1
CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.
EXHIBIT 10.36
MANUFACTURING AGREEMENT
THIS PURCHASE AGREEMENT is entered into as of this 13th day of September 1999 by
and between Wellex Corporation, a California corporation, whose principal place
of business is located at 44141 S. Grimmer Blvd., Fremont, CA 94538 (hereinafter
referred to as ("MANUFACTURER") and Verilink Corporation, a Delaware
corporation, having its principal office at 127 Jetplex Circle, Madison, AL
35758 (hereinafter referred to as "PURCHASER").
1. TERM
This Agreement shall become effective on the date hereof and shall be in
effect for two (2) years. The term of this Agreement shall be
automatically extended for an additional one (1) year period unless
either party elects to terminate the Agreement by written notice given
to the other party at least ninety (90) days before the end of the
initial two (2) year term.
2. SPECIFICATIONS; QUALITY; Y2K
(a) All products to be manufactured pursuant to this Agreement
("Products") shall be in accordance with PURCHASER's specifications
and drawings, which have been provided to MANUFACTURER
(b) All work performed by MANUFACTURER shall be performed in a skillful
and professional manner and shall be consistent with best commercial
standards of the industry, including but not limited to, ISO 9002,
BABT, Production Quality Assurance Approval (PQAA) facility
certification, and PURCHASER'S "Quality Plan" (see Exhibit D).
(c) MANUFACTURER represents and warrants that its internal processes and
that, to the best of its knowledge, the internal processes of its
suppliers and vendors are Y2K compliant. As used herein, "Y2K
Compliant" shall mean that neither performance nor functionality is
affected by dates prior to, during, and after the Year 2000.
IN PARTICULAR:
Rule 1. No value for current date will cause any interruption in any
operation.
Rule 2. Date-based functionality must behave consistently for dates
prior to, during and after Year 2000.
Rule 3. In all interfaces and data storage, the century in any date must
be specified either explicitly or by unambiguous algorithms or
inferencing rules.
Rule 4. Year 2000 must be recognized as a leap year.
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MANUFACTURER is required to use its best efforts to avoid the
interruptions of critical operations (including: security systems,
capital HVAC Systems, power systems, computer systems, phone systems,
and all company facilities used to support this Agreement.
MANUFACTURER will provide PURCHASER a written Y2K plan (within one
(1) month of the signing of this Agreement) addressing as a minimum
all requirements called out in the Y2K section of this Agreement.
Status of outstanding items will be reported monthly to PURCHASER
until resolution is complete. Y2K status reports must include as a
minimum evidence of facility equipment and services inventory. Y2K
impacts analysis of said inventory, outstanding issues and
contingency plans are required.
In addition, MANUFACTURER shall provide:
1) Availability of key personnel beginning December 19, 1999 through
January 31, 2000.
2) List of contact numbers and methods to reach MANUFACTURER's
personnel during this period. This list should include direct dial
lines (outside the PBX), cellular numbers, pagers, satellite phone
numbers, internet based instant messages/chat programs, e-mail
addresses, and any other means to rapidly communicate between
MANUFACTURER and PURCHASER during this specified period.
3. Shipping
All shipments of Products shall be MANUFACTURER F.O.B PURCHASERS' bonded
stores area in MANUFACTURER's facility and title shall pass to PURCHASER
upon such shipment.
4. Products
All Products to be manufactured pursuant to this Agreement are listed on
Exhibit A hereto. Products may be added to or deleted from Exhibit A,
subject to the terms and conditions of this Agreement.
5. PRODUCT PAYMENT TERMS
Payment terms for all Products shall be one percent (1%) ten (10) days,
net thirty (30) days. All "invoices" shall contain such detail, as may
be necessary to support its MANUFACTURER's charges.
6. INVENTORY PURCHASE
(a) Purchase. MANUFACTURER shall purchase all of PURCHASER's inventory
(RAW STOCK), including inventory ordered but not yet delivered. That
inventory shall be transferred to MANUFACTURER on or before October
29, 1999 and shall be maintained by MANUFACTURER in a controlled
stock room to insure that either party may validate physical and
book inventory. MANUFACTURER shall conduct cycle
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counts in accordance with a schedule mutually agreed upon by
MANUFACTURER and PURCHASER.
