Manufacturing and Purchase Agreement - Brocade Communications Switzerland SarL. and Solectron Corp.
MANUFACTURING AND PURCHASE AGREEMENT
This MANUFACTURING AND PURCHASE AGREEMENT ("Agreement") is entered into as of
March __, 2003 ("Effective Date") by and between Brocade Communications
Switzerland SarL., a corporation organized under the laws of Switzerland, and
having its principal place of business at 29, Route de I'Aeroport, Case Postale
105, CH-1215 Geneva 15, Switzerland ("Brocade"), on the one hand, and Solectron
Corporation, a Delaware corporation with an office at 847 Gibraltar Drive,
Milpitas, CA 95035, and its subsidiaries and affiliates, including but not
limited to Solectron Technology Singapore Ltd., Solectron Technology Sdn Bhd,
and Solectron Netherlands BV(collectively, "Solectron"), on the other hand (each
a "Party" and collectively the "Parties").
1. Definitions.
1.1 "Ancillary Technology" means all test programs and consigned
equipment and related fixtures provided to Solectron by Brocade.
1.2 "Brocade Technology" means the Technology and all Derivatives
thereof (a) provided by Brocade to Solectron pursuant to this Agreement, or (b)
developed by Brocade or Solectron pursuant to this Agreement; provided, however,
that such Technology is not Solectron 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 ("Brocade AVL") as provided by Brocade to Solectron and as updated by
Brocade from time to time, and (b) as the source of certain FRUs and/or
components to be used by Solectron in the manufacture of the Products.
1.4 "Solectron Vendors" means any Brocade Vendors, which are also
included on Solectron's preferred supplier list ("Solectron PSL"). The version
of the Solectron PSL existing as of the Effective Date is attached as Exhibit F.
This Solectron PSL may be modified from time to time without amending Exhibit F
or this Agreement.
1.5 "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.
1.6 "Solectron Technology" means the Technology [*], which are (a)
developed by Solectron prior to entering into this Agreement, and (b) developed
independently by Solectron.
1.7 "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.
1.8 "Joint Technology" means any (a) Technology that is first
conceived or reduced to practice by one or more of Solectron'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
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by one or more of Solectron'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.
1.9 "Products" means the Brocade products and FRUs identified on
Exhibit A.
1.10 "Purchase Order" means a Brocade purchase order for the
purchase of the Products issued to Solectron pursuant to the provisions of this
Agreement.
1.11 "SLA" means the "service level agreement" document, which is a
document created by Brocade and Solectron containing certain operational terms
agreed between the parties. The SLA will include mutually agreed upon
operational/performance metrics for delivery, quality, communication, technical
support and flexibility. These metrics will be used as guidelines for CSI input
and quarterly scorecards. The version of the SLA existing as of the Effective
Date is attached as Exhibit C for reference only. The parties may agree in
writing from time to time to change the SLA, without amending Exhibit C or this
Agreement.
1.12 "Specifications" means the functional and performance
specifications (including, without limitation, bills of materials, schematic
diagrams, and Product, component and assembly drawings) relating to the testing
and manufacturing of each Product as provided in writing by Brocade to
Solectron.
1.13 "Statement of Work" means a written statement of work signed
by both parties for special development work to be done by Solectron 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.
1.14 "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 [*] (or as
otherwise agreed in the SLA), Brocade will provide Solectron with a [*] forecast
of the quantity demand for each Product ("Product Forecast") either in writing
or via EDI. For the purpose of spare parts, Brocade will provide Solectron, [*],
with a [*] repair forecast of the quantity demand for all FRUs 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 FRUs used in such Product [*], which shall in no case extend
longer than [*] from the end-of-life date of such Product. The Forecasts [*], or
as otherwise instructed in writing by Brocade. [*] purchased within the
applicable lead time; provided that, for a ninety (90) day period, Solectron
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 not [*].
2.2 [*] [*]
2.3 Vendor Forecasts. Solectron will provide each Brocade Vendor,
as mutually agreed and specified in the SLA, with [*] 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.
