................3
4.7 Tooling and McDATA-Owned Equipment............................................4
4.8 Change in Manufacturing Process...............................................4
4.9 Country of Origin Certificate.................................................4
4.10 International Direct Ship Products............................................4
4.11 Environmental Matters.........................................................5
5. PRODUCT PRICING .....................................................................5
5.1 Prices .....................................................................5
5.2 Production Quote Model........................................................5
5.3 Price Matrix..................................................................5
5.4 Optical [*] Material Pricing.................................................5
5.5 Cost Reduction Requirements...................................................5
5.6 Most Favored Nations..........................................................6
6. FORECASTS, ORDERS, AND DELIVERY........................................................6
6.1 Forecasts.....................................................................6
6.2 Burst Capacity................................................................6
6.3 Purchase Orders and Releases..................................................6
6.4 Payment Terms.................................................................7
6.5 Acceptance of Purchase Orders.................................................7
6.6 Delivery .....................................................................7
6.7 Delayed Delivery..............................................................7
6.8 Order Rescheduling............................................................7
6.9 Order Cancellation............................................................8
6.10 Packaging.....................................................................8
6.11 Shipment, Title and Risk of Loss..............................................8
7. WARRANTY AND DISCLAIMER................................................................8
7.1 Performance Warranties........................................................8
7.2 Product Warranty..............................................................8
7.3 Epidemic Failure Warranty....................................................10
8. INVENTORY RISK MANAGEMENT.............................................................10
8.1 Lead Time Expectations.......................................................10
8.2 Non-cancelable Non-returnable (NCNR) Rules...................................10
8.3 End-of-Life Inventory Support................................................10
8.4 Inventory Risk Limitation for Excess and Obsolete Inventory..................10
8.5 Supplemental First Choice Purchases..........................................11
9. RISK MANAGEMENT ....................................................................11
9.1 Disaster Recovery............................................................11
9.2 Key Personnel................................................................11
9.3 SCI Supplier Disaster Recovery Plan..........................................11
10. PROGRAM MANAGEMENT....................................................................11
10.1 Quarterly Reviews............................................................11
10.2 On-site Support Expectations.................................................11
10.3 New Product Introduction Program Coordination................................11
11. CONFIDENTIAL INFORMATION AND NON-DISCLOSURE...........................................12
11.1 Confidential Information.....................................................12
11.2 Exceptions...................................................................12
11.3 Non-Disclosure Obligation....................................................12
11.4 Effect of Termination........................................................12
11.5 Injuctive Relief.............................................................13
12. INDEMNIFICATION AND INSURANCE.........................................................13
12.1 Infringement Indemnification by SCI..........................................13
12.2. Infringement Indemnification by McDATA.......................................13
12.3 Indemnification by McDATA....................................................13
12.4 General Indemnification......................................................13
12.5 Insurance....................................................................14
13. LIMITATION OF LIABILITY...............................................................14
14. TERM AND TERMINATION..................................................................14
14.1 Term ....................................................................14
14.2 Termination for Material Breach..............................................14
14.3 Termination for Insolvency...................................................14
14.4 Inventory Indemnification....................................................14
14.5 Effect of Termination........................................................15
14.6 Return of Materials..........................................................15
14.7 Dispute Resolution...........................................................15
15. MANUFACTURE RIGHTS....................................................................15
16. MARKETING OR PUBLICITY................................................................15
17. EXPORT ADMINISTRATION.................................................................16
18. GENERAL PROVISIONS....................................................................16
18.1 Relationship of Parties......................................................16
18.2 Notices ....................................................................16
18.3 Force Majeure................................................................16
18.4 Amendment or Waiver..........................................................16
18.5 Non-Assignment; No Third Party Rights........................................16
18.6 Severability.................................................................16
18.7 Further Assurances...........................................................17
18.8 Attorney's Fees..............................................................17
18.9 Governing Law................................................................17
18.10 Entire Agreement.............................................................17
18.11 Right to Audit...............................................................17
18.12 Counterparts.................................................................17
Appendix 1 Products ....................................................................18
Appendix 2 Quote Model..................................................................19
Appendix 3 Price Matrix.................................................................21
Appendix 4 SCI Contract Quality Requirements............................................11
This Manufacturing and Purchase Agreement (the "Agreement") is entered into
by and between McDATA and SCI.
For and in consideration of the mutual promises and covenants contained
herein, the parties agree as follows:
1. SCOPE
This Agreement establishes the non-exclusive terms and conditions under
which ▇▇▇▇▇▇ agrees to purchase from SCI and SCI agrees to manufacture and
supply/sell to McDATA certain Products (as defined below).
2. DEFINITIONS
2.1 "Product(s)" refers to the McDATA products described on the attached
Appendix 1, as may be amended from time to time, which meet the
specifications agreed upon by the Parties and which McDATA is hereby
authorized to purchase and distribute.
2.2 "Minimum Order Quantity" means the minimum quantity for which
an SCI supplier will accept an order.
2.3 "Economic Order Quantity" means a quantity at which a desirable
price break is achieved.
2.4 "Specifications" means specifications, drawings, Bills of Materials
("BOM") made available by McDATA to SCI.
2.5 "McDATA Process Documentation" means documents provided by McDATA to
SCI to define the process SCI shall use to manufacture the Products.
2.6 "SCI Process Documentation" means the documents used by SCI to
define the process SCI shall use to manufacture the Products.
2.7 "SCI Contract Quality Requirements" means the requirements specified
on Appendix 4, as provided by McDATA to SCI, to define the quality
assurance procedures and requirements necessary in the manufacture
of the Products.
2.8 "Engineering Change Order" or "ECO" means a change to a
Specification, McDATA Process Documentation, SCI Process
Documentation, or the Products.
2.9 "Engineering Change Request" or "ECR" means a notification from one
party to the other, outlining in detail, the specific requirements
of an Engineering Change Order.
2.10 "Manufacturability" means the ability to produce the Products to
McDATA's Specifications, McDATA Process Documentation, SCI Process
Documentation, and SCI practices and manufacturing capabilities, in
accordance with the terms stated in Appendix 4, including without
limitation the testability of the Products utilizing the mutually
agreed upon Product Acceptance Tests (as defined herein) resulting
in commercially acceptable yields.
2.11 "Direct Ship Products" means Product(s) being shipped by SCI
directly to McDATA's Customer.
2.12 "Non-direct Ship Products" means all other Product(s) not being
shipped by SCI directly to McDATA's Customer.
2.13 "Product Acceptance Tests" means the testing array to be applied by
SCI to individual Products as mutually agreed by the Parties in
writing.
2.14 "Finished Goods" means Product that has met the Product Acceptance
Test criteria, and is ready for shipment.
2.15 "Transformation Costs" means all costs associated with the
manufacture of the Products, excluding raw material costs.
2.16 "Purchase Order Release" means a blanket purchase order release or
an outbound sales order release issued by McDATA to SCI.
3. PRODUCTS
3.1 Products. SCI agrees to sell to McDATA the Products listed on
Appendix 1. The Parties agree that changes (additions or deletions)
to Appendix 1 may be made, provided the Parties mutually agree in
writing to such changes. The Parties agree that additional Products
may be added to Appendix 1 and Appendix 1 will be deemed amended
upon McDATA's issuance of a purchase order pursuant to SCI's written
quotation for the Products.
3.2 Product Specifications. SCI agrees to manufacture the Products in
accordance with the Specifications, as may be provided to SCI by
▇▇▇▇▇▇. Upon mutual agreement on terms, conditions, and price,
Product Specifications may be amended from time to time.
3.3 Quality and Reliability Assurance. SCI agrees to manufacture the
Products in accordance with the quality and reliability assurance
requirements specified in Appendix 4 (SCI Contract Quality
Requirements). Appendix 4 may be amended from time to time in
writing as mutually agreed.
3.4 Identification of Products and Trademark Rights
3.4.1 Identification of Products. SCI and McDATA hereby agree that
Products sold hereunder will be labeled and marketed by McDATA under
▇▇▇▇▇▇'s (or its Customers') trademarks. SCI shall have the right to
affix and McDATA shall not remove or cover over any nameplate
indicating model number, serial number, patent number and/or patent
pending legends, and any other markings which may be required by law
or by regulatory agencies, where covering over such nameplate would
violate any laws, patents, or trademarks.
3.4.2 Trademark Rights.
3.4.2.1 McDATA shall provide to SCI for each Product a list and description
of the trademarks, trade names, insignia, symbols, decorative
designs or packaging designs (collectively the "Trademarks") to be
affixed by SCI to the finished Products or to the packaging of such
finished Products. ▇▇▇ agrees to affix the Trademarks in strict
conformity with the then-current McDATA written instructions and
standards received by SCI. However, nothing in this Agreement shall
operate to confer on SCI any right to use any Trademark for any
purpose other than in connection with the manufacture or repair of
Products in accordance with this Agreement.
3.4.2.2 It is the intention of the parties to protect as fully as possible
all of their rights to their respective trademarks. Therefore, no
right is granted hereunder for either party to use the trademarks
of the other party, except as specifically permitted in writing by
such other party. Willful use of either party's trademark by the
other party contrary to the provisions of this Section shall
constitute a material breach of this Agreement.
4. MANUFACTURE OF PRODUCTS
4.1 Manufacture of Products. SCI shall manufacture for McDATA such
quantities and types of Products as McDATA may order from time to
time, and as SCI may accept pursuant to this Agreement. SCI shall
not, unless otherwise specified in a written agreement entered into
by McDATA, manufacture or sell any Product except as directed by
▇▇▇▇▇▇ hereunder. Notwithstanding the foregoing, nothing in this
Agreement shall be deemed to grant SCI any right to use ▇▇▇▇▇▇'s
name for any purpose other than as expressly provided herein or
otherwise mutually agreed.
4.2 Manufacturability of McDATA Design.
4.2.1 New Products. McDATA shall provide its Specification(s) and may
provide McDATA Process Documentation to SCI for new Products. SCI
shall provide to McDATA a New Product Project Plan (Section 10.3)
including without limitation feedback, risk assessment, and
suggested improvements to McDATA in writing as to the
Manufacturability of such design(s). Upon ▇▇▇▇▇▇'s review of such
New Product Project Plan submitted by SCI, and upon mutual agreement
and written authorization by ▇▇▇▇▇▇, SCI shall commence production
of the new Product. In the event McDATA instructs SCI to commence
production prior to mutual agreement of such New Product Project
Plan, such commencement does not indicate SCI's agreement as to the
Manufacturability of such New Product design. If SCI commences
production prior to mutual agreement and/or McDATA's specific
instructions to commence production, then such production indicates
SCI's acceptance of responsibility for production using such design.
4.2.2 Engineering Change Orders. McDATA shall provide its Specification(s)
and may provide McDATA Process Documentation to SCI for existing
Products. SCI shall provide to McDATA an ECO Project Plan for
Engineering Change Orders (Section 4.6) including without limitation
feedback, risk assessment, and suggested improvements in writing as
to the Manufacturability of such Engineering Change Orders (ECO).
Upon ▇▇▇▇▇▇'s review of such ECO Project Plan submitted by SCI, and
upon mutual agreement and written authorization by ▇▇▇▇▇▇, SCI shall
commence production of the Products implementing the ECO or continue
production without implementing such ECO. In the event McDATA
instructs SCI to commence production implementing such ECO prior to
mutual agreement of such ECO Project Plan, such commencement does
not indicate SCI's agreement as to the Manufacturability of such ECO
design. If SCI commences production prior to mutual agreement and/or
McDATA's specific instructions to commence or continue production,
then such production indicates SCI's acceptance of responsibility
for production using such design.
