CONFIDENTIAL TREATMENT Exhibit 10.1
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE PORTIONS OF THE
AGREEMENT INDICATED WITH [****]. A COMPLETE COPY OF THIS AGREEMENT, INCLUDING
THE REDACTED TERMS, HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION.
MANUFACTURE AND SUPPLY AGREEMENT
This Manufacture and Supply Agreement (the "AGREEMENT") is entered into
as of June 30, 2002 (the "EFFECTIVE DATE") by and between DMC Stratex Networks,
Inc., a Delaware corporation, having an office and place of business at 170 Rose
Orchard Way, San Jose, California 95134, United States of America ("DMC
STRATEX"), and Microelectronics Technology, Inc., a R.O.C. corporation, having
an office and place of business at No 1 Innovation Road II, Hsinchu 300, Taiwan,
R.O.C. ("MTI"). Capitalized terms not otherwise defined herein shall have the
meaning set forth on Exhibit A attached hereto.
WHEREAS, MTI manufactures and supplies digital microwave radio
components and products for use in telecom applications;
WHEREAS, DMC Stratex desires to have MTI manufacture and supply to DMC
Stratex, and MTI desires to manufacture and supply, certain Products
manufactured to Specifications and in accordance with the terms and conditions
of this Agreement; and
WHEREAS, DMC Stratex will transfer to MTI, on a consignment basis,
certain inventory of components and accessories for incorporation into Products,
and MTI agrees to deplete, to the fullest extent, such consignment inventory, in
connection with the manufacture of the Products prior to obtaining similar
components from third party suppliers.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, and covenants contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereby agree as follows:
1. KNOW-HOW LICENSE.
1.1. DMC Stratex License. Subject to the terms and conditions of this Agreement
and during the Term and for a period necessary for MTI to fulfill the final
Purchase Order issued under Section 12.1 and to maintain and perform its repair
capability under Section 12.4, DMC Stratex hereby grants to MTI, and MTI hereby
accepts, a non-exclusive, non-transferable, royalty-free, fully paid-up, and
non-sublicensable (except for sublicense to a Subsidiary) right and license,
solely in Taiwan, the People's Republic of China ("PRC") and any other locations
agreed to by DMC Stratex, to use the DMC Stratex Know-How (and any improvements
thereto) and the Intellectual Property Rights associated therewith, solely to
develop and manufacture the Products for sale to DMC Stratex and to provide
warranty and repair services for such Products to DMC Stratex, and to entities
and persons designated by DMC Stratex, in DMC Stratex's sole and absolute
discretion.
1.2. Restrictions and Reservation of Rights. MTI agrees not to use the DMC
Stratex Know-How, or make or sell any Product, except as expressly permitted in
Section 1.1.
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DMC STRATEX NETWORKS, INC. CONFIDENTIAL
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All Intellectual Property Rights in and to the Product and to the
DMC Stratex Know-How are and shall at all times be owned by DMC Stratex, subject
only to the license rights expressly granted to MTI in Section 1.1. Any and all
rights not expressly granted to MTI herein are reserved by DMC Stratex.
2. OWNERSHIP OF KNOW-HOW.
2.1. Ownership.
2.1.1. DMC Stratex Ownership. All DMC Stratex Know-How shall at all
times remain the exclusive property of DMC Stratex. MTI shall
not apply to register any DMC Stratex Know-How, Specifications
or Products, or any aspect of the foregoing owned by DMC
Stratex, under any form of intellectual property protection
registration system, including, without limitation, patent,
design or copyright registration, in any jurisdiction
throughout the world. MTI shall not at any time challenge or
oppose DMC Stratex's ownership of or rights to use or register
the DMC Stratex Know-How, Products or the Specifications.
2.1.2. MTI Ownership. All MTI Know-How shall at all times remain the
exclusive property of MTI. DMC Stratex shall not apply to
register any MTI Know-How, or any MTI proprietary aspect
thereof, under any form of intellectual property protection
registration system, including, without limitation, patent,
design or copyright registration, in any jurisdiction
throughout the world. DMC Stratex shall not at any time
challenge or oppose MTI's ownership of or rights to use or
register the MTI Know-How.
2.2. License to MTI Know-How.
2.2.1. MTI hereby grants, subject to Section 2.2.3, to DMC Stratex,
and DMC Stratex hereby accepts, a non-exclusive, irrevocable,
royalty-bearing, non-transferable, world-wide, sublicensable
(subject to the restrictions under Section 2.2.2 below) right
and license to use, reproduce and incorporate all or any
portion of the MTI Know-How into and for manufacture of
Products, and to sell, offer for sale, distribute, market and
advertise such Products containing MTI Know-How, for so long
as DMC Stratex continues to sell such Products. The rate of
royalty paid for the license of the MTI Know-How granted
herein shall be as set forth on Exhibit L.
2.2.2. The right to sublicense by DMC Stratex shall be subject to the
restrictions that (a) the sublicensee of DMC Stratex shall
only have the right, under such sublicense, to manufacture the
Products exclusively for DMC Stratex, and shall not
manufacture for itself or for any third party in any form; (b)
the sublicensee shall have no right to use any of MTI Know-How
for manufacture, reproduction or incorporation into any other
product, component or device, other than the Products, and
shall have no right to sell, offer for sale, distribute,
market, advertise or otherwise dispose of any such product,
component or device containing any of MTI Know-How, other than
the Products; (c) the sublicense shall have a duration no
longer than that for the license granted to DMC
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DMC STRATEX NETWORKS, INC. CONFIDENTIAL
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Stratex in Section 2.2.1 herein; (d) there should be no more
than two sublicensees concurrently at any point in time to
manufacture the Products; (e) DMC Stratex shall give prior
notice to MTI of any such sublicensee and related information;
and (f) no further sublicense may be granted by any of such
sublicensees.
2.2.3. DMC Stratex shall not exercise the license granted to DMC
Stratex by MTI in Section 2.2.1 to manufacture the Product on
its own or by a third party, (a) so long as MTI has not
commenced transition of its manufacturing services pursuant to
Section 16.5, or (b) so long as MTI has not become subject to
bankruptcy, receivership, liquidation, reorganization or other
proceeding of insolvency in favor of the general interest of
creditors.
2.3. Assignment of Improvements.
2.3.1. Assignment of DMC Stratex Know-How Improvements. MTI shall
promptly communicate to DMC Stratex, in writing, any and all
improvements and developments to the DMC Stratex Know-How
related to the Products, conceived or developed by MTI, or a
third party working under MTI's direction or control, ("DMC
STRATEX KNOW-HOW IMPROVEMENTS") including, without limitation,
any design changes or other information. Subject to the
license granted to MTI under Section 1.1, MTI hereby
irrevocably conveys, transfers, assigns and delivers to DMC
Stratex all rights, title and interests in and to the DMC
Stratex Know-How Improvements, throughout the world, free from
any liens and encumbrances, to the extent that DMC Stratex is
not already the owner of all such rights, title and interests
therein and thereto; except that any improvement or
development made by MTI to the MTI Know-How shall constitute
and remain a part of MTI Know-How and property. DMC Stratex
Know-How Improvements shall be deemed DMC Stratex Know-How for
the purposes of this Agreement.
2.3.2. Assignment of MTI Know-How Improvements. DMC Stratex shall
promptly communicate to MTI, in writing, any and all
improvements and developments to the MTI Know-How related to
the Products, conceived or developed by DMC Stratex, or a
third party working under DMC Stratex's direction or control
under this Agreement, ("MTI KNOW-HOW IMPROVEMENTS") including,
without limitation, any design changes or other information.
Subject to the license granted to DMC Stratex under Section
2.2, DMC Stratex hereby irrevocably conveys, transfers,
assigns and delivers to MTI all rights, title and interests in
and to the MTI Know-How Improvements, throughout the world,
free from any liens and encumbrances, to the extent that MTI
is not already the owner of all such rights, title and
interests therein and thereto; except that any improvement or
development to the DMC Stratex Know-How shall constitute and
remain a part of DMC Stratex Know-How and property. MTI
Know-How Improvements shall be deemed MTI Know-How for the
purposes of this Agreement.
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DMC STRATEX NETWORKS, INC. CONFIDENTIAL
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2.4. Further Assistance.
2.4.1. Assistance by MTI. MTI agrees to cooperate with DMC Stratex or
its designee(s), at DMC Stratex's or its designees' expense,
both during and after the Term, in applying for, obtaining,
perfecting, evidencing, sustaining and enforcing DMC Stratex's
Intellectual Property Rights in and to the DMC Stratex
Know-How Improvements, including, without limitation,
executing such written instruments as may be prepared by DMC
Stratex and doing such other acts as may be necessary in the
opinion of DMC Stratex to obtain a patent, register a
copyright, or otherwise enforce the ownership of DMC Stratex
in such DMC Stratex Know-How Improvement (and MTI hereby
irrevocably appoints DMC Stratex and any of its officers and
agents as its attorney in fact to act for and on MTI's behalf
of, and instead of MTI only for the matter specifically
provided for in this Section 2.4.1, with the same legal force
and effect as if executed by MTI; provided that, when acting
in its capacity of attorney-in-fact, DMC Stratex shall advise
MTI in advance of any act or omission to act that may have a
Material Adverse Effect on the interest of MTI under this
Agreement).
2.4.2. Further Assistance by DMC Stratex. DMC Stratex agrees to
cooperate with MTI or its designee(s), at MTI's or its
designees' expense, both during and after the Term, in
applying for, obtaining, perfecting, evidencing, sustaining
and enforcing MTI's Intellectual Property Rights in and to the
MTI Know-How Improvements, including, without limitation,
executing such written instruments as may be prepared by MTI
and doing such other acts as may be necessary in the opinion
of MTI to obtain a patent, register a copyright, or otherwise
enforce the ownership of MTI in such MTI Know-How Improvement
(and DMC Stratex hereby irrevocably appoints MTI and any of
its officers and agents as its attorney in fact to act for and
on DMC Stratex's behalf of, and instead of DMC Stratex only
for the matter specifically provided for in this Section
2.4.2, with the same legal force and effect as if executed by
DMC Stratex; provided that, when acting in its capacity of
attorney-in-fact, MTI shall advise DMC Stratex in advance of
any act or omission to act that may have a Material Adverse
Effect on the interest of DMC Stratex under this Agreement).
3. CONSIGNED INVENTORY.
3.1. Inventory Transfer. Following the Effective Date, DMC Stratex will continue
to review and evaluate the Business Inventory to determine the scope and items
of the Consigned Business Inventory (as defined below). Such determination shall
be performed during the Transition Period and shall be substantially completed
by December 31, 2002. Following the determination of each batch of Business
Inventory, MTI will take possession of such batch of Business Inventory, less
(a) the Scrapped Business Inventory, (b) the Retained Inventory; (c) any of the
Business Inventory related to manufacture of the IDUs or accessories; and (d)
any other Business Inventory not required for Altium or XP4Plus+ production
(collectively, the "CONSIGNED BUSINESS INVENTORY"). MTI shall transport, or
arrange for the transportation, at MTI's cost, of all Consigned Business
Inventory from DMC Stratex's premises at 170 Rose Orchard Way, San Jose,
California 95134, United States of America and 482 South Abbott Street,
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DMC STRATEX NETWORKS, INC. CONFIDENTIAL
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Milpitas, California 95035, United States of America to MTI's premise located at
1 Innovation Road II, Science-Based Industrial Park, Hsinchu, Taiwan, or B15
Block 52, Wuxi State High & New Technology Industry Development Zone, Jiangsu,
People's Republic of China, as applicable (the "FACILITY") in accordance with
the terms, schedule and timeline provided for in the Transition Services
Agreement. MTI shall be responsible for obtaining the appropriate licenses or
permits (including, without limitation, shipping transport, customs and other
clearances) necessary to import the Consigned Business Inventory to Taiwan or
the PRC, as applicable, in accordance with Section 9.5.2 of this Agreement. No
later than three (3) business days before the first shipment of the Consigned
Business Inventory for such transfer to be made after the execution of this
Agreement, DMC Stratex shall provide MTI with a list of the Consigned Business
Inventory and the price for each item of such inventory; provided that such
price shall be (i) valued with adjustment based on [****]; (ii) net of [****],
and (iii) subject to MTI's review for accuracy, which shall be completed by the
date of shipment of the Consigned Business Inventory (such list being referred
to as the "CONSIGNMENT INVENTORY PRICING LIST"). MTI shall hold such Consigned
Business Inventory on a consignment basis pursuant to the terms of this Section
3 and any storage, control, management, insurance or other costs or expenses
relating to the Consigned Business Inventory after the delivery thereof to MTI
and up to the end of the Inventory Period shall be borne by MTI. If DMC Stratex
requests that MTI retain any Consigned Business Inventory after the end of the
Inventory Period or if any Consigned Business Inventory remains unsold after the
end of the Inventory Period, DMC Stratex shall pay for all reasonable storage,
control, management, insurance (provided that MTI shall cooperate with DMC
Stratex in procuring such insurance), and other costs and expenses related to
such retained Consigned Business Inventory, subject to Section 3.5.3 below.
3.2. Business Inventory Purchases by MTI. If DMC Stratex requests MTI to
manufacture Products pursuant to the terms hereof, MTI shall use the Consigned
Business Inventory in connection with the manufacture of the Products to the
fullest extent such Consigned Business Inventory can be used with the Products.
Each item of Consigned Business Inventory used by MTI to manufacture the
Products shall be deemed to be sold to MTI at the time MTI incorporates such
item of Consigned Business Inventory into a Product, and title to such item
shall not pass to MTI until such time. The price of any item of Consigned
Business Inventory shall be as set forth on the Consigned Inventory Pricing
List.
3.2.1. Payment. Payment for all Purchases set forth in the "Report of
Purchase" delivered pursuant to Section 3.6 hereof shall be
made by MTI to DMC Stratex, by wire transfer to DMC Stratex's
account at the bank of DMC Stratex's choice, no later than
forty (40) calendar days following the date of each Report of
Purchase; provided, that any receivables due from MTI for
Purchases shall be subject to the right of offset against
receivables due from DMC Stratex for the Products manufactured
by MTI and sold to DMC Stratex, described in Section 10.2
below.
3.2.2. Purchase. A "PURCHASE" of Consigned Business Inventory by MTI
hereunder shall occur, and Consigned Business Inventory shall
be "Purchased" (and title to Purchased Consigned Business
Inventory shall pass to MTI), when:
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DMC STRATEX NETWORKS, INC. CONFIDENTIAL
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3.2.2.1. any items of Consigned Business Inventory are
incorporated into Product (but only to the extent of
the items so incorporated);
3.2.2.2. any Consigned Business Inventory is destroyed, while
in storage at MTI's Facility; provided that an item
shall be deemed to be "destroyed" if the outer
appearance or physical form of the item has become
substantially ruined or deformed and thereby causes
it to lose its intended function; an item shall not
be deemed "destroyed" if the item has a latent defect
or other functional disorder or breakdown that cannot
be determined merely by its outer appearance or
physical form. Any defective item shall be referred
to herein as a "MALFUNCTIONAL ITEM." In case of any
Malfunctional Item, MTI shall (a) include the
necessary information in the monthly report required
under Section 3.6, and both parties shall negotiate
in good faith to determine the appropriate action to
be taken with respect to such Malfunctional Items;
and (b) provide reasonable support in reviewing and
dispositioning such Malfunction Items; or
3.2.2.3. this Agreement terminates or the Inventory Period
lapses, in which case all Consigned Business
Inventory in MTI's possession on the effective date
of the termination shall be deemed to have been
Purchased by MTI on the effective date of the
termination to the extent such Consigned Business
Inventory is not returned to DMC Stratex within sixty
(60) calendar days after the effective date of
termination or expiration of this Agreement or the
Inventory Period, subject to Section 3.5.
3.3. Storage of Consigned Business Inventory Prior to Purchase. Consigned
Business Inventory shall be considered to be "in storage" at a Facility of MTI
from the time of delivery by DMC Stratex to that Facility until such time as the
Consigned Business Inventory is Purchased by MTI or returned to DMC Stratex as
provided herein. MTI shall maintain all Consigned Business Inventory while in
storage in an area within MTI's Facility separate or identifiable from MTI's
other goods, whether owned by MTI or consigned or bailed from any other person
or entity. MTI shall store the Consigned Business Inventory carefully and
properly so as to protect the Consigned Business Inventory from loss or damage.
