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EXHIBIT 10.9
Standard Manufacturing Agreement
Solectron Confidential
STANDARD MANUFACTURING AGREEMENT
Solectron California Corporation ("Solectron") whose principal place of business
is located at 847 Gibraltar Drive, Milpitas, California 95035 and Fine Pitch
Technology Inc. whose principal place of business is located at 2450 Autumnvale
Drive, San Jose, California 95131 (Solectron California Corporation and Fine
Pitch Technology Inc. collectively referred to as "Solectron") and Juniper
Networks Inc. ("Customer") whose principal place of business is located at 385
Ravendale Drive, Mountain View, California 94043 in their desire to formulate a
strategic business relationship and to define their expectations regarding this
relationship, hereby agree as follows:
1.0 PRECEDENCE:
1.1 This Agreement is intended by Solectron and Customer to operate as a basic
set of operating conditions regarding their respective business
relationship. Product specific requirements along with specific business
terms and conditions will be mutually agreed to and documented by an
addendum to this Agreement.
1.2 It is the intent of the parties that this Agreement and its addenda shall
prevail over the Standard Manufacturing Agreement previously entered into
by the party's with the effective date of February 10, 1998. It is the
intent of the parties that this Agreement and its addenda shall also
prevail over the terms and conditions of any purchase order, acknowledgment
form or other instrument.
1.3 This Agreement may be executed in one or more counterparts, each of which
will be deemed the original, but all of which will constitute but one and
the same document. The parties agree this Agreement and its addenda may not
be modified except in writing signed by both parties.
2.0 TERM
2.1 This Agreement shall commence on the effective date, June 10, 1998, and
shall continue for an initial term of one (1) year. This Agreement shall
automatically be renewed for successive one(1) year increments unless
either party requests in writing, at least ninety (90) days prior to the
anniversary date, that this Agreement not be so renewed.
3.0 PRODUCT FORECAST
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3.1 Customer will provide an annual twelve (12) month forecast and a monthly
six (6) month rolling Product forecast to Solectron.
4.0 MATERIAL PROCUREMENT
4.1 Solectron is authorized to purchase materials using standard purchasing
practices including, but not limited to, acquisition of material
recognizing Economic Order Quantities, ABC buy policy and long lead time
component management in order to meet the forecasted requirements of
Customer. [***]
Customer recognizes its financial responsibility for the material
purchased by Solectron on behalf of Customer. Customer is responsible for
material to the extent that (i) material was purchased by Solectron to
support the Product forecast and agreed upon safety stock; (ii) Solectron
exercised reasonable business judgment in managing suppliers and lead
times; (iii) Solectron complied with Customer cancellation instructions
in a timely manner (canceled all open orders within one (1) week of
receiving instructions).
4.2 Customer may revise or cancel a purchase order for Product and may also
eliminate a component from a Product. If Customer revises or cancels a
purchase order ("Order"), or eliminates a component, or through revised
forecast (downside) causes excess inventory, Solectron shall identify all
potential liability of Customer for material on order, material on hand,
work in process, and finished goods. Solectron shall undertake
commercially reasonable efforts to cancel all applicable component
purchase orders and reduce component inventory through return for credit
programs or allocate components for alternate programs to minimize
charges to Customer. Customer agrees to compensate Solectron for costs
incurred for finished goods (including profit); work in process
(including labor performed); material on hand which could not be returned
or used for other customers and at other sites of Solectron; material on
order which could not be canceled; applicable material supplier's
restocking or cancellation fees; and agreed
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Solectron handling charges. Customer agrees to pay carrying costs to
Solectron of [***].
4.3 Solectron will report its inventory position to Customer on a monthly
basis, including the following data: quantity of raw material, work in
process and any open orders that cannot be canceled due to supplier lead
time. Report will specifically identify any material on hand or on order
where the quantity exceeds the agreed three (3) month forward looking
forecast plus safety stock.
4.4 Solectron shall undertake reasonable efforts to cancel all applicable
component purchase orders and reduce component inventory through return
for credit programs or allocate components for alternate programs if
applicable.
5.0 PURCHASE ORDERS AND PRICE REVIEWS
5.1 Initial order placement will be an Order from Customer to Solectron issued
electronically with facsimile copy as backup. Shipment of Product to
Customer from date of acceptance shall be [***] for forecasted Product
[***]. Solectron will provide notice to Customer of Order acceptance and
scheduled shipment date [***].
5.2 Customer may issue specific Orders to Solectron which will be identified
as "high priority" at time of Order placement. Scheduled shipment of
designated "high priority" Product will be [***]. Solectron will ship
these Products [***]. Solectron's on-time delivery performance of "high
priority" Products will be taken into consideration by the parties during
quarterly price reviews.