4.3 Manufacture in Accordance with Specifications. SCI shall manufacture
all Products in strict conformity with all applicable
Specifications, SCI Process Documentation, McDATA Process
Documentation, and SCI Contract Quality Requirements and all
applicable laws and regulations. SCI shall not make any change in or
deviate in any way from such Specifications except pursuant to an
Engineering Change Order approved as provided in this Agreement.
Further, SCI shall ensure, that SCI's manufacturing processes shall
meet the requirements of the regulatory agencies applicable to the
manufacture of the Products, including without limitation
Underwriters' Laboratory (UL), U.S. Federal Communications
Commission (FCC), and the Canadian Standards Association (CSA). In
the event of a breach of this section, in addition to other remedies
provided in this Agreement and available to McDATA at law, SCI shall
be liable for and shall pay all costs associated with any retrieval,
retest, rework, and/or reinstallation required due to such breach,
including without limitation material, labor, and overhead costs.
4.4 Location and Qualification of Manufacturing Operations. SCI shall
manufacture all Products, in whole or in part, in its plant in
Colorado Springs or Fountain, Colorado unless McDATA authorizes SCI
in writing to manufacture Products in another plant location. Other
SCI facilities may manufacture McDATA Products upon meeting the
certification and quality standards required by McDATA. Should the
quality standards of any SCI facility fall below McDATA's stated
requirements for the manufacture of its Product, and it is necessary
for McDATA to re-qualify one of SCI's manufacturing facilities, SCI
and McDATA will mutually agree on SCI's reimbursement of the
reasonable expenses incurred by McDATA for such re-qualification.
Notwithstanding the foregoing, SCI shall not be liable to pay
expenses for regularly-scheduled visits on ▇▇▇▇▇▇'s behalf.
4.5 Approved Supplier List and Manufacturer's Parts List. SCI agrees to
comply with the terms specified in Appendix 4 (SCI Contract Quality
Requirements) with regard to supplier management.
4.6 McDATA Engineering Change Orders.
4.6.1 In the event McDATA intends to implement an Engineering Change
Order, McDATA shall provide a written Engineering Change Request to
SCI outlining, in specific detail, the proposed change. SCI may at
any time propose an ECO by providing an ECR to McDATA.
4.6.2 The recipient of an ECR will use commercially reasonable efforts to
provide a preliminary response (acknowledging receipt of the ECR and
all associated documentation) within twenty-four (24) hours of
receipt, and a more detailed written response within three (3)
business days of receipt unless otherwise mutually agreed to in
writing. Such detailed response shall include without limitation,
(i) the proposed implementation plan for such ECO; (ii) the likely
pricing and scheduling impact of the ECO on any open purchase order;
(iii) DFx analysis; and (iv) the target date for SCI implementing
the ECO (collectively, the "ECO Project Plan").
4.6.3 McDATA will verbally notify the SCI program manager of any emergency
ECR followed by a written confirmation, which may be in the form of
a confirming e-mail, facsimile or hard copy delivered to SCI. SCI
will, within four (4) hours of receiving the written notice from
McDATA, use commercially best commercial efforts to provide a
written response to an emergency ECR issued by McDATA that requires
a "Stop Build" or "Stop Ship" as further defined in the ECR.
4.6.4 In the event either party identifies an engineering change that must
be implemented for reasons of safety or environment ("Safety or
Environment Change"), the parties agree to cooperate and implement
such Safety or Environment Change as soon as possible after
discovery. Once such a Safety or Environment Change is discovered,
the parties agree that no affected product shall be manufactured or
shipped until such Safety or Environment Change has been
implemented, notwithstanding any delay in scheduled delivery dates
or changes to price. The parties further agree to cooperate in the
implementation of such Safety or Environment Change on Product
shipped prior to discovery of the hazard. In this regard, SCI agrees
to prepare a quotation for the manufacture of field change kits or
to implement factory retrofitting, as appropriate. McDATA and SCI
shall mutually agree on a case-by-case basis on appropriate charges
for the implementation of a Safety or Environment Change on WIP,
finished goods awaiting shipment and in field Products.
4.6.5 Both Parties agree to notify the other party immediately if anything
in an ECR or ECO could affect the safety and well-being of employees
and/or customers.
4.6.6 The parties shall mutually agree in writing to each ECO, and to the
implementation and all costs thereof. SCI shall not commence
implementation of an ECO until both parties agree to such ECO in
writing.
4.6.7 In the event SCI implements an unauthorized change, upon
notification by McDATA, SCI shall be liable for, and shall pay all
authorized costs associated with any retrieval, retest, rework
and/or reinstallation required due to such breach, including without
limitation material, labor, and overhead costs.
4.6.8 Any obsolete and/or excess materials resulting from an ECO will be
dealt with in accordance with Section 8.4 (Inventory Risk Limitation
for Excess and Obsolete Inventory) below.
4.7 Tooling and McDATA-owned Equipment.
4.7.1 All tooling and McDATA-owned equipment, including without
limitation, ▇▇▇▇ ▇▇▇▇▇▇▇▇, in-circuit test fixtures, personal
computers and printers (collectively, "Tooling") furnished to SCI
or developed by SCI for McDATA and paid for by McDATA shall be the
sole property of McDATA and ▇▇▇▇▇▇ will provide instructions for
marking as such. SCI may use such Tooling only for the manufacture
of McDATA's Products purchased directly by ▇▇▇▇▇▇, unless otherwise
mutually agreed in writing. On a quarterly basis, or upon request
by McDATA, SCI shall provide a detailed list of such Tooling owned
by McDATA which is in SCI's possession, including part number and
manufacturer.
4.7.2 SCI shall store, protect, preserve, and perform general maintenance
on such Tooling in accordance with sound industry practice and
McDATA's requirements, but with no less care than SCI uses in the
storage, protection, preservation, calibration and maintenance of
its own property. McDATA is responsible for any mutually agreed upon
cost associated with refurbishment including without limitation
calibration, or the replacement of such Tooling. In such an event
that such refurbishment or replacement of Tooling is required, SCI
will notify McDATA of such need, and request authorization to
perform such action. In the event ▇▇▇▇▇▇'s Tooling becomes lost or
damaged while in SCI's possession for any reason other than through
normal and proper use, SCI agrees to replace or repair such property
at SCI's expense. Within sixty (60) days after the completion or
termination of this Agreement, SCI will request McDATA to provide
SCI with instructions for the disposition of all such Tooling, and
McDATA will pay for packing and shipping such property. Such Tooling
disposition instructions and potential impact on SCI's warranty
capabilities shall be mutually agreed upon.
4.7.3 In accordance with the provisions of Section 18.11, McDATA reserves
the right to perform an audit at the SCI facilities to ensure
compliance with this Section 4.7.
4.8 Change in Manufacturing Process. SCI shall notify McDATA immediately
in writing of any proposed significant change which would materially
impact any manufacturing process, or use of equipment. McDATA
requires advance notice of and must approve any and all changes that
will affect Product quality or field reliability. Notwithstanding
the foregoing, notice of emergency changes not deemed to be
significant changes, and which do not affect Product quality or
field reliability, but deemed necessary by SCI to accommodate
manufacturing processes during SCI's normal business hours, may be
provided to McDATA within twenty-four (24) hours of SCI's
implementation of such emergency change.
4.9 Country of Origin Certificate. Upon McDATA request, SCI will provide
a Country of Origin Certificate for SCI-manufactured Products.
4.10 International Direct Ship Products. Unless otherwise agreed, for
Direct Ship Products being shipped internationally, McDATA shall be
(i) the exporter of record for any Products and/or Product
documentation exported from the country of manufacture, and shall
comply with all applicable country of manufacture export control
statutes and regulations, and (ii) the importer of record for all
Products exported from the country of manufacture and later imported
and returned to McDATA or to SCI. SCI will cooperate with McDATA in
obtaining any export or import licenses for the Products.
Upon McDATA request, SCI will evaluate the Product to determine whether
or not Product qualifies as originating goods within the North
American Free Trade Agreement (NAFTA). SCI will provide a NAFTA
Certificate of Origin for those goods that are found to be NAFTA
eligible. McDATA will assist SCI by providing any information
requested by SCI that is needed to evaluate the Product. Such
information may include, but is not limited to: engineering support,
technical information, Product literature, functionality of Product
, end use of Product, manufacturer and country of manufacture for
any components supplied or consigned by McDATA. In the event
McDATA's Product evaluation by SCI cannot be performed without
incurring additional expenses, McDATA will be responsible for
payment of such additional expenses.
McDATA hereby certifies that it will not knowingly export, directly or
indirectly, any U.S. origin technical data or software acquired from
SCI or any direct product of that technical data or software, to any
country for which the United States Government requires an export
license or other approval, without obtaining such approval from the
United States Government.
4.11 Environmental Matters.
4.11.1 SCI warrants that it is currently in compliance with and that it
shall continue to comply with all federal, state and local laws,
rules, orders, and regulations relating to the protection of the
environment and related matters. SCI acknowledges that any chemical,
material or waste that may be used or generated in its processes, is
solely its responsibility to properly handle, use, store, treat, and
dispose of in accordance with the above mentioned applicable
environmental laws and regulations. SCI shall notify McDATA
immediately of any change or possible change in SCI's compliance
with this section.
4.11.2 SCI agrees to provide McDATA, promptly upon request, with any and
all relevant information concerning its compliance with applicable
environmental laws and regulations, including copies of required
documentation. SCI also agrees, upon reasonable notice and during
normal office hours, to permit McDATA to inspect its premises and
audit its relevant records for the sole purpose of determining SCI's
compliance with all applicable environmental laws and regulations.
4.12 Labor Disputes. SCI shall immediately notify McDATA whenever any
actual or potential labor dispute delays or threatens to delay the
timely performance of this Agreement.
5. PRODUCT PRICING
5.1 Prices. Prices for the Products will be established based on the
Production Quote Model cited in Section 5.2 below, together with the
information from the Price Matrix (Appendix 3) cited in Section 5.3
and the Optical Transceiver Material pricing cited in Section 5.4
below. Prices for the Products shall be mutually agreed upon by both
parties in writing, signed by authorized signatories of each party.
5.2 Production Quote Model. On or before five (5) business days prior to
the end of each month, SCI shall provide pricing quotation schedules
to McDATA on a monthly basis (in accordance with the "Inventory
Revaluation Method" as defined in Section 5.5 below) for all
Products, with stated cost reductions in accordance with Section 5.5
below. Additionally, SCI shall provide to McDATA costed Bills of
Materials (BOMs) with each quotation. McDATA may, from time to time,
request interim pricing quotations; such interim quotation shall be
provided to McDATA within seventy-two (72) hours of McDATA's request
for requote of existing Products. First time quotes for new Products
shall be provided within ten (10) business days of McDATA's request.
▇▇▇▇▇▇'s issuance of a purchase order indicates McDATA's acceptance
of such quotation, subject to additional terms McDATA may state on
such purchase order. SCI shall use the Production Quote Model,
attached hereto as Appendix 2, to provide such information to
McDATA.
5.3 Price Matrix. SCI agrees to use the Price Matrix, attached hereto as
Appendix 3, in conjunction with the Production Quote Model (Appendix
2) in determining the prices SCI shall charge to McDATA for the
Products.
