Document:

exv10w31

EXHIBIT
10.31

PROFESSIONAL SERVICES AGREEMENT

BETWEEN

AND

					
	 	 	 	 	 
	Harmonic Inc. / Plexus Confidential
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	 	Harmonic-Plexus PSA 17 September 03

 

 

CERTAIN INFORMATION FROM THIS DOCUMENT HAS BEEN REDACTED PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST BY HARMONIC INC. UNDER 17 C.F.R. §§ 200.80(B)(4), 200.83 AND 240.24B-2 AND SUBMITTED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

PROFESSIONAL SERVICES AGREEMENT

This Professional Services Agreement (“Agreement”) by and between Plexus Services Corp., including
its subsidiaries and affiliates (“Plexus”), a Nevada Corporation whose principal place of business
is located at 55 Jewelers Park Drive, Neenah, WI 54957-0156, and Harmonic Inc., including its
subsidiaries and affiliates, (“Harmonic”), a Delaware Corporation whose principal place of business
is located at 549 Baltic Way, Sunnyvale, CA 94089 USA, is entered into as of September 22, 2003
(“Effective Date”).

WHEREAS, Harmonic desires to purchase custom manufacturing and related services for certain
products consisting of hardware and software components for resale to its customers; and

WHEREAS, Plexus is in the business of providing manufacturing services that include the custom
manufacture of printed electronic circuit boards, systems and related services; and

WHEREAS, the parties deem it desirable by means of this Agreement to establish terms and conditions
which shall govern Plexus’s sale and Harmonic’s purchase of the products and services;

NOW, THEREFORE, in consideration of the foregoing and of the mutual promises herein set forth, the
parties hereto mutually agree as follows:

1. Definitions

	1.1.	 	“Annualized Run Rate” shall mean the aggregate price of the previous quarter’s actual
shipments to Harmonic plus current quarter open orders and forecast, annualized.

	1.2.	 	“Approved Vendor List” (AVL) shall mean the list of suppliers or component manufacturers
approved as sources of supply for each component.

	1.3.	 	“Blanket Purchase Order” — shall mean the written instrument issued by Harmonic during the
Term against which Releases shall be issued, but which in itself is not a binding commitment
to purchase Product, nor sets any date for delivery;

	1.4.	 	“Custom engineered component” (CEC) shall mean a build to print component that is built to a
specification and only used in Harmonic’s Product.

	1.5.	 	“Finished Goods” a Product which is physically complete, has passed final test and
inspection, and has been transacted and physically moved to the Finished Goods location.

	1.6.	 	“Minimum Order Quantity (MOQ) List” shall mean a list of parts that have a minimum order
purchase quantity requirement.

	1.7.	 	“Products” shall mean the items consisting of hardware and software components to be
manufactured by Plexus in accordance with Harmonic’s specifications and delivered to Harmonic
as a completed product, including (i) any successor, follow-up, enhanced, or modified version
of these Products, and (ii) any other goods which the parties agree in writing shall be
subject to this Agreement.

	1.8.	 	“Purchase Order” shall mean the written instrument issued by Harmonic during the Term which
is a binding commitment to purchase specific Products or services and which establishes dates
for delivery;

					
	 	 	 	 	 
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	 	Harmonic-Plexus PSA 17 September 03

 

 

	1.9.	 	“Release” shall mean any written request issued by Harmonic pursuant to a Blanket Order by
which a purchase commitment is made and the delivery date for all or part of the Blanket Order
is set;
	 
	1.10.	 	“Order” shall mean, collectively, Purchase Order, Blanket Purchase Order, and Releases.

	1.11.	 	“Services” shall mean the services to be provided by Plexus to Harmonic including but not
limited to, prototype development and manufacturing, test development, product manufacturing,
system assembly, order fulfillment, and repair.

	1.12.	 	“Specification” shall mean the Harmonic manufacturing specifications made available to
Plexus, including but not limited to bill of materials, test specifications, and assembly
drawings, applicable to each Product as designated on the Order.

	1.13.	 	“Transition period” shall mean the period of time Harmonic is transitioning the manufacture
of its products to Plexus which shall end the earlier of: i) June 30, 2004; or ii) when
receipts, open orders, and forecast total at least ten million dollars per quarter.

	1.14.	 	“Work Product” shall mean the Product, any and all recommendations, findings, reports,
designs, drawings, diagrams, plans, specifications, writings of any nature, photographs,
artwork, audio and visual works, computer programs, inventions, discoveries, and improvements
developed, written, made, conceived or reduced to practice in the course of or arising out of
the Services performed by Plexus for Harmonic under this Agreement.

	2.	 	List of Exhibits. The following exhibits attached hereto are incorporated and made a
part of this Agreement:

	 	•	 	Exhibit A – Transition
	 
	 	•	 	Exhibit B – Pricing
	 
	 	•	 	Exhibit C – Scheduling and Flexibility
	 
	 	•	 	Exhibit D – Material Procurement and Liability
	 
	 	•	 	Exhibit B – Fulfillment Services
	 
	 	•	 	Exhibit F – Quality Requirements

	3.	 	Scope of Work

	3.1.	 	Plexus shall manufacture a range of products and provide Services on behalf of Harmonic at
the prices incorporated by reference in Exhibit B. Plexus shall manufacture Products that
conform to Harmonic’s Specifications, quality and other applicable documentation as set forth
in this Agreement. Unless otherwise specified herein, the parties agree that Plexus may
provide such Products and Services from any of its various global facilities.

	3.2.	 	This Agreement is not a requirements contract and does not obligate Harmonic to purchase any
Products. Plexus agrees to assemble, test and sell the Products exclusively to Harmonic and
Harmonic shall purchase Products in accordance with and only in response to Purchase Orders,
Blanket Purchase Orders, and Releases issued by Harmonic.

	3.3.	 	The parties shall develop a mutually agreed “Service Level Agreement” (SLA) within ninety
(90) days of the Effective Date of this Agreement Such SLA shall define expected performance
levels and establish a framework for communication between the parties and shall be fully
incorporated herein by this reference. In the event of any conflict between any provision of
this Agreement and any provision in the SLA, the terms and conditions of this Agreement shall
prevail.

	4.	 	Term

	4.1.	 	This Agreement shall commence on the Effective Date and shall continue for an initial term of
thirty-six (36) months and shall automatically renew for successive twelve (12) month
increments, unless terminated earlier as provided hereunder.

	5.	 	Product Forecast

	5.1.	 	Harmonic shall provide Plexus on a monthly basis, a twelve (12) month rolling forecast that
assumes three (3) months of demand arc covered by Orders issued by Harmonic. Such forecasts
are to be used by Plexus for planning purposes and do not constitute any obligation by
Harmonic to purchase Products, as the forecasts are estimates based on marketing data, which
may be inaccurate and subject to change according to actual market demand. Notwithstanding
the foregoing, Plexus may make component purchases based on Harmonic’s forecast with
Harmonic’s prior written authorization.

