EXHIBIT 10.15
Flextronics International Manufacturing Contract
This Manufacturing Agreement ("Agreement") is entered into this 3rd day of
November, 1998 by and between Replay Networks having its place of business at
1003 Ewell Court, Palo Alto, California 94303 ("Replay Networks") and
Flextronics International USA, Inc., 2090 Fortune Drive, San Jose, CA 95131
("Flextronics").
Replay Networks has created a market for Replay Networks' Products and is solely
responsible for the sales and marketing of the Products. Flextronics has
developed processes and practices for manufacturing products for many different
electronic applications and at Replay Networks' request desires to manufacture
Replay Networks' Products in accordance with Replay Networks' specifications.
Replay Networks acknowledges that Flextronics' expertise is manufacturing and
that Flextronics' responsibility related to the Replay Networks' Products is
limited to this extent. The parties agree as follows:
1.0 WORK LICENSE
Flextronics agrees to use reasonable commercial efforts to perform the work
(hereinafter "Work") pursuant to purchase orders or changes thereto issued by
Replay Networks and accepted by Flextronics. Work shall mean to procure
components, materials, equipment and other supplies and to manufacture,
assemble, test, and products (hereinafter "Products") pursuant to detailed
written specifications for each such Product which are provided by Replay
Networks and accepted by Flextronics and to deliver such Products. For each
Product or revision thereof, written specifications shall include but are not
limited to bill of materials, schematics, assembly drawings, process
documentation, test specifications, current revision number, and approved vendor
list (hereinafter "Specifications") as attached hereto.
Flextronics is granted by Replay Networks a non-exclusive license during the
term of this Agreement to use all of Replay Networks' patents, trade secrets and
other intellectual property required to perform Flextronics' obligations under
this Agreement.
2.0 FORECASTS, ORDERS, MATERIAL PROCUREMENT
2.1 Forecast. Replay Networks shall provide Flextronics, on a [***] basis, a
rolling [***] Product order forecast.
2.2 Purchase Orders. Replay Networks will issue written purchase orders [***]
per calendar [***] which specify all Work to be completed within a minimum [***]
period commencing on the date of the purchase order. Each purchase order shall
reference this Agreement, and the applicable written Specifications as described
in Section 1.0. Purchase orders shall normally be deemed accepted by
Flextronics, provided however that Flextronics may reject any order that
represents a significant deviation from Replay Networks' historical ordering
volumes or shipment dates. Flextronics shall notify Replay Networks of rejection
of any purchase order within [***] working days of receipt of such order.
Replay Networks may use its standard purchase order form to release items,
quantities, prices, schedules, change notices, specifications, or other notice
provided for hereunder. The parties agree that the terms and conditions
contained in this Agreement shall prevail over any terms and conditions of any
purchase order, acknowledgment form or other instrument.
2.3 Material Procurement. Replay Networks' accepted purchase orders will
constitute authorization for Flextronics to procure, using standard purchasing
practices, the components, materials and supplies necessary for the manufacture
of Products ("Inventory") covered by such purchase orders.
In addition, Replay Networks authorizes Flextronics to purchase, in amounts
beyond the amount necessary to fill accepted purchase orders, the components,
materials, and supplies: (i) with lead times greater than [***] days at
the time the order is placed ("Long Lead Time Components") plus [***] to
account for the order, shipment, receipt and manufacturing time and, (ii)
purchased in quantities above the required amount in order to achieve price
targets ("Economic Order Inventory"), and (iii) purchased in excess of
requirements because of minimum let sizes available from manufacturers ("Minimum
Order Inventory"). Together these are called "Special Inventory".
CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
[***] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Flextronics may purchase Long Lead Time Components sufficient to meet all
deliveries under the purchase orders and Product forecast in effect at the time
the order with the supplier is placed, and may reasonably purchase Minimum Order
Inventory even if greater than the amount necessary to meet purchase orders and
Product forecast. Economic Order Inventory shall be purchased by Flextronics
only with the prior approval of Replay Networks. Flextronics may, from time to
time, hold Long Lead Time Components and finished goods in inventory to increase
Replay Networks flexibility. The components and quantities of all such
inventory will be documented in a separate letter and signed by both Flextronics
and Replay Networks.