(b) Payment Terms. MANUFACTURER shall make monthly payments to PURCHASER
for the inventory purchased pursuant to this Agreement, commencing
thirty five (35) days from the initial (10-29-99) date that
inventory is transferred to MANUFACTURER. Each payment shall equal
the greater of: (i) one sixth (1/6) of PURCHASER's cost of the
transferred inventory; or (ii) PURCHASER's cost of the inventory
consumed in the manufacture of Products during thirty (30) day
period immediately preceding the payment date. However, in no event
shall the total amount paid under this clause exceed the dollar
amount of inventory transferred.
(c) Six Month Review. At the end of six (6) months from the date that
the inventory is transferred, MANUFACTURER and PURCHASER shall
evaluate the remaining inventory. Any inventory determined by mutual
agreement to be obsolete or excess (i.e., not forecasted to be used
in the manufacture of Products within nine (9) months from the date
of evaluation) shall be repurchased by PURCHASER at MANUFACTURER's
cost plus a minimum handling charge agreed to by each party. No
"Purchased from PURCHASER" inventory will be held longer than one
(1) year without a Material Carrying Charge agreed to by each party.
(One and a half % (1.5 %) per month).
(d) Last Time Buys. PURCHASER will identify all inventory purchased by
PURCHASER as part of a last time buy. Such inventory will not be
subject to the buy-back provision of Section 6(c) of this Agreement.
SEE EXHIBIT C. (to be provided fifteen (15) days from Agreement
signing.) Exhibit C will identify Part Number, "where used" and
projected "depletion" date for each " Last Time Buy" item.
PURCHASER's engineering department will identify replacement
components for these items prior to usage of the last units.
7. WIP PURCHASE
MANUFACTURER shall purchase from PURCHASER at PURCHASER's cost all of
PURCHASER's non-obsolete work in process ("WIP") included in the
PURCHASER's initial purchase order and/or forecast. All WIP purchased
hereunder shall be paid for by PURCHASER within thirty (30) days from
transfer to MANUFACTURER. The cost for completing and testing of WIP
shall be determined in accordance with Exhibit B to this Agreement and
paid by PURCHASER in accordance with Section 5 of this Agreement. No
partially completed sub-assemblies will be transferred to MANUFACTURER.
8. CONSIGNMENT OF EQUIPMENT; TRAINING
PURCHASER will deliver to MANUFACTURER its test equipment and
manufacturing equipment unique to PURCHASER's Products for use by
MANUFACTURER in manufacturing and testing Products. PURCHASER will
retain title to such equipment, which shall be immediately returned to
PURCHASER upon termination of this Agreement in good working order.
MANUFACTURER shall maintain and upgrade the equipment as may be required
to perform its obligations under this Agreement. PURCHASER shall
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provide at its cost such additional test equipment as may be necessary
to meet production requirements. Any modifications required to be made
to equipment provided to MANUFACTURER pursuant to this section shall be
documented by an Engineering Change Order ("ECO") or (Equivalent
Manufacturing Control Documents) and shall be at PURCHASER's expense.
PURCHASER shall provide such training to MANUFACTURER's personnel as may
be necessary for MANUFACTURER to manufacture and test Products.
9. PRICING; MATERIAL COSTS
(a) MANUFACTURER's prices for its services shall be determined in
accordance with the following formula:
o [*]
o [*]
o [*]
[*]
[*] The revenue forecast will be reviewed July 1, 2000, and each
quarter thereafter, and in the event the revenue does not meet
expectations, forward adjustments will be made reflecting an
increase/decrease in Material Margin as agreed to between PURCHASER
and MANUFACTURER as defined below in Section 9(d); no retroactive
adjustments will be made. No adjustment will be made under this
paragraph to the material margin on a quarterly basis if the total
of the MANUFACTURER's actual revenue year to date plus the
PURCHASER's forecast is equal to the annual revenue target on an
annualized basis.
(b) MANUFACTURER shall review its actual cost information, and provide
PURCHASER with costed Bills-of-Material on a quarterly basis. After
the quarterly cost review, MANUFACTURER will revise PURCHASER's
cost, based on actual cost of raw material, plus agreed to mark-up.
If MANUFACTURER, at PURCHASER's request, must pay premiums for
expedited material shipments, MANUFACTURER will review with
PURCHASER increased pricing prior to implementation, for PURCHASER's
approval. PURCHASER will be responsible for documented and approved
premium cost.
(c) MANUFACTURER shall use its best efforts to obtain the lowest
possible costs and to obtain flexibility to accommodate PURCHASER's
schedule changes, based on PURCHASER's forecasts. Purchaser shall
transfer to MANUFACTURER any volume purchase or unique pricing
agreements it may have relating to Products.