					
	 	 	 	 	 
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	 	Harmonic-Plexus PSA 17 September 03

 

 

	6.	 	Orders

	6.1.	 	Harmonic may place Orders with Plexus on an as needed basis and such Orders shall become
effective upon acceptance of the Order by Plexus. Orders shall specify the quantities,
prices, revisions, delivery schedules, products, Specifications, and other applicable
information necessary for the transaction. Plexus shall acknowledge the Orders within two (2)
business days of receipt by facsimile, confirmed email, or mail, provided that the Orders are
within the forecast and flexibility parameters set forth in Exhibit C. Such acknowledgements
will include verified delivery dates and confirmation of any other applicable Order
information requested by Harmonic. If Plexus has any issues with, or requested modifications
to, a Harmonic Order, Plexus and Harmonic will work together in good faith to resolve such
issues expeditiously and with as little impact to the fulfillment of the Order as possible.
This Agreement becomes the exclusive and binding agreement between the parties for the
purchase of Products and/or Services when an Order is accepted by acknowledgement and/or
commencement of performance by Plexus. Acceptance of an Order is limited to these terms and
conditions and each party expressly rejects any other terms, conditions or provisions, on
either party’s standard forms, including but not limited to, invoices, acknowledgments, and
purchase orders, unless otherwise agreed in writing by both parties.

	6.2.	 	Orders shall be fulfilled in accordance with Exhibits C and D. Upon Harmonic’s written
request Order fulfillment services will be provided in accordance with Exhibit E.

	7.	 	Title

	7.1.	 	Except as otherwise provided herein, all shipments of Products hereunder shall be made, and
Products shall be deemed delivered, FCA Boise Idaho (INCOTERMS 2000), at which point title to
Product(s) and risk of loss pass to Harmonic. In the case of shipments of finished Products
from Plexus’ Malaysia facilities to Harmonic facilities in Sunnyvale, California shipments
shall be made, and Products shall be deemed delivered, DDP destination (INCOTERMS 2000) at
which point risk of loss to the Product will pass to Harmonic (title with respect to such
shipments will pass, however, to Harmonic at the time of shipment by Plexus). Any finished
Products from Malaysia for which Harmonic requests Plexus to ship to destinations other than
Harmonic Sunnyvale, California, shipments shall be made, and Products shall be deemed
delivered, FCA point of origin (1NCOTERMS 2000), at which point title to Products and risk of
loss pass to Harmonic.

	7.2.	 	If Plexus has held finished Product manufactured in accordance with this Agreement in Plexus
inventory for more than thirty (30) days, Plexus may, unless otherwise mutually agreed in
writing, invoice Harmonic for such Product but will hold Product within its facilities pending
further shipment instructions from Harmonic (“Fulfillment Inventory”). Plexus will invoice
for such Fulfillment Inventory upon the same being placed in Harmonic’s Finished Goods
inventory location at Plexus, at which time title and risk of loss to such inventory
shall also pass to Harmonic. Plexus will, however, insure such Fulfillment Inventory held in
Plexus’ facilities at the full replacement cost thereof under the terms and conditions of
Plexus’ “all risk” insurance coverage. The prices for the Fulfillment Inventory shall be the
prices set forth in those Harmonic Orders under which Plexus manufactured such inventory.
Harmonic has requested that Plexus hold such Product following invoicing in order to provide
an inventory management and distribution service to Harmonic. If Plexus holds Product for
more than (90) days after title to the same has transferred to Harmonic, Plexus will notify
Harmonic and ship the Product to Harmonic or its designated agents, unless otherwise agreed in
writing.

	8.	 	Packing and Transportation

	8.1.	 	All Products shall be packaged appropriately for the method of transportation and in
accordance with the Specifications. All Products shall be shipped in accordance with written
shipping instructions provided by Harmonic, or if no such instructions are provided, by best
route and mode of transportation. Plexus shall be liable for any cost, loss, damage,
liability or excess shipping costs resulting from routing differing from Harmonic’s
instructions. Unless otherwise specified on the Order, for any shipments subject to FCA terms
as specified in Section 7.1, Plexus shall prepay and add to invoice the cost of freight and
any taxes, VAT, duties, customs, or other charges or fees assessed by any government
applicable to the transaction, that would apply to the requested destination.

	8.2.	 	Each party shall provide reasonable assistance to the other party with respect to applicable
import and export activity necessary for product shipments. Harmonic further agrees to submit
requested export information to Plexus pursuant to Plexus Guidelines for Harmonic-Driven
Export Shipments.

					
	 	 	 	 	 
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	 	Harmonic-Plexus PSA 17 September 03

 

 

	9.	 	Delivery

The delivery date for Product will be the
 date set forth in Harmonic Orders accepted by Plexus.  Plexus will deliver Product no sooner than
 [*] ([*]) days early and no later than zero (0) days late.
 Plexus will notify Harmonic as soon as it
 becomes aware of any impending late delivery and, if a late delivery is caused by factors within Plexus
reasonable control, Plexus will expedite shipment and pay any resulting incremental cost in doing so.
  If Plexus delivers Product more than fifteen (15) business days late and the lateness is within Plexus’
 reasonable control, such late delivery shall be considered a material breach of this Agreement by Plexus, and
 Harmonic, at its option, may reschedule such late shipment for up to ninety (90) calendar days or cancel
all or part of the applicable Order without any charge, obligation or liability.

	10.	 	Performance Review

	10.1.	 	Harmonic shall review the overall performance of Plexus on a quarterly basis based on review
criteria agreed to by both parties, in the form of a Quarterly Business Review (QBR). The
process shall involve measuring performance against targets in the areas of quality, delivery,
lead-time, customer service, price, cost reduction, productivity and technology. The intent
of this review is to maintain leading levels of competitiveness and to track the progress
toward meeting the above-mentioned targets and, when needed, implement innovative processes to
help achieve those targets. The process is meant to be one that is forward-looking and
constructive and the result is to mutually benefit both parties. Additionally, Harmonic may
request weekly and monthly meetings or conference calls to review Plexus performance and
address any relevant issues.

	10.2.	 	In order for Harmonic to effectively manage its business, Plexus agrees to use reasonable
commercial efforts to provide to Harmonic timely and accurate information about Plexus’s
operations subject to confidentiality obligations to third parties.

	11.	 	Pricing

	11.1.	 	Harmonic shall pay for Products in accordance with the cost models as set forth in
Exhibit B. For Services not expressly set forth in Exhibit B, then prices shall be as
mutually agreed in writing.

	12.	 	Payment Terms

	12.1.	 	All payments hereunder by Harmonic to Plexus shall be made in
US dollars net [*] ([*]) days
from the date of receipt of an accurate invoice, which shall be no sooner than the date of
delivery of the Products to Harmonic’s designated location. Plexus’ may submit invoices to
Harmonic electronically, via fax or US mail. Payment of invoices shall not constitute
acceptance of Products or Services and shall be subject to lawful adjustments and offset for
failure of Plexus to meet the requirements of this Agreement.

	13.	 	Quality

	13.1.	 	Plexus shall be ISO 9001:2000 certified at all manufacturing facilities used for Harmonic
Products.

	13.2.	 	Plexus shall manage and administer all regulatory compliance inspections which take place on
Plexus premises, including but not limited to, coordination and scheduling of UL/TUV factory
audit visits, to maintain product certification. Plexus shall be responsible for coordinating
all Product regulatory corrective action.

	13.3.	 	Plexus shall comply with the requirements of Harmonic CM Quality Requirements Document,
QA0G09, Exhibit F.  Any deviation from Exhibit F shall be by mutual written agreement.

	13.4.	 	Harmonic is not responsible for costs associated with rework and/or scrap during the
manufacturing process. Exception is if Plexus and Harmonic mutually agree that the cost is
design related, then cost is passed on to Harmonic. Other exceptional cases will be
negotiated in good faith on a case-by-case basis.

	13.5.	 	Plexus shall perform out of box audit which includes visual as well as test of the Products
on a sampling basis agreed upon by Harmonic at no charge until agreed upon performance levels
are attained.

