Manufacturing Services Letter Agreement
EXHIBIT 10.24
[LOGO OF JABIL CIRCUIT]
Redback Networks, Incorporated
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▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: Jabil Circuit, Inc. Manufacturing Services
Dear ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇:
This letter ("Letter Agreement"), dated as of September 14, 2000
("Effective Date"), sets forth the terms under which Jabil Circuit, Inc.
("Jabil") will provide to Redback Networks, Inc. ("Redback") those manufacturing
services specifically identified in Schedule 1 hereto ("Manufacturing
Services"). Redback and Jabil are referred to herein as "Party" or "Parties".
Jabil and Redback have agreed that the terms and conditions set forth in this
Letter Agreement shall control and govern our Manufacturing Services
relationship prior to the execution of a more detailed and definitive
Manufacturing Services Agreement, and that any prior agreements executed,
discussions had or negotiations engaged in, between the Parties before the
Effective Date shall have no force or effect with regard to the Manufacturing
Services except that Redback shall remain liable to pay Jabil the price of all
work performed by Jabil thereunder. Pre-printed language on each Party's forms,
including purchase orders, shall not constitute part of this Letter Agreement
and shall be deemed unenforceable. Notwithstanding the foregoing, the terms and
conditions of any Design Services Letter Agreement or Design Services Agreement
executed by the Parties shall control and govern the design services
relationship of the Parties unless the Parties specifically intend to superCede
the same and so indicate in writing.
1. Manufacturing Services. Jabil will use commercially reasonable efforts to
perform the Manufacturing Services in conformity
with the Statement of Work ("SOW") set forth in Schedule 1 hereto, as
amended or modified in writing from time to time by mutual agreement
between the Parties.
2. Payment and Acceptance. Redback shall pay Jabil all amounts when due,
including all Non-Recurring Engineering Costs ("NRE Costs"), that Jabil may
incur in the performance of the Manufacturing Services. Redback shall pay
Jabil all undisputed invoiced amounts within thirty (30) days from the date
of Jabil's invoice therefor. Redback may only dispute an invoice provided
that Redback notifies Jabil in writing, within three (3) business days
after the date of receipt, that the invoice contains a material error that
impedes payment thereof. Such notification shall identify the alleged error
in the invoice, a justification for considering this error material,
together with any supporting documentation. Redback will remain liable and
will issue payment without delay in accordance to this Section for any
undisputed portions or amounts in the invoice. In the event of
cancellation, expiration or termination of this Letter Agreement for any
reason, Redback shall remain liable for all fees, costs of material and
expenses incurred by Jabil as set forth herein up to and including the date
of such cancellation, expiration or termination.
Redback will be deemed to have accepted any Product (as defined in
Section 4 below) prepared as part of the Manufacturing Services unless,
within ten (10) days following Jabil's delivery of such Product, Redback
provides a detailed written notice, as referenced in Section 15 herein,
setting forth the manner in which such Product - fails to comply with the
SOW.
3. Build Schedule Forecasts. Within ten (10) business days following the
execution of this Letter Agreement, Redback shall provide Jabil with a
monthly forecast, in writing, of quantity requirements of each Product (as
defined in Section 4 below) that Redback anticipates requiring during the
next twelve (12) month period ("Build Schedule Forecast"). The Build
Schedule Forecast shall be updated by Redback in writing, on at least a
monthly basis. Any rescheduling or cancellation of the orders set forth in
a Build Schedule Forecast shall be subject to the terms set forth in
Schedule 2 hereto, Rescheduled Delivery, Cancellation of Orders and Letter
Agreement Expiration and Termination Charges.
