Manufacturing and Purchase Agreement - Brocade Communications Systems Inc. and Hon Hai Precision Industry Co. Ltd.
MANUFACTURING AND PURCHASE AGREEMENT
This MANUFACTURING AND PURCHASE AGREEMENT ("Agreement") is entered into as of
the date last executed below ("Effective Date") by and between Brocade
Communications Systems, Inc., a Delaware corporation with a place of business at
1745 Technology Drive, San Jose, California 95110 ("Brocade"), and Hon Hai
Precision Industry Co., Ltd., a Taiwan corporation with an office at No. 2, Tzu
Yu St., Tu-Chen, Taipei Hsien, 20306, Taiwan, R.O.C. ("Hon Hai").
1. Definitions.
1.1 "Ancillary Technology" means all test programs and fixtures
provided to Hon Hai by Brocade.
1.2 "Brocade Technology" means the Technology and all Derivatives
thereof (a) provided by Brocade to Hon Hai pursuant to this Agreement, or (b)
developed by Brocade pursuant to this Agreement, or (c) developed by Brocade or
Hon Hai pursuant to a Statement of Work; provided, however, that such Technology
is not Hon Hai Technology.
1.3 "Brocade Vendors" means third party producers and suppliers
that have been specified by Brocade in writing (a) on Brocade's approved vendor
list ("AVL") as provided by Brocade to Hon Hai and as updated by Brocade from
time to time, and (b) as the source of certain parts and/or components to be
used by Hon Hai in the manufacture of the Products.
1.4 "Derivative" means: (a) for copyrightable or copyrighted
material, any translation, abridgment, revision or other form in which an
existing work may be recast, transformed or adapted; (b) for patentable or
patented material, any improvement thereon; and (c) for material which is
protected by trade secret, any new material derived from such existing trade
secret material, including new material which may be protected under copyright,
patent and/or trade secret laws.
1.5 "Hon Hai Technology" means the Technology [*] which are (a)
developed by Hon Hai prior to entering into this Agreement, and (b) specified on
a Statement of Work executed by an authorized representative of Brocade as Hon
Hai Technology.
1.6 "Intellectual Property Rights" means copyright rights,
trademark rights (including, without limitation, trade names, trademarks,
service marks, and trade dress), patent rights, trade secrets, moral rights,
right of publicity, goodwill and all other intellectual property rights as may
exist now and/or hereafter come into existence and all renewals and extensions
thereof, arising under the law of the United States or any state, country or
other jurisdiction.
1.7 "Joint Technology" means any (a) Technology that is first
conceived or reduced to practice by one or more of Hon Hai's employees with one
or more of Brocade's employees; provided in the case of a patentable invention
that a party's contribution will meet the requirements for joint invention under
United States law, or (b) joint work of authorship fixed in a tangible medium of
expression prepared by one or more of Hon Hai's employees with one or more of
Brocade's employees with the intention that their contributions be merged into
inseparable or interdependent parts of a unitary whole.
1.8 "Products" means the Brocade products identified on Exhibit A,
which may be modified from time to time upon written agreement of the parties.
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1.9 "Purchase Order" means a Brocade purchase order for the
purchase of the Products issued to Hon Hai pursuant to the provisions of this
Agreement.
1.10 "SLA" means the "service level agreement" document, which is a
document created by Brocade and Hon Hai containing certain operational and
financial terms agreed between the parties. The version of the SLA existing as
of the Effective Date is attached as Exhibit C for reference only. The parties
may change the SLA from time to time without amending Exhibit C or this
Agreement.
1.11 "Specifications" means the functional and performance
specifications (including, without limitation, bills of materials, schematic
diagrams, parts and assembly drawings, and test specifications and work/assembly
instructions) relating to the testing and manufacturing of each Product as
provided by Brocade.
1.12 "Statement of Work" means a written statement of work signed
by both parties for special development work to be done by Hon Hai for Brocade.
Each Statement of Work will be sequentially numbered (e.g., SOW 1, SOW 2, etc.)
and attached to this Agreement by an amendment.
1.13 "Technology" means any and all technical information and/or
materials, including, without limitation, ideas, techniques, designs, sketches,
drawings, models, inventions, know-how, processes, apparatus, methods,
equipment, algorithms, software programs, data, software source documents, other
works of authorship, formulae and information concerning engineering, research,
experimental work, development, design details and specifications.
2. Material Procurement.
2.1 Forecasting and Material Purchasing. Once a [*], Brocade will
provide Hon Hai with a rolling [*] forecast of the quantity demand for each
Product ("Product Forecast"). For the purpose of spare parts, Brocade will
provide Hon Hai, once per [*], with a rolling [*] repair forecast of the
quantity demand for all Parts (defined in Section 11.1) listed by part number
("Parts Forecast", collectively with the Product Forecast, the "Forecasts").
Upon the end-of-life of any Product, Brocade will extend its Parts Forecast for
all Parts used in such Product [*], which shall in no case extend longer than
[*] from the end-of-life date of such Product. The Forecasts are [*]: Hon Hai
may purchase the materials required to meet the demand in the Forecasts only as
far in advance as the published component lead time (including any manufacturing
offset, as agreed to by the parties in the SLA) for each component necessary to
manufacture the Product, or as otherwise instructed in writing by Brocade. [*]
purchased within the applicable lead time; provided that Hon Hai will take all
steps [*] component materials by diligently attempting to return unused
materials or to transfer unused materials to use for other customers to the
extent that they do not incorporate proprietary Brocade Technology. Brocade will
not pay for any unused materials that are purchased [*].
2.2 Vendor Forecasts. Hon Hai will provide each of the Brocade
Vendors with [*] forward-looking, rolling forecasts for the Product materials
and will update such forecasts as necessary to keep each Brocade Vendor current
with each new Forecast provided by Brocade.
2.3 Material Management. Hon Hai will, at a minimum, comply with
the following obligations to ensure good component material management for the
Products, including any Parts (defined in Section 11.1) for repair purposes: (a)
[*] component level failure analysis or [*] by the Brocade Vendor; (b) [*]
component returns, failure analysis and corrective actions regarding defective
components with the Brocade Vendors and promptly communicate this information to
Brocade; (c) work with Brocade Vendors to [*] component leadtimes and costs; (d)
provide regular performance feedback to Brocade Vendors, with a copy to Brocade;
(e) ensure that all component materials used by Hon Hai to produce the Products
meet the Specifications; and (f) calculate for Brocade and provide documentation
of the country of origin
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of each of the Products in accordance with US law. As between Hon Hai and
Brocade, [*] will be solely responsible for all costs relating to the collection
and replacement of Products and Parts [*] due to Hon Hai's use of component
materials that [*]
3. Manufacturing Obligations.
3.1 Work Instructions; SLA. Hon Hai will manufacture and test the
Products in strict compliance with the work instructions agreed between Brocade
and Hon Hai for each Product. Hon Hai will honor the lead time, reporting, and
other requirements in the then-current version of the SLA as agreed between
Brocade and Hon Hai. As the work instructions and SLA are operating documents
that are subject to frequent change, the most recent versions of the documents
will not be formally amended into this Agreement; however, both the work
instructions for each Product and the SLA are incorporated herein by reference.
3.2 [*]. Hon Hai acknowledges and agrees that [*] for the
provision of manufacturing and repair services and the supply of Products to
Brocade hereunder and that the full [*] provision of all manufacturing and
repair services and supply of Products to Brocade hereunder is a material
condition of this Agreement.
