SOLECTRON
MANUFACTURING AGREEMENT
MANUFACTURING SERVICES AGREEMENT
NO. [_______________]
This Manufacturing Agreement ("Agreement") is entered into by and between
Solectron Corporation, a Delaware Corporation, located at 847 Gibraltar Drive,
Milpitas, CA 95035, by and on behalf of its subsidiaries and affiliates
("Solectron" OR "Manufacturer") and Arris Interactive L.L.C., a Delaware
limited liability company, having its principal office at 3871 Lakefield Drive,
Suwanee, Georgia 30024-1242 ("Purchaser"). Solectron and Purchaser hereby agree
as follows:
1. Term
This Agreement shall be effective on July 2, 2001, and shall remain in force
for one (1) year. This Agreement shall automatically be renewed for successive
one (1) year terms unless either Party requests in writing, at least ninety
(90) days prior to the anniversary date, that this Agreement not be so renewed.
2. SPECIFICATION COMMENTS
All products covered under this Agreement shall be in accordance with
Purchaser's specifications and drawings listed herein ("Products").
3. TITLE AND SHIPPING
All shipments by Solectron and EXW: Solectron facility/point of shipment
(Incoterms 2000).
4. PAYMENT TERMS
a. Solectron and Customer agree to payment terms of Net 30 days from the
latter of the date of invoice of shipment.
b. All prices and payments shall be in U.S. Dollars unless otherwise
agreed by the Parties.
c. Except for the net value added taxes, prices are exclusive of all
taxes, duties, customs or similar charges and are subject to an
increase equal in amount to any charge Solectron may be required to
collect or pay upon shipment of the Product.
d. Until Solectron has received payment in full, Solectron retains a
security interest in the Products delivered to Purchaser.
5. PURCHASE ORDERS AND FORECASTS
a. Purchaser will provide to Manufacturer firm purchase orders for a
minimum of sixty (60) days in advance of delivery of Products.
Further, Purchaser will maintain a six month non-binding forecast by
month of planned purchases of Products and will issue revisions of
that forecast to Manufacturer monthly. Manufacturer will purchase
materials per purchase order and forecast based on lead-time and
inventory-class buy policy. Purchaser is responsible for material
purchased upon Purchaser's purchase order or, with Purchaser's
pre-approval, purchased upon Purchaser's non-binding forecast, in case
of Purchaser requested schedule reductions or cancellations, but only
for items that cannot be rescheduled or cancelled. Purchaser will
maintain a minimum of sixty (60) days of Products on order at all
times. Each purchase order shall become effective upon acceptance of
the order by Manufacturer.
b. Purchaser may reschedule deliveries on Products under purchase orders
in accordance with the following schedule:
Number of days prior to the original schedule Maximum percentage of the Product quantity by which
the delivery date that written notice of a change the scheduled delivery can be decreased or rescheduled
OR rescheduling is received by Solectron. for later delivery without incurring cancellation charges.
00 - 60 DAYS 0% can be rescheduled. Total volume is firm. Mix changes are
acceptable with thirty (30) calendar days prior written notice.
Purchaser remains fully liable for all material.
61 - 90 DAYS 25% of total volume can be rescheduled, one time per purchase
order, only, for a maximum reschedule of sixty (60) days from
the original delivery date acknowledged by Manufacturer.
Purchaser will be responsible for a one percent per month
carrying charge on Manufacturer's cost of the material acquired
pursuant to the original delivery date that cannot be
rescheduled or cancelled.
91 - 120 DAYS 50% of total volume can be rescheduled. Purchaser will be
responsible for a one percent per month carrying charge on
Manufacturer's cost of the material acquired pursuant to the
original delivery date that cannot be rescheduled or cancelled.
120 + DAYS 100% of total volume can be rescheduled.
If a Purchaser requested reschedule represents an acceleration or
increase, Manufacturer shall use commercially reasonable efforts to
meet Purchaser's request. Purchaser shall be responsible for the costs
reasonably and directly incurred by Manufacturer to meet
Purchaser's request, subject to prior written notification to and
written approval by Purchaser.