(d) Prices are based on the following assumptions:
1. Major items are defined as main cards, snaps, shelves, power
supplies. (See Exhibit B).
2. Minor Items are defined as cables, CDs, manuals, & other
accessory items.
[*] Confidential Treatment Requested.
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3. [*]
4. No shipping preparation labor charge will be incurred for minor
items.
5. [*]
6. [*]
7. [*]
8. Material margin structure defined during a calendar year [each
one (1) year period beginning 01-01-00].
Revenue Material Margin
[*] [*]
[*] [*]
[*] [*]
[*] [*]
At the end of the first one-year period, MANUFACTURER and
PURCHASER will review the opportunity to reduce the [*] rate,
based on the revenue and future projections.
(e) No MANUFACTURER's inventory will be held longer than one (1) year
without a material carrying charge agreed to by each party per
agreement in Item 6C.
(f) Non Cancelable Non Returnable material purchased by MANUFACTURER per
PURCHASER'S Purchase Orders or Letter of Agreement will be the sole
liability of PURCHASER.
10. PURCHASE ORDERS; FORECASTS
(a) All purchases made pursuant to this Agreement shall be made pursuant
to a Purchase Order, which shall be signed by an authorized
representative of PURCHASER and shall contain PURCHASER's part
number, revision level of Products to be shipped, and PURCHASER's
delivery schedule.
(b) Every thirty (30) days, PURCHASER shall provide MANUFACTURER with a
firm Purchase Order for its requirements for the next thirty (30)
day period and a forecast for the subsequent five (5) month period.
Within the thirty (30) day period, MANUFACTURER shall provide a
cycle time of five (5) working days from production release to
shipment to MANUFACTURER'S bonded stock inventory.
(c) MANUFACTURER shall use PURCHASER's Purchase Orders and forecasts as
a basis for purchasing materials required for Products. PURCHASER
shall be responsible for the costs of any material purchased for
Products subject to a Purchase Order and forecast not used for the
manufacture of Products due to cancellations by PURCHASER.
MANUFACTURER shall use its best efforts to mitigate PURCHASER's
liability pursuant to this section.
[*] Confidential Treatment Requested.
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(d) PURCHASER shall be entitled to cancel, reschedule, or modify
Purchase Orders that provide for delivery beyond thirty (30) days,
provided PURCHASER provides MANUFACTURER with at least fourteen (14)
days written notice of such cancellation, rescheduling, or
modification. If such action by PURCHASER represents an acceleration
of shipment date or increase in quantity of Products, MANUFACTURER
will use its best efforts to meet PURCHASER's request, subject to
material availability and capacity, and expedite labor charges.
11. WARRANTY
(a) MANUFACTURER warrants that the Product sold hereunder will be free
from defects in material and workmanship according to IPC 610
Workmanship Standards and other appropriate quality standards for a
period of one (1) year from the date of shipment, provided that: (i)
MANUFACTURER is notified in writing by PURCHASER within thirty (30)
days after PURCHASER's discovery of any Product failure, or (ii) the
defective Product is returned to MANUFACTURER no longer than ten
(10) days following the last day of the warranty period.
MANUFACTURER shall include serial numbers and/or date stamps, as
designated by PURCHASER, on each Product to facilitate warranty
tracking. PURCHASER shall forward defective Products to MANUFACTURER
freight prepaid, and MANUFACTURER will use its best efforts to
return the repaired or replaced Products freight prepaid by
MANUFACTURER to PURCHASER no later than thirty (30) days from the
date MANUFACTURER received the defective Product. The foregoing
warranty shall not be valid if the Product or component parts have
been subjected to abuse, misuse, accident, alteration, neglect,
unauthorized repair or installation.
(b) Subject to Exhibit D, the foregoing warranty provisions set forth
the MANUFACTURER's sole liability and the PURCHASER's exclusive
remedies for claims (except as to title) based on defects in, or
failure of, any Product sold hereunder when the claim is based on
breach of warranty. Upon the expiration of the applicable warranty
for any Product sold hereunder, all such liability shall terminate.
(c) The above warranty periods shall not be extended by the repair or
replacement of Products pursuant to any of the above warranties. The
above warranties shall apply to PURCHASER, its successors, assigns
and those who purchase or use Products. PURCHASER shall deal
directly with MANUFACTURER for returns and repairs.