While the Consigned Business Inventory is in storage, MTI shall assume the risk
of loss or damage to it from any cause whatsoever. MTI shall ensure that, while
the Consigned Business Inventory is in storage, such Consigned Business
Inventory does not become subject to any lien or other security interest
securing any obligation owed or alleged to be owed by MTI to any person or
entity, except, however, MTI shall not be in material breach of this Agreement
for statutory liens which exist temporarily, solely by operation of law, because
payments have not yet been received in the ordinary course of business. MTI
shall have no right or power to sell, pledge, assign or otherwise dispose of the
Consigned Business Inventory; except for (i) Product sales permitted hereunder
that incorporate items of Consigned Business Inventory, (ii) Scrapped or Salvage
Sales pursuant to Section 3.5 hereof, or (iii) as otherwise agreed to in writing
by DMC Stratex. DMC Stratex shall have the right to inspect, no more frequently
than once a calendar month, the Consigned Business Inventory then in storage at
MTI's Facilities upon reasonable notice to MTI, and during regular business
hours; provided, however, that should any inspection or audit reveal a
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DMC STRATEX NETWORKS, INC. CONFIDENTIAL
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material problem with MTI's storage of the Cosigned Business Inventory, such
limitation on the frequency of the audit shall be deemed waived by the parties.
DMC Stratex and MTI shall conduct a joint review, at the end of the sixth (6th)
and twelfth (12th) months of the Inventory Period, of the status of the
Consigned Business Inventory, so as to determine which items thereof are beyond
their ordinary shelve lives or may otherwise become Scrapped or sold for Salvage
Sales (as both defined in Section 3.5), at a time earlier than expiration of the
Inventory Period. In the event DMC Stratex and MTI fail to reach an agreement as
to the status of certain Consigned Business Inventory, DMC Stratex shall make
the final decision. Upon the conclusion of any inspection, audit, or review,
both parties shall reconcile their books and records to correspond with the
findings.
3.4. Rework. Subject to DMC Stratex's prior approval for the cost of the rework,
DMC Stratex shall reimburse MTI for costs for the reworking that is reasonably
necessary in preparing any portion of Consigned Business Inventory for
incorporation into Products, and such reimbursement shall be due [****]
following the date of the Report of Purchase for the month in which such rework
occurs.
3.5. Scrapped Consigned Business Inventory and Salvage Sales; Retention of
Consigned Business Inventory. At the end of the Inventory Period, DMC Stratex
shall determine whether any remaining Consigned Business Inventory not
incorporated into Product is to be Scrapped, sold pursuant to a Salvage Sale,
retained pursuant to Section 3.5.3 below, or returned.
3.5.1. "SCRAPPED" shall mean the destruction of Consigned Business
Inventory that has not been incorporated into Product. Upon
approval by DMC Stratex, MTI shall destroy all Consigned
Business Inventory that is determined to be Scrapped at any
time before or upon expiration of the Inventory Period, and
such Scrapped Consigned Business Inventory shall be deemed to
be returned and not Purchased.
3.5.2. "SALVAGE SALE" shall mean the sale of Consigned Business
Inventory to a third party pursuant to the following terms:
Consigned Business Inventory sold only after the lapse of the
Inventory Period and upon written approval of DMC Stratex;
upon a third party's purchase of Consigned Business Inventory,
[****] of the proceeds shall be promptly remitted to DMC
Stratex and the remaining [****] shall be the property of MTI.
3.5.3. At DMC Stratex's request, which shall be made no later than
thirty (30) calendar days prior to the expiration of the
Inventory Period, in lieu of returning any Consigned Business
Inventory that remains unsold after the end of the Inventory
Period, MTI will retain such Consigned Business Inventory for
such time as DMC Stratex shall request prior to any
termination or expiration of this Agreement, and the
provisions of this Section 3 shall continue to apply to such
Consigned Business Inventory until it is Purchased, Scrapped,
sold pursuant to a Salvage Sale, or returned to DMC Stratex
(as DMC Stratex shall determine in its sole discretion),
except that DMC Stratex shall pay for all reasonable storage,
control, insurance (provided that MTI shall cooperate with DMC
Stratex in procuring such insurance), management or other
costs or expenses related to any retained Consigned Business
Inventory.
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DMC STRATEX NETWORKS, INC. CONFIDENTIAL
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3.6. Report of Purchase. MTI shall provide to DMC Stratex, within three (3)
business days after the tenth (10th) business day of every month, a record for
the applicable calendar month of the following ("REPORT OF PURCHASE"):
3.6.1. quantity of Consigned Business Inventory Purchased;
3.6.2. shipment of Product to DMC Stratex or DMC Stratex's customers
and/or distributors, as applicable, identifying the person or
entity receiving the shipment (if such person or entity is
known to MTI), the Product being shipped, and the quantity of
the Product being shipped;
3.6.3. the quantity and location of the balance of all Consigned
Business Inventory;
3.6.4. manufacturing or work-in-process stage of Products ordered by
DMC Stratex to the extent available;
3.6.5. other reports required by the Joint Services Agreement; and
3.6.6. any other reports requested by DMC Stratex, if agreed to by
MTI in advance, provided that such agreement shall not be
unreasonably withheld.
3.7. Audits. MTI shall allow DMC Stratex or its representative to audit and
analyze relevant records of MTI to ensure compliance with the Obligations
pursuant to the following terms.
3.7.1. Such audits will be permitted within three (3) weeks of MTI's
receipt from DMC Stratex of a written request to audit;
3.7.2. Such audits will be conducted during normal business hours at
a time on which the parties have mutually agreed and shall not
interfere unreasonably with MTI's business activities
conducted at MTI's Facilities; and
3.7.3. DMC Stratex's costs and expenses related to such audits shall
be borne by DMC Stratex unless such audit uncovers a Material
Discrepancy, as reasonably established in an audit report
provided to MTI, in the records required pursuant to Section
3.6 above, in which case all costs and expenses shall be borne
solely by MTI. For the purposes of this Section, a "MATERIAL
DISCREPANCY" is a discrepancy that results in the adjustment
of payments of more than [****] of the amount due for that
monthly report. Upon MTI's receipt and confirmation of a
written request by DMC Stratex, MTI shall remit payment, due
and payable together with the immediately next payment for the
Purchase, for the amount of any discrepancy and the costs and
expenses of the conduct of an audit, if provided for in this
Section.
3.8. Consignment Security Interest.
3.8.1. The parties acknowledge that even though title to items of the
Consigned Business Inventory does not pass to MTI until such
items
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DMC STRATEX NETWORKS, INC. CONFIDENTIAL
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are Purchased, the consignment of the Consigned Business
Inventory under this Agreement constitutes under the UCC the
creation of a "security interest" therein in favor of DMC
Stratex as a "secured party" (as such terms are defined in the
UCC). In furtherance but not by way of a limitation thereof,
MTI hereby pledges, assigns and grants to and for the benefit
of DMC Stratex a security interest in the "Collateral"
described in subsection 3.8.2 below to secure payment and
performance of MTI's obligations under this Agreement (the
"OBLIGATIONS").
3.8.2. The "COLLATERAL" shall consist of all right, title and
interest of MTI in and to: the Consigned Business Inventory
not yet Purchased; the Consigned Business Inventory Purchased;
any products or goods to which the Consigned Business
Inventory becomes accessed or into which any Consigned
Business Inventory becomes commingled by virtue of
incorporation by manufacturing of the Product; and any
proceeds of any of the foregoing; provided, however, that
pursuant to Section 3.5.2, [****] of the proceeds of Consigned
Business Inventory sold pursuant to a duly approved Salvage
Sale shall not be deemed Collateral.
3.8.3. MTI shall, and hereby does authorize DMC Stratex to, execute
and file any and all instruments and documents (including UCC
financing statements and security interest registrations in
all relevant jurisdictions), that DMC Stratex reasonably deems
necessary or advisable to protect the rights, title and
interests of DMC Stratex in and to the Collateral. Further,
should the execution or filing of any such document require
action by MTI, MTI shall execute and file any and all
documents MTI reasonably requested by DMC Stratex as being
necessary or advisable to protect the rights, title and
interests of DMC Stratex in and to the Collateral.
3.8.4. If any of the events specified in Section 16.2 ("Termination")
hereof occurs as to MTI, then DMC Stratex shall have all
rights and remedies provided to a secured party with respect
to the Obligations and/or the Collateral that are provided by
applicable law, including, without limitation, all rights and
remedies of a secured party under the UCC and the Security
Agreement, which remedies are incorporated herein as if
restated in full. Such rights and remedies and all other
rights, powers and remedies of DMC Stratex hereunder are
cumulative and in addition to all rights, power and remedies
provided under any and all agreements between DMC Stratex and
MTI, at law, in equity or otherwise. Any delay or failure by
DMC Stratex to exercise any right, power or remedy shall not
constitute a waiver thereof by DMC Stratex, and no single or
partial exercise by DMC Stratex of any right, power or remedy
shall preclude other or further exercise thereof or any
exercise of any other rights, powers or remedies.
3.9. Inventory Incentive Program. The parties shall work together to develop a
plan to provide incentives to MTI to use the Consigned Business Inventory as set
forth in more detail on Exhibit K ("Inventory Incentive Program"); provided that
DMC Stratex
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DMC STRATEX NETWORKS, INC. CONFIDENTIAL
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shall use commercially reasonable efforts to plan and issue Purchase Orders for
Products for which such Consigned Business Inventory may be used.
4. MANUFACTURING PERIOD.
4.1. Specifications. DMC Stratex shall provide Specifications for the Products
in accordance with the schedule set forth on Exhibit D.
4.2. Changes to the Specifications. DMC Stratex is entitled to request
modifications in the form of changes or additions to the Specifications at any
time during the Term. Such requests shall be submitted by DMC Stratex to MTI in
writing for MTI's prior consent before implementation of any such modifications,
which consent shall not be unreasonably withheld (as further provided for in the
Joint Service Agreement). If such modifications require additional expenditures
of time, cost or effort by MTI, MTI shall advise DMC Stratex, within [****] of
DMC Stratex's request for modification, of the impact on the Schedule and upon
any recurring and non-recurring manufacturing cost for the Product. The parties
shall make a good faith effort to negotiate and agree upon any change which may
apply to the unit price of the Product within [****] from the date of MTI's
response to DMC Stratex's notification of the proposed engineering change, and
this Agreement shall be amended accordingly. DMC Stratex shall reimburse MTI, in
accordance with Section 10.1 of this Agreement, any and all out of pocket costs
and expenses incurred by MTI in implementing such modifications requested by DMC
Stratex, whether a recurring or non-recurring expense, provided that MTI obtain
DMC Stratex's prior written approval prior to incurring such expense. DMC
Stratex shall not be obligated to reimburse MTI for any employee time expended
in evaluating such modification. If such modifications do not require MTI's
expenditure of additional time, cost, or effort, MTI will develop the Product to
conform to such modification of the Specifications at no additional charge and
with no change in the Schedule. Implementation of changes may require, at DMC
Stratex's cost, first article verification and acceptance in accordance with
Section 5 ("Acceptance and Rejection of Deliverables"). Upon receipt of DMC
Stratex's written approval, MTI will proceed with implementation of the
prescribed changes, and the Specifications and the Schedule will be updated to
reflect such changes.
4.3. Configuration Control. MTI shall not make or incorporate any change in the
Specifications for the Products which affects form, fit, function, regulatory
approvals, interface, interchangeability, reliability or maintainability,
without the prior written approval of DMC Stratex. All Components used in
production of Products shall be listed on DMC Stratex's Approved Manufacturers
List, containing DMC Stratex's part number and approved vendors for that
component (hereinafter "AML"). The up-to-date version of the AML shall be made
available to MTI by DMC Stratex in a PDM database format on the Agile system.
MTI must put systems in place within its quality system to ensure that all
components purchased for use in production of Products are in compliance with
the AML. MTI shall remain liable for any material purchased by MTI or any third
party purchasing agent on behalf of MTI that is at variance with DMC Stratex's
AML.
4.4. Tooling. Except for the Products identified in Section 3 of Exhibit B, MTI
is responsible for all of the process tooling, assembly tools and test fixtures
necessary or appropriate to manufacture the Products, except for tools consigned
by DMC Stratex; provided that DMC Stratex shall provide reasonable assistance to
MTI in the design, manufacture, procurement or supply of any of the process
tooling, assembly tools and test fixtures. DMC Stratex shall have the option to
pay for the development of all
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DMC STRATEX NETWORKS, INC. CONFIDENTIAL
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process tooling, assembly tools, test fixtures developed after the date hereof
by either party exclusively for the manufacture of the Product ("DMC STRATEX
EXCLUSIVE TOOLING"). In the event DMC Stratex pays for such development, DMC
Stratex shall own all right, title and interest in and to all DMC Stratex
Exclusive Tooling, including, without limitation, all Intellectual Property
rights therein, and MTI shall not use DMC Stratex Exclusive Tooling for any
purpose, other than the manufacture of Products or performance of Services for
DMC Stratex, or as otherwise permitted in writing by DMC Stratex. In the event
DMC Stratex elects not to exercise its option to pay for the development of the
DMC Stratex Exclusive Tooling, MTI may pay for such development, and in such
event, MTI shall solely own all right, title and interest, without any
restriction, in and to all DMC Stratex Exclusive Tooling, including, without
limitation, all Intellectual Property rights therein.
4.5. Joint Services Agreement. The day to day activities of the parties and the
responsibility and obligations of each party in the manufacturing of the
Products shall be set forth in more detail in the Joint Services Agreement. To
the extent any terms or conditions of the Joint Services Agreement conflict with
any terms or conditions set forth herein, the terms and conditions of this
Agreement shall control.
4.6. Reviews and Progress Reports.
4.6.1. Deliverables. During the Manufacturing Period, MTI will
provide DMC Stratex with Deliverables in accordance with the
Schedule set forth on Exhibit D attached hereto.
4.6.2. Progress Reports. During the Manufacturing Period, MTI will
provide DMC Stratex with written progress reports, as
requested by DMC Stratex, starting one (1) month after the
Effective Date and ending on the date of DMC Stratex's final
acceptance of all Deliverables in accordance with Section 5
hereof. The foregoing obligation shall not apply with respect
to any unit of Altium Product which MTI has already
manufactured or sold to DMC Stratex prior to the Effective
Date. Commencing on the Effective Date and during the Term,
MTI shall provide DMC Stratex with a progress report that
shall indicate progress of all Products manufactured or
supplied pursuant to this Agreement, which report shall
contain the following information: (a) status of progress of
the Products as measured against the scheduled Milestones; (b)
a short description of problems in meeting any Milestone; (c)
proposed recovery method to meet the next Milestone if
necessary; (d) probability of meeting the next Milestone; and
(e) any other information regarding the progress as reasonably
requested by DMC Stratex.
4.6.3. Reviews. DMC Stratex is entitled to conduct periodic reviews,
especially during the Manufacturing Period, to ensure its
satisfaction with the manufacture of the Products. During
normal business hours, upon reasonable notice to MTI, DMC
Stratex shall have the right, but not the obligation, to (a)
inspect the Services provided by MTI pursuant to this
Agreement; (b) inspect and test, at DMC Stratex's own expense,
MTI's manufacturing facilities in which the Products are being
manufactured, and any vehicles, containers or other equipment
used in providing Services, including, without limitation, any
areas where
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Components or Products are stored, handled, packaged, or
manufactured; and (c) inspect and obtain copies of licenses,
authorizations, approvals or written communications from any
governmental entity or agency applicable or related to
Services.
4.7. Placement of Trademarks. DMC Stratex may require that MTI place DMC Stratex
Trademarks on the Products. Any use or placement of such markings and
identification shall be strictly in accordance with the requirements of DMC
Stratex as set forth in the DMC Stratex Trademark Guidelines, as provided to MTI
and as may be updated from time to time by DMC Stratex. MTI shall provide
mock-ups and other samples to DMC Stratex for approval in advance of actual
production of the Products, provided that the costs and expenses for such
mock-ups and samples shall be apportioned between DMC Stratex and MTI upon good
faith negotiation. MTI is not authorized to use the DMC Stratex Trademarks on
any products, other than Products ordered by and delivered to DMC Stratex, or
for any other purpose.
4.7.1. Trademark License. Subject to the terms and conditions of this
Agreement and during the Term, DMC Stratex hereby grants to
MTI, and MTI hereby accepts, a non-exclusive,
non-transferable, non-sublicensable, royalty-free, fully
paid-up, limited right and license to use the DMC Stratex
Trademarks solely to fulfill its obligations pursuant to this
Agreement. This license shall terminate on the earlier of
termination or expiration of this Agreement or failure of MTI
to maintain the quality requirements set forth in this
Agreement. MTI shall obtain no rights or interest, of any
kind, in and to the DMC Stratex Trademarks, other than those
limited rights set forth in this Section.