The maximum amount of rescheduled Product is limited also by the
capability of Manufacturer to produce the remaining Product, as
contracted, within the time remaining in the Term. Should Purchaser
request a reschedule of product (while meeting all other reschedule
constraint conditions) beyond the term of this Agreement or such that
Manufacturer cannot complete the total contracted production within
the Term of this Agreement due to manufacturing capacity constraints,
material procurement constraints, or any other situations not caused
or controlled by Manufacturer, then Manufacturer and Purchaser shall
discuss reasonable solutions to such scheduling problems, including
extending the term of this Agreement to accommodate those problems.
c. Upon Manufacturer's request, Purchaser may give written authorization
to Manufacturer to order or procure materials with long lead-times in
order to improve Manufacturer's ability to respond to changes in
Purchaser's forecast. Specific limits regarding the quantity and/or
dollar value of this material shall be documented in writing and
provided to Purchaser on a case-by-case basis.
d. Purchaser shall not be responsible for rescheduling charges if
Purchaser reschedules delivery of Products as a result of
Manufacturer's failure to deliver Products which meet the requirements
of this Agreement or to deliver Products in accordance with specified
delivery schedules.
e. All purchase orders issued by Purchaser shall contain the following
information:
1. Purchaser's part number, description, and revision level of
Product to be shipped.
2. The delivery schedule.
3. The unit price.
No more than one type of Product can be ordered per purchase order.
6. WARRANTY
a. Product Warranty
Manufacturer warrants that the Products sold hereunder will be free
from defects in material, manufacture and workmanship (to exclude
customer provided materials; i.e. "consigned", and will perform in
accordance with the applicable Specifications under normal handling,
use and operation for a period of eighteen (18) months from the date
Purchaser receives the Product.
Manufacturer's sole obligation under this Product Warranty, and
Purchaser's sole and exclusive remedy, shall be at Manufacturer's
option, to either repair, replace or credit
Purchaser's account for any Products found to be defective during this
warranty period. This remedy is made on the following conditions:
i. Manufacturer is notified in writing of the defective
Products within a reasonable time after Purchaser or
Purchaser's customer acknowledges receipt of
Products.
ii. Purchaser shall forward defective Products to
Manufacturer at Manufacturer's expense. Manufacturer
shall use its best effort to return the repaired or
replaced Products freight prepaid by Manufacturer to
Purchaser no later than thirty (30) days from the
date Manufacturer receives the defective Products.
Such Products will be returned Manufacturer F.O.B.
destination. The Product Warranty referred to in
this Agreement shall apply to all Products supplied
to replace defective Products.
Repaired Products shall be warranted for a period of
ninety (90) days or the remainder of the original
warranty period, whichever is longer. The
aforementioned warranties shall inure to Purchaser
and its assigns and may be passed through to
Purchaser's customers.
b. The foregoing warranty shall not be valid if the Products or component
parts have been subjected to abuse and the defects are the result of
misuse, accident, neglect, alteration, or improper testing, storage,
and/or improper installation by Purchaser, or its agents and other
subcontractors.
c. Products shall be accepted by Manufacturer once Purchaser has
identified the returned goods with the proper Returned Material
Authorization (RMA) number displayed on the shipping cartons and the
associated Product name. In addition, if there is more than one RMA
lot being returned at any given time, there cannot be more than one
RMA lot per shipping container. RMA numbers shall be issued by the
Program Manager or designate.
d. Once RMA lot receipts are acknowledged by Manufacturer, these lot(s)
will be returned to Purchaser in new shipping containers with proper
RMA number and Product name displayed on the carton. The period for
this return will be thirty (30) calendar days from the date of receipt
at Manufacturer. Should any of the containers be damaged in shipment
from the Purchaser to Manufacturer which in turn causes damage to the
Products contained, Purchaser's carrier will be notified immediately
so insurance claims can be filed by Manufacturer.
e. Product which are returned to Manufacturer with alleged defects, which
Products are found to be in proper working order, upon return to
Purchaser may be subject to a twenty-five dollar ($25.00) surcharge to
cover the costs of handling and testing.
f. Upon Purchaser's request, Manufacturer will repair out-of-warranty
Products. Each such out-or-warranty repair shall be charged as agreed
to by both Parties. This repair cost basis will be one of the
following: (1) charged at a time and material basis; (2) average cost.
re-
pair cost basis; (3) fixed unit repair cost. Manufacturer warrants
each such repair for a period of four months for material and six
months for manufacturing workmanship from the date of Purchaser's
receipt of the repaired Products. Manufacturer shall pay all freight
charges for repaired Products requiring a second repair under
Manufacturer's warranty for repaired Products as set forth in this
paragraph.