5.4 Optical [*] Material Pricing. SCI agrees [*]and shall be burdened at
[*]of quoted purchase cost as set forth on Appendix 3
5.5 Cost Reduction Requirements.
5.5.1 SCI understands that ▇▇▇▇▇▇ has established and negotiates on a
regular basis, special volume price relationships with its component
vendors. If, by virtue of these special relationships, ▇▇▇▇▇▇ has
obtained a better price on certain components than has SCI, SCI
agrees to purchase such components from said vendors at McDATA's
negotiated price, provided the overall impact of the underlying
terms, conditions, Economic Order Quantities and lead times
associated with obtaining the better prices can be mutually agreed
upon.
5.5.2 The parties agree that component materials which drive approximately
80% of the material cost of Products, will be reviewed and adjusted
on a month-to-month basis. Product quotes (in the form set forth on
Appendix 2) will be updated accordingly on a monthly basis, provided
▇▇▇▇▇▇ agrees to SCI's "Inventory Revaluation Method" for
implementation of monthly component cost adjustments. The "Inventory
Revaluation Method" is defined as McDATA's payment to SCI for the
difference between the current component standard cost and the new
quoted price for same components, multiplied by the quantity of
on-hand and on-order (which cannot be adjusted) inventory received
prior to purchase of components at the new price. SCI shall provide
a summary of the proposed revaluation including the component part
number, present standard, new quote price and the quantity of
inventory at the current standard cost. ▇▇▇▇▇▇ agrees to issue a
purchase order to cover the cost associated with the revaluation of
items which will cut in within the next month, plus any other items
at McDATAs discretion. SCI shall invoice the total monthly
revaluation purchase order on a weekly basis evenly distributed over
the next six (6) week period. Upon receipt of revaluation purchase
order, SCI shall implement the reduced Product pricing.
5.5.3 The parties agree that one hundred (100%) percent of the material
throughput costs and the Transformation Costs will be reviewed and
adjusted on a quarterly basis. The pricing matrix contained in
Appendix 3 shall be jointly reviewed by the parties at an agreed
upon frequency, not less than quarterly, and may be modified with
the mutual written agreement of the Parties signed by authorized
signatories of each party. [*].
5.6 Most Favored Nations. SCI agrees that the prices, terms and
conditions in this Agreement shall not exceed those offered to any
other customer for similar or like components purchased under
SCI-negotiated vendor pricing on such components. At the time SCI
becomes aware of such lower prices or more favorable terms or
conditions being offered to another customer, SCI shall immediately
offer those lower prices, or more favorable terms and conditions to
McDATA. In such event, the Parties shall mutually agree on the
method for such settlement of the difference in price or terms and
conditions for the prior thirty (30) days. McDATA shall have the
right to request an audit regarding the subject matter of this
section in accordance with the terms set forth in Section 18.11.
6. FORECASTS, ORDERS, AND DELIVERY
6.1 Forecasts. On a monthly basis, McDATA will provide a new forecast so
as to maintain a minimum of six (6) month rolling forecast of its
projected orders for Products. This six month minimum shall be
increased as needed to ensure forecasts are made through the current
SCI quoted lead time of all components. Any quantities listed in any
forecast or other correspondence between the parties are only
estimates and do not constitute a commitment on McDATA's part to
purchase such quantity. Such forecasts are made as an accommodation
for planning purposes and authorization for SCI's purchase of long
lead materials as identified in the costed BOMs which accompany SCI
price quotation. ▇▇▇▇▇▇'s liability for such long lead material is
as stated in Section 6.9.
6.2 Burst Capacity. SCI shall plan capacity to accommodate approximately
a one-time [*]increase over the greater of the then-current forecast
or blanket purchase order run rate quantities for the given quarter.
6.3 Purchase Orders and Releases. McDATA shall issue blanket purchase
orders to SCI for Products. The quantities of such blanket purchase
orders will not exceed monthly purchase quantities and be provided
so as to ensure a minimum eight (8) weeks coverage of forecasted
Products. SCI shall build Products to Finished Goods pursuant to the
quantities and due dates stated on such blanket purchase order.
McDATA shall use commercially reasonable efforts, on a daily basis,
to issue releases against the purchase orders to SCI by 12:00 noon
on a given day for individual orders of Products to be shipped on
the following day or in such time as specified on such Purchase
Order Release. If McDATA fails to provide releases by 12:00 noon on
a day, and alternate shipping method is required, the alternate
shipping cost shall be borne by McDATA. McDATA may transmit purchase
orders and releases in writing, by facsimile or other means of
electronic transfer agreed to by the parties.
The Parties agree that the terms and conditions of this Agreement take
precedence over any pre-printed terms on any purchase order,
acknowledgement, notification, or any other document used in
performance of this Agreement.
6.4 Payment Terms. Terms of payment are [*]percent [*] days Net thirty
(30) days from date of invoice. Such invoice may not be dated prior
to the date the applicable Products are shipped from SCI. McDATA is
entitled to take such [*]percent discount if payment is mailed on or
before the [*]day after the date of invoice. Net thirty (30) day
payments by McDATA are not eligible for the discount. Payments are
not subject to setoffs or offsets. McDATA will use commercially
reasonable efforts to report disputed invoices to SCI within five
(5) business days of McDATA receipt. Disputed invoices not
reconciled on or before the [*] invoice discount period shall not be
eligible for the [*] percent invoice discount, unless otherwise
mutually agreed. Upon request, SCI will provide backup documentation
to support SCI's claim for the stated amount of any invoice.
6.5 Acceptance of Purchase Orders. Within three (3) business days of
SCI's receipt of a purchase order, SCI shall provide written
acknowledgement to McDATA of acceptance or rejection of such
purchase order. In the event such purchase order is rejected, SCI
shall provide the reasons for such rejection on the acknowledgement.
Within four (4) hours of SCI's receipt of each release, SCI will use
commercially reasonable efforts to provide written acknowledgement
to McDATA of acceptance of such release.
6.6 Delivery. SCI shall deliver Products in accordance with the dates
stated on the Purchase Order or Purchase Order Release. If McDATA
requires delivery sooner than the date specified on the Purchase
Order Release, or if McDATA requires quantities in excess of the
forecast or purchase order, SCI will use best commercial efforts to
comply with such requests. Any deviation from the stated delivery
date must be coordinated in advance.
6.7 Delayed Delivery.
6.7.1 SCI shall immediately notify McDATA if delivery of any Products will
be delayed and, concurrently, notify McDATA of the rescheduled
delivery date. In the event of such delay, McDATA may, at any time
prior to the rescheduled delivery date, cancel without penalty that
portion of its purchase order covering such delayed Products. The
notification may be communicated by facsimile, telephone, electronic
mail, or any other method agreed to by the parties, provided that
SCI shall use commercially reasonable efforts to obtain McDATA's
actual acknowledgement of the notice of anticipated delay. SCI and
McDATA will jointly develop alternatives to resolve any late
delivery of the Product, including use of premium routing. SCI will
develop recovery plans with new committed shipment dates and
communicate such plans to McDATA within twenty-four (24) hours of
missed shipments. If SCI is unable to deliver the Product on the
acknowledged delivery date, through no fault of McDATA, McDATA may
require SCI to pay the difference between premium routing rates and
standard routing rates.
6.7.2 SCI further agrees that time and rate of delivery are of the essence
of this Agreement. The "Delivery Dates" shall be those specified as
the "need by" date or the "scheduled ship date" stated on each
purchase order or Purchase Order Release issued under this
Agreement. For Direct Ship Products (as defined in Section 6.11.1),
deliveries will be considered on time if they are released to the
common carrier on the Delivery Date stated on the purchase order or
Purchase Order Release. For Non-direct Ship Products (as defined in
Section 6.11.2), deliveries will be considered on time if they are
delivered to McDATA on the Delivery Date stated on the purchase
order or Purchase Order Release.
6.8 Order Rescheduling.
6.8.1 McDATA may reschedule purchase orders, blanket purchase orders,
and/or Purchase Order Releases.
6.8.2 Upon receipt of notice to reschedule purchase or blanket purchase
order quantities scheduled to ship within a [*]day window for which
SCI has already placed material in either work-in-process (WIP) or
Finished Goods, SCI will process the quantity into Finished Goods.
Purchase orders with due dates beyond [*] days may be rescheduled
without limitation.
6.8.3 SCI agrees to hold rescheduled finished Products(s) for sixty (60)
days from the date such Product(s) was received into Finished Goods
at no cost to McDATA. In the event such rescheduled Products have
not been released for shipment within such 60 day period, SCI shall
invoice and ship Products sixty (60) days after completion of
Product into SCI's Finished Goods, or upon request by McDATA, SCI
shall hold such Product on mutually agreed upon terms.
6.8.4 Purchase Order Releases with a due date of greater than four (4)
hours may be rescheduled. SCI will provide best commercial efforts
to meet reschedule requests with due dates less than four (4) hours.
6.8.5 McDATA agrees to pay a monthly inventory carrying cost equal to
[*]percent of the value of SCI's on-hand inventory in support of
McDATA Product requirements, excluding (i) Finished Goods inventory
and (ii) the value of component inventory receipts over the prior
sixty (60) days. On no less than a monthly basis, SCI agrees to
provide to McDATA or make available to McDATA a report outlining
such carrying costs.
6.8.6 McDATA reserves the right to audit SCI's records pursuant to this
section in accordance with the terms set forth in Section 18.11.
6.9 Order Cancellation. McDATA may cancel any Product purchase order at
any time subject to the terms set forth in Section 14.4 (Inventory
Indemnification). The extent of liability for open purchase orders
or for other components previously authorized by McDATA for purchase
by SCI is further limited by the expectation that SCI shall
immediately issue a cancellation notice on all open purchase orders
with its suppliers in a timely manner, and that SCI shall use best
commercial efforts to return any and all excess and/or obsolete
inventory to its suppliers. McDATA reserves the right to review and
approve any cancellation or restocking charges associated with the
cancellation of such open purchase orders or the return of excess
and/or obsolete inventory.
6.10 Packaging. SCI shall package each Product in accordance with
McDATA's Specifications. In the event such Specifications are not
provided, SCI shall package each Product in accordance with SCI's
standard commercial practices for domestic or international
shipment. SCI shall include with each shipment a list of contents,
including serial numbers, to allow review of contents upon receipt.
Unitized packaging, suitable for reshipment as a single spare part
unit or assembly without additional packaging, and which shall at
least conform to minimum acceptable industry standards shall be made
available for purchase by McDATA for reshipment of spares to end
users. Product, Repairs and Spare parts must be labeled with the
McDATA part number (or other part number specified by McDATA) and
SCI's serial number and revision number.
6.11 Shipment, Title and Risk of Loss.
6.11.1 For "Direct Ship Products", such Product shall be shipped EX WORKS,
Incoterms 2000, SCI plant of manufacture in Colorado. Title to and
risk of loss for such Products shipped directly to McDATA's Customer
shall pass to McDATA upon shipment. SCI agrees to ship Products one
(1) day after receipt of a Purchase Order Release, provided SCI
receives such release no later than 12: 00 noon.
6.11.2 For "Non-direct Ship Products", such Product shall be shipped (SCI
Truck) FOB Destination unless otherwise provided herein. For Product
being shipped (SCI Truck) FOB Destination, title to and risk of loss
for such other Products shall pass to McDATA upon receipt by McDATA
at the destination. In the event McDATA chooses to use a common
carrier for expedited shipment (i.e., for schedule pull-ins), such
shipment shall be FOB SCI dock, and title and risk of loss passes
upon shipment. McDATA shall be responsible for the additional
shipping cost on such expedited common carrier shipments unless
otherwise mutually agreed to. SCI agrees to deliver Products one (1)
day after receipt of a Purchase Order Release, provided SCI receives
such release no later than 12: 00 noon.