Replay Networks will be responsible for all Inventory and Special Inventory
purchased by Flextronics under this Section 2.1 under the conditions provided
elsewhere in this Agreement.
3.0 SHIPMENTS, SCHEDULE CHANGE, CANCELLATION
3.1 Shipments. All Products delivered pursuant to the terms of this Agreement
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shall be suitably packed for shipment in accordance with Replay Networks'
Specifications, marked for shipment to Replay Networks' destination specified in
the applicable purchase order and delivered.. Shipment will be F.O.B.
Flextronics' facility at which time risk of loss and title will pass to Replay
Networks. All freight, insurance and other shipping expenses, as well as any
special packing expenses not included in the original price quotation for the
Products, will be paid by Replay Networks.
3.2 Quantity Increases and Shipment Schedule Changes. For any accepted
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purchase order, Replay Networks may (i) increase the quantity of Products or
(ii) reschedule the quantity of Products and their shipment date as provided in
the table below:
Maximum Allowable Variance From Purchase Order Quantities/Shipment Dates
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# of days before Allowable Maximum Maximum
Shipment Date Quantity Reschedule Reschedule
on Purchase Order Increases Quantity Period
----------------- --------- ---------- ----------
[***] [***] [***] [***]
[***] [***] [***] [***]
[***] [***] [***] [***]
[***] [***] [***] [***]
Any purchase order quantities increased or rescheduled pursuant to this Section
may not be subsequently increased or rescheduled without the prior written
approval of Flextronics. All other changes in quantity or shipment date require
Flextronics' prior written consent and shall be subject to an inventory carrying
charge of [***] per month for finished Product, and Inventory and Special
Inventory procured to support the original schedule. Allowable quantity
increases are subject to material availability. Flextronics will use reasonable
commercial efforts to meet quantity increases. If there are extra costs to meet
a schedule increase in excess of the above limits, Flextronics will inform
Replay Networks for its approval in advance.
3.3 Cancellation. Replay Networks may not cancel any portion of Product
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quantity of an accepted purchase order without Flextronics' prior written
approval, not to be unreasonably withheld. If the parties agree upon a
cancellation, Replay Networks will pay Flextronics for Products, Inventory, and
Special Inventory affected by the cancellation as follows: (i) [***] of the
contract price for all finished Products in Flextronics' possession, (ii) [***]
of the cost of all Inventory and Special Inventory in Flextronics' possession
and not returnable to the vendor or usable for other Replay Networkss, whether
in raw form or work in process, less the salvage value thereof, (iii) [***] of
the cost of all Inventory and Special Inventory on order and not cancelable,
(iv) [***] vendor cancellation charges incurred with respect to Inventory and
Special Inventory accepted for cancellation or return by the vendor, and (v)
expenses incurred by Flextronics related to labor and equipment specifically put
in place to support Replay Networks' purchase orders.
Flextronics will use reasonable commercial efforts to return unused Inventory
and Special Inventory and to cancel pending orders for such inventory, and to
otherwise mitigate the amounts payable by Replay Networks.
[***] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
If the forecast for any period is less than the previous forecast supplied over
the same period, that amount will be considered canceled and Replay Networks
will be responsible for any Special Inventory as set forth in the specific
letter described in Section 2.3.
4.0 ENGINEERING CHANGES
Replay Networks may request, in writing, that Flextronics incorporate
engineering changes into the Product. Such request will include a description
of the proposed engineering change sufficient to permit Flextronics to evaluate
its feasibility and cost. Flextronics' evaluation shall be in writing and shall
state the costs and time of implementation and the impact on the delivery
schedule and pricing of the Product. Flextronics will not be obligated to
proceed with the engineering change until the parties have agreed upon the
changes to the Product's Specifications, delivery schedule and Product pricing
and upon the implementation costs to be borne by the Replay Networks including,
without limitation, the cost of Inventory and Special Inventory on-hand and on-
order that becomes obsolete.
5.0 TOOLING, NON-RECURRING EXPENSES, SOFTWARE
Flextronics shall provide non-Product specific tooling at its expense. Replay
Networks shall pay for or obtain and consign to Flextronics any Product specific
tooling and other reasonably necessary non-recurring expenses, to be set forth
in Flextronics' quotation. All software which Replay Networks provides to
Flextronics is and shall remain the property of Replay Networks. Replay
Networks grants Flextronics a license to copy, modify and use such software
required to perform Flextronics' obligations under this Agreement. All
software developed by Flextronics to support the process tooling or otherwise
shall be and remain the property of Flextronics.