(d) EXCEPT AS HEREINABOVE PROVIDED, THE FOREGOING WARRANTIES ARE
EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED,
OR STATUTORY, INCLUDING THE IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
12. DELIVERY
(a) Products shall be delivered to PURCHASER in accordance with the
delivery dates as specified on PURCHASER's Purchase Orders as agreed
to by MANUFACTURER.
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(b) Upon learning of any potential delays, MANUFACTURER will immediately
notify PURCHASER in writing as to the cause and extent of such
delay. MANUFACTURER and PURCHASER will review the cause and extent
of such delay, and the Purchase Order Line Item delivery date will
be modified if Material is determined to be on allocation,
defective, or incorrect, in a manner that could not be reasonably
anticipated by MANUFACTURER. If the above circumstances do not
apply, the delivery schedule in the Purchase Order shall remain in
effect.
(c) PURCHASER requires a compliance to agreed upon delivery date greater
than 95%. Delivery Commitment is defined as a Purchase Order Line
Item, 100% quantity shipped as acknowledged in Purchase Order
Delivery Date. MANUFACTURER shall be responsible for any financial
penalties or additional expenses as a result of MANUFACTURER's
failure to meet the mutually agreed to delivery commitments.
If MANUFACTURER is performing below 95% delivery commitment to
individual line item requirement into PURCHASER's stores area,
PURCHASER will withhold 3% of the dollar amount of the delinquent
Purchase Order line item until performance achieves 95% within
thirty (30) days or a mutually agreed upon recovery period.
PURCHASER will refund the withheld amount if the performance
achieves 95% within thirty (30) days or the mutually agreed to
recovery period, whichever is applicable. If performance does not
achieve 95% within the applicable period, PURCHASER shall retain all
amounts withheld.
13. TERMINATION
This Agreement may be terminated by either party at any time upon the
occurrence of any one or more of the following events of default:
(a) Failure of the other party (i) to perform pursuant to the terms and
conditions of this Agreement; and (ii) to cure such performance
deficiency within sixty (60) days after receiving written notice
thereof given by the aggrieved party;
(b) The entering into or filing by the other party of a petition,
arrangement or proceeding seeking an order for relief under the
bankruptcy laws of the United States, a receivership for any of the
assets of the other party, a composition with or assignment for the
benefit of its creditors, a readjustment of debt, or the dissolution
or liquidation of the other party;
(c) The insolvency of the other party.
Upon termination, by MANUFACTURER pursuant to PURCHASER's default,
PURCHASER shall be liable for any material acquired by MANUFACTURER,
pursuant to PURCHASER's Purchase Orders, current forecasts and approved
material Purchase authorizations.
14. INSPECTION
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(a) Source Inspection. Upon request from PURCHASER, MANUFACTURER agrees
to allow PURCHASER to inspect and review the work being performed
under this Agreement, including materials and supplies being used.
However, shipments will not be delayed if PURCHASER fails to conduct
such source inspection. Source inspection does not constitute
acceptance of Products.
(b) Approved MANUFACTURERs. In the course of purchasing component parts
on behalf of PURCHASER, MANUFACTURER must follow PURCHASER's
Approved Vendors List for all component parts. If MANUFACTURER
offers alternatives to PURCHASER's AVL, the alternatives must be
approved in writing by PURCHASER prior to acquisition by
MANUFACTURER of alternative component parts.
(c) Bonded Stores Inventory Accuracy. While PURCHASER owns "Bonded
Stores Inventory", MANUFACTURER is responsible for staffing,
maintenance, data and inventory accuracy. A formal cycle count
process and/or physical inventories will be required by
MANUFACTURER. In the event the MANUFACTURER's inventory accuracy
defined as book-to-physical units and dollars, falls below 98%
accuracy, PURCHASER will require MANUFACTURER to complete a physical
inventory, at MANUFACTURER's expense, until such time inventory
accuracy is compliant. Failure to meet these requirements will
require the MANUFACTURER to provide a root cause analysis,
containment plan, and preventive action plan based on PURCHASER's
periodic audits.
15. ENGINEERING CHANGE ORDERS ("ECOs")
From time to time MANUFACTURER will be asked to implement ECOs. The
following shall apply to ECOs:
(a) PURCHASER shall notify MANUFACTURER in writing of a proposed ECO.
This notification should include the documentation of the change to
effectively support MANUFACTURER's investigation of the impact of
this proposal.
