Manufacturing And Purchase Agreement

Exhibit 10.19

CONFIDENTIAL TREATMENT

MANUFACTURING AND PURCHASE AGREEMENT This Manufacturing and Purchase Agreement (the " Agreement" ) is made as of this 5th day of Sept. 2003 (the " Effective Date" ), by and between Flash Electronics, Inc., a California corporation (hereafter the " Seller" ) located at 4050 Starboard drive, Fremont, CA 94538, and 3PARdata, Inc (hereafter the " Buyer" ) located at 4209 Technology Drive, Fremont, CA 94538.

In consideration of the mutual covenants and representations herein set forth, the Seller and the Buyer agree as follows:

1.

AGREEMENT TO MANUFACTURE

During the term of this Agreement and subject to the terms and conditions herein, the Seller will provide custom manufacturing services to the Buyer. These services include, but are not limited to, subassemblies and components, material management, assembly of printed circuit boards (the " Products" ), final electronic equipment testing, troubleshooting, and rework for the Products. Buyer sells Products on a worldwide basis.

2.

PURCHASE OF PRODUCTS

2.1 Buyer' s Responsibility : The Buyer agrees to be liable or the costs of the materials and agreed upon materials mark-up [***] associated with materials purchases agreed in this purchase agreement. Details of the amount of inventory may be defined on the purchase order or other written agreement by both parties.

2.2 Seller' s Responsibility . The Seller agrees to purchase materials based on Buyer' s policy and instruction, using approved vendors at the most favorable prices available. The Seller further agrees to purchase materials in a reasonable quantity to protect lead-time requirements and volume discounts if available and necessary.


3.

TERM AND TERMINATION .

The term of this Agreement shall commence upon the Effective Date and continue for 12 full calendar months. Thereafter, the Agreement shall automatically renew for successive 12-month periods unless either party gives 90 days' written notice prior to the anniversary date of its intent to terminate the Agreement. This Agreement may be amended from time to time by written agreement signed by both parties. Notwithstanding the foregoing and subject to the terms and conditions herein, this Agreement may be terminated (i) by either Buyer or Seller for any reason on 90 days prior written notice to the other party; or (ii) upon written notice to the other party at any time any one of the following events occur (a) the other files a voluntary petition in bankruptcy; (b) the other is adjudicated bankrupt; (c) the other makes an assignment for the benefit of its creditors; (d) a court assumes jurisdiction of the assets of the other under any bankruptcy or reorganization act; (e) a trustee or receiver is appointed by a court for all or a substantial portion of the assets of the other; (f) there is a substantial change in the financial

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Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


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conditions of the other; or (g) the other party is unable to pay its material debts as they become due. In addition, either party shall have the right to terminate this Agreement for breach by the other in the performance of any material obligation of this Agreement, where such breach continues for a period of thirty (30) days after written notice thereof to the other. Both parties' financial obligations shall survive any termination of this Agreement and Seller shall return to Buyer, at Buyer' s expense, all tooling, equipment, components, drawings, specifications, documentations and supplies that are owned by Buyer.


4.

TERMS OF SALE .

4.1 Orders . For each Product to be manufactured, Buyer and Seller will mutually agree upon a manufacturing lead time, which will be the number of days it will take, on average, to receive and kit all components, assemble, test and ship the Product. Commencing on the Effective Date, Buyer shall place, and Seller shall fulfill, firm monthly orders on a 3 months rolling basis for any of the Products, as amended by Buyer from time to time in accordance with this Section 4. Buyer shall use all reasonable efforts to provide Seller with six months' prior written notice of the discontinuance of any Product. Concurrently, Buyer shall also deliver to Seller a non-binding (as set forth below), rolling forecast of its anticipated demand for Products [***]. Buyer' s rolling firm purchase orders and [***] forecast will be required to secure a sufficient quantity of long lead-time components. 4.1.1 Buyer will be liable to Seller for Seller' s restocking charges, transportation charges and other direct charges incurred by Seller, in respect of materials ordered by Seller based on Buyer' s firm orders and not previously delivered to Buyer (" excess components" ), on Buyer' s cancellation of purchase orders hereunder or Buyer' s termination of this Agreement (unless Buyer terminates for cause); provided (i) the excess components are in the same condition as when originally purchased by Seller and (ii) that Buyer may, at its option, take delivery of any excess components resulting from such a cancellation or termination. If Buyer decides not to take delivery of excess components, the Seller will make best efforts to sell the excess components in the open market and charge the Buyer for the variance between the original cost and [***] of the agreed upon materials mark-up of the part and the price for the part received in the open market, provided, however, that if the variance is more than [***], Buyer' s consent shall be required before Seller may sell any such excess component on the open market. If Seller is unable to sell the excess components in the open market within 30 days or Buyer does not give its consent as required by the previous sentence, and provided the excess components are in the same condition as when originally purchased by Seller, Seller will (i) receive payment from Buyer for the original cost of the part plus [***] the agreed upon materials mark-up and (ii) transfer title and deliver the excess components to Buyer, FOB Seller' s facility. Buyer will also be liable to Seller for long lead-time components which are non-cancelable and non-returnable (" NCNR" ), as well as any MOQ (Minimum Order Quantity) and MPQ (Minimum Package Quantity) which have been listed on costed BOM' s provided with quote and purchased by Seller (with Buyer' s prior written approval) to cover Buyer' s firm purchase orders hereunder. Seller and Buyer will agree to a list

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Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


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of NCNR items that will be updated by mutual agreement quarterly during the calendar year. 4.1.2 Seller will obtain Buyer' s prior written approval to purchase any components with lead-times in excess of Buyer' s 3 months purchase orders. Once Seller has obtained Buyer' s approval, Buyer will be liable for these components in accordance with this Section 2.1.