2.4 Material Management. Solectron will, at a minimum, comply with
the following obligations to ensure good component material management for the
Products, including: (a) [*]
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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 Solectron to produce the Products
meet the Specifications; and (f) calculate for Brocade and provide documentation
of the country of origin of each of the Products and FRUs in accordance with US
law. As between Solectron and Brocade, [*] will be solely responsible for all
costs relating to the collection and replacement of Products and FRUs due to
Solectron's use of component materials that [*]
2.5 Procurement Responsibility Table. Attached hereto as Exhibit G
is the current Procurement Responsibility Table, which provides definitions of
Tier 1, Tier 2 and Tier 3 components and the respective obligations of Brocade
and Solectron for [*] such components. The parties may agree in writing from
time to time to change the Procurement Responsibility Table without amending
Exhibit G or this Agreement, provided, however, that all revisions shall be
controlled using a revision number to capture any mutually agreed upon changes.
2.6 Alternative Sourcing. Solectron may only procure FRUs and/or
components used in the manufacture of Brocade Products from Brocade Vendors.
During the life of this Agreement, Solectron will provide initial or alternative
Solectron-approved sourcing suggestions to Brocade for those FRUs and/or
components for which Brocade has not provided or accepted any Solectron Vendors.
If approved by Brocade these vendors will be added to the Brocade AVL and deemed
"Solectron Vendors".
2.7 Excess and Obsolete Materials. [*] the materials purchased by
Solectron subject to the terms of this Agreement, to support Brocade purchase
orders, forecasted demand requirement, requested inventory build up and
flexibility requirements as further detailed in the SLA. Excess and obsolete
material will be managed according to the provisions of Exhibit H.
3. Manufacturing Obligations.
3.1 Specifications and Statements of Work. Solectron will
manufacture and test the Products in strict compliance with the Specifications,
Statements of Work and any other written instructions agreed between Brocade and
Solectron for each Product. Solectron will honor the lead time, reporting, and
other requirements in the then-current version of the SLA as agreed between
Brocade and Solectron. 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 Delivery. Solectron acknowledges and agrees to meet the
delivery requirements of all Product manufacturing, supply and repair services
as specified in the SLA.
3.3 Changes. Solectron agrees that Solectron will not change the
manufacturing location of the facilities for the manufacture, assembly, or test
of the Products, or use third party manufacturers, without Brocade's prior
written consent, which shall not be unreasonably withheld.
3.4 Ancillary Technology. Brocade, at its sole discretion, may
furnish Ancillary Technology to Solectron solely for use in the manufacture and
testing of the Products. Solectron 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 Solectron's obligations under this Agreement. Solectron
will maintain the Ancillary Technology in good condition and repair, ordinary
wear and tear excepted, and provide necessary and reasonable calibration
services for the Ancillary Technology. Brocade and Solectron agree that the
terms set out in Exhibit B hereto will apply to all Ancillary Technology, and
Solectron will be responsible for obtaining the
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requisite insurance coverage and conducting appropriate inspections in
accordance with Exhibit B hereto. With respect to any Ancillary Technology
licensed to Solectron pursuant to this Agreement, Brocade agrees to provide
Solectron with a reasonable amount of support, at no charge, with respect to the
initial installation, set-up and debugging 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 Solectron, 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. The foregoing shall in no way limit Brocade's
responsibility to fulfill its purchase obligations under any purchase orders
issued by Brocade to Solectron and accepted by Solectron.
4. License Rights and Restrictions.
4.1 License to Solectron.
(a) License to Specifications. Subject to the terms of
this Agreement, Brocade hereby grants Solectron 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 for the purpose of manufacturing the Products for Brocade.
(b) License to Ancillary Technology. Subject to the terms
of this Agreement, Brocade hereby grants Solectron 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 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 Solectron 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 at each
Brocade-approved Solectron manufacturing facility.
(d) License to Brocade Technology. Brocade hereby grants
Solectron 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 as
necessary to fulfill its manufacturing obligations under this Agreement.
Solectron 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 Solectron nor any third party will
retain any rights in any materials incorporated into the Products. To the extent
that (a) Solectron provides to Brocade any Solectron Technology [*], Solectron
hereby grants to Brocade a non-exclusive, royalty-free, perpetual, irrevocable
license under Solectron's Intellectual Property rights to make, have made, use,
sell, import, reproduce, display, distribute, and create derivative works of
such Solectron Technology solely in connection with the development,
manufacture, marketing, and sale of Brocade products.