7 WARRANTY AND DISCLAIMER.
7.1 Performance Warranties. SCI represents and warrants to McDATA that
(a) it has the power to enter into and perform its obligations under
this Agreement; (b) it has and will have full and sufficient right
to assign or grant any rights and/or licenses granted pursuant to
this Agreement; and (c) its performance of this Agreement shall not
infringe upon or violate the intellectual property rights of any
third party or violate any federal, state or municipal laws.
7.2 Product Warranty
7.2.1 For a period of [*]months from date of shipment to McDATA's end
customer, SCI warrants the Products will:
7.2.1.1 Be free from defects in material.
7.2.1.2 Be free from defects in workmanship.
7.2.1.3 Products shall be considered free from defects in workmanship if
(i) they are manufactured in accordance with the requirements set
forth in Section 2 of Appendix 4 hereto, (ii) the Products conform
to the Product Specifications, and (iii) successfully complete any
mutually agreed upon Product Acceptance Tests.
7.2.2 SCI will, and without charge to McDATA, promptly (within 10
business days of SCI's receipt) repair, or replace as mutually
agreed, any Product which is determined to be defective and which
is returned to SCI for warranty repair, provided the Product has
not been damaged, subjected to misuse, altered, improperly
repaired or maintained by McDATA or third parties in a manner
which SCI reasonably determines to have adversely affected
performance or reliability. The materials portion of the Product
warranty shall not apply to McDATA consigned or supplied materials
unless such consigned or supplied materials have been abused or
misused by SCI or damaged by external causes directly contributed
to by SCI. Further, the component materials portion of the Product
warranty provided by SCI shall not exceed the component warranty
provided by the component manufacturer for those items where
McDATA has negotiated a contract with such other component
manufacturer, however SCI will always provide a minimum of a 12
month warranty [redact warranty period?] in such event. SCI's
liability hereunder is limited to the repair, or replacement of
the defective Product, and if neither repair nor replacement is
possible, a refund of the monies paid for such non-conforming
Product, and does not include any labor related to the removal
and/or subsequent reinstallation thereof. In the event that
replacement or refund of monies is required, such option shall be
mutually agreed. SCI agrees that if a field replaceable unit
("FRU") under warranty is returned by McDATA to SCI [*] times for
the same failure, [*] times for any non-cosmetic failure, SCI
shall replace such FRU and SCI shall subsequently destroy such
FRU. Details of SCI's policies regarding the repair or replacement
of warranty returns will be reviewed and negotiated in good faith
by the parties hereto. SCI shall provide McDATA a quarterly report
by serial number of the FRUs that have been returned to SCI [*]
times for the same failure and [*] times for any non-cosmetic
failure. Product may consist in part of used FRUs which are
warranted as equivalent to new when used in the Product. Further,
field-failed FRUs returned to SCI may not be incorporated into
subsequently manufactured unit-level assemblies. McDATA will
identify the FRUs as being FRUs that have failed in the field, and
send same to SCI. Unless otherwise instructed by McDATA, SCI will
repair and recertify such FRUs and return same to McDATA
identified as recertified field-failed FRUs.
7.2.3 Within six (6) months of the Effective Date, the Parties agree to
review the actual and projected warranty returns and the costs
associated thereto, and discuss SCI's continuing to offer such [*]
month warranty on all Products at no charge.
7.2.4 All claims for breach of warranty must be received by SCI no later
than ninety (90) days after the expiration of the warranty period
for the Product.
7.2.5 Warranty returns to SCI will be transacted for credit only. In the
event McDATA requests that SCI purchase non-warranty returns for
SCI-manufactured products, SCI agrees to purchase such returns at
the time of return, and at McDATA's discretion, SCI will repair,
replace or dispose of such return, and ▇▇▇▇▇▇ will pay to
repurchase the non-warranty return at the same price paid by SCI,
and ▇▇▇▇▇▇ will further pay SCI the rework, replacement or
disposition costs therefor. The Parties will mutually agree on
non-warranty returns for non-SCI-manufactured products. All
shipping costs for such warranty returns are borne by SCI.
7.2.6 Failure analysis on return material authorization (RMA) shall be
completed in accordance with Section 8 of Appendix 4 (SCI Contract
Quality Requirements).
7.2.7 SCI's warranty obligations will cease upon the earlier of the
agreed upon warranty period or upon SCI's fulfillment of McDATA's
request to return any Tooling necessary for Product testing.
7.2.8 McDATA warrants to SCI that the McDATA Process Documentation which
it provides to SCI to manufacture the Products is accurate and
complete unless McDATA informs SCI otherwise.
7.2.9 SCI warrants to McDATA that the SCI Process Documentation which it
provides to McDATA to manufacture the Products is accurate and
complete unless SCI informs McDATA otherwise.
7.2.10 UNLESS EXPRESSLY AGREED TO BY SCI IN WRITING, SCI MAKES NO
WARRANTY THAT THE PRODUCTS WILL (i) MEET ANY SPECIFICATION NOT
MADE KNOWN TO AND AGREED TO BY SCI, OR (ii) RECEIVE THE APPROVAL
OF OR BE CERTIFIED BY UNDERWRITERS LABORATORY, ANY FEDERAL, STATE,
LOCAL OR FOREIGN GOVERNMENT AGENCY (INCLUDING WITHOUT LIMITATION
THE FEDERAL COMMUNICATIONS COMMISSION) OR ANY OTHER PERSON OR
ENTITY. SCI ASSUMES NO RESPONSIBILITY FOR OBTAINING SUCH APPROVALS
OR CERTIFICATIONS FOR THE PRODUCTS, OR MEETING SUCH UNKNOWN
SPECIFICATIONS FOR THE PRODUCTS.
7.2.11 THE PRODUCT WARRANTY AND SUCH OTHER WARRANTIES AS AGREED TO IN
THIS AGREEMENT ARE THE ONLY WARRANTIES GIVEN BY SCI. SCI MAKES,
AND ▇▇▇▇▇▇ RECEIVES, NO OTHER WARRANTY EITHER EXPRESSED OR
IMPLIED. ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE, AND ALL IMPLIED WARRANTIES OF TITLE FOR
ANY McDATA-CONSIGNED OR McDATA-SUPPLIED MATERIALS ARE EXPRESSLY
DISCLAIMED AND EXCLUDED HEREFROM.
7.3 Epidemic Failure Warranty.
7.3.1 In addition to the warranties specified above, SCI warrants all
Products against Epidemic Failure (as defined below) found to
exist in the Products during the warranty period (Epidemic Failure
Period).
7.3.2 An Epidemic Failure shall mean a Product failure resulting from a
defect in material or workmanship (defined in Section 7.2.1) that
has: (i) a defect rate of [*]percent [*]or more occurring with the
same Product(s) for the same root cause over any consecutive
[*]day period, and/or (ii) a defect that causes [*]data center
outages for the same root cause within the Epidemic Failure
Period.
7.3.3 In the event of a suspected epidemic failure situation, SCI and
McDATA shall work together to (i) conduct a thorough investigation
into the failure's root cause, (ii) determine whether the failure
constitutes an Epidemic Failure as defined in this section, and
(iii) develop an agreed cost effective corrective action plan.
7.3.4 In the event of an Epidemic Failure, McDATA has the option of
having SCI, at SCI's expense: (i) sort, screen, repair and/or
replace McDATA's Product, including installed Products, Products
pending installation, and Spares which are subject to such
Epidemic Failure; and (ii) implement corrective action. The
parties will mutually agree on the time required to complete
servicing/correcting such Products. SCI shall reimburse McDATA for
all commercially reasonable direct (out of pocket) costs,
including without limitation all overhead and logistical costs
related to the implementation of the corrective action.
8. INVENTORY RISK MANAGEMENT
8.1 Lead Time Expectations. SCI shall actively work with its suppliers
to continually reduce component and in-house process lead times.
Additionally, SCI will provide a tracking report on component lead
times on a quarterly basis. Such report will reflect the number of
part numbers with lead time in thirty (30) day increments.
8.2 Non-cancelable Non-returnable (NCNR) Rules for Components.
Non-cancelable non-returnable (NCNR) is hereby defined as any
component that is unique to McDATA's Products and/or cannot be
returned to the supplier or utilized by SCI on other customer
programs. SCI agrees to notify ▇▇▇▇▇▇ in writing of any components
that are considered to be NCNR and for which SCI intends to hold
McDATA liable for payment to SCI. In such event, SCI shall not
place purchase orders for such NCNR components without receiving
prior written authorization from McDATA. McDATA may choose to use
a letter of intent to provide a blanket authorization for low
dollar NCNR items.
8.3 End-of-life Inventory Support. SCI will notify McDATA as parts
reach end-of-life, through a supplier of SCI declaring the
end-of-life of its parts. SCI will use best commercial efforts to
locate and qualify a reasonable alternative to replace the
end-of-life parts and/or components. If mutually agreed, SCI will
execute an end-of-life buy of such end-of-life parts or components
on ▇▇▇▇▇▇'s behalf. SCI will continue to manage the end-of-life
McDATA inventory for a mutually agreed upon term. SCI shall use
best commercial efforts to mitigate McDATA's liability for
carrying costs by requesting that its suppliers hold such
inventory. SCI shall provide to McDATA, on a monthly basis, a
summary report of on-hand and projected end-of-life liabilities.
8.4 Inventory Risk Limitation for Excess and Obsolete Inventory.
8.4.1 For purposes of this Agreement, (i) "excess inventory" means
on-hand and on-order inventory that has forecasted or purchase
order demand, but exceeds forecasted or purchase order demand, and
(ii) "obsolete inventory" means on-hand and on-order inventory for
which there is no forecasted or purchase order demand.
8.4.2 In the event SCI has excess and obsolete inventory SCI shall use
best commercial efforts to minimize McDATA's liability relative to
such E&O inventory by: (a) using the E&O inventory (when possible)
on other programs within SCI facilities; (b) issuing cancellation
notice on all outstanding material orders with SCI suppliers no
later than seventy-two (72) hours; and (c) returning piece parts
as allowed by SCI suppliers. On no less than a monthly basis, SCI
agrees to provide to McDATA or make available to McDATA a report
outlining such E&O inventory.
8.4.3 All E&O material that SCI sells to McDATA will be at the revalued
cost or SCI's purchase order/invoice cost, whichever reflects
SCI's true cost.
8.4.4 McDATA may audit SCI's records in support of SCI's claims herein
in accordance with Section 18.11.
8.4.5 From time to time it may be necessary for SCI to procure
components to support ▇▇▇▇▇▇'s intended but unforecasted
requirements. Such procurement shall be fulfilled pursuant to a
Letter of Intent (LOI) signed by both parties.
8.5 Supplemental First Choice Purchases. In the event McDATA has
excess inventory that may be consumed in the Products, SCI agrees
to purchase such inventory from McDATA as required to support
McDATA Product orders, and SCI further agrees to accordingly
adjust purchase orders for such parts that are in place with SCI's
vendors.