4.7.2. Trademark License Restrictions. MTI shall apply DMC Stratex
Trademarks as specified in the Specifications and in strict
accordance therewith and shall not (a) apply to register any
trade name, trademark or other identifier associated with DMC
Stratex in any jurisdiction; (b) use for any purpose any name
or mark similar to or capable of being confused with any trade
name or trade mark or other identifier associated with DMC
Stratex or DMC Stratex's products from time to time, except as
permitted pursuant to this Agreement; or (c) challenge or
oppose DMC Stratex's ownership of or rights to use or register
any DMC Stratex Trademarks.
4.8. Manufacturing Services. Subject to the terms and conditions of this
Agreement and during the Term, MTI shall complete, in a timely manner and in
accordance with the professional standards generally applicable in the relevant
industry, all Services necessary to manufacture the Product in conformance with
Specifications, in accordance with the Schedule, and in accordance with the
quality and reliability standards set forth on Exhibit F. MTI shall provide all
technology (except for DMC Stratex Know-How), labor, materials, Purchased
Assets, and facilities necessary to manufacture the Product, and if applicable,
the DMC Stratex Exclusive Tooling. In the process of providing the Services, MTI
shall deliver all Deliverables in accordance with the Milestones set forth on
Exhibit D.
4.9. Changes In Process or Method of Manufacturing. During the Term, MTI agrees
that it will not make material changes, without DMC Stratex's prior written
consent (which consent shall not unreasonably withheld), in the process or
method of
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DMC STRATEX NETWORKS, INC. CONFIDENTIAL
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manufacturing, including, without limitation, any changes to the form, fit,
function, regulatory approvals, interface, interchangeability, reliability or
maintainability of the manufacturing process. MTI further agrees that any
contemplated changes in process or method of manufacturing will be submitted to
DMC Stratex in sufficient time to provide DMC Stratex with a reasonable
opportunity in which to evaluate such changes, as set forth in more detail in
the Joint Services Agreement. DMC Stratex may request that MTI utilize, at DMC
Stratex's cost, specific material or parts for the manufacture or assembly of
Products, or change the manufacturing process provided. DMC Stratex's request
shall be in accordance with this Agreement.
4.10. ESD REQUIREMENTS. For static devices which are static sensitive and
capable of being degraded, damaged, or destroyed by electrostatic charges or
discharges, (a) all items shall be preserved, packaged, and stored in such a
manner as to prevent exposure to the generation or discharge of electrostatic
voltages, (b) processed and handled at a minimum, in accordance with JEDEC
Publication #JEP108-B (April, 1991), and (c) MTI shall maintain a documented
system for the control and handling of static-sensitive materials.
5. ACCEPTANCE AND REJECTION OF DELIVERABLES.
5.1. Delivery of Deliverables. MTI shall deliver to DMC Stratex all Deliverables
set forth on Exhibit D. "DELIVERY" shall be deemed to have occurred when MTI
delivers a set of testable Deliverables to DMC Stratex, accompanied by a written
statement listing the Deliverables delivered and stating that they are ready for
DMC Stratex's acceptance testing.
5.2. Acceptance Testing.
5.2.1. First Article Process. Within [****] after receipt of any
Deliverable, DMC Stratex, with the assistance of MTI if
reasonably requested by DMC Stratex, will examine and test
each Deliverable to determine whether the Deliverable conforms
to the Specifications for such Deliverable. This process shall
require MTI to subject the first articles from the production
process to one hundred percent (100%) verification for visual,
mechanical, and electrical requirements of the controlling
document. This process shall conform to the "FIRST ARTICLE
PROCESS" set forth on Exhibit D. (If the changes are
implemented by a sub-tier supplier to MTI, it is MTI's
responsibility to perform the First Article Process with that
sub-tier supplier). The results of the First Article Process
shall be maintained by MTI and a copy of the results shall be
forwarded to DMC Stratex's Purchasing Department. When the
First Article conforms to the First Article Process, MTI shall
complete all first article documents and submit samples and
documents to DMC Stratex for approval. Within [****] after
such delivery, DMC Stratex will provide MTI with written
acceptance of such Deliverable, provided that such Deliverable
conforms to the Specifications, or a written statement of
Errors (the "STATEMENT OF ERRORS") to be corrected prior to
DMC Stratex's payment of the amount due upon DMC Stratex's
acceptance of the Deliverables. In the event a Deliverable
fails to conform to Specifications in a negligible manner, DMC
Stratex may accept MTI's corrections to such Deliverable,
without initiating the Deliverable correction process set
forth in Section 5.2.2 of this Agreement.
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DMC STRATEX NETWORKS, INC. CONFIDENTIAL
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"ERRORS" mean (a) defects in the Product which causes it not
to operate in conformance with the Specifications; (b) defects
in the documentation which render it inaccurate, erroneous or
otherwise unreliable; or (c) any aspect of any Deliverable
which fails to conform to the Specifications.
5.2.2. Correction of Deliverables. In the event DMC Stratex rejects
any Deliverable, MTI will promptly correct the Errors existing
in any Deliverable set forth in the Statement of Errors and
redeliver the Deliverable to DMC Stratex within [****], or
within [****] if reprocessing of prototypes is required, after
receipt of the Statement of Errors. Within [****] after such
redelivery, DMC Stratex will provide MTI with written
acceptance or another Statement of Errors. The procedure set
forth in this Section 5.2.2 will be repeated until DMC Stratex
either accepts the Deliverables or terminates this Agreement
pursuant to Section 16.2 below.
5.2.3. Rejection. Should DMC Stratex reasonably determine, prior to
acceptance, that any Deliverable fails to meet Specifications
after the second redelivery of that Deliverable pursuant to
Section 5.2.2, DMC Stratex may terminate its obligations under
Section 6.2 ("DMC Stratex's Exclusivity") only with respect to
the particular Product for which such Deliverable applies,
without incurring any liability for such termination.
6. EXCLUSIVITY.
6.1. MTI's Exclusivity. MTI shall not sell or transfer any (a) Product, (b) any
sub-assembly component thereof proprietary to DMC Stratex, (c) any documentation
or information which constitutes or incorporates DMC Stratex's Know-How, or any
portion thereof, or (d) DMC Stratex Exclusive Tooling (provided DMC Stratex owns
all rights, title and interests in and to such tooling) to any third party,
without DMC Stratex's prior written consent. This Section 6.1 shall survive any
expiration or termination of this Agreement.
6.2. DMC Stratex's Exclusivity. Provided that MTI satisfies: (a) DMC Stratex's
performance, quality and quantity requirements; and (b) the requirements and
other terms of the Joint Services Agreement, DMC Stratex agrees that it will not
purchase from any third party or engage any third party for the manufacture of
Products during the Term; except, however, (i) DMC Stratex shall have the right
to purchase Products, Components, or any portion thereof, from DMC Stratex's
existing suppliers during the outstanding term of such suppliers' agreements
with DMC Stratex, existing as of the Effective Date hereof; and (ii) DMC Stratex
may purchase the Altium 11, 13 and 15 GHz Products from third party suppliers
during the Term.
6.3. Right of First Discussion. If DMC Stratex in the future desires to
manufacture additional products that are designed or developed by DMC Stratex
that are not provided for under the terms and conditions of this Agreement
("ADDITIONAL PRODUCTS"), DMC Stratex shall present to MTI a request for proposal
to have such Additional Products manufactured by MTI, prior to providing such
request for proposal to a third party, and to discuss with MTI the manufacturing
of such Additional Products by MTI.
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6.4. Non-Competition. As long as MTI is supplying the Products under this
Agreement and for a period of [****] after the expiration or termination of this
Agreement (or an extension or renewal of this Agreement), MTI will not compete
with DMC Stratex in DMC Stratex's efforts to market or sell the XP4, Altium or
any other Products covered by this Agreement, except where the termination of
this Agreement is caused by DMC Stratex's material breach or where the
termination results from DMC Stratex's bankruptcy, in accordance with Section
16.3.
7. PRICING AND PURCHASE ORDERS.
7.1. Purchase Orders. Subject to the terms and conditions of this Agreement, MTI
agrees to accept purchase orders for the Products provided by DMC Stratex on DMC
Stratex's standard purchase order forms ("PURCHASE ORDERS"), and to sell the
Products to DMC Stratex pursuant to the terms and conditions of this Agreement.
Each Purchase Order shall specify the delivery dates, quantity, model number and
description of the Products to be purchased. Upon MTI's acceptance of the
Purchase Order in writing (such acceptance not to be unreasonably withheld),
each Purchase Order shall constitute a firm and binding contract. The terms and
conditions of this Agreement replace in their entirety any and all of the
pre-printed purchase order terms and conditions appearing on the Purchase Orders
and any MTI order confirmation or acknowledgment. MTI shall have [****] to
provide DMC Stratex with written notice of acknowledgement, acceptance or
rejection (which may be made together with a proposed modification to the
quantity or delivery schedule offered in the Purchase Order) of the Product
delivery schedule set forth in the Purchase Order. Failure to acknowledge or
reject (or modify, if applicable) such Purchase Order within such [****] period
shall be deemed an acceptance of such Purchase Order.
7.2. Change Order. Without notice to assignees, DMC Stratex may change the
method of shipment or packing, and/or change the place of delivery set forth in
any Purchase Order by written change order ("CHANGE ORDER") at any time,
provided that DMC Stratex shall notify MTI of any change to the method of
shipment or packing, and/or place of delivery set forth in a Purchase Order at
least [****] prior to the original shipment date. If any such change causes an
increase or decrease in the cost of or the time required to perform under the
Purchase Order, an equitable adjustment shall be made in the Purchase Order
price or delivery schedule or both, and the Purchase Order shall be modified in
writing accordingly. MTI has [****] to give DMC Stratex written notice of
acknowledgement of any Change Order. Failure to acknowledge or reject (or
modify, if applicable) the Change Order within such [****] period shall be
deemed an acceptance of the Change Order.
7.3. Pricing. MTI shall supply Products to DMC Stratex at the established prices
set forth on Exhibit H and the reduction formula set forth on Exhibit I. The
resulting price shall be referred to herein as the "PRICE." The Prices are in
U.S. dollars, and it is the responsibility of MTI to hedge against any of MTI's
cost changes which may result from a fluctuation of currency exchange rates.
7.4. Cost Saving Efforts. MTI shall reduce the cost periodically in good faith
based on DMC Stratex's purchase volume, as set forth in more detail on Exhibit
I, and shall make mutual effort at cost improvements, in accordance with
principles set forth on Exhibit I.
7.5. Termination of Purchase Order For Default. It is understood and agreed that
time is of the essence in any Purchase Order or any extension thereof effected
by any
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Change Order. DMC Stratex may terminate any Purchase Order by written notice, in
whole or in part, if (a) MTI fails to make delivery of the Product or to perform
the Services within [****] of the agreed-upon delivery schedule specified in the
Purchase Order or the applicable Change Order, (b) MTI fails to replace or
correct defective Products in accordance with Section 9.3 ("Inspection upon
Delivery") or Section 12.2 ("In-Warranty Repair"); (c) MTI fails to perform any
of the provisions of the Purchase Order or to so fail to make progress as to
endanger performance in any material respect in accordance with the terms
thereof, or (d) if MTI becomes insolvent, admits in writing its inability to pay
its debts in general as they mature, files a voluntary petition to bankruptcy,
makes an assignment for the benefit of creditors or if a petition under
bankruptcy is filed against it, and if the foregoing condition is not removed or
petitions not dismissed within [****].
7.6. Termination of Purchase Order For Convenience. DMC Stratex may terminate
any Purchase Order, in whole or part, at any time, by giving written notice to
MTI specifying the extent to which performance under the Purchase Order is
terminated. Immediately upon receipt of such notice, MTI shall stop performing
under the Purchase Order, and within six (6) weeks after such notice, MTI shall
submit to DMC Stratex its written termination claim. Failure of MTI to submit
its termination claim as provided herein shall constitute an unconditional and
absolute waiver by MTI of any claim arising from DMC Stratex's notice
termination, except where the damage or claim in connection with such
termination is not assessable or determinable within such six (6) week period
but only if MTI submits such damage claim as soon as it is finally assessed or
determined. MTI shall reasonably assess its damage to determine whether or not
any excess items may be used by MTI for the manufacture of associated products
or diverted for any other purpose, and to correspondingly reduce MTI's
termination claim by the value of such items, and MTI shall exercise
commercially reasonable effort to so divert or otherwise dispose of such items
to reduce its termination claim. When settlement has been made, title to any
such items determined not useable by MTI and charged to DMC Stratex in the
termination claim shall vest in DMC Stratex upon payment of the claim and
forthwith be delivered to DMC Stratex at DMC Stratex's expense, under DMC
Stratex's shipping instructions; provided that MTI shall be entitled to dispose
of such items at its own discretion if DMC Stratex does not instruct on delivery
to DMC Stratex or other disposition of such items within six (6) months after
the settlement of the termination claim. In no event shall MTI be entitled to
incidental or consequential damages, attorney's fees or agent's commissions as a
result of DMC Stratex's termination in accordance with this Section 7.6. DMC
Stratex reserves the right to verify claims hereunder, within sixty (60)
calendar days after receipt of MTI's termination claim, and MTI shall make
available to DMC Stratex upon its request, all relevant books, records,
inventories and facilities for DMC Stratex's inspection and audit. DMC Stratex
shall not unreasonably withhold, and shall promptly pay within five (5) calendar
days following MTI's termination claim, the undisputed compensation or payment
for the damages arising from DMC Stratex's termination for convenience set forth
in this Section 7.6. During a period of one (1) year following the payment of
damage claim to MTI, DMC Stratex shall have the right to inspect and audit, or
have inspected and audited, all relevant books, records, inventories and
facilities of MTI to ascertain such damage claim submitted by MTI pursuant to
this Section 7.6. If any audit reveals that MTI materially overstated its damage
claim, MTI shall immediately pay DMC Stratex the amount overstated, and MTI
shall bear the cost of the audit.
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8. FORECAST AND LIABILITY.
8.1. Forecast. DMC Stratex will issue a forecast of the expected demand for the
Products for [****], such forecast to be updated on or before the 5th business
day of each month. DMC Stratex will issue Purchase Orders for the delivery of
the Product for the first [****] of that [****] forecast. MTI shall procure any
Long-Lead Time Components in good faith against DMC Stratex's forecast for the
remaining [****] of the [****] forecast. In no event shall DMC Stratex be liable
to MTI for the purchase of any non-cancellable, non-returnable Long-Lead Time
Components for more than [****] of DMC Stratex's total price under the remaining
[****] of the [****] forecast, provided, however, that MTI shall use its best
efforts to cancel, return or to find alternate uses for any Long-Lead Time
Components.
8.2. Delayed Shipments. DMC Stratex may request MTI to delay shipment of any
Products for only up to [****] beyond the original shipment date, at no cost to
DMC Stratex. The maximum allowable delayed shipments will not exceed [****] of
the [****] scheduled shipments. Any shipment delayed at DMC Stratex's request
for [****] or more than the original shipment date shall be fully paid by DMC
Stratex to MTI at its total price in the applicable Purchase Order, regardless
of whether the shipment has been delivered to DMC Stratex or DMC Stratex's
customers, and payment for such shipment shall be due and payable in accordance
with Section 10.1 of this Agreement. Upon such payment, title to Products in
such delayed shipment will fully vest in DMC Stratex. MTI shall issue the
invoice for such delayed shipment upon the earlier of: (a) the shipment date of
the Products; and (b) the expiration of such [****] period.
8.3. Liability Reports. MTI will provide to DMC Stratex on a monthly basis a
liability report detailing by part number the amount of liability incurred by
MTI due to cancellation or delay by DMC Stratex.
8.4. Excess Materials. "EXCESS MATERIALS" mean those excess components,
purchased by MTI in response to DMC Stratex's Forecast, which cannot be
incorporated into the Products because of DMC Stratex's terminations,
rescheduling or other delays caused by DMC Stratex, and which cannot be returned
to the supplier for a refund. MTI will notify DMC Stratex of the amount and
dollar liability of any Excess Materials in a consolidated monthly report. The
parties will jointly review the status of Excess Materials on a quarterly basis,
and will decide what action to take with respect to such Excess Materials
semiannually. Reimbursement or compensation to MTI by DMC Stratex for the value
of such Excess Materials shall be made on a semi-annual basis, no later than
thirty (30) calendar days after DMC Stratex's receipt of MTI's monthly reports
(reconciled to the parties' joint quarterly review) of such Excess Materials for
the preceding six months. MTI will mitigate the cost of such Excess Materials by
working with its suppliers to obtain the lowest possible liability.