4.3 Residual Information. Brocade may disclose and use the ideas,
concepts, know-how, and techniques which are related to the manufacture of
Brocade's products, retained in the memories of individuals, and contained in
Solectron Technology or developed, provided, or accessed by Solectron
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under this Agreement (RESIDUAL INFORMATION) to make, have made, use, sell,
import, reproduce, display, distribute, and create derivative works of such
Solectron Technology solely as necessary in connection with the development,
manufacture, marketing, and sale of Brocade products, [*]
4.4 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.
Solectron will not modify, decompile or reverse engineer the Brocade Firmware or
any Brocade Technology.
5. Purchase Orders.
5.1 Purchase Order Acceptance. Solectron 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 Solectron ("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. Subject to any flexibility terms set
forth in the SLA, Solectron will, at [*], accept all Purchase Order
cancellations, reschedules and changes in the quantity of Products ordered
within the cancellation, rescheduling, change, or other flexibility terms in the
SLA.
5.3 Demand Flexibility Requirements. Solectron recognizes the
uncertainty of Brocade demand and will accommodate changes to Brocade's demand
pursuant to the terms in the SLA.
(a) Tooling, Equipment and Non-recurring Services.
Solectron customer orders for tooling, equipment and non-recurring services are
typically firm and non-cancelable; however, in the event that Brocade determines
that it must cancel such an order prior to the tooling or equipment being
delivered or services rendered, then Brocade shall only be liable to Solectron
for the actual and reasonable costs accrued by Solectron, [*] as mutually agreed
upon by the parties.
6. Shipping and Delivery.
6.1 Shipment. Unless otherwise agreed upon in writing, all
shipments of the Products will be made [*] (per Incoterms 2000).
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, Solectron will notify Brocade as soon as
reasonably possible, as to the cause and extent of such delay. Except as Brocade
may otherwise advise in advance and in writing, Brocade may [*] any goods (i)
shipped [*] the quantity ordered, (ii) shipped in a [*] shipments, or (iii)
shipped [*].
6.3 Accelerated Measures. If Solectron 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, Solectron will, [*], employ
accelerated measures such as [*] required to meet the specified delivery
schedule or minimize the lateness of shipments [*]
7. Acceptance.
7.1 Inspection. Solectron will ship Products directly to [*]. All
deliveries of Products are subject to inspection and testing by Brocade [*]
before final acceptance. Within [*] after receipt of
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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 Solectron, [*]. [*], In the event that the returned
Product is defective, Solectron will repair or replace such defective Product,
[*]. Solectron will return to Brocade or its customer, as the case may be,
freight prepaid, all repaired or replaced Products within [*] after Solectron'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
Solectron 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 Solectron to the End User at [*] expense, pursuant
to the terms of the SLA.
7.3 Spot Testing. Upon prior written notice to Solectron, and
subject to the confidentiality requirements herein, Brocade or its authorized
representative(s) may conduct spot functional tests of the Products at
Solectron's facility at which Products are being manufactured during Solectron'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 Solectron'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 Solectron will promptly take all steps necessary to correct such failures.
7.4 Site Inspections. Upon prior written notice to Solectron, and
subject to the confidentiality provisions herein, Brocade[*], will have the
right to perform on-site inspections at Solectron's manufacturing facilities and
Solectron will fully cooperate with Brocade in that regard at mutually agreed
upon times. If an inspection or test is made on Solectron's premises, Solectron
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, Solectron
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.
8. Pricing and Payment.
8.1 Prices. The unit prices to be paid by Brocade for the Products
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 include [*]
for the Products or warranty repair services (as the case may be), any related
deliverable items and packaging for delivery to Brocade. The prices attached to
the Exhibit A will be reviewed on a [*] basis. All payments hereunder will be
paid in U.S. Dollars unless otherwise mutually agreed upon by the parties in
writing. [*]
8.2 Components Management. Solectron agrees to manage inventory
and purchase materials in a manner that is cost effective. [*]
(a) Cost Reductions. Material cost reductions will be
reviewed and mutually agreed upon by Brocade and Solectron on a [*] basis and
shall be included in an updated Exhibit A.