5.3 In the event Customer issues Orders in excess of forecasts and agreed to
safety stock, Solectron will use commercially reasonable efforts to
recover and replenish inventory levels. Expediting costs for such Orders
will be agreed upon prior to Order placement. Solectron will provide
Customer with "what-if" shortages results [***].
5.4 Solectron and Customer will meet every three (3) months during the term
of this Agreement to review safety stock levels, pricing and to determine
whether any price adjustment is required. [***]
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5.5 Solectron will provide pricing for average monthly volumes of [***]. If
volumes fall below [***] production rate of [***], Solectron and
Customer agree to review the causes. If the volumes have dropped due to
the end of Product life, Solectron and Customer agree to develop their
end-of-life support strategy. If the low volumes are only temporary,
Solectron and Customer will discuss what if any fixed program costs are
required to maintain the Solectron team. Solectron will attempt to
minimize the fixed program costs by re-assigning personnel whenever
possible. Solectron will consider production volumes of comparable (within
the same Product family) follow-on products when calculating total monthly
volumes realized.
6.0 DELIVERY
6.1 Solectron will target [***] on time delivery, defined as shipment of
Product by Solectron within a window of [***] except as provided above.
Each configuration order received from Customer will include the date on
which the Product is to be delivered to either Customer or their
designated customer location.
6.2 The FOB point is ex factory.
6.3 Solectron and Customer shall agree to delivery schedule flexibility
requirements specific to the Product as documented in the addenda.
6.4 Upon learning of any potential delivery delays, Solectron will notify
Customer as to the cause and extent of such delay.
6.5 If Solectron fails to make deliveries at the specified time and such
failure is caused by Solectron, Solectron will, at no additional cost to
Customer, employ accelerated measures such as material expediting fees,
premium transportation costs, or labor overtime required to meet the
specified delivery schedule or minimize the lateness of deliveries.
6.6 Should Customer require Solectron to undertake export activity on behalf
of Customer, Customer agrees to submit requested export information to
Solectron pursuant to Solectron Guidelines for Customer-Driven Export
Shipments as provided in the addenda.
7.0 PAYMENT TERMS
7.1 Solectron and Customer agree to payment terms of Net 30 days from the date
of invoice.
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7.2 Currency will be in U.S. Dollars unless specifically negotiated and
reflected in the addenda.
7.3 Until the purchase price and all other charges payable to Solectron have
been received in full, Solectron retains and Customer grants to Solectron
a security interest in the products delivered to Customer and any proceeds
therefrom.
8.0 QUALITY
8.1 The Customer program quality requirements shall be in accordance with IAW
ISO 9002. Printed Circuit Board Assemblies ("PCBA") shall be fabricated
IAW with IPC-A-610 Rev.B, Class 2. Low volumes will prohibit the use of
statistical based methods for quality management. Rather, all entities
agree to evaluate quality performance using a yield or Defects Per Million
(DPM) process, with a Pareto of failures. Improvements will be prioritized
and assigned appropriate resources by all parties.
9.0 ENGINEERING CHANGES
9.1 Customer may, upon advance written notice to Solectron, submit engineering
changes for incorporation into the Product. It is important that this
notification include documentation of the change to effectively support an
investigation of the impact of the engineering change. Solectron will make
a reasonable effort to review the engineering change and report to
Customer [***]. If any such change affects the price, delivery, or quality
performance of said Product, an equitable adjustment will be negotiated
between Solectron and Customer prior to implementation of the change.
9.2 Solectron agrees not to undertake significant process changes, design
changes, or process step discontinuance affecting electrical performance
and/or mechanical form and fit without prior written notification and
concurrence of the Customer.
10.0 INVENTORY MANAGEMENT
10.1 Solectron agrees to purchase components according to the Customer approved
vendor list (AVL) including any sourcing plans as provided by the addenda.
10.2 All customer tooling/equipment furnished to Solectron or paid for by
Customer in connection with this Agreement shall:
a) Be clearly marked and remain the personal property of Customer.
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b) Be kept free of liens and encumbrances
c) Unless otherwise agreed, Customer is responsible for the general
maintenance of Customer tooling/equipment.
Solectron shall hold Customer property at its own risk and shall not
modify the property without the written permission of Customer. Upon
Customer's request, Solectron shall redeliver the property to Customer in
the same condition as originally received by Solectron with the exception
of reasonable wear and tear. In the event the property is lost, damaged or
destroyed, Solectron's liability for the property is limited to the book
value of the property.
11.0 CONFIDENTIAL INFORMATION
11.1 Solectron and Customer agree to execute, as part of this Agreement, a
Nondisclosure Agreement for the reciprocal protection of confidential
information.