3.3 No Subcontracting. Hon Hai agrees that no portion of the
manufacture, assembly, or test of the Products will be subcontracted to third
parties and that Hon Hai will not change the location of the facilities for the
manufacture, assembly, or test of the Products without Brocade's prior written
consent. Hon Hai agrees that no portion of the subassembly of Parts will be
subcontracted to affiliated or unaffiliated third parties without Brocade's
prior written consent, which shall not be unreasonably withheld or delayed.
3.4 Ancillary Technology. Brocade, at its sole discretion, may
furnish Ancillary Technology to Hon Hai solely for use in the manufacture and
testing of the Products. Hon Hai will not at any time use the Ancillary
Technology for any other purposes or for any third parties or in any manner
other than in performing Hon Hai's obligations under this Agreement. Hon Hai
will maintain the Ancillary Technology in good condition and repair and provide
necessary calibration services for the Ancillary Technology. Brocade and Hon Hai
agree that the terms set out in Exhibit B hereto, which may be modified from
time to time upon written agreement of the parties, will apply to all Ancillary
Technology, and Hon Hai will be responsible for obtaining the requisite
insurance coverage and conducting appropriate inspections in accordance with
Exhibit B hereto. With respect to any Ancillary Technology licensed to Hon Hai
pursuant to this Agreement, Brocade agrees to provide Hon Hai with a reasonable
amount of support, at no charge, with respect to the initial installation,
set-up and debugging of such Ancillary Technology and Hon Hai will be solely
responsible for all ongoing use and support of such Ancillary Technology.
3.5 Non-Exclusivity. Nothing in this Agreement will be construed
or deemed to prevent or otherwise inhibit Brocade's ability or right to
manufacture, any product (including the Products) at a Brocade facility or at
alternate or additional third party facility(ies) of Brocade's choice. Further,
nothing in this Agreement will be construed or deemed to (a) require Brocade to
order all units of any Product from Hon Hai, or (b) prevent or otherwise inhibit
Brocade's ability or right to design, develop, manufacture, have manufactured,
market, use, sell, and or distribute any follow-on products or derivatives of
the Products.
4. License Rights and Restrictions.
4.1 License to Hon Hai.
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(a) License to Specifications. Subject to the terms of
this Agreement, Brocade hereby grants Hon Hai a limited non-exclusive,
non-transferable, royalty-free license (without the right to sublicense) under
Brocade's trade secret rights, during the term of this Agreement, to use the
Specifications solely internally and solely for the purpose of manufacturing the
Products for Brocade.
(b) License to Ancillary Technology. Subject to the terms
of this Agreement, Brocade hereby grants Hon Hai a limited non-exclusive,
non-transferable, royalty-free license (without the right to sublicense) under
Brocade's copyright and trade secret rights, during the term of this Agreement,
to use and copy the test software (provided as part of the Ancillary Technology)
solely internally and solely for the purpose of manufacturing and testing the
Products for Brocade.
(c) License to Brocade Firmware. Subject to the terms of
this Agreement, Brocade hereby grants Hon Hai a limited non-exclusive,
non-transferable, royalty-free license (without the right to sublicense) under
Brocade's copyright rights, during the term of this Agreement, to copy the
Brocade Firmware onto Product units in the manufacturing process.
(d) License to Brocade Technology. Brocade hereby grants
Hon Hai a limited non-exclusive, non-transferable, royalty-free license (without
the right to sublicense) under Brocade's Intellectual Property Rights, during
the term of this Agreement, to use the Brocade Technology solely internally, and
solely as necessary to fulfill its manufacturing obligations under this
Agreement. Hon Hai is granted no right, and is expressly prohibited from using
the Brocade Technology, to develop, manufacture or distribute any products other
than the Products.
4.2 License to Brocade. Neither Hon Hai nor any third party will
retain any rights in any materials incorporated into the Products. To the extent
that Hon Hai provides any Hon Hai Technology to Brocade [*], Hon Hai hereby
grants to Brocade a non-exclusive, royalty-free, perpetual, irrevocable license
under Hon Hai's Intellectual Property rights to make, have made, use, sell,
import, reproduce, display, distribute, and create derivative works of the Hon
Hai Technology solely in connection with the development, manufacture,
marketing, and sale of Brocade Products, as listed on Exhibit A, which may be
modified from time to time upon written agreement of the parties.
4.3 Restrictions. Except as expressly set forth above, each party
retains all of its Intellectual Property Rights. No license is granted by
Brocade to make, use or sell any other products under the Brocade Intellectual
Property Rights or to make, use or sell any products for any other purpose. Hon
Hai will not modify, decompile or reverse engineer the Brocade Firmware or any
Brocade Technology.
5. Purchase Orders.
5.1 Purchase Order Acceptance. Hon Hai is permitted to sell the
Products only to Brocade, and to third parties who have been authorized in
writing by Brocade to purchase the Products from Hon Hai ("Designated
Purchasers") in satisfaction of Purchase Orders issued during the term of this
Agreement, subject to and in accordance with the terms and conditions of this
Agreement.
5.2 Quantity Flexibility. Hon Hai will, at [*], accept all
Purchase Order cancellations, reschedulings and changes in the quantity of
Products ordered within the cancellation, rescheduling, change, or other
flexibility terms outlined in the SLA. The version of the SLA existing as of the
Effective Date is attached as Exhibit C for reference only. The parties may
change the SLA from time to time without amending Exhibit C or this Agreement.
6. Shipping and Delivery.
6.1 Shipment. All shipments of the Products will be made [*] (per
Incoterms 2000). [*]
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6.2 Timing. Shipments to Brocade, or to other locations specified
by Brocade, will be shipped in the [*] ordered by Brocade, and [*] the
acknowledged delivery date, [*] the acknowledged delivery date. Upon learning of
any potential shipment delays, Hon Hai will notify Brocade [*] within such
shorter time as may be required in the SLA as to the cause and extent of such
delay. Except as Brocade may otherwise advise in advance and in writing, Brocade
[*] any goods (i) shipped [*] the quantity ordered, (ii) shipped in a [*]
shipments, or (iii) shipped [*].
6.3 Accelerated Measures. If Hon Hai fails or has reason to
believe it will fail to make shipments at the specified time and such failure is
not due to an action or omission of Brocade, Hon Hai will, [*] employ
accelerated measures [*] required to meet the specified delivery schedule or
minimize the lateness of shipments.
7. Acceptance.
7.1 Inspection. Hon Hai will ship Products directly to [*]. All
deliveries of Products are subject to inspection and testing by Brocade [*]
before final acceptance. Within [*] after receipt of Products ("Rejection
Period"), Brocade [*] may inspect and reject any Product that fails to meet the
Specifications.
7.2 Rejection. Within the Rejection Period, customers may notify
Brocade of any Product rejections and the reasons therefor. In accordance with
the RMA procedures of Section 11.1, below, Brocade [*] may return rejected or
defective Products to Hon Hai, [*]. In the event that the returned Product is
defective, Hon Hai will repair or replace such defective Product, [*]. For all
returned Products that are defective, Hon Hai will return to Brocade or its
customer, as the case may be, freight prepaid, all repaired or replaced Products
within [*] after Hon Hai's receipt of the returned Product or within such other
time as specified in the SLA. Any returned Products that have been damaged by
misuse, abuse or unauthorized repair, by or on behalf of the End User, may be
treated by Hon Hai as "out of warranty" and subject to out of warranty repair
charges referenced in Section 8.1 only. Any returned Products which are not in
fact defective may be returned by Hon Hai to the End User at [*] expense.