7. DELIVERY
Products shall be delivered to Purchaser in accordance with required delivery
dates as specified on Purchaser's purchase orders as agreed-to by Manufacturer.
Upon learning of any potential delays, Manufacturer shall immediately notify
Purchaser in writing, as to the cause and extent of such delay. The Purchaser
may request overnight or special delivery on Products failing to meet the
ship-dates specified on purchase orders, the incremental cost to be paid by the
Manufacturer if the delay is due to causes within Manufacturer's control. If
the delay is due to causes within Purchaser's control, incremental cost for
overnight or special delivery on Products to be paid by the Purchaser.
8. TERMINATION AND CANCELLATION
a. For Cause - This Agreement may be terminated by either Party at any
time upon occurrence of any one or more of the following Events of
Default:
(1) failure of the other Party: a) to perform pursuant to the
material terms and conditions of this Agreement; and b) to
cure such performance deficiency within sixty (60) days after
receiving written notice thereof given by the aggrieved
Party; or
(2) 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 receiver- ship
for any 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.
b. For Convenience - Either Party may terminate this Agreement for
convenience upon one hundred and twenty (120) days written notice to
the other Party.
c. Upon termination, Purchaser shall be responsible for any unique,
non-cancelable material acquired plus handling charges pursuant to
purchase orders and mutually agreed upon long lead time items
purchased to forecast. Any such material shall be shipped promptly
Purchaser upon termination and shall be subject to the then current
pricing and payment terms. Purchaser shall also be responsible for any
mutually agreed upon unamortized investment incurred by Manufacturer
at the time of termination in the event that Purchaser terminates the
Agreement.
d. If Manufacturer agrees to purchase order reschedules in excess of
those allowed specified in paragraph 5.b, or if Purchaser suspends,
reschedules or does not issue purchase orders for forecasted shipments
to which long lead-time material purchases have been made,
then Manufacturer may invoice for finished product and/or raw material
carrying charges. Such carrying charges shall be calculated monthly at
1.0%. :
here:
I = total dollar value at Manufacturer's actual cost of unused raw
material inventory being held by Manufacturer.
P = prime interest rate expressed as a decimal.
9. INSPECTION
a. Upon request and reasonable notice from Purchaser, Manufacturer shall
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 effect such source
inspection. Source inspection does not constitute acceptance. Final
acceptance shall be at Purchaser's facility.
b. Purchaser shall have a reasonable time not to exceed thirty (30) days
after actual receipt of Products for domestic shipments within which
to inspect prior to Purchaser's acceptance thereof. For shipments of
overseas via boat, Purchaser shall have sixty (60) days after shipment
date within which to inspect prior to Purchaser's acceptance thereof.
Purchaser will notify Manufacturer in writing of all particular
deficiencies of the same during the inspection period.
c. In the course of purchasing component parts on behalf of Purchaser,
Manufacturer must follow Purchaser's Approved Vendors list (AVL) for
all component parts. If Manufacturer offers alternative to Purchaser's
AVL, the alternative may be approved in writing by Purchaser prior to
procurement/ production at Manufacturer's facility.
10. ENGINEERING CHANGE ORDERS
It is recognized that from time to time Manufacturer will be asked to implement
ECOs. The following delineates the procedures to be followed by the Parties:
a. Purchaser must notify Manufacturer in writing of proposed ECO. This
notification will include the documentation of the change to
effectively support Manufacturer's investigation of the impact of this
proposal. The documentation should include: ECO form with written
description of change, revised BOM, drawings, AVL, media, required
implementation date, etc.
b. If such changes cause an increase or decrease in the total number of
Products due under an order issued hereunder or in the time required
for its performance, an equitable adjustment shall be made; provided,
however, that any claim by either Party therefore must be asserted in
writing in the form of a quotation within thirty (30) calendar days
from the acknowledged receipt date of the change notice by
Manufacturer.
c. Upon notice of a change. Manufacturer shall use commercially
reasonable efforts to review all costs impacted within five (5) days
after Manufacturer's receipt of ECO proposal. All cost impacts and
material availability issues will be presented, mutually reviewed and
agreed to in writing with Purchaser prior to Manufacturer's
implementation.
d. Purchaser will be responsible for all expedite costs associated with
emergency ECO implementation. For non-emergency ECO's, Manufacturer
shall present the cost impacts and material availability issues, to be
mutually reviewed and agreed-to in writing by the Parties prior to
Manufacturer's implementation.
e. Manufacturer shall notify Purchaser in writing of any proposed changes
to the Products. If Purchaser has not given approval of any proposed
changes within fifteen (15) calendar days after receipt of such
written notification, Manufacturer will conclusively presume that
Purchaser has disapproved the change. Manufacturer will continue to
deliver un- changed Products in accordance with the provisions of this
Agreement should Purchaser not approve the proposed change.