9. RISK MANAGEMENT
9.1 Disaster Recovery. Within thirty (30) days after the Effective
Date of this Agreement, SCI agrees to provide ▇▇▇▇▇▇ a formal
disaster recovery plan in writing. Such plan shall delineate SCI's
ability to continue process development, Product manufacture and
shipment, and to preserve contracted commitments in the event of a
disaster (e.g., fire, flood, loss of database or engineering
documentation, etc.). The plan shall be designed to encompass all
aspects of SCI's commitments.
The disaster recovery plan shall address, at a minimum:
a) alternate facilities to accommodate parts procurement,
assembly, test, storage and warehousing activities
b) alternate transportation methods to McDATA's specified
customers
c) SCI's database protection plan to include off-site
storage
d) replacement of tooling needed for the Products
e) actions which would be taken in the event of a strike by
SCI employees, outside suppliers, and outside groups
vital to the operation of SCI's business
f) estimated recovery time in the event that a disaster
occurred affecting the area listed above and any other
potential disaster
g) SCI's work-in-process (WIP) and raw stock position
h) plan for single and sole source components
i) archiving all design and manufacturing documentation in a
secured facility not located at or near SCI's facility.
9.2 Key Personnel. SCI shall notify McDATA in advance of any change in
SCI key personnel assigned to ▇▇▇▇▇▇'s account, including without
limitation, day-to-day operational contacts, SCI management team,
and any other individuals SCI believes to be key to SCI's
performance under this Agreement.
9.3 SCI Supplier Disaster Recovery Plan. SCI shall use commercially
reasonable efforts to ensure that each of its strategic sole
source suppliers supplying components for the Products has a
disaster recovery strategy in place similar to the requirements
stated in this section.
10 PROGRAM MANAGEMENT
10.1 Quarterly Reviews. SCI and McDATA shall participate in reviews, at
a minimum on a quarterly basis, to discuss pricing and delivery;
quality and reliability performance against mutually agreed upon
performance goals; Product changes; deliveries; NCNR quantities;
Economic Order Quantities; current and future business strategies;
and other business opportunities as necessary. Cost reduction
target attainment and suggestions for future cost reduction will
be highlighted, along with action plans to remedy anticipated
problems and to resolve existing problems.
10.2 On-site Support Expectations. No later than thirty (30) days
following the Effective Date, SCI agrees to place a technical
program manager ("On-site Program Manager") on-site at McDATA to,
at a minimum, coordinate the activities regarding (i) ECOs as set
forth in Section 4.6, (ii) component change(s), (iii) cost
reductions, (iv) supplier evaluations, (v) new Product
introduction (as set forth in Section 10.3). The On-site Program
Manager shall further act as liaison between SCI and McDATA.
▇▇▇▇▇▇ agrees to provide appropriate facilities at McDATA to
enable such On-site Program Manager to perform the duties in
accordance with this Agreement.
10.3 New Product Introduction Program Coordination. SCI agrees to
assume the program management for new product introduction (NPI)
for McDATA Products at SCI. SCI's NPI Program Manager shall manage
all aspects of NPI, including without limitation (i) quality
planning expectations as further defined in the SCI Contract
Quality Requirements, Appendix 4 attached hereto, including
without limitation, subcontract supplier selection and
qualification; receiving inspection; in-process inspection points
and criteria; closed loop corrective action ("CLCA"); (ii)
prototype, alpha and pre-production build support expectations;
qualification builds, reports and results; and (iii) DFx analysis
support (Manufacturability). SCI shall develop a project plan for
each NPI encompassing all such aspects of NPI as set forth above
("New Product Project Plan"), including without limitation,
defining the point at which SCI shall warrant to McDATA the
Manufacturability of any such new Product.
11. CONFIDENTIAL INFORMATION AND NON-DISCLOSURE
11.1 Confidential Information.
11.1.1 Each party acknowledges that it may have access to certain
Confidential Information of the other party. As used herein,
"Confidential Information" means any and all technical or business
or financial information, including third party information,
furnished or disclosed, in whatever form or medium (regardless of
whether tangible, intangible, visual or oral), by one party to the
other, including but not limited to information regarding patents
and patent applications, trade secrets, works of authorship,
software programs, software source documents, software
architecture, algorithms, formulae, ideas, techniques, know-how,
processes, inventions, apparatuses, equipment, models, information
related to current, future and proposed products and services,
research, experimental work, development, design details,
specifications and engineering information, procurement,
purchasing and manufacturing requirements, costs, pricing,
potential and actual customer lists, investors, employees,
business and contractual relationships, business forecasts, sales
and merchandising information, marketing plans; information
regarding third parties; and any physical manifestations of
Confidential Information (such as notes, reports, memoranda,
etc.). Confidential Information includes without limitation all
information that is clearly identified at the time of disclosure
as confidential or that, under the circumstances of its
disclosure, ought in good faith be treated as confidential.
11.1.2 The Recipient shall hold such Confidential Information in the
strictest confidence, and release such information only to those
employees requiring such information during the course of business
between the Parties. Each employee is subject to the Recipient's
confidentiality policy to protect disclosed Confidential
Information. Disclosure of such information to persons other than
Recipient's employees requires the Disclosing Party's prior
written consent. All such Confidential Information disclosed to
Recipient shall be and remain the sole property of the Disclosing
Party. Upon the Disclosing Party's request, ▇▇▇▇▇▇▇▇▇ agrees to
return all such Confidential Information and any copies thereof
and/or data which contains the Confidential Information.
11.1.3 SCI acknowledges that McDATA's and McDATA's customers' customer
lists and ship to addresses are the Confidential Information of
McDATA, and agrees to take all reasonable precautions to protect
the confidentiality of such, including without limitation 1)
complying with the terms and conditions of this Section 11; and 2)
taking special steps to ensure that Products being readied for
shipment are not labeled for shipment destinations until the last
practicable moment before pick up by the common carrier.
11.2 Exceptions. Information will not be deemed Confidential
Information hereunder if the receiving party can demonstrate that
such information: (a) is already known to the receiving party
prior to disclosure; (b) is independently developed by the
receiving party without the use of the disclosing party's
Confidential Information; (c) is or becomes publicly available
through no fault of the receiving party; or (d) is lawfully
disclosed to the receiving party by a third party without
restriction on disclosure and without breach of a nondisclosure
obligation. A party may disclose Confidential Information pursuant
to the requirements of a governmental agency or by operation of
law, provided that such party gives the other party reasonable
prior written notice sufficient to allow the other party time to
contest such disclosure.
11.3 Non-Disclosure Obligation. Each party agrees that for a period of
six (6) years following the disclosure of Confidential
Information, it (a) will not use, directly or indirectly, or
reproduce the Confidential Information of the other party for any
purpose except in accordance with the terms of the Agreement; (b)
will not disclose the Confidential Information of the other party
to any third parties except as expressly permitted in this
Agreement; and (c) will use reasonable care, but in all events at
least the same degree of care that it uses to protect its own
information of similar importance, to protect and maintain the
confidentiality of all Confidential Information of the other party
in its possession or control. Each party agrees not to disclose
Confidential Information to its employees or agents unless (1)
such employees or agents have a "need to know" such Confidential
Information and (2) have agreed in writing to be bound by
non-disclosure obligations at least as restrictive as those set
forth herein. Each party further agrees to take commercially
reasonably steps to ensure that the other party's Confidential
Information is not disclosed or distributed by its employees or
agents in violation of this Section 11.
11.4 Effect of Termination. Upon the termination or expiration of this
Agreement, or upon any request of a party, all Confidential
Information, together with any copies of same as may be authorized
herein, will (at the election of the disclosing party) either be
returned to the disclosing party or certified destroyed by the
receiving party. Notwithstanding the termination or expiration of
this Agreement, each party agrees the requirements regarding use,
confidentiality and non-disclosure set forth herein will survive
the termination or expiration of this Agreement for a period of
six (6) years from the date of the disclosure of the Confidential
Information. Notwithstanding the provisions of this Section 11,
SCI's obligation for non-disclosure with regard to ▇▇▇▇▇▇'s
Specifications and McDATA Process Documentation shall remain in
full force and effect and subject to the terms of this Section 11
indefinitely.
11.5 Injunctive Relief. In the event of any breach of this Section 11,
the parties agree that the non-breaching party may suffer
irreparable harm for which monetary damages would be an inadequate
remedy. Accordingly, the parties hereby agree that the
non-breaching party shall be entitled to seek injunctive relief,
in addition to any other available remedies at law or in equity.
11.6 Each party agrees that it will not, without the prior written
consent of the other party, transmit Confidential Information
received from the other party to any country outside of the United
States of America.
12. INDEMNIFICATION AND INSURANCE
12.1 By McDATA . Subject to the provisions of Section 12.4, ▇▇▇▇▇▇
agrees, at its expense, to defend, indemnify and hold harmless SCI
and its officers, directors and employees from and against all
third party claims, suits and proceedings (i) arising in
connection with product liability claims for the Products
resulting from McDATA's design of the Products or due to McDATA's
negligence or willful misconduct; (ii) relating to any breach of a
representation or warranty by ▇▇▇▇▇▇ hereunder, or (iii) based on
any third party claim that the Products infringe or violate any
United States patent or trademark, or worldwide trade secret or
copyright, and will pay all final judgments awarded or settlements
entered into on such claim, proceeding or suit. Notwithstanding
the foregoing, McDATA shall not be liable for any claim of
infringement to the extent any Product is altered or modified
without McDATA's authorization.
12.2 By SCI. Subject to the provisions of Section 12.4, SCI agrees, at
its expense, to defend, indemnify and hold harmless McDATA and its
officers, directors and employees from and against all third party
claims, suits and proceedings (i) arising in connection with
product liability claims for the Products resulting from SCI's
manufacturing process or due to SCI's negligence or willful
misconduct; (ii) relating to any breach of a representation or
warranty by SCI hereunder; and/or (iii) based on any third party
claim that SCI's manufacturing process of the Products infringes
any third party's United States patent or trademark, or worldwide
trade secret or copyright and will pay all final judgments awarded
or settlements entered into on such claim, proceeding or suit.
12.3 By Either Party. Subject to the provisions of Section 12.4, each
party shall defend, indemnify and hold the other party, its
officers, directors and employees from and against any and all
claims, including personal injury and death, losses, expenses
(including reasonable attorneys' fees), demand, or judgments
("Claims") which result from or arise out of:
12.3.1 The presence, of either party's agents, employees, subcontractors
(Personnel), or equipment on the property of the other party or
its customers that caused the Claims; or
12.3.2 The negligent performance by either party or its Personnel of any
effort for or on behalf of the other party; or
12.3.3 The negligent acts, errors, or omissions of either party or its
Personnel; or
12.4 Indemnification Procedures. The indemnifying party's
indemnification obligations are conditioned upon the indemnified
party: (i) giving prompt notice of the claim or action to the
indemnifying party; (ii) granting sole control of the defense or
settlement of the claim or action to the indemnifying party
(except that the indemnified party's prior written approval will
be required for any settlement that reasonably can be expected to
require a material affirmative obligation of, result in any
ongoing material liability to or materially prejudice or
detrimentally impact the indemnified party in any way); and (iii)
providing reasonable cooperation and, at the indemnifying party's
request and expense (except for the value of the time of the
indemnified party's employees), assistance to the indemnifying
party in the defense or settlement of the claim or action.