7.3 Spot Testing. Upon prior notice to Hon Hai, Brocade or its
authorized representative(s) may conduct spot functional tests of the Products
at Hon Hai's facility at which Products are being manufactured during Hon Hai's
normal business hours. The parties will mutually agree upon the timing of such
investigations, which will be conducted in such a manner as not to interfere
with Hon Hai's operations. If any Products fail any material part of the test
procedure set forth on the Statement of Work, Brocade may reject such Products,
and Hon Hai will promptly take all steps necessary to correct such failures.
7.4 Site Inspections. Upon [*] notice to Hon Hai, Brocade[*] will
have the right to perform on-site inspections at Hon Hai's manufacturing
facilities and Hon Hai will fully cooperate with Brocade in that regard at
mutually agreed upon times. If an inspection or test is made on Hon Hai's
premises, Hon Hai will provide Brocade's inspectors with reasonable assistance
at no additional charge. In the event that any on-site inspection of the
Products indicates that the Products do not conform to the requirements of this
Agreement, Hon Hai will not ship such Products to Brocade until such
nonconformity has been cured and only Products meeting the conformance criteria
may be shipped. This does not limit Brocade's right to perform additional
acceptance testing at Brocade's facilities.
7.5 Failure to Inspect. Notwithstanding anything to the contrary
contained in this Agreement, inspection or failure to inspect the Products upon
Delivery will not affect Brocade's rights under the warranty provisions of this
Agreement.
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8. Pricing and Payment.
8.1 Prices. The unit prices to be paid by Brocade for (a) the
Products, and (b) all out-of-warranty repair services, shall be as set forth on
Exhibit A or as otherwise agreed by the parties. Except as otherwise expressly
provided in this Agreement, such unit prices includes [*] for the Products or
repair services (as the case may be), any related deliverable items and services
and packaging for delivery to Brocade. All payments hereunder will be paid in
U.S. Dollars unless otherwise mutually agreed upon by the parties in writing.
8.2 Taxes. Where the law permits, Hon Hai will treat Brocade as
exempt from applicable state and/or local sales tax for Product(s) purchased
pursuant to this Agreement. Where required by state or local law, Brocade will
provide Hon Hai with a valid reseller's exemption certificate for each taxing
jurisdiction to which Hon Hai ships Product(s). The Parties agree that for any
purchases made in the People's Republic of China, no sales taxes shall apply.
8.3 Invoices. Hon Hai will submit invoice(s) periodically to
Brocade upon [*] of Product(s) to the United States. (All Products shipped
outside of the United States shall be governed by the agreement entered into by
and between Brocade Switzerland SarL and Hon Hai, dated _____, 2002.) Brocade
will pay such invoices net [*] after the date of [*] of the Products or receipt
of Hon Hai's invoice, whichever is later ("Payment Period"); provided however,
that if the SLA specifies a different Payment Period, Brocade will pay within
the time specified in the SLA and not the Payment Period specified in this
Agreement. Payment will not constitute acceptance of the Products by Brocade.
9. Quality Assurance.
9.1 Quality Standards. Hon Hai will manufacture and repair the
Products in accordance with the quality requirements, standards and expectations
as set forth on the Statement of Work or as otherwise mutually agreed upon by
the parties in writing.
9.2 Quality Plan. Hon Hai will establish, maintain and manage a
quality assurance program for the Products that is consistent with, and at least
as restrictive as, the terms and conditions listed in Exhibit D, which may be
modified from time to time upon written agreement of the parties.
10. Engineering Changes.
10.1 ECOs. Brocade may, upon advance written notice to Hon Hai,
submit engineering change orders ("ECOs") for changes to the Products. ECOs will
include documentation of the change to effectively support an investigation of
the impact of the engineering change. Hon Hai will review the ECO and report to
Brocade within [*] of Hon Hai's receipt of the ECO. If the ECO affects the
manufacturing or repair costs of the Products or otherwise affects the price of
the affected Products, the parties agree to negotiate in good faith an equitable
adjustment to the price of the affected Products prior to implementation of the
change. The parties agree that [*] is a reasonable time period to permit Hon Hai
to evaluate ECO impact regarding potential excess manufacturing costs and price.
10.2 No Changes. No changes will be made to the Products without
Brocade's prior written consent and no approved change will be made effective
prior to the date approved by Brocade in writing. Hon Hai will not change or
modify the processes for the Products without Brocade's prior written consent.
Hon Hai will reimburse Brocade for all expenses incurred by Brocade to qualify
changes to such materials or processes that are undertaken by Hon Hai without
Brocade's prior written consent.
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11. Product Repairs and Parts Supply.
11.1 Repair Services. [*] Hon Hai will provide repair services to
Brocade and Brocade-authorized third parties (i) for all in-warranty Products
(including all parts therein and any parts provided separately "Parts")) in
accordance with the terms of Sections 14, below, and (ii) for any
out-of-warranty Products and Parts for a period of [*] from the end-of-life
production of such Products or Parts by Hon Hai or a Brocade Vendor. For any
Product or Part that is returned to Hon Hai for repair or replacement services,
Brocade will issue a Return Material Authorization ("RMA") number, and will
forward such RMA electronically to Hon Hai, through Brocade's Oracle system. All
Products and Parts returned to Hon Hai for repair or replacement services will
include the RMA affixed to the packaging.
11.2 Parts Supply. Hon Hai will make available to Brocade Product
Parts as Brocade may [*] for [*] Products purchased by Brocade from Hon Hai
during the Product production. For a period of [*] after the date of delivery to
Brocade by Hon Hai of the last unit of the Product manufactured by Hon Hai, Hon
Hai will also undertake the following: (a) Hon Hai will maintain [*] necessary
for the Products; (b) Hon Hai will maintain [*] so that Hon Hai will be able to
[*] any Parts originally [*] by Hon Hai; (c) Hon Hai will [*] its Parts vendors
to obtain and will provide notice to Brocade at least [*] prior to discontinuing
the availability of any Part; (d) Hon Hai will inform Brocade of all [*]
notifications for Parts upon Hon Hai's receipt of such notifications; and (e)
Hon Hai will inform Brocade if a [*] is the most economical procurement strategy
for such Parts as to which such a notification is received (especially [*] Parts
which may require tool maintenance and set-up charges that far outweigh piece
part costs). [*] If Brocade determines that [*] is not financially favorable due
to the [*]of the remaining support period for the Part(s), Hon Hai will assist
Brocade in [*] through manufacturing. [*]
12. Ownership.
12.1 Ownership by Brocade. As between Brocade and Hon Hai, Brocade
will own all right, title, and interest in the Specifications, Brocade Firmware,
Products, Ancillary Technology and the Brocade Technology (excluding the Hon Hai
Technology, which will be owned exclusively by Hon Hai) and all Intellectual
Property Rights therein, and Hon Hai hereby irrevocably transfers, conveys and
assigns to Brocade all of its right, title, and interest therein. Hon Hai will
execute such documents, render such assistance, and take such other action as
Brocade may reasonably request, at Brocade's expense, to apply for, register,
perfect, confirm and protect Brocade's rights to the Brocade Technology, and all
Intellectual Property Rights therein.
12.2 Ownership by Hon Hai. As between Hon Hai and Brocade, Hon Hai
will own all right, title and interest in the Hon Hai Technology (excluding the
Brocade Technology, which will be owned exclusively by Brocade), and all
Intellectual Property Rights therein.
12.3 Ownership of Joint Technology. Subject to the ownership rights
specified in Sections 1.1 and 1.1, [*] own all right, title and interest in the
Joint Technology and all Intellectual Property Rights therein, and [*] use the
Joint Technology and all Intellectual Property Rights therein without
restriction and for any reason. [*] will execute such documents, render such
assistance, and take such other action as [*] may reasonably request, at [*]
expense, to apply for, register, perfect, confirm and protect [*] rights in the
Joint Technology.