11. 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 disclosed to third parties. Neither Party shall 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 hereto, without written consent of the other Party. Each
Party shall 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 if it
considers any particular information or materials to be confidential. This
provision shall survive termination of this Agreement.
All written data such as drawings, plans, reports, designs, schematics, bill of
materials, and other specifications supplied by Purchaser to Manufacturer shall
remain the exclusive property of Purchaser. Such data and any copies thereof,
together with all data furnished by Purchaser and any copies thereof, shall be
returned to the extent requested upon completion of the services, in the event
of termination under the Agreement. or upon the earlier written request
therefore by.
12. 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 or
through the intentional acts or negligence of a Party or of any. person for
whose actions said Party is legally liable. Both Parties shall carry and
maintain liability insurance coverage to satisfactorily cover its obligations
under this Agreement.
13. COMPLIANCE WITH APPLICABLE LAWS
Manufacturer and Purchaser has been, and shall continue to be, in material
compliance with the provisions of all federal, state and local laws,
regulations, rules and ordinances to the transactions governed by this
Agreement.
14. 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, material unavailability, or any other cause
beyond reasonable control of the Party invoking this section -and if such Party
shall give prompt written notice to the other Party - its performance shall be
excused, and the time or the performance shall be extended for the period of
delay or inability to perform due to such occurrences as stated above.
15. 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 be invalidated or otherwise affect
any provision in the Agreement, and the Agreement shall be construed
as if such invalid, illegal or unenforceable provision had never been
contained herein.
b. INTEGRATION AND 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 obtained in quotation, acknowledgment, confirmation,
purchase order, invoice or other form of Purchaser or Manufacturer.
All prior and contemporaneous proposals, negotiations, representations
and agreements are merged in the Agreement. These terms of the
Agreement may not be altered, modified, superseded, amended or
rescinded, and no additional terms shall become a part of the
Agreement, except pursuant to a writing specifically referencing the
Agreement and signed by a representative of the Party against whom
enforcement is sought.
c. NOTICE: Unless otherwise specified in the Agreement, all notices and
other conditions permitted or required by the provisions of those
documents shall be in writing and shall be mailed, telecopied,
telegraphed, telexed, or delivered to the other Party at the ad- dress
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 telecopied, when actually received;
iii) if telegraphed, when actually received; iv) if telexed, when
dispatched; or v) 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:
Solectron Corporation
847 Gibraltar Drive
Milpitas, CA 95035
ii. If intended for Purchaser, to:
Arris Interactive, LLC
3871 Lakefield Drive, Suite 300
Suwanee, Georgia 30024-1242
d. ASSIGNMENT: This Agreement shall not be assignable by either Party
without the prior written consent of the other Patty, such consent
shall not be unreasonably withheld, and any purported assignment,
including full or partial assignment or delegation to any agency or
subcontractor, not permitted hereunder shall be void. If consent is
given, this contract shall be binding upon and inure to the benefit of
the assigns.
e. WAIVER: No failure or delay on the part of either Party hereto in
exercising any right or remedy under the Agreement shall operate as a
waiver thereof; nor shall any single or partial exercise of any such
right or remedy. No provision of the Agreement may be waived except in
writing signed by the Party granting such waiver.
f. GOVERNING LAW: The 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 the Agreement
shall not relevant to determining the meaning if 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 the Agreement.
g. CONSEQUENTIAL DAMAGES: In no event shall Purchaser or Manufacturer be
liable for special, incidental or consequential damages including
without limitation, loss of profits, even if advised of the
possibility thereof.