6.0 PRODUCT ACCEPTANCE AND WARRANTIES
6.1 Product Acceptance. Flextronics will build, inspect and test Products for
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Replay Networks and deliver them to Replay's on-site Product Inventory Storage
Area at which time title will pass. Flextronics will provide a certificate of
conformance that the products meet the parties joint Product acceptance
criteria. Replay Networks will have [***] days after shipment of the Product
to review the report and come to Flextronics to audit the Product. If no audit
is performed within the [***] days the Product will be deemed accepted.
Products shipped to a location other than the on-site Replay Product Inventory
Storage area will be inspected and tested as required by Replay Networks within
[***] days of receipt. If Products are found to be defective in material or
workmanship, Replay Networks has the right to reject such Products during said
period. Products not rejected during said period will be deemed accepted.
Replay Networks may return defective Products, freight collect, after obtaining
a return material authorization number from Flextronics to be displayed on the
shipping container and completing a failure report. Rejected Products will be
promptly repaired or replaced, at Flextronics' option, and returned freight pre-
paid. If the Product is source inspected by Replay Networks prior to shipment,
Replay Networks will inspect goods within [***] days of its request date.
6.2 Express Limited Warranty. Flextronics warrants that the Products will
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conform to Replay Networks' applicable Specifications and will be free from
defects in workmanship for a period of [***] days from the date of shipment.
Materials are warranted to the same extent that the original manufacturer
warrants the materials. This express limited warranty does not apply to (a)
materials consigned or supplied by Replay Networks to Flextronics; (b) defects
resulting from Replay Networks' design of the Products; (c) any other defects;
or (d) Product that has been abused, damaged, altered or misused by any person
or entity after title passes to Replay Networks. With respect to first articles,
prototypes, pre-production units, test units or other similar Products,
Flextronics makes no representations or warranties whatsoever. Notwithstanding
anything else in this Agreement, Flextronics assumes no liability for or
obligation related to the performance, accuracy, specifications, failure to meet
specifications or defects of or due to tooling, designs or instructions produced
or supplied by Replay Networks and Replay Networks shall be liable for costs or
expenses incurred by Flextronics related thereto. Upon any failure of a Product
to comply with the above warranty, Flextronics' sole obligation, and Replay
Networks' sole remedy, is for Flextronics, at its option, to promptly repair or
replace such unit and return it to Replay Networks freight collect. Replay
Networks shall return Products covered by the warranty freight pre-paid after
completing a failure report and obtaining a return material authorization number
from Flextronics to be displayed on the shipping container.
FLEXTRONICS MAKES NO OTHER WARRANTIES OR CONDITIONS ON THE PRODUCTS, EXPRESS,
IMPLIED, STATUTORY, OR IN ANY OTHER PROVISION OF THIS AGREEMENT OR COMMUNICATION
WITH
[***] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
REPLAY NETWORKS, AND FLEXTRONICS SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OR
CONDITION OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
7.0 PAYMENT TERMS, ADDITIONAL COSTS AND PRICE CHANGES
7.1 Price and Payment Terms. The price for Products to be manufactured will be
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set from time to time through purchase orders issued by Replay Networks and
accepted by Flextronics. All prices quoted are exclusive of federal, state and
local excise, sales, use and similar taxes, and any duties, and Replay Networks
shall be responsible for all such items. Payment for any Products, services or
other costs to be paid by Replay Networks hereunder is due [***] days net
from the date of invoice and shall be made in lawful U.S. currency. Replay
Networks agrees to pay [***] monthly interest on all late payments. Furthermore,
if Replay Networks is late with payments, or Flextronics has reasonable cause to
believe Replay Networks may not be able to pay, Flextronics may require
prepayment or delay shipments or suspend work until assurances of payment
satisfactory to Flextronics are received.