12.5 Insurance. Each party agrees to maintain appropriate worker's
compensation insurance for its employees as well as commercial
general liability insurance . SCI agrees to maintain insurance in
the following minimum amounts: $20,000,000 General Liability
insurance; and in excess of $20,000,000 property insurance. Upon
▇▇▇▇▇▇'s written request pursuant to the execution of this
Agreement, SCI will provide McDATA with proof of such coverage in
the form of a Certificate of Insurance. SCI further agrees to
notify McDATA of any changes in such insurance coverage. ▇▇▇▇▇▇'s
written request for SCI to issue a Certificate of Insurance should
be sent to the following: SCI Technology, Inc., Asset Management
Department, PO Box 1000, Huntsville, AL 35807.
13. LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY BE LIABLE
FOR ANY INDIRECT, SPECIAL, INCIDENTAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMIATION CONSEQUENTIAL
DAMAGES FOR LOSS OF PROFITS, REVENUE, DATA, RECORDS, OR USE,
INCURRED BY EITHER PARTY OR ANY THIRD PARTY, WHETHER ARISING UNDER
THEORY OF CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABLITY
OR OTHERWISE, EVEN IF THE OTHER PARTY OR ANY OTHER PERSON HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. CLAIMS (I) FOR DAMAGES
FOR BODILY INJURY OR DEATH OR DAMAGE TO PERSONAL PROPERTY DIRECTLY
CAUSED BY EITHER PARTY'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT;
(II) FOR BREACH OF REPRESENTATIONS OR WARRANTIES; (III) RELATING
TO THE PARTIES' OBLIGATIONS RELATING TO INDEMNIFICATIONS; OR (IV)
FOR BREACH OF CONFIDENTIALITY ARE EXCLUDED FROM THE FOREGOING
LIMITATION.
14. TERM AND TERMINATION
14.1 Term. The term of this Agreement shall be for one (1) year from
the Effective Date, and unless terminated pursuant to the
termination provisions of this Agreement, will automatically renew
for one (1) year terms. Either party may terminate this Agreement
without cause by providing the other party sixty (60) days written
notice.
14.2 Termination for Material Breach. In addition to any other rights
or remedies that may be available at law or in equity, a party may
terminate this Agreement if the other party is in material breach
of this Agreement and has not cured the breach within thirty (30)
days of written notice specifying the breach. If the breach is not
cured within the thirty (30) day period, termination will become
effective on the thirtieth (30th) day following the written
notice. Consent to extend the cure period for breaches other than
nonpayment of fees shall not be unreasonably withheld, so long as
the breaching party has commenced cure during the thirty (30) day
notice period and pursues cure of the breach in good faith.
14.3 Termination for Insolvency. Either party may immediately terminate
this Agreement by written notice to the other upon the occurrence
of any of the following events: (i) either party becomes
insolvent; (ii) a receiver is appointed for either party or its
property; (iii) either party makes, or attempts to make, an
assignment for the benefit of its creditors; (iv) any proceedings
are commenced by or for either party under any bankruptcy,
insolvency, or debtor's relief law and such proceedings are not
set aside within thirty days following their filing; and/or (v)
either party liquidates or dissolves or makes a good faith attempt
to liquidate or dissolve voluntarily or otherwise.
14.4 Inventory Indemnification. [*]
14.5 Effect of Termination. Termination of this Agreement and pursuant
liability of either party shall be limited in accordance with
Section 13. Notwithstanding, either party may seek injunctive
relief. The parties' rights and obligations under Sections 1, 4.7,
7, 11, 12 and 13 hereof shall survive termination of this
Agreement. In the event of termination or expiration of this
Agreement, SCI agrees to provide McDATA with all of the data and
records required in Appendix 4 (SCI Contract Quality
Requirements). The parties agree that for a period of six (6)
months following termination or expiration of this Agreement, the
terms of this Agreement shall apply to any purchase orders issued
by McDATA and subsequently accepted by SCI, provided SCI may
retain the Tooling required for the testing and manufacturing of
the Products.
14.6 Return of Materials. Upon the termination of this Agreement, each
party shall promptly deliver to the other party any of the other
party's proprietary information in its possession, including, but
not limited to, Confidential Information and/or developments, and
all notes, records, engineering notebooks, Tooling, and other
documents relating thereto. Each party shall continue thereafter
to promptly return to the other party any of the above mentioned
materials and all copies thereof that come into its possession.
14.7 Dispute Resolution. In the case of disputes between the Parties
that cannot be resolved upon one Party issuing and the other Party
receiving written notice of a dispute, the following escalation
sequence is mutually agreed between the Parties. Should the
dispute not be resolved within fifteen (15) calendar days after
dispute notification, both Parties agree to escalate the dispute
to the appropriate Corporate Executive VP's. Should the dispute
remain unresolved in the pursuing fifteen (15) day period from
escalation, the Parties will discuss the legal options which best
suit the dispute. In the event the Parties cannot agree on the
legal option (judicial, mediation, or arbitration) on the
thirty-fifth (35th) day after the dispute notification, the
Parties agree to seek Arbitration as the means of settling the
dispute. The Parties agree to use the Commercial Arbitration
Rules-Expedited Procedures of the American Arbitration
Association. If the Parties mutually agree upon one arbitrator to
hear the case, one arbitrator will be used. If the Parties cannot
agree upon one arbitrator, then each Party will chose one
arbitrator and the third arbitrator shall be selected by the other
two arbitrators. The period allowed for the arbitrator(s)'
discovery shall not exceed thirty (30) calendar days. Arbitration
shall be limited to fifteen (15) days following discovery
completion, and the judgment of the arbitrator(s) shall be final
and binding upon the Parties. Any arbitration pursuant to this
Agreement shall be held in Boulder, Colorado. Each party shall
bear its own expenses and shall share equally the administrative
expenses of the hearing, including, without limitation,
arbitration fees and the expenses of a court reporter.
15. MANUFACTURE RIGHTS. In the event (1) of proceedings in bankruptcy
or insolvency invoked by or against SCI, or in the event of the
appointment of an assignee for the benefit of creditors or a
receiver, or (2) SCI is no longer in business, and provided ▇▇▇▇▇▇
has complied with all its payment obligations under this
Agreement, SCI agrees to authorize only ▇▇▇▇▇▇ to produce the
Products. Such authorization shall be in the form of a
Manufacturing Rights Agreement between the parties for McDATA to
make, sell, offer for sale or export the Products. SCI's
Manufacturing Rights Agreement will allow McDATA to receive and
utilize SCI's manufacturing strategies and production
documentation, SCI Process Documentation, test procedures, all
data and records required in Appendix 4 (SCI Contract Quality
Requirements).. In the event the Products contain any SCI
Intellectual Property, SCI agrees to grant to McDATA a worldwide,
nonexclusive, irrevocable license to continued use of such SCI
Intellectual Property in the Products. SCI will grant McDATA
Manufacturing Rights including SCI Intellectual Property License
only if one (1) of the two (2) events stated above occurs.
16. MARKETING OR PUBLICITY. The parties may publicly refer to the
existence, but not the content, of this Agreement and may
reference their business relationship by creating a hyper-link
from one party's web site to the other party's web site. Neither
party shall use the name, trademark, or service mark of the other
party in any advertising, promotional material, or publicity
releases without first obtaining the other party's prior written
consent. SCI acknowledges and agrees that McDATA will file this
Agreement with the Securities and Exchange Commission (SEC), and
that McDATA will seek confidential treatment of pricing terms and
as otherwise allowed by the SEC.
17. Export Administration. Each party agrees to comply with the U.S.
Foreign Corrupt Practices Act and all relevant export laws and
regulations of the United States and the country or territory in
which the Products are provided ("Export Laws") to assure that
neither any deliverable, if any, nor any direct product thereof is
(i) exported, directly or indirectly, in violation of Export Laws
or (ii) intended to be used for any purposes prohibited by the
Export Laws, including without limitation nuclear, chemical, or
biological weapons proliferation.
18 GENERAL PROVISIONS.
18.1 Relationship of Parties. McDATA and SCI are independent
contractors. Nothing in this Agreement shall be construed to
create a partnership, joint venture, or agency relationship
between the parties. Neither party is granted the right or
authority to assume or create any obligation or responsibility,
express or implied, on behalf of, or in the name of the other
party, or to bind such other party in any manner to anything
whatsoever. It is expressly agreed that under no circumstances
shall any of the employees of one party be deemed the employees of
the other for any purpose. Each party shall be solely responsible
for payment of all compensation and benefits payable to its
employees, as well as all employment related taxes.
18.2 Notices. All notices required hereunder shall be in writing, and
shall be deemed given when transmitted by facsimile (provided such
facsimile is subsequently confirmed in writing within five (5)
days of the facsimile date) or deposited with an express delivery
services with guaranteed third day delivery, prepaid, addressed as
follows:
To SCI: With an additional copy to:
SCI Systems, Inc. SCI Systems, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇.
Colorado Springs, CO 80916-4226 Colorado Springs, CO 80916-4226
Attn: VP Plant Manager Attn: McDATA Operations Manager
To McDATA: With an additional copy to:
McDATA Corporation McDATA Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-3464
Attn: VP Manufacturing, Attn: General Counsel
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
cc: Manager, Contracts
Department
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
18.3 Force Majeure. Neither party shall be liable for any failure or
delay in its performance under this Agreement due to causes which
are beyond its reasonable control, including, but not limited to,
acts of God, acts of civil or military authority, fires,
epidemics, floods, earthquakes, riots, wars, sabotage, and
governmental actions; provided that (a) the delayed party: (i)
gives the other party written notice of such cause promptly, and
in any event within fifteen (15) days of discovery thereof, and
(ii) uses commercially reasonable efforts to correct such failure
or delay in its performance, and (b) the delayed party's time for
performance or cure under this Agreement shall be extended for a
period equal to the duration of the cause or sixty (60) days,
whichever is less. The party against whom this section is invoked
shall have the right to terminate the affected installments under
any purchase order. Notwithstanding, should McDATA be the party
claiming the force majeure event, McDATA shall be liable for any
applicable cancellation charges as set forth in Section 14.4
(Inventory Indemnification). This force majeure provision may not
be invoked for failure or inability to make a payment under this
Agreement.
18.4 Amendment. No provision of this Agreement will be deemed amended
or modified by either party, unless such amendment or modification
is made in writing and signed by authorized representatives of
both parties.
18.5 Non-Assignment; No Third-Party Rights. Neither party may assign
this Agreement or any of its rights or obligations hereunder
without the other party's prior written consent which shall not be
unreasonably withheld or delayed. In the event of such an
assignment, the assignor must provide written notice of its intent
to assign and the assignee must agree in writing to be bound by
the terms and conditions of this Agreement. Any assignment in
violation of the foregoing restrictions shall be null and void.
This Agreement shall bind and inure to the benefit of the
successors and permitted assigns of the parties hereto. This
Agreement is for the sole and exclusive benefit of the parties
hereto and not for the benefit of any third parties, and nothing
in this Agreement shall be construed as giving any rights to any
person not a party hereto.
18.6 Severability. If any provision of this Agreement is held to be
invalid or unenforceable by a proper authority having jurisdiction
over this Agreement, such provision shall be deemed null and void
and the remaining provisions of this Agreement shall remain in
full force and effect. The parties shall substitute for the
affected provision an enforceable provision that approximates the
intent and economic effect of the affected provision.
18.7 Further Assurances. The parties agree to execute, acknowledge and
deliver such further instruments, and to do all such other acts as
may be necessary or appropriate in order to carry out the purposes
and intent of this Agreement.
18.8 Attorney's Fees. If any litigation arises between the parties in
connection with this Agreement, the prevailing party will be
entitled to recover reasonable attorneys' fees, costs and expenses
from the other party.
