EXHIBIT 10.13
SUPPLY AGREEMENT
No. C000325
FOR
MANUFACTURING AND RELATED SERVICES
Between
SOLECTRON CORPORATION
And
ZHONE TECHNOLOGIES, INC.
SUPPLY AGREEMENT
No. C000325
This Supply Agreement ("Agreement") is entered into by and between Solectron
Corporation, located at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, by and on
behalf of its subsidiaries and affiliates ("Solectron") and Zhone Technologies,
Inc., located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, by and on
behalf of its subsidiaries and affiliates ("Zhone").
1.0 Agreement Structure
1.1 This Agreement shall become effective concurrently with the date of
execution of the Asset Purchase Agreement ("Effective Date").
1.2 This Agreement consists of: (i) this base Supply Agreement which defines
the basic terms and conditions of the relationship between the parties;
(ii) Statements of Work; and (iii) the following Exhibits, which detail
among other things specific information regarding work performed under this
Agreement
Exhibit A-1 - Products
Exhibit B-1 - Pricing Model
Exhibit C-1 - Flexibility/Cancellation/Component Liability
Exhibit D - Out of Warranty Services
Exhibit E - Commodity Substitution Approval Form
1.3 If there is a conflict among the terms and conditions of the various
documents or an ambiguity created by differences between them, the order of
decreasing precedence shall be (i) Statements of Work, (ii) Exhibits, and
(iii) Supply Agreement.
2.0 Definitions
"Asset Purchase Agreement" shall mean that certain Asset Purchase Agreement
dated March 13, 2000, between Solectron Texas, L.P. and Premisys
Communications, Inc.
"Components" shall mean any parts, material, components, or other items
that are used in the manufacture and assembly of Products.
"Engineering Change" or "EC" shall mean any electrical or mechanical
change(s) to a Product which would affect the function, performance,
programming model, reliability, safety, serviceability, appearance,
dimensions, tolerances, or composition of bills of material, or material
sources thereof.
"Engineering Support Services" means those services described in Section
5.3.
"Excess Components" means Components in Solectron's inventory that were
purchased within agreed to material order Lead Times and in quantities to
support Zhone's demand forecast, which
are non-cancelable and/or non-returnable and for which the latest demand
forecast does not show consumption in any Product within the next ninety
(90) days.
"Final Premium Amount" has the meaning specified in Section 2.5 of the
Asset Purchase Agreement.
"Lead Time" means (i) with respect to Components, the minimum length of
time prior to a specific delivery date that Solectron must issue a purchase
order for Components to ensure delivery by such date; and (ii) with respect
to Products, the minimum length of time prior to a specific delivery date
that Solectron must receive an order from Zhone to ensure manufacture and
delivery by such date.
"Manufacturing Design" means any Work Product or any other material,
including mechanical design elements in support of the manufacturing
process, that relate to manufacturing equipment, manufacturing processes
and/or the manufacturability of Products (i.e. DFX).
"Manufacturing Services" means those services described in Section 5.2.
"Material Breach" means those events of breach set forth in Section 16.1.
"No Defect Found" or "NDF" shall mean a Product whose function was suspect,
but no specific fault was detected in Solectron's performance of failure
analysis.
"Obsolete Components" means Components in Solectron's inventory that were
purchased within agreed to material order Lead Times and in quantities to
support Zhone's demand forecast, which are non-cancelable and/or non-
returnable and for which the latest demand forecast does not show
consumption in any Product within the next one-hundred eighty (180) days.
"Order" shall have the meaning specified in Section 6.4.
"Pre-existing Work Product" means Work Product created or owned (as between
Solectron and Zhone) by one party prior to the date of this Agreement.
"Pre-Production Services" means those services described in Section 5.1.
"Product(s)" means the completed assemblies manufactured by Solectron and
also includes any field replaceable units, specific components of a field
replaceable unit, subassemblies of a field replaceable unit, service Parts,
documentation, code and related Services associated with the completed
assemblies as specified in the Exhibits. Products shall not include
Prototypes. The initial Products covered by this Agreement are set forth
on Exhibit A-1 ("Initial Products"). The parties may add or delete
Products from this Agreement only by mutual agreement. Any Products added
will be set forth in additional Exhibits (e.g., Exhibit ▇-▇, ▇▇▇▇▇▇▇ ▇-▇,
etc.) signed by both parties ("Follow-on Products"). In lieu of a separate
Product Exhibit, the parties may agree to add Products via quotations
against which Orders are placed. The term Products shall mean only Initial
Products and any Follow-on Products, only if applicable.
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"Product Design" means any Work Product or any other material, including
electrical, mechanical, industrial, circuit and/or schematic design
elements, and Product Specifications, that relate to the functional design
of the Products.
"Prototype" means a preliminary version of a Product which may or may not
be functional, is intended for internal use and testing and not for resale,
and is not suitable for production in commercial quantities.
"RMA" means returned material authorization.
"Return" means an amount equal to the product of the Final Premium Amount
times 1.333.
"Services" shall mean the pre-production, manufacturing, testing,
engineering, and other related services described in this Agreement,
applicable Exhibits, and Statements of Work.
"Statement(s) of Work" shall mean documents agreed to in writing by both
parties, which describe the work to be performed, the pricing for such
work, the specifications and any supplemental terms that additionally apply
to such work. In the absence of such separate document(s), Solectron's
quotation(s) against which Zhone's orders are submitted and accepted will
constitute the Statement(s) of Work. This Agreement may include multiple
Statements of Work.
"Specifications" shall mean that portion of each Statement of Work that
provides objective, physical specifications for work to be performed.
Solectron will purchase and assemble material according to such
specifications. The Commodity Substitution Approval Forms attached hereto
and incorporated herein (Attachment B) shall be considered part of Zhone's
specifications.
"Test Design" means any Work Product or other material, including test
development, programming, or processes, related to testing a Product.
"Tooling" means equipment, fixtures, tools, testers, code and other similar
items used in performance of this Agreement.
"WIP" means work-in-process and relates to partially completed Products in
Solectron's manufacturing process.
"Work Product" means (a) any net list, schematic, diagram, circuitry,
technology, invention, idea, discovery, improvement, design, concept,
technique, algorithm, formula, method, process, configuration, mechanism,
model, system, network, data, plan, library, work of authorship, file,
media, record, report, copy, pictorial work, graphic work, audiovisual
work, hardware, firmware, computer interface (including for example but not
limited to programming interfaces), computer language, computer protocol,
computer software program or application (irrespective of whether source
code or object code), flow chart, blueprint, drawing, graph, information,
material, research or development, irrespective of whether patentable, or
(b) any portion, copy or extract of such Work
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Product, irrespective of whether in tangible or intangible form, and
irrespective of the media of such Work Product.
3.0 Term
3.1 Except as provided by Section 16.0, this Agreement shall be effective on
the Effective Date and shall remain in force for (i) the Initial Products
for four (4) years, and (ii) any Follow-on Products until such time as the
parties execute a separate, definitive agreement covering those Products
(the "Initial Term"). Following the Initial Term, this Agreement shall
automatically be renewed for one (1) year. Thereafter, this Agreement shall
automatically be renewed for successive one (1) year increments unless
either party requests in writing, at least ninety (90) days prior to the
anniversary date, that this Agreement not be so renewed. The parties
acknowledge the need to better understand the business model for, and
appropriate terms that should apply to, Follow-on Products and the parties
will endeavor to negotiate a separate agreement to address these Products.
4.0 Purchase Commitment and Prices
4.1 During the Initial Term and subject to the limitations set forth herein,
Solectron shall supply and Zhone shall purchase Initial Products and
related Manufacturing Services exclusively from Solectron.