(b) [*]
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8.3 Taxes. [*] Where the law permits, Solectron will treat Brocade
as exempt from applicable state and/or local sales tax for Product(s) purchased
pursuant to this Agreement.
8.4 Invoices. [*], Solectron will submit invoice(s) periodically
to Brocade upon [*] of Product(s) for which the recipient takes delivery outside
the United States. (All Products for which the recipient takes delivery inside
of the United States shall be governed by the agreement entered into by and
between Brocade Communications Systems, Inc. and Solectron, dated February 21,
2003.) Brocade will pay non-disputed invoices net [*] after the later of date of
[*] of (a) the Products [*], or (b) Solectron's invoice to Brocade. Payment will
not constitute acceptance of the Products by Brocade. If Brocade requests, and
Solectron agrees, that Products or FRUs be kept in [*], Solectron will invoice
Brocade for the Products [*] after the Products or FRUs enter [*]. Upon [*] for
such Products or FRUs that enter Finished Goods, Brocade will take [*] of these
Products.
8.5 [*]
9. Quality Assurance.
9.1 Quality Standards. Solectron 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. Solectron 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.
10. Engineering Changes.
10.1 ECOs. Brocade may, upon advance written notice to Solectron,
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. [*], Solectron will acknowledge the ECO
and report to Brocade within [*] upon Solectron'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 Solectron to evaluate ECO impact regarding potential excess
manufacturing costs and price, if any, and non-recurring costs, if any.
Notwithstanding the foregoing, Brocade may require, from time to time, [*]
implementation of an emergency ECO. In these cases, Solectron will provide
Brocade with a preliminary estimate of the cost impact within [*].
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. Solectron will not change or
modify the processes for the Products without Brocade's prior written consent.
Solectron will reimburse Brocade for all expenses incurred by Brocade to qualify
changes to such materials or processes that are undertaken by Solectron without
Brocade's prior written consent.
11. Product Repairs and FRUs Supply.
11.1 Repair Services. Solectron will provide repair services to
Brocade and Brocade-authorized third parties (i) for all in-warranty Products in
accordance with the terms of Sections 14, below, and (ii) [*] for any
out-of-warranty Products and FRUs for a period of [*] from the end-of-life
production of such Products or FRUs by Solectron or a Brocade Vendor. For any
Product or FRU that is returned to Solectron for repair or replacement services,
Brocade will issue a Return Material Authorization ("RMA")
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number, and will forward such RMA electronically to Solectron, through Brocade's
[*] system. All Products and FRUs returned to Solectron for repair or
replacement services will include the RMA affixed to the packaging.
11.2 FRUs Supply. Solectron will make available to Brocade Product
FRUs as Brocade may [*] for [*] Products purchased by Brocade from Solectron
during the Product production. For a period of [*] after the date of delivery to
Brocade by Solectron of the last unit of the Product manufactured by Solectron,
Solectron shall undertake the following: (a) Solectron will maintain [*] for
each Product; (b) Solectron will inform Brocade of all [*] notifications for
FRUs or components upon Solectron's receipt of such notifications; and (c)
Solectron will inform Brocade if a [*] is the most economical procurement
strategy for such FRUs or components as to which such a notification is received
(especially [*] FRUs which may require tool maintenance and set-up charges that
far outweigh piece part costs). [*] If Brocade determines that a final buy is
not financially favorable due to the [*] of the remaining support period for the
FRU(s), Solectron will assist Brocade in [*] through manufacturing. [*]
12. Ownership.
12.1 Ownership by Brocade. As between Brocade and Solectron,
Brocade will own all right, title, and interest in the Specifications, Brocade
Firmware, Products, Ancillary Technology and the Brocade Technology (excluding
the Solectron Technology, which will be owned exclusively by Solectron) and all
Intellectual Property Rights therein, and Solectron hereby irrevocably
transfers, conveys and assigns to Brocade all of its right, title, and interest
therein. Solectron 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 Solectron. As between Solectron and Brocade,
Solectron will own all right, title and interest in the Solectron Technology
(excluding the Brocade Technology, which will be owned exclusively by Brocade),
and all Intellectual Property Rights therein.