8.5. Obsolete Materials. "OBSOLETE MATERIALS" mean those unique materials that
MTI ordered in response to DMC Stratex's Purchase Orders or Forecast, which MTI
has on hand, but which can no longer be used by MTI pursuant to this Agreement.
On a monthly basis, MTI will send (under separate cover from the Excess
Materials report) a report, which identifies MTI's purchase cost for such
Obsolete Materials. The parties shall jointly review and discuss the appropriate
reimbursement or compensation to MTI for such Obsolete Materials on a quarterly
basis. Reimbursement or compensation to MTI by DMC Stratex for the value of such
Obsolete Materials shall be made on a semi-annual basis, no later than thirty
(30) calendar days after DMC Stratex's receipt of MTI's
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DMC STRATEX NETWORKS, INC. CONFIDENTIAL
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monthly reports (reconciled to the parties' joint quarterly review) of such
Obsolete Materials for the preceding six months. MTI will mitigate the cost of
such Obsolete Materials by working with its suppliers to obtain the lowest
possible liability.
8.6. MTI's Obligation to Notify DMC Stratex of Discontinued Materials. MTI shall
promptly notify DMC Stratex of any plans by a third party supplier to
discontinue the manufacture or supply of any Component or accessories to be
incorporated into the Product, to the extent MTI, or any of any of its
affiliates, becomes aware of such discontinuance. MTI shall use best efforts to
provide notice sufficient to allow DMC Stratex to make alternate arrangements to
procure such Component or accessory.
9. PACKING AND SHIPPING.
9.1. Packing. Unless otherwise specified, all Products shall be packed,
packaged, marked and otherwise prepared for shipment in a manner which is: (a)
in accordance with good commercial practice, (b) acceptable to common carriers
for shipment at the lowest rate for the particular Product and in accordance
with all governmental regulations, and (c) adequate to ensure safe arrival of
the Product at the named destination and for storage and protection against
weather. An itemized packing sheet must accompany each shipment unless otherwise
specified.
9.1.1. All orders shall be shipped complete by a single shipment or a
number of shipments, unless otherwise instructed by DMC
Stratex. MTI shall immediately give DMC Stratex oral advice of
any prospective failure to ship the specified quantity of
Products in time to meet the scheduled delivery date. Should
only a portion of the Products be available for shipment by
the delivery date, MTI shall consult with DMC Stratex to
obtain delivery instructions. Where DMC Stratex permits MTI to
make partial shipments (such permission not to be unreasonably
withheld), the shipments shall be applied against completion
of the oldest open Purchase Order first.
9.1.2. If MTI ships any Product by a method other than as specified
in the corresponding Purchase Order, MTI shall pay any
resulting increase in the cost of freight incurred over the
cost of freight which would have been incurred had MTI
complied with DMC Stratex's shipping instructions, except
where such a variation in the method of shipment results from
a Change Order pursuant to Section 7.2, in which event, such
cost shall be borne by DMC Stratex.
9.1.3. If solely due to MTI's failure to make timely shipment, the
specified method of transportation would not permit MTI to
meet the scheduled delivery date, the Products affected shall
be shipped by air transportation or other expedient means
reasonably acceptable to DMC Stratex. In such circumstance,
MTI shall pay for any resulting increase in the freight cost
over that which DMC Stratex would have been required to pay if
the specified method of transportation was used.
9.1.4. If MTI ships more Products than ordered in the Purchase Order,
the amount of over-shipment may, at DMC Stratex's option,
either be kept by DMC Stratex for credit against future
shipments or returned to MTI
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at MTI's expense. DMC Stratex will not be obligated to pay MTI
for any overshipment of the Products.
9.1.5. MTI shall obtain DMC Stratex's approval before making any
delivery more than ten (10) business days prior to the
scheduled delivery date. If MTI ships more than ten (10)
business days in advance of the scheduled delivery date
without DMC Stratex's approval, DMC Stratex may return the
Products to MTI at MTI's expense.
9.2. Delivery. Unless otherwise specifically provided on the face of the
Purchase Order, all Products shall be delivered on Ex Works (Incoterms 2000),
MTI's facility, freight collect.
9.3. Inspection Upon Delivery. Upon receipt of any Product delivery, DMC Stratex
shall have two (2) weeks to inspect and test such Product in accordance with the
procedures set forth on Exhibit E. If the Product is found to be defective in
material and workmanship, or if the Product does not conform to Specifications,
DMC Stratex shall have the right to reject such Product during such two (2) week
period. Product not rejected during such period shall be deemed accepted.
Rejected Product shall be replaced with conforming Product within two (2) weeks
after receipt of the rejected Product. DMC Stratex shall have the right to
inspect and test such replacement Product within two (2) weeks of delivery.
9.4. Rejection of Replacement Products. If any replacement Product provided to
DMC Stratex after rejection of the original Product pursuant to Section 9.3 is
found to be defective in material and workmanship, or if such replacement
Product does not conform to Specifications, DMC Stratex shall, at its option,
(a) afford MTI one or more extensions of time to correct the non-conformance for
a period to be specified by DMC Stratex, or (b) terminate the Purchase Order and
be entitled to a prompt and full refund of all amounts previously paid for such
Product, and notwithstanding Section 6.2 ("DMC Stratex's Exclusivity"), purchase
Product from a third party supplier.
9.5. Export and Import Responsibilities.
9.5.1. Exports from Taiwan. MTI shall be responsible for obtaining
the appropriate license or permits to clear Taiwan customs for
export. DMC Stratex will be responsible for supplying export
documents, letters of instruction and carrier routing for
transportation. MTI will furnish DMC Stratex with all
information necessary for DMC Stratex to timely generate
export documents.
9.5.2. Imports to Taiwan. MTI shall be responsible for obtaining the
appropriate licenses or permits (including, without
limitation, shipping transport, customs and other clearances)
necessary to import the Consigned Business Inventory to Taiwan
or the PRC, as applicable. Shipment of the Consigned Business
Inventory to Taiwan will be made on an Exworks (Incoterms
2000), DMC Stratex's facility, freight collect. DMC Stratex
will act as the "Principal Party of Interest" and will be
responsible for complying with the export laws of the United
States of America, and for generating export documents to
forwarder and/or carriers for shipment out of the United
States of America. MTI will designate the forwarder and pay
all freight and handling charges for such shipments.
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9.6. NAFTA. From time to time, MTI will be required to qualify shipments under
the North American Free Trade Agreement (NAFTA), and MTI, or its U.S.-based
designated affiliate, shall be designated as the importer of record. MTI will be
required to assemble and test materials in San Jose, California, United States
of America, in order to qualify finished Product as United States origin
materials. Expenses associated with these transactions for the Altium Product
shall be as set forth on Exhibit H and borne by DMC Stratex, and expenses
associated with these transactions for the XP4Plus+ Product shall be negotiated
by the parties in good faith. Records must be kept on NAFTA qualified Products
for DMC Stratex Networks and U.S. government inspection, as required.
10. PAYMENT.
10.1. Invoices. Unless DMC Stratex disputes the amount due on an invoice in good
faith, DMC Stratex shall pay MTI's invoices [****] from receipt thereof. Payment
of invoices shall not constitute acceptance of the Product and shall be subject
to adjustment for errors, shortages, and defects in the Product or other failure
of MTI to meet agreed-upon requirements of the Purchase Order.
10.2. Set-off. DMC Stratex may set off any amount owed by DMC Stratex to MTI
under this Agreement or the Asset Purchase Agreement against any amount owed by
MTI to DMC Stratex under this Agreement or the Asset Purchase Agreement,
provided that DMC Stratex shall notify MTI in advance of any such set-off.
11. WARRANTIES.
11.1. MTI General Warranty. MTI represents, warrants and covenants that: (a) MTI
has full power to enter into this Agreement and to carry out its obligations
under this Agreement; (b) each of MTI's employees, consultants, contractors or
any other third party who has been or will be involved in the development of the
Product will have executed an agreement with MTI conveying all proprietary
rights in and to the Product to MTI; and (c) MTI has the right to disclose or
use, without liability to others, all subject matter, including ideas,
inventions, creations, works, processes, designs and methods as developed by MTI
that MTI will disclose or use in performing the Services.
11.2. MTI Products Warranty. MTI represents, warrants and covenants that: (a)
all Products and Deliverables furnished hereunder shall meet the quality,
operating conditions and performance requirements described in the
Specifications and any applicable Purchase Order; (b) all Products shall be free
from defects in workmanship and material; (c) MTI has good and marketable title
to the Products to be furnished hereunder and there are no liens, claims or
encumbrances of any kind whatsoever against the Product manufactured by MTI for
DMC Stratex (other than the security interest in favor of DMC Stratex described
in Section 3.8); and (d) any MTI contributed portion of the Product shall not
infringe any Intellectual Property Rights of any third parties. If any Product
delivered hereunder does not meet the warranties specified in this Section 11.2
or otherwise as applicable, DMC Stratex may, at its election, require MTI to
promptly correct, at no cost to DMC Stratex, any defective or nonconforming
Products by repair or replacement, at MTI's facility for a period of [****] from
delivery ("WARRANTY PERIOD"), as set forth more fully in Section 12.2 herein.
The provisions of this clause shall not limit or affect the rights of DMC
Stratex under Section 9.3.
11.3. MTI Service Warranty. MTI represents, warrants and covenants that: (a) the
Services performed shall meet the quality, operating conditions and performance
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requirements described in the Specifications and any applicable Purchase Order;
(b) all Services shall be performed in accordance with professional standards,
generally applicable to the relevant industry; and (c) in connection with its
performance with its performance of Services, MTI will not infringe any
Intellectual Property Rights of any third party.
11.4. MTI Compliance with Laws Generally. MTI represents, warrants and covenants
that: (a) MTI shall comply with all Laws in all material respects as applicable
to its performance under this Agreement; and (b) MTI shall at all times perform
any Services safely and in a manner which shall minimize, to the greatest extent
possible, any threat of bodily injury or property damage, and shall enforce
compliance with the professional standards of safety applicable in the relevant
industry and accident prevention found under applicable Laws. Upon written
request by DMC Stratex, MTI agrees to execute and furnish a certification of
compliance, which may be on DMC Stratex's form reasonably acceptable to MTI and
which shall certify compliance with any applicable federal, state, local laws or
regulations, including, but not limited to, FLSA, EEOC, and OSHA, or their
equivalent.
11.5. DMC Stratex Warranty. DMC Stratex represents, warrants and covenants that
(a) DMC Stratex has full power to enter into this Agreement and to carry out its
obligations under this Agreement; (b) DMC Stratex has the right to disclose or
use, without liability to others, all subject matter, including ideas,
inventions, creations, works, processes, designs and methods that DMC Stratex
will disclose in conjunction with its performance under this Agreement; (c)
those portions of the Product designed by and proprietary to DMC Stratex do not
and will not infringe any Intellectual Property Rights of any third parties; (d)
the Consigned Business Inventory incorporated into the Products by MTI shall
meet the quality, operating conditions and performance requirements necessary
for manufacture of the Products in conformance with Specifications; (e) the
Consigned Business Inventory incorporated into the Products by MTI shall be free
from defects in workmanship and material during the Warranty Period, (f) DMC
Stratex has good title to the Consigned Business Inventory to be transferred to
MTI on a consignment basis, and there are no liens, claims or encumbrances of
any kind whatsoever against any of the Consigned Business Inventory (other than
the security interest in favor of DMC Stratex described in Section 3.8), and (g)
DMC Stratex shall comply with all Laws in all material respects as applicable to
its performance under this Agreement. In the event of a material breach of DMC
Stratex's warranty set forth in Section 11.5(d) or 11.5(e), MTI's sole and
exclusive remedy, and DMC Stratex's sole liability, for DMC Stratex's material
breach of Section 11.5(d) or 11.5(e) shall be for DMC Stratex to pay all
reasonable costs incurred by MTI to fix (if MTI decides to so fix) the defect in
the Consigned Business Inventory incorporated into the Product.
11.6. Disclaimer of Warranty. THE FOREGOING WARRANTIES SHALL CONSTITUTE
CONDITIONS AND ARE IN LIEU OF ALL OTHER WARRANTIES, WHETHER EXPRESSED OR
IMPLIED, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT OF THIRD
PARTY RIGHTS. THE FOREGOING WARRANTIES SHALL SURVIVE ANY DELIVERY, INSPECTION,
ACCEPTANCE OR PAYMENT OF OR FOR THE PRODUCTS.
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12. REPAIRS AND DISCONTINUANCE.
12.1. Last Buy. In the event of termination or expiration of this Agreement for
any reason, DMC Stratex shall have the right to place, and MTI shall accept, a
final Purchase Order for Products at the then-current Prices pursuant to the
terms and conditions of this Agreement. This Agreement shall be deemed
terminated only upon MTI's satisfaction of its obligation pursuant to this
Section 12.1, at which time production of the Product shall be deemed
terminated, subject to Section 16.5 of this Agreement. The final Purchase Order
shall require all Products to be delivered within [****] of the final Purchase
Order date.
12.2. In-Warranty Repair. In the event DMC Stratex returns to MTI a
non-conforming Product, covered under the warranty set forth in Section 11.2,
MTI shall repair and return the non-conforming Product within ten (10) business
days of the receipt of such non-conforming Product. In the event MTI fails to
timely provide the foregoing remedy, MTI shall promptly issue a credit to DMC
Stratex for the returned non-conforming Product.
12.3. Out of Warranty Repair - During Term. Prior to DMC Stratex issuing a final
Purchase Order under Section 12.1 above, MTI shall repair out-of-warranty
Products at the prices set forth on Exhibit G. For out-of-warranty repairs, MTI
shall repair or replace such non-conforming Products within ten (10) business
days for [****] of the returned Products and within fifteen (15) business days
for the remaining [****] of the returned non-conforming Products.
12.4. After Term Support. For a period of not less than [****] years after the
earlier of (a) DMC Stratex's placement of a final Purchase Order under Section
12.1 above; and (b) the termination or expiration of this Agreement, MTI shall:
(i) maintain repair capability for such Product, to the extent that MTI's
suppliers or contractors, either named in the AML or otherwise, provide such
repair capability for the equivalent term (except, however, in the event such
other supplier or contractor ceases providing such services, MTI shall use best
efforts to locate alternate suppliers or contractors to provide such repair
capability), and (ii) make best efforts to work with DMC Stratex to determine a
mutually agreeable supply of spare parts for each Product, either from current
suppliers or alternate suppliers. Any spare parts provided pursuant to this
Section 12.4 will be materially equivalent to the original parts in form, fit
and function. Following DMC Stratex's issuance of a final Purchase Order, MTI
agrees to repair out-of-warranty Products at prices and in time frames to be
mutually agreed upon by the parties (and the parties agree to negotiate such
terms reasonably and in good faith). Except with respect to the foregoing
sentence, the terms of this Agreement will govern all repairs of Products. For
each Product, MTI shall provide a standard spare parts list.
12.5. Returns. All non-conforming Products repaired and returned to DMC Stratex
pursuant to this Section 12 shall be accompanied by a report that gives the
following details: (a) RMA reference number under which the unit/assembly was
returned; (b) Part Number and Serial number of the returned unit/assembly; (c)
Part number and description of the individual component causing the fault; (d)
Circuit Reference Designator of the defective component; (e) Part number of the
PCB sub assembly from which that the defective component was removed; (f)
Revision of the sub assembly; (g) Date of manufacture of the returned
unit/Assembly; (h) Root Cause Analysis of the unit/assembly defect (upon
request); and (i) any other information reasonably requested by DMC Stratex. MTI
shall provide to DMC Stratex a monthly report (including a soft
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copy) of historical trends, including, without limitation, a Pareto Analysis of
the root causes found.
