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EXHIBIT 10.17
PURCHASE AGREEMENT #10152
1. AGREEMENT: This Agreement states the terms under which Cielo
Communications, Inc. located 000 Xxxxxxxxxxx Xxxxxxx, Xxxxxxxxxx,
Xxxxxxxx (hereinafter referred to as BUYER or Cielo) and XeTel Corp.,
with place of business located at 0000 Xxxxx Xxxxx Xxxx, Xxxxxx, Xxxxx
(hereinafter referred to as SELLER or XeTel) will conduct business with
each other and to identify how such business will be conducted.
When Cielo or BUYER is referred to in this agreement, it refers to
Cielo Communications, Inc. and its current or future facilities
worldwide.
2. CONTRACT TERM: This Agreement takes effect on June 1, 1998, and will
remain effective for an initial term of one (1) year. Thereafter, this
Agreement shall automatically renew itself for successive one-year
term, unless terminated pursuant to Section 23 below.
2.1. BUYER and SELLER will review the terms and conditions of this
Agreement to determine if changes need to be made. These
reviews will occur when the BUYER and/or SELLER make the
request for such a review. Any change will only be effective
when made in writing and signed by authorized representatives
of both BUYER and SELLER.
3. SCOPE: SELLER agrees to sell to BUYER and BUYER may purchase from
SELLER those part numbers for which SELLER is currently approved as a
source of supply as referenced in the attached Schedule A.
3.1. BUYER shall have the right to make additions or subtractions
to the list of items in Schedule A. Pricing for additional
products shall be established at a value reflective of an
annual forecast and will use the same formula for calculating
the price that is used for existing assemblies in Schedule A,
subject to mutual agreement of the parties. The pricing will
be reviewed on a quarterly basis and adjusted according to the
forecasted volumes from the Buyer. SELLER agrees to adjust the
formula to meet goals identified in Section 13.
3.2. BUYER will supply documentation to the SELLER to assist SELLER
in procuring components to assemble items in Schedule A.
SELLER agrees to procure components approved per BUYER
documentation and only those part numbers listed in BUYER
specifications. If for some reason any component does not meet
BUYER specification, SELLER must notify BUYER for approval
prior to using the said component in any assembly. BUYER will
provide SELLER with new documentation or provide SELLER with a
Deviation Authorization if approval is granted. SELLER must
secure the new documentation or Deviation Authorization in
writing before using the component.
3.3. BUYER reserves the right to purchase some or all of the items
identified in Schedule A from other suppliers in the event
that BUYER deems it appropriate to do so, exercising its
independent business judgment. Under such circumstances, BUYER
will update its forecasts to reflect the necessary changes and
to allow SELLER to adjust forecasted demand accordingly.
4. FORECASTS: BUYER will provide a rolling annual forecast to the SELLER
for all items on Schedule A on monthly basis at minimum. BUYER shall
not be obligated to purchase the exact forecasted quantity of any
Schedule A items from SELLER, this Agreement being intended merely to
establish the terms, conditions, and prices applicable when and if the
BUYER does so purchase.
4.1. BUYER will provide SELLER with an annual Purchase Order (PO).
This PO will provide SELLER with the BUYER'S best estimate of
its long term forecast. The PO will specify the part number,
revision level, and quantity to be shipped or scheduled to be
released. BUYER will release against this PO based on
individual Module usage or by KANBAN trigger or other
notification methods.
5. PRODUCTION AUTHORIZATION: SELLER has authorization to assemble and test
the PO quantities as released by BUYER plus sufficient inventory to
fill Module requests as defined by Cielo's Master Planning Schedule
(MPS). Shipments to be made so Modules are on BUYER'S dock to meet
delivery requirements as defined in Section 15.1.2.
5.1. BUYER will maintain cancellation rights for all assemblies
outside a 60-day rolling window unless SELLER was authorized
in writing by BUYER to produce assemblies outside that window.
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5.2. The PO will be revised by the BUYER as necessary and sent to
SELLER. At a minimum, SELLER agrees to adjust its internal
schedule for all PO deliveries the first week of every month
and more often if there are significant schedule changes.
SELLER shall notify BUYER of any delivery issues according to
Escalation Requirements as defined in Schedule D.
6. RAW MATERIALS: BUYER material liability shall be limited to the
Strategic Inventory Levels established in Schedule C for Non-Cancelable
Non-Returnable (NCNR) components, excess due to minimum order quantity
and for those long lead time materials required to sustain production
forecasts and approved by the BUYER. Management of Min/Max levels for
all components will be the responsibility of the SELLER. BUYER will
assume responsibility for material required to support end of product
life only if BUYER approves quantities purchased by SELLER.
