June 1999
Manufacturing Services Agreement
(Venice Printed Circuit Assemblies)
Hewlett-Packard Singapore Pte Ltd Manufacturers' Services S'pore Pte Ltd 450 Alexandra Road No 12, Street 65, 12th Floor Ang Mo Kio Industrial Park 3 Singapore 119960 Singapore 569060
This Agreement is effective this 1st day of June 1999 ("Effective Date") by and between Hewlett-Packard Singapore (Pte) Ltd; (herein referred to as "HP") and MANUFACTURERS' SERVICES SINGAPORE PTE LTD (herein referred to as "CM").
PREAMBLE
Whereas, CM is in the business of performing assembly services, testing and other manufacturing related operations for the product(s) defined in Schedule 1 ("the Products") and;
Whereas HP is desirous of entering into an manufacturing services agreement with CM under terms and conditions set forth below:
1. TERM
This Agreement shall be in effect from the Effective Date and shall be
valid for a period of [*] ("Term"). Thereafter, annual renewals of this
Agreement shall be by mutual written consent of both parties.
2. SCOPE OF SERVICES
During the Term of this Agreement, CM shall manufacture the Products in
accordance with the specifications set out in Schedule 1, 6, 8 and supply
those Products exclusively to HP, and HP shall purchase such volumes of
the Products as to be ordered by HP from time to time.
CM shall perform the following manufacturing services:
(a) Assembly
(b) Testing
(c) Packaging and delivery
(d) Service support
3. DEFINITION OF SERVICES
Assembly:
The process of joining together components in accordance with process
flow, written process, technical requirement and visual inspection
criteria.
--------------------- [*] = Information redacted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.
The process of testing electrical performance where required to meet the
product's electrical specifications.
Packaging and Delivery:
The process of packaging the product as defined in the assembly procedure
specified in Schedule 6.
Service Support:
The process of supplying service assemblies specified in Schedule 9
between the product manufacturing release date and the end of the GMS
period, defined as [*] after the product End-Of-Life.
4. FORECAST AND ORDERS
Subject to this clause, the process for forecasting and ordering
(including CM's response to orders) the Products shall be in accordance
with Schedule 2.
4.1 Forecast
Throughout the Term of this Agreement, HP shall provide CM with an
advanced non-cancellable [*] order and a rolling forecast of
projected demand for each model of the Products. Such rolling
forecast shall be for at least [*] although HP may forecast for up
to [*].
4.2 Purchase Order
HP shall provide the purchase order for the following [*].
Purchase orders must contain the following terms:
(a) the name and product number of the Product ordered
(b) the minimum quantities per Product and multiples thereof;
(c) delivery instructions, including requested delivery schedule.
(shipping destination will be provided separately)
(d) purchase order number and contract number, date of order, name
and title of HP's representative, invoice-to address, order
acknowledgement address and any special instructions.
4.3 Response Time
CM shall respond within [*] working days after the receipt of the
Purchase Order.
5. MATERIALS MANAGEMENT
Materials required for the manufacture of the Products shall:
(a) be supplied to CM by HP on consignment; and/or
(b) obtained by CM from vendors approved by HP ("turnkey")
Such consigned/turnkey materials are specified in Schedule 3.
5.1 Materials on Consignment
Where materials are supplied by HP on consignment:
(a) CM shall be responsible for all forwarding and brokerage costs
and customs duties or user fees. CM shall also assist HP with
all import formalities and obtain customs clearance for such
consigned materials.
(b) As long as CM continues to have possession of the material
supplied by HP, HP shall retain legal title to all such
materials supplied. In the event such materials are used even
with loss of identity, the legal title to the resultant
products shall remain in HP.
(c) CM shall submit to HP on a monthly basis, a report on the
balance of consigned materials in the possession and control
of CM at its premises in an agreed format.
(d) HP reserves the right to perform a periodic statistical audit
of CM's physical inventory.
(e) Upon termination of this Agreement and/or business
relationship for whatever reasons, CM shall return the
remaining quantity of consigned materials to HP in good
condition.
5.2 Materials on Turnkey
Where materials are obtained by CM from vendors approved by HP:
(a) CM shall purchase materials only from HP approved vendors in
the Approved Vendors List ("AVL") set out in Schedule 4.
(b) Any changes in vendors, parts specifications and processes
shall be subject to HP's review and written approval.
(c) CM shall plan for the turnkey materials required according to
HP's forecast and communicate the requirements to the approved
vendors based on the AVL allocation percentage determined by
HP.
(d) CM shall verify the quality and quantity of each receipt of
materials from suppliers. CM shall take a proactive role to
initiate corrective actions for any non-conformance to
material specification.