7.2 Letter of Credit. Upon Flextronics' request at any time during the term of
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this Agreement, Replay Networks agrees to obtain and maintain a stand-by letter
of credit (LOC) to minimize the financial risk to Flextronics for its
performance of Work under this Agreement. The LOC shall be for a minimum period
of time of [***] and shall be for a total amount which is equal to [***]. The
calculation shall be based upon the forecast provided by Replay Networks
pursuant to Section 2.1. The draw-down procedures under the LOC shall be
determined solely by Flextronics. Flextronics will, in good faith, review Replay
Networks' creditworthiness periodically and may provide more favorable terms
once it feels it is prudent to do so. Replay Networks agrees to provide all
necessary financial information required for Flextronics to make a proper
assessment of creditworthiness.
7.3 Additional Costs. Replay Networks is responsible for [***]. Replay
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Networks caused delays as a result of consigned inventory will result in a
special charge to the Replay Networks of [***] of the sales price of the
Product for each month, or part thereof, delayed.
7.4 Price Changes. The price of Products to Replay Networks may be increased
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by Flextronics if (a) the market price of fuels, materials, raw materials,
equipment, labor and other production costs, increase beyond normal variations
in pricing as demonstrated by Flextronics, and (b) the parties agree to the
increase after good faith negotiation.
7.5 Cost Reductions. Flextronics agrees to seek ways to reduce the cost of
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manufacturing Products by methods such as elimination of components, obtaining
alternate sources of materials, redefinition of Specifications, and improved
assembly or test methods. Upon implementation of such ways which have been
initiated by Flextronics, Flextronics will receive [***] of the demonstrated
cost reduction. Replay Networks will receive [***] of the demonstrated cost
reduction upon implementation of such ways initiated by Replay Networks. Replay
Networks and Flextronics will review costs on a quarterly basis.
8.0 TERM AND TERMINATION
8.1 Term. The term of this Agreement shall commence on the date hereof above
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and shall continue for one (1) year thereafter until terminated as provided in
Section 8.2 or 10.9. After the expiration of the initial term hereunder (unless
this Agreement has been terminated) this Agreement shall be automatically
renewed for separate but successive one-year terms.
8.2 Termination. This Agreement may be terminated by either party (a) for any
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reason upon [***] days written notice to the other party, or (b) if the other
party defaults in any payment to the terminating party and such default
continues without a cure for a period of [***] days after the delivery of
written notice thereof by the terminating party to the other party, or (c) if
the other party defaults in the performance of any other material term
[***] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
or condition of this Agreement and such default continues unremedied for a
period of [***] days after the delivery of written notice thereof by the
terminating party to the other party. Termination of this Agreement for any
reason shall not affect the obligations of either party which exist as of the
date of termination. Upon termination for any reason whatsoever, Replay Networks
shall be responsible for the finished Products, Inventory, and Special Inventory
in existence at the date of termination in the same manner as for cancellations
as set forth in Section 3.3. Notwithstanding termination of this Agreement,
Sections 6.2, 9.0, and 10.1 shall survive said termination.
9.0 LIABILITY LIMITATION
9.1 Patents, Copyrights, Trade Secrets, Other Proprietary Rights. Replay
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Networks shall defend, indemnify and hold harmless Flextronics from all claims,
costs, damages, judgments and attorney's fees resulting from or arising out of
any alleged and/or actual infringement or other violation of any patents, patent
rights, trademarks, trademark rights, trade names, trade name rights,
copyrights, trade secrets, proprietary rights and processes or other such rights
related to the Products. Flextronics shall promptly notify Replay Networks in
writing of the initiation of any such claims.
THE FOREGOING STATES THE ENTIRE LIABILITY OF THE PARTIES TO EACH OTHER
CONCERNING INFRINGEMENT OF PATENT, COPYRIGHT, TRADE SECRET OR OTHER INTELLECTUAL
PROPERTY RIGHTS.
9.2 Product Liability. Replay Networks agrees that, if notified promptly in
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writing and given sole control of the defense and all related settlement
negotiations, it will defend Flextronics from any claim or action and will hold
Flextronics harmless from any loss, damage or injury, including death, which
arises from any alleged defect of any Products. Replay Networks shall name
Flextronics as an additional insured under Replay Networks' product liability
policies for any Products.