4.2 The pricing model for the Initial Products is set forth in Exhibit B-1,
which may be changed by mutual agreement of the parties by executing a new
pricing model. The pricing model for Follow-on Products will be set forth
in an additional Exhibit(s) that corresponds to the applicable Product
Exhibit (e.g., Exhibit ▇-▇, ▇-▇, etc.) which is signed by both parties, or
in a quotation against which Orders are placed. During the Initial Term of
this Agreement, the prices for Initial Products (and any other mutually
agreed Products) will include a five percent (5%) ▇▇▇▇-up over the agreed
base pricing model to enable Solectron to recover the Return. During the
Initial Term of this Agreement, the parties agree to meet on each
anniversary of the Effective Date to review the status of Solectron's
recovery of the Return. If Solectron recovers the Return prior to the
expiration of the Initial Term of this Agreement, then the prices then in
effect will be reduced by the five percent (5%) ▇▇▇▇-up. At each review,
if the revenue stream from the Products is not achieving an annual run-rate
that is consistent with recovery of the Return during the Initial Term of
this Agreement, then within thirty (30) days of said review, Zhone will
make a payment to Solectron equal to that portion of the Return on a pro-
rated basis that has not been recovered at the time of the review. The
parties further agree that if Solectron has not recovered the Return by the
expiration of the Initial Term of this Agreement, then within thirty (30)
days of the expiration of the Initial Term of this Agreement, Zhone will
make a payment to Solectron equal to that portion of the Return that has
not been recovered by Solectron.
4.3 In the event that Zhone rightfully terminates this Supply Agreement in
accordance with Section 16.1 for Solectron's Material Breach, Zhone's
purchase commitment contained in Section 4.1 above and Zhone's guarantee
that Solectron shall receive the Return contained in Section 4.2 above will
be terminated without further obligation to Solectron.
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4.4 Prices for Pre-Production, Engineering Support Services, Out-of-Warranty
Service, and all other services will be mutually agreed to by the parties.
4.5 The parties acknowledge and agree to meet quarterly to review the Product
prices for the purpose of reducing the Product prices for the upcoming
quarter. Each party shall diligently pursue cost improvement opportunities
for each and every element of the price to reduce the cost of the Products,
including but not limited to, recommending design or process changes, and
new sources, which may result in an overall cost reduction. The parties
acknowledge and agree that the Price for any particular Product may be
increased to the extent of any price increase of any Component incorporated
into such Product or any increases in assembly or test time due to any
Engineering Change order or specific instructions from Zhone. Any price
change shall apply only to purchase orders or material releases issued
after the effective date of such price change.
5.0 Products, Services and Systems
5.1 Pre-Production Services.
(i) Solectron shall provide Pre-Production Services to Zhone as agreed
upon by the parties. The specific scope of Pre-production Services will be
specified in the Statement of Work applicable to the Product, and may
include, without limitation, the following:
A. design for manufacturing and test evaluations
B. development of assembly and test processes
C. development of test programs and/or fixtures
D. production of prototype and/or validation units
(ii) Solectron will perform such Pre-Production Services and deliver any
pre-production deliverables to Zhone in accordance with the pre-production
schedule and accepted order(s) applicable to such Pre-Production
Deliverables. If Zhone requires Solectron to produce prototype builds,
Solectron will:
A. deliver each such build within five (5) days of commencing
production of the prototype build provided Solectron has all
necessary material, documentation, tools, fixtures and equipment;
B. deliver a DFM report to Zhone within five (5) days after
delivering a prototype build to Zhone.
(iii) Solectron shall operate a prototype facility dedicated to production
of pre-production deliverables in such a manner as to ensure that the
prototype build activity will not hinder Solectron's manufacturing
capability to meet Zhone's Product demand requirements and vice versa.
(iv) The parties shall agree in writing upon pricing for prototype and
pilot builds. Costs for other services will be handled in accordance with
the provisions of Section 5.3 below.
(v) Test Engineering. Zhone will provide Solectron with test vectors and
all other information reasonably necessary to develop test programs and
fixtures for the Products. Solectron will designate a test engineer(s), as
Zhone deems necessary and as mutually agreed, who shall be responsible for
interacting with Zhone's test engineering group in a timely manner to
develop and/or support (as specified in the relevant Product plan) test
programs and test fixtures for use in manufacturing such Product for Zhone.
Upon mutual agreement by the parties, Solectron will locate such test
engineer(s) at Zhone's engineering facilities.
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(vi) Pre-Production Reports and Reviews. Prior to the award of any pre-
production program by Zhone, Solectron shall provide Zhone with a project
plan which includes a detailed timeline with milestones. Upon award of any
pre-production program by Zhone the parties will mutually agree upon the
detailed project plan. During the pre-production program, Solectron will
provide Zhone with regular written progress reports at least monthly. All
such reports shall include, but shall not be limited to, the following: (A)
status of progress toward milestones; (B) short description of problems or
potential problems, if any, preventing Solectron from meeting the
milestones; (C) recovery method proposed in order to meet milestones, if
needed, and (D) any other information related to the pre-production
Services as reasonably requested by Zhone.
(vii) Zhone shall have the right to conduct periodic reviews of Solectron's
Pre-Production Services. Upon reasonable notice, Solectron will allow
Zhone, during Solectron's normal business hours, to visit those portions of
Solectron's facilities used to perform such pre-production Services to
inspect and discuss the status of pre-production activities.
5.2 Manufacturing Services. Solectron will accept any Orders for Products
issued in accordance with this Agreement. Solectron agrees to manufacture,
test, package and deliver the Product quantities committed in accordance with
the Specifications and Quality Plan for such Products and deliver such
quantities to Zhone or its customers, pursuant to the terms of this Agreement.
5.3 Engineering Support Services. Solectron shall provide Engineering Support
Services which shall include, without limitation, the following:
A. Designated Component Engineering liaison to interact with Zhone's
designers. Such liaison will, among other things, assist in the
selection of Components meeting design requirements and coordinate
Component evaluations and qualifications.
B. Support Zhone's quick turn prototype requirements.
C. Perform Beta Pilot production checkout.
D. Provide seamless transfer from prototype/pilot environment to
Solectron's volume production sites.
Such services will be provided at mutually agreed pricing and, except as
provided otherwise herein, billed in the period supplied. Designated
resources will be billed on a monthly basis.
5.4 Out-of-Warranty Service. Solectron shall provide Out-of-Warranty Service
to Zhone under terms and conditions substantially similar to the form attached
as Exhibit D.
5.5 Failure Analysis, Repair and Refurbishment. Solectron shall provide failure
analysis, repair and refurbishment services to Zhone for both in-warranty
and out-of-warranty Products as set forth in Section 15.2 and Exhibit D,
respectively.
5.6. Program Management. Each party shall designate a manager authorized to
act as its worldwide single point of contact for all business and
strategic issues pertaining to this Agreement. In addition, Solectron shall
designate a program manager(s), who may be physically located at Zhone's
facility, to act as Solectron's single point of contact with Zhone in
connection with each new Product release to be manufactured by Solectron
hereunder. The parties shall agree upon in writing the scope of the
program manager's responsibilities during the Product life cycle. Solectron
shall implement a
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dedicated "customer focus team", consisting of (at least) one (1) program
manager, one (1) materials manager and one (1) technical manager. The
responsibility of the customer focus team shall be to manage Solectron's
performance hereunder.
