Manufacturing Service Agreement

Exhibit 10.11


Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.


ACT MANUFACTURING INC. AND [CONVERGENT LOGO] CONVERGENT NETWORKS, INC. [ACT LOGO]


MANUFACTURING SERVICES AGREEMENT


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This Manufacturing Services Agreement ("Agreement") between ACT Manufacturing, Inc. ("ACT") and Convergent Networks, Inc. ("Convergent") is entered into as of September 20, 2000 (the "Effective Date").


1. SERVICES


ACT agrees to use diligent efforts to perform the services (hereinafter "Services") pursuant to purchase orders or changes thereto issued by Convergent Networks. The Services shall mean (a) the procurement of components, materials, equipment and other supplies, (b) the manufacture, assembly, and testing, of products (hereinafter "Products") pursuant to detailed written specifications for each such Product as provided by Convergent Networks, (c) the delivery of such Products, and (d) the provision of the services set forth on Attachment A. For each Product or revision thereof, written specifications shall include but are not limited to bill of materials, schematics, assembly drawings, process documentation, test specifications, current revision number, and approved vendor list (hereinafter "Specifications") as attached to each purchase order issued hereunder.


2. ORDER ADMINISTRATION AND FORECAST MANAGEMENT


Convergent Networks must have 90 days worth of purchase orders in place at all times. Convergent Networks must also have an additional 90 days (for a total of 180 days) of forecast in place at all times. Purchase orders must specify part number, quantity, rev level, price and requested delivery dates provided such additional forecasts shall be fully cancelable and re-scheduled until such time as such forecasts fall within a 90 day period. First 30 days of forecast are non-cancelable/non-rescheduled. ACT will schedule all material to arrive at least 21 days prior to requested in-house date at Convergent Networks. Days 31- 60 are non-cancelable but can be rescheduled out to a maximum of 60 days one time only. Days 61-90 are fully rescheduled/cancelable within the following guidelines:


Convergent Networks will be responsible for all excess custom and unique material bought on their behalf. Convergent Networks will be responsible for all excess created by non-cancelable/non-returnable items. Convergent Networks will be responsible for all excess created by purchasing of minimum order quantities and minimum package sizes. ACT will plan material to support the forecast provided by the Convergent Networks. Convergent Networks must convert [**]% the forecast for the 90 day period. Convergent Networks will be responsible for all charges set forth below, and custom/unique parts purchased to support orders and forecast within the 90-day period. ACT shall use its best efforts to return all returnable/cancelable items to distributors.


ACT will charge [**]% per month for items carried in inventory greater than 7 weeks as a result of reschedules.


ACT will charge [**]% for material returned to ACT's Distributors on the Convergent Networks behalf due to reschedules or cancellations for non- distribution items only.


ACT will change a [**]% handling charge for excess or obsolete material, which must be returned to the Convergent Networks.


Convergent Networks shall not pay the foregoing charges for any materials, parts, components and/or inventory purchased by ACT in excess of Convergent Networks' forecasts; provided, however, if the Minimum Amount (as defined below) of a particular component or part purchased by ACT is greater than the amount for such component or part in Convergent Network's forecast, the foregoing cancellation charges shall apply to the Minimum Amount less those components or parts converted into Product by Convergent or may be allocated to meet the requirements for other ACT customers. For purposes of this Section 2, "Minimum Amount" means the smallest quantity of a component or part that ACT can purchase to meet Convergent Network's forecasts for such components or parts, but does not include any greater minimum amount purchased by ACT to obtain better per unit pricing or other more favorable terms.


Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.


CONVERGENT NETWORKS AND ACT MANUFACTURING
MANUFACTURING SERVICES AGREEMENT


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3. PRICING


ACT will submit a formal quote to set pricing for the upcoming quarter. ACT and Convergent Networks will meet every three months to review process and material cost changes. New pricing for the upcoming quarter will be set at that time. Major changes may be negotiated by either party during the quarter when necessary.


All prices are F.O.B. shipping point, on any product not delivered directly by ACT owned vehicles. Payment terms are Net 30 days. Convergent Networks will have the right to select the method of shipment, including carrier, insurance, means of transportation and routing. ACT will assist Convergent Networks in obtaining favorable logistics services from ACT's partners and vendors.


Material cost reductions negotiated solely by Convergent Networks shall be passed [**]% to Convergent Networks. Material cost reductions negotiated solely by ACT on behalf of the Convergent Networks will be split [**]% to each party for a period of one year, unless Convergent establishes better pricing during such one-year period, in which case ACT shall pass all of the savings on to Convergent.


4. FLEXIBILITY


ACT agrees to provide a [**]% "upside" (i.e. quantities of Product in excess of forecast) in any given quarter commencing three weeks from receipt of request. Convergent Networks will be promptly informed in advance of any charges associated with holding critical components in stock (boards/ASICS/sheet metal, etc.). Convergent Networks assumes all risk for Engineering Change Orders (ECOs) to critical parts held in stock to support flexibility. Should Convergent Networks exercise the full [**]% flexibility it will not again be available until the lead time of the longest lead-time component; provided, however, ACT shall use reasonable efforts on behalf of Convergent Networks to negotiate arrangements with distributors and brokers to obtain additional inventory to provide for [**] upside flexibility for the quarterly immediately following the quarter during which Convergent Networks has exercised the [**]% upside.


5. CONVERGENT NETWORKS DELIVERABLES


Unless otherwise stated in writing, Convergent Networks agrees to provide to ACT all information required to properly manufacture the Product (Attachment B). Convergent Networks agrees to provide all unique test equipment, test procedures and software code required to isolate defects. Subject to Section 7, ACT disclaims liability for any non-manufacturing related defects which such tools did not isolate.


6. APPROVED MANUFACTURERS


ACT will only purchase components specified and approved by Convergent Networks. Any changes are subject to Convergent Networks advance written consent. If Convergent Networks refuses to give such consent or fails to respond within ten days of ACT's request therefor, and ACT has used its reasonable efforts to purchase from the approved manufacturers and shortages or allocation exist, ACT shall not be liable for failing to deliver the affected Product. In the event that ACT is unable to purchase a specified component from approved manufacturers due to unavailability and Convergent Networks has given ACT advance notice of its need for the specified component with at least the lead time specified by ACT for such specified component, ACT will make every effort to obtain the specified components, including buying from "brokerage" at ACT's expense.


7. WARRANTY


a). ACT warrants that (i) the Products provided under this Agreement will be free of manufacturing defects for a period of one year from date of shipment, (ii) the Products will conform to the specifications set forth in the applicable purchase order, and (iii) will be performed in accordance with IPC (formerly the Institute for Interconnecting and Packaging Electronic Circuits) standards for a Class II Factory and will assume responsibility for all process-related defects and assembly violations,


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