	13.6.	 	Should Harmonic experience a trend of Product defects upon their arrival or during their
normal operational use, and the root causes have been identified to be due to Plexus
workmanship or component suppliers, -Harmonic may issue a corrective action request to Plexus
for corrective actions. Plexus shall investigate and provide its preliminary response within
five business days and final response in ten business days with both short term and long term
resolutions.

 

			
	*	 	Information redacted pursuant to a confidential
treatment request by Harmonic Inc. under 17 C.F.R. §§ 200.80(b)(4), 200.83 and
240.24b-2 and submitted separately with the Securities and Exchange Commission.

					
	 	 	 	 	 
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	 	Harmonic-Plexus PSA 17 September 03

 

 

	13.7.	 	The foregoing quality requirements may be amended in writing from time to time by agreement
of the parties without the need to amend this Agreement.

	14.	 	Engineering Changes and Additional Costs

	14.1.	 	Harmonic reserves the right at any time to request that Plexus incorporate engineering
changes (an “ECN”) in the specifications, drawings or other descriptions to which the Products
are to conform, subject to an equitable and agreeable adjustment in price and/or time of
performance and acceptance by Plexus of such changes. This notification will include
documentation of the change to effectively support Plexus’s investigation of the impact of the
engineering change. Plexus will use commercially reasonable efforts to review the changes and
report any issues to Harmonic within three (3) business days after receipt of the proposed ECN
from Harmonic. If any such change affects the price, delivery, or quality performance of said
Product, Harmonic and Plexus will mutually review all issues raised by the ECN and agree in
writing to specific resolutions prior to ECN implementation.

	14.2.	 	Harmonic shall not be responsible for any administrative costs associated with the
implementation of ECNs.

	14.3.	 	Plexus shall notify Harmonic of any engineering changes proposed to be made by Plexus to the
Products and shall furnish a written description of the expected effect of the change of the
Products, including effect on price, performance, reliability and serviceability.

	14.4.	 	Plexus shall make no engineering change, Approved Vendor List change, process flow changes,
test procedure change or discontinue any process step without Harmonic’s prior written
approval.

	14.5.	 	Harmonic agrees to provide written approval or disapproval of any change in pricing or
specifications within [*] ([*]) days of receipt from Plexus unless regulatory agency approval
is a requirement on Harmonic. A formal change order to existing purchase orders will be
furnished to Plexus within fourteen (14) days of initial approval. If Harmonic fails to
respond, such failure shall not constitute approval to proceed with the change.

	14.6.	 	Any claim by Plexus for a price adjustment resulting from an ECN requested by Harmonic shall
be deemed waived unless notice of a claim is made in writing within thirty (30) days from ECN
approval date.

	15.	 	Repairs and Replacement

	15.1.	 	Plexus shall provide standard turnaround time on repairs of [*] days. Plexus and Harmonic
will, in the SLA or another appropriate written agreement, mutually agree on the terms and
conditions of Plexus providing spare parts and other support services on an expedited basis
for selected Products.

	16.	 	Harmonic Consigned Material

	16.1.	 	From time to time, Harmonic may supply Plexus with or pay Plexus for certain material,
components, inspection tools, inventory or test equipment to be used solely for the
manufacturing and testing of Products (“Consigned Material”). Title to and right of immediate
possession of Consigned Material shall be and remain in Harmonic at all times and shall be
returned to Harmonic upon request in good and serviceable condition (fair wear and tear
excepted). Harmonic reserves the right to remove Consigned Material from Plexus’ site upon
reasonable notice. Plexus shall bear all risk of loss or damage to Consigned Material. In
the event Consigned Material is lost stolen, damaged, or made unfit for use, Plexus shall
immediately, at Harmonic’s option, either replace such materials at its own expense or credit
Harmonic for the actual purchase price of such Consigned Materials. Any Consigned Material
issued to Plexus by Harmonic free of charge for incorporation into the Products shall be
subject to the provisions of Section 16.2.

	16.2.	 	Insurance for Consigned Material and Equipment. Upon request, Harmonic shall provide an
estimate of the dollar value of Consigned Material issued to Plexus and Plexus shall at all
times during the term of this Agreement carry and maintain, at its expense, physical damage
insurance providing “all risks” coverage for Consigned Materials. Such insurance shall be
with insurance companies of recognized responsibility and shall contain endorsements (a)
naming Harmonic (or its successor or assignee, if requested by Harmonic) as loss payee for
physical damage insurance, and (b) providing thirty (30) days’ prior written notice to
Harmonic before coverage lapses or is canceled or materially changed.

 

			
	*	 	Information redacted pursuant to a confidential
treatment request by Harmonic Inc. under 17 C.F.R. §§ 200.80(b)(4), 200.83 and
240.24b-2 and submitted separately with the Securities and Exchange Commission.

					
	 	 	 	 	 
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	16.3.	 	Plexus shall use the Consigned Material in a skillful and proper manner and comply with all
instructions given to Plexus by Harmonic regarding the care and use of the Consigned Material
and shall not use the Consigned Materials for purposes other than the execution of the Orders.
Plexus shall undertake not to modify, adjust or alter in any way the Consigned Material
without Harmonic’s prior written consent or to remove any marks identifying any article as
Consigned Material or Harmonic property.

	16.4.	 	The maximum acceptable cycle count or physical inventory adjustments on Harmonic owned or
Consigned Materials is [*] ([*]) on value of component inventory being adjusted. Any
adjustments in excess of such percentage will be borne by Plexus.

	16.5.	 	Plexus shall at all reasonable times and upon reasonable notice permit Harmonic or its
authorized representatives to enter upon its premises for the purpose of inspecting, audit and
removing Consigned Material.

	16.6.	 	Plexus shall maintain and provide upon request a written inventory of all such Consigned
Materials. Unless otherwise agreed, Plexus is responsible for the general maintenance of
Consigned Materials including, but not limited to, calibration and shall not modify any
Consigned Materials without the prior written permission of Harmonic.

	17.	 	Conveyance of Rights

	17.1.	 	Plexus warrants that it has the right to use any manufacturing process used by Plexus in
connection with the manufacture of Product, other than manufacturing processes required by
Harmonic’s Specifications or developed by Harmonic, without creating any obligation on the
part of Harmonic to pay any fee, license, penalty or other expense in connection with
Harmonic’s use, reproduction, marketing, licensing or sale of the Work Product or Products,
other than the payments to Plexus as set forth herein.

	18.	 	Test Development and Concurrent Engineering

	18.1.	 	Plexus shall provide to Harmonic a design for manufacturing assessment, which shall include
an assessment of design for test, but will exclude in-depth schematic and accessibility
evaluation process efficiency, at no cost to Harmonic. At Harmonic’s request, Plexus shall
provide up to two (2) Design for Testability reports each quarter at no additional charge. In
addition, Plexus may be requested to provide test development or concurrent engineering
services for Harmonic.