5.7 Tooling and NRE. The Parties acknowledge and agree that Solectron may
incur non-recurring expenditures for Tooling, software programs and other
expenses for the manufacture of the Products. All such non-recurring
expenditures will be agreed upon in writing by Zhone and Solectron prior to
incurrence and be the subject of separate purchase orders which will be
independent of any Orders for Products. Solectron will invoice Zhone for
such approved expenditures and such invoices will be paid by Zhone within
ten (10) days of the date of the invoice. Unless otherwise agreed in
writing by the parties, Tooling will be furnished and owned solely by Zhone
and consigned to Solectron, or purchased or manufactured by Solectron and
paid for by Zhone. Solectron shall bear the cost of maintaining Tooling;
provided, however, that Zhone will bear the cost of repairing or replacing
Tooling that becomes obsolete or experiences significant defects or quality
problems. All Zhone Tooling/equipment furnished to Solectron or paid for by
Zhone in connection with this Agreement shall: (i) be clearly marked and
remain the personal property of Zhone; and (ii) be kept free of liens and
encumbrances. Solectron shall hold Zhone property at its own risk and
shall not modify the property without the written permission of Zhone. Upon
Zhone's request, Solectron shall redeliver the property to Zhone in the
same condition as originally received by Solectron with the exception of
reasonable wear and tear. In the event the property is lost, damaged or
destroyed, Solectron's liability for the property is limited to the book
value of the property.
5.8 Systems. Zhone and Solectron agree that Zhone's order management and
fulfillment system will be installed at Solectron on or before the
Effective Date of this Agreement. Zhone is responsible for maintaining
this system and will provide all resources and pay for all costs associated
with such maintenance. Solectron will have a license to access and use
this system for the purpose of performing its obligations under this
Agreement.
6.0 Material Procurement, Orders
6.1 Solectron will procure Components only from Zhone's authorized vendors.
Zhone will provide Solectron with an approved vendor list for each phase of
Product manufacture. Solectron will not procure Components from alternate
vendors nor deviate from the approved vendor list without prior written
approval or as provided in Exhibit E. Solectron may, from time to time,
suggest its preferred suppliers as alternate vendors to Zhone and Zhone
agrees to use reasonable commercial efforts to evaluate and approve
Solectron's preferred suppliers for addition to the approved vendor list.
6.2 Zhone will provide Solectron a rolling six (6) month Product forecast. The
most recent three (3) months of such forecast will reflect weekly Product
demand and such portion of the forecast will be updated weekly via the
order management and fulfillment system. In addition, during the first
month of the current calendar quarter, Zhone will provide Solectron with a
quarterly blanket purchase order for the following calendar quarter, which
will be refreshed at least once every thirty
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(30) days. Such forecast and blanket purchase order will not be binding on
Zhone and do not represent a commitment to purchase Products except as
otherwise set forth in this Agreement.
6.3 Solectron is authorized to purchase Components to support Zhone's blanket
purchase order and forecast pursuant to Component Lead Times and consistent
with standard purchasing practices including, but not limited to,
acquisition of economic and minimum order quantities. Zhone recognizes its
financial responsibility for the Components purchased by Solectron on
behalf of Zhone in accordance with this provision to the extent such items
are non-cancelable and/or non-returnable.
6.4 For the Initial Products and any other mutually agreed Products, Solectron
will utilize Zhone's order management and fulfillment system to monitor and
respond to Zhone's actual Product demand. Zhone's receipt of a customer
order in its order management and fulfillment system is Solectron's
authorization to manufacture and ship Product and Zhone's commitment to buy
Product in the quantities specified in the customer order (an "Order") or
as otherwise committed by Solectron pursuant to Sections 7.0 and 8.0. In
all other cases, Zhone will issue purchase orders or material releases
against a blanket purchase order (also an "Order"). Solectron will notify
Zhone of its acceptance or rejection of the Order within five (5) business
days of receipt. Rejections, if any, will be based on the quantities
requested as compared to those previously forecasted. In the event that
Solectron does not notify Zhone of its acceptance or rejection, then such
Order will be deemed accepted. Accepted Orders will constitute Zhone's
authorization for Solectron to manufacture and ship Product to Zhone in the
quantities agreed.
6.5 In the event of a decrease in Zhone's forecast or blanket purchase order
quantity, reschedule or cancellation of an Order, discontinuance of
Product, or an engineering change, Zhone agrees to compensate Solectron for
Excess Components in accordance with Section 10.1 below.
6.6 Solectron shall undertake all commercially reasonable efforts to cancel all
applicable Component purchase orders and reduce Component inventory through
return for credit programs or allocate Components for alternate programs if
applicable.
7.0 Delivery
7.1 Solectron will use all commercially reasonable efforts to achieve 100% on
time delivery, defined as shipment of Product by Solectron within a window
of three (3) days early and zero days late of the committed delivery date.
Upon learning of any potential delivery delays, Solectron will notify Zhone
as to the cause of such delays and the actions taken by Solectron to
resolve such delays. Solectron's Lead Time for Orders received with
quantities that are equal to or less than those specified in the most
recent weekly forecast is ten (10) days unless Zhone is notified otherwise
in writing by Solectron at least thirty (30) days prior to receipt of the
Order. For any Orders received with materially different quantities or a
shorter Lead Time, Solectron will notify Zhone of the committed delivery
date.
7.2 All U.S. origin shipments by Solectron are F.O.B. Solectron's point of
shipment (i.e., at Solectron's manufacturing plant). All other shipments
are Ex Works-Solectron's point of shipment (i.e., at
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Solectron's manufacturing plant). Title to Product(s) and risk of loss will
pass to Zhone upon Zhone's or its agent's retrieval of Product(s) at
Solectron's point of shipment.
7.3 Zhone shall have a reasonable time to inspect the Products. Zhone will
notify Solectron in writing of particular deficiencies during the
inspection period which shall be the ten (10) day period immediately
following receipt. Failure to give notice of or particularize the
deficiencies will constitute Zhone's acceptance.
7.4 If applicable, Solectron shall provide Zhone with a valid, accurate
completed Exporter's Certificate of Origin for all Products which qualify
for preferential duty treatment under the North American Free Trade
Agreement ("NAFTA"). Solectron shall deliver the Exporter's Certificate of
Origin to Zhone prior to the first shipment of such Products in order to
enable Zhone to claim preferential duty treatment under NAFTA at the time
of entry. Solectron shall notify Zhone in writing prior to making any
pricing or sourcing changes that might result in the Products being deemed
ineligible for preferential duty treatment under NAFTA. Solectron
recognizes that the Exporter's Certificate of Origin will be used by Zhone
as proof of eligibility for preferential duty treatment and agrees to
provide full cooperation to Zhone in connection with any U.S. Customs
inquiries into NAFTA claims relating to this Agreement.
7.5 Zhone reserves the right to claim duty drawback on all purchases from
Solectron, and Solectron shall cooperate by providing the necessary
certificates of Delivery or in instances where the imported Product
received further processing, shall furnish certificates of manufacture and
delivery on all articles and Products which may be subject to drawback as
requested by Zhone.
8.0 Flexibility of Shipments
The parties may agree to different flexibility terms that will apply to
specific Products by executing a Flexibility/Cancellation/Component
Liability Terms Exhibit C that corresponds to the applicable Product
Exhibit (e.g., Exhibit C-1, C-2, etc.) In the absence of such different
terms, the following flexibility terms will apply to any effective Product
Exhibits.
8.1 Request to Accelerate Delivery. Zhone may request acceleration of delivery
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of Products by issuing an electronic or written (including facsimile)
notice to Solectron, or by increasing its forecasted Product demand in the
order management and fulfillment system. Solectron will use all
commercially reasonable efforts to accept the requested new delivery date.