12.4 Attorney in Fact. The Parties agree that that if either Party
("Assignee") is unable because of the other Party's ("Assignor") unavailability,
dissolution or incapacity, unreasonable refusal or unreasonable failure to act
in a timely manner such that intellectual property rights protection may be
impaired, to secure Assignor's signature to apply for or to pursue any
application for any United States or foreign patents or mask work or copyright
registrations covering the inventions assigned to Assignee under this Agreement,
then Assignee hereby irrevocably designates and appoints Assignee and its duly
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authorized officers and agents as Assignor's agent and attorney in fact, to act
for and in Assignor's behalf and stead to execute and file any such applications
and to do all other lawfully permitted acts to further the prosecution and
issuance of patents, copyright and mask work registrations thereon with the same
legal force and effect as if executed by Assignor.
13. Confidential Information.
13.1 General. Except as otherwise provided in this Section, the
definition, use, and disclosure of confidential information by the parties shall
be governed by the Mutual Non-Disclosure Agreement between the parties and dated
May 22, 2000.
13.2 Sensitive Brocade Information. "Sensitive Brocade Information"
means the Forecasts, Specifications, AVL, Brocade Technology, Ancillary
Technology, bill of materials, SLA, work instructions, and all data accessed by
Hon Hai pursuant to Sections 1, 1, 1, 1, 1 and 1.
13.3 Confidentiality Obligations. Hon Hai will, at all times, both
during the term of this Agreement and at all times thereafter, keep in
confidence and trust all Sensitive Brocade Information. Hon Hai may use the
Sensitive Brocade Information only as necessary to perform its obligations under
this Agreement. Hon Hai will take all required steps to prevent unauthorized
disclosure or use of Sensitive Brocade Information and to prevent it from
falling into the public domain or into the possession of unauthorized persons.
Hon Hai will not disclose Sensitive Brocade Information to any person or entity
other than its employees who need access to such Sensitive Brocade Information
in order to effect the intent of this Agreement and who have entered into
written confidentiality agreements that protect the Sensitive Brocade
Information. Hon Hai will immediately give notice to Brocade of any unauthorized
use or disclosure of Sensitive Brocade Information. Hon Hai agrees to assist
Brocade in remedying such unauthorized use or disclosure of Sensitive Brocade
Information.
13.4 Exclusions. These obligations will not apply to the extent
that Sensitive Brocade Information: (a) is already known to Hon Hai at the time
of disclosure, which knowledge Hon Hai will have the burden of proving; (b) is,
or, through no act or failure to act of Hon Hai, becomes publicly known; (c) is
received by Hon Hai from a third party without restriction on disclosure; (d) is
independently developed by Hon Hai without reference to Sensitive Brocade
Information, which independent development Hon Hai will have the burden of
proving; or (e) is approved for release by written authorization of Brocade.
13.5 Legal Disclosures. A disclosure of Sensitive Brocade
Information (a) in response to a valid order by a court or other governmental
body, or (b) otherwise required by law, will not be considered to be a breach of
this Agreement or a waiver of confidentiality for other purposes; provided,
however, that Hon Hai will provide prompt written notice thereof to Brocade to
enable it to seek a protective order or otherwise prevent such disclosure and
will cooperate with Brocade in seeking such protective order.
14. Warranty.
14.1 Product Warranty. Hon Hai warrants for a period of [*] from
the date of [*] of each unit of each Product, that such unit of each Product [*]
(a) will conform to the Specifications; (b) will be of good material (except for
material supplied by Brocade) and workmanship and free from defects in the
manufacture; (c) will be free and clear of all liens and encumbrances and that
Hon Hai will convey good and marketable title to such Product. For purposes of
clarification, the Parties agree that Hon Hai will have satisfied its
workmanship obligations in (b) above to the extent that such workmanship [*] or
(ii) the minimum requirements agreed upon in writing by the parties in a
Statement of Work or other signed document. [*]
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requested with respect to the omitted portions.
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14.2 Product Warranty Remedy. In accordance with the RMA procedures
outlined in Section 11.1, above, Brocade will promptly notify Hon Hai of any
Products [*] that Brocade believes do not comply with the warranties contained
in this Agreement. Hon Hai will pay all [*] associated with Products returned
for repairs during the warranty period. Hon Hai will, at [*] option, either (i)
credit Brocade for the purchase price paid by Brocade for the defective Product
units, or (ii) at [*] expense, replace, repair or correct such Product within
[*] of notification [*]. Hon Hai will [*] any charges in order to effect the
earliest reasonable replacement of such defective Products to Brocade [*]. Hon
Hai agrees to maintain a repair capability for products under warranty. Hon Hai
will provide to Brocade detailed information, including location, telephone
number, contact person and hours of operation for the Hon Hai service
representative who will be Brocade's contact for warranty claims and questions.
[*] Replaced Products will be warranted for [*] period, plus time equal to [*]
because of repair or replacement and shipment time, or [*], whichever is longer.
[*]
(a) [*]
14.3 Other Obligations and Warranties.
(a) Regulatory Compliance. Hon Hai represents and
warrants that its manufacturing facilities and processes will comply with all
applicable international, federal, state and local statutes, laws and
regulations.
(b) Import/Export Requirements. Brocade and Hon Hai will
comply with all import and export laws and regulations and maintain appropriate
import and export documentation. At Brocade's request, Hon Hai will make
available for inspection and audit all import and export documentation for the
Products and the Hon Hai Technology included in the Products sold under this
Agreement. At Brocade's request, Hon Hai will also assist Brocade in determining
an appropriate Export Control Classification Number ("ECCN") for all Products
sold hereunder. At Brocade's request, Hon Hai will also provide export screening
for all shipments of Products or Parts. Hon Hai will not, directly or
indirectly, export, re-export or transship any Technology in violation of any
applicable U.S. export control laws and regulations or any other applicable
export control laws promulgated and administered by the government of any
country having jurisdiction over the parties or the transactions contemplated
herein.
(c) Formation, Good Standing and Authority. Each of Hon
Hai and Brocade represents and warrants to the other that it is a company duly
formed, validly existing and in good standing under the laws of its jurisdiction
and that this Agreement has been duly executed and delivered by it, and
(assuming due authorization, execution and delivery by the other) constitutes a
legal, valid and binding obligation of it, enforceable against it in accordance
with its terms, subject to (i) laws of general application relating to
bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
(d) DOAs and Misshipments. Notwithstanding the terms and
conditions in Sections 7.2 and 14.2 of the Agreement, in the event that a
Product is rejected and returned to Hon Hai by Brocade [*] because (1) such
Product was [*] by, or on behalf of, Hon Hai (a "Misshipment"), and such
Misshipment is attributable to Hon Hai's acts or omissions, or (2) such Product
is found to be dead on arrival (a "DOA"), and such DOA is attributable to the
acts or omissions of Hon Hai, then Hon Hai shall:
(i) [*] for the return of such Misshipment/DOA;
and
(ii) [*] testing and reconfiguring such
Misshipment/DOA so that it is fully functional and meets the Specifications; and
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(iii) hold such Misshipment/DOA [*] for a period
of up to [*] or upon date of Brocade [*], whichever is less.
Subject to Hon Hai's compliance with the obligations in (i), (ii) and (iii)
above, Brocade agrees to provide Hon Hai with [*] for Misshipments and DOAs. In
addition, Hon Hai agrees to [*] all Misshipments and DOAs and to provide
Brocade, on a regular basis, a [*] regarding such Misshipments and DOAs. The
Parties agree to use their [*] efforts to identify and resolve Misshipment and
DOA issues and [*] such issues.