(b) Upon notice of a change, MANUFACTURER will make best effort to
review all costs impacted within five (5) working days. All cost
impacts and material availability issues will be mutually reviewed
and agreed to with PURCHASER prior to implementation.
(c) Emergency ECOs will be immediately implemented at PURCHASER's
request. PURCHASER will be liable for costs (material and labor)
associated with emergency ECO implementation.
16. CONFIDENTIALITY
Both parties acknowledge that, by reason of their relationship, they may
have access to certain information and materials concerning the other's
business, plans, and products (including, but not limited to,
information and materials contained in technical data provided to the
other party) which is confidential and of substantial value to the other
party, which value would be impaired if such information were used by
the other
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party or disclosed to third parties. Both parties agree that they shall
not use in any way, for their own account or the account of any third
party, nor disclose to any third party, any such confidential
information which is revealed to it by the other party without written
authorization from the other party. Each party will take every
reasonable precaution to protect the confidentiality of such information
consistent with the efforts exercised by it with respect to its own
confidential information. Each party shall advise the other of
information or materials it considers to be confidential. Upon
termination of this Agreement, all confidential information shall be
returned to owners of that confidential information. This provision
shall survive termination of this Agreement.
17. INDEMNIFICATION
Each party shall indemnify and defend the other party against all
claims, suits, losses, expenses and liabilities for bodily injury,
personal injury, death and property damage directly or indirectly caused
by any Products of through the intentional acts or negligence of a party
or of any person for whose actions such party is legally liable. Both
parties shall carry and maintain liability insurance coverage to
satisfactorily cover its obligations under this Agreement.
18. COMPLIANCE WITH APPLICABLE LAWS
MANUFACTURER has been, and shall continue to be, in material compliance
with the provisions of all applicable federal, state and local laws,
regulations, rules and ordinances applicable to the transactions
governed by this Agreement.
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19. FORCE MAJEURE
In the event that performance by either party of its obligations under
this Agreement is prevented due to any Act of God, fire, casualty,
flood, earthquake, war, strike, lockout, epidemic, destruction of
production facilities, riot, insurrection, or any other similar cause
beyond the reasonable control of the party invoking this section, and if
such party shall give prompt written notice to the other party, the time
for its performance shall be excused, and the time for the performance
shall be extended for the period of delay or inability to perform due to
such occurrences.
20. MISCELLANEOUS
(a) Severability. In the event that one or more of the provisions, or
parts thereof, contained in this Agreement shall for any reason be
held to be invalid, illegal, or unenforceable by a court of
competent jurisdiction, the same shall not invalidate or otherwise
affect any other provision in the Agreement, and the Agreement shall
be construed as if such invalid, illegal or unenforceable provision
had never been contained herein.
(b) Entire Agreement; Modification. This Agreement constitutes the
entire and exclusive statement by PURCHASER and MANUFACTURER of the
terms of their agreement, notwithstanding any additional or
different terms that may be contained in any quotation,
acknowledgment, confirmation, purchase order, invoice or other form
of PURCHASER or MANUFACTURER. All prior and contemporaneous
proposals, negotiations, representations and agreements are merged
into this Agreement. The terms of this Agreement may not be altered,
modified, superseded, amended or rescinded, and no additional terms
shall become a part of this Agreement, except pursuant to a writing
specifically referencing this Agreement and signed by a
representative of the party against whom enforcement is sought.
(c) Notice. Unless otherwise specified in this Agreement, all notices
and other communications permitted or required by the provisions
hereof shall be in writing and shall be mailed, faxed or delivered
to the other party at the address set forth below (or at such other
address as either party shall designate in writing to the other
party during the term of this Agreement) and shall be effective and
deemed received: i) if mailed, when actually received; ii) if faxed,
when actually received; or iii) if personally delivered, when
delivered. Each notice to MANUFACTURER or PURCHASER shall be
addressed, until notice of change thereof, as follows:
i) If intended for MANUFACTURER, to:
Wellex Corporation
44141 S. Grimmer Blvd.
Fremont, CA 94538
Attn: Richard L. Fitzgerald
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ii) If intended for PURCHASER, to:
Verilink Corporation
127 Jetplex Circle
Madison, AL 35758
Attn: Thomas E. Abernathy, Jr.
(d) Assignment. This Agreement shall not be assignable by either party
without the prior written consent of the other party.