6.1. BUYER may negotiate contracts with OEM's for components it has
specified. SELLER may piggyback these contracts, subject to
OEM approval. Contracts and pricing are to be used exclusively
for BUYER'S assemblies. Any cost savings from a BUYER'S
contract is to be passed directly to BUYER. Negotiation of
these contracts may require pricing to be adjusted during the
term of this agreement. BUYER and SELLER will work together to
determine price impact and cut in date. At that time, Schedule
A will be updated to reflect the new pricing. BUYER will use
reasonable effort to secure any authorizations needed by the
SELLER to procure any proprietary components. SELLER will
receive a copy of all such authorizations from BUYER if
needed.
7. CAPACITY SURGE DEMAND: SELLER agrees to make every reasonable effort to
ensure that, upon notice from BUYER, delivery quantities on order can
be increased to match actual demand. This surge capacity may be
contingent upon material availability, labor availability and equipment
capacity. BUYER and SELLER must mutually agree on the surge plan.
Strategic Inventory Levels established in Schedule C are to support
such surges in BUYER demand. New designs or new releases of present
designs may be an exception as the Strategic Inventory Levels are not
yet secured.
8. STANDARD LEAD TIMES GOAL/EXPECTATION: BUYER and SELLER agree to work
together to drive toward the shortest possible lead-time to support
BUYER customer requirements.
8.1. GOAL SETTING: As part of the Quarterly Meeting Review process,
SELLER and BUYER will assess lead time needs, develop goals
and plans for lead time reduction, and review progress toward
the established goals.
8.2. LONG-TERM OBJECTIVE: Assuming the materials pipeline is full
it is the long term objective to reduce manufacturing lead
time from receipt of order to shipment of finished product to
designated carrier from an initial 10 working days to a
maximum of 3 working days within 120 days of mutually agreed
start date for that particular assembly.
9. RESCHEDULES AND CANCELLATIONS:
9.1. Provided no constraints per section 8.0, BUYER will provide a
rolling twelve month forecast for order management purposes.
The initial ninety (90) days is to be considered `firm',
supported by actual purchase orders for the demand
requirements. Within the first thirty (30) days, BUYER demand
may be adjusted up by 20% or down 0% of the production plan
loaded on SELLER'S order book during this period. Thirty-one
to sixty (31 to 60) days BUYER demand may be adjusted up by
50% or down by 20% of the production plan loaded on SELLER'S
order book during this period. Sixty-one to ninety (61-90)
days, BUYER demand may be adjusted up by 75% of the production
plan loaded on SELLER'S order book during this period. Greater
than sixty (60) days, BUYER may reschedule or cancel 100% of
planned demand. Buyer will be liable for material in
accordance with Section 6.
10. PRICING: Will be in US Dollars and will be the same for all BUYER'S
facilities, regardless of ordering or delivery location as subject to
provisions of Section 14.1.1.
10.1. Pricing for items covered by this Agreement is listed in
Schedule A.
10.1.1. Pricing includes packaging to good commercial
standards or when specified, to BUYER Procurement
Specifications as well as chemicals, supplies and
consumable materials needed to make BUYER products.
10.2. Pricing for all items listed in Schedule A is firm for the
duration of this agreement. Exceptions to this may be
permitted upon mutual agreement of the parties due to:
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10.2.1. Cost of material changes beyond the control of SELLER
and agreed upon by BUYER and SELLER. Refer to
Schedule D for Escalation Schedules.
10.2.2. BUYER specification revision changes, which cause
SELLER'S manufacturing costs to change.
10.2.3. Market conditions which cause SELLER'S pricing to be
non-competitive will permit BUYER to reopen
negotiations to reduce pricing.
10.2.4. Cost reduction projects by SELLER and/or BUYER will
permit either SELLER or BUYER to reopen negotiations
to reduce pricing.
10.2.5. Significant forecast quantity increases or decreases
will permit BUYER and/or SELLER to reopen
negotiations to adjust pricing.
10.2.6. Changes in Material Acquisition Service fee based on
total annual material purchases as detailed in
Schedule E.
10.3. Pricing changes of any kind will take effect only after BUYER
and SELLER have reached agreement regarding them via a written
revision of Schedule A.
11. PURCHASE PRICE VARIANCES (PPVs): PPVs for all components needed to
build product as listed in Schedule A will be authorized per occurrence
by the Buyer. These PPVs will be calculated on the actual price paid
compared with the PO pricing for the last quarter for both increases
and decreases. PPV will be added to POs as separate itemized NRE line
items.
11.1. Individual PPVs of significant impact (greater than $15,000)
may be addressed sooner than the quarterly update if deemed
necessary by the BUYER or SELLER.
12. SAFETY STOCK:
12.1. Finished Goods Safety Stock. SELLER agrees to hold up to two
weeks of finished goods inventory. These quantities will be
mutually agreed upon by BUYER and SELLER, based on the
forecast provided pursuant to Section 9.1. At the end of each
month, SELLER will provide BUYER with a rolling inventory
aging report, and SELLER may invoice BUYER for any finished
goods that have been held by SELLER for more than 30 days at
Net 30 days. Buyer shall have the right to reduce its forecast
provided pursuant to Section 9.1 for the 30-day period
following the date of such invoice by the amount of any such
inventory invoiced to BUYER. In addition, BUYER agrees to be
liable for such finished goods in the event of cancellation by
BUYER of this Agreement or changes or modifications made by
BUYER via an Engineering Change Order (ECO) or Deviation
Authorization. Finished goods inventory levels are documented
in Schedule A. For purposes of this Section 12, all inventory
accounting shall be based on the FIFO method.