16. PRICING
a. The prices for the Products shall be those set forth in quotations
provided by Manufacturer and accepted by Purchaser's purchase
order(s). Prices are exclusive of all taxes now in force or enacted in
the future and therefore are subject to increase equal in amount to
any tax Manufacturer may be required to collect or pay upon the sale
or delivery of any Products or on this transaction with Purchaser's
prior approval.
b. Cost reductions will be sought by Purchaser and Manufacturer for each
Product through the terms of this Agreement Manufacturer will revise
pricing for each cost reduction based on the effectivity as follows:
(i) Purchaser identified cost reductions will be reflected in the
pricing 100% after depletion of inventory.
(ii) Manufacturer identified cost reductions will be reflected in
the pricing 50% after depletion of inventory. Thereby sharing
the cost reduction partially with Purchaser, but limited to a
period of 180 days plus depletion of inventory, thereafter
the full cost reduction will be reflected in the base
material cost.
c. Pricing will be reviewed and adjusted each calendar quarter by
Manufacturer to reflect as a minimum; ECOs, present market conditions
for material, cost reductions, present process yields, and changes in
demand.
17. PROGRAM IMPROVEMENTS
Not withstanding Paragraph 16, Purchaser and Manufacturer will jointly work
towards process improvements in me following areas:
* Cost
* Quality
* Cycle Time
* On-time Delivery
* Communication
* Design improvements on manufacturability, quality,
and cost.
* Other
Purchaser and Manufacturer will meet every three (3) months to review current
worldwide material prices for high dollar components and make changes with
mutual agreement to procurement strategy to achieve best total pricing. In
addition, the items listed above will also be included in the review cycle.
18. NON-RECURRING EXPENSES AND PURCHASER OWNED EQUIPMENT
a. Upon prior authorization via a purchaser order by Purchaser,
Manufacturer shall order and purchase for Purchaser at Purchaser's
expense all of the process tooling, assembly tools, and test fixtures
required to manufacture the Products except for tools consigned by
purchaser and listed in Exhibit A. Manufacturer shall submit the
request for authorization to Purchaser in writing and Purchaser shall
grant or deny the request in
writing within ten (10) days after the date of request. If Purchaser
does not respond to Manufacturer within the prescribed period for each
request, the request shall be canceled. Manufacturer shall not be
liable for the impact to production schedules should Purchaser not
grant authorization or should not respond to a request in a timely
manner. All orders and forecasts for Products requiring the tooling
shall be mutually reviewed and adjusted accordingly.
b. Manufacturer shall provide or contract for all maintenance and
calibration required for the process tooling, manufacturing tooling
and test equipment whether purchased by Manufacturer or consigned by
Purchaser while in the possession of Manufacturer. Preventative
maintenance shall be at the expense of Manufacturer. Remedial
maintenance and scheduled calibration required shall be at the expense
of the Purchaser.
c. Upon termination of this Agreement Manufacturer shall package and ship
to Purchaser, F.O.B. Manufacturer shipping point and at the risk and
expense of Purchaser, all of the process tooling, manufacturing
tooling and test equipment paid for by Purchaser as well as all
consigned tooling and equipment supplied by Purchaser.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the date first written
above.
FOR: SOLECTRON CORPORATION, FOR: ARRIS INTERACTIVE L.L.C.
(Manufacturer) (Purchaser)
By: /s/ George W. Moore By: /s/ James D. Lakin
------------------------------- ----------------------------------
Name: George W. Moore Name: James D. Lakin
------------------------------ --------------------------------
Title: Corporate Vice President Title: President
---------------------------- -------------------------------
Date: 6/12/01 Date: 6/29/01
------------------------------ --------------------------------
APPENDIX A
MANUFACTURING SITES LISTING
As of July 2, 2001, this Manufacturing Services Agreement applies to the
following Solectron manufacturing sites who are conducting business with Arris
Interactive, L.L.C. :
SOLECTRON DE MEXICO, S.A. DE C.V.
Prol. Lopez Mateos Sur 2915, Km. 6.5
Tlajomulco de Zuniga, Jalisco Mexico
SOLECTRON GEORGIA
437 Old Peachtree Road
Suwanee, Georgia 30024
SOLECTRON CALIFORNIA
48233 Warm Springs Blvd.
Fremont, California 94539
Solectron Charlotte
SOLECTRON NORTH CAROLINA
6800 Solectron Drive
Charlotte, North Carolina 28262
SOLECTRON MASSACHUSETTS
125 Fisher St.
Westboro, MA 01581
ARRIS NETWORK TECHNOLOGIES BUSINESS UNIT ADDENDUM
TO THE
MANUFACTGURING SERVICES AGREEMENT
This ARRIS Network Technologies Business Union Addendum to the
Manufacturing Agreement (this "Addendum") is entered into on the 22 day of
October 2001 ("Effective Date") by and between Solectron Corporation, a
Delaware corporation located at 847 Gibraltar Drive, Milpitas, CA 95035
("Solectron"), and ARRIS International, Inc., a Delaware Corporation having a
principal office at 11450 Technology Circle, Duluth, Georgia 30097 ("ARRIS" and
"Purchaser").