13. INDEMNIFICATION; LIMITATION OF LIABILITY.
13.1. MTI Indemnification. MTI will indemnify, hold harmless, and, at DMC
Stratex's request, defend DMC Stratex, its directors and employees (collectively
"DMC STRATEX IMDEMNITEES") from and against any loss, cost, liability or expense
(including reasonable court costs and attorneys' fees) arising out of (a)
injuries or death to persons or damage to property in any way arising out of or
caused or alleged to have been caused by Services performed by, or Products
provided by, MTI, or any third party working under MTI's control or direction;
(b) any breach of any representation or warranty by MTI or failure of MTI to
perform its obligations under this Agreement; or (c) violation of any Law,
including, without limitation, any environmental laws, in any way arising out of
or caused or alleged to have been caused by MTI's Services or by any Product
provided by MTI (collectively "DMC STRATEX CLAIMS"). DMC Stratex agrees (i) to
notify MTI of any DMC Stratex Claim, (ii) if DMC Stratex has not requested that
MTI defend the DMC Stratex Claim, to permit MTI, at MTI's expense, to
participate in the defense thereof with counsel of MTI's choosing, and (iii) if
DMC Stratex has requested that MTI defend the DMC Stratex Claim, to provide MTI,
at MTI's sole expense, with all needed information, assistance and authority
necessary for MTI to do so. MTI shall not settle or compromise any DMC Stratex
Claim, without DMC Stratex's prior written approval, which approval shall not be
unreasonably withheld. DMC Stratex may, at its own option and expense, be
represented in any action or proceeding, arising from the DMC Stratex Claim, by
legal counsel of its own selection. If MTI has defended, or has assumed the
defense of the DMC Stratex Claim, either upon DMC Stratex's request or
otherwise, DMC Stratex shall not settle or compromise any DMC Stratex Claim
without MTI's prior written consent.
13.2. DMC Stratex Indemnification. DMC Stratex will indemnify, hold harmless,
and, at MTI's request, defend MTI, its directors and employees (collectively
"MTI IMDEMNITEES") from and against any loss, cost, liability or expense
(including reasonable court costs and attorneys' fees) arising out of (a)
injuries or death to persons or damage to property in any way arising out of or
caused or alleged to have been caused by DMC Stratex's design of Products or by
any third party working under DMC Stratex's control or direction; (b) any breach
of any representation or warranty by DMC Stratex or failure of DMC Stratex to
perform its obligations under this Agreement; or (c) violation of any Law,
including, without limitation, any environmental laws, in any way arising out of
or caused or alleged to have been caused by DMC Stratex or by DMC Stratex's
design of the Products (collectively "MTI CLAIMS"). MTI agrees (i) to notify DMC
Stratex of any MTI Claim, (ii) if MTI has not requested that DMC Stratex defend
the MTI Claim, to permit DMC Stratex, at DMC Stratex's expense, to participate
in the defense thereof with counsel of DMC Stratex's choosing, and (iii) if MTI
has requested that DMC Stratex defend the MTI Claim, to provide DMC Stratex, at
DMC Stratex's sole expense, with all needed information, assistance and
authority necessary for DMC Stratex to do so. DMC Stratex shall not settle or
compromise any MTI Claim, without MTI's prior written approval, which approval
shall not be unreasonably withheld. MTI may, at its own option and expense, be
represented in any action or proceeding, arising from the MTI Claim, by legal
counsel of its own selection. If DMC Stratex has defended, or has assumed the
defense of the MTI Claim, either upon MTI's request or otherwise, MTI shall not
settle or compromise any MTI Claim without DMC Stratex's prior written consent.
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13.3. Limitation of Liability. EXCEPT FOR ANY DAMAGES ARISING FROM BREACH OF
SECTION 1.2 ("RESTRICTIONS AND RESERVATION OF RIGHTS"), 4.7.2 ("TRADEMARK
LICENSE RESTRICTIONS"), 13.1 ("MTI INDEMNIFICATION"), 13.2 ("DMC STRATEX
INDEMNIFICATION") AND/OR 15 ("CONFIDENTIALITY") HEREOF, IN NO EVENT SHALL EITHER
PARTY BE LIABLE FOR: (A) SPECIAL, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES
OF ANY KIND, OR FOR ANY LOSS OF PROFITS, LOSS OF REVENUE, LOSS RESULTING FROM
INTERRUPTION OF BUSINESS, WHETHER OR NOT ADVISED OF THE POSSIBILITY OF SUCH
LOSS; OR (B) MONETARY DAMAGES COLLECTIVELY IN EXCESS OF [****] UNITED STATES
DOLLARS.
14. INSURANCE.
During the Term and for so long as any Products are available for sale in any
jurisdiction and so long as any Consigned Business Inventory, manufactured
Product, tooling, test fixtures or any other property of DMC Stratex ("DMC
PROPERTY") remain on MTI's site, in transit between sites, or otherwise in MTI's
care and custody, MTI shall maintain, at its sole cost and expense, such
insurance policy or policies which may be customary or required by law or by
regulation for the purposes of carrying out its general business activities as
well as its obligations under this Agreement. Such insurance shall include, at a
minimum, an adequate comprehensive insurance policy or policies from reputable
insurer(s) in sufficient amounts necessary to cover the value of such DMC
Property for any loss or damage thereto. Such insurance policy(ies) shall, to
the extent it is available in the general insurance market in Taiwan, cover
against "all risks", including earthquakes, theft, civil commotion, malicious
damage, fire, lightening and explosion, flood or general water damage, typhoon,
and any other insurable cause covered under such insurance policies.
MTI will provide DMC Stratex with copies of the insurance policies maintained
under this Section. To the extent permitted under the applicable policy(ies)
procured by MTI, MTI will name DMC Stratex as an additional insured and the
policy(ies) will contain a waiver of subrogation with respect to the additional
insured. MTI shall be responsible for the maintenance and renewal of all
policies required under this Section and may not cancel, terminate or curtail
the insurance policy(ies) in any manner without the prior express written
approval of DMC Stratex, which approval shall not be unreasonably withheld.
If MTI cannot or fails to obtain such insurance policy(ies), MTI shall
indemnify, defend, and hold harmless DMC Stratex against (a) any loss or damage
to DMC Property, to the extent such damage occurred as a result of an insurable
cause generally covered by such insurance policies; and (b) any claims made by
government regulatory bodies or other third parties, as a result of either (i)
any failure by MTI to maintain such insurance which may be required by law or by
regulation, or (ii) any claim filed by an employee of MTI or any third party due
to bodily injury or property damage caused by or in relation to the use, care or
handling of DMC Property. These indemnity provisions will survive any
termination or expiration of this Agreement.
15. CONFIDENTIALITY.
15.1. Definition of Confidential Information. "CONFIDENTIAL INFORMATION" means
any and all information and material disclosed by the disclosing party
("DISCLOSER") to the receiving party ("RECIPIENT") or obtained by Recipient
through inspection or observation of Discloser's property or facilities (before
or after the signing of this Agreement, and
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DMC STRATEX NETWORKS, INC. CONFIDENTIAL
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whether in writing, or in oral, graphic, electronic or any other form) that is
marked or described as, identified in writing as, or provided under
circumstances indicating it is, confidential or proprietary. Confidential
Information, includes, without limitation, (a) DMC Stratex's Request for
Quotation or Proposal (if any), Specifications, Deliverables, DMC Stratex
Exclusive Tooling, DMC Stratex Know-How and any trade secrets or other
non-public information related to any of the foregoing; (b) any information
relating to either party's product plans, product designs, product costs,
product prices, finances, marketing plans, business opportunities, personnel,
research, development or know-how; (c) any third party confidential information
disclosed to DMC Stratex or to MTI, and (d) the terms, conditions and existence
of this Agreement.
15.2. Non-Disclosure Obligations. Recipient shall hold all Confidential
Information of Discloser in confidence and shall not disclose any Confidential
Information to any third party. Subject to Section 17.12 ("Equitable Relief"),
Recipient shall disclose Discloser's Confidential Information only to its
employees and agents who need to know such information and who are bound by
restrictions regarding disclosure and use of such information comparable to and
no less restrictive than those set forth herein. Recipient shall not use any
Confidential Information for the benefit of itself or any third party or for any
purpose other than the purpose of this Agreement. Recipient shall take the same
degree of care that it uses to protect its own confidential and proprietary
information of similar nature and importance (but in no event less than
reasonable care) to protect the confidentiality and avoid the unauthorized use,
disclosure, publication or dissemination of the Confidential Information. The
obligations of this Section 15 with respect to any item of Confidential
Information or with respect to any discussions or agreements between the parties
shall survive and continue for five (5) years from the date of Recipient's
receipt of such Confidential Information, except that obligations with respect
to trade secrets shall survive any termination or expiration of this Agreement
and shall survive in perpetuity.
15.3. Exceptions. The foregoing restrictions will not apply to Confidential
Information to the extent such Confidential Information: (a) is or becomes
publicly known through no act or omission of the Recipient; (b) was rightfully
known by Recipient before receipt from Discloser, as evidenced by Recipient's
contemporaneous written records or any other demonstrable proof; (c) becomes
rightfully known to Recipient without confidential or proprietary restriction
from a source other than Discloser that does not owe a duty of confidentiality
to Discloser with respect to such Confidential Information; or (d) is
independently developed by Recipient without the use of or reference to any
Confidential Information, as evidenced by Recipient's contemporaneous written
records or any other demonstrable proof. In addition, Recipient may use or
disclose Confidential Information to the extent (i) approved in writing in
advance by Discloser or (ii) Recipient is legally compelled to disclose such
Confidential Information, provided, however, that prior to any such compelled
disclosure, Recipient shall give Discloser reasonable advance notice of any such
disclosure, to the extent legally permissible, and shall cooperate with
Discloser in protecting against any such disclosure and/or obtaining a
protective order narrowing the scope of such disclosure and/or use of the
Confidential Information.
15.4. Return of Confidential Information. Upon any expiration or termination of
this Agreement or upon the request of the Discloser, Recipient shall return or
destroy, at Discloser's option, all Confidential Information of Discloser and
any copies thereof, unless retention of such Confidential Information is
provided for herein. In addition, Recipient shall promptly destroy any
electronic or otherwise non-returnable embodiments of Discloser's Confidential
Information.
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16. TERM AND TERMINATION.
16.1. Term. This Agreement shall commence on the Effective Date and shall
continue for a period of five (5) years from the Effective Date, unless
terminated earlier as provided in this Section 16. After expiration of the
initial term, this Agreement may be extended upon agreement by the parties. The
initial term and any renewal term shall be collectively referred to herein as
the "TERM."
16.2. Termination for Cause. Either party may terminate this Agreement at any
time if the other party is in material breach of any warranty, term, condition
or covenant of this Agreement, and fails to cure such breach within [****]
(unless such period is extended by the agreement of the parties) after receiving
notice of that breach and the other party's intention to terminate, except that
DMC Stratex may terminate this Agreement immediately if MTI has materially
breached Section 1.2, 4.7.2 or 15 herein, and MTI may terminate this Agreement
if DMC Stratex has materially breached Section 2.2 or 15 herein. Termination
will become effective automatically upon expiration of the cure period in the
absence of a cure.
16.3. Termination for Bankruptcy. This Agreement shall be immediately terminated
if either party voluntarily or involuntarily (and such involuntary bankruptcy
proceeding is not dismissed within sixty (60) days of filing) becomes subject to
any bankruptcy, receivership, liquidation, reorganization or other proceeding of
insolvency in favor of the general interest of all its creditors, subject to
MTI's termination obligations as set forth in 16.5.
16.4. Effect of Termination. Any provisions of this Agreement, which are
intended, by their specific terms or by necessary implication, to survive the
expiration or termination of this Agreement shall so survive. Except as
expressly provided for in this Agreement (such as remedies set forth with
respect to changes in forecasts and Purchase Orders in Sections 7 and 8 of this
Agreement), neither party shall be liable to the other party for damages of any
sort solely as a result of terminating this Agreement in accordance with its
terms. Termination of this Agreement will be without prejudice to any other
right or remedy of either party.
16.5. Termination Obligations. Upon any expiration or termination of this
Agreement for any reason, MTI shall promptly assist DMC Stratex in transitioning
the manufacturing and supply capabilities for the Products back to DMC Stratex,
or to a third party designated by DMC Stratex, in an orderly manner pursuant to
the prices, terms and conditions as reasonably determined by the parties.
Provided DMC Stratex pays for such Products, MTI shall continue to manufacture,
under the terms and conditions of this Agreement, the Products or the necessary
Components for the Products, solely as determined by DMC Stratex. MTI's
obligation to continue to supply DMC Stratex with the Products (or Components)
shall continue during such period of time as necessary to fully transition the
manufacturing and supply capabilities from MTI to DMC Stratex or its designee.
Any transition of manufacturing and supply capabilities from MTI to DMC Stratex
or its designee, when made, shall only be relevant to the Products and only to
the extent necessary for DMC Stratex to obtain manufacturing services for the
Products from third-party suppliers. Other than as necessary to comply with
Section 2.2 or this Section 16.5, in no event shall MTI be obligated to transfer
or disclose any MTI Know-How for such transition.
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16.6. Exit Strategy. Should the business environment change significantly to
dictate a different manufacturing strategy for DMC Stratex or for MTI, the
parties shall negotiate a termination of this Agreement, or other resolution to
this Agreement and jointly determine the details of an "Exit Strategy" that
shall be mutually beneficial to both parties or shall minimize any adverse
impact to either party to the greatest possible extent.
16.7. Return of Materials. Upon any expiration or termination of this Agreement,
or otherwise upon DMC Stratex's request, production material consigned to MTI,
DMC Stratex Exclusive Tooling and other DMC Stratex tools, test fixtures, test
equipment, and automated test equipment will be returned to DMC Stratex, or the
parties will otherwise decide what action to take, as instructed by and at the
cost of DMC Stratex. Items such as "golden test units" that MTI may obtain from
DMC Stratex on loan or consigned will be returned to DMC Stratex. As
appropriate, the value of such items will be discounted for the period of use.
In the event of any termination or expiration of this Agreement, all
Confidential Information and other data relating to DMC Stratex, the Products or
the Specifications will be returned to DMC Stratex or migrated to a third party
as instructed by DMC Stratex.
16.8. Transition back - "Recapture" or "Migrate". In the event the parties
decide to transition the manufacturing of the Products back to DMC Stratex, MTI
shall participate, in good faith, in support of such transition.
16.9. Buy Back - Technology Investment. As jointly determined, DMC Stratex will
buy back any MTI technology investment that is required for DMC Stratex to
continue manufacturing at DMC Stratex facilities at such prices, terms and
conditions to be mutually agreed.
16.10. Emergency Back Up Plan. During the Term and for a period of twelve (12)
months thereafter, MTI shall maintain (at a location outside of Taiwan) all
necessary information and documentation required for the manufacture of
Products, including, without limitation, any and all necessary trade secret,
know-how, idea, invention, process, technique, algorithm, program (whether in
source code or object code form), design, schematic, drawing, formula, data, and
technical, engineering, manufacturing, and product information (collectively,
"EMERGENCY DOCUMENTATION"). Such Emergency Documentation shall contain
sufficient information for DMC Stratex to recreate the manufacturing process at
another location in the event MTI cannot perform its obligations under this
Agreement.
17. GENERAL.
17.1. Force Majeure. Neither party will be deemed in default of this Agreement
to the extent that performance of its obligations or attempts to cure any breach
are delayed or prevented by reason of any act of God, fire, natural disaster,
accident, act of government or court, shortages of material or supplies or any
other cause beyond the control of such party ("FORCE MAJEURE"), provided that:
(a) the non-performing party gives the other party written notice of the force
majeure promptly, but in any event no later than sixty (60) calendar days after
the discovery thereof, and uses good faith efforts to perform its obligations
under this Agreement; and (b) in the event the party affected by the Force
Majeure event is MTI, MTI comply promptly with its obligations under Section
16.10 ("Emergency Back Up Plan") of this Agreement. In the event of such a Force
Majeure, the time for performance or cure will be extended for a period equal to
the duration of the Force Majeure, not to exceed six (6) months. In addition,
upon the occurrence of any
27
DMC STRATEX NETWORKS, INC. CONFIDENTIAL
CONFIDENTIAL TREATMENT
Force Majeure event that prevents MTI from manufacturing or delivery of the
Products pursuant to the Purchase Order, DMC Stratex's obligations under Section
6.2 ("DMC Stratex's Exclusivity") will be terminated, and upon the conclusion of
such Force Majeure event and upon MTI being ready to perform its obligations
under this Agreement, the parties will negotiate a reinstatement of such
obligations.
17.2. Relationship of Parties. Each party hereby represents and warrants to the
other that it is engaged in an independent business and shall perform its
obligations under this Agreement as an independent contractor and not as an
agent or employee of or a joint venturer with the other party; that the persons
performing the Services hereunder for or by itself are not agents or employees
of the other party; that it has and hereby retains, except as set forth herein,
the right to exercise full control with respect to the means of its performance
hereunder and full control over the employment, direction, compensation and
discharge of all employees, agents and subcontractors assisting in such
performance; that it shall be solely responsible for all matters relating to
payment of such employees, including compliance with worker's compensation,
unemployment and disability insurance, social security withholding, and all such
matters; and that it shall be responsible for the acts of itself and the acts of
all agents, employees and contractors employed by it during its performance
under this Agreement.