Solectron will notify Zhone of and seek Zhone's prior written agreement to
reasonable and actual premium costs, if any, required to meet the requested
accelerated delivery date. Zhone will have the option of accepting these
premium charges or maintaining the original delivery date.
8.2 Confirmation and Acceptance of Request to Change Product Mix or Accelerate
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Delivery. Solectron agrees to give electronic or written (including
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facsimile) confirmation of receipt of Zhone's request within five (5)
business days. Zhone's request shall be deemed accepted by Solectron if
Zhone does not receive Solectron's electronic or written (including
facsimile) acceptance or rejection within five (5) business days after
receipt of Zhone's request.
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8.4 Request to Delay Delivery
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(i) Zhone may reschedule individual shipments of Product. Solectron will
use reasonable efforts to accommodate such requests on a case-by-case
basis. Such reschedules may be subject to additional charges and will be
contingent upon availability of material, personnel and capacity resources.
If the requested rescheduled delivery date is more than ninety (90) days
after the original scheduled delivery date, the affected inventory may be
deemed Excess Components, and the terms of Section 10.1 will apply. Such
charges shall be reviewed and approved by Customer prior to the reschedule
being executed. Any rescheduled item may be invoiced at the price in effect
at the time of shipment.
(ii) Zhone will notify Solectron of its request by issuing an electronic or
written (including facsimile) notice to Solectron, or by decreasing its
forecasted Product demand in the order management and fulfillment system.
Solectron will respond to Zhone's request to delay delivery of Product
demand within five (5) business days from the receipt of Zhone's request.
If Zhone does not receive Solectron's written (including facsimile) or
electronic response within five (5) business days after receipt of Zhone's
request, then Zhone's request shall be deemed accepted by Solectron.
9.0 Cancellation of Shipments
The parties may agree to different cancellation terms that will apply to
specific Products by executing a Flexibility/Cancellation/Component
Liability Terms Exhibit C that corresponds to the applicable Product
Exhibit (e.g., Exhibit C-1, C-2, etc.) In the absence of such specific
terms, the following cancellation terms will apply to any effective Product
Exhibits.
9.1 Zhone's requests to cancel shipments of Products will be reviewed
individually by Solectron. Cancellation charges will be assessed as
follows: (a) for shipments scheduled to ship within forty five (45) days,
cancellation charges shall be 100% of the price of the Products being
canceled; (b) for shipments scheduled beyond forty five (45) days,
cancellation charges will include: (i) the contract price of all finished
Products in Solectron's possession, (ii) the cost of work-in-process
inventory (including handling charges and value add), (iii) the cost of
Components on order (including handling charges) or on hand which cannot be
canceled or returned to the vendor pursuant to the terms of Section 10.1
below, (iv) any vendor cancellation charges incurred with respect to
material canceled or returned to the vendor, (v) material handling charges,
and (vi) charges for non-recurring services associated with work stoppage.
Charges will be based on the date written notice of a cancellation is
received at Solectron.
9.2 Where cancellation of a previously rescheduled shipment has occurred, the
cancellation charge may be computed as if the previously requested
reschedule had instead been a request for cancellation.
9.3 Orders for Tooling, test equipment or non-recurring services are firm and
not cancelable.
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10.0 Excess and Obsolete Components
The parties may agree to different Component liability terms that will
apply to specific Products by executing a
Flexibility/Cancellation/Component Liability Terms Exhibit C that
corresponds to the applicable Product Exhibit (e.g., Exhibit C-1, C-2,
etc.) In the absence of such different terms, the following Component
liability terms will apply to any effective Product Exhibits.
10.1 If Zhone cancels or reschedules Orders, changes its forecast, fails to
receive customer orders in its order fulfillment and management system, or
implements an Engineering Change notice, or breaches this Agreement (such
actions shall collectively be referred to as a "Material Event"), which
results in Excess and/or Obsolete Components (including long lead material,
MOQ's, and unique/custom material), then if those Excess and/or Obsolete
Components are not fully consumed prior to the end of sixty (60) days
following the date of the Material Event, Solectron may request and Zhone
agrees to pay Solectron a carrying charge on the inventory of two percent
(2%) per month. Zhone agrees to pay such carrying charge on such Excess
and/or Obsolete Components until it is fully consumed; provided, however,
that if it is not consumed by the end of the ninety (90) days following the
date of the Material Event, Solectron may request and Zhone shall purchase
such Excess and/or Obsolete Components from Solectron and Solectron will
continue, at Zhone's option, to hold such inventory on Zhone's behalf,
subject to agreed carrying charges, or Solectron will deliver the
Components to Zhone's designated location at Zhone's expense. Solectron
will use all commercially reasonable efforts to minimize the Excess and/or
Obsolete Components.
11.0 Invoice and Payment Terms
11.1 Solectron will invoice Zhone upon shipment of Product. Solectron and Zhone
agree to payment terms of net ten (10) days from the date of invoice or
delivery of Product, whichever occurs later. If Zhone fails to make timely
payment or satisfy credit arrangements, it shall be deemed a Material
Breach of this Agreement as more fully set forth in Section 16.1. In this
event, Solectron may, in addition to any other rights and remedies provided
at law or in equity, suspend its performance under this Agreement and
withhold shipment of Products, refuse to accept further orders, change
credit and payment terms, request other assurances and/or take any other
action that Solectron, in its sole discretion, deems appropriate until
Zhone makes other arrangements satisfactory to Solectron. In the event
Zhone does not cure the Material Breach or make alternative arrangements
satisfactory to Solectron, Solectron may terminate this Agreement and
exercise any and all rights and remedies provided at law or in equity or in
this Agreement, including this Section 11.1.
11.2 Currency will be in U.S. Dollars unless specifically negotiated otherwise
and reflected in a Statement of Work.
11.3 Except for the net value added taxes, prices are exclusive of all taxes,
duties, customs or similar charges and are subject to an increase equal in
amount to any charge Solectron may be required to collect or pay upon
shipment of the Product.
12.0 Quality
11
12.1 Zhone shall for each Product provide an initial proposed quality plan which
sets forth, without limitation, the operation flow of each Product, the
process control for each Product, the audit procedures for each Product and
the inspection procedures for each Product. Solectron shall have the
opportunity to review and provide comments on such plans. A final plan will
be mutually agreed to in writing (the "Quality Plan") Any changes to the
plans will be mutually agreed in writing.
12.2 Upon reasonable notice and during normal business hours, Zhone shall have
the right to review, inspect, test and evaluate Solectron's facilities,
operations, manufacturing and test processes, and procedures that relate to
Solectron's performance of this Agreement for the purposes of determining
compliance with this Agreement and quality control.
13.0 Engineering Changes
13.1 Zhone may submit Engineering Changes to Solectron in writing for
incorporation into the Product. It is important that this notification
include documentation of the change to effectively support an investigation
of the impact of the Engineering Change. Solectron will use all
commercially reasonable efforts to review the Engineering Change and
respond to Zhone within one (1) week. If any such change affects the price,
delivery, or quality performance of said Product, an equitable adjustment
will be negotiated between Solectron and Zhone prior to implementation of
the change. In the event Zhone requests that a change be implemented prior
to Solectron's evaluation of pricing and schedule impact, Solectron will
use all commercially reasonable efforts to perform as directed and Zhone
will be liable for all costs associated with such implementation. The terms
of Section 10.1 shall apply to any Excess or Obsolete Components that
result from an Engineering Change.
13.2 Solectron agrees not to undertake significant process changes, product
design changes, or process step discontinuance affecting electrical
performance and/or mechanical form, fit and function without prior written
notification and concurrence of Zhone.