	19.	 	Title to Work Product

	19.1.	 	Deliverables of any and all Work Product shall be promptly disclosed to Harmonic and shall
become and remain the sole and exclusive property of Harmonic. Plexus hereby irrevocably
transfers and assigns to Harmonic all right, title and interest in the Work Product, including
all rights in any patents, copyright, trade secrets, inventions, copyrightable materials, or
other intellectual property rights relating to the Work Product. Plexus agrees to execute any
documents, including patent and copyright assignments, take any acts and otherwise cooperate
with Harmonic, at Harmonic’s expense (including the reasonable time incurred by Plexus
employees at their actual hourly wage rate) but without further compensation to Plexus, in any
action Harmonic deems necessary to secure fully to Harmonic all rights in the Work Product or
to obtain, register, maintain or defend for Harmonic’s benefit any or all of the intellectual
property rights identified above. Harmonic shall have, at all times, all rights, title and
interest in and to all intellectual property including copyrights related to the Work Product.
This shall include any Work Product with Plexus. Plexus hereby assign all rights, titles,
and interest to any copyrighted Work Product. Notwithstanding the foregoing, Plexus shall own
all intellectual property rights in and to any manufacturing process technology developed by
Plexus in connection with the manufacture of Product for Harmonic (“Plexus IP”). Plexus
hereby grants Harmonic a perpetual, royalty-free, worldwide, non- exclusive, non-transferable
license to the Plexus IP to use, make, have made, and sell the Product.

	20.	 	Confidential Information

	20.1.	 	The parties hereby acknowledge that in the course of performance of this Agreement, it will
obtain information, including but not limited to, technical and/or business information
describing or related to development or manufacturing activities of the other party and its
products which is a confidential and proprietary in nature (“Proprietary Information”). At
all times during the term of this Agreement, each party shall hold Proprietary Information in
strict confidence and shall not disclose such Proprietary Information to any third party
without the

 

			
	*	 	Information redacted pursuant to a confidential
treatment request by Harmonic Inc. under 17 C.F.R. §§ 200.80(b)(4), 200.83 and
240.24b-2 and submitted separately with the Securities and Exchange Commission.

					
	 	 	 	 	 
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	 	Harmonic-Plexus PSA 17 September 03

 

 

	 	 	prior written consent of the other party consistent with the Mutual Non-Disclosure Agreement
executed between the parties effective February 24, 2003 and any amendments or extensions
thereof, (“NDA”) which is fully incorporated herein by this reference, and shall apply and
survive the termination or expiration of this Agreement.

	20.2.	 	Products purchased pursuant to Harmonic’s specifications or drawings shall not be disclosed
or quoted for sale to others by Plexus. All specifications, drawings, samples, or other data
furnished by Harmonic shall be treated as Proprietary Information by Plexus in accordance with
the NDA, shall remain Harmonic’s property and shall be promptly returned to Harmonic upon
request.

	20.3.	 	Neither party may advertise or publish information related to this Agreement without the
other party’s prior written approval.

	20.4.	 	Subject to the terms of the NDA, the proprietary rights of the parties and confidentiality
obligations owed to third parties, Plexus and Harmonic agree to exchange, at least
semi-annually, relevant process development information and business plans to include market
trends, process technologies, product requirements, new product developments, available
capacity and other information to support technology advancements by both Plexus and Harmonic.

	20.5.	 	Each party acknowledges that the other party shall be entitled to preliminary injunctive
relief in order to enforce the provisions of this Agreement relating to the confidentiality of
its confidential or proprietary information, in addition to, and not by way of limitation, any
other legal or equitable remedies available to such party.

	20.6.	 	This Agreement is intended to secure to Harmonic Plexus’s assistance and cooperation.
During the term of this Agreement, Plexus shall maintain sufficient separation between teams
of its employees, agents, or contractors who may be working for competitors of Harmonic to
avoid any conflict of interest. Upon request, Plexus shall demonstrate the adequacy of its
precautions to avoid such conflict of interest. If Harmonic determines at any time during the
term of this Agreement that such a conflict exists, notwithstanding the adequacy of such
precautions taken by Plexus, Harmonic may cancel this Agreement pursuant to the terms of
Section 23 below. Plexus further agrees that it shall not engage directly or indirectly
either for itself, or with or for any other person or entity in any work or undertaking which
shall create any legal impediment against Plexus’ performance of its obligations under this
Agreement and the rights granted to Harmonic hereunder.

	21.	 	Acceptance and Warranty

	21.1.	 	[*].
	 
	21.2.	 	[*].
	 
	21.3.	 	[*].
	 
	21.4.	 	[*].
	 
	21.5.	 	[*].
	 
	21.6.	 	[*].
	 
	21.7.	 	[*].
	 
	21.8.	 	[*].
	 
	21.9.	 	[*].
	 
	21.10.	 	[*].
	 
	21.11.	 	[*].

	22.	 	Disaster Recovery

	 	 	In the event of a disaster for over [*] for any non-material related issue at the Plexus
location(s), and Plexus is unable to meet delivery commitments to the Harmonic, Plexus using
its reasonable commercial efforts shall begin

 

			
	*	 	Information redacted pursuant to a confidential
treatment request by Harmonic Inc. under 17 C.F.R. §§ 200.80(b)(4), 200.83 and
240.24b-2 and submitted separately with the Securities and Exchange Commission.

					
	 	 	 	 	 
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	 	Harmonic-Plexus PSA 17 September 03

 

 

	 	 	within [*] days implementing a disaster recovery transition plan to have products built at
another location or equivalent facility. Such plan shall be approved by Harmonic prior to
its implementation. Harmonic shall review and approve Plexus disaster recovery plan within
30 days of the Effective Date of this Agreement. Plexus will provide a formal disaster
recovery plan and provide updates at minimum on an annual basis.

	23.	 	Termination

	23.1.	 	If either party materially fails to meet any of the terms and conditions as stated in either
this Agreement or the addenda, Plexus and Harmonic agree to negotiate in good faith to resolve
such default. If the defaulting party fails to cure such default or submit an acceptable
written plan to resolve such default within thirty (30) days following notice of default, the
non-defaulting party shall have the right to terminate this Agreement by furnishing the
defaulting party with ninety (90) days written notice of termination.

	23.2.	 	This Agreement shall terminate upon written notice should either party; (i) enter into or
file a petition, arraignment or proceeding seeking an order for relief under the federal
bankruptcy laws of its respective jurisdiction and such petition, arraignment or proceeding is
not dismissed within sixty (60) days; (ii) enter into a receivership of any of its assets; or
(iii) enter into a dissolution or liquidation of its assets or an assignment for the benefit
of its creditors and the same remains undischarged for a period sixty (60) days.

	23.3.	 	The termination or expiration of this Agreement, except in accordance with Section 24, shall
not affect or impair the rights and obligations of either party that have accrued under this
Agreement as of the date of expiration or termination.

	23.4.	 	Either party may terminate this Agreement, in whole or in
part for any reason upon [*] ([*])
day written notice. Plexus shall give additional notice equal to the number of days that the
longest lead time material exceeds this notice period.

	23.5.	 	In the event of termination of this Agreement for any reason, at Harmonic’s option, Plexus
shall support Harmonic with Products sufficient to cover all Harmonic Orders in place at the
time of the termination notice and as may be issued by Harmonic and fulfilled by Plexus prior
to the termination date. As of the termination date, Plexus shall stop work immediately on
all affected Orders and deliver or destroy, at Harmonic’s option, all copies of all materials
containing any Proprietary Materials. In addition, Plexus shall deliver to Harmonic all other
Harmonic Consigned Material, confidential information and other materials in its possession.
Harmonic shall be obligated for all completed products, work-in-progress, all component
material purchased by Plexus in support of Harmonic’s Orders, all long lead-time material
purchased by Plexus to support Harmonic’s Orders, all non- cancelable/non-returnable
inventory, all minimum buy quantities of inventory, and any other such items resulting from
Services provided herein.