11.2 Subject to the terms of the Nondisclosure Agreement and the proprietary
rights of the parties, Solectron and Customer agree to exchange, at least
semi-annually, relevant process development information and business plans
to include market trends, process technologies, product requirements, new
product developments, available capacity and other information to support
technology advancements by both Solectron and Customer.
12.0 WARRANTY
12.1 Solectron warrants for a period of [***] from the date of
manufacture of the Product, that (i) the Product will conform to the
specifications applicable to such Product at the time of its manufacture,
which are furnished in writing by Customer and accepted by Solectron; (ii)
such Product will be of good material (supplied by Solectron) and
workmanship and free from defects for which Solectron is responsible in
the manufacture; (iii) such Product will be free and clear of all liens and
encumbrances and that Solectron will convey good and marketable title to
such Product. In the event that any Product manufactured shall not be in
conformity with the foregoing warranties, Solectron shall, at Solectron's
option, either credit Customer for any such nonconformity (not to exceed
the purchase price paid by Customer for such Product), or, at Solectron's
expense, replace, repair or correct such Product. The foregoing
constitutes Customer's sole remedies against Solectron for breach of
warranty claims.
12.2 Solectron shall have no responsibility or obligation to Customer under
warranty claims with respect to Products that have been subjected to
abuse, misuse, accident, alteration, neglect or unauthorized repair.
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THE WARRANTIES CONTAINED IN THIS SECTION ARE IN LIEU OF, AND SOLECTRON
EXPRESSLY DISCLAIMS AND CUSTOMER WAIVES ALL OTHER REPRESENTATIONS AND
WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR ARISING BY COURSE OF DEALING OR
PERFORMANCE, CUSTOM, USAGE IN THE TRADE OR OTHERWISE, INCLUDING WITHOUT
LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY, TITLE AND FITNESS
FOR A PARTICULAR USE.
12.3 An Epidemic Condition exists when Failure reports or statistical samplings
show that [***] of the same Product installed or shipped during any one
month contain an identical, repetitive defect in Solectron supplied
material and/or workmanship.
If during the warranty period of one year, the same Product shows evidence
of an Epidemic Condition Juniper shall promptly notify Solectron of such
condition. Upon notification, Juniper shall have the right, pending
correction of the Epidemic Condition, to postpone further shipments of
such Product by giving written notice of such postponement to Solectron.
Such postponement shall temporarily relieve Solectron of its shipment
liability and Juniper of any shipment liability for such postponed
shipments. Both parties shall work together to prepare and propose a
corrective action plan addressing implementation and procedure milestones
for remedying such Epidemic Condition(s). Both parties shall use best
efforts to implement the remedy in accordance with the agreed upon
schedule.
In the event of Epidemic Failure Solectron will:
(a) Incorporate the remedy in the affected Product in accordance with
Juniper engineering change order procedures.
(b) Ship all subsequent Products incorporating the required modification.
(c) [***]
12.4 Solectron shall have no liability or responsibility under Sections above
for any losses or damages to the extent that any such Epidemic Failure
claims are the result of:
12.4.a Solectron's compliance with Customer specifications;
12.4.b the negligence of Customer or any other person providing goods or
services in connection with the design, development, production,
and distribution of the Product (with the exception of Solectron
manufacture of the Product);
12.4.c modification or alteration of the Product by a party other than
Solectron;
12.4.d defects in Customer's products or components thereof (with the
exception of the Products and Solectron supplied components
thereof).
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13.0 TERMINATION
13.1 If either party fails to meet any one or more of the terms and
conditions as stated in either this Agreement or the addenda,
Solectron and Customer agree to negotiate in good faith to resolve
such default. If the defaulting party fails to cure such default or
submit an acceptable written plan to resolve such default within
thirty (30) days following notice of default, the nondefaulting party
shall have the right to terminate this Agreement by furnishing the
defaulting party with thirty (30) days written notice of termination.
13.2 This Agreement shall immediately terminate should either party; (i)
become insolvent; (ii) enter into or file a petition, arraignment or
proceeding seeking an order for relief under the bankruptcy laws of
its respective jurisdiction; (iii) enter into a receivership of any of
its assets or; (iv) enter into a dissolution of liquidation of its
assets or an assignment for the benefit of its creditors.
13.3 Either Solectron or Customer may terminate this Agreement without
cause by giving ninety (90) days advance written notice to the other
party.
14.0 DISPUTE RESOLUTION
14.1 In the spirit of continued cooperation, the parties intend to and
hereby establish the following dispute resolution procedure to be
utilized in the unlikely event any controversy should arise out of or
concerning the performance of this Agreement.
14.2 It is the intent of the parties that any dispute be resolved
informally and promptly through good faith negotiation between
Solectron and Customer. Either party may initiate negotiation
proceedings by written notice to the other party setting forth the
particulars of the dispute. The parties agree to meet in good faith to
jointly define the scope and a method to remedy the dispute. If these
proceedings are not productive of a resolution, then senior management
of Solectron and Customer are authorized to and will meet personally
to confer in a bona fide attempt to resolve the matter.