14.0 Confidential Information
14.1 All proprietary and confidential information exchanged between the parties
in connection with this Agreement shall be subject to the terms of that
certain Nondisclosure Agreement, dated March 13, 2000, between Solectron
and Zhone attached as Exhibit A to the Asset Purchase Agreement. Such
Nondisclosure Agreement shall be deemed to run concurrently with the term
of this Agreement.
14.2 Subject to the terms of the Nondisclosure Agreement and the proprietary
rights of the parties, Solectron and Zhone agree to exchange, at least
semi-annually, relevant process development information and business plans
to include market trends, process technologies, product requirements, new
product developments, available capacity and other information to support
technology advancements by both Solectron and Zhone.
15.0 Warranty
12
15.1 The parties intend to collect data for one hundred eighty (180) days with
the goal of agreeing to a warranty period of eighteen (18) months from the
date of shipment. Until a separate agreement in writing is reached, and
unless otherwise agreed in a Product Exhibit, Solectron warrants for a
period of twelve (12) months from the date of manufacture of the Product
that (i) the Product will conform to the specifications applicable to such
Product at the time of its manufacture, which are furnished in writing by
Zhone and accepted by Solectron; and (ii) such Product will be of good
material (supplied by Solectron) and be free from defects in workmanship.
If Products are subject to a third-party manufacturers' warranty, then to
the extent permitted by such third-party, Solectron hereby assigns such
warranties to Zhone.
15.2 ZHONE'S SOLE AND EXCLUSIVE REMEDY AND SOLECTRON'S ENTIRE LIABILITY FOR
BREACH OF WARRANTY IS AS STATED IN THIS SECTION 15.2. In the event that any
Product manufactured shall not be in conformity with the foregoing
warranties, Solectron shall, at Solectron's option, either credit Zhone for
any such nonconformity (not to exceed the purchase price paid by Zhone for
such Product), or, at Solectron's expense, replace, repair or correct such
Product. Repaired or replaced Product shall be warranted for the remainder
of the original warranty period or ninety (90) days, whichever is greater.
Zhone agrees to pay a screening fee for assemblies submitted for warranty
work that are not packed appropriately, result in No Defect Found, or are
required to be tested against a later version test software than was used
at the time of manufacture. Such fee will be negotiated and established in
good faith by the parties based on historical field data and other relevant
information. Zhone will cover all transportation costs to and from
Solectron for warranty repairs and shall retain title to returned Product.
15.3 Solectron shall have no liability or responsibility for any costs, losses
or damages due to defective or failed Product claims to the extent that the
claims result from: (a) Solectron's compliance with Zhone's supplied
Specifications and/or manufacturing processes, (b) inadequate operating
environment, accident, disaster, neglect, abuse, or misuse, (c) design
flaws or design parameters exceeding or violating component specifications,
(d) external or environmental factors after shipment from Solectron, (e)
follow-on handling, processing, or manufacturing of Products after shipment
of the Product from Solectron or the SLC, as applicable, (f) repair,
attempted repair, modification, or alteration of the Product by a party
other than Solectron, (g) electrostatic discharge damage (not caused by
Solectron), (h) defects related to components provided by third party
suppliers selected by Zhone, which defects Solectron could not reasonably
detect, prevent or control, and (i) Products for which Zhone has not
provided functional or other tests to adequately diagnose failures.
Solectron makes NO WARRANTY as to software which is supplied on an "AS IS"
basis. Likewise, Solectron makes NO WARRANTY as to prototypes, pre-
production units, or units shipped at Zhone's request with less than the
testing provided for in the work order for production units.
15.4 THE WARRANTIES CONTAINED IN THIS SECTION ARE IN LIEU OF, AND SOLECTRON
EXPRESSLY DISCLAIMS AND ZHONE WAIVES ALL OTHER REPRESENTATIONS AND
WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR ARISING BY COURSE OF DEALING OR
PERFORMANCE, CUSTOM, USAGE IN THE TRADE OR OTHERWISE,
13
INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY,
TITLE AND FITNESS FOR A PARTICULAR USE.
15.5 Zhone represents and warrants to Solectron that it is the owner of all
proprietary rights in the information provided to Solectron in order to
manufacture the Products, and that it has the unqualified right to make
available to Solectron, material and other information, including drawings,
designs and specifications, and the order management and fulfillment
system. Additionally, Zhone represents and warrants to Solectron that it is
the owner of software provided to Solectron hereunder and/or has the right
to supply the software. Zhone hereby grants to Solectron a license to use
and reproduce the software, and any other documentation or information
provided to Solectron for the purposes contemplated by this Agreement.
16.0 Breach; Remedies and Termination
16.1 The following failures in performance will be deemed a Material Breach by
the applicable party:
(i) material failure by Solectron to meet committed delivery dates;
(ii) material failure by Solectron to maintain the quality standards set
forth in Section 12.1;
(iii) failure by Zhone to pay for Products or Services as required under
this Agreement.
16.2 If either party fails to meet any one or more of the terms and conditions
as stated in this Agreement, or upon the occurrence of a Material Breach,
Solectron and Zhone agree to negotiate in good faith to resolve such
default or Material Breach. If the defaulting party fails to cure such
default or Material Breach, or submit an acceptable written plan to resolve
such default or Material Breach within thirty (30) days following notice of
default or Material Breach, the nondefaulting party shall have the right to
terminate this Agreement by furnishing the defaulting party with written
notice of termination, which termination shall be effective within thirty
(30) days of the date of such notice.
16.3 Either party may immediately terminate this Agreement if the other party
(i) becomes insolvent; (ii) enters into or file a petition, arraignment or
proceeding seeking an order for relief under the bankruptcy laws of its
respective jurisdiction; (iii) enters into a receivership of any of its
assets; or (iv) enters into a dissolution of liquidation of its assets or
an assignment for the benefit of its creditors.
16.4 Upon termination of this Agreement or individual Statement of Work, Zhone
agrees to reimburse Solectron for applicable charges as set forth in
Sections 9.1 and 10.1. Except for termination due to Zhone's default or
Material Breach, Solectron shall, at Zhone's election, complete all work in
process and deliver such Product to Zhone's designated location. Upon any
termination, Solectron shall work cooperatively with Zhone to ensure the
orderly transfer of the Products to Zhone or its designated third party in
a manner so as to minimize any adverse impact to Zhone.
17.0 Dispute Resolution
14
17.1 In the spirit of continued cooperation, the parties intend to and hereby
establish the following dispute resolution procedure to be utilized in the
unlikely event any controversy should arise out of or concerning the
performance of this Agreement.
17.2 It is the intent of the parties that any dispute be resolved informally and
promptly through good faith negotiation between Solectron and Zhone. Either
party may initiate negotiation proceedings by written notice to the other
party setting forth the particulars of the dispute. The parties agree to
meet in good faith to jointly define the scope and a method to remedy the
dispute. If these proceedings are not productive of a resolution, then
either party may choose to escalate the problem to senior management.
17.3 Should any disputes remain existent between the parties after completion of
the two-step resolution process set forth above, or in any event, more than
thirty (30) days following written request by a party to escalate the
dispute to senior management, then the parties shall promptly submit any
dispute to mediation with an independent mediator as administered by the
American Arbitration Association. In the event mediation is not successful
in resolving the dispute, the parties agree to submit the dispute to
binding arbitration in accordance with the then-current Commercial Rules
and supervision of the American Arbitration Association. The arbitration
will be held in the US headquarters city of the party not initiating the
claim before a sole arbitrator who is knowledgeable in business information
and electronic manufacturing services. The arbitrator will not have the
power to award any damages excluded by, or in excess of, any damage
limitations expressed in this Agreement. Issues of arbitrability will be
determined in accordance solely with the federal substantive and procedural
laws relating to arbitration; in all other respects, the arbitrator will be
obligated to apply and follow the substantive law of the state specified in
this Agreement. Each party will bear its own attorney's fees associated
with the arbitration and other costs and expenses of the arbitration will
be borne as provided by the rules of the American Arbitration Association.