4. Product Manufacture. Jabil will manufacture the products as more
particularly described in Schedule 1 hereto including any updates,
renewals, modifications or amendments thereto (the "Product") in accordance
with the specifications set forth
JBL993 Manufacturing Services Letter Agreement
in Schedule 1 and otherwise supplied and/or approved by Redback
("Specifications") and any build schedule approved by Jabil ("Build
Schedule"). Jabil will reply to each proposed Build Schedule that is
submitted in accordance with the terms of this Letter Agreement by
notifying Redback of its acceptance or rejection within five (5) business
days of receipt of any proposed Build Schedule. In the event of Jabil's
rejection of a proposed Build Schedule, Jabil's notice of rejection will
specify the basis for such rejection. Jabil will test all Product according
to the testing specifications, standards, procedures and parameters set
forth in Schedule 1 and otherwise supplied and/or approved by Redback
("Test Procedures") and will package and ship the Product in accordance
with the packaging and shipping specifications set forth in Schedule 1 and
otherwise supplied and/or approved by Redback ("Packaging and Shipping
Specifications"). Redback shall be solely responsible for the sufficiency
and adequacy of the Specifications, Packaging and Shipping Specifications
and Test Procedures and shall hold Jabil harmless for any claim arising
therefrom.
5. Materials Procurement. Jabil will use reasonable commercial efforts to
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procure components, per Redback's approved vendor list, necessary to
fulfill mutually agreed upon Build Schedules. Redback shall be responsible
for the performance of suppliers and quality of the components.
6. Jabil Warranty, Exclusive Remedy and Limitation of Damages. Jabil warrants
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(a) that it will manufacture the Product in accordance with Jabil
Workmanship Standards, and (b) that at the time of manufacture, the Product
will conform, in all material respects to the Specifications. The above
warranty shall remain in effect for a period of one year from the date any
Product is initially delivered to Redback or to Redback's designated
carrier ("Warranty Period"). This warranty is extended to, and may only be
enforced by, Redback.
In accordance with Jabil's standard return material authorization process
and procedure ("RMA"), Jabil will either repair or replace, in its sole
discretion, any Product that contains a defect caused by a breach of the
warranty set forth in this Section 6 provided that the Product is received
within thirty (30) days following the end of any applicable Warranty Period
("RMA Product"). If Redback desires to return a Product based on a claim of
breach of the warranty set forth in this Section 6, Redback shall request
an RMA number from Jabil. Redback shall then consign the alleged defective
Product, to Jabil's designated repair facility at Redback's risk and
expense, and specify the Jabil assigned RMA number. Jabil will analyze any
such RMA Product and, if a breach of warranty is found ("Defect"), then
Jabil will repair or replace the RMA Product within twenty (20) business
days of receipt by Jabil of the RMA Product and all required associated
documentation. In the event a Defect is found, Jabil will reimburse Redback
for the reasonable cost of transporting the RMA Product to Jabil's
designated repair facility and Jabil will deliver the repaired RMA Product
or its replacement, to Redback's designated destination at Jabil's risk and
expense. If no such Defect is found, Redback shall reimburse Jabil for all
fees, costs and expenses incurred to analyze and, if requested by Redback,
repair or replace the non-Defective RMA Product and Redback shall bear
responsibility for all transportation costs to and from Jabil's designated
repair facility.
THE FOREGOING SHALL CONSTITUTE REDBACK'S SOLE AND EXCLUSIVE REMEDY FOR A
BREACH OF THE WARRANTY MADE BY JABIL HEREIN OR ANY OTHER OBLIGATION OF
JABIL HEREUNDER. THE WARRANTY SET FORTH IN THIS SECTION 6 IS IN LIEU OF,
AND JABIL EXPRESSLY DISCLAIMS, AND REDBACK EXPRESSLY WAIVES, ALL OTHER
WARRANTIES AND REPRESENTATIONS OF ANY KIND WHATSOEVER WHETHER EXPRESS,
IMPLIED, STATUTORY, ARISING BY COURSE OF DEALING OR PERFORMANCE, CUSTOM,
USAGE IN THE TRADE OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY
WARRANTY OF MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE OR
INFRINGEMENT OR MISAPPROPRIATION OF ANY RIGHT, TITLE OR INTEREST OF REDBACK
OR ANY THIRD PARTY. REDBACK UNDERSTANDS AND AGREES THAT IT SHALL HAVE FULL
AND EXCLUSIVE LIABILITY WITH RESPECT TO ANY PRODUCT, WHETHER FOR PRODUCT
DESIGN LIABILITY, PRODUCT LIABILITY, DAMAGE TO PERSON OR PROPERTY AND/OR
INFRINGEMENT OR MISAPPROPRIATION OF THIRD PARTY RIGHTS. NO ORAL OR WRITTEN
STATEMENT OR REPRESENTATION BY JABIL, ITS AGENTS OR EMPLOYEES SHALL
CONSTITUTE OR CREATE A WARRANTY OR EXPAND THE SCOPE OF ANY WARRANTY
HEREUNDER.
