1
Exhibit 10.19
FRAME MANUFACTURING AGREEMENT
BETWEEN
ALCATEL BELL N.V.
AND
M.C.M.S. BELGIUM S.A.
Dated November 18, 1997
2
FRAME MANUFACTURING AGREEMENT
This Frame Manufacturing Agreement (the "Frame Agreement") is dated as of
November 18, 1997 by and between MCMS Belgium s.a., a Belgian corporation
("MCMS") and Alcatel Bell s.a., a Belgian corporation ("Alcatel Bell").
WHEREAS MCMS is in the business of providing manufacturing services that include
the custom manufacture of electronic board and system level products (the
"Products") and related services;
WHEREAS the parties desire to establish the terms and conditions that will apply
to purchase by any Alcatel Company (as defined hereafter) of any Product
manufactured by MCMS.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth,
the receipt and adequacy of which are hereby acknowledged,
THE PARTIES AGREE AS FOLLOWS:
1. Definitions
1.1 Alcatel Company: any company directly or indirectly controlled by Alcatel
Alsthom s.a., which shall enter into a Manufacturing
Services Agreement with MCMS, whereby "control" means
the ownership of no less than 50% of the shares entitled
to vote for the election of the directors (or any
management body comparable to a board of directors).
1.2 Downside: the authorized percentage reduction (set forth below in
article 9 hereafter) in the quantity of Products ordered
by the Customer compared to any forecast;
1.3 Effective Date: the Effective Date of this Agreement is the Closing Date
as defined in the Asset Sale and Purchase Agreement
entered into on November 4, 1997 between the parties
hereto.
1.4 Modified Turnkey Materials Arrangement: the arrangement applicable during
the period referred in article 3 hereafter, whereby the
Customer shall sell to MCMS, CIF MCMS' site in Belgium,
all materials necessary to manufacture Products pursuant
to the 200,000 hours commitment stated in article 2
hereafter on a strictly cost basis, which materials
shall be resold to the Customer at such cost as part of
the overall Product being manufactured by MCMS.
1.5 Release: the Customer order to MCMS, whether by written or
electronic means, for committed delivery dates and
quantities of Product(s), at agreed upon prices, for a
specified period of time;
3
1.6 Upside: The percentage increase (set forth below in article 9)
in the quantity of Product(s) that the Customer may
purchase in excess volumes in any forecast.
2. Quantities and Products
Alcatel Bell will cause Alcatel Companies to place with MCMS orders representing
a work volume of no less than 100,000 hours during the first 12 months from the
Effective Date of this Agreement, 65,000 hours during the period from 13 through
24 months after the Effective Date of this Agreement and 35,000 hours during the
period from 25 through 36 months after the Effective Date of this Agreement.
In case Alcatel Bell would not, during any year of the Term of this Agreement
(as defined in article 19) order the minimum volume as set forth above, the
parties will jointly examine the possibility to transfer the missing volume
(expressed in hours) to the next year. The hours which can not be transferred
will be invoiced to Alcatel Bell.
3. Manufacturing Services Agreement
Alcatel Bell will cause Alcatel Companies to enter into individual Manufacturing
Services Agreement with MCMS.
Each of the Manufacturing Services Agreement will set forth the Products to be
manufactured initially by MCMS, which Products may be added to or changed from
time to time by mutual agreement of the parties.
4. Modified Turnkey Materials Arrangement
Starting from the Effective Date of this Agreement, the Alcatel Companies shall
sell to MCMS all materials necessary to manufacture Products pursuant to the
aggregate 200,000 hours commitment stated in article 2 above on a strictly cost
basis, which materials shall be resold to the Alcatel Companies at such cost as
part of the overall Product being manufactured by MCMS.
Alcatel Companies may consign materials to MCMS as mutually agreed to. All such
consigned materials will be delivered to MCMS in sufficient time and quantities,
taking into account attrition levels set forth in the Manufacturing Services
Agreements, to allow MCMS to meet scheduled delivery dates for the applicable
Products.