12.2. Raw Material Safety Stock: The raw material safety stocks will
be determined in the Strategic Inventory Level Schedule
(Schedule C) at no additional cost to the BUYER. Safety stock
levels will be reviewed and adjusted at least once per
quarter. BUYER agrees to be liable for these materials in the
event of changes or modifications made by the BUYER via an
Engineering Change Order (ECO), Deviation Authorization,
schedule reduction, quantity reduction or cancellation, or
contract termination by BUYER or SELLER. If circumstances
require SELLER to carry excessive raw material safety stock,
in the event of last time buys, the safety stock adder will be
1% per month.
13. TOTAL COST, QUALITY, AND MANUFACTURABILITY IMPROVEMENTS:
13.1. GOAL AND EXPECTATIONS
13.1.1. PRIMARY: To ensure that SELLER'S products and
services provide to BUYER a competitive advantage in
worldwide markets.
13.1.2. SECONDARY: To improve SELLER'S costs of product and
services toward being the lowest cost on a global
basis.
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June 1, 1998
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PURCHASE AGREEMENT #10152
13.2. ON-GOING CONTINUOUS COST IMPROVEMENT GOALS
13.2.1 SELLER agrees to make continuous process
improvements, both with and without assistance from
BUYER, which will provide cumulative annual pricing
reductions Goals to BUYER totaling at least 2.5% of
the BUYER'S sell price less SELLER'S tightly
controlled materials, such as the Optical
Sub-Assemblies. This reduction does not include the
material reduction that is a result of BUYER level
contracts as defined in Section 7.
13.2.2 When cost reductions are identified by the SELLER,
the savings will generally be shared with the BUYER
on an equal (50/50) basis for 6 months after the
implementation. After 6 months the total cost
reduction will be reflected in Schedule A pricing.
SELLER may choose to pass on a larger percentage to
BUYER in order to meet the annual cost reduction goal
outlined in section 13.2.1. BUYER may agree to extend
the 6-month period to allow the SELLER to recapture
costs associated with implementation of a cost
reduction.
14. FREIGHT:
14.1. All pricing is F.O.B. SELLER'S manufacturing facility.
14.2. Freight carrier to be specified to the SELLER by the BUYER. If
a product requires return for rework as under warranty, SELLER
should bear all costs associated with freight back to SELLER,
then freight for returning the goods to BUYER, including
duties, custom fees, excise taxes, etc.
14.3. LATE SHIPMENTS
14.3.1. CAUSED BY SELLER: Freight charges and other
applicable expedite charges, that are over and above
the normal charges, which may be necessary to deliver
the product to BUYER will be paid for by SELLER.
SELLER is to contact the BUYER for freight transit
instructions. (NOTE: If the BUYER request expedited
air freight of these shipments, SELLER agrees to pay
for these additional expedited air freight costs.)
14.3.2. CAUSED BY BUYER: When special handling is required to
meet an unusual demand specified by the BUYER,
SELLER'S special handling charges will be reimbursed
by the BUYER.
15. PERFORMANCE MEASURES: SELLER and BUYER will periodically review
performance according to Schedule B. During these periodic reviews,
SELLER and BUYER will jointly establish goals for improvement in all
areas. If SELLER continuously fails to improve upon performance issues
or ignores requests by BUYER to maintain acceptable performance levels,
BUYER may adjust the level of business given to SELLER, up to and
including the termination of this Agreement per Section 24.
15.1. GOALS: Long Term: 100% Quality Acceptance Rate; 100% On-Time
Delivery Performance.
15.1.1. QUALITY PERFORMANCE: Based upon the number of lots of
product received which meet BUYER'S specifications.
SELLER'S short-term goal is 99.7% acceptance by
October 1998 based on 6 month moving average.
15.1.2. ON-TIME DELIVERY PERFORMANCE: Based upon the
quantities of acceptable quality product which arrive
on BUYER'S dock on the specified dock date or up to 5
working days earlier. SELLER'S short-term goal is 98%
on time by October 1998 based on 6 month moving
average.
16. SHIPPING QUANTITY VARIANCES: No variance from the delivery quantities
scheduled are allowed unless other arrangements are agreed to by the
appropriate BUYER. SELLER will notify BUYER, in advance, of any
proposed variances.
16.1. Quantities shipped over the specified delivery quantity may be
returned to SELLER at SELLER'S expense.
16.2. The un-shipped quantities of short shipments, if not closed
short by the BUYER, will be considered late and subject to
SELLER'S liability for freight costs on the shorted
quantities.