	24.	 	Dispute Resolution

	24.1.	 	In the spirit of continued cooperation, the parties intend to and hereby establish the
following dispute resolution procedure to be utilized in the event any controversy or dispute
should arise out of or concerning the performance of this Agreement.

	24.2.	 	It is the intent of the parties that any dispute be resolved informally and promptly through
good faith negotiation between Plexus and Harmonic. Either party may initiate negotiation
proceedings by written notice to the other party setting forth the particulars of the dispute.
The parties agree to meet in good faith to jointly define the scope and a method to remedy
the dispute. If these proceedings are not productive of a resolution within thirty (30)
days, then the parties agree to submit the dispute to binding arbitration as set forth below

	24.3.	 	Any controversy of claim arising out of or relating to this Agreement or the breach thereof,
that cannot be resolved informally as set forth above, shall be settled by arbitration before
three (3) arbitrators in accordance with the Rules of the American Arbitration Association
(“AAA”) then in effect, and judgment upon the award rendered by the arbitrators may be entered
in any court having jurisdiction. Within 15 days after the commencement of arbitration, each
party shall select one person to act as arbitrator and the two selected shall select a third
arbitrator within ten (10) days of their appointment. If the arbitrators selected by the
parties are unable or fail to agree upon the third arbitrator, the third arbitrator shall be
selected by the American Arbitration Association. The place of arbitration shall be San Jose,
California. Either party, before or during any arbitration, may apply to a court having
jurisdiction for a temporary restraining order or preliminary injunction where such

 

			
	*	 	Information redacted pursuant to a confidential
treatment request by Harmonic Inc. under 17 C.F.R. §§ 200.80(b)(4), 200.83 and
240.24b-2 and submitted separately with the Securities and Exchange Commission.

					
	 	 	 	 	 
	Harmonic Inc. / Plexus Confidential
	 	Page 9
	 	Harmonic-Plexus PSA 17 September 03

 

 

	 	 	relief is necessary to protect its interest pending completion of the arbitration
proceedings. Neither party nor the arbitrators may disclose the existence or results of any
arbitration hereunder without the prior written consent of both parties.

	25.	 	Limitation of Liability
	 
	 	 	[*]

	26.	 	Intellectual Property Indemnity

	26.1.	 	[*].
	 
	26.2.	 	[*].
	 
	26.3.	 	[*].
	 
	26.4.	 	[*].

	27.	 	General Indemnity. Each party (the “Indemnifying Party”) shall hold harmless the other party
(the “Indemnified Party”), against
[*].

	28.	 	Insurance. Without in any way limiting the obligations set forth in Sections 27, Plexus
shall maintain in full force and effect the following insurance:

	 	(a)	 	Workers’ Compensation Insurance covering Plexus’ full liability under the
Workers’ Compensation Laws of the states in which work is being performed under this
Agreement.
	 
	 	(b)	 	Bodily Injury Liability Insurance (including automobile) with limits of at
least the sum of [*] for injury to or death of one person, and at least the sum of [*]
for injury to or death of more than one person in any one occurrence.
	 
	 	(c)	 	Property Damage Liability Insurance (including automobile) with limits of at
least the sum of [*] for property damage resulting from each occurrence.
	 
	 	(d)	 	In lieu of b and c above, Bodily Injury Liability Insurance (including
automobile) and Property Damage Liability Insurance (including automobile) with a
Combined Single Limit of at least the sum of [*].
	 
	 	(e)	 	The insurance described in b, c and d above shall provide contractual liability
coverage with respect to the liability assumed by Plexus under this Agreement and
shall:

	 	(i)	 	include Harmonic as an Additional Insured, provided that
Harmonic’s rights as an Additional Insured will extend only to liabilities
specifically assumed by Plexus under this Agreement and Harmonic will not
pursue insurance claims directly with Plexus insurance carrier unless
(a) Harmonic has requested that Plexus file a claim (for which Plexus is liable
under this Agreement) with its insurance carrier and Plexus has failed to do so
within fifteen (15) days after receipt of such notice, or (b) Plexus has ceased
to do business or Harmonic has the right to terminate this Agreement under
Section 23.2. Plexus insurance carrier shall have the right to deny any claim
submitted by Harmonic if not in conformity with the above;
	 
	 	(ii)	 	not be cancelable without thirty (30) days prior written notice to Harmonic;
	 
	 	(iii)	 	be primary insurance and, should Harmonic have other valid
insurance, Harmonic’s insurance shall be excess insurance only; and
	 
	 	(iv)	 	include a severability of interest clause,

	 	(f)	 	At Harmonic’s request, Plexus shall provide Harmonic with proof of compliance
with the insurance provisions of this section. Plexus shall require its suppliers, if
any, who may enter upon Harmonic’s premises to maintain insurance in accordance with
the insurance provisions of this section.

 

			
	*	 	Information redacted pursuant to a confidential
treatment request by Harmonic Inc. under 17 C.F.R. §§ 200.80(b)(4), 200.83 and
240.24b-2 and submitted separately with the Securities and Exchange Commission.

					
	 	 	 	 	 
	Harmonic Inc. / Plexus Confidential
	 	Page 10
	 	Harmonic-Plexus PSA 17 September 03

 

 

	29.	 	General

	29.1.	 	Assignment. Neither party shall delegate, assign or transfer its rights or obligations
under this Agreement, whether in whole or part, without the written consent of the other party
which shall not be unreasonably withheld, provided, however, either party may assign this
Agreement to a third party in connection with a merger transaction or the sale of all or
substantially all of its assets.

	29.2.	 	Force Majeure. Neither party shall be liable for any failure or delay in its performance
under this Agreement due to acts of God, acts of civil or military authority, fires, floods,
earthquakes, riots, wars or any other cause beyond the reasonable control of the delayed party
provided that the delayed party: (i) gives the other party prompt written notice of such
cause; and (ii) uses reasonable commercial efforts to remedy such delay in its performance.
In the event that Plexus fails to deliver Products to Harmonic due to such causes and fails to
provide a plan for remedy which is reasonably acceptable to Harmonic, Harmonic may suspend
this Agreement in whole or in part for the duration of such delaying cause and, at its option,
buy the Products from another source and deduct the quantity so purchased from any unsatisfied
Order to Plexus. In such event Harmonic agrees to make reasonable commercial efforts to
purchase, or cause to be purchased, materials from Plexus for the manufacture of Products by a
third party, if feasible under the circumstances.

	29.3.	 	Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of California, excluding its choice of law provisions.

	29.4.	 	Counterparts. This Agreement may be executed in one or more counterparts, each of which
will be deemed the original, but all of which will constitute but one and the same document.

	29.5.	 	Relationship of the Parties. Nothing contained herein shall be construed to create an
agency, partnership or joint venture between Harmonic and Plexus. It is further agreed and
understood that neither party nor its employees shall be deemed to be in the employment of the
other and shall have no express or implied right or authority under this Agreement to assume
or create any obligations on behalf of the other party to any contract, agreement
or undertaking with any third party.

	29.6.	 	Modification. No change, modification or revision of this order or this Agreement shall be
effective unless agreed to in writing and signed by each party’s duly authorized
representative.

	29.7.	 	Waiver. Failure of a Party to enforce at any time any of the provisions hereof shall not be
construed to be a waiver of such provisions, nor be deemed a waiver of any other right
hereunder or the right of a Party thereafter to enforce any such provisions.

	29.8.	 	Severability. If any portion of this Agreement is held invalid, the parties agree that such
invalidity shall not affect the validity of the remaining portions of this Agreement, and the
parties shall seek in good faith to agree to substitute for the invalid provision a valid
provision that most closely approximates its terms.