Components and materials consigned to MCMS will be duly insured by the latter
against any kind of damage while in its custody.
Notwithstanding the foregoing, the parties acknowledge that they will as soon as
possible establish a Turnkey Arrangement, as set forth in article 5 hereafter.
2/8
4
5. Turnkey Arrangement
Notwithstanding the provisions of article 4, MCMS and any Alcatel Company may
elect any time to establish a turnkey arrangement, at which point the pricing
as established in the corresponding Manufacturing Services Agreement shall be
modified to the mutual agreement and benefit of each of the parties.
6. Pricing
Pricing for the Products shall be agreed to and paid in Belgian Francs for
delivery ex-works by MCMS.
The initial price per hour during the period from the Effective Date hereof
through six months thereafter for the minimum commitments referred to in article
2, shall be set forth in each Manufacturing Services Agreement.
In case however such initial price would be less than BEF 2,016 (two thousands
and sixteen Belgian Francs) per hour, then Alcatel Bell shall compensate MCMS
for the difference within the limits of the commitments set forth in article 2.
Such compensation shall be paid monthly within 30 days of submission by MCMS of
the supporting documents and invoice.
Every six months, such price of BEF 2,016 (or any price resulting from revision
thereof) will be reviewed in order to take into account the actual costs
directly imputable to the Alcatel Companies' orders, whereby MCMS' fixed assets
depreciation will be accounted for in proportion to such Alcatel Companies'
orders in the total turnover of MCMS.
In case of Turnkey Arrangement, the resulting additional operational profit will
be shared between MCMS and Alcatel Bell on a 50/50 basis.
7. Forecasts
Each Alcatel Company shall provide MCMS with a monthly rolling forecast
("Forecast") detailing such Alcatel Company's anticipated Product requirements
for the ensuing six month period.
8. Releases
The Customer will submit to MCMS (by letter, fax or electronic mail), Releases
including following information:
- Release order and issuing date
- Product part number and price
- Delivery date and quantity
MCMS will accept all Releases issued within the limits of flexibility set forth
in article 9 hereafter and will make all reasonable efforts to meet the upside
requests exceeding such limits
3/8
5
9. Products Testing and Debug
Included as part of its standard assembly services, MCMS provides ICT and FCT
testing. The test times and costs are based on the scope of work and complexity
of the Product(s). MCMS establishes an upper limit on the test and debug time of
individual board level Product(s) at four (4) hours. MCMS will provide the
Alcatel Companies with a list of defects found within 72 hours after the
discovery thereof. The disposition of Product(s) will be determined mutually by
MCMS and each Alcatel Company. My additional debug and rework performed by MCMS
will be done on a time and materials basis.
10. Payment Terms
Each Alcatel Company shall pay MCMS invoices within thirty days end of the
month of the date of invoice.
Invoices issued by any Alcatel Company for materials and components will be
payable within thirty days end of the month of the date of invoice. MCMS and
every Alcatel Company will however agree upon an invoicing procedure so as to
compensate the respective invoices and avoid any cash advance by MCMS.
11. Delivery conditions
All materials sold to MCMS by any Alcatel Company as provided for in article 4
will be delivered CIF MCMS' premises in Belgium.
All Products sold by MCMS to any Alcatel Company shall be delivered F.O.B. MCMS'
dock in Belgium.
12. Cancellations
In the event that any Alcatel Company wishes to cancel Product(s) ordered by
Release pursuant to this Agreement, such Alcatel Company shall be liable to MCMS
for the following:
12.1 Payment for all Product(s) delivered to such Alcatel Company and in
transit, plus Product(s) in MCMS' finished goods inventory prior to, and
including, the effective date of cancellation, at the unit prices
applicable to such Product(s) as set forth in applicable Releases.