18.0 Limitation of Liability
18.1 OTHER THAN DAMAGES ARISNG OUT OF SECTION 4.1 AND SECTION 10.1, IN NO EVENT,
WHETHER AS A RESULT OF BREACH OF CONTRACT, WARRANTY, TORT (INCLUDING
NEGLIGENCE), STRICT LIABILITY, PRODUCT LIABILITY, OR OTHERWISE, SHALL
EITHER PARTY BE LIABLE TO THE OTHER FOR ANY SPECIAL, INCIDENTAL, INDIRECT,
CONSEQUENTIAL, OR EXEMPLARY DAMAGES OF ANY KIND, INCLUDING WITHOUT
LIMITATION, LOSS OF PROFITS, LOSS OF USE OR DATA OR INTERRUPTION OF
BUSINESS, WHETHER OR NOT EITHER PARTY WAS ADVISED OF THE POSSIBILITY OF
SUCH DAMAGE.
18.2 Solectron is performing work per specifications provided by Zhone.
Therefore, Solectron shall not be liable for the technical adequacy or
design of the product(s); nor shall Solectron be liable for the safety or
regulatory compliance of the Product(s), including but not limited to
ensuring that the Products meet applicable government or responsible agency
regulations. Should the Products or changes fail to meet the applicable
approvals, standards or regulations, Solectron may cease production until
Zhone and Solectron agree to required changes and applicable qualifications
are met, without being in breach of this Agreement. Zhone is responsible
for obtaining required
15
approvals relative to any changes and will be responsible for all costs
attributable to such requirements. Zhone agrees to indemnify and save
Solectron harmless from and against all losses, expenses or damages arising
out of any claim resulting from Solectron's compliance with Zhone's
specifications.
19.0 Intellectual Property Rights and Licenses
19.1 Scope. The provisions of this Section 19.0 will apply to the services
-----
provided by Solectron which are related to Manufacturing Services. If Zhone
desires to engage Solectron to provide circuit, board, system and/or
schematic design services, ASIC design services, or other specific services
then the parties either will execute a separate agreement.
19.2 Agreements with Employees and Consultants. Each party shall have agreements
-----------------------------------------
with its employees and consultants such that ownership of such persons'
inventions and authored works vests in the employer or in the entity which
hired the consultant, respectively.
19.3 Pre-Existing Work Product. If either party creates or owns Pre- existing
-------------------------
Work Product: (a) such party ("owning party") shall solely own such
Pre-existing Work Product (subject to any right of any third party),
notwithstanding disclosure or delivery to the other party of such Pre-
existing Work Product; (b) the owning party shall have the right to hold in
its own name all Intellectual Property Rights that may be available in (or
result from) such Pre-existing Work Product; and (c) the other party shall
have no license, sublicense, right or immunity, either directly or
indirectly, or by implication, estoppel or otherwise, under such
Intellectual Property Rights, except as expressly provided elsewhere in
this Agreement or in a separate written agreement.
19.4 Work Product Related to Product Design. To the extent that Work Product is
--------------------------------------
created, whether solely by either party or jointly by both parties, in the
provision of Manufacturing Services under this Agreement, and such Work
Product relates to Product Design, then: (a) Zhone shall solely own such
Work Product, notwithstanding disclosure or delivery of such Work Product
to Solectron; (b) Zhone shall have the right to hold in its own name all
Intellectual Property Rights that may be available in (or result from) such
Work Product; and (c) Solectron shall have no license, sublicense, right or
immunity, either directly, indirectly, or by implication, estoppel or
otherwise, under such Intellectual Property Rights, except as expressly
provided elsewhere in this Agreement. Hereafter all such Work Product,
together with all Pre-existing and Test Design Work Product solely owned by
Zhone, shall be referred to as "Zhone Work Product".
19.5 Work Product Related to Manufacturing Design. To the extent that Work
--------------------------------------------
Product is created, whether solely by Solectron or jointly by Zhone and
Solectron, in performing this Agreement, and such Work Product relates to
Manufacturing Design, then: (a) Solectron shall solely own such Work
Product, notwithstanding disclosure or delivery of such Work Product to
Zhone; (b) Solectron shall have the right to hold in its own name all
Intellectual Property Rights that may be available in (or result from) such
Work Product; and (c) Zhone shall have no license, sublicense, right or
immunity, either directly, indirectly, or by implication, estoppel or
otherwise, under such Intellectual Property Rights, except as expressly
provided elsewhere in this Agreement. Hereafter all such Work
16
Product, together with all Pre-existing and Test Design Work Product solely
owned by Solectron, shall be referred to as "Solectron Work Product."
19.6 Solectron Work Product License to Zhone. Notwithstanding anything to the
---------------------------------------
contrary in this Agreement, to the extent that in connection with
performing this Agreement, Solectron Work Product is disclosed or delivered
to Zhone, or incorporated directly into the Products: Solectron grants to
Zhone a worldwide, nonexclusive, fully paid-up, right and license under
Solectron's Intellectual Property Rights (available in or resulting from
the Solectron Work Product) to use such Solectron Work Product solely in
connection with the Products; subject, however, to the condition that, to
the extent that such Solectron Work Product is Confidential Information,
the provisions of Section 14.0 shall apply.
19.7 Zhone Work Product License to Solectron. Notwithstanding anything to the
---------------------------------------
contrary in this Agreement, to the extent that in connection with the
performance of this Agreement, Zhone Work Product is disclosed or delivered
to Solectron, or is incorporated directly into the Products: Zhone grants
to Solectron during the term of this Agreement, a worldwide, nonexclusive,
nontransferable, fully paid-up, right and license under Zhone's
Intellectual Property Rights (available in or resulting from the Zhone Work
Product) to do any of the following solely for the purpose of manufacturing
Product and providing related services under this Agreement: to use, make,
have made, reproduce, and prepare derivative works based upon such Zhone
Work Product; subject, however, to the condition that to the extent that
such Zhone Work Product is Confidential Information, the provisions of
Section 14.0 shall apply.
19.8 Work Product Related to Test Design. To the extent that Work Product is
-----------------------------------
created, whether solely by Solectron or jointly by Zhone and Solectron, in
performing this Agreement, and such Work Product relates to Test Design,
then: (a) the party (or parties) creating such Work Product shall solely
(or jointly, as the case may be) own such Work Product, notwithstanding
disclosure or delivery of such Work Product to the non-creating party; (b)
the party (or parties) creating such Work Product shall have the right to
hold in its own name (or their joint names, as the case may be) all
Intellectual Property Rights that may be available in (or result from) such
Work Product; and (c) the other party, if applicable, shall have no
license, sublicense, right or immunity, either directly, indirectly, or by
implication, estoppel or otherwise, under such Intellectual Property
Rights, except as expressly provided elsewhere in this Agreement. If the
parties jointly own such Work Product, they shall have no obligation to
account to each other for any use of such Work Product.
19.9 No Other Licenses Granted. Except as expressly provided otherwise in this
-------------------------
Agreement, nothing in this Agreement shall be deemed to grant to either
party, either directly or indirectly, or by implication, estoppel or
otherwise, any license, sublicense, right or immunity under any
Intellectual Property Rights of the other party or its licensors.