14.3 Should any disputes remain existent between the parties after
completion of the two-step resolution process set forth above, then
the parties shall promptly submit any dispute to mediation with an
independent mediator. In the event mediation is not successful in
resolving the dispute, the parties agree to submit the dispute to
binding arbitration as provided by their respective jurisdiction.
15.0 LIMITATION OF LIABILITY
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IN NO EVENT, WHETHER AS A RESULT OF BREACH OF CONTRACT, WARRANTY, OR TORT
(INCLUDING NEGLIGENCE), STRICT LIABILITY, PRODUCT LIABILITY, OR
OTHERWISE, SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY SPECIAL,
INCIDENTAL, CONSEQUENTIAL, EXEMPLARY DAMAGES OF ANY KIND WHETHER OR NOT
EITHER PARTY WAS ADVISED OF THE POSSIBILITY OF SUCH DAMAGE.
16.0 PATENT, COPYRIGHT AND TRADEMARK INDEMNITY
Each party (the "indemnifying party") shall defend, indemnify, and hold
harmless the other party from any claims by a third party of infringement
of intellectual properties resulting from the acts of the indemnifying
party pursuant to this Agreement, provided that the other party (i) gives
the indemnifying party prompt notice of any such claims, (ii) renders
reasonable assistance to the indemnifying party thereon, and (iii)
permits the indemnifying party to direct the defense of the settlement of
such claims.
17.0 GENERAL
17.1 Each party to this Agreement will maintain insurance to protect itself
from claims (i) by the party's employees, agents and subcontractors under
Worker's Compensation and Disability Acts, (ii) for damages because of
injury to or destruction of tangible property resulting out of any
negligent act, omission or willful misconduct of the party or the party's
employees or subcontractors, (iii) for damages because of bodily injury,
sickness, disease or death of its employees or any other person arising
out of any negligent act, omission, or willful misconduct of the party or
the party's employees, agents or subcontractors.
17.2 Neither party shall delegate, assign or transfer its rights or
obligations under this Agreement, whether in whole or part, without the
written consent of the other party provided, however, upon prior written
notice to Solectron Customer may assign or transfer its rights to those
parties as provided in Exhibit A.
17.3 Neither party shall be liable for any failure or delay in its
performance under this Agreement due to acts of God, acts of civil or
military authority, fires, floods, earthquakes, riots, wars or any other
cause beyond the reasonable control of the delayed party provided that
the delayed party: (i) gives the other party written notice of such cause
within fifteen (15) days of the discovery of the event; and (ii) uses its
reasonable efforts to remedy such delay in its performance.
17.4 This Agreement shall be governed by, and construed in accordance with
the laws of the State of California, excluding its conflict of laws
provisions. In any action to enforce this Agreement, the prevailing party
shall be awarded all court costs and reasonable attorney fees incurred.
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Agreed:
Solectron California Corporation Customer Juniper Networks
By: /s/ JIM WILLIAMS By: /s/ GARY HEIDENREICH
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Name: Jim Williams Name: Gary Heidenreich
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Title: Vice President Title: VP, Operations
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Date: 8/8/98 Date: 6/10/98
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Fine Pitch Technology Inc.
By: /s/ YEN-HAO PAN
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Name: Yen-Hao Pan
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Title: Operation Mgr
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Date: 6/3/98
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JUNIPER NETWORKS SOLECTRON ADDENDUM TO STANDARD MANUFACTURING AGREEMENT
This Addendum and the Standard Manufacturing Agreement (SMA) set forth the terms
and conditions under which Solectron agrees to manufacture and support the
Juniper Networks Martini product based on the specifications provided by Juniper
Networks. SOLECTRON agrees to perform such manufacturing, and to ship to Juniper
or it's customers in return for payment. This Addendum is hereby incorporated by
reference into the SMA. Except as set forth herein, the Addendum is subject to
each and every provision of the SMA. Capitalized terms not otherwise defined
here shall have the meanings ascribed to such terms in the SMA.
This addendum describes changes and additions to the SMA. It follows the
numbering scheme of the SMA. If a specific item was NOT changed or modified,
that item number will NOT be seen in the Addendum. For example, there were no
changes to Item 1.1. Thus, there is no 1.1 under section 1.0 although 1.1.1. has
been added under section 1.1 and thus are elements of this Addendum.
Signatures
/s/ JIM DAILY /s/ GARY HEIDENREICH
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Jim Daly Gary Heidenreich
Division Manager Vice President of Operations
Complex Systems Division Juniper Networks
Solectron
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the Commission. Confidential treatment has been requested with respect to
the omitted portions.