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June 1, 1998
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17. NON-CONFORMING MATERIALS:
17.1. The products delivered by SELLER may be inspected and tested
as required by the BUYER. If BUYER determines that materials
received do not meet the specifications to which they were
ordered or are defective in material or workmanship, BUYER may
return the materials to SELLER at SELLER'S expense for rework
or replacement. SELLER shall provide BUYER with a Return
Authorization (RA) Number within 24 hours of BUYER'S request.
SELLER must then repair, replace or credit BUYER'S account for
said items as determined by mutual agreement of both parties.
Repair or replacement of non-conforming assemblies is to be
done within one week from the date non-conforming materials is
received by SELLER at the manufacturing site. SELLER must also
provide a report to BUYER detailing the cause of the
non-conformance and corrective action taken to assure it will
not happen again.
17.2. Non-conforming material situations may be negotiated by the
BUYER to ensure that BUYER'S production requirements are
attained with Seller reserving first right of refusal to
remedy. This may include, back-charging SELLER for rework and
sorting costs when return of materials to SELLER does not meet
BUYER'S business needs. Back-charge costs will be agreed upon
by SELLER and the BUYER, prior to performing the rework or
sorting.
17.3. Other SELLER'S facilities can be used to perform the rework,
if required, to meet BUYER'S production requirements. There
will be no additional freight or rework charges to the BUYER.
17.4. Component infant mortality or components that fail not due to
workmanship at BUYER'S facility shall not be the
responsibility of the SELLER. Any repair or rework desired by
the BUYER shall be billed at a standard hourly rate as
established by the SELLER.
18. PAYMENT METHOD AND TERMS:
18.1. PAYMENT METHOD: All payments will be made in US Dollars.
18.2. PAYMENT TERMS: Net 30 days from invoice date.
19. CUSTOM TOOLING PURCHASES:
19.1. DEFINITION: Custom tooling shall be defined to include all
related hardware, software and supporting design documentation
unique or dedicated to BUYER'S requirements.
19.2. OWNERSHIP: Unless specifically noted on the purchase order or
tooling agreement document:
19.2.1. Tooling purchased or paid for by BUYER shall become
the property of BUYER and must be returned to BUYER
upon request. BUYER will be responsible for packaging
and shipping cost for relocating BUYER tooling and
equipment from SELLER's facility. Any equipment
consigned or paid for by BUYER is to be used solely
for the purpose for which it was designed and used
only for BUYER'S assemblies. Calibration of all
SELLER owned/operated equipment and BUYER consigned
equipment must be traceable to ISO 9002 requirements
where applicable.
19.2.2. RETURN OF TOOLING TO BUYER (if so requested by BUYER)
19.2.2.1. Tooling to be returned to BUYER upon
BUYER'S written request within 15 days of
last lot completed needing the use of the
tool.
19.2.3. MARKING OF TOOLING: Tooling paid for by BUYER must be
permanently marked, if practical, with "PROPERTY OF
CIELO COMMUNICATIONS, INC".
19.3. IN-CIRCUIT TEST (ICT)
19.3.1. New Programs: SELLER will quote the necessary ICT
fixturing and other NRE charges on new assemblies and
provide an itemized list of charges in the initial
quotation.
Ongoing Support: Repair and maintenance shall be the responsibility of
the SELLER unless replacement is necessary as deemed by BUYER and
SELLER at which time BUYER shall provide a purchase order for
replacement of the fixture. Changes to the design causing said tooling
to change shall be the responsibility of the BUYER.
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19.4 FUNCTIONAL CIRCUIT TEST (FCT)
19.4.1 New Program: SELLER will quote the cost of design and
development of FCT and provide an itemized list, or
BUYER will supply SELLER with necessary equipment and
documentation to perform FCT.
19.4.2 Ongoing Support: All charges associated with
repair/replacement of custom or BUYER supplied
equipment is the responsibility of the BUYER. SELLER
will ask for purchase orders to cover these charges
or BUYER will provide replacement parts.
19.5 Other: All charges related to repair/replacing custom tooling
that is unique to the BUYER'S requirements is the
responsibility of the BUYER. SELLER will ask for purchase
orders to cover these charges or BUYER will provide
replacement parts.
19.6 PREVENTATIVE MAINTENANCE AND CALIBRATION: SELLER to provide
preventive maintenance and calibration on all equipment
consigned by BUYER per ISO 9002 requirements. Preventative
maintenance and calibration costs on all BUYER supplied
equipment or custom equipment procured by SELLER and paid for
by BUYER is the responsibility of the BUYER. SELLER agrees to
work with the BUYER to determine preventative maintenance and
calibration schedule on equipment.
19.7 TOOLING CARE: Normal care of tooling shall be borne by SELLER.
19.8 TOOLING REPORT: At a minimum of every 6 months, SELLER will
provide BUYER with a report which provides the tooling owned
by BUYER and its condition.