12.3 Ownership of Joint Technology. All discoveries, improvements
and inventions conceived or first reduced to practice, as those terms are used
before the U.S. Patent and Trademark Office, in the performance of this
Agreement jointly by Solectron personnel and Brocade personnel (the "Joint
Technology"), shall be the property [*] Each party shall execute all documents
and take such further actions as may be reasonably required to evidence, perfect
or enforce any such assignment. [*]
12.4 [*]
12.5 Attorney in Fact. Solectron agrees that that if Brocade is
unable because of Solectron's unavailability, dissolution or incapacity,
unreasonable refusal or failure to act in a timely manner such that intellectual
property rights protection specified in Section 12.3 may be impaired, to secure
Solectron'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 Brocade under this Agreement, then Solectron hereby
irrevocably designates and appoints the Brocade and its duly authorized officers
and agents as Solectron's agent and attorney in fact, to act for and in
Solectron'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 Solectron.
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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
April 21, 1998. Notwithstanding any provision to the contrary contained herein,
the Non-Disclosure Agreement shall be in full force and effect during the term
of this Agreement and any renewal thereof.
13.2 Sensitive Brocade Information. "Sensitive Brocade Information"
means the Forecasts, Specifications, Brocade AVL, Brocade Technology, Ancillary
Technology, bill of materials, SLA, work instructions, and all data accessed by
Solectron pursuant to Sections 2, 3, 4, 5, 6 and 11, as well as the contractual
terms and conditions, including contract exhibits, between Brocade and
Solectron.
13.3 [*]
13.4 Confidentiality Obligations.
(a) Solectron Obligations. [*] to assist Brocade in
remedying such unauthorized use or disclosure of Sensitive Brocade Information
(b) [*]
13.5 Exclusions. These obligations will not apply to the extent
that Sensitive Brocade Information [*]: (a) is already known to [*] at the time
of disclosure, which knowledge such party will have the burden of proving; (b)
is, or, through no act or failure to act of [*], becomes publicly known; (c) is
received by [*] from a third party without restriction on disclosure; [*]; or
(e) is approved for release [*]
13.6 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 [*] will provide prompt written notice thereof to [*] to
enable [*] to seek a protective order or otherwise prevent such disclosure and
will cooperate with that party in seeking such protective order.
14. Warranty.
14.1 Product Warranty. [*], Solectron warrants for a period of [*]
from the date of [*] of each unit of each Product, [*]
14.2 Product Warranty Remedy. In accordance with the RMA procedures
outlined in Section 11.1, above, Brocade will promptly notify Solectron of any
Products [*] that Brocade believes do not comply with the warranties contained
in this Agreement. Solectron will pay all [*] associated with Products returned
for repairs during the warranty period[*] Solectron 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 [*]. Solectron will [*] any charges in order to effect the
earliest reasonable replacement of such defective Products to Brocade [*].
Solectron agrees to maintain a repair capability for products under warranty.
Solectron will provide to Brocade detailed information, including location,
telephone number, contact person and hours of operation for the Solectron
service representative who will be Brocade's contact for warranty claims and
questions. [*]. Replaced Products will be warranted for [*]
14.3 [*]Other Obligations and Warranties.
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<PAGE>
(a) Regulatory Compliance. Solectron 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 Solectron
will comply with all import and export laws and regulations and maintain
appropriate import and export documentation. At Brocade's request, Solectron
will make available for inspection and audit all import and export documentation
for the Products and the Solectron Technology included in the Products sold
under this Agreement. [*] Solectron 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
Solectron 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) Consigned Equipment. Brocade shall ensure that at the
time of delivery of Brocade Property or Ancillary Technology, Brocade shall have
[*]such Brocade Property or Ancillary Technology. [*]Intellectual Property.
Brocade warrants that it has all intellectual property rights required to make
available to Solectron the material and information (including any designs,
drawings and specifications) necessary for Solectron to manufacture the Products
hereunder. In addition, Brocade warrants that it is the owner or all copyrights
and trade secrets in, and that Brocade has the right to supply, the software
provided by Brocade to Solectron hereunder for inclusion in the Products.
14.4 Warranty Exclusions and Disclaimer.
(a) [*]
(b) 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. [*] renew [*] for successive [*] terms [*] provides notice of
its decision to not renew the Agreement no later than [*] prior to the end of
the then-current term.