20.0 Intellectual Property Indemnification
20.1 Zhone will defend, at its expense, any action or claim brought against
Solectron or its subsidiaries alleging that Products provided by Solectron
under this Agreement infringe any patent, copyright, trademark, or any
other proprietary right, and Zhone will pay all costs and damages
(including
17
attorney's fees) incurred by Solectron or its subsidiaries that are
attributable to such actions or claims; provided that Zhone is promptly
notified in writing and furnished a copy of each allegation of infringement
and is given authority, information, and assistance (at Zhone's expense)
necessary to defend or settle such claim. Zhone shall have no liability
under this Section for a claim or suit if the alleged infringement or
violation is the result of Solectron's unauthorized modification or
alteration of the Specification, or Zhone' compliance with Solectron's
specifications, designs, or manufacturing processes.
20.2 Solectron will defend, at its expense, any action or claim brought against
Zhone alleging that Solectron's manufacturing processes utilized in the
performance of this Agreement infringe any patent, copyright, trademark, or
any other proprietary right, and Solectron will pay all costs and damages
(including attorney's fees) incurred by Zhone that are attributable to such
actions or claims; provided that Solectron is promptly notified in writing
and furnished a copy of each allegation of infringement and is given
authority, information, and assistance (at Solectron's expense) necessary
to defend or settle such claim. Solectron shall have no liability under
this Section for any claim or suit where: (i) infringement or violation is
attributable to Solectron's incorporation of Zhone's Specification into the
Product unless Solectron knew that such designs, if so incorporated, would
so infringe or violate; and (ii) such claim or suit would have been avoided
but for the combination, operation, or use of the Product with devices,
parts, or software not supplied by Solectron unless Solectron knew that
such combination, operation or use would so infringe or violate.
21.0 Personal Injury Indemnification
21.1 Each party agrees to indemnify and hold the other harmless against any
loss, cost or expense, including reasonable attorneys' fees, finally
awarded against the other in connection with a claim by a third party for
personal injury or property damage, to the extent that such damage is
caused by a negligent act or omission by the indemnifying party or its
agents. Each indemnitor's obligations hereunder shall be conditioned upon
receiving a prompt notice of each such claim from the indemnitee and the
sole authority to defend, and the indemnitee shall cooperate and provide
reasonable assistance to the indemnitor in defense of the claim. Each party
agrees to carry commercial liability, property damage, and automobile
liability coverage, including contractual endorsement and products hazard
coverage in reasonable amounts.
22.0 Independent Contractor; Competition
22.1 Each of the parties hereto shall conduct the work to be performed hereunder
as an independent contractor and not as an agent or employee of the other
party. Subject to the terms and conditions of this Agreement, each party
shall choose the means to be employed and the manner of carrying out its
obligations hereunder.
22.2 Nothing in this Agreement shall limit the right of Zhone or Solectron to
develop, have developed, procure and/or market products or services now or
in the future, including any which may be competitive with those which are
the subject of this Agreement. Neither party shall be required to disclose
planning information to the other.
18
23.0 General
23.1 Each party to this Agreement will maintain insurance to protect itself from
claims (i) by the party's employees, agents and subcontractors, (ii) for
damages because of injury to or destruction of tangible property resulting
out of any negligent act, omission or willful misconduct of the party or
the party's employees or subcontractors, (iii) for damages because of
bodily injury, sickness, disease or death of its employees or any other
person arising out of any negligent act, omission, or willful misconduct of
the party or the party's employees, agents or subcontractors.
23.2 Neither party shall delegate, assign or transfer its rights or obligations
under this Agreement, whether in whole or part, without the written consent
of the other party; provided, however, that either party may assign this
Agreement to a wholly owned subsidiary upon written notice to the other
party subject to the condition that such assignment will be null and void
in the event that such subsidiary ceases to be wholly owned by the
contracting party. Failure by either party to enforce any provision of this
Agreement shall not be deemed to be a continuing waiver or a waiver of any
other default or other term and condition.
23.3 Neither party shall be liable for any failure or delay in its performance
under this Agreement due to acts of God, acts of civil or military
authority, fires, floods, earthquakes, riots, wars or any other cause
beyond the reasonable control of the delayed party provided that the
delayed party: (i) gives the other party written notice of such cause
within fifteen (15) days of the discovery of the event; and (ii) uses its
reasonable efforts to remedy such delay in its performance. If such delay
shall continue for more than thirty (30) days, the party injured by the
inability of the other to perform shall have the right upon written notice
to the other party to either (a) terminate this Agreement as set forth in
Section 16.0, or (b) treat this Agreement as suspended during the delay,
find alternative sourcing, and reduce any commitment in proportion to the
duration of the delay.
23.4 Each party agrees that it will not knowingly (a) export or re-export,
directly or indirectly, any technical data (as defined by the U.S. Export
Administration Regulations), including software received from the other
under this Agreement, (b) disclose such technical data for use in, or (c)
export or re-export, directly or indirectly, any direct product of such
technical data, including software, to any destination to which such export
or re-export is restricted or prohibited by U.S. or non-U.S. law without
obtaining prior authorization from U.S. Department of Commerce and other
competent government authorities to the extent required by those laws. This
clause shall survive termination or cancellation of this Agreement.
23.5 All notices required by this Agreement shall be in writing and delivered
postage paid to the addresses set forth below or at such other address as
either party may furnish to the other in writing:
To Solectron: Solectron Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇. V.P. & COO
19
with a copy to Solectron Texas, L.P.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇, Director, M/S 2197
Attn: Legal Department
To Zhone: Zhone Technologies, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, V.P. Operations
with a copy to Zhone Technologies, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: General Counsel
23.6 Failure of either party to enforce any term or condition of this Agreement
will not be deemed to be a waiver of such term or condition. If any
provision of this Agreement is held to be invalid, the other provisions
will not be affected.
23.7 This Agreement, the Exhibits and the Statement(s) of Work constitute the
entire agreement of the parties concerning the subject matter covered
herein, and shall supersede all prior discussions, oral or other
agreements. This Agreement may be executed in one or more counterparts,
each of which will be deemed the original, but all of which will
constitute but one and the same document. The parties agree this
Agreement, including the Exhibits, may not be modified except in writing
signed by both parties.
23.8 The parties hereto agree that the terms and conditions contained in either
party's printed or electronic documents shall not apply to the purchase
and/or sale of the Products and that the terms and conditions set forth
herein shall govern all such transactions; provided, however, that the
terms and conditions typed or hand-written on the face of a purchase
order, acknowledgment or other document relating to the Product types,
quantities, prices, ship-to locations and shipment dates shall, if
accepted by both parties hereto, also apply to all such transactions and
shall augment the terms and conditions set forth herein.
23.9 The parties hereto agree that this Agreement shall not be construed,
enforced or governed by the United Nations Convention on Contracts for the
International Sale of Goods; rather this Agreement is entered into in the
State of California, U.S.A. and shall be construed, enforced and governed
solely in accordance with the laws of the State of California, U.S.A
without giving effect to any choice of law provisions thereof. In any
action to enforce this Agreement, the prevailing party shall be awarded
all court or arbitration costs and reasonable attorney fees incurred.
23.10 Each party shall comply with all applicable laws (including environmental
laws), ordinances, regulations and codes, foreign or domestic, and shall
maintain all required permits, certificates, licenses, approvals and
inspections in performance of this Agreement.
20
23.11 Neither party shall engage in publicity related to this Agreement without
the prior written approval of the other party.