19.9 END OF LIFE: Tooling which has reached the end of its useful
life and idle tooling will be retained by SELLER until BUYER
provides written disposition to SELLER.
19.10 BUYER is responsible for freight costs, taxes, duties
calibration, preventive maintenance, or other similar costs
related to BUYER purchased / supplied tooling only.
20. SELLER'S MANUFACTURING PROCESS: Both BUYER and SELLER agree to pursue
continuous improvement in all areas of their businesses, including the
SELLER'S manufacturing processes.
20.1 Manufacturing process changes which can significantly affect
the quality, performance and/or cost of the product being
purchased are to be reviewed and approved by BUYER before
implementation by SELLER.
20.2 Manufacturing process changes which SELLER believes will have
no impact upon the quality, performance and/or cost of the
product being purchased may be implemented at the discretion
of SELLER with notification to the BUYER. SELLER will remain
fully responsible for meeting product specification and
usability requirements.
21. SUPPLIER DEVELOPMENT PROGRAM: SELLER agrees to actively participate
with BUYER in BUYER'S Supplier Development Program.
21.1 FORMAL QUARTERLY REVIEW: As part of the Supplier Development
Program, BUYER and SELLER agree to alternate hosting of Formal
Quarterly Meetings. The following representatives should
attend at a minimum:
Management - BUYER and SELLER
Program Manager - SELLER
Commodity Manager - BUYER
The agenda is noted in Schedule B.
22. MISCELLANEOUS TERMS AND CONDITIONS:
22.1 All terms and conditions will be per the terms and conditions
found in this Agreement. If any difference exists between the
terms and conditions of the purchase orders and this
Agreement, the terms and conditions of this Agreement will
take precedence.
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22.2 All issues, disputes and particular items which arise and
which are not specifically addressed in this Agreement and/or
the individual BUYER purchase orders will be discussed and
resolved through good faith negotiations.
23. CONTRACT TERMINATION:
23.1 This Agreement may be terminated by BUYER within 180 days
written notice of breach of this agreement, provided SELLER
has not cured said breach within 60 days of receipt of breach.
Voiding of this agreement shall not relieve BUYER of its
obligation to pay for finished goods or raw materials which
have been ordered or delivered, as defined in Section 7, and
shall not relieve SELLER of any liabilities incurred during
the term of this Agreement, including, without limitation, any
liability of SELLER for breach of this Agreement and any
liability of SELLER for warranty obligation on the terms of
this Agreement.
23.2 This Agreement may be terminated for cause by SELLER upon 180
days written notice of breach of this agreement, provided
BUYER has not cured said breach within 60 days of receipt of
breach Voiding of this Agreement shall not relieve BUYER of
its obligation to settle all outstanding sums due and payable
for finished goods or raw materials which have been ordered or
delivered, as defined in Section 7, and for any other
liabilities incurred during the term of this Agreement. Nor
shall it relieve SELLER of any liabilities incurred during the
term of this Agreement, including, without limitation, any
liability of SELLER for breach of this Agreement and any
liability of SELLER for warranty obligation on the terms of
this Agreement.
23.3 SELLER or BUYER may terminate this Agreement without cause
upon six (6) months written notice. In the event of such
termination the parties shall mutually agree on the phase out
plan.
23.4 Survival of Certain Provisions: Notwithstanding anything to
the contrary in this Agreement, the following sections shall
survive termination of this Agreement: 17, 18, 19, 22, 26, 27,
28 and 29.
24. FORCE MAJEURE: No party will be liable to the other parties for its
failure to perform or for delay in the performance of its obligations
under this Agreement to the extent such failure or delay results from
causes beyond its reasonable control, including, without limitation,
acts of God, fires, explosions, wars or other hostilities,
insurrections, revolutions, earthquakes, floods, epidemics or
quarantine restrictions, unforeseeable governmental restrictions or
controls, or transportation embargoes or interruptions; provided,
however, that if a party is prevented from performing its obligations
under this Agreement because of such extraordinary circumstances for a
period of 10 consecutive days, the other parties may terminate this
Agreement immediately upon notice to the other parties.
25. CONTINGENCY PLAN: SELLER to provide BUYER a mutually acceptable
disaster recovery plan within 3 months of signing this agreement. Upon
approval of the disaster recovery plan by BUYER, the document will be
added to this agreement.
26. INDEMNIFICATION: Each party warrants to the other that it has full
right, power, legal capacity and authority to enter into and perform
this Agreement and that it will indemnify and hold harmless the other
party for any breach of this warranty.
26.1 Indemnification by SELLER: SELLER agrees, at its own expense
to indemnify the BUYER against any damages, costs (including
attorneys' fees and costs) or other liability arising from any
claim brought against them with respect to any products
manufactured by SELLER, (collectively "BUYERS Losses") to the
extent such BUYER Losses are caused by SELLER's failure to
manufacturer the Products in conformance with the
Specifications and with SELLER's warranties as set forth in
this Agreement, or by SELLERS's misconduct or negligence;
provided, with respect to any claim or action, that BUYER
provides (i) prompt written notice of such claim or action,
(ii) sole control and authority over the defense or settlement
of such claim or action and (iii) proper and full information
and reasonable assistance to defend and/or settle any such
claim or action.