RECITALS:
WHEREAS, Solectron and the Purchaser are parties to that certain
Manufacturing Services Agreement effective on July 2, 2001, as amended, (the
"MSA);
WHEREAS, Solectron and the Purchaser desire to add certain terms
related only to the ARRIS Network Technologies Business Unit manufacturing
services, that in no way modify or alter the MSA, except to add additional
terms applicable only to the ARRIS Network Technologies Business Unit
manufacturing services;
WHEREAS, ARRIS Network Technologies Business Unit currently
manufacturers many of its products at the following facilities:
ANA: that is, ARRIS facilities located at Avenida San Lorenzo 425, Cd.
Juarez, Chihuahua, Mexico;
AA: that is, ARRIS facilities located at C. Tapioca No. 5455-A, Cd.
Juarez, Chihuahua, Mexico;
Plastics: that is, ARRIS facilities located at 12055 Rojas Dr. Suite
A, El Paso, Texas;
WHEREAS, ANA, AA and Plastics are collectively referred to herein as
the "Manufacturing Facilities";
WHEREAS, ARRIS wishes to outsource to Solectron the manufacturing for
the products manufactured at the Manufacturing Facilities ("Products"); and
WHEREAS, the parties agree that Solectron shall become ARRIS'
exclusive manufacturer for the Products, subject to the terms hereof.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Solectron and the Purchaser
hereby agree to the following Addendum terms applicable only the ARRIS Network
Technologies Business Unit manufacturing services for the Products:
1. Solectron and ARRIS hereby agree that the terms and conditions of the MSA,
as specifically added to or modified by this Addendum for the stated limited
purposes related to the
Product, are applicable to the manufacturing services to be performed on the
Products related to the ARRIS Network Technologies Business Unit.
2. ADDITION TO SECTION 1 OF THE MSA. The following is added to the end of
Section 1: "Solectron will invest significant capital in start-up costs for the
manufacturing of the Products. To make the efforts contemplated under this
Addendum a worthwhile effort, the ARRIS and Solectron agree to a term of two
(2) years, with respect to the Products. ARRIS agrees to such two-year term,
provided that Solectron's performance meets commercially reasonable two-year
term, provided that Solectron's performance meets commercially reasonable
performance measures with respect to quality and delivery, and that its price
and terms are competitive, given Solectron's additional engineering and design
work. Following a two-year term, the term shall revert to the Manufacturing
Service Agreement No. SLRDC180-071001, Section 1.3.
3. PURCHASE ORDERS AND FORECASTS, ADDITION TO SUBSECTION 5.A AND 5.C. The
following is added to the end of Subsections 5.a and 5.c, to read as follows:
5.a. Purchaser will provide to Manufacturer firm purchase orders
for a minimum of sixty days for sales order and target
inventory. Further, Purchaser win maintain a six-month
non-binding forecast by month of planned purchases of
Products and will issue revisions of that forecast to
Manufacturer monthly. Manufacturer will purchase materials
per purchase orders. Purchaser is responsible for material
purchased upon Purchaser's purchase order or, with
Purchaser's pre-approval, in case of Purchaser requested
schedule reductions or cancellations, but only for items
that cannot be rescheduled or cancelled. Each purchase order
shall become effective upon acceptance of the order by
Manufacturer. Manufacturer shall respond to Purchase Order
request within two business days.
5.c. The desired lead time for all products from Manufacturer is
eight weeks or less. Upon Manufacturer's request, Purchaser
may give written authorization to Manufacturer to order or
procure materials with long lead-times in order to improve
Manufacturer's ability to respond to changes in Purchaser's
forecast. Specific limits regarding the quantity and/or
dollar value of this material shall be documented in writing
and provided to Purchaser on a case-by-case basis.