14.4 Warranty Disclaimer. THE WARRANTIES CONTAINED IN THIS SECTION
14 ARE IN LIEU OF, AND EACH PARTY EXPRESSLY DISCLAIMS AND THE OTHER PARTY WAIVES
ALL OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR ARISING
BY COURSE OF DEALING OR PERFORMANCE, CUSTOM, USAGE IN THE TRADE OR OTHERWISE,
INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR USE AND NONINFRINGEMENT OF THIRD PARTY RIGHTS.
15. Term and Termination.
15.1 Term. This Agreement will commence on the Effective Date and
will continue for a period of [*] thereafter, unless earlier terminated pursuant
to this Agreement. [*] may renew this Agreement for successive [*] terms by
providing written notice to [*] no later than [*] prior to the end of the
then-current term.
15.2 Termination for Default. [*] may terminate this Agreement if
[*] violates any covenant, agreement, representation or warranty contained
herein in any material respect or defaults or fails to perform any of its
obligations or agreements hereunder in any material respect, which violation,
default or failure is not cured within [*] after written notice (which notice
will describe the alleged breach in reasonable detail) from [*] stating its
intention to terminate this Agreement by reason thereof.
15.3 Other Causes of Termination. This Agreement will terminate
upon written notice by either party, immediately, if
(a) a receiver is appointed for the other party or its
property;
(b) the other party makes a general assignment for the
benefit of its creditors;
(c) the other party becomes insolvent or unable to pay
its debts as they mature in the ordinary course of business or makes an
assignment for the benefit of its creditors;
(d) the other party is liquidated or dissolved; or
(e) any proceedings are commenced against the other party
under any bankruptcy, insolvency or debtor's relief law and such proceedings are
not vacated or set aside within sixty (60) days from the date of commencement
thereof.
15.4 Effect of Termination. In the event of the expiration or
termination of this Agreement:
(a) Hon Hai will complete the production of any Products
of which Hon Hai has [*] as of the effective date of such expiration or
termination and Deliver such completed Products to Brocade by the earlier of (i)
the acknowledged delivery date, or (ii) [*];
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(b) Hon Hai will immediately cease the use of all of the
Brocade Technology upon completion of the work required in 1.1(a);
(c) Hon Hai will return or destroy (as appropriate
depending on the nature of the material) all Sensitive Brocade Information
within thirty (30) days after the effective date of the termination and certify
in writing that such party has complied with its obligations hereunder; and
(d) NEITHER BROCADE NOR HON HAI SHALL BE LIABLE TO THE
OTHER BECAUSE OF SUCH EXPIRATION OR TERMINATION, FOR COMPENSATION, REIMBURSEMENT
OR DAMAGES FOR THE LOSS OF PROSPECTIVE PROFITS, ANTICIPATED SALES OR GOODWILL,
ON ACCOUNT OF ANY EXPENDITURES, INVESTMENTS OR COMMITMENTS MADE BY EITHER, OR
FOR ANY OTHER REASON WHATSOEVER BASED UPON THE RESULT OF SUCH EXPIRATION OR
TERMINATION.
15.5 Survival. The rights and obligations of the parties set forth
in Sections 1, 3.3, 3.4, 4.2, 4.3, 5, 6, 7, 8, 9, 11, 12, 14, 15.4, 15.5, 16,
17, 18 and 19 will survive any termination or expiration of this Agreement [*].
16. Dispute Resolution. In the spirit of continued cooperation, the parties
agree to follow the dispute resolution procedure described in this Section in
the event any controversy should arise out of or concerning the parties'
performance under this Agreement. In the event of a dispute or claim arising
between the parties on any matter relating to this Agreement, either party may
initiate negotiation proceedings by written notice to the other party setting
forth the particulars of the dispute. Upon receipt of such notice, the parties
agree to meet in good faith within [*] of the date of such notice, to jointly
define the scope of and a method to remedy the dispute. If such meeting does not
resolve the dispute, then senior management of Hon Hai and Brocade are
authorized to and will meet personally within [*] to confer in a bona fide
attempt to resolve the matter. The parties will use diligent efforts to arrange
meetings or telephone conferences as needed to facilitate these negotiations. If
such dispute remains unresolved following the parties' undertaking of the
actions set forth in this Section 16, the parties shall have the right to avail
themselves of all other rights and remedies, whether available under this
Agreement, at law or in equity. Each party's rights to terminate this Agreement
for breach subject to the notice period set forth in Section 15 shall apply
regardless of the parties' discussions under this Section 16.
17. Limitation of Liability.
17.1 Consequential Damages Waiver. EXCEPT FOR BREACHES OF [*]
NEITHER PARTY SHALL HAVE ANY LIABILITY TO EACH OTHER OR ANY OTHER THIRD PARTY
FOR ANY LOST PROFITS, LOST DATA, LOSS OF USE OR COSTS OF PROCUREMENT OF
SUBSTITUTE GOODS OR SERVICES, OR FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL
DAMAGES ARISING IN ANY WAY OUT OF THIS AGREEMENT OR THE TRANSACTION CONTEMPLATED
THEREBY, UNDER ANY CAUSE OF ACTION OR THEORY OF LIABILITY, AND IRRESPECTIVE OF
WHETHER SUCH PARTY HAD ADVANCE NOTICE OF THE POSSIBILITY OF SUCH DAMAGES.
17.2 Failure of Essential Purposes. THE LIMITATIONS SET FORTH IN
THIS SECTION 17 SHALL APPLY NOTWITHSTANDING THE FAILURE OF THE ESSENTIAL PURPOSE
OF ANY LIMITED REMEDY.
18. Indemnification.
18.1 Hon Hai Indemnity. Hon Hai will defend, indemnify and hold
Brocade and its officers, directors and employees harmless (inclusive of
reasonable attorneys' fees) from and against any claim, suit, action or
proceeding brought against Brocade arising from, relating to or in connection
with: (a) Hon
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Hai's breach of any licenses granted to Hon Hai under this Agreement; (b) [*] in
the Products, to the extent that the claim is based on facts which constitute a
non-conformance with the [*] or [*] or [*] provided or developed by Hon Hai; (c)
acts, errors or omissions by or negligence of Hon Hai, its employees, officers,
agents or representative of any of them; (d) any third party claims founded on
theories of [*] related to the Products, to the extent that the claim is not
based on elements of the Products manufactured in conformance with the
Specifications; or (e) [*] the Products or Hon Hai Technology of any [*] not
based on the [*] provided by Brocade. In the event the Hon Hai Technology and/or
the Products are held or believed by Hon Hai to infringe, or Brocade's use of
the Hon Hai Technology and/or the Products is enjoined, [*]
18.2 Brocade Indemnity. Brocade will defend, indemnify and hold Hon
Hai and its officers, directors and employees harmless (inclusive of reasonable
attorneys' fees) from and against any claim, suit, action or proceeding brought
against Hon Hai arising from, relating to or in connection with: [*] (c) acts,
errors or omissions by or negligence of Brocade, its employees, officers, agents
or representative of any of them[*]. In the event the Brocade Technology is held
or believed by Brocade to infringe, or Hon Hai's use of the Brocade Technology
is enjoined, Brocade will have the option[*] to: (i) procure for Hon Hai the
right to continue using Brocade Technology; (ii) replace Brocade Technology with
non-infringing technology; (iii) modify Brocade Technology so that it becomes
non-infringing; or (iv) accept return of Brocade Technology. Brocade's
obligations hereunder will be void as to any Brocade Technology modified by Hon
Hai (without Brocade's approval), solely to the extent such modification is the
alleged basis of the suit.