17.3. Subcontractors. If subcontractors are employed by a party, such party
shall be fully responsible for their acts and omissions and the acts and
omissions of their employees. There shall be no contractual relationship between
the subcontractor and the other party. The party employing such subcontractors
shall indemnify, defend and hold harmless the other party from and against any
and all liability for payment of its subcontractors and suppliers, including,
without limitation, mechanic's liens.
17.4. Public Announcements. The parties hereto shall not make any press release
or public announcement concerning this Agreement or any term hereof, the
existence of discussions between the parties, or any memoranda, letters or
agreements between the parties relating to the transaction contemplated hereby,
except with the prior written consent of the other party or as required under
applicable law or regulatory authority. Any press release or public announcement
relating to the transaction drafted by a party hereto in accordance with the
terms hereof must be approved by the non-drafting party, such approval not to be
unreasonably withheld.
17.5. Assignment.
17.5.1. As DMC Stratex has specifically contracted for MTI's services,
and as MTI has specifically agreed to provide Services to DMC
Stratex, neither party may assign or delegate its obligations
under this Agreement, either in whole or in part, in any
manner whatsoever, without the prior written consent of the
other party.
17.5.2. Without limiting the generality of the foregoing, each party
may be acquired in a Change-of-Control Event, without
obtaining the other party's prior written consent, subject to
Section 17.5.3. A "Change-of-Control Event" shall mean any
transaction or series of transactions, including, without
limitation, any merger or other corporate reorganization of a
party, any equity investment in such party, any sale of all or
substantially all of the assets of such party, any sale or
series of sales or any other transfer or series of transfers
of such party's
28
DMC STRATEX NETWORKS, INC. CONFIDENTIAL
CONFIDENTIAL TREATMENT
voting stock by its present shareholders or their grant of a
proxy or proxies or their entry into a voting trust or any
other agreement, or any combination of such transactions,
which results in the present shareholders of such party owning
less than a majority of the voting stock of such party or
otherwise not possessing direct day to day control of the
management and affairs of such party.
17.5.3. If either party enters into substantial negotiations that can
lead to a Change-of-Control Event, as defined in Section
17.5.2, and such party determines that such Change-of-Control
Event will have a Material Adverse Effect on the other party,
the party affected by the Change-Of-Control Event shall
promptly notify the other party thereof, and a consultation
shall immediately commence upon the other party's request. The
parties further agree that:
(a) The agenda for such consultation shall include (i) whether
it is necessary to make adjustment to any clauses of this
Agreement to avoid or minimize any Material Adverse Effect
upon the non-assigning party; and (ii) if the manufacturing
services by MTI to DMC Stratex is to be discontinued, the
terms and conditions by which MTI and DMC Stratex will jointly
conduct an orderly transition of MTI's manufacturing and
supply capabilities for the Products to DMC Stratex; (iii) the
period necessary for such transition; and (iv) the scope,
royalty and other considerations and terms for the license to
be granted by MTI to DMC Stratex necessary for DMC Stratex to
obtain manufacturing services of the Products from other
suppliers; and (v) other matters that either party deems
appropriate; and the parties shall negotiate in good faith and
with best efforts in order to reach conclusion on such
consultation within sixty (60) calendar days after its
commencement.
(b) Subject to the foregoing Section 17.5.3(a), if DMC Stratex
elects not to consent to a Change-of-Control Event affecting
MTI, DMC Stratex may terminate its obligations under Section
6.2 ("DMC Stratex Exclusivity"), without incurring any further
obligations as a result of such termination. So long as DMC
Stratex continues to place Purchase Orders with MTI under this
Agreement, MTI shall supply Products in accordance with the
terms and conditions of this Agreement.
(c) Subject to the foregoing Section 17.5.3(a), MTI may
terminate this Agreement in the event DMC Stratex is
Controlled by certain third party(ies) to be agreed upon by
DMC Stratex and MTI in the future.
17.5.4. Subject to the foregoing, this Agreement shall be binding upon
and shall inure to the benefit of the parties and their
respective successors and permitted assigns.
17.6. Notices. Except as otherwise provided herein, all notices required
hereunder or pertaining hereto shall be in writing and shall be deemed delivered
and effective upon either (a) five (5) days after deposit in the mail, postage
prepaid (except where the addressee proves that the notice is not received) (b)
personal delivery, (c) electronic confirmation of a telecopy transmission
received in its entirety at the applicable telecopy number indicated below,
after which the notice will be sent within two (2) business days
29
DMC STRATEX NETWORKS, INC. CONFIDENTIAL
CONFIDENTIAL TREATMENT
by recognized express courier service, as specified in (d) below, or (d) the
earliest of delivery, refusal of the addressee to accept delivery or failure of
delivery after at least one attempt during normal business hours, in each case
as such events are recorded in the ordinary business records of the delivery
service, which will be by recognized express courier service (such as United
Parcel Service), with all charges prepaid or charged to the sender's account, to
the applicable address set forth below or at such other address as shall be
specified in writing in accordance with this Section:
If to DMC Stratex: DMC Stratex Networks, Inc.
170 Rose Orchard Way
San Jose, CA 95134
Attn: [****]
Fax: [****]
email: [****]
With a copy to: Morrison & Foerster LLP
755 Page Mill Road
Palo Alto, CA 94304
Attn: [****]
Fax: [****]
email:[****]
If to MTI: Microelectronics Technology, Inc.
1 Innovation Road II
Science-Based Industrial Park
Hsinchu, Taiwan
Attn: [****]
Fax: [****]
email: [****]
With a copy to: Lee & Li, Attorneys-at-Law
8th Floor, 11, Park Ave. II
Science-Based Industrial Park
Hsinchu, Taiwan
Attn: [****]
Fax: [****]
email: [****]
17.7. Governing Law; Venue. This Agreement is deemed entered into in San Jose,
California, United States of America and shall in all respects be governed by
and construed under the laws of the State of California, United States of
America, without reference to any of its choice of law rules that would require
the application of the law of any other jurisdiction. The parties expressly
disclaim the application of the United Nations Convention on the International
Sale of Goods to this Agreement. The parties hereto agree that any and all
claims, differences or disputes related to any provision of, or based on any
right arising out of, this Agreement (other than those claims involving or
related to consignment and security interest remedies or enforcement, including,
without limitation, the right, title and interest of DMC Stratex in the
Consigned Business Inventory not purchased hereunder) shall be finally resolved
by arbitration, composed by three (3) arbitrators of which either party shall
select one (1) and the two (2) arbitrators shall then appoint the third as the
chairperson. The arbitration shall be conducted in (i) San Jose, California,
United States of America, pursuant to the rules of the American
30
DMC STRATEX NETWORKS, INC. CONFIDENTIAL
CONFIDENTIAL TREATMENT
Arbitration Association, if MTI is the applicant for the arbitration; and (ii)
Taipei, Taiwan, pursuant to the ROC Arbitration Act if DMC Stratex is the
applicant for the arbitration. The procedural law of the place of the
arbitration shall apply where the rules are silent. All arbitral proceedings
shall be conducted in English. The arbitral award shall be final, conclusive and
enforceable by any court of competent jurisdiction.
17.8. Severability. If any provision of this Agreement, or the application
thereof, shall for any reason and to any extent be determined by a court of
competent jurisdiction to be invalid or unenforceable under applicable law, the
remaining provisions of this Agreement shall be interpreted so as to best effect
the intent of the parties. The parties further agree to replace any such invalid
or unenforceable provisions with valid and unenforceable provisions designed to
achieve, to the extent possible, the business purposes and intent of such
invalid and enforceable provisions.
17.9. Entire Agreement. This Agreement, together with all exhibits and schedules
hereto, the Transition Services Agreement, the Asset Purchase Agreement and the
Joint Services Agreement, constitute the entire understanding and agreement of
the parties with respect to the subject matter of this Agreement, and supersede
all prior and contemporaneous understandings and agreements, whether written or
oral, with respect to such subject matter, including, without limitation, the
Memorandum of Understanding, entered into by and between MTI and DMC Stratex on
or about May 24th, 2002 and the Master Agreement entered into by and between MTI
and DMC Stratex on or about March 12, 2002.
17.10. Amendments, Modifications and Waivers. No delay or failure by either
party to exercise or enforce at any time any right or provision of this
Agreement will be considered a waiver thereof or of such party's right
thereafter to exercise or enforce each and every right and provision of this
Agreement. No single waiver will constitute a continuing or subsequent waiver.
No waiver, modification or amendment of any provision of this Agreement will be
effective unless it is in writing and signed by the parties, but it need not be
supported by consideration.
17.11. Counterparts. This Agreement may be executed in any number of
counterparts, by manual or facsimile signatures, all of which together shall
constitute one agreement.
17.12. Equitable Relief. Because either party will have access to and become
acquainted with Confidential Information of the other party, the unauthorized
use or disclosure of which would cause irreparable harm and significant injury
which would be difficult to ascertain and which would not be compensable by
damages alone, the parties agrees that Discloser will have the right to
injunctive relief, specific performance or other equitable relief, without
posting of a bond, to redress a breach of Section 15 ("Confidentiality"),
without prejudice to any other rights and remedies that the Discloser may have
for a breach of this Agreement.
17.13. Headings and References. The headings and captions used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement. All references in this Agreement to sections,
paragraphs, exhibits and schedules shall, unless otherwise provided, refer to
sections and paragraphs hereof and exhibits and schedules attached hereto, all
of which are incorporated herein by this reference.
31
DMC STRATEX NETWORKS, INC. CONFIDENTIAL
CONFIDENTIAL TREATMENT
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the Effective Date.
DMC STRATEX NETWORKS, INC. MICROELECTRONICS TECHNOLOGY, INC.
By: /S/ Carl A. Thomsen By: /S/ Patrick Wang
------------------------------- ----------------------------------
Name: Carl A. Thomsen Name: Patrick Wang
Title: Senior Vice President, Title: Chief Executive Officer and
Chief Financial Officer and Chairman of the Board
Corporate Secretary
32
DMC STRATEX NETWORKS, INC. CONFIDENTIAL
CONFIDENTIAL TREATMENT
EXHIBIT A
DEFINITIONS
Capitalized terms that are not otherwise defined in this Exhibit A shall have
the meaning given them elsewhere in this Agreement or in the Asset Purchase
Agreement entered into by and between the parties on or about June 30, 2002
("ASSET PURCHASE AGREEMENT").
1.1. "AML" shall have the meaning set forth in Section 4.3 of this
Agreement.
1.2. "ASSET PURCHASE AGREEMENT" shall have the meaning set forth in
the introductory paragraph of this Exhibit A.
1.3. "BUSINESS INVENTORY" means the inventory (including all parts,
components and accessories) owned by DMC Stratex that may be
required to produce the Products.
1.4. "COLLATERAL" shall have the meaning set for in Section 3.8.2
of this Agreement.
1.5. "COMPONENTS" shall mean those parts and sub-assemblies that
will be incorporated into the Products.
1.6. "CONSIGNED BUSINESS INVENTORY" shall have the meaning set
forth in Section 3.1 of this Agreement.
1.7. "DELIVERABLES" mean those prototype units of the Product,
information and materials to be delivered by MTI to DMC
Stratex pursuant to the terms and conditions of this
Agreement, as set forth more specifically on Exhibit D.
1.8. "DMC STRATEX EXCLUSIVE TOOLING" shall have the meaning set
forth in Section 4.4 of this Agreement.
1.9. "DMC STRATEX KNOW-HOW" means any data, processes, technical
specifications and other information or material that is
recorded in writing or otherwise in a material form relating
to the manufacture of Products (whether protected by patent,
copyright or any other applicable laws for protection of
intellectual property right), and that is provided (or made
available) to MTI by DMC Stratex or otherwise developed by or
for and/or acquired by DMC Stratex or from proprietary
information supplied by DMC Stratex, including, without
limitation, registrable and unregistrable intellectual
property, block and circuit diagrams, test procedures,
specifications for mechanical components and materials,
component drawings, purchase specifications, recommended
sources for purchase of components or material, or screening
procedures for selection of suppliers, systems configurations
and software and any customer lists. For the avoidance of
doubt, the scope of DMC Stratex Know-How does not include MTI
Know-How.
1.10. "DMC STRATEX KNOW-HOW IMPROVEMENTS" shall have the meaning set
forth in Section 2.3.1 of this Agreement.
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CONFIDENTIAL TREATMENT
1.11. "DMC STRATEX TRADEMARKS" mean the DMC Stratex's logos,
tradenames, trademarks and services marks which DMC Stratex
shall place on Products pursuant to Section 4.7 of this
Agreement.
1.12. "FACILITY" shall have the meaning set forth in Section 3.1 of
this Agreement.
1.13. "FIRST ARTICLE PROCESS" shall have the meaning set forth in
Section 5.2.1 of this Agreement, and is set forth in detail on
Exhibit D.
1.14. "IDU" means the indoor unit component of the Products,
consisting of signal processing components and associated
circuitry, mechanical parts and software required to meet
system performance specifications.
1.15. "INTELLECTUAL PROPERTY RIGHTS" mean any and all intellectual
property rights, including, without limitation, patents,
copyrights, trademarks, trade secrets, mask work rights,
industrial rights and other intellectual property and
proprietary rights throughout the world. Intellectual Property
Rights shall include, without limitation, all rights, whether
existing now or in the future, whether statutory or common
law, in any jurisdiction in the world, together with all
local, regional, national, and multinational registrations,
applications for registration and all renewals and extensions
thereof (including, without limitation, any continuations,
continuations-in-part, divisionals, reissues, substitutions
and reexaminations); all goodwill associated therewith; and
all benefits, privileges, causes of action and remedies
relating to any of the foregoing, whether before or hereafter
accrued, including, without limitation, the exclusive rights
to apply for and maintain all such registrations, renewals and
extensions; to sue for all past, present and future
infringements or other violations of any rights relating
thereto; and to settle and retain proceeds from any such
actions.
1.16. "INVENTORY PERIOD" means the period beginning on July 1, 2002
and ending on December 31, 2003.
1.17. "JOINT SERVICES AGREEMENT" means the agreement entered into by
and between the parties that will govern the day-to-day
activities and responsibilities of each party, which agreement
is attached hereto as Exhibit J.
1.18. "LAWS" mean any statute, law, regulation, ordinance, rule,
judgment, order, decree, permit, concession, grant, franchise,
license, agreement, directive, guideline, policy or rule of
common law, or any governmental requirement or other
governmental restriction or similar form of decision or
determination, or any interpretation or administration of any
of the foregoing by any applicable national, state, local, or
foreign government (or any association, organization or
institution of which any of the foregoing is a member, or to
whose jurisdiction thereof is subject, or in whose activities
any thereof is a participant), whether now or hereafter in
effect.
1.19. "LONG-LEAD TIME COMPONENTS" mean those components that have a
cumulative lead-time (including current manufacturing cycle
time) in excess of the Purchase Order commitments for the
Products.
1.20. "MANUFACTURING PERIOD" means the initial period of this
Agreement, during which DMC Stratex will closely monitor MTI's
progress on the initial set-up of
A - 2
CONFIDENTIAL TREATMENT
the manufacturing process. During the Manufacturing Period,
MTI will be required to deliver the Deliverables and meet the
Milestones set forth on Exhibit D, including, without
limitation, the First Article Process.
1.21. "MATERIAL DISCREPANCY" shall have the meaning set forth in
Section 3.7.3 of this Agreement.
1.22. "MILESTONES" mean those agreed upon dates by which MTI will
complete certain portion of the Services or deliver certain
Deliverables, as set forth on Exhibit D.
1.23. "MTI KNOW-HOW" means any data, processes, and other
information or material, provided (or made available) by MTI
to DMC Stratex pursuant to this Agreement, and that is
recorded in writing or otherwise in a material form (whether
protected by patent, copyright or any other applicable laws
for protection of intellectual property right), relating to
MTI's radio designs (including, without limitation, hybrid
transceiver) and manufacturing process and proprietary product
developed or acquired by or for MTI, and any improvements
thereto made by or for MTI in the course of performing this
Agreement.
1.24. "OBLIGATIONS" shall have meaning set forth in Section 3.8.1 of
this Agreement.
1.25. "ODU" means the outdoor component of the Product, consisting
of Microwave components and associated circuitry, mechanical
parts and software required to meet system performance
specifications.
1.26. "PRICES" shall have the meaning set forth in Section 7.3 of
this Agreement and shall be more specifically set forth on
Exhibit H.
1.27. "PRODUCTS" means the microwave radio products manufactured by
MTI to Specifications, as described more specifically on
Exhibit B.