4. AMENDMENT TO SUBSECTION 8.B. Section 8.b is modified for this Addendum to
read as follows: "For Convenience -During the two (2) year term of this
Addendum, there shall be no right of termination for convenience by either
party.
5. AMENDMENT TO SUBSECTION 8.D. Section 8.d is modified to eliminate the
following: "here: I = total dollar value at Manufacturer's actual cost of
unused raw material inventory being held by Manufacturer. P = prime interest
rate expressed as a decimal."
6. AMENDMENT TO SECTION 14. The following phrase is deleted from Section 14:
"material unavailability".
7. ADDITION TO SUBSECTION 15.D. The following is added to the end of Subsection
15.d.: "It is recognized that ARRIS, from time to time, may choose to exit or
dispose of certain product liens. It is understood that ARRIS has no obligation
to Solectron to remain in business or otherwise continue to purchase products
of such product lines if and when actions are taken, subject to the material
liability terms, and other applicable terms of the MSA."
8. ADDITION TO SUBSECTION 16.C. The following is added to the end of Subsection
16.c, for the purposes of the Products covered by this Addendum:
16.c.(i) Solectron will manufacture and sell the Products to ARRIS at
a price ("Price") that is the same as the ARRIS' standard cost of the
Products ("ARRIS' Cost" or "Cost") for a period not to exceed six (6)
months. To determine the Cost, ARRIS will compile and provide
information to Solectron showing ARRIS Standard Costs, including
components, labor and overhead and ARRIS shall provide such
information to Solectron no later than 15 days from the Effective
Date of this Agreement.
16.c(ii) Solectron shall continue to offer to ARRIS the Products at
the ARRIS' Cost during the first six (6) months of the term of this
Addendum. However, during said six (6) month period, said Cost shall
be subject to adjustment due to the following reasons:
a. A dollar for dollar ("Pro Tanto") increase or decrease in Price
due to bill of materials ("BOM") errors, labor hours errors,
other errors in ARRIS' submitted accounting documents upon which
the Price and ARRIS Cost are based, or as authorized by ARRIS
pursuant to Section 16.;
b. After the first 6 months from the date of this Addendum, based on
inventory depletion, Arris and Solectron shall work together to
target joint Cost Reduction opportunities. The intent shall be to
agree on a pricing model which includes Solectron's costs,
including, but not limited to cost of acquisition and
transformation cost consisting of materials, cost of acquisition,
labor and overhead on future pricing. Pricing will be reviewed
quarterly in accordance with paragraph 16.c. of the current MSA
(SLR DC180-071001); and
c. Negative purchase part variances and cost impacts from
engineering changes.
9. ADDITION TO SECTION 18. Section 18 is modified to add the following one-time
occurrences directly related to this Addendum:
18.d. To support the manufacturing efforts at the Manufacturing
Facilities, ARRlS has a significant amount of assets, typically in
the form of capital equipment. ARRIS will sell to Solectron those as
per the mutually agreed Transfer Schedule those assets which
Solectron determines are necessary or required to manufacture the
Products ("Capital Equipment") at the book value or market value,
whichever is less, as of the Effective Date of this Addendum.
Solectron shall be responsible for the packing and shipping costs of
transferring the Capital Equipment from ARRIS' facilities to
Solectron's facilities.
18.e. ARRIS will deliver to Solectron the Product-unique assets ("PU
Assets"), such as tooling and test equipment. Solectron will be
allowed to use the PU Assets, at no charge to Solectron. Solectron
shall be responsible for the packing and shipping costs of
transferring the PU Assets from ARRIS' facilities to Solectron's
facilities. ARRIS shall be responsible for packing and shipping costs
associated with the return of the PU from Solectron's facilities to
ARRIS's, or ARRIS designee's facilities.
18.f. Solectron shall pay for all its NRE costs and other costs
associated with Solectron's engineering, manufacturing and other
internal costs associated with the transfer of the manufacturing of
the Products.
18.g. ARRIS shall pay for all their internal costs of crating,
packaging, travel, training, etc. to support the efforts under this
Product transfer.
18.h. The closing of ARRIS' Manufacturing Facilities will result in
the laying off or termination of most of the ARRIS employees from the
Manufacturing Facilities. Solectron Monterrey, Mexico (hereafter
known as "SLR-MTY") will use good faith and commercially reasonable
efforts to hire approximately 15 to 18 of the current ARRIS employees
from the Manufacturing Facilities offer these employees at
Solectron's minimum standard relocation package.