JABIL'S WARRANTY SHALL NOT APPLY TO ANY PRODUCT JABIL DETERMINES TO HAVE
BEEN SUBJECTED TO TESTING FOR OTHER THAN SPECIFIED ELECTRICAL
CHARACTERISTICS OR TO OPERATING AND/OR ENVIRONMENTAL CONDITIONS IN EXCESS
OF THE MAXIMUM VALUES ESTABLISHED IN APPLICABLE SPECIFICATIONS, OR TO HAVE
BEEN THE SUBJECT OF MISHANDLING, ACCIDENT, MISUSE, NEGLECT, IMPROPER
TESTING, IMPROPER OR UNAUTHORIZED REPAIR
Page 2
ALTERATION, DAMAGE, ASSEMBLY, PROCESSING OR ANY OTHER INAPPROPRIATE OR
UNAUTHORIZED ACTION OR INACTION THAT ALTERS PHYSICAL OR ELECTRICAL
PROPERTIES. THIS WARRANTY SHALL NOT APPLY TO ANY DEFECT IN THE PRODUCT
ARISING FROM ANY DRAWING, DESIGN, SPECIFICATION, PROCESS, TESTING OR OTHER
PROCEDURE, ADJUSTMENT OR MODIFICATION SUPPLIED AND/OR APPROVED BY REDBACK.
EXCEPT WITH REGARD TO ANY INDEMNITIES SET FORTH HEREIN, UNDER NO
CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR TO ANY
OTHER PERSON OR ENTITY UNDER ANY CONTRACT, TORT, STRICT LIABILITY,
NEGLIGENCE, OR OTHER LEGAL OR EQUITABLE CLAIM OR THEORY FOR ANY SPECIAL,
INCIDENTAL, CONSEQUENTIAL, OR INDIRECT DAMAGES, LOSS OF GOODWILL OR
BUSINESS PROFITS, LOST REVENUE, WORK STOPPAGE, DATA LOSS, COMPUTER FAILURE
OR MALFUNCTION, OR FOR ANY AND ALL OTHER DAMAGES, LOSS, OR EXEMPLARY OR
PUNITIVE DAMAGES WHETHER SUCH PARTY WAS INFORMED OR WAS AWARE OF THE
POSSIBILITY OF SUCH LOSS OR DAMAGE. THE FOREGOING SHALL NOT EXCLUDE OR
LIMIT EITHER PARTY'S LIABILITY FOR DEATH OR PERSONAL INJURY RESULTING FROM
ITS NEGLIGENCE TO THE EXTENT THAT SUCH LIABILITY CANNOT BY LAW BE LIMITED
OR EXCLUDED.
7. Jabil Existing Intellectual Property. Jabil shall retain all right,
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title and ownership to any "Jabil Existing Intellectual Property" that is
incorporated into any Product that is prepared as part of the Manufacturing
Services or as part of any other work provided pursuant to this Letter
Agreement or any other related agreement executed by the Parties. As used
herein, the term "Jabil Existing Intellectual Property" means any
discoveries, inventions, technical information, procedures, manufacturing
or other processes, software, firmware, technology, know-how or other
intellectual property rights owned, developed or obtained by Jabil outside
of this Letter Agreement or known by Jabil prior to the execution of this
Letter Agreement that are used by Jabil in creating, or are embodied
within, any Product, the Manufacturing Services or other work performed
under this Letter Agreement.