9.3 No Other Liability. EXCEPT FOR THE EXPRESS WARRANTIES CREATED UNDER THIS
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AGREEMENT AND EXCEPT AS SET FORTH OTHERWISE IN THIS AGREEMENT, IN NO EVENT SHALL
EITHER PARTY BE LIABLE TO THE OTHER FOR ANY INCIDENTAL, CONSEQUENTIAL, SPECIAL
OR PUNITIVE DAMAGES OF ANY KIND OR NATURE ARISING OUT OF THIS AGREEMENT OR THE
SALE OF PRODUCTS, WHETHER SUCH LIABILITY IS ASSERTED ON THE BASIS OF CONTRACT,
TORT (INCLUDING THE POSSIBILITY OF NEGLIGENCE OR STRICT LIABILITY), OR
OTHERWISE, EVEN IF THE PARTY HAS BEEN WARNED OF THE POSSIBILITY OF ANY SUCH LOSS
OR DAMAGE, AND EVEN IF ANY OF THE LIMITED REMEDIES IN THIS AGREEMENT FAIL OF
THEIR ESSENTIAL PURPOSE.
10.0 MISCELLANEOUS
10.1 Confidentiality. All written information and data exchanged between the
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parties for the purpose of enabling Flextronics to manufacture and deliver
Products under this Agreement that is marked "Confidential" or the like, shall
be deemed to be Confidential Information. The party which receives such
Confidential Information agrees not to disclose it directly or indirectly to any
third party without the prior written consent of the disclosing party.
Confidential Information disclosed pursuant to this Agreement shall be
maintained confidential for a period of [***] after the disclosure thereof.
10.2 Entire Agreement. This Agreement constitutes the entire agreement between
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the Parties with respect to the transactions contemplated hereby and supersedes
all prior agreements and understandings between the parties relating to such
transactions. Replay Networks shall hold the existence and terms of this
Agreement confidential, unless it obtains Flextronics' express written consent
otherwise. In all respects, this Agreement shall govern, and any other
documents including, without limitation, preprinted terms and conditions on
Replay Networks' purchase orders shall be of no effect.
10.3 Amendments. This Agreement may be amended only by written consent of both
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parties.
10.4 Independent Contractor. Neither party shall, for any purpose, be deemed to
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be an agent of the other party and the relationship between the parties shall
only be that of independent contractors. Neither party shall have any right or
authority to assume or create any obligations or to make any representations or
warranties on behalf of any other party, whether express or implied, or to bind
the other party in any respect whatsoever.
[***] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
10.5 Expenses. In the event a dispute between the parties hereunder with
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respect to this Agreement must be resolved by litigation or other proceeding or
a party must engage an attorney to enforce its right hereunder, the prevailing
party shall be entitled to receive reimbursement for all associated reasonable
costs and expenses (including, without limitation, attorneys fees) from the
other party.
10.6 Security Interest. Until the purchase price and all other charges payable
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to Flextronics hereunder have been received in full, Flextronics hereby retains
and Replay Networks hereby grants to Flextronics a security interest in the
Products delivered to Replay Networks and any proceeds therefrom up to the total
amounts owed to Flextronics. Replay Networks agrees to promptly execute any
documents requested by Flextronics to perfect and protect such security
interest.
10.7 Governing Law. This Agreement shall be governed by and construed under the
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laws of the State of California, excluding its choice of law principles. The
parties consent to the exclusive jurisdiction of the state and Federal courts in
Santa Clara County, California.
10.8 Successors, Assignment. This Agreements shall be binding upon and inure to
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the benefit of the parties hereto and their respective successors, assigns and
legal representatives. Neither party shall have the right to assign or
otherwise transfer its rights or obligations under this Agreement except with
the prior written consent of the other party, not to be unreasonably withheld.
10.9 Force Majeure. In the event that either party is prevented from
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performing or is unable to perform any of its obligations under this Agreement
(other than a payment obligation) 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 the reasonable control of the party invoking this section, and if such
party shall have used its commercially reasonable efforts to mitigate its
effects, such party shall give prompt written notice to the other party, 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.
Regardless of the excuse of Force Majeure, if such party is not able to perform
within [***] days after such event, the other party may terminate the
Agreement. Termination of this Agreement shall not affect the obligations of
either party which exist as of the date of termination.
ACCEPTED AND AGREED TO:
REPLAY NETWORKS: FLEXTRONICS INTERNATIONAL USA, INC.:
/s/ Anthony Wood /s/ Michael McNamara
- ---------------------------- ------------------------------------
By: Anthony Wood By: Michael McNamara
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Title: CEO Title: President
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[***] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.