15.2 Termination for Default. [*] [*] may terminate this Agreement
if the [*] 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.
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<PAGE>
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) Solectron will complete the production of any
Products of which Solectron 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) [*] of the effective date of such
expiration or termination;
(b) Solectron will immediately cease the use of all of
the Brocade Technology upon completion of the work required in 15.4(a);
(c) Solectron 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 SOLECTRON 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, 2.7, 3.4, 4.2, 4.3, 4.4, 5, 6, 7, 8, 9, 11, 12, 14, 15.4, 15.5,
16, 17, 18 and 21 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 Solectron 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
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<PAGE>
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 Solectron Indemnity. Solectron 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) Solectron's breach of any licenses granted to Solectron under this
Agreement; (b) [*], to the extent that the claim is based on (x) facts which
constitute a non-conformance with [*] or (y) [*] provided or developed by
Solectron; (c) acts, errors or omissions by or negligence of Solectron, 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 Solectron
Technology of [*] not based on the [*] provided by Brocade. [*] In the event the
Solectron Technology and/or the Products are held or believed by Solectron to
infringe, or Brocade's use of the Solectron Technology and/or the Products is
enjoined[*] [*]
18.2 Brocade Indemnity. Brocade will defend, indemnify and hold
Solectron and its officers, directors and employees harmless (inclusive of
reasonable attorneys' fees) from and against any claim, suit, action or
proceeding brought against Solectron 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
Product or Brocade Technology or Ancillary Technology are held or believed by
Brocade to infringe, or Solectron's manufacture of the Product or use of the
Brocade Technology and/or the Ancillary Technology is enjoined, Brocade will
have the option[*] to: (x) replace or modify the relevant Product, Brocade
Technology and/or the Ancillary Technology with non-infringing technology,
software or hardware which is functionally equivalent or superior for use by
Solectron on a going forward basis; or (y) obtain a license for Brocade to
continue using the Product, Brocade Technology and/or the Ancillary Technology.
Brocade's obligations hereunder will be void as to any Product, Brocade
Technology and/or the Ancillary Technology modified by Solectron (without
Brocade's approval), solely to the extent such modification is the alleged basis
of the suit. [*]
19. Export. Solectron agrees that:
19.1 Solectron will provide Brocade the trade management component
of Solectron's customer order fulfillment supply chain offerings;
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<PAGE>
19.2 From time to time, upon request by Brocade, Solectron will
review Brocade's export databases and processes to ensure that such databases
and processes meet all legal requirements
19.3 Solectron shall assume the [*].
19.4 Solectron will perform routed transactions for Brocade.
19.5 Upon request by Brocade, Solectron will provide Brocade with
comprehensive ongoing support regarding international trade matters, including
but not limited to support for new site start-ups, [*]
19.6 Solectron will provide Brocade with significant access to
Solectron's trade experts.
19.7 Solectron 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 FRUs.
20. Environmental Requirements. Solectron 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 the [*] pursuant to the [*].
20.4 Solectron will provide complete and accurate [*] for Product
prior to shipment.
20.5 [*] Information. Solectron 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.
20.6 Solectron will comply with all applicable laws governing
import or export of Products.
20.7 Disposition of Excess Materials. Solectron 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 Environment. Solectron will continuously implement and
maintain processes and policies designed to protect [*] at any facility at which
Product manufacturing operations are performed under this Agreement.
20.9 Ozone Depleting Substances. Solectron 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 United States [*], as now in existence or
hereafter amended; or
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<PAGE>
(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. Solectron 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 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
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<PAGE>
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 Switzerland SarL.
29, Route de I'Aeroport
Case Postale 105
CH-1215 Geneva 15, Switzerland
Attn.: General Counsel
With a copy to: Brocade Communications Systems, Inc.
1745 Technology Drive
San Jose, CA 95110
Attn.: General Counsel
If to Solectron: Solectron Corporation
847 Gibraltar Drive, Bldg. 5
Milpitas, CA 95035
Attn.:Corporate Legal Department
Such notice will be treated as having been received upon the earlier of actual
receipt or five (5) days after posting.
21.10 [*]
21.11 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.
21.12 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.
21.13 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 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.
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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.