18.9 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Colorado excluding its
choice of law provisions. Any action brought in connection with
this Agreement may be brought in the state or federal courts of
Colorado. In any such action, SCI submits to the personal
jurisdiction of such courts. The United Nations Convention on
Contracts for the International Sale of Goods (CISG) is
specifically excluded and shall not be applicable to any
transaction contemplated herein.
18.10 Entire Agreement. This Agreement, together with any applicable
appendices, constitutes the entire Agreement between McDATA and
SCI relating to the subject matter of this Agreement. This
Agreement supersedes the Manufacturing Agreement 01-92-01-0A and
its Amendment 01 (5/23/96) and Amendment 02 (4/30/98). This
Agreement takes precedence over any pre-printed terms and
conditions on invoices, purchase orders, acknowledgements, or
other forms used by the parties in carrying out the terms and
conditions of this Agreement.
18.11 Right to Audit. McDATA reserves the right to have access to such
SCI records for McDATA invoices, supplier purchase orders and any
other applicable documentation of cost and expenses incurred by
SCI in performance of this Agreement, for purpose of audit and
verification. Such audits may be performed by McDATA or by an
independent auditor selected by McDATA during normal business
hours and upon reasonable notice, for so long as such records are
required to be retained. SCI will retain such records for six (6)
years or as required by law. Further, McDATA reserves the right to
audit SCI and/or SCI's facilities at any time upon reasonable
notice, to ensure SCI's compliance with this Agreement. McDATA
shall ensure that any auditor performing audit duties, whether
McDATA personnel or an independent auditor selected by McDATA,
shall first have entered into SCI's confidentiality agreement.
18.12 Counterparts. This Agreement shall be executed upon the affixed
signatures of both Parties' duly authorized representatives. Three
(3) original copies shall be executed and be retained by the
following: one (1) original remains with McDATA, one (1) with SCI
Plant in Fountain, CO, and one (1) copy sent to SCI Contract
Department in Huntsville, AL.
18.13 Waiver. No waiver of any right or remedy on one occasion by either
party shall be deemed a waiver of such right or remedy on any
other occasion.
Appendix 1
PRODUCTS
McDATA PART # DESCRIPTION REVISION EAU*
------------- ----------- -------- ----
▇▇▇-▇▇▇▇▇▇-▇▇▇ FUJI BOX B [*]
▇▇▇-▇▇▇▇▇▇-▇▇▇ FUJI FPM H [*]
▇▇▇-▇▇▇▇▇▇-▇▇▇ SHASTA 32 BOX D [*]
▇▇▇-▇▇▇▇▇▇-▇▇▇ SHASTA 32 EMC A [*]
▇▇▇-▇▇▇▇▇▇-▇▇▇ SHASTA 16 BOX A [*]
▇▇▇-▇▇▇▇▇▇-▇▇▇ SHASTA 16 EMC A [*]
▇▇▇-▇▇▇▇▇▇-▇▇▇ REDCLOUD C [*]
▇▇▇-▇▇▇▇▇▇-▇▇▇ MONARCH CNTRL PNL E [*]
470-000370-402 MONARCH CTP A [*]
▇▇▇-▇▇▇▇▇▇-▇▇▇ MONARCH MXS C [*]
▇▇▇-▇▇▇▇▇▇-▇▇▇ MONARCH LASER C [*]
▇▇▇-▇▇▇▇▇▇-▇▇▇ MONARCH 8 PORT D [*]
▇▇▇-▇▇▇▇▇▇-▇▇▇ MONARCH 4 PORT D [*]
▇▇▇-▇▇▇▇▇▇-▇▇▇ MONARCH TOKEN RNG C [*]
▇▇▇-▇▇▇▇▇▇-▇▇▇ MONARCH MXC B [*]
▇▇▇-▇▇▇▇▇▇-▇▇▇ MONARCH LASER SPARE G [*]
▇▇▇-▇▇▇▇▇▇-▇▇▇ MONARCH LASER SPARE D [*]
▇▇▇-▇▇▇▇▇▇-▇▇▇ MONARCH D [*]
▇▇▇-▇▇▇▇▇▇-▇▇▇ SILVERCREEK BRIDGE B [*]
▇▇▇-▇▇▇▇▇▇-▇▇▇ GUNBARREL PORT C [*]
▇▇▇-▇▇▇▇▇▇-▇▇▇ GUNBARREL CLO F [*]
▇▇▇-▇▇▇▇▇▇-▇▇▇ GUNBARREL BACKPLANE C [*]
▇▇▇-▇▇▇▇▇▇-▇▇▇ GUNBARREL CTP A [*]
▇▇▇-▇▇▇▇▇▇-▇▇▇ GUNBARREL OP PANEL A [*]
*EAU refers to Estimated Annual Usage. McDATA does not intend for the EAU
to be a forecast or a binding commitment to order or purchase the estimated
quantities. The EUA is provided solely for reference.
Appendix 2
Quote Model
---------------------------------------------------------------------------------------------------------------------------
| SCI QUOTATION NUMBER: ASSEMBLY NUMBER:
| QUOTATION DATE: DESCRIPTION:
| REVISION LEVEL: LEAD TIME:
| McDATA CONTACT ANNUAL VOLUME:
---------------------------------------------------------------------------------------------------------------------------
1 MATERIAL COST $0.00
INDIRECT MATERIAL COST $0.00
TOTAL MATERIAL $0.00
MATL BURDEN $0.00
PPV AMORT $0.00
TOTAL MATERIAL $0.00
2 DIRECT LABOR
[*} $0.00
[*] $0.00
[*] $0.00
[*] $0.00
[*] $0.00
[*] $0.00
[*] $0.00
[*] $0.00
[*] $0.00
[*] $0.00
[*] $0.00
[*] $0.00
2A TEST
[*] $0.00
[*] $0.00
[*] $0.00
[*] $0.00
[*] $0.00
[*] $0.00
[*] $0.00
[*] $0.00
[*] $0.00
[*] $0.00
[*] $0.00
4 OTHER COST
[*] $0.00
[*] $0.00
[*] $0.00
[*] $0.00
[*] $[*}0.00
5 PROFIT $0.00
6 PRICE (LESS XCVRS) $0.00
7 OTHER MATERIAL COST $0.00
OTHER MATL BURDEN $0.00
TOTAL OTHER MATERIAL $0.00
8 TOTAL PRICE $0.00
NON-RECURRING EXPENSES:
------------------------------------------------------------ ------------ ---------- ----------
Item Unit Price Qty Ext Price
------------------------------------------------------------ ------------ ---------- ----------
Process Development $0.00
------------------------------------------------------------ ------------ ---------- ----------
Screen Print Stencil $0.00
------------------------------------------------------------ ------------ ---------- ----------
SMT Process Fixture $0.00
------------------------------------------------------------ ------------ ---------- ----------
Auto Insertion Fixture $0.00
------------------------------------------------------------ ------------ ---------- ----------
Wave Solder Tooling $0.00
------------------------------------------------------------ ------------ ---------- ----------
Post Wave Tooling $0.00
------------------------------------------------------------ ------------ ---------- ----------
ICT Fixture $0.00
------------------------------------------------------------ ------------ ---------- ----------
ICT Programming, Installation, Debug $0.00
------------------------------------------------------------ ------------ ---------- ----------
Functional Test Development $0.00
------------------------------------------------------------ ------------ ---------- ----------
Functional Test Hardware $0.00
------------------------------------------------------------ ------------ ---------- ----------
PWB Tooling $0.00
------------------------------------------------------------ ------------ ---------- ----------
Other $0.00
------------------------------------------------------------ ------------ ---------- ----------
TOTAL NRE COST $0.00
------------------------------------------------------------ ------------ ---------- ----------
THIS QUOTATION IS BASED UPON COST OF MATERIALS AND LABOR AT THE TERMS: [ * ]
TIME OF THE QUOTATION FOR THE ABOVE PRODUCT OR SERVICE. SCI SHIP POINT: SCI-COLO. SPGS.
RESERVES THE RIGHT TO REVISE PRICING TO REFLECT CHANGES IN COST F.O.B. POINT: BOULDER, CO
OF MATERIALS OR LABOR.
ALL TERMS AND CONDITIONS (UNLESS OTHERWISE STATED)ARE
PER THE EXISTING CONTRACT AND ITS ADDENDUMS. APPROVAL _______________________
Appendix 3
Price Matrix
Quarterly Sales Volume [*] [*] [*]
BURDEN [*] [*] [*]
PROFIT MARGIN [*] [*] [*]
OPTICAL TRANSCEIVER BURDEN [*] [*] [*]
The above Burden and Profit percentages will be applied beginning the first
day of the [*], based on the current forecasted purchase volume for that
[*]. At the end of each quarter the parties agree to a settlement of the
difference in forecasted percentages and the actual sales volume achieved.
Appendix 4
SCI Contract Quality Requirements
1. QUALITY SYSTEM
a. SCI shall maintain a certified quality system meeting, at a
minimum, the requirements of ISO 9002
b. SCI is subject to assessment to verify conformance to the
requirements of this document. This could be accomplished by
any or all of the following methods upon reasonable notice to
SCI:
i. SCI may be requested to complete a McDATA self-assessment
form with supporting evidence for the responses given
ii. McDATA Supplier Quality Engineers may conduct an on-site
assessment of SCI's quality system.
iii. McDATA may perform Source, Receiving, or In-process
inspection of SCI supplied materials to determine
conformance to requirements.
iv. McDATA may request documents and records to verify
compliance to system requirements.
2. QUALITY REQUIREMENTS
a. Products shall meet the following requirements, in order of
precedence:
i. Purchase Order
ii. Drawings and Bills of Materials
iii. Specifications referenced on Drawings
iv. IPC-A-610 (current revision) Class II (Circuit Card Assemblies)
b. Any items not in compliance with the above requirements must
be authorized via a McDATA Engineering Change Order (ECO),
Material Change Order (MCO) or McDATA Temporary Deviation
Authorization (TDA). TDAs shall be requested as soon as the
non-compliant condition is identified, and whenever possible,
prior to commence of build. Non-compliant Product without
authorization is considered SCI's risk and responsibility,
and these items are not to be delivered to McDATA until
authorization has been granted. ECOs, MCOs, and TDAs shall be
issued by McDATA at its sole discretion.
c. SCI is expected to deliver defect-free product and shall
implement all necessary process controls and evaluation gates
to ensure that Products are defect-free.
3. QUALITY AND DELIVERY PERFORMANCE
a. McDATA expects 100% defect free and on-time delivery.
b. McDATA will monitor SCI's delivered quality performance.
Defective Product delivered to McDATA will not only be
considered a quality defect, but will also not be considered
an on-time delivery. SCI agrees to stock a mutually agreed
upon number of SCI-owned Products at McDATA to be used as
replacement(s) for Defective Product ("Swap Stock"). Upon
notification by McDATA that Product is defective, McDATA will
pull an equivalent number of Product as replacement, and SCI
shall replenish the Swap Stock to the agreed upon level. If
there is sufficient stock in the Swap Stock to replace
Defective Product in accordance with this section, then such
delivery will not negatively impact the delivery status. In
the event there are certain Products for which SCI has not
established a Swap Stock, then upon notification by McDATA
that Product is defective, SCI will provide replacement
Product to McDATA on the date SCI receives such notification.
c. McDATA may perform Source Inspection at its discretion.