1.28. "PURCHASE" shall have the meaning set forth in Section 3.2.2
of this Agreement.
1.29. "PURCHASED ASSETS" shall have the meaning set forth in Section
1.1(a) of the Asset Purchase Agreement.
1.30. "PURCHASE ORDERS" shall have the meaning set forth in Section
7.1 of this Agreement.
1.31. "REPORT OF PURCHASE" shall have the meaning set forth in
Section 3.6 of this Agreement.
1.32. "RETAINED INVENTORY" means the Business Inventory that is
retained by DMC Stratex (and not transferred to MTI) (a) in
order for DMC Stratex to fulfill purchase orders for Products
outstanding as of the date hereof, (b) in order for DMC
Stratex to fulfill purchase orders for Products received
during the Transition Period (as such term is defined in the
Transition Services Agreement) that are to be fulfilled by DMC
Stratex, and (c) all other inventory of DMC Stratex necessary
to conduct its business and manufacture its products.
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CONFIDENTIAL TREATMENT
1.33. "SALVAGE SALE" shall have the meaning set forth in Section
3.5.2 of this Agreement.
1.34. "SCHEDULE" means the schedule for the completion of certain
Milestones and delivery of certain Deliverables, as set forth
in more detail on Exhibit D.
1.35. "SCRAPPED" shall have the meaning set forth in Section 3.5.1
of this Agreement.
1.36. "SCRAPPED BUSINESS INVENTORY" means any Business Inventory
that is deemed to be obsolete by DMC Stratex pursuant to
Section 3.1 of this Agreement.
1.37. "SERVICES" shall mean those manufacturing and supply services,
as generally outlined in Section 4.8 hereof, to be provided by
MTI for DMC Stratex in accordance with this Agreement.
1.38. "SPECIFICATIONS" mean the technical specifications for the
manufacture of the Products, as such Specifications are set
forth on Exhibit C, as amended from time to time pursuant to
Section 4.2.
1.39. "SUBSIDIARY" means an entity, of which fifty percent (50%) or
more of its voting securities or beneficial ownership interest
is owned directly or indirectly, or whose business operation
is otherwise controlled by, MTI, and which will perform
manufacturing services in accordance with this Agreement.
1.40. "TERM" shall have the meaning set forth in Section 16.1 of
this Agreement.
1.41. "TRANSITION SERVICES AGREEMENT" shall mean that transition
services agreement entered into by and between DMC Stratex and
MTI on or about June 30, 2002.
1.42. "UCC" means the Uniform Commercial Code as enacted in
California and amended or modified from time to time. Unless
otherwise defined herein or the context otherwise requires,
terms for which meanings are provided in the UCC are used this
Agreement, including its preamble and recitals, with such
meanings.
1.43. "WARRANTY PERIOD" shall have the meaning set forth in Section
11.2 of this Agreement.
A - 4
CONFIDENTIAL TREATMENT
EXHIBIT B
PRODUCT DESCRIPTION
1. ALTIUM: (FULLY TESTED RADIO SYSTEM)
PART NUMBER DESCRIPTION COMMENTS DELIVERY ARO
- ------------- ---------------- --------------------------------------------------- ------------
A0021X060-xxx Altium 6 GHz ODU Generic 6 GHzODU, NN/HH, T-Rspacing, Spot Frequency [****]
A0021X070-xxx Altium 7 GHz ODU Generic 7 GHzODU, NN/HH, T-Rspacing, Spot Frequency [****]
A0021X750-xxx Altium 7.5 GHz ODU Generic 7.5 GHzODU, NN/HH, T-Rspacing, Spot Frequency [****]
A0021X080-xxx Altium 8 GHz ODU Generic 8 GHzODU, NN/HH, T-Rspacing, Spot Frequency [****]
A0021X11X-xxx Altium 11 GHz ODU Generic 11 GHzODU, NN/HH, T-Rspacing, Spot Frequency [****]
A0021X13X-xxx Altium 13 GHz ODU Generic 13 GHzODU, NN/HH, T-Rspacing, Spot Frequency [****]
A0021X15X-xxx Altium 15 GHz ODU Generic 15 GHzODU, NN/HH, T-Rspacing, Spot Frequency [****]
A0021X18X-xxx Altium 18GHz ODU Generic 18GHzODU, NN/HH, T-Rspacing, Spot Frequency [****]
A0021X23X-xxx Altium 23 GHz ODU Generic 23 GHzODU, NN/HH, T-Rspacing, Spot Frequency [****]
A0021X26X-xxx Altium 26 GHz ODU Generic 26 GHzODU, NN/HH, T-Rspacing, Spot Frequency [****]
A0021X28X-xxx Altium 28 GHz ODU Generic 28 GHzODU, NN/HH, T-Rspacing, Spot Frequency [****]
A0021X38X-xxx Altium 38 GHz ODU Generic 38 GHzODU, NN/HH, T-Rspacing, Spot Frequency [****]
** Based on receipt of ODU's from Stratex Networks.
2. XP4 PLUS+: (FULLY TESTED ODU SUBSYSTEM)
PART NUMBER DESCRIPTION COMMENTS DELIVERY ARO
- -------------- ---------------------------------- ----------------------------------- ------------
860-20107X-XXX XP4 7Ghz 2X/4XE1Standard Power ODU Generic for T-R Spacing and SubBand [****]
860-20207X-XXX XP4 7Ghz 4X/8XE1Standard Power ODU Generic for T-R Spacing and SubBand [****]
860-20307X-XXX XP4 7Ghz 16XE1Standard Power ODU Generic for T-R Spacing and SubBand [****]
860-20108X-XXX XP4 8Ghz 2X/4XE1Standard Power ODU Generic for T-R Spacing and SubBand [****]
860-20208X-XXX XP4 8Ghz 4X/8XE1Standard Power ODU Generic for T-R Spacing and SubBand [****]
860-20308X-XXX XP4 8Ghz 16XE1Standard Power ODU Generic for T-R Spacing and SubBand [****]
860-21113X-XXX XP4 13Ghz 2X/4XE1High Power ODU Generic for T-R Spacing and SubBand [****]
860-20113X-XXX XP4 13Ghz 2X/4XE1Standard Power ODU Generic for T-R Spacing and SubBand [****]
860-21213X-XXX XP4 13Ghz 4X/8XE1High Power ODU Generic for T-R Spacing and SubBand [****]
860-20213X-XXX XP4 13Ghz 4X/8XE1Standard Power ODU Generic for T-R Spacing and SubBand [****]
860-21313X-XXX XP4 13Ghz 16XE1High Power ODU Generic for T-R Spacing and SubBand [****]
860-20313X-XXX XP4 13Ghz 16XE1Standard Power ODU Generic for T-R Spacing and SubBand [****]
860-21115X-XXX XP4 15Ghz 2X/4XE1High Power ODU Generic for T-R Spacing and SubBand [****]
860-20115X-XXX XP4 15Ghz 2X/4XE1Standard Power ODU Generic for T-R Spacing and SubBand [****]
860-21215X-XXX XP4 15Ghz 4X/8XE1High Power ODU Generic for T-R Spacing and SubBand [****]
860-20215X-XXX XP4 15Ghz 4X/8XE1Standard Power ODU Generic for T-R Spacing and SubBand [****]
860-21315X-XXX XP4 15Ghz 16XE1High Power ODU Generic for T-R Spacing and SubBand [****]
860-20315X-XXX XP4 15Ghz 16XE1Standard Power ODU Generic for T-R Spacing and SubBand [****]
860-21118X-XXX XP4 18Ghz 2X/4XE1High Power ODU Generic for T-R Spacing and SubBand [****]
860-20118X-XXX XP4 18Ghz 2X/4XE1Standard Power ODU Generic for T-R Spacing and SubBand [****]
860-21218X-XXX XP4 18Ghz 4X/8XE1High Power ODU Generic for T-R Spacing and SubBand [****]
860-20218X-XXX XP4 18Ghz 4X/8XE1Standard Power ODU Generic for T-R Spacing and SubBand [****]
860-21318X-XXX XP4 18Ghz 16XE1High Power ODU Generic for T-R Spacing and SubBand [****]
860-20318X-XXX XP4 18Ghz 16XE1Standard Power ODU Generic for T-R Spacing and SubBand [****]
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CONFIDENTIAL TREATMENT
860-21123X-XXX XP4 23Ghz 2X/4XE1High Power ODU Generic for T-R Spacing and SubBand [****]
860-23123X-XXX XP4 23Ghz 2X/4XE1High Power-RFLB ODU Generic for T-R Spacing and SubBand [****]
860-20123X-XXX XP4 23Ghz 2X/4XE1Standard Power ODU Generic for T-R Spacing and SubBand [****]
860-22123X-XXX XP4 23Ghz 2X/4XE1Standard Power-RFLB ODU Generic for T-R Spacing and SubBand [****]
860-21223X-XXX XP4 23Ghz 4X/8XE1High Power ODU Generic for T-R Spacing and SubBand [****]
860-23223X-XXX XP4 23Ghz 4X/8XE1High Power-RFLB ODU Generic for T-R Spacing and SubBand [****]
860-20223X-XXX XP4 23Ghz 4X/8XE1Standard Power ODU Generic for T-R Spacing and SubBand [****]
860-22223X-XXX XP4 23Ghz 4X/8XE1Standard Power-RFLB ODU Generic for T-R Spacing and SubBand [****]
860-21323X-XXX XP4 23Ghz 16XE1High Power ODU Generic for T-R Spacing and SubBand [****]
860-23323X-XXX XP4 23Ghz 16XE1High Power-RFLB ODU Generic for T-R Spacing and SubBand [****]
860-20323X-XXX XP4 23Ghz 16XE1Standard Power ODU Generic for T-R Spacing and SubBand [****]
860-22323X-XXX XP4 23Ghz 16XE1Standard Power-RFLB ODU Generic for T-R Spacing and SubBand [****]
860-20126X-XXX XP4 26Ghz 2X/4XE1Standard Power ODU Generic for T-R Spacing and SubBand [****]
860-22126X-XXX XP4 26Ghz 2X/4XE1Standard Power-RFLB ODU Generic for T-R Spacing and SubBand [****]
860-20226X-XXX XP4 26Ghz 4X/8XE1Standard Power ODU Generic for T-R Spacing and SubBand [****]
860-22226X-XXX XP4 26Ghz 4X/8XE1Standard Power-RFLB ODU Generic for T-R Spacing and SubBand [****]
860-20326X-XXX XP4 26Ghz 16XE1Standard Power ODU Generic for T-R Spacing and SubBand [****]
860-22326X-XXX XP4 26Ghz 16XE1Standard Power-RFLB ODU Generic for T-R Spacing and SubBand [****]
860-20138X-XXX XP4 38Ghz 2X/4XE1Standard Power ODU Generic for T-R Spacing and SubBand [****]
860-22138X-XXX XP4 38Ghz 2X/4XE1Standard Power-RFLB ODU Generic for T-R Spacing and SubBand [****]
860-20238X-XXX XP4 38Ghz 4X/8XE1Standard Power ODU Generic for T-R Spacing and SubBand [****]
860-22238X-XXX XP4 38Ghz 4X/8XE1Standard Power-RFLB ODU Generic for T-R Spacing and SubBand [****]
860-20338X-XXX XP4 38Ghz 16XE1Standard Power ODU Generic for T-R Spacing and SubBand [****]
860-22338X-XXX XP4 38Ghz 16XE1Standard Power-RFLB ODU Generic for T-R Spacing and SubBand [****]
3. In addition, the term "PRODUCTS" shall include any and all other
products that may modify, improve upon or derive from the Altium and/or
XP4 product family (excluding the line of DXR products). "Products"
shall include the ODU portion of the product being developed as of the
Effective Date under the name "Unity," to the extent MTI's price,
quality, and delivery meet DMC's performance requirements.
4. ARO deliveries are assumed to be within forecast requirements.
B - 2
CONFIDENTIAL TREATMENT
EXHIBIT C
SPECIFICATIONS
The Specifications for the Products shall be as set forth in the following
documentation, which DMC Stratex shall make available to MTI:
Specification for XP Plus Series of Digital Microwave Radios E1/E3
000-000076-SPC
Specification for XP Plus Series of Digital Microwave Radios DS-1/DS-3
000-000077-SPC
Specification for Altium Series of Digital Microwave Radios SDH/SONET
1011ALT_1201_U
C - 1
CONFIDENTIAL TREATMENT
EXHIBIT D
ALTIUM SUMMARY MANUFACTURE AND QUALIFICATION SCHEDULE
RESPONSIBLE
MILESTONE DELIVERABLE PARTY DUE DATE
- --------------- --------------- ----------- ------
Transfer of all Specifications, DMC Stratex [****]
relevant Product drawings,
Specifications and BOMs, and
supporting applicable
documentation work
instructions
Tooling and Test Manufacturing DMC Stratex [****]
Fixtures - 100% and Test
capacity on line Equipment
Engineering First Article MTI [****]
released - First Product
Article Products
Implementation of Tested DMC Stratex [****]
joint business Processes and and MTI
processes supporting
Documentation
Completion of MTI All Altium DMC Stratex [****]
Manufacturing Products
Review approved for
(Qualification) MTI production
Transfer 50% First Article MTI [****]
Capacity MX311 Product
Transition supply Online DMC Stratex [****]
lines to MTI qualified
suppliers at
MTI
MTI System Audit Report DMC Stratex [****]
Qualification Audit
D - 1
CONFIDENTIAL TREATMENT
XP4 SUMMARY MANUFACTURE SCHEDULE
MILESTONE DELIVERABLE RESPONSIBLE PARTY DUE DATE
- --------------- --------------- ----------------- --------
Transfer of all Specifications, DMC Stratex [****]
relevant Product drawings,
Specifications and BOMs, and
supporting applicable Work instructions
documentation work - DMC Stratex and
instructions MTI joint
development
Tooling and Test Manufacturing DMC Stratex [****]
Fixtures - Pilot and Test
capacity Equipment
Tooling and Test Manufacturing DMC Stratex [****]
Fixtures - 50% and Test
capacity Equipment
Tooling and Test Manufacturing DMC Stratex [****]
Fixtures - 100% and Test
capacity including Equipment
PCA
Engineering First Article MTI [****]
released - First Product
Article Products
Engineering pending First Article MTI [****]
- - First Article Product
Products
Completion of All XP4 DMC Stratex [****]
Manufacturing Products
Review approved for
(Qualification) MTI production
Implementation of Tested DMC Stratex and [****]
joint business Processes and MTI
processes supporting
Documentation
D - 2
CONFIDENTIAL TREATMENT
Transfer PCA ODU Online MTI [****]
board production to qualified
MTI production
Transition supply Online DMC Stratex [****]
lines to MTI qualified
suppliers at
MTI
*The Manufacture and Qualification Schedule shall be further supplemented by the
"Master Qualification Plan" to be developed by the parties.
FIRST ARTICLE PROCESS: The First Article Process shall be per DMC Stratex's
First Article Requirements procedure, SQ-OP004 or an equivalent DMC Stratex
approved MTI procedure. In addition to the mechanical and electrical tests
listed in the First Article Process, the First Article will not be approved
until the following steps are completed.
Completion of the First Article Process.
Completion of the Manufacturing Readiness Review.
DMC Stratex's written approval of the First Articles pursuant to Section 5.2.1
of this Agreement.
The foregoing process must be performed for each frequency.
D - 3
CONFIDENTIAL TREATMENT
EXHIBIT E
INSPECTION TESTING AFTER PRODUCT DELIVERY
1. Altium Product:
[****].
2. XP4Plus+:
[****]
E - 1
CONFIDENTIAL TREATMENT
EXHIBIT F
QUALITY AND RELIABILITY STANDARDS
1. Quality and Reliability Requirement. MTI shall maintain a documented Quality
program consistent with the intent of ISO-9000 and meet applicable Reliability
requirements per Belcore (Tel Cordia Technologies) Standard TR-332/TR-NWT-000284
for telecommunication industries as listed below:
1.1 MTI shall provide an approved copy of the MTI's Quality document.
1.2 MTI shall document a Program Quality Plan, in accordance with ISO 10005.
1.3 The Program Quality Plan shall identify the critical key processes and how
MTI will control the processes utilizing techniques such as Statistical Process
Control (SPC).
1.4 For contracted end assembly, the Program Quality Plan must identify
selection of components per Quality Level III (P.S. MTI conforms to level II now
and will do effort to meet level III in the future.) per Belcore TR-332.
Exception: early life control portion of requirement paragraph "g" is not
required. Reliability audits should be conducted on regular intervals with prior
notice to MTI, at least once a year to ensure compliance in selection of
components for production per above standards.