SOLECTRON CORPORATION BROCADE COMMUNICATIONS SWITZERLAND
SARL
By: ___________________________________ By: _________________________________
Name: _________________________________ Name: _______________________________
Title: ________________________________ Title: ______________________________
Date: ________________________________ Date: _______________________________
Brocade Manufacturing Agreement BROCADE CONFIDENTIAL
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<PAGE>
EXHIBIT A
PRODUCTS
-------------------------------------------------------------------------
PRODUCT / PART NAME BROCADE PART NUMBER UNIT PRICE
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Brocade Manufacturing Agreement BROCADE CONFIDENTIAL
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<PAGE>
EXHIBIT B
ANCILLARY TECHNOLOGY TERMS AND CONDITIONS
1. All tools, tooling equipment, test equipment and other materials
furnished to Solectron by Brocade or paid for by Brocade ("Brocade Property" or
"Ancillary Technology") in connection with this Agreement will be clearly
identified by Solectron 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. Solectron will allow Brocade personnel onto Solectron'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 [*] Brocade Property or Ancillary Technology to Solectron[*],
and Solectron agrees that it will not issue any negotiable bills or receipts on
the Brocade Property or Ancillary Technology and will neither file nor permit
any lien or other claim to be filed against any of the Brocade Property or
Ancillary Technology. In the event that such a lien or claim is filed that is
created by or on behalf of Solectron, Solectron will promptly notify Brocade and
will take all action necessary to cause such lien or claim against the Brocade
Property or Ancillary Technology to be released or otherwise removed within [*].
If such lien or claim is not released within such [*], then Brocade may deem
that Solectron has purchased the Brocade Property or Ancillary Technology at the
[*] cost for such Brocade Property or Ancillary Technology and such amount will
be immediately payable to Brocade. Solectron will hold Brocade Property and
Ancillary Technology at its own risk and will not modify the property without
the written permission of Brocade, provided, however, that in the event the
property is lost, damaged or destroyed, Solectron's liability for the Brocade
Property or Ancillary Technology is limited to [*] the Brocade Property or
Ancillary Technology. Solectron agrees that Brocade property will be used by
Solectron only to perform Solectron's obligations under this Agreement. Upon
Brocade's request, Solectron will redeliver the property to Brocade in the same
condition as originally received by Solectron with the exception of reasonable
wear and tear.
3. Unless otherwise agreed to in writing by Brocade, all Brocade Property
or Ancillary Technology will be insured by Solectron, at Solectron's expense,
while in its custody or control in an amount equal to the replacement cost
thereof, with loss payable to Brocade. Solectron will execute and deliver to
Brocade such evidence of insurance relative to property furnished by Brocade to
Solectron as may be requested reasonably by Brocade.
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EXHIBIT C
SLA (FOR REFERENCE ONLY)
[TO BE ATTACHED]
Brocade Manufacturing Agreement BROCADE CONFIDENTIAL
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<PAGE>
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
--------------------------------------------------------------------------------
DOCUMENT REVISION HISTORY
REVISION # DATE DESCRIPTION
--------------------------------------------------------------------------------
Draft 2/11/03 Written by RS and Team
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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Brocade Communication Systems Inc. Document: 99-0000112-01
Page 1 of 8 Revision: A
Revision Date: 2/11/03
<PAGE>
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
Brocade Communication Systems Inc. Document: 99-0000112-01
Page 2 of 8 Revision: A
Revision Date: 2/11/03
<PAGE>
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:
-------------------------------------------------------------------------------
Incoming Inspection Test Failure Pareto Charts [debug/rework]
-------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------
In-Process Audit Results Third Party Audit Results
-------------------------------------------------------------------------------
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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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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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:
-------------------------------------------------------------------------------------------------------
CLCA# Status: Target Closure Date: Customer Ref. No.
-------------------------------------------------------------------------------------------------------
BRC-MMDDYY OPEN If applicable
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EXHIBIT E
DOAS AND MISSHIPMENTS
[*]
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 Solectron by
Brocade [*] because (a) such Product was [*] by, or on behalf of, Solectron (a
"Misshipment"), or (b) such Product is found to be dead on arrival (a "DOA"),
then Solectron shall: (i) [*] for the return of such Product; (ii) [*] such
Product so that it is fully functional, meets the Specifications, and saleable
as new; and (iii) [*] such Product [*] or until material [*] by Brocade,
whichever is less. In addition, Solectron 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 best efforts to [*]
Misshipment and DOA issues and [*] processes to reduce such issues.