McDATA Source Inspection, if required, will be available
Monday through Friday, 8am - 5pm. SCI will be given notice
that source inspection will be required (the amount of notice
will be commensurate with the quality level of recent
delivery). SCI is responsible to take the availability of
source inspection into account when scheduling Product for
process and delivery.
i. SCI shall provide appropriate facilities for Source
Inspection, including but not limited to adequate and
ergonomically acceptable work space, equipment, lighting,
access to phone and other facilities as necessary.
ii. Source inspection does not constitute acceptance, and does
not preclude McDATA's rejection of such Product subsequent to
Source Inspection.
4. SUPPLIER CONTROLS
a. Supplier Selection
i. SCI shall not purchase any component or make-to-print
part for use in the manufacture of any Product from any
vendor other than those listed in the Manufacturer's
part list (MPL) in Agile for components and other
off-the-shelf items, or the Approved Supplier List (ASL)
for make-to-print parts unless otherwise directed in
writing by an authorized employee of McDATA. ▇▇▇▇▇▇
agrees to provide updated MSLs and ASLs to SCI on a
timely basis.
ii. Although it is ▇▇▇▇▇▇'s general policy to maintain a
consistent approved MPL or ASL for each Product, SCI is
encouraged to recommend substitutions to such list. Any
recommendation by SCI for such a substitution must
include without limitation:
o For MPL parts, one complete, original copy of the
manufacturer's specification
o For ASL parts, the completed supplier
qualification per the Supplier Qualification
requirements identified below
o Sufficient sample parts as identified by ▇▇▇▇▇▇
o Justification for such recommended substitution
including without limitation estimated cost
reduction/increase per assembly directly
attributable to the change
o Part Qualification MPL/ASL Addition Request
(format to be provided by ▇▇▇▇▇▇)
McDATA reserves the right to accept or reject any such
recommendation in its sole discretion.
b. Supplier Qualification
i. In accordance with ISO 9002 requirements, SCI shall
establish documented processes and criteria for the
selection and qualification of suppliers and
subcontractors (including other SCI facilities for those
components and assemblies in which SCI is recommending,
in addition to or in lieu of, McDATA's normal MPL/ASL
specifications). The process and criteria shall be
provided to McDATA Supplier Quality Engineering
personnel for review and agreement.
ii. SCI shall notify McDATA Supplier Quality Engineering of
the intent to qualify or re-qualify suppliers or
subcontractors. McDATA may choose to participate in any
Supplier management activities. Upon request by ▇▇▇▇▇▇,
SCI shall provide the results of supplier selection and
monitoring activities to McDATA.
iii. For ASL parts, SCI shall perform capability studies of
SCI-selected suppliers to ensure its long-term ability
to provide compliant material. The capability study and
its results shall be provided to McDATA for review and
approval.
iv. SCI reserves the right to operate to a subset of
McDATA-provided MPL/ASL.
c. Supplier Monitoring
i. SCI shall establish documented processes and criteria
for the monitoring of its suppliers and subcontractors
(including other SCI facilities). The process and
criteria shall be provided to McDATA Supplier Quality
Engineering personnel for review and agreement. McDATA
may request reports of the results of the monitoring
process at any time.
ii. SCI shall establish methods for the evaluation of MPL
and ASL parts to be used in McDATA Products to ensure
that all materials meet the requirements per applicable
drawing, BOM and specification for such parts. The
process and criteria shall be provided to McDATA
Supplier Quality Engineering personnel for review and
agreement. These methods shall be reviewed and updated
upon revision to drawings, BOMs or specifications, and
submitted to McDATA Supplier Quality Engineering.
iii. SCI shall perform First Article Inspection reports of
all make-to-print items to be used in McDATA production,
and shall submit them to McDATA Supplier Quality
Engineering for review upon request.
iv. SCI shall maintain records of material evaluations that
are performed upon receipt, and shall make such records
available to McDATA upon request.
d. Supplier Data: SCI shall provide supplier performance
reports, at a minimum to include yield and defect cause
information, for all strategic make-to-print items (to be
specified by McDATA). Reports will be provided at least
monthly, within one week after the end of the month in
consideration.
e. Supplier Corrective Actions: SCI shall provide weekly status
of any initiated, in-work, and completed Supplier Corrective
Action requests to suppliers of materials used in McDATA
production.
5. ASSEMBLY QUALITY
a. SCI shall complete a readiness review prior to production
build for any new Products. The readiness review shall meet
the requirements of a mutually agreed upon format, and shall
be confirmed by McDATA Supplier Quality Engineering prior to
the commencement of production build.
b. McDATA and SCI shall mutually agree on a plan for First
Article Inspection ("First Article Inspection Plan").
c. SCI shall perform First Article Inspection of all SCI-built
McDATA assemblies in accordance with the First Article
Inspection Plan, and shall submit reports of the results of
such inspection to McDATA Supplier Quality Engineering for
review. Such first article inspection report shall include
without limitation verification that established processes
and Products built to those processes meet specified
requirements. McDATA Supplier Quality Engineering may choose
to perform a duplicate first article inspection. McDATA
Supplier Quality Engineering will approve the first article
inspections prior to additional assembly in excess of the
First Article Inspection Plan. SCI will investigate root
cause and take corrective action for any first article
rejections.
d. SCI shall submit a Quality Plan for each program built at
SCI, per a mutually agreed upon format.
e. SCI shall provide a process map, which may be included in the
Quality Plan, for all McDATA Product build, showing data
collection points and Work Instructions which describe the
work performed at each step. Copies of the documents used and
data collected at each step shall be provided to McDATA as
reference. An updated process map and associated documents
shall be submitted upon any change.
f. Used electronic components (components which have been
previously soldered to and removed from an assembly or
subassembly) may not be reused even if such components are
known to be functionally acceptable unless mutually agreed to
in writing by the parties.
6. OUTGOING QUALITY CONTROLS
a. Out of Box Audit: SCI shall develop, implement and perform an
Outgoing Inspection Audit of Product that will be based on a
statistically valid continuous sampling plan. The sampling
plan to be used will be agreed upon by ▇▇▇▇▇▇ and SCI. The
outgoing inspection audit will be performed prior to delivery
of Product to McDATA Source Inspection and/or shipment to
McDATA or any McDATA customers. The outgoing inspection will
verify at a minimum the presence of and conformance to all
Specifications including:
i. all visual/cosmetic requirements
ii. workmanship
iii. configuration
iv. labeling requirements
v. accessory kit if applicable
vi. test completion/confirmation
7. RELIABILITY TESTING. SCI shall perform ▇▇▇▇, burn, and
Ongoing Reliability Testing Reliability Demonstration
(ORT/Rel demo) reliability tests as specified by McDATA, in
accordance with procedures described in SCI's Quality Plan
for each Product. ▇▇▇▇ and burn tests may be performed as a
normal part of the production process. ORT/Rel demo tests
shall be performed by SCI on a sample of finished Product as
a Product and process validation. Product is available for
shipment upon successful completion of such testing.
8. FAILURE ANALYSIS, ROOT CAUSE AND CLOSED LOOP CORRECTIVE ACTION
a. Level 1 Failures:
i. Level 1 Failures are failures during (a) the last 25% of
Burn Cycle; (b) Out of Box Audit Failures; (c) ORT and
Reliability Demonstration Failures; (d) Customer Returns
and Issues; or (e) a High Process Fallout/ Trend
(defined as three (3) or more failures for the same
fault in any thirty (30) day period).
ii. Any process in which yield has decreased 4% or more in a
week reporting period, or in which a yield decrease has
been reported for three (3) weeks in a row, shall be
treated as a Level 1 Failure.
iii. SCI shall identify a process owner responsible for the
analysis and closure of Level 1 Failures.
iv. SCI shall monitor process failures to identify Level 1
Failures. Upon identification of a Level 1 Failure, SCI
shall immediately notify McDATA Supplier Quality
Engineering in a special alert to McDATA.
v. SCI shall identify and implement a containment plan for
Level 1 Failures within twenty-four (24) hours of
identification, and shall convey that plan to McDATA
Supplier Quality Engineering for review.
vi. Failure analysis to the component level shall occur
within three (3) calendar days of the receipt of the
failure (or identification of the failure if from within
SCI).
vii. Failure Analysis to Root Cause shall be completed within
five to ten (5-10) business days of component
identification.
viii.Status reports for Analysis of Level 1 Failures shall be
weekly at a minimum and may be required daily until
closure.
b. Level 2 Failures:
i. Level 2 Failures are failures at (a) SCI Final Test or
Inspection; (b) McDATA Source or Receiving Inspection;
(c) or in-process at McDATA.
ii. SCI shall identify and implement a containment plan for
Level 2 Failures within twenty-four (24) hours of
identification and return to SCI if failed at McDATA.
iii. Failure analysis to the component level shall be
completed within three (3) calendar days of the receipt
of the failure (or identification of the failure if from
within SCI).
iv. Failure Analysis to Root Cause shall be completed within
twenty (20) business days of component identification.
c. Level 3 Failures
i. Level 3 Failures are routine in-process failures that do
not qualify as Level 1 or 2 Failures.
ii. Failure analysis to the component level shall be
completed within ten (10) calendar days
iii. McDATA reserves the right to require Failure Analysis by
SCI to the Root Cause to be completed within thirty (30)
calendar days of component identification.
iv. Replaced component parts shall be identified and
retained by SCI for no less than thirty (30) calendar
days after such replacement.
d. SCI shall immediately implement corrective action for all
Level 1 and 2 Failure causes related to SCI processes.
i. Upon request of McDATA Supplier Quality Engineering, all
affected items shall be identified.
ii. A containment plan shall be established, presented to
McDATA Supplier Quality Engineering for approval, and
implemented immediately.
iii. A long-term corrective action plan shall be developed
and presented to McDATA Supplier Quality Engineering for
approval. The corrective action status will be tracked
and reported weekly until implementation is completed
and effectiveness is verified.
9. QUALITY REPORTING AND DATA. Commencing on the Effective Date:
a. SCI shall provide weekly reports of process quality
performance, including yield, defect pareto, root cause, and
corrective actions. Process steps to be included in the
reports are to be mutually agreed upon by ▇▇▇▇▇▇ and SCI.
Level 2 and 3 Failures are included in these weekly reports.
b. SCI shall provide proof that delivered Product meets all
requirements including the successful completion of all
inspections and tests.
c. SCI shall report Failure Analysis queue levels on a weekly
basis, including quantity in each troubleshoot location and
aging of the items in each location.
10. COMMUNICATION
a. SCI will endeavor to provide acknowledgement by e-mail,
phone, fax or other method of communication, of all requests
for information or action, within one (1) hour of the request
being made by McDATA. SCI personnel will use all commercially
reasonable efforts to respond to ▇▇▇▇▇▇'s requests within
twenty-four (24) hours, with at a minimum, a plan for when
the issue will be closed. Quality Issues should be closed
with root cause and corrective action analysis within two (2)
to ten (10) days depending on the nature of the problem.
b. McDATA has the right to reject any items submitted by SCI for
review, and to ask for changes or corrections.
11. TRAINING
a. SCI shall establish a personnel training and certification
program for all assembly, test and inspection processes for
McDATA Product. SCI shall permit McDATA Supplier Quality
Engineering to audit the effectiveness of SCI's training
programs, and if requested, SCI shall submit training plans
to McDATA Supplier Quality Engineering for review and
approval. SCI training records shall be made available for
audit by McDATA upon request to verify that all personnel
engaged in the manufacture, test or inspection of McDATA
Product, have been certified capable of properly performing
their work.