10. THE FOLLOWING SUBSECTION TITLED "19.0 PPM INVENTORY" IS ADDED TO THE MSA IN
RELATION TO THE PRODUCTS AND READS AS FOLLOWS:
19. PPM INVENTORY
19.a. ARRIS currently has in its Manufacturing Facilities a
significant amount or inventory including raw material, components,
and subassemblies, which material ARRIS had been using in the
manufacturing of the Products ("PPM Inventory"). ARRIS will make a
list of all such inventory and its respective cost, provide said list
to Solectron and deliver all the PPM inventory to be stored at
ALMACENADORA USCO LOGISTICS DE MEXICO, S.A. DE C.V., or as otherwise
reasonably determined by Solectron.
19.b. Solectron shall use reasonable commercial efforts to utilize
the PPM Inventory in its manufacture of the Products for ARRIS and
its other global manufacturing operations.
19.c. Solectron shall keep track of its usage of the PPM Inventory,
and issue a bi-weekly report of such usage to ARRIS. Upon issuance of
said bi-weekly reports, Solectron shall issue a purchase order ("PO")
to ARRlS for the consumed PPM Inventory at the Standard Cost or
Weighted Average Cost, whichever is lower. Solectron shall pay ARRIS
for the consumed PPM Inventory within thirty (30) days of the date of
the bi-weekly report.
19.d. If Solectron has not used up all the PPM Inventory within one
year of the Effective Date, ARRIS and Solectron shall negotiate a way
to use, sell or otherwise dispose of the remaining PPM Inventory.
After such one-year period following the Effective Date of this
Addendum, ARRIS shall be responsible for all of Solectron's costs
associated with the ARRIS PPM Inventory, until such time as the ARRIS
PPM Inventory is depleted.
19.e. ARRlS is responsible for insurance on the ARRIS Owned Inventory
(PPM Inventory) which will be managed by Solectron. Solectron is
responsible for the storage and handling cost of the PPM Inventory,
subject to the terms of Section 19.d, upon receipt of the designated
storage site.
11. SOFTWARE. All software, which ARRIS provides to Solectron, is and shall
remain the property of Arris. Arris grants to Solectron a license to copy,
modify and use such software as required to perform Solectron obligations under
this agreement. All software developed by Solectron to support the production
process or otherwise shall be and remain the property of Solectron.
12. BANKING. The parties acknowledge that ARRIS has in place a secured credit
facility pursuant to a credit agreement (the "Credit Agreement") with a
syndicate of lenders (the "Lenders") led by Credit Suisse First Boston ("CSFB")
and The CIT Group/Business Credit, Inc. ("CIT"). In connection with that Credit
Agreement, the parties further agree that the obligations of ARRIS under this
Addendum shall be subject to the following conditions precedent:
a) Solectron shall have provided to the Lenders all required
consents, releases and acknowledgements in the form of
collateral access agreements, warehousemen's letters, UCC
consignment financing statements or other documents,
recognizing the Lenders' security interests and waiving
any conflicting claims in the ARRIS assets in the
possession of Solectron in such form and covering such
other matters as the Lenders may require, including, but
not limited to, agreeing to act as custodian or depositary
in order to perfect a possessory security interest under
Mexican law in favor of CIT, as agent for the Lenders, in
the assets of Arris held by Solectron, all of the
foregoing to be in form and substance reasonably
satisfactory to CSFB and CIT; and
b) The receipt by Arris of all consents, waivers,
modification or approvals from the Lenders as Arris
believes are necessary or prudent under the Credit
Agreement.
13. LIMITATION ON AMENDMENT. The changes made to the MSA herein apply only to
this Addendum, and except as expressly modified for the purposes of this
Addendum only, the Manufacturing Services Agreement shall remain in full force
and effect, without modification or waiver.
14. GOVERNING LAW. This Amendment shall be governed by, and construed in
accordance with, the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their duly authorized representatives as of the date first
written above.
FOR SOLECTRON CORPORATION: FOR ARRIS International, Inc.
(Solectron) (Purchaser)
By: /s/ Jose Almaraz By: /s/ David B. Potts
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Name: Mr. Jose Almaraz Name: David B. Potts
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Title: General Manager Solectron Monterrey Title: Senior V.P. Finance
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