12.2 Payment for all "work-in-process" as of the effective date of cancellation
based upon the percentage of completion, as determined by MCMS,
multiplied by the applicable unit price of the Product(s). Such Alcatel
Company may request MCMS to complete and deliver all work-in-process
inventory at the unit prices set forth in applicable Releases.
12.3 Payment for the price difference between purchasing cost plus burden (if
any) and reselling cost of material inventory in MCMS facilities in
support of such Alcatel Company's Releases
4/8
6
12.4 Payment for the cost plus burden associated with material inventory in
MCMS facilities and on order which cannot be cancelled or returned,
provided that such inventory is in support of such Alcatel Company's
Releases.
12.5 Payment of any restocking charges, cancellation charges and other charges
incurred by MCMS with suppliers for all components and materials ordered
for the manufacture of Product(s) in accordance with such Alcatel
Company's Releases plus a five percent (5%) handling fee calculated on
the purchase price of the corresponding components and materials.
MCMS shall use reasonable efforts to minimize cancellation charges by returning
inventory and material for credit, cancelling material on order and applying
material to other MCMS business requirements (when possible, at the sole
discretion of MCMS), by reselling inventory and minimizing all work-in-process
and finished goods to support the final production schedule. Upon payment of the
cancellation charges relating thereto, all finished goods inventory of
Product(s), work-in-process, and non-returnable/non-cancellable components at
MCMS or on order shall be delivered, at Customer's expense and on its request,
to Customer, F.O.B. MCMS.
13. Warranty
MCMS warrants for a period of one (1) year from the date of shipment of the
Product(s) that (i) the Product(s) will conform to the specifications applicable
to such Product(s) at the time of its manufacture which an furnished in writing
by Alcatel Company and accepted by MCMS; and (ii) such Product(s) will be of
good material and workmanship and free from defects for which MCMS is
responsible. In the event that any Product(s) manufactured is not in conformity
with the foregoing warranties MCMS shall, subject to parties' mutual agreement,
either (i) credit Alcatel Company for any such non-conformity the purchase price
paid by Alcatel Company for such Product(s), or (ii) at MCMS's expense, replace,
repair or correct such non-conforming Product(s); provided that, if such
Product(s) is not repaired, replaced or corrected within thirty (30) days after
MCMS is notified of any non-conformity, MCMS shall credit Alcatel Company the
purchase price paid by Alcatel Company for such non-conforming Product(s).
THE FOREGOING CONSTITUTES ALCATEL COMPANY'S SOLE REMEDIES AGAINST MCMS FOR
BREACH OF WARRANTY CLAIMS. EXCEPT AS PROVIDED IN THIS AGREEMENT, MCMS MAKES NO
WARRANTIES WITH RESPECT TO THE PRODUCT(S), EXPRESS OR IMPLIED, INCLUDING ANY
IMPLIED WARRANTIES RESPECTING NON INFRINGEMENT, OR MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR ANY IMPLIED WARRANTIES ARISING FROM A COURSE OF
PERFORMANCE, A COURSE OF DEALING, OR TRADE USAGE.
14. Indemnification
a) Each party agrees to indemnify, defend and hold harmless the other party,
including its directors, officers and employees, from and against any and
all claims, losses, demands, costs or liabilities, resulting from or in
connection with such party's breach of this Agreement, negligence or
misconduct.
5/8
7
b) Any Alcatel Company with which MCMS will enter into a Manufacturing
Services Agreement will represent and warrant that the manufacture, use,
delivery and sale of any Product(s) manufactured by MCMS for such Alcatel
Company in execution of such Manufacturing Services Agreement will not
infringe any patent, trademark or other intellectual property rights of
any third party. Said Alcatel Company shall agree to defend at its
expense, hold harmless and indemnify MCMS, including its officers,
directors, and employees, from and against any judgements, liabilities,
expenses, or costs arising from any claim or action asserting that MCMS'
manufacture, use or sale of any Product(s) or part thereof infringes,
directly or indirectly, any intellectual property right, including,
without limitation, parent, trademark, copyright, trade secret, or other
proprietary right of any third party, foreign or domestic.
c) An indemnified party pursuant to article 11 shall notify the indemnifying
party promptly upon receiving or learning of any claim or action pursuant
to which indemnity will be sought and shall provide reasonable assistance
to the indemnifying party in the defense of any such action. This article
11 shall survive the termination of this Agreement.