(e) Waiver. No failure or delay on the part of either party hereto in
exercising any right or remedy under this Agreement, or any single
or partial exercise of any such right or remedy, shall operate as a
waiver thereof. No provision of this Agreement may be waived except
in writing signed by the party granting such waiver.
(f) Governing Law; Interpretation. This Agreement shall be governed by
and construed in accordance with the laws of the State of
California. Acceptance or acquiescence in a course of performance
rendered under this Agreement shall not be relevant to determining
the meaning of the Agreement, even though the accepting or
acquiescing party had knowledge of the nature of the performance and
an opportunity for objection. No course of prior dealing between the
parties and no usage of the trade shall be relevant to supplement or
explain any terms used in this Agreement.
(g) Moving Costs. The responsibility for moving costs required to
implement this Agreement shall be governed by PURCHASER's letter to
MANUFACTURER, dated July 30, 1999.
(h) PURCHASER's Personnel. MANUFACTURER will make available working
space for a mutually agreed upon number of PURCHASER's personnel.
(i) COOPERATION. PURCHASER will assist MANUFACTURER in identifying
current or former employees of PURCHASER as potential employees of
MANUFACTURER and in making such persons available for interview.
21. RETURN MATERIAL AUTHORIZATION
If product is found to be defective pursuant to Section 11 of this
Agreement, PURCHASER will notify MANUFACTURER and MANUFACTURER will
provide a Return Material Authorization number prior to PURCHASER
returning the Product. MANUFACTURER will make best effort to provide an
RMA number within twenty-four (24) hours.
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22. QUARTERLY REVIEWS
PURCHASER and MANUFACTURER will jointly work towards process
improvements in the following areas:
- Total Price
- Quality
- Cycle Time
- On-time Delivery
- Design improvements on manufacturability, quality and price
PURCHASER and MANUFACTURER will meet every three (3) months to review
current worldwide material prices for higher dollar components and
determine a procurement strategy to achieve best total pricing.
23. REPAIR CENTER
MANUFACTURER agrees to provide a repair center for Products subject to
mutual agreement between MANUFACTURER and PURCHASER. Among the terms to
be agreed upon are pricing for repair of Products, and refurbishment and
modification of field equipment. Repair costs will be twenty-two (22%)
of the actual product cost which includes internal handling and repair
(excluding transportation). Repair cycle time will be five (5) work days
on current products, where material is immediately available.
After completion of first year of this Agreement, both parties will
review actual cost of repair, including labor, material, and overhead,
and will agree upon any adjustment of repair cost.
24. CONTROL OF CONSIGNED INSPECTION; MEASURING & TEST EQUIPMENT
MANUFACTURER shall track consigned inspection measuring and test
equipment within the MANUFACTURER's recall system. This includes:
- Calibrating equipment,
- Maintaining calibration certification records (per ISO 9002),
- Supplying the purchaser with a quarterly summary of equipment
calibration status.
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ACCEPTED FOR ACCEPTED FOR
Verilink Corporation Wellex Corporation
By: /s/ Grahmam G. Pattison By: /s/ Chern H. Lee
Print: Grahmam G. Pattison Print: Chern H. Lee
Title: President and CEO Title: President & CEO
Date: September 13, 1999 Date: September 13, 1999
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EXHIBIT D
QUALITY PLAN
PRODUCT QUALITY LEVELS
1st Pass Final Test Yields.
Subcontractor is required to meet or exceed 1st pass final test yields of 97%
(for each model manufactured) and must show evidence of continuous improvement.
This requirement is based on monthly data collected by MANUFACTURER for each
model manufactured during the month, with a minimum lot size of 25 units for the
month. PURCHASER reserves the right to monitor testing processes and verify 1st
pass final test yields. Analysis of 1st pass test yields must be completed by
MANUFACTURER within ten (10) working days of the previous month end during which
the data was collected.
Failure to meet these requirements will require that the MANUFACTURER provide a
written root cause analysis, containment plan, and preventive action plan within
five (5) working days of capturing the prior month's data.
Field Return Rate
The field return rate, due to any workmanship or related discrepancies,
excluding NTF (No Trouble Found), as defined in IPC 610 (latest revision) must
not exceed 0.2% for each model shipped under this Agreement. Failure to meet
this requirement will result in MANUFACTURER repairing defective product at no
charge to PURCHASER. Failure to meet these requirements will require that the
MANUFACTURER provide a written root cause analysis, containment plan, and
preventive action plan within five (5) working days of capturing the prior
month's data.
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