18.3 [*]
19. Export. Hon Hai agrees that:
19.1 Hon Hai will perform routed transactions for Brocade, and
19.2 Hon Hai will provide Brocade with comprehensive ongoing
support regarding the following key issues: [*], accurate record-keeping of all
export document packets, [*] on all switches and FRUs, and Manufacturing
affidavits for all Brocade Products and Parts.
20. Environmental Requirements. Hon Hai warrants and agrees that:
20.1 Product Content. All Products and their packaging will comply
with Brocade's general specifications for environment (if any), and, for
purposes of this Agreement, such specifications are part of the Specifications
for the Product.
20.2 Shipment. All Products will be shipped in conformance with all
applicable national and international [*] including, where applicable,
regulations regarding [*], including regulations regarding [*]. All packaging
materials, including pallets, will be [*] and comply with national and
international regulations regarding [*] where applicable.
20.3 [*]. Each [*] contained in the Product is on the inventory of
[*] compiled and published by [*] pursuant to the [*].
20.4 Hon Hai will provide complete and accurate [*] for Product
prior to shipment.
20.5 [*] Information. Hon Hai will furnish Brocade any information
reasonably requested by Brocade to confirm compliance with applicable laws or to
determine the [*] effects of materials included in the Products or in its
packaging.
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20.6 Hon Hai will comply with all applicable laws governing import
or export of Products and will be solely responsible for obtaining all requisite
licenses and other authorizations.
20.7 Disposition of Excess Materials. Hon Hai will [*] of any
excess or waste materials generated from manufacture of Product (including
damaged or nonconforming product or materials) in compliance with the provisions
of this Agreement, applicable laws and any specific instructions received from
Brocade.
20.8 Hon Hai will continuously implement and maintain processes and
policies designed to [*] at any facility at which Product manufacturing
operations are performed under this Agreement.
20.9 Ozone Depleting Substances. Hon Hai hereby certifies that
neither Product, nor any part, piece or component of any Product:
(a) contains any [*] as those terms are defined in [*]
and implementing regulations of the [*], as now in existence or hereafter
amended; or
(b) has been manufactured with a process that uses any
[*]
21. General.
21.1 Insurance. Each party will maintain workers' compensation and
comprehensive general liability insurance (including product liability coverage)
adequate to cover its obligations under this Agreement.
21.2 Assignment. [*] will assign this Agreement, in whole or in
part, or any obligations or rights hereunder (except the right to receive
payments), except with the prior written consent of [*], which consent will not
be unreasonably withheld or delayed. Notwithstanding the foregoing, Brocade will
have the right to assign or otherwise transfer this Agreement without such
consent (i) to a subsidiary, parent, or entity under common control with
Brocade, or (ii) to a successor party in the event of a merger, acquisition,
sale, transfer or other disposition of all or substantially all of the assets of
Brocade. Subject to the foregoing, this Agreement will inure to the benefit of
each of the party's successors and assigns.
21.3 Relationship of the Parties. The parties to this Agreement are
independent contractors. There is no relationship of agency, partnership, joint
venture, employment or franchise between the parties. Neither party has the
authority to bind the other or to incur any obligation on its behalf.
21.4 Publicity. Hon Hai will not publicize or disclose the terms of
this Agreement to any third party without the prior written consent of Brocade.
21.5 Waiver. No term or provision hereof will be considered waived
by either party, and no breach excused by either party, unless such waiver or
consent is in writing signed on behalf of the party against whom the waiver is
asserted. No consent by either party to, or waiver of, a breach by either party,
whether express or implied, will constitute a consent to, waiver of, or excuse
of any other, different or subsequent breach by either party.
21.6 Severability. If any part of this Agreement is found invalid
or unenforceable, that part will be amended to achieve as nearly as possible the
same economic effect as the original provision and the remainder of this
Agreement will remain in full force.
21.7 Choice of Law. This Agreement will be governed by and
construed in accordance with the laws of the United States and the State of
California as applied to agreements entered into and to be
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performed entirely within California between California residents. The parties
agree that the United Nations Convention on Contracts for the International Sale
of Goods (1980) is specifically excluded from application to this Agreement.
21.8 Choice of Forum. This Agreement will be deemed made and
entered into in Santa Clara County, California. Except for either party's right
to apply to any court of competent jurisdiction for a temporary restraining
order and/or a preliminary injunction to enjoin the other party from
misappropriating or infringing any Intellectual Property Rights of the moving
party, the parties hereby submit to the exclusive jurisdiction of, and waive any
venue objections against, the United States District Court for the Northern
District of California, San Jose Branch and the Superior and Municipal Courts of
the State of California, Santa Clara County, in any litigation arising out of
this Agreement. The parties hereby irrevocably waive any and all claims and
defenses either might otherwise have in any action or proceeding in any of such
courts based upon any alleged lack of personal jurisdiction, improper venue,
forum non conveniens or any similar claim or defense.
21.9 Notices. Any notice provided for or permitted under this
Agreement will be treated as having been given when (a) delivered personally,
(b) sent by confirmed telex or telecopy, (c) sent by commercial overnight
courier with written verification of receipt, or (d) mailed postage prepaid by
certified or registered mail, return receipt requested, to the party to be
notified, at the address set forth below, or at such other place of which the
other party has been notified in accordance with the provisions of this Section.
If to Brocade: Brocade Communications Systems, Inc.
1745 Technology Drive
San Jose, CA 95110
Attn.: General Counsel
If to Hon Hai: Hon Hai Precision
1705 Junction Court
Suite 200
San Jose, CA 95112-1023
Attn.: ________________________
Such notice will be treated as having been received upon the earlier of actual
receipt or five (5) days after posting.
21.10 Amendment. This Agreement may be amended or supplemented only
by a writing that refers explicitly to this Agreement and that is signed on
behalf of both parties.
21.11 Interpretation. No party will be deemed the drafter of this
Agreement, which Agreement will be deemed to have been jointly prepared by the
parties. If this Agreement is ever construed, whether by a court or by an
arbitrator, such court or arbitrator will not construe this Agreement or any
provision hereof against any party as drafter. The Section and other headings
contained in this Agreement are for reference purposes only and will not in any
way affect the meaning and/or interpretation of this Agreement. It is the intent
of the parties that this Agreement and its addenda will prevail over the terms
and conditions of any purchase order, acknowledgment form or other instrument.
In the event of a conflict between the terms of this Agreement and the terms
contained in any addenda to this Agreement, the terms of the addenda will be
controlling. Addenda will not be binding until executed by authorized
representatives of each party.
21.12 Entire Agreement; Counterparts; Fax Signatures. This
Agreement, including all exhibits to this Agreement, constitutes the entire
agreement between the parties relating to this subject matter and supersedes all
prior and/or simultaneous representations, discussions, negotiations and
agreements, whether written or oral. This Agreement may be executed in
counterparts, each of which will be deemed
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an original, but both of which together will constitute one and the same
instrument. The parties agree that facsimile signatures of the parties will be
binding.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective duly authorized officers as of the date first written above.
HON HAI PRECISION BROCADE COMMUNICATIONS SYSTEMS,
INC.