Upon full payment of all monies due and owing under this Letter Agreement
and all other monies due and owing to Jabil pursuant to any other related
agreement executed by the Parties, Jabil will grant to Redback a worldwide
wide, non-exclusive, fully paid-up, royalty free right and license to use,
sell, and distribute the Jabil Existing Intellectual Property only insofar
as is required for Redback to use, sell or distribute the Product provided
as part of the Manufacturing Services performed by Jabil pursuant to this
Letter Agreement.
8. Jabil Created Intellectual Property. Jabil shall retain all right, title
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and ownership to any "Jabil Created Intellectual Property" that is
incorporated into any Product that is prepared as part of the Manufacturing
Services or into any other work provided pursuant to this Letter Agreement
or any other related agreement executed by the Parties. As used herein,
the term "Jabil Created Intellectual Property" means any discoveries,
inventions, technical information, procedures, manufacturing or other
processes, software, firmware, technology, know-how or other intellectual
property rights created, developed or reduced to practice by or for Jabil
in (a) preparing any Product provided pursuant to this Letter Agreement, or
(b) which is otherwise embodied within the Manufacturing Services or any
other work provided pursuant to this Letter Agreement.
Upon full payment of all monies due and owing under this Letter Agreement
and all other monies due and owing to Jabil pursuant to any other related
agreement executed by the Parties, Jabil will assign to Redback all right,
title and interest in and to the Jabil Created Intellectual Property.
Redback hereby grants to Jabil a worldwide, non-exclusive, fully paid-up,
royalty-free right and license in and to the Product and the Jabil Created
Intellectual Property.
Jabil Created Intellectual Property and Jabil Existing Intellectual
property shall hereinafter be referred to collectively as "Jabil
Intellectual Property".
9. Manufacturing Rights. In consideration of the transfer by Jabil of the
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rights to the Jabil Intellectual Property, Redback grants Jabil exclusive
manufacturing rights for one hundred percent (100%) of Redback's products
which contain any Jabil Intellectual Property and/or any Redback product
containing a "derivative" of the Jabil Intellectual Property. For the
purposes of this Letter Agreement, a derivative is defined as "a design
that is based in full or in part on the Jabil Intellectual Property". These
manufacturing rights shall remain exclusive for the life of any Redback
product unless the Parties mutually agree that the term of manufacturing
exclusivity shall be for a shorter period as specifically set forth in
Manufacturing Services Letter Agreement
Page 3
any other related agreement executed by the Parties. In the event that
manufacturing is subsequently transferred to a third party, Redback and
Jabil shall mutually agree upon the terms and conditions of, and shall use
commercially reasonable efforts to facilitate, such transfer. In such
event, Redback shall, at a minimum, be liable for all monies due Jabil as
set forth herein and any other monies due Jabil as set forth in any other
related agreement executed by the Parties.
10. Redback Warranty and Indemnification. Jabil shall not be responsible to
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conduct nor shall Redback hold Jabil liable for failure to conduct any
patent, trademark and copyright searches necessary to identify and evaluate
any potential infringement claims with respect to the Product. Redback
agrees to indemnify, defend and hold Jabil and its, directors, employees,
subsidiaries, affiliates, successors and assigns harmless from and against
all claims, damages, losses, costs and expenses, including attorneys' fees,
arising from any third party claims asserted against Jabil and its
employees, subsidiaries, affiliates, successors and assigns that are based
in part or in whole on any of the following: (a) Specifications, Redback
proprietary information and technology, any Product, or intellectual
property, information, technology and processes supplied and/or approved by
Redback or otherwise required by Redback of Jabil; and (b) that any item in
subsection (a) infringes or violates any patent, copyright or other
intellectual property right of a third party, and (c) design or product
liability alleging that any item in subsection (a) has caused or will in
the future cause damages of any kind. Jabil may employ counsel, at its own
expense to assist Jabil with respect to any such claims, provided that if
such counsel is necessary because of a conflict of interest with Redback or
its counsel or because Redback does not assume control of the defense of a
claim for which Redback is obligated to indemnify Jabil hereunder, Redback
shall bear such expense. Redback shall not enter into any settle that
affects Jabil's rights or interest without Jabil's prior written approval,
which shall not be unreasonably withheld. Jabil will provide such
assistance and cooperation as is reasonably requested by Redback or its
counsel in connection with such indemnified claims.