	29.9.	 	Compliance with Laws.

	 	29.9.1	 	In the performance hereof, the Parties shall comply with all applicable laws, rules,
regulations, orders, or ordinances of any federal, state, local or other government
agency of the United States or any other applicable jurisdiction, including but not
limited to, procurement of required permits and/or certificates. Parties shall comply
with all applicable federal, state and/or local laws in any applicable jurisdiction
that require products, materials, services or containers furnished to be constructed,
packaged, labeled or registered in a prescribed manner.
	 
	 	29.9.2	 	Parties shall comply with all laws and regulations of the United States, or any other
applicable jurisdiction, concerning importation and exportation of Products. The
parties will provide mutual assistance as required to comply with said laws and
regulations.
	 
	 	29.9.3	 	Each party (the “Breaching Party”) agrees to indemnify the other Party for any loss
or damage sustained because of the Breaching Party’s noncompliance with this Section
29.9.

	29.10.	 	Notices. All notices permitted or required hereunder shall be deemed to have been given
(i) three (3) days after being deposited in the U.S. mail, first class postage prepaid, or
(ii) immediately if transmitted by confirmed facsimile, or (ii) next day if sent by overnight
commercial carrier (e.g. Federal Express) if addressed to the party as follows

					
	 	 	 	 	 
	Harmonic Inc. / Plexus Confidential
	 	Page 11
	 	Harmonic-Plexus PSA 17 September 03

 

 

	 	 	 	 	 
	 

	 	If to Harmonic:
	 	Harmonic Inc.
	 

	 	 	 	549 Baltic Way
	 

	 	 	 	Sunnyvale, CA 94089 USA
	 

	 	 	 	Attn: Legal Department
	 

	 	 	 	Fax: 408-490-6524
	 
	 

	 	If to Plexus:
	 	Plexus Services Corp.
	 

	 	 	 	55 Jewelers Park Drive
	 

	 	 	 	Neenah, WI 54957
	 

	 	 	 	Attn: General Counsel
	 

	 	 	 	Fax: 920-751-3234

	29.11.	 	Survival. The terms and conditions of Sections 1, 17, 19, 20, 21, 23, 24, 25, 26, 29 and
any other provisions that would normally be deemed to survive, shall survive the expiration or
termination of this Agreement.

	29.12.	 	Complete Agreement. This Agreement in conjunction with all relevant Exhibits, constitutes
the complete contract between the parties and supersedes all prior or contemporaneous
representations, communications, agreements and understandings, oral or written, with respect
to the subject matter hereof. Each party represents and agrees that it has not relied on any
representation or warranty other than those contained herein in entering into this Agreement.
In the event of a conflict between this Agreement and the Exhibits attached hereto, the, terms
and conditions of this Agreement shall prevail.

	 	 	 	 	 	 	 	 	 
	Accepted and agreed:	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Plexus:	 	 	 	Harmonic Inc.:
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Name:

	 	 	 	 	 	Name:	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Title:

	 	 	 	 	 	Title:	 	 
	 

	 	 
	 	 	 	 	 	 

					
	 	 	 	 	 
	Harmonic Inc. / Plexus Confidential
	 	Page 12
	 	Harmonic-Plexus PSA 17 September 03

 

 

Exhibit A

Transition

	1.	 	During the Transition Period, the following terms shall apply:

	2.	 	The parties agree that Plexus will lead all transition activities during the Transition
Period.

	3.	 	Plexus shall provide multiple transition teams with on-site resources. Plexus shall assign
sufficient number of transition managers in order to meet project milestones agreed to by
Harmonic and Plexus.

	4.	 	Inventory transfer:

	 	a.	 	Plexus will purchase Active Inventory from Harmonic and its subcontractors at Plexus
standard cost, subject to such inventory meeting Plexus and Harmonic’s reasonable
inspection and acceptance criteria, less Plexus’ MOH charges.
	 
	 	b.	 	Active Inventory is defined as usable and within Harmonic forecasted demand in next 12
months plus identified end-of-life raw material (up to [*]). The value of this Active
Inventory is estimated to be [*] to [*]. Inventory transfers from Harmonic subcontractors
will be sold directly to Plexus. In the event any conflict arises between Plexus and
Harmonic’s subcontractors, then, Harmonic agrees to take an active role in resolving the
issues.

	5.	 	Inventory Transfer PPV:

	 	 	 	In the event of any price differential between Plexus standard cost and Harmonic
subcontractor cost, Harmonic will settle any disputes with the Harmonic subcontractor.

	6.	 	Costs associated with transition Non Recurring Engineering shall be borne as follows:

	 	a.	 	Stencils – Plexus
	 
	 	b.	 	Programming (ALL) – Plexus
	 
	 	c.	 	SMT Tooling – Plexus
	 
	 	d.	 	Jigs/Tools – Plexus
	 
	 	e.	 	ICT Fixtures – Plexus covers refurbishment cost and transfer of existing. Harmonic
covers new fixture expense and bring up.
	 
	 	f.	 	Functional Fixtures – Harmonic
	 
	 	g.	 	Wave pallet, PCB Tooling, PCB test, and CEC Tooling – —  If new tooling is requested by
Harmonic, Harmonic shall bear all costs. If new tooling is at the initiative of Plexus and
results in a cost reduction, Plexus shall bear all costs, and such cost reduction shall be
passed to Harmonic after Plexus’ recover of tooling implementation cost and as provided in
this Agreement.

	7.	 	Transition Freight

	 	 	 	All costs of pre-carriage, freight, and insurance applicable to the transition of any
material, including but not limited to, components, tools, and test equipment, from existing
subcontractors and Harmonic to designated sites shall be borne by Plexus. Any VAT, duties,
customs, or other charges or fees assessed by any government applicable to the transition
with respect to any material or components shall be borne by Plexus, and with respect
to tools and test equipment, shall be equally shared between the parties.

	8.	 	Transition Pricing:

	 	a.	 	Prices during the Transition Period shall be in accordance with the chart below.

	 
	 	b.	 	Pricing on products quoted during initial quote review are “not to exceed” quotations.
	 
	 	c.	 	Transition pricing shall include plan to transition to Plexus approved vendors
with specific timeline identifying date of implementation of pricing received in
original quote. Quoted prices have to take effect after consumption of transferred
inventory and Harmonic approval of new sources. It is understood that the
conversion to Plexus sources need to be initiated at the start of the transition
period to insure that quoted pricing is realized by Harmonic 90 days after
successful product transfer to Plexus or qualification of new sources by Harmonic,
whichever is sooner.
	 
	 	d.	 	Plexus shall provide a timeline for move from Boise to low cost manufacturing sites by
specific products

 

			
	*	 	Information redacted pursuant to a confidential
treatment request by Harmonic Inc. under 17 C.F.R. §§ 200.80(b)(4), 200.83 and
240.24b-2 and submitted separately with the Securities and Exchange Commission.

					
	 	 	 	 	 
	Harmonic Inc. / Plexus Confidential
	 	Page 13
	 	Harmonic-Plexus PSA 17 September 03

 

 

	9.	 	Buffer Inventory — Plexus agrees to hold buffer inventory to cover demand equal to eighty (80)
calendar days forecasted demand, which could be carried up to one hundred fifty (150) calendar
days by Plexus.