23.12 The provisions of Sections 1, 2, 4, 8, 9, 10, 14, 15, 17, 18, 19, 20, 21,
and 23 shall survive expiration or termination of this Agreement.
Agreed:
SOLECTRON CORPORATION ZHONE TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇ By:
--------------------------- ------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇ Name:
--------------------------- ------------------------------
Title: SR. VP, CFO & SECRETARY Title:
--------------------------- ----------------------------
Date: Date:
--------------------------- ------------------------------
21
23.13 Neither party shall engage in publicity related to this Agreement without
the prior written approval of the other party.
23.14 The provisions of Sections 1, 2, 4, 8, 9, 10, 14, 15, 17, 18, 19, 20, 21,
and 23 shall survive expiration or termination of this Agreement.
Agreed:
SOLECTRON CORPORATION ZHONE TECHNOLOGIES, INC.
By: By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------- ------------------------------
Name: Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------- -----------------------------
Title: Title: VP, Operations
------------------------ ----------------------------
Date: Date: March 10, 2000
------------------------ ----------------------------
22
EXHIBIT A-1
Products
IMACS Product Family
23
EXHIBIT A-2
Products
Sechtor and ARCA-DACS Products
24
EXHIBIT B-1
Pricing Model
for the
IMACS Product Family
25
Zhone Order Fulfillment Pricing
Costing/Pricing for Processing Product to FGI Status (unit charge)
P/N Description Mat'l Cost of Total PWBA Assy PWBA Test
Acquisition Mat'l Time Rate Time Rate
8.0% $40.70 $40.70
2525-N4N
2525-N9N
Costing/Pricing for Processing Product from FGI through Systems Configuration (monthly charge)
P/N Number of Systems QA Total Systems
Systems Shipped Configuration & Test Configuration Cost
Time Rate Time Rate
Hr $40.70 0.1333 $40.70
Costing/Pricing for Order Fulfillment Services (monthly charge)
Number of Time Rate Margin Goodwill Monthly
Items Shipped 0.1666 $40.70 6.0% Margin Charge
(/0.94) 5.0%
Costing/Pricing for Processing Product to FGI Status (unit charge)
25% Pre- Common Re-Test Total PWBA FGI Margin Goodwill
Test Mfg Value Add 5.0% Assy, Test & CVA Cost 6.0% Margin Qty Extended
Time Rate Time Rate Time Rate (/0.94) 5.0% Per Value
$40.70 $40.70 $40.70
Value per system
Value per system
Costing/Pricing for Processing Product from FGI through Systems Configuration (monthly charge)
Margin Goodwill Monthly
6.0% Margin Charge
(/0.94) 5.0%
EXHIBIT B-1
Pricing
For the
Sechtor and ARCA-DACS Products
Pricing will be provided via quotation.
27
EXHIBIT C-1
Flexibility/Cancellation/Component Liability Terms
IMACS Product Family
Intentionally Left Blank
28
EXHIBIT C-2
Flexibility/Cancellation/Component Liability Terms
Sechtor and ARCA-DACS Products
Intentionally Left Blank
29
EXHIBIT D
Out of Warranty Service
30
EXHIBIT E
PASSIVE COMMODITY SUBSTITUTION APPROVAL FORM
--------------------------------------------
ZHONE TECHNOLOGIES, INC
This form sets forth the conditions under which Solectron Corporation
("Solectron") may substitute certain components for those specified on Zhone's
BOM and sourced through Zhone's approved vendor list (AVL). Zhone's signature
will constitute its express authorization for any substitutions made by
Solectron in accordance with the criteria and conditions listed below.
Resistors: Substitution is approved for these components using the
following criteria:
. Equal/Better than Tolerance (i.e., 5% when AVL specs 10%)
. Equal/Better than Zhone Rating (i.e., 1/4 watt when AVL specs 1/8
watt)
Conditions:
1. Applies to carbon film, metal film, and surface mount resistors
only.
2. Wire wound resistors must meet AVL, no exceptions.
3. In all cases, resistance values must meet AVL specifications.
4. The temperature coefficient (PPM/DEG C) will be "equal to" or
"better than".
5. Substitution can be done provided form, fit, and function meet
original specification.
Inductors: Substitution is approved for these components using the
following criteria:
. Equal/Better than Tolerance (i.e., 10% when AVL specs 20%)
Conditions:
1. Surface mount shall be of the same size and pitch as specified.
2. The temperature coefficient (PPM/DEG C) will be "equal to" or
"better than".
3. Q Value must be "equal to" unless AVL reads Q=XX or greater.
4. Substitution can be done provided form, fit, and function meet
original specification.
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All substitutions are limited to Solectron, Preferred+, and Preferred
suppliers, and Zhone approved suppliers.
Capacitors: Substitution is approved for these components using the
following criteria:
. Equal/Better than Tolerance (i.e., 10% when AVL specs 20%)
. Equal/Better than Voltage (i.e., 20 volt when AVL specs 1 volt)
. Equal/Better than Dielectric (i.e., NPO in place of X7R or X5U and X7R
in place of Z5U.)
Conditions:
1. Tantalum or electrolytic capacitors shall be replaced by the
same type.
2. Surface mount shall be of the same size and pitch as
specified.
3. Reel and Ammo pack radial/axial lead components with a
smaller case size is acceptable.
4. The temperature coefficient (PPM/DEG C) will be "equal to"
or "better than".
5. The type of film will remain the same (i.e., polyester can
not be substituted for polycarbonate, and polycarbonate can
not be substituted for polysulfone, etc.)
6. The type of construction will remain the same (i.e., WRAP
and fill cannot be substituted for hermetically sealed,
etc.)
7. Substitution can be done provided form, fit, and function
meet original specification.
ZHONE APPROVES THESE SUBSTITUTIONS WITH THE AUTHORIZED SIGNATURE BELOW:
ZHONE TECHNOLOGIES, INC.
Signature: ___________________________
Name: _______________________________
Title: _______________________________
Date: ________________________________
32
CONNECTOR COMMODITY SUBSTITUTION APPROVAL FORM
----------------------------------------------
ZHONE TECHNOLOGIES, INC.
This form sets forth the conditions under which Solectron may substitute certain
components for those specified on Zhone's Bills of Materials (BOM) and sourced
through Zhone's approved vendor list (AVL). Zhone's signature will constitute
its' express authorization for any substitutions made by Solectron in accordance
with the criteria and conditions listed below.
Connector: Substitution is approved for these components using the
following criteria:
. Thicker gold plating (i.e., 30u > 15u > gold flash)
. Higher temperature material (i.e., LCP > polyester)
. Retention, i.e., kinked, leads
. Different color material
In addition, the following substitutions may also be made for the
designated part type:
. Headers - substitute "breakaway" for "solid"
. DSUB's - substitute "screwlock installed" for units with separate
screwlocks
. PLCC Sockets - substitute low insertion force for standard insertion
force
. DIP Sockets - substitute better than plating (i.e., beryllium>
phosphor bronze > copper alloy and, dual leaf > single leaf)
. ▇▇▇▇▇ - substitute metal latches for plastic latches
. DIN - substitute level I > level II > level IIII
Exceptions:
. ▇▇▇▇▇ - substation of gold vs. tin plating on contacts is not allowed
33
All substitutions are limited to Solectron, Preferred+ and Preferred
suppliers and, Zhone approved suppliers.
ZHONE APPROVES THESE SUBSTITUTIONS WITH THE AUTHORIZED SIGNATURE BELOW:
ZHONE TECHNOLOGIES, INC.
Signature: ___________________________
Name: _______________________________
Title: _______________________________
Date: ________________________________
34