26.2 Notwithstanding anything to the contrary herein, neither party
nor its agent(s), representative(s) or employee(s) shall be
liable to the other pursuant to this agreement for amounts
representing loss of revenues, loss of profits, loss of
business or indirect, consequential, special or punitive
damages of the other party, however caused and on any theory
of liability, even if the other party has been advised of the
possibility of such damages. The liability of the BUYER, its
agent(s)
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representative(s) and employee(s) to SELLER for damages or
alleged damages whether in contract or tort (including strict
liability and negligence) with respect to this agreement is
limited to and shall not exceed the amounts paid by BUYER to
SELLER under this agreement during the twelve (12) months
immediately preceding the event and/or Product giving rise to
the damages.
27. WARRANTY: Should SELLER'S product(s) be confirmed as being faulty due
to a defect in workmanship or fail to meet the mutually agreed upon
specifications in effect on the date of sale within one year of
shipment to BUYER or its customer, SELLER will repair or replace these
faulty goods free of cost, if returned to SELLER within thirty days
after the end of the warranty period. Goods returned after this period
will be repaired or replaced for a charge to be negotiated. For any
material BUYER deems necessary to have repaired or replaced at its or
its customer's facility due faulty workmanship, SELLER shall have the
first right of refusal to send or supply the necessary resources to
remedy the situation in a timely manner as mutually agreed between the
two parties.
28. CONFIDENTIAL INFORMATION
28.1 Nondisclosure and Nonuse: Each party shall treat as
confidential all Confidential Information of the other party,
shall not use such Confidential Information except as set
forth in this Agreement, and shall use reasonable efforts not
to disclose such Confidential Information to any third party.
Each party shall disclose Confidential Information of the
other party only to its directors, officers, employees, and
consultants who are required to have such information in order
for such party to carry out the transactions contemplated by
this Agreement and who have signed nondisclosure agreements
protecting the Confidential Information on substantially the
same terms as this Agreement. Each party shall promptly notify
the other party of any actual or suspected misuse or
unauthorized disclosure of the other party's Confidential
Information.
28.2 Exceptions: Notwithstanding the above, neither party shall
have liability to the other with regard to any Confidential
Information of the other which the receiving party can prove:
(i) was in the public domain at the time it was disclosed or
has entered the public domain through no fault of the
receiving party; (ii) was known to the receiving party,
without restriction at the time of disclosure as demonstrated
by files in existence at the time of disclosure; (iii) is
disclosed with the prior written approval of the disclosing
party; (iv) becomes known to the receiving party without
restriction from a source other than the disclosing party
without breach of this Agreement by the receiving party and
otherwise not in violation of the disclosing party's rights;
(v) is disclosed generally to third parties by the disclosing
party without restrictions similar to those contained in this
Agreement; (vi) is disclosed pursuant to the order or
requirement of a court, administrative agency, or other
governmental body; provided however that the receiving party
shall provide prompt notice of such court order or requirement
to the disclosing party to enable the disclosing party to seek
a protective order or otherwise prevent or restrict
disclosure.
28.3 Return of Confidential Information: Upon expiration of this
Agreement, each party shall promptly return all Confidential
Information of the other party.
28.4 Remedies: Any breach of the restrictions contained in this
Section 28 is a breach of this Agreement which may cause
irreparable harm to the nonbreaching party. Any such breach
shall entitle the nonbreaching party to injunctive relief in
addition to all legal remedies.
28.5 "Confidential Information" of a party shall mean any
information disclosed by that party to the other pursuant to
this Agreement which is written, graphic, machine readable or
other tangible form and is marked "Confidential",
"Proprietary" or in some other manner to indicate its
confidential nature. Confidential Information may also include
oral information disclosed by one party to the other pursuant
to this Agreement, provided that such information is
designated as confidential at the time of disclosure and is
reduced to writing by the disclosing party within thirty (30)
days after its oral disclosure, and such writing is marked in
a manner to indicate its confidential nature and delivered to
the receiving party.
Purchase Agreement #10152
Rev. A
June 1, 1998
9
PURCHASE AGREEMENT #10152
29. MISCELLANEOUS
29.1 Amendments and Waivers: Any term of this Agreement may be
amended or waived only with the written consent of the parties
or their respective successors and assigns. Any amendment or
waiver effected in accordance with this Section 29.1 shall be
binding upon the parties and their respective successors and
assigns.
29.2 Successors and Assigns: SELLER shall not assign any of its
rights, obligations or privileges (by operation of law or
otherwise) hereunder without the prior written consent of
BUYER. BUYER shall have the right to assign its rights,
obligations and privileges hereunder to an assignee that
agrees in writing to be bound by the terms of this Agreement.