By: _________________________________ By: __________________________________
Name: _______________________________ Name: ________________________________
Title: ______________________________ Title: _______________________________
Date: _______________________________ Date: ________________________________
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EXHIBIT A
PRODUCTS
--------------------------------------- ------------------------------------ -------------------------------------
PRODUCT NAME BROCADE PART NUMBER UNIT PRICE
--------------------------------------- ------------------------------------ -------------------------------------
--------------------------------------- ------------------------------------ -------------------------------------
--------------------------------------- ------------------------------------ -------------------------------------
--------------------------------------- ------------------------------------ -------------------------------------
--------------------------------------- ------------------------------------ -------------------------------------
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EXHIBIT B
ANCILLARY TECHNOLOGY TERMS AND CONDITIONS
1. All tools, tooling equipment, test equipment and other materials
furnished to Hon Hai by Brocade or paid for by Brocade ("Brocade Property" or
"Ancillary Technology") in connection with this Agreement will be clearly
identified by Hon Hai and will remain the property of Brocades and will be (a)
clearly marked and remain the personal property of Brocade, and (b) kept free of
liens and encumbrances. Hon Hai will allow Brocade personnel onto Hon Hai's
premises upon 24 hours notice to allow Brocade to inspect the condition of the
Brocade Property or reclaim possession of the Brocade Property.
2. Brocade [*] the Brocade Property, and Hon Hai [*] agrees that it will
not issue any negotiable bills or receipts on the Brocade Property and will
neither file nor permit any lien or other claim to be filed against any of the
Brocade Property. In the event that such a lien or claim is filed, Hon Hai will
promptly notify Brocade and will take all action necessary to cause such lien or
claim against the Brocade Property to be released or otherwise removed within
[*]. If such lien or claim is not released within such [*], then Brocade may
deem that Hon Hai has purchased the Brocade Property at the [*] cost for such
Brocade Property and such amount will be immediately payable to Brocade. Hon Hai
will hold Brocade Property at its own risk and will not modify the property
without the written permission of Brocade. Hon Hai agrees that Brocade property
will be used by Hon Hai only to perform Hon Hai's obligations under this
Agreement. Upon Brocade's request, Hon Hai will redeliver the property to
Brocade in the same condition as originally received by Hon Hai with the
exception of reasonable wear and tear. Hon Hai agrees that in the event the
property is lost, damaged or destroyed, Hon Hai's liability for the property is
limited to the book value of the property.
3. Unless otherwise agreed to in writing by Brocade, all Ancillary
Technology will be insured by [*]. Hon Hai will execute and deliver to Brocade
such other or further agreements relative to property furnished by Brocade to
Hon Hai as may be requested by Brocade.
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EXHIBIT C
SLA (FOR REFERENCE ONLY)
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EXHIBIT D
QUALITY PLAN
Solectron shall comply with the terms and conditions of Brocade's quality
procedure document identified in Brocade's Agile system as:
[*] MANUFACTURING SUPPLIER QUALITY PROCEDURE
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EXHIBIT D
BROCADE
MANUFACTURING SUPPLIER QUALITY PROCEDURE
OPERATIONS
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DOCUMENT REVISION HISTORY
REVISION # DATE DESCRIPTION
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Draft 2/11/03 Written by RS and Team
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Brocade Communication Systems Inc. Document: 99-0000112-01
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TABLE OF CONTENTS
Section Page
------- ----
1.0 Description 3
2.0 Scope 3
3.0 References 3
4.0 Procedure
4.1 Value Proposition 3
4.2 Supplier Participation Matrix 4
4.3 Management Communication 4
4.4 Workmanship Standards 4
4.5 Repair and Rework 4
4.6 Design for Manufacturability (DFM) and Value Engineering 4
4.7 Authorized Vendor List (AVL) 5
4.8 Process Qualification & Controls 5
4.9 Test/Quality Data Collection & Reporting 5
4.10 Product Inspection / Process Auditing 5-6
4.11 RMA Processing 6
4.12 Supplier Corrective Action Requests 6
Appendix A: Standard Product Qualification Process Flow 7
Appendix B: Corrective Action Request (CAR) Form 8
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1.0 DESCRIPTION
1.1 This procedure outlines the generic product and process quality
requirements for key commodity parts supplied to and/or manufactured
for Brocade, Inc.
2.0 SCOPE
2.1 This procedure applies to [*] to Brocade, Inc. It may also be applied,
at Brocade's discretion, to products specifically developed for Brocade
by [*] and other [*].
2.2 If a conflict arises between any requirement outlined in this procedure
and a specific supplier contract signed by Brocade Inc., the [*] take
precedence.
3.0 REFERENCES
3.1 Acceptability of Printed Boards (Class 2) ANSI/IPC-A-600E (latest
revision)
3.2 Acceptability of Printed Circuit Assemblies (Class 2) ANSI/IPC-A-610B
(latest revision)
3.3 ANSI/IPC 7711 and 7721 Suggested Guidelines for Modification, Rework
and Repair of Printed Boards and Assemblies (Level C)
3.5 ANSI/IPC-T-50D (Terms and Definitions for Interconnecting and Packaging
Electronic Circuits)
3.6 ANSI Z1.4 Sampling tables
3.7 Brocade Product Quality Plan (Product Specific)
3.8 Manufacturing/contract agreement
4.0 PROCEDURE
4.1 VALUE PROPOSITION
4.1.1 The Brocade supply chain value proposition is to establish supplier
partnerships characterized by the following:
- Open and honest communication
- Strong "values based" management
- On-time delivery of quality products
- End user customer focus
- Timely data driven decision making
- Mutual respect and responsiveness
- Ongoing mutual total life cycle cost reduction
4.1.2 We believe that relationships with these characteristics will enable us
to establish a world class supply chain management system and provide
products and services that consistently meet or exceed our customer's
requirements.
[FLOW CHART]
4.1.3 We believe that everyone in a supply chain is a customer for the work
done by an "upstream" internal employee or external supplier. As such,
you have a right to expect good work from them and an obligation to
deliver work of high caliber to your internal and/or external customer.
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4.1.4 Sustained quality excellence requires continuous process improvement.
This means, regardless of how good present performance is, it can
become even better. "You can manage what you can measure." Align what
you measure to the individual behaviors you want to support.
4.2 SUPPLIER PARTICIPATION
4.2.1 Contract manufacturing and other key suppliers are expected to [*] in
the Brocade product development process. We depend on your [*] to
optimize the design, quality, cost and delivery of Brocade products.
Brocade will formally engage suppliers, through meetings and dialogue,
throughout the product life cycle. Appendix A outlines a generic
product qualification process flow.
4.3 MANAGEMENT COMMUNICATION
4.3.1 Our goal is to create a communication process to establish and sustain
mutually profitable and rewarding business relationships. We want to
become your [*], and we want you to become our [*].
4.3.2 To this end, Brocade will participate in periodic management
communication meetings with key suppliers. These meetings will include
a review of quality, cost and delivery performance metrics and ongoing
improvement plans.
4.3.3 Specific Quality metrics and requirements are identified with in the
Brocade Product Quality Plan's. Additionally, process parameters and
controls may be included within each plan.
4.4 WORKMANSHIP STANDARDS
4.4.1 Printed Wiring Boards shall meet the requirements of [*], latest
revision, Class [*].
4.4.2 Printed Circuit Assemblies shall meet the requirements of [*], latest
revision, Class [*].
4.4.3 [*] Requirements for Soldered Electrical and Electronic Assemblies and
HDBK-001 (Handbook and guide to supplement [*] with amendment [*]).
4.4.4 [*]. Supplier specific workmanship standards should be identified and
communicated to Brocade, Inc. prior to production.