1.5 Prior to MTI starting any production efforts, MTI shall provide the Program
Quality Plan to DMC Stratex Purchasing Department.
1.6 The Quality plan shall include the controls required to satisfy the ESD
requirements for devices which are static sensitive and capable of being
degraded, damaged, or destroyed by electrostatic charges or discharges such that
(1) all items shall be preserved, packaged, and stored in such a manner as to
prevent exposure to the generation or discharge of electrostatic voltages, (2)
all items shall be processed and handled as a minimum in accordance with JEDEC
Publication #JEP108-B (April, 1991) and (3) supplier MTI shall maintain a
documented system for the control and handling of static-sensitive materials.
1.7 MTI shall provide to DMC Stratex monthly reports, containing as a minimum:
First Pass Yields, Critical Process Yields, SPC data, Pareto charts on defects
and major failure modes.
1.8 MTI shall identify the major cause of the failures and provide a corrective
action plan with an implementation date within ten (10) business days.
1.9 MTI must perform detailed failure root cause analysis, when requested by DMC
Stratex, to provide most likely failure cause of select items with higher field
failures. Fault tree, cause and effect diagram and other engineering tools and
techniques must be used to scientifically provide most like scenarios and causes
of failed items. Corrective action related to design or processes opportunities
as identified in the failure analysis must be implemented at the earliest
available opportunity. Progress of detailed failure analysis must be reported,
at least once a month through a formal progress report, or as requested by DMC
Stratex.
F - 1
CONFIDENTIAL TREATMENT
EXHIBIT G
OUT-OF-WARRANTY REPAIRS
Pursuant to Section 12.4 of this Agreement, MTI shall charge the
following amounts for repairs of non-conforming Products, which are no
longer covered under the warranty set forth in Section 11.2 of this
Agreement. The following list of prices are subject to further
negotiations by the parties, and may be adjusted up or down subject to
such negotiations.
I. ALTIUM: (FULLY TESTED RADIO SYSTEM)
PART NUMBER DESCRIPTION REPAIR PRICE REPLACEMENT PRICE
----------- --------------------------- ------------ -----------------------------
UP UNTIL THE AFTER THE END
[****] MONTHS OF THE [****]
FROM THE MONTH OF
BEGINNING OF DELIVERY OF
THE [****] PRODUCT
MONTH OF
DELIVERY OF
PRODUCT
A00211060-xxx Altium 6 GHz ODU NN [****] [****] [****]
A00212060-xxx Altium 6 GHz ODU Prot [****] [****] [****]
A00211070-xxx Altium 7 GHz ODU NN [****] [****] [****]
A00212070-xxx Altium 7 GHz ODU Prot [****] [****] [****]
A00211750-xxx Altium 7.5 GHz ODU NN [****] [****] [****]
A00212750-xxx Altium 7.5 GHz ODU Prot [****] [****] [****]
A00211080-xxx Altium 8 GHz ODU NN [****] [****] [****]
A00212080-xxx Altium 8 GHz ODU Prot [****] [****] [****]
A0021111X-xxx Altium 11 GHz ODU NN [****] [****] [****]
A0021211X-xxx Altium 11 GHz ODU Prot [****] [****] [****]
A0021113X-xxx Altium 13 GHz ODU NN [****] [****] [****]
A0021213X-xxx Altium 13 GHz ODU Prot [****] [****] [****]
A0021115X-xxx Altium 15 GHz ODU NN [****] [****] [****]
A0021215X-xxx Altium 15 GHz ODU Prot [****] [****] [****]
A0021118X-xxx Altium 18GHz ODU NN [****] [****] [****]
A0021218X-xxx Altium 18GHz ODU Prot [****] [****] [****]
A0021123X-xxx Altium 23 GHz ODU NN [****] [****] [****]
A0021223X-xxx Altium 23 GHz ODU Prot [****] [****] [****]
A0021126X-xxx Altium 26 GHz ODU NN [****] [****] [****]
A0021226X-xxx Altium 26 GHz ODU Prot [****] [****] [****]
A0021128X-xxx Altium 28 GHz ODU NN [****] [****] [****]
A0021228X-xxx Altium 28 GHz ODU Prot [****] [****] [****]
A0021138X-xxx Altium 38 GHz ODU NN [****] [****] [****]
A0021238X-xxx Altium 38 GHz ODU Prot [****] [****] [****]
Note:
1. For the range of 11GHz and 13GHz, MTI will not assume any repair and
replacement.
2. For the range of 15GHz, MTI will be responsible for the repair as well
as replacement only for the delivered Product composed of
Transceiver(s) "made" by MTI.
3. For the 15GHz ODU made by other suppliers, MTI may provide replacement
service for such ODU only if (i) such other suppliers cannot provide
the out-of-warranty service; (ii) the transceiver of such ODU was
manufactured by MTI.
4. For replacement service, MTI will scrap the failed units at MTI's site.
G - 1
CONFIDENTIAL TREATMENT
II. XP4 PLUS+: (FULLY TESTED ODU SUBSYSTEM)
Part Number Description Repair Price Replacement Price
- -------------- ----------------------------------- ------------ -----------------------------
Up until the After the
[****] months end of the
from the [****]
beginning of month of
the [****] delivery of
month of Product
delivery of
Product
860-201072-131 XP4 7Ghz 2X/4XE1 Standard Power ODU [****] [****] [****]
860-202071-011 XP4 7Ghz 4X/8XE1 Standard Power ODU [****] [****] [****]
860-203071-011 XP4 7Ghz E3 Standard Power ODU [****] [****] [****]
860-201081-011 XP4 8Ghz 2X/4XE1 Standard Power ODU [****] [****] [****]
860-202081-011 XP4 8Ghz 4X/8XE1 Standard Power ODU [****] [****] [****]
860-203081-011 XP4 8Ghz E3 Standard Power ODU [****] [****] [****]
860-201131-011 XP4 13Ghz 2X/4XE1 Standard Power ODU [****] [****] [****]
860-202131-011 XP4 13Ghz 4X/8XE1Standard Power ODU [****] [****] [****]
860-203131-011 XP4 13Ghz E3 Standard Power ODU [****] [****] [****]
860-201151-011 XP4 15Ghz 2X/4XE1Standard Power ODU [****] [****] [****]
860-202151-011 XP4 15Ghz 4X/8XE1Standard Power ODU [****] [****] [****]
860-203151-012 XP4 15Ghz E3 Standard Power ODU [****] [****] [****]
860-201181-011 XP4 18Ghz 2X/4XE1Standard Power ODU [****] [****] [****]
860-202181-011 XP4 18Ghz 4X/8XE1Standard Power ODU [****] [****] [****]
860-203181-011 XP4 18Ghz E3 Standard Power ODU [****] [****] [****]
860-201232-011 XP4 23Ghz 2X/4XE1Standard Power ODU [****] [****] [****]
860-202232-011 XP4 23Ghz 4X/8XE1Standard Power ODU [****] [****] [****]
860-203232-011 XP4 23Ghz E3 Standard Power ODU [****] [****] [****]
860-201261-011 XP4 26Ghz 2X/4XE1Standard Power ODU [****] [****] [****]
860-202261-011 XP4 26Ghz 4X/8XE1Standard Power ODU [****] [****] [****]
860-203261-011 XP4 26Ghz E3 Standard Power ODU [****] [****] [****]
860-201381-011 XP4 38Ghz 2X/4XE1Standard Power ODU [****] [****] [****]
860-202381-011 XP4 38Ghz 4X/8XE1Standard Power ODU [****] [****] [****]
860-203381-011 XP4 38Ghz E3 Standard Power ODU [****] [****] [****]
Note:
1. For the range of 26GHz and 38GHz, MTI will be responsible for the
repair as well as replacement only if (i) such Product was composed of
Transceiver(s) "made" by MTI, or (ii) DMC Stratex continues to provide
discounted transceivers for replacement per mutually agreed price.
2. For replacement service, MTI will scrap the failed units at MTI site.
G - 2
CONFIDENTIAL TREATMENT
EXHIBIT H
PRICES
The Price for the Products are set forth below in United States Dollars as
follows:
I. ALTIUM PRICING.
ODU ONLY ODU & IDU NAFTA COMMENTS
-------- --------- ----- --------
18G AND UP
NN [****] [****] [****] Note 1
PROT [****] [****] [****] Note 1
6G AND 15G
NN [****] [****] [****] Note 1, 2
PROT [****] [****] [****] Note 1, 2
15G WITH YIG
NN [****] [****] [****]
PROT [****] [****] [****]
7G AND 8G
NN [****] [****] [****] Note 1, 2
PROT [****] [****] [****] Note 1, 2
11/13/15G
NN OR PROT N/A [****] N/A Note 3
TRANSFER COST AND DISCOUNTED XCVR/IF (18G-38G)
NN Protected
------ --------------------
Discounted XCVR/IF [****] [****] (Note 4)
RF PlugIn Kits [****] [****] (Note 5)
Enclosure Assy [****] [****] (Note 5)
YIG Synth [****] [****]
OSAC [****] [****]
RF Distribution Assy [****] [****] (Note 5)
Discounted xfer mat'l cost [****] [****]
NOTES:
1. DMC Stratex shall make arrangement to transport and consign the IDU,
ISK, Accessories, and anything else not part of the integration of ODU
to MTI.
2. The Prices are based on the cost of single loop VCO. The YIG shall be
used if the single loop VCO does not perform appropriately. When YIG is
used, the Price will be adjusted, based on the incremental cost of YIG.
3. In addition to term specified in Note 1, DMC Stratex will make
arrangement to transport and consign the ODU to MTI.
4. DMC Stratex and MTI shall negotiate the pro rata term in good faith to
utilize the excess XCVR/IF inventory left in both parties.
5. If complete Kits or Assy Are not available, DMC will sell the partial
Kits or Assy to MTI at DMC Stratex's standard costs less any profit and
overhead.
6. The incremental cost for Altium 311 (2 x STM-1) will be negotiated and
paid by DMC Stratex.
H - 1
CONFIDENTIAL TREATMENT
II. XP4 PLUS+ PRICING.
[****]
H - 2
CONFIDENTIAL TREATMENT
EXHIBIT I
MTI PRICE REDUCTION PLAN
I. MTI RESPONSIBILITIES.
A. XP4PLUS+ PRODUCT:
1. PRODUCTS SHIPPED PRIOR TO JANUARY 1, 2003: [****]
2. PRODUCTS SHIPPED ON OR AFTER JANUARY 1, 2003: [****]
B. ALTIUM PRODUCT:
1. PRODUCTS SHIPPED AFTER THE EFFECTIVE DATE: [****]
II. DMC STRATEX RESPONSIBILITIES. To assist MTI to achieve the above-stated goal
for Product Price reduction, DMC Stratex agrees to allocate adequate engineering
resources for continuous cost improvements (particularly to reduce PCA costs).
Any subsequent or additional reduction in Prices shall be subject to mutual
review and combined efforts at further cost improvements.
I - 1
CONFIDENTIAL TREATMENT
EXHIBIT J
JOINT SERVICES AGREEMENT IS INCORPORATED BY REFERENCE HEREIN.
J - 1
CONFIDENTIAL TREATMENT
EXHIBIT K
INVENTORY UTILIZATION INCENTIVE PROGRAM
PURPOSE: DMC Stratex's current inventory levels significantly exceed the current
demand levels for both quantity and configuration requirements for the Products.
This Inventory Utilization Incentive Program set forth in this Exhibit K
("INCENTIVE PROGRAM") is designed to provide incentives to both DMC Stratex and
MTI employees to develop and execute plans to convert and use DMC Stratex's
current inventory for the Products.
THE INCENTIVE PROGRAM WILL BE STRUCTURED AS FOLLOWS:
INCENTIVE PROGRAM: DMC Stratex shall pay DMC Stratex and MTI teams of employees
who successfully adapt currently unusable consigned inventory ("UNUSABLE
CONSIGNED INVENTORY") to a form that may be used with current configuration
requirements for the Products ("USABLE CONSIGNED INVENTORY") a bonus payment
equal to [****] of the "DISCOUNTED VALUE" of the Usable Consigned Inventory
("EMPLOYEE BONUS PAYMENT"). At the end of each fiscal year (March 31st), [****]
of the Employee Bonus Payment accumulated in such fiscal year shall be
distributed to the MTI team, and the remaining [****] shall be distributed to
the DMC Stratex team.
The cost of the "UNUSABLE CONSIGNED INVENTORY" shall mean the original cost to
DMC Stratex of such inventory.
The cost of the "USABLE CONSIGNED INVENTORY" shall be the cost of the Unusable
Consigned Inventory, less any amount of cost incurred by MTI to rework such
Unusable Consigned Inventory ("REWORK COST") to convert such inventory to Usable
Consigned Inventory.
"DISCOUNTED VALUE":
(a) For the first [****] of Unusable Consigned Inventory utilized in accordance
with this Exhibit K, the "Discounted Value" shall mean the cost of the Usable
Consigned Inventory, less a discount of [****] from the Usable Consigned
Inventory cost. (b) Thereafter, Discounted Value shall mean the Usable Consigned
Inventory less a discount of [****] from the Usable Consigned Inventory cost.
The following is an example of how the Incentive Program will work:
DESCRIPTION QTY UNIT/$ TOTAL/$ COMMENTS
- ----------- --- ------ ------- --------
PCA, DS3 ("UNUSABLE [****] Consigned Inventory -
CONSIGNED INVENTORY") DMC Stratex
CONVERT TO PCA, E3
"Rework Cost" - Quoted by MTI [****]
Net Value ("Usable Consigned [****]
INVENTORY")
K - 1
CONFIDENTIAL TREATMENT
Discount provided by DMC [****] Purchase Order issued
Stratex to MTI for by MTI to DMC
utilization ("DISCOUNTED Stratex. Inventory
VALUE") incorporated into the
Products sold to
DMC Stratex per
Exhibit H.
Employee Incentive provided [****] [****] paid to each
by DMC Stratex to be paid to team by DMC Stratex at
MTI and DMC Stratex fiscal year end based
employees ("EMPLOYEE BONUS on the net value of
PAYMENT") the Usable Consigned
Inventory.
A. REWORKED COMPONENT ITEMS.
Items that require conversion and rework ("REWORKED COMPONENT ITEMS") for
utilization based on future demand shall be eligible for this Incentive Program,
provided, however, such items shall qualify for Employee Bonus Payment when and
only when they are incorporated into the Products to fulfill demand
requirements.
B. NON-REWORKED COMPONENT ITEMS.
Component items that do not require rework or conversion, such as components for
PCAs, ("NON-REWORKED COMPONENT ITEMS") shall be eligible for the Incentive
Program if such components are used by MTI for items other than the Products.
Such Non-reworked Component Items shall qualify for the Employee Bonus Payment
when DMC Stratex receives purchase orders from MTI for such items. Although
Rework Costs are not applicable to the Non-reworked Component Items, a [****]
discount will be applied to the original cost to DMC Stratex of such
Non-reworked Component items (the "DISCOUNTED VALUE") to determine the Employee
Bonus Payment.
C. FINISHED GOODS INVENTORY ITEMS.
Those goods which DMC Stratex designates as "FINISHED GOODS INVENTORY ITEMS"
will be reviewed on a case-by-case basis to determine the appropriate Employee
Bonus Payment.
K - 2
CONFIDENTIAL TREATMENT
EXHIBIT L
ROYALTY RATE
The royalty rate for DMC Stratex's exercise of the license rights granted to DMC
Stratex under Section 2.2 shall be calculated as follows: DMC Stratex shall pay
a royalty equal to [****] of "MTI's Average Selling Price" of the specific
component (which is either incorporated into a Product or sold as a stand-alone
merchandise) containing MTI Know-How, which has been manufactured by DMC
Stratex, or a third party designated by DMC Stratex, in the exercise of DMC
Stratex's rights under Section 2.2. "MTI's Average Selling Price" shall mean (i)
[****].
All the royalty payment shall be subject to audit right of MTI against DMC
Stratex's books and records related to calculation of such royalty, which may be
exercised no more than once every calendar year and only within normal business
hours of DMC Stratex with at least two (2) weeks' notice, and DMC Stratex shall
provide reasonably necessary assistance and support in such audit; provided that
no audit shall be permitted after twelve (12) months after the settlement of the
royalty due. DMC Stratex shall provide MTI, no later than tenth (10th) calendar
days after each quarter, a quarterly report on the royalty due for the preceding
quarter, and all royalty payments shall be due within thirty (30) calendar days
after the quarterly royalty report is sent by DMC Stratex.
L - 1