Subject to the foregoing, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon
the respective permitted successors and assigns of the
parties.
29.3 Governing Law; Jurisdiction: This Agreement and all acts and
transactions pursuant hereto and the rights and obligations of
the parities hereto shall be governed, construed and
interpreted in accordance with the laws of the State of
Colorado without giving effect to principles of conflicts of
law.
29.4 Notices: Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient upon
receipt, when delivered personally or by courier, overnight
delivery service or confirmed facsimile, or forty-eight (48)
hours after being deposited in the regular mail as certified
or registered mail (airmail if sent internationally) with
postage prepaid if such notice is addressed to the party to be
notified at such party's address or facsimile number as set
forth, or subsequently modified by written notice.
29.5 Severability: If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties
agree to renegotiate such provision in good faith, in order to
maintain the economic position enjoyed by each party as close
as possible to that under the provision rendered
unenforceable. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such
provision, then (i) such provision shall be excluded from this
Agreement, (ii) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in
accordance with its terms.
29.6 Entire Agreement: This agreement and the documents referred to
herein are the product of both parties hereto, and constitute
the entire Agreement between such parties pertaining to the
subject matter hereof and thereof, and merge all prior
negotiations and drafts of the parties with regard to the
transactions contemplated herein and therein. Any and all
other written or oral agreements existing between the parties
hereto regarding such transactions are expressly cancelled.
29.7 Independent Contractors: The relationship of SELLER and BUYER
established by this Agreement is that of independent
contractors, and nothing contained in this Agreement will be
construed (i) to give either party the power to direct and
control the day-to-day activities of the other (ii) to
construe the parties as partners, joint ventures, co-owners or
otherwise as participants in a joint or common undertaking, or
(iii) to allow either party to create ore assume any
obligation on behalf of the other for any purpose whatsoever.
Please acknowledge receipt and acceptance of this Agreement by signing below:
BY SELLER: /s/ XXXX XXXXX BY BUYER: /s/ XXX XXXX
-------------------------- -------------------------
PRINT NAME: Xxxx Xxxxx PRINT NAME: Xxx Xxxx
-------------------------- -------------------------
TITLE: VP Materials TITLE: President & CEO
-------------------------- -------------------------
COMPANY XeTel, Corp. COMPANY Cielo Communications. Inc.
-------------------------- -------------------------
DATE: 6/2/98 DATE: 6/4/98
-------------------------- -------------------------
Purchase Agreement #10152
Rev. A
June 1, 1998
10
SCHEDULE A
PURCHASE AGREEMENT ITEMS
MATERIAL ASSEMBLY TEST ANNUAL
PART NUMBER DESCRIPTION COST COST COST PROFIT QTY KANBAN SIZE
----------- ----------------------- -------- -------- ---- ------ ------ -----------
00-0000-000 FC1063SW-GBIC-Untested
00-0000-000 FC1063SW-GBIC-Tested
00-0000-000 GBE1250SW-GBIC-Untested
00-0000-000 GBE1250SW-GBIC-Tested
BUYER: SELLER:
----------------------------------- -----------------------------------
Xxxxx X. Xxxxxxxxxx, Date Xxxxxx Xxxxxxx, Date
Sr. Supply Engineer Manager Program Manager
Purchase Agreement #10152
Schedule A, Revision A
June 1, 1998
11
SCHEDULE B
QUARTERLY REVIEW
XeTel Responsibility Cielo Responsibility
BUSINESS PLANS/STRATEGIES
---------------------------------------------------------------------------------------------------------------
o Sales o Sales
o Business Climate o Business Climate
o Product/Customer Mix o Product/Customer Mix
o Expansion Plans o Expansion Plans
o Organization Charts/Changes o Organization Charts/Changes
o Product line Updates o Product line Updates
o New Programs o New Programs
o Supplier Development Program o Supplier Development Program
PROCESS UPDATES
---------------------------------------------------------------------------------------------------------------
o Cost Reductions o Forecast Accuracy
o Safety Stock Program o Payment of Invoices
o Procurement (availability, pricing) o Information Exchange - EDI
o Receiving Inspection
o Manufacturing Process
o Lead Time Reduction
o Test (ICT, FCT, Burn-In)
o Shipping
o Open ADR/SCAR
o Finished Goods Safety Stock
MEASURES
---------------------------------------------------------------------------------------------------------------
o Receiving Inspection o Incoming Receiving Inspection