(e) CM shall have the full ownership and accountability of
delivery, quality and cost
(f) CM shall submit to HP on a monthly basis, a report on the
balance of turnkey materials in the possession and control of
CM on its premises and the quantity and leadtime and value of
open purchase orders of turnkey materials in an agreed format.
(g) CM shall obtain authorisation from HP for the purchase of very
long component lead times or industry parts allocations, in
excess of the stated cumulative lead-
time. All exception buy agreements shall be dated and written
and shall specify the part numbers and description of
materials to be purchased, the assembly that the materials are
to be used in, and the maximum liability.
6. MATERIALS LIABILITY
6.1 Planned End-Of-Life
HP shall provide [*] notice before any planned Product End-Of-Life.
HP and CM shall each endeavour to avoid or to minimise any materials
liability for both HP (consignment) and CM (turnkey) controlled
materials.
6.2 Unplanned EOL
In the event of an unplanned End-Of-Life, CM shall take all
reasonable steps to reduce outstanding excess materials exposure and
liability. All eventual materials liability must be clearly
documented and justified.
HP shall be liable for the materials purchased for purchase orders
that have been issued to CM, as well as those that have been
purchased/ordered outside the period of HP's orders due to long lead
time. HP shall not be liable for any excess material purchased by
CM.
6.3 Build Plan Reduction outside Materials Lead-times
HP shall not be liable for any material exposure in the event of a
build plan reduction that is beyond the lead-times of components.
6.4 Build Plan Changes within Materials Lead-times
In the event of a change in build plan within lead-time, CM shall
take all reasonable steps to reduce outstanding excess materials
exposure and liability. HP shall be liable only for inventory that
is purchased/ordered within the material lead-time.
6.5. HP shall be liable for any material exposure in the event of a PCO
implementation that is beyond the leadtime of the components
6.6 Exposure Reduction
CM shall strive to continuously reduce the lead-time of the
components and the logistic flow between the assemblies so as to
reduce the material exposure and improve response time for material
assembly.
7. OPERATING SUPPLIES
7.1 CM shall provide operating supplies as required in the manufacturing
process. HP shall provide on consignment all indirect materials
unique to HP.
7.2 Any changes to the use of operating supply materials and/or the
supplier shall require written approval from HP. Operating supplies
which require approval include but shall not be limited to oils,
paper for printer testing and label printing ink ribbons.
7.3 Upon termination of this Agreement and/or business relationship for
whatever reasons, CM shall return the remaining consigned indirect
materials to HP in good condition.
8. EQUIPMENT AND TOOLING
8.1 CM shall supply all standard production tooling and fixture
requirements defined in Schedule 5A.
8.2 HP shall provide unique process equipment and spare/replacement
parts associated with the manufacturing process as defined in
Schedule 5B. HP shall have full ownership of all equipment and tools
exclusively paid for by HP but under CM possession. Schedule 5B
shall be updated whenever there is any change in the list of
equipment and tooling consigned to CM.
8.3 CM and its suppliers shall maintain and repair the unique process
equipment.
8.4 In the event that CM considers it necessary to renew any HP unique
tools or to add alterations to the existing tools to meet HP's
specifications or request, CM shall notify HP for approval at least
two (2) months prior to the actual implementation. HP shall not
withhold the approval unreasonably.
8.5 CM shall qualify all new tools/fixture and obtain HP's written
approval before they are used in CM's production line. CM shall send
HP a copy of its qualification report to HP. In the event that HP
does not concur with CM's qualification result, HP has the right to
reject the use of new tools until corrective actions are taken.
8.6 CM shall calibrate all equipment and tools according to the
procedures specified by manufacturers or as per HP requirements. A
calibration report must be filed and made available to HP upon
request.
8.7 CM shall not sell, assign, sublet, pledge, hypothecate or otherwise
encumber or suffer a lien upon or against any interest in this
Agreement any unique equipment or tools mentioned herein, or alter,
or remove the equipment or tools, from the place of installation
without HP's prior written consent, which consent shall not be
unreasonably withheld.
8.8 In the event that this Agreement is terminated for whatever cause,
CM shall pack the applicable equipment and tools for shipment in
accordance with manufacturers' specifications and shall return in
the same condition as when delivered to CM, fair wear and tear
excepted, to a location to be specified by HP at HP cost.
HP is responsible for PCA ICT test and Top level test software
upgrades.
9. PROPERTY
9.1 HP shall at all times retain all right, title and interest in HP
property, including but not limited to materials, operating supplies
and equipment and tooling, consigned to CM.
9.2 HP shall conduct physical inventory audits of all HP property such
as consigned equipment / tooling and components located at CM
Premises at no cost to HP.