	10.	 	Plexus will cover all costs not specifically identified in this Agreement for transition
activities.

	11.	 	Harmonic’s NSG and MV encoder product lines shall be built in Malaysia unless otherwise
agreed in writing. If Plexus chooses to build product (that was previously designated to be
built in a low cost region) in Boise prior to transfer to low-cost sites, then Plexus shall
extend the low cost site pricing to Harmonic during the time that Product is built at the
Boise site.

					
	 	 	 	 	 
	Harmonic Inc. / Plexus Confidential
	 	Page 14
	 	Harmonic-Plexus PSA 17 September 03

 

 

	 	 	 
	

	 	Transition Pricing
	     Plexus Production Cost Estimator
	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Boise	 	 	Penang	 	 	San Jose	 
	MATERIAL
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Material
	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 
	Materials Overhead
	 	 	[*]	 	 	 	 	 	 	 	[*]	 	 	 	[*]	 	 	 	 	 	 	 	[*]	 	 	 	[*]	 	 	 	 	 	 	 	[*]	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total Material Cost
	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 
	LABOR
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Direct Labor Cost
	 	Hours	 	 	Rate	 	Total	 	Hours	 	 	Rate	 	 	Total	 	Hours	 	 	Rate	 	Total
	Assembly Labor
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 
	SMT
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 
	ICT Test
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 
	Functional Test
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total Labor Cost
	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Packaging
	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Subtotal
	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Profit margin
	 	 	[*]	 	 	 	 	 	 	 	[*]	 	 	 	[*]	 	 	 	 	 	 	 	[*]	 	 	 	[*]	 	 	 	 	 	 	 	[*]	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total Price
	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	NRE
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 
	 
	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 
	Plexus Notes and Assumptions:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Denotes specific assembly information required
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	1) Pricing markups to be used during transition period:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	Standard	 	 	 	 	 	Total	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Annual	 	Materials	 	 	 	 	 	Material	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Revenue	 	Overhead	 	Profit	 	Markup	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

The table above represents an example of the cost estimator that shall be used to calculate the
price by Product. The shaded areas in the cost estimator are filled in on a product specific basis
and the Standard Materials Overhead and Profit percentages specified in the inset table are fixed
and are applied based on location.

 

			
	*	 	Information redacted pursuant to a confidential
treatment request by Harmonic Inc. under 17 C.F.R. §§ 200.80(b)(4), 200.83 and
240.24b-2 and submitted separately with the Securities and Exchange Commission.

					
	 	 	 	 	 
	Harmonic Inc. / Plexus Confidential
	 	Page 15
	 	Harmonic-Plexus PSA 17 September 03

 

 

Exhibit B

Pricing

	1.	 	Pricing model to be utilized after the Transition Period for this Agreement shall be in
accordance with the chart below. After the Transition Period, forecasted run rate will be
reviewed each quarter and pricing will be adjusted forward accordingly. Upon completion of
transition, profit will be reduced by one-half of one percent (0.50%) at the corresponding run
rate.

	2.	 	The mark-up charged by Plexus to Harmonic for components with
purchase prices of [*] will be
assessed a total mark-up of [*] and no other adders or mark-ups shall apply to these
components. Components consigned by Harmonic to Plexus for integration into purchased
assemblies shall be charged [*]. Such charges shall be submitted to Harmonic no later than
the next calendar month after usage.

	3.	 	Establishment of product costs to be based on a “Best of BOM’s approach”, utilizing the best
available price for all components during the Transition Period and thereafter.

	4.	 	Every occurrence of a negative Purchase Price Variance (PPV) shall be adjusted at the end of
the quarter and netted against positive PPV with respect to such calendar quarter under the
following conditions:

	 	a)	 	Market shift; or
	 
	 	b)	 	Demand increase or decrease outside the flexibility parameters outlined in
Exhibit C.

	 	 	After such quarterly netting, Plexus shall invoice Harmonic for negative PPV charges only if
such variance exceeds [*] per component. All negative PPV charges greater than [*], unless
otherwise agreed in writing, will be supported by Plexus with written justification and
Harmonic’s approval prior to expenditure.

	5.	 	Plexus will be responsible for driving a collaborative cost reduction at a rate that averages
[*]. Plexus will recommend cost savings initiatives and monitor progress to targets. Plexus
and Harmonic shall also provide cost reduction initiatives at a minimum quarterly, and agree
on action plans based on benefits, and return on investment consideration.

	6.	 	Plexus and Harmonic will meet every three (3) months during the term of this Agreement to
review pricing and determine whether any price increase or decrease is required. Any change
in price shall apply only to shipments by Plexus at a mutually agreed to date. A risk
liability program to measure performance on risk liability shall also be reviewed. This
program shall include product overall component and production lead-time reduction reviews.

	7.	 	Plexus shall make no change in manufacturing location without Harmonic’s prior written
approval. Plexus will bear all costs associated with transferring production between sites
when Plexus directs the move. Transition costs associated with moves requested by Harmonic
for cost reduction purposes will be borne by Harmonic and 100% of cost reduction savings goes
to Harmonic, unless the parties agree to equally share transition costs then Section 9 below
applies to any cost savings after Plexus recovers its share of the transition costs.

	8.	 	If a cost reduction is initiated and obtained by Harmonic, such cost reduction will be passed
on to Harmonic entirely at the next pricing review and/or for the next Order.

	9.	 	If a cost reduction is initiated and obtained by Plexus, Plexus will be entitled to retain
[*] of such cost savings for the quarter following the next pricing review at which time [*]
will be passed on to Harmonic.

	10.	 	On the day new pricing is implemented, Plexus will also write-down or write-up, as
applicable, existing raw materials, work-in-process and finished goods inventory held by it to
reflect the new agreed to pricing and invoice or credit Harmonic for the same, as applicable.

	11.	 	Plexus shall, on a quarterly basis, provide a written overview of the commodities and trends
represented in Harmonic’s products which will be the basis for a quarterly commodity
management review. Upon Harmonic’s request, Plexus shall provide access to Plexus’s commodity
management quarterly reports, updated supplier lists, and specific commodity plans for the
next period.

	12.	 	Plexus shall provide Harmonic with the following deliverables for each request for quotation
requested by Harmonic: a bill of materials detailing procurement source and the proposed cost
of each component on said bills of materials (costed BOM). Costed BOMs shall also include
designations for custom engineered components, lead-times, and minimum order quantities where
applicable, which will be the basis for determining total liabilities to Harmonic. Long-lead
time items and non-cancelable/non-returnable should also be identified.

 

			
	*	 	Information redacted pursuant to a confidential
treatment request by Harmonic Inc. under 17 C.F.R. §§ 200.80(b)(4), 200.83 and
240.24b-2 and submitted separately with the Securities and Exchange Commission.

					
	 	 	 	 	 
	Harmonic Inc. / Plexus Confidential
	 	Page 16
	 	Harmonic-Plexus PSA 17 September 03

 

 

	13.	 	Quote lead-time on production assemblies will be [*] ([*]) weeks. Rough order of magnitude
(ROM) quotes, detailing a “not to exceed” price will be presented on new product introductions
(NPI) within [*] of receipt of bill of materials, with the complete package to be presented
within one week after BOM release to Plexus.

	14.	 	Plexus warrants that prices offered to Harmonic during the term of this Agreement are based
on the lowest costs offered to any of Plexus’s customers for the same or substantially similar
materials or services sold or in any way made available to any other purchaser.

	15.	 	Non-recurring Engineering charges will be invoiced by Plexus and paid by Harmonic at Plexus
actual cost plus the then current MOH percentage.