- Overall Lot Acceptance of Components - Delivery Performance
- PWB Lot Acceptance by assembly - Delivery Performance, last 4 quarters
- PWB Defect Pareto by assembly - PWA Lot Acceptance, last 4 quarters
- Supplier Quality Performance - PWA Defect Pareto by Product Line, last 4
o In Process Verification quarters (top 5 defects only)
- As needed to identify trend
o ICT
- 1st Pass ICT Yield by PWA, last 6 months
- ICT Defect Pareto by PWA, last 6 months
(top 5 defects only)
o FCT
- 1st Pass Functional Yield by PWA, last 6 months
- Functional Defect Pareto by PWA, last 6 months
(top 5 defects only)
o Final QA
- Final QA Yield by PWA
- Final QA Defect Pareto by PWA (top 5 defects
only)
- Delivery Performance (Service Level)
o Miscellaneous
- % Scrap at Assembly Level by PWA
- Failure Analysis Results on Failed Components
- Failure Report Updated
- Cumulative First Pass Yield
- Total annual forecasted materials expenditures
- FG Inventory Aging Report
BUYER: SELLER:
/s/ XXXXX X. XXXXXXXXXX 6/3/98 /s/ XXXXXX XXXXXXX 6/2/98
------------------------------------ -------------------------------
Xxxxx X. Xxxxxxxxxx, Date Xxxxxx Xxxxxxx, Date
Sr. Supply Engineer Program Manager
Purchase Agreement #10152
Schedule B, Revision A
June 1, 1998
12
SCHEDULE D
ESCALATION SCHEDULE
Expected
Time for
Event or Action Critical Level Notification
--------------- -------------- ------------
Change in component lead time affecting potential safety stock levels 3,4 72 hrs
Change in pricing affecting PCBA price 2,3,4 72 hrs
End of life notification 2,3,4 72 hrs
Report of lot failure by manufacturing 3,4 24 hrs
Report of tool/equipment failure requiring action by Cielo 3,4 24 hrs
Notification of contract breach or termination date by Xetel 1,2,3,4 24 hrs
Notification of contract breach or termination date by Cielo 1,2,3,4 24 hrs
List of component parts whose qty are below minimum level 2,3,4 5 days
List of component parts whose qty exceeds maximum level 3,4 5 days
Change in personnel critical to Cielo system or process 1,2,3,4 3 days
Lack of requested response by Cielo 1,2,3,4 1= 30-day late
2= 15 day late
3= 10 day late
4= 5 day late
Lack of requested response by Xetel 1,2,3,4 1= 30-day late
2= 15 day late
3= 10 day late
4= 5 day late
Lack of response to Corrective Action Request 1,2,3,4 1= 30-day late
2= 15 day late
3= 10 day late
4= 5 day late
Failure to execute MRP by EMR Cielo 3,4 24 hrs
Line down not affecting delivery of needed PCBA's 2,3,4 24 hrs
Line down affecting delivery of needed PCBA's 1,2,3,4 2 hrs
LEVEL CIELO XETEL SUPPLIER
----- ----- ----- --------
1 President/CEO President/CEO President/CEO
VP Sales/Marketing VP Operations VP Operations
VP Operations VP Sales/Marketing VP Sales/Marketing
Commodity Manager VP Materials VP Materials
Buyer/Planner Program Management Director General Manager
Buyer/Planner Program Manager General Manager
Materials Coordinator Account Manager
Product Manager
In-Plant Operator
2 VP Operations VP of Materials General Manager
Buyer/Planner Program Management Director General Manager
Commodity Manager Program Manager Product Manager
Buyer/Planner Materials Coordinator Account Manager
In-Plant Operator
3 Commodity Manager Program Manager Product Manager
Buyer/Planner Materials Coordinator Account Manager
In-Plant Operator
4 Buyer/Planner Materials Coordinator Account Manager
In-Plant Operator
BUYER: SELLER:
/s/ XXXXX X. XXXXXXXXXX 6/3/98 /s/ XXXXXX XXXXXXX 6/2/98
----------------------------------- -----------------------------------
Xxxxx X. Xxxxxxxxxx, Date Xxxxxx Xxxxxxx, Date
Sr. Supply Engineer Program Manager
Purchase Agreement #10152
Schedule D, Revision A
June 1, 1998
13
MATERIALS ACQUISITION SERVICE (MAS) FEE
The MAS rate is inclusive of all costs including freight. MAS rate is subject
to further adjustments based on the total annual agreed upon forecasted volume
of unit assemblies for the next four quarters based on the following Table:
Total Annual Forecasted Material Material Acquisition Service Fee
Expenditures (Millions of $) OSAs & Overall
================================ ================================
Optical Sub-assemblies** 3%
1 15%
2 - 3 6.0%
3 - 5 5.8%
5 - 10 5.75%
10 - 15 5.5%
15 - 20 4.5%
20 - 25 4.0%
25+ 3.5%
The MAS fee will be calculated by multiplying the appropriate MAS percentage
based on the total material expenditure level times the total value of the
materials provided by SELLER excluding chemicals/supplies and packaging of any
given assembly.
BUYER: SELLER:
/s/ XXXX XXXXXXXXXX 6/3/98 /s/ XXXXXX XXXXXXX 6/2/98
----------------------------------------------- --------------------------------------------
Xxxx Xxxxxxxxxx - Sr. Supply Engineer Date Xxxxxx Xxxxxxx - Program Manager Date
Purchase Agreement #10152
Schedule E, Revision A
June 1, 1998