9.3 Upon HP's request, or the expiration or sooner determination of this
agreement, CM shall return all HP property to HP in good condition;
normal wear and tear excluded. All return costs shall be borne by
HP.
10. STAFFING
10.1 CM shall maintain sufficient personnel to support the business and
ensure that its assembled products conform to HP's specifications
and quality standards.
10.2 To be deleted.
10.2 HP shall provide the necessary training required at start-up, free
of charge to CM employees. CM shall carry out any subsequent
training and maintain verifiable training records.
10.3 In the event training of CM employees is conducted in HP's premises
in Singapore, CM shall pay for all expenses incurred by CM
employees, in attending the training in Singapore.
10.4 In the event HP sends personnel to CM to assist in the start-up, HP
shall pay for all expenses incurred by HP employees.
11. ENGINEERING AND ASSEMBLY
11.1 The process and specifications for the assembly and engineering of
the Products shall be as described in Schedule 6 and shall be
governed by the terms and conditions therein. (Schedule 6 will be
revised quarterly if there is changes)
12. CHANGE ORDERS
12.1 HP shall be entitled to change its specifications subject to
issuance of a Production Change Order (PCO). Such change shall be
effective from the date of the PCO, subject to an agreed
implementation schedule and there is no consequent increase the
costs of services.
12.2 In the event the PCO increases the cost of services, the parties are
entitled to renegotiate for higher service charges payable. if the
parties are unable to agree to an adjustment in service charges, HP
may withdraw its PCO or alternatively exercise its right of
termination under the Agreement provided HP pays all attendant costs
involved in terminating the Agreement including unused materials and
spare parts.
13. PRODUCTION VOLUME
13.1 Both parties shall comply with the production ramp profile for new
top level assemblies and yield expectations for Printed Circuit
Assemblies(PCA) as determined by HP and CM as set out in Schedule 7.
(a) Production volume shall mean the projected quantity ordered by
customers.
(b) Due to changes in production volume, the production capacity
flexibility shall be as follows:
o [*]
o [*]
o [*]
CM shall respond to [*] of installed capacity with a lead-time of
[*].
13.2 In the event changes are beyond the above limits, HP and CM shall
review and discuss on the necessary actions to be taken.
13.3 In the case of volume ramp down or discontinuance, HP shall provide
[*] notice.
14. COST REDUCTION
14.1 CM shall actively pursue cost reduction from the onset of initial
production.
14.2 Cost reduction shall be achieved in areas including but not limited
to process improvements, material cost reductions, redesigning,
improved manufacturing efficiency, packaging recycling,
transportation, yields, localisation and automation.
14.3 In the event that changes in the assembly processes result in
significant productivity, HP and CM shall [*]. HP and CM shall agree
on all process adjustments.
14.4 CM shall fulfil all the cost goals and roll-in timelines as set out
in Schedule 7.
15. QUALITY
Subject to this clause, quality specifications, requirements and standards
for the Products shall be as defined in Schedules 6 and 8.
15.1 CM shall ensure that the finished Products satisfy HP
specifications, quality and reliability standards by appropriate
agreed-upon test methods. HP shall ensure that current revision of
specifications and test methods are made available to CM.
15.2 HP shall ensure that any changes in specifications are updated with
current revisions and CM informed of the changes.
15.3 CM shall maintain a quality system that meets 1S09002 standards.
15.4 CM shall ensure compliance in all areas to the current version of HP
Workmanship Specification for ESD Control (HP Document
#A-5951-1589-1, the relevant sections of which are attached in
Schedule 8).
15.5 CM shall ensure that the finished products comply with the
product-specific technical product regulations (E.g. UL, CSA, CCIB,
VCCI, FCC).
15.6 CM shall ensure that their factory certifications are maintained for
manufacture in accordance with the specified technical product
regulations.
15.7 CM shall conduct any necessary testing in accordance with HP
specifications and manage, execute HP specified qualifications &
processes and submit data, failure analysis and corrective actions
to HP.
15.8 Any units rejected by HP may be returned to CM for possible rework
or rescreen at no charge to HP, if the cause or failure of is due to
CM's non-conformance to HP's specifications or defective
workmanship. If HP opts to make a claim against CM under Clause 24,
HP shall provide sufficient documentation as needed to support its
claim.
15.9 CM warrants that all Material Safety Data Sheets for the Product
shall be provided to HP upon request and shall be complete and
accurate.
16. YIELD
16.1 In the event that assembly yield is low due to assembly quality or
equipment problems, CM shall conduct the necessary investigation to
resolve the problem(s) encountered.
16.2