15. Proprietary Rights
The manufacture of the Products for any Alcatel Company in execution of a
Manufacturing Services Agreement will not convey to such Alcatel Company any
rights of license, express or implied, or by estoppel or otherwise, under any
patent copyright or maskwork of MCMS or its affiliates. MCMS expressly reserves
all rights under such patents, copyrights or maskworks.
All patents, copyright or other intellectual property rights relating to the
Products will remain property of the Alcatel Company having ordered such Product
in the frame of a Manufacturing Services Agreement and such agreement will not
convey to MCMS any right of license except for the execution of such agreement.
16. Assignment
Neither party may assign this Agreement, or any portion thereof, without the
prior written consent of the other party, provided however that Alcatel Bell
will be entitled to assign this Agreement to any Alcatel Company.
17.Entire Agreement
This document is the entire understanding between MCMS and Alcatel Bell with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements, understandings, dealings and negotiations. No
modification, alteration or amendment shall be effective unless made in writing
and signed by duly authorized representatives of both parties.
6/8
8
18. Limitation of Liability
IN NO EVENT, WHETHER AS A RESULT OF BREACH OF CONTRACT, WARRANTY, TORT
(INCLUDING NEGLIGENCE), STRICT LIABILITY, PRODUCT LIABILITY, OR OTHERWISE, SHALL
EITHER PARTY BE LIABLE TO THE OTHER FOR ANY LOSS OF PROFITS, LOSS OF USE, OR ANY
SPECIAL INCIDENTAL, CONSEQUENTIAL, OR EXEMPLARY DAMAGES OF ANY KIND, WHETHER OR
NOT SUCH PARTY IS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
19. Term and Termination
This Agreement shall remain in effect for a period of three (3) years from the
Effective Dare hereof. Notwithstanding the foregoing, either party may terminate
this Agreement at any time in the event that the other party (i) fails to cure a
material default under this Agreement within thirty (30) days after receiving
written notice thereof or (ii) becomes insolvent, files or has filed against it
a petition in bankruptcy, or generally becomes unable to pay its debts as they
become due.
20. Force Majeure
Except with respect to Alcatel Bell's payment obligations hereunder, neither
party shall be liable for their failure to perform under this Agreement due to
reasons beyond their reasonable control, including, without limitation, fire,
flood, acts of God, accident, riot, war, government intervention, strikes, labor
difficulties, natural disasters or power outages.
21. Relationship of the Panic
Neither party is designated or appointed an agent or representative to the other
party and no party will have any authority, either expressed or implied, to
create or assume any agency or obligation on behalf of or in the name of the
other party. The relationship of MCMS to Alcatel Bell is that of independent
contractor, and neither party will have any responsibility for or obligations to
the employees of the other.
22. Successors; Severability
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their successors and permitted assigns. If any provision of this
Agreement is adjudged to be unenforceable in whole or in part, such adjudication
shall not affect the validity of the remainder of this Agreement. Each provision
of this Agreement is severable from every other provision and constitutes a
separate, distinct and binding covenant.
23. Non-Waiver
Failure by either Party to exercise any right granted in this Agreement shall
not be deemed a waiver of such right
7/8
9
24. Governing law - Disputes
This Agreement shall be governed by the laws of Belgium and all disputes which
can not be settled amicably will be deferred to the courts of Brussels.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date first
above written.
MCMS S.A ALCATEL BELL N.V.
By: /s/ Robert F. SUBIA By: /s/ Julien DE WILDE
------------------------- -------------------------
Name: Robert F. SUBIA Name: Julien DE WILDE
Title: President and CEO Title: President and CEO