4.2 Precedence . On any conflict between the term of this Agreement and the terms in any exhibit or purchase order, the order of precedence as to the controlling terms shall be as follows:


i.

The terms on the face page of Buyer' s purchase order as accepted by Seller;

ii.

The terms of this Agreement; and

iii.

The terms of any exhibits to this Agreement.

4.3 Increase, Rescheduling and Cancellation .

4.3.1 Buyer may increase, decrease or reschedule the quantity of Products specified in a purchase order by delivering to Seller, by mail or facsimile, a written change order in accordance herewith (each, a " Change Order" ); provided that no Change Order shall be effective until acknowledged and accepted in writing by Seller but further provided that, if Seller fails to acknowledge or reject a Change Order within ten (10 calendar days after Seller actually received said notice, such Change Order will be deemed accepted.

4.3.2 The schedule of each purchase order can be extended only twice, and the push out time cannot exceed 60 days from the original or once extended commit date. Buyer may only submit a Change Order in accordance with the following parameters unless otherwise agreed in writing by both parties;

Number of Calendar Days'

Advance Notice.

Percentage of Scheduled Shipment that

may be Rescheduled ( OR Increased or decreased) 0-30 days

[***] 31-60 days

[***] 61-90 days

[***] 91 or more days

[***]

4.3.3 The rescheduling or cancellation of any of Buyer' s purchase orders hereunder shall not affect any installments, or portions thereof, which have already been shipped by Seller.

4.3.4 If Buyer requests that any shipments be rescheduled for more than 60 days at any one time, Buyer shall take ownership of excess material by issuing a purchase order. Buyer has the option to request Seller to (i) hold the excess material [***] or (ii) accept shipment of excess material and pay purchase order.


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Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


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4.3.5 Buyer may cancel a Purchase Order hereunder in accordance with the foregoing parameters on written notice to Seller; provided that, unless otherwise agreed in writing, Buyer' s cancellation of any purchase order, or any portion thereof, shall be subject to Section 4.1.1 above.

5.

STATEMENT OF WORK .

5.1 Manufacturing Standards . The Buyer shall provide the Seller with specifications for the Products (the " Specifications" ) The Seller shall maintain a database to ensure that all the Buyers and components hereunder comply with AML; provided that the Seller shall not be bound by any changes in the AML unless provided by the Buyer in writing. The Seller shall manufacture and assemble each Product at its designated facility in compliance with the Seller' s workmanship standards and Buyer' s specifications. The Seller shall use reasonable efforts to maintain the highest level of workmanship and shall conform to IPC 610 Class II (Commercial Standard) unless otherwise stated and agreed to in writing.

In any event, if the Specifications described in Section 5.1 above and Seller' s workmanship conflict, the Seller shall notify Buyer in writing and, unless otherwise agreed, the Specifications shall take precedence. The Buyer may change its manufacturing processes upon the Seller' s prior written approval, which shall not be unreasonably refused. The Buyer may further request the Seller to repurchase specific material or parts for the manufacture or assembly of the Products.

Buyer shall provide support in the manufacturing process, including test procedure, troubleshooting guideline and on site training, as agreed in writing between Seller and Buyer. Boards that fail the testing should go through the trouble shooting process. Boards that fail again after trouble shooting will be reviewed with Buyer at a regular bi-monthly meeting. Buyer and Seller will agree on disposition of defective boards within 30 days. If it is determined that the failure is attributed to a design issue (and cannot be repaired within a reasonable period of time), Buyer will take ownership of the board within 60 days.

Neither party is granted any right or interest to the trademarks, mark or trade name (collectively, " Marks" ) of the other party and neither party may use the other' s Marks without such other party' s prior written consent. Notwithstanding the foregoing, Seller may use Buyer' s Marks solely in the course of assembling the Products in the packaging provided by Buyer as set forth herein and in the Specifications. Seller shall not remove any of Buyer' s Marks from any Product or packaging therefore.

5.2 Seller Changes . Seller shall not make or incorporate any changes in the Specifications without Buyer' s prior written approval, which approval shall not be unreasonably withheld.

5.3 Buyer Changes . Subject to this Section 5.3, Buyer may make engineering change orders (ECOs) to the Products from time to time during the term hereof by written notification to Seller, describing the details of those engineering changes. Drawings, designs and/or


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specifications required therefore shall also be supplied by Buyer. In accordance with Section 4.1 above, Buyer shall be liable for any and all NCNR items and all materials and products purchased by Seller in response to Buyer' s firm orders rendered obsolete by such changes. Subject to Section 7, Buyer may propose an increase or decrease in the unit price of any Products and any changes in the applicable manufacturing schedule or process subject to Section 4.3.2 above, provided that Buyer allows [***] Seller to provide feedback on proposed changes. The parties shall make all good faith efforts to agree upon any changes in price, schedule or process [***]. If work-in-process is changed per Buyer' s engineering changes, Seller may ship said products and bill Buyer [***] for the labor and material costs caused by such changes. In addition, a processing fee of [***] shall be charged to the Buyer when the number of ECOs processed exceeds [***].
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