4.4.5 Brocade Cosmetic Specification 95-0000001-01.
4.5 REPAIR AND REWORK
4.5.1 [*] (Terms and Definitions for Interconnecting and Packaging Electronic
Circuits) contains the following definitions:
Repair(ing): The act of restoring the functional capability of
a defective article in a manner that precludes compliance with
applicable drawings or specifications.
Rework(ing): The act of reprocessing non-complying articles,
through the use of original or alternate equivalent
processing, in order to bring the article into compliance with
applicable drawings and specifications.
4.5.2 [*] (Suggested Guidelines for Modification, Rework and Repair of
Printed Boards and Assemblies) categorizes modifications, rework and
repairs into [*] levels ([*]).
4.5.3 Brocade will accept PWB fab and assemblies that have been [*]), using
Level [*] techniques outlined in the above. Level [*] rework techniques
may be authorized by Brocade, only through prior Brocade Engineering or
Quality approval.
4.5.4 All [*] must meet the workmanship requirements of [*] and/or [*]. Any
[*] method not contained in [*] must be authorized by Brocade Quality
before being used on any Brocade product.
4.6 DESIGN FOR MANUFACTURABILITY (DFM) AND VALUE ENGINEERING
4.6.1 [*] shall conduct Design for Manufacturability analysis for every new
Brocade board design and/or significant ECO. [*] should participate in
these reviews, as appropriate and/or conduct similar reviews for [*]
products.
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4.6.2 Suppliers are expected to initiate and/or participate in periodic value
engineering efforts to reduce the current and future Brocade cost of
goods sold (COGS). The timing and content of this activity shall be
determined on a [*] basis.
4.7 AUTHORIZED VENDOR LIST (AVL)
4.7.1 Contract manufacturers and other partners who supply critical
components to Brocade must use Brocade's AVL, as required. Notification
of this requirement will be made in advance.
4.7.2 Brocade will consider AVL change recommendations from any supplier.
Change requests must be approved in writing by Brocade prior to
implementation. This is typically done through Brocade's Agile Document
System.
4.7.3 Brocade reserves the right to [*] or [*] at no additional cost of any
materials supplied with [*] content. This will be considered a serious
offense and may have a negative impact on the offending supplier
relationship with Brocade.
4.8 PROCESS QUALIFICATION & CONTROLS
4.8.1 Brocade may require certain documentation from selected suppliers prior
to commencing production.
4.8.2 The following supporting documentation may be requested:
- Supplier qualification & performance monitoring process
- Production process flow diagram
- Product qualification testing plan and results (PVT)
- Supplier version of BOM's and AVL's used to produce
Brocade products
- Process characterization documentation [e.g. SMT stencil,
solder paste, SMT and through-hole reflow, board cleaning,
rework, etc.]
- Production test specifications and instructions, and
in-process quality/control plan
- Assembly process flow diagram
- Gage Repeatability and Reproducibility Studies (Gage R&R:
where/when applicable)
- First Article Inspection
- Other documentation as appropriate
4.9 TEST/QUALITY DATA COLLECTION & REPORTING
4.9.1 Suppliers will be required to provide periodic test and inspection
yield information to Brocade, upon request. Typical (but not limited to
the following) test and inspection results requested would be:
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Incoming Inspection Test Failure Pareto Charts [debug/rework]
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In-circuit Test Quality Inspection Pareto Charts
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Functional Test Final Inspection Results
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Environmental Stress Screening Corrective Action Status
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In-Process Audit Results Third Party Audit Results
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4.9.2 Performance reporting charts and graphs should generically include the
following information:
- Goals: benchmarks of best in class performance
- Targets: interim goal for a given period
- Actions: actions that are necessary to realize these
improvements with owners assigned and planned completion
dates
- Progress: measured by relative improvements (delta) each
period
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requested with respect to the omitted portions.
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4.10 PRODUCT INSPECTION / PROCESS AUDITING
4.10.1 Brocade reserves the right to conduct [*] product inspection and/or
process audits of supplier facilities engaged in producing supplied
parts or Brocade final products. These activities would be conducted
with [*] of the respective supplier. Discrepancies found during these
audits will result in a Corrective Action Request (CAR) (see Paragraph
4.12 below.)
4.10.2 Brocade also reserves the right to conduct source inspection at the
supplier site. This inspection process, if implemented, would typically
include the following activities:
- Inspection of in process and/or finished product against
all appropriate workmanship standards.
- Acceptance sampling in accordance with ANSI Z1.4
(supercedes Mil Std 105), Single Sampling Plan for 1% AQL,
Level II, normal inspection level.
- As an example, a random sample of 13 units would be
inspected for critical workmanship attributes from a lot
of 100 units. The lot would be accepted with zero defects
found and rejected with one or more defects found. The
supplier would be responsible to conduct a 100% screen of
the entire lot for the defective attribute and re-submit
the lot for another sample inspection.
- Reduced inspection would occur when production is at
steady state, ten consecutive lots pass at normal
inspection levels, and the total number of defects in the
sample from those ten lots are equal to or less than the
applicable number given in ANSI Z1.4. Acceptance of five
additional lots at reduced level would qualify the part
number for dock-to-stock. Conversely, if two of five
consecutive lots were rejected, a tightened inspection
would be conducted until five consecutive lots were
accepted. At that point, the part would start the
qualification process over at the normal inspection level.
4.10.3 Details of the source inspection process and qualification standards
will be further defined and agreed upon prior to implementation with
selected suppliers.
4.11 RETURN MATERIAL AUTHORIZATION (RMA) PROCESSING
4.11.1 Brocade will contact suppliers with RMA requests via telephone, e-mail
and/or fax, depending upon the specific arrangements made.
4.11.2 Unless otherwise specified, suppliers shall provide RMA numbers to
Brocade within [*] from receipt of the request.
4.11.3 Suppliers shall repair or replace the defective part within [*] of
receipt of the defective product.
4.11.4 Suppliers shall maintain records of all RMA requests and provide
in-process and completion status of Brocade RMA's.
4.12 CORRECTIVE ACTION REQUESTS (CARS)
4.12.1 Brocade will issue a Corrective Action Request (Appendix B) whenever a
discrepant product or unsatisfactory supplier process condition is
discovered. The CAR Form may be transmitted to the supplier via e-mail
or fax.
4.12.2 Unless otherwise specified, suppliers shall acknowledge receipt and
provide a preliminary assessment and immediate corrective action of the
discrepancy within [*]) of receipt. Unless otherwise specified, the
preventative measures shall be completed and the documentation
submitted no later than [*] of a CAR receipt.
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the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
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Appendix A:
Standard Product Qualification Process Flow
[FLOW CHART]
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Appendix B: Corrective Action Template (8D)
CLOSED LOOP CORRECTIVE ACTION FORM
CUSTOMER AFFECTED BROCADE PART NUMBER CUSTOMER MODEL NUMBER QTY:
STEP 1 INTERNAL TEAM MEMBERS EXTERNAL TEAM MEMBERS
STEP 2 DESCRIBE THE PROBLEM DATE:
STEP 3 ROOT CAUSE ANALYSIS DATE:
STEP 4 CONTAINMENT PLAN DATE:
STEP 5 CORRECTIVE ACTION PLAN DATE:
STEP 6 VERIFICATION OF CORRECTIVE ACTION DATE:
STEP 7 PREVENT RECURRENCE DATE:
STEP 8 CONGRATULATE TEAM DATE:
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CLCA# Status: Target Closure Date: Customer Ref. No.
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BRC-MMDDYY OPEN If applicable
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EXHIBIT E
EXCLUDED PARTS
PART FXCN NO.
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1. [*] [*]
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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.
Brocade Manufacturing Agreement BROCADE CONFIDENTIAL
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