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EXHIBIT F
SOLECTRON PREFERRED SUPPLIER LIST
The following is the Solectron PSL as of the Effective Date:
[TO BE ATTACHED]
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EXHIBIT G
PROCUREMENT RESPONSIBILITY TABLE
[*]
[*]
[*]
[*]
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EXHIBIT H
EXCESS AND OBSOLETE MATERIALS
DEFINITIONS:
"Excess Inventory" means on-hand component inventory purchased exclusively for
the Brocade account that is in excess of [*] demand.
"Obsolete Inventory" means [*] inventory and [*] inventory on-order with NO [*]
within the Obsolete Forecast Horizon.
"Obsolete Forecast Horizon" means a period in excess of [*] for which there is
no [*] for inventory, unless otherwise mutually agreed to by Brocade and
Solectron.
DISPOSITION OF EXCESS AND OBSOLETE MATERIAL
ON HAND EXCESS MATERIAL:
For Excess Inventory, Brocade will [*] such Excess Inventory (the "Inventory
[*]") (by way of example only. [*]) within [*] of written notification by
Solectron.
[*]
The Excess Inventory will [*] in Solectron's [*]. The value of the components
will continue to show in [*], provided, however, that [*] shall be calculated by
[*] of such Excess Inventory (example: [*]) from Brocade's [*]. [*]
Solectron reporting of inventory balances to Brocade shall show an itemization
of inventory components that equals the [*] with a line at the bottom of the
report which [*] and which shows a [*].
On a [*] basis per a mutually agreeable schedule, (1) Solectron will refresh the
E&O analysis to reflect any changes in [*], (2) the parties will perform an
evaluation of the reserve to cover the [*], if any, and (3) the parties shall
perform a [*]. Solectron shall [*] Brocade for any [*] if overall exposure [*]
over [*], or alternatively, within [*] of receipt of a written accounting from
Solectron, Brocade would [*] Solectron [*] to [*] if [*] over [*].
For on hand inventory that is excess to [*], Brocade will [*] as obsolete
material at [*] (the [*]% intended to include [*]).
OBSOLETE MATERIAL:
For Obsolete Material, Brocade will [*] within [*] of written notification of by
Solectron that such material [*]. The [*] for each component to be scrapped will
be the [*] of such material [*] (the [*]% intended to include [*]).
Brocade may direct Solectron to utilize all or a portion of the [*] (defined
above) to [*]
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If Brocade feels there may be a future need for Obsolete Inventory, Brocade
could require Solectron to [*] such [*] for up to [*] (unless a longer term is
agreed to by the parties) from written notification by Solectron that such
material has become Obsolete Inventory.
WAREHOUSE FEE:
[*] indicated as follows:
Penang: [*]%
Columbia: [*]%
Milpitas: [*]%
REPORTING:
Once per [*], Solectron will prepare a report that will show Brocade [*], its
[*], and its [*] to a [*] demand forecast horizon. This report will itemize the
parts that are [*] and [*] (no gross requirements), and will split the [*]
between [*] materials.
On a [*] basis, Solectron will itemize all activity to [*]. Any increases or
decreases in the [*] will be noted. Any utilization of any [*] shall be [*].
Solectron shall not make any utilizations without the written direction and
authorization of Brocade. Certificates of destruction will be provided for scrap
transactions, if requested by Brocade.
ENGINEERING CHANGE ORDER MANAGEMENT
For any engineering change order ("ECO") submitted by Brocade to Solectron,
Solectron shall provide Brocade[*] with an exposure analysis, which exposure
analysis shall [*] a comprehensive list of all [*], and the [*] Brocade,
resultant from the implementation of such ECO.
Upon written approval by Brocade, Solectron shall implement such ECO. Within [*]
of Solectron's implementation of such ECO, Solectron shall provide Brocade with
a final analysis of the [*] due to the Brocade ECO.
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EXHIBIT I
SOLECTRON PATENTS
[TO BE ATTACHED]
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