11. Confidentiality Obligations. In order to protect both Parties' proprietary
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information, intellectual property and technology ("Confidential
Information") the Parties agree that each Party shall use the same degree
of care, but no less than a reasonable degree of care, as such Party uses
with respect to its own similar information to protect the Confidential
Information of the other Party and to prevent any use of Confidential
Information other than for the purposes of this Letter Agreement. This
Section 11 imposes no obligation upon a Party with respect to Confidential
Information which (a) was known to such Party before receipt from the
disclosing Party; (b) is or becomes publicly available through no fault of
the receiving Party; (c) is rightfully received by the receiving Party from
a third party without a duty of confidentiality; (d) is disclosed by the
disclosing Party to a third party without imposing a duty of
confidentiality on the third party; (e) is independently developed by the
receiving Party without a breach of this Letter Agreement; or (f) is
disclosed by the receiving Party with the disclosing Party's prior written
approval. If a Party is required by a government body or court of law to
disclose Confidential Information, then such Party agrees to give the other
Party reasonable advance notice so that the other Party may seek a
protective order or otherwise contest the disclosure.
12. Term. The term of this Letter Agreement shall begin on the Effective Date
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and shall end upon final payment to Jabil of all monies due to Jabil under
this Letter Agreement. Notwithstanding the foregoing 2, 4, 5, 6, 7, 8, 9,
10, 11, 12, 16, and 17 herein shall survive the expiration or termination
of this Letter Agreement.
13. Force Majeure. Neither Party will be liable for any delay in performing or
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for failing to perform its obligations under this Letter Agreement (other
than the payment of money) resulting from any cause beyond its reasonable
control including, without limitation, acts of God; blackouts; power
failures; inclement weather; fire; explosions; floods; hurricanes;
tornadoes; earthquakes; epidemics; strikes; work stoppages; labor,
component or material shortages; slow-downs; industrial disputes, sabotage;
accidents; destruction of production facilties; riots or civil
disturbances; acts of government or governmental agencies, including
changes in law or regulations that materially and adversely impact the
Party; provided that the Party affected by such event promptly notifies
(and in no event more than ten (10) business days of discovery of the
event) the other Party of the event. If the delays caused by the force
majeure conditions are not cured within sixty (60) days of the force
majeure event, then either Party may immediately terminate this Letter
Agreement. Termination of this Letter Agreement pursuant to this Section 13
shall not affect Redback's obligation to pay Jabil, as set forth herein.
14. Partial Invalidity. Whenever possible, each provision of this Letter
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Agreement shall be interpreted in such a way as to be effective and valid
under applicable law. If a provision is prohibited by or invalid under
applicable law, it shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Letter Agreement.
Manufacturing Services Letter Agreement
JBL993
Page 4
JABIL CIRCUIT, INC.
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15. Notices. All notices, demands and other communications made hereunder shall
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be in writing and shall be given either by personal delivery, by nationally
recognized overnight courier (with charges prepaid), by facsimile or EDI
(with telephone confirmation) addressed to the respective Parties at the
following addresses:
Notice to Jabil: Jabil Circuit, Inc.
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▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇ ▇▇▇▇▇▇▇▇▇
with a copy to: Jabil Circuit, Inc.
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▇▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: General Counsel
Notice to Redback: Redback Networks, Inc.
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▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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Attn: ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇
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with a copy to: --------------------------------
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Attn:---------------------------
16. Dispute Resolution. Any disputes arising under this Letter Agreement shall
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be resolved by binding arbitration conducted the county of Santa Clara,
California according to the procedures set forth in the American
Arbitration Code.
Manufacturing Services Letter Agreement
Page 5
17. Governing Law and Jurisdiction. This Letter Agreement and the
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interpretation of its terms shall be governed by the laws of the State of
California, without application of conflicts of law principles. The
provisions of the United Nations Convention on Contracts for the
International Sale of Goods shall not apply to this Letter Agreement. The
Parties hereby agree that the United States District Court for the Northern
District of California or the California State courts serving the county of
Santa ▇▇▇▇▇ shall have exclusive jurisdiction over any litigation arising
hereunder.
Please indicate your acceptance of the terms and conditions set forth herein by
executing both copies of this Letter Agreement enclosed and returning to me a
fully executed original.
Very truly yours,
/s/ ▇▇ ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇
Business Unit Manager
Jabil Circuit, Inc.
ACCEPTED AND AGREED:
/s/ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇
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Redback
By: ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇
Title: Director of Operations
Date: 9/14/00
Manufacturing Services Letter Agreement
Page 6
SCHEDULE 1
TO MANUFACTURING SERVICES LETTER AGREEMENT
BETWEEN JABIL AND REDBACK
STATEMENT OF WORK
.. Product description:
.. Specifications:
.. NRE Costs:
.. Components and materials requirements:
.. Test Procedures:
.. Packaging and Shipping Specifications:
.. Suppliers Designated by Redback:
Manufacturing Services Letter Agreement
Page 7
SCHEDULE 2
TO MANUFACTURING SERVICES LETTER AGREEMENT
BETWEEN JABIL AND REDBACK
Rescheduled Delivery, Cancellation of Orders and Letter Agreement
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Termination/Expiration Charges
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Redback may request Jabil to reschedule the delivery date for Product(s)
and cancel pending orders in accordance with this schedule. The charges to
Redback for deferring or accelerating delivery of an order (rescheduled),
cancellation of an order or termination or expiration of this Letter
Agreement for any reason are outlined below;
Days Prior to Reschedule Cancellation/Termination/Expiration
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Delivery Date Terms LiabilIty
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0-30 Days Redback may not reschedule an order within Redback may not cancel an order to be delivered
30 days of the delivery date without payment within 30 days of the applicable delivery date
in full for the order. without payment to Jabil in full for the order.
31-60 Days from original Redback may reschedule the delivery of up to Redback will be charged 2.0% of Jabil's incurred
delivery date 40% of an order without additional liability cost plus applicable margin for any order
provided that such rescheduled order is cancelled more than 30 and up to 60 days from the
rescheduled to be delivered within 30 days of applicable delivery date.
the original delivery date.
61-90 days from original Redback may reschedule delivery of up to Redback will be charged 2.0% of Jabil's incurred
delivery date 60% of an order without additional liability cost plus applicable margin for any order
provided that such rescheduled order is cancelled more than 60 and up to 90 days from the
rescheduled to be delivered within 90 days of applicable delivery date.
the original delivery date.
90 days and beyond from Redback may reschedule 100% of an order Redback will be charged 2.0% of Jabil's incurred
original delivery date without additional liability provided that such cost plus applicable margin for any order
rescheduled order is rescheduled to be cancelled more than 90 days prior to the
delivered within 180 days of the original applicable delivery date.
delivery date.
Redback shall be responsible for all costs of all inventory resulting from
a reschedule, cancellation, termination or expiration. Where applicable,
carry costs will be billed on a monthly basis and based on the prime rate
as announced in The Wall Street Journal as of the date of reschedule (the
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prime rate shall be adjusted on the first business day of each calendar
month thereafter for as long as the rescheduled order is maintained in
inventory) plus two percent (2%) per annum and shall be applied to the
inventory applicable to the rescheduled or cancelled order. Reschedules in
excess of the maximum deferred quantity or period (set forth above) will be
considered cancellations and subject to applicable cancellation charges.
Reschedules and cancellations may result in revised product pricing. In
addition to the costs set forth above, Redback shall also be liable for the
applicable depreciation (determined in accordance with U.S. generally
accepted accounting principles) for the period of time any piece of
equipment is idle as a result of the reschedule, cancellation, termination
or expiration for up to six months from the date of cancellation,
termination or expiration.
JBL993 Manufacturing Services Letter Agreement
Page 8
JABIL CIRCUIT, INC.
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