	16.	 	Upon request, parties shall mutually agree to a special pricing model to be extended on a
case by case basis in order to support a specific product proposal, such as a multi-year
agreement.

	17.	 	Harmonic Cost Model: Annual revenue pricing is to be reflected [*] for the respective [*].
If change to [*] is greater than [*] then the parties will mutually agree to revise the cost
model.

	18.	 	The prices set forth herein include all applicable taxes, including but not limited to VAT,
duties, customs, and other charges or fees assessed by any government, excepting sales tax,
and such prices shall not be subject to change as a result of any change in Seller’s tax
liabilities. All such taxes and charges shall be stated separately on Seller’s invoice.

 

			
	*	 	Information redacted pursuant to a confidential
treatment request by Harmonic Inc. under 17 C.F.R. §§ 200.80(b)(4), 200.83 and
240.24b-2 and submitted separately with the Securities and Exchange Commission.

					
	 	 	 	 	 
	Harmonic Inc. / Plexus Confidential
	 	Page 17
	 	Harmonic-Plexus PSA 17 September 03

 

 

     Plexus Production Cost Estimator

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Boise	 	 	Penang	 	 	San Jose	 
	MATERIAL
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Material
	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 
	Materials Overhead
	 	 	[*]	 	 	 	 	 	 	 	[*]	 	 	 	[*]	 	 	 	 	 	 	 	[*]	 	 	 	[*]	 	 	 	 	 	 	 	[*]	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total Material Cost
	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	LABOR
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Direct Labor Cost
	 	Hours	 	 	Rate	 	Total	 	Hours	 	 	Rate	 	Total	 	Hours	 	 	Rate	 	Total
	Assembly Labor
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 
	SMT
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 
	ICT Test
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 
	Functional Test
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total Labor Cost
	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Packaging
	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Subtotal
	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Profit margin
	 	 	[*]	 	 	 	 	 	 	 	[*]	 	 	 	[*]	 	 	 	 	 	 	 	[*]	 	 	 	[*]	 	 	 	 	 	 	 	[*]	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total Price
	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	NRE
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 
	 
	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	[*]	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Plexus Notes and Assumptions:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Denotes specific assembly information required
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	1) $10M quarterly run rate qualifies for the $50M pricing level.
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	2) Tiered Markups:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	Standard	 	 	 	 	 	Total	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Annual	 	Materials	 	 	 	 	 	Material	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Revenue	 	Overhead	 	Profit	 	Markup	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

	 	 	The table above represents an example of the cost estimator that shall be used to calculate the
price by Product. The shaded areas in the cost estimator are filled in on a product specific basis
and the Standard Materials Overhead and Profit percentages specified in the inset table are fixed
and are applied based on annual revenue and
location.

 

			
	*	 	Information redacted pursuant to a confidential
treatment request by Harmonic Inc. under 17 C.F.R. §§ 200.80(b)(4), 200.83 and
240.24b-2 and submitted separately with the Securities and Exchange Commission.

					
	 	 	 	 	 
	Harmonic Inc. / Plexus Confidential
	 	Page 18
	 	Harmonic-Plexus PSA 17 September 03

 

 

Exhibit C

Scheduling and Flexibility

	1.	 	Harmonic may cancel Orders, or portions of Orders, by written notice with no liability if
cancelled at least [*] ([*]) days prior to delivery date except for components on the LLT List
and agreed upon MOQ List. Harmonic may cancel Orders within less than [*] ([*]) days of
delivery date subject only to material liabilities as defined in Exhibit D.
	 
	2.	 	Harmonic may place an Order, or any portion of an Order, on hold by written notice to Plexus
which shall take effect immediately upon receipt. Orders placed on hold will be rescheduled
in accordance with the order flexibility parameters set forth below.
	 
	3.	 	Upon written notification of an Order cancellation, Plexus shall undertake reasonable
commercial efforts to cancel all applicable component purchase orders and reduce component
inventory through return for credit programs or allocate components for alternate programs if
applicable, in addition, Plexus shall exercise reasonable commercial efforts to reduce the
value of cancellation charges incurred.
	 
	4.	 	Product lead-time after receipt of order is [*] ([*]) weeks on forecasted product.
	 
	5.	 	Upon learning of any potential delivery delays, Plexus will notify Harmonic as to the cause
and extent of such delay.
	 
	6.	 	Harmonic may reschedule Product delivery for Orders within the following Flexibility
Parameters:

Harmonic may push out up to one month’s supply of Product delivery (based on then current
Harmonic Orders) for up to [*] days from originally scheduled delivery date.

	 	 	 	 	 
	[*]

	 	-
	 	Days
	 
	[*]

[*]

[*]

	 	-

-

-
	 	Single Product

Total Demand

Deferral time limit
	 
	 	 	 	 
	[*]

	 	-
	 	Days
	 
	[*]

[*]

[*]

	 	-

-

-
	 	Single Product

Total Demand

Deferral time limit
	 
	 	 	 	 
	[*]

	 	-
	 	Days
	 
	[*]

[*]

[*]

	 	-

-

-
	 	Single Product

Total Demand

Deferral time limit

Notwithstanding the foregoing, if mutually agreed, Plexus shall make commercially reasonable
efforts to pull in Product delivery schedules in excess of the percentages indicated above to
the extent reasonably requested by Harmonic.

 

			
	*	 	Information redacted pursuant to a confidential
treatment request by Harmonic Inc. under 17 C.F.R. §§ 200.80(b)(4), 200.83 and
240.24b-2 and submitted separately with the Securities and Exchange Commission.

			
	 
	Harmonic Inc. / Plexus Confidential
	 	Harmonic-Plexus PSA 17 September 03

Page 19

 

Exhibit D

Material Procurement and Liability

	1.	 	Harmonic will be liable only for custom engineered components (CEC), long lead items,
non-cancelable/non-returnable, and mutually agreed upon minimum order quantity items reporting
to assemblies on Orders only. For items with lead-times greater than [*] ([*]) days, Plexus
will provide an itemized list (“LLT list”) of these items and will submit to Harmonic for
approval and any additional changes will be approved on an as needed basis. Harmonic also
agrees to assume material liability for safety stock items or other materials which both
parties agree to purchase from time to time.
	 
	2.	 	Harmonic assumes no material liability for components purchased outside of Order demand
and/or outside lead-time indicated above (within commercial reasonableness) unless otherwise
specified in writing.
	 
	3.	 	It is the intent of both parties to work cooperatively to establish Plexus agreements with
component suppliers which will enable delivery flexibility.
	 
	4.	 	Plexus has agreed to hold end-of life (EOL) components for Harmonic up to a value of [*] for
[*] after notification of EOL at no cost to Harmonic.
	 
	5.	 	End-of-life variances shall not exceed [*] ([*]) of the material value identified on written
end of life notice. Plexus is responsible for maintaining a balanced inventory position on
CEC devices.
	 
	6.	 	For the purposes of this Exhibit D, (i) Obsolete Inventory shall mean those components in
inventory or on order that no longer appear on a Harmonic bill of materials or which appear on
a Harmonic bill of materials for a Product that has no Order or forecast demand; (ii)Inactive
Inventory shall mean those components in inventory or on order that are on the bill of
material for an Product that has current Order or forecast demand, but which demand will not
consume such components; and (iii)Excess Inventory shall mean those components in inventory or
on order that are projected to be consumed by a Harmonic Order or forecasted demand, but not
within the next one hundred twenty (120) calendar days.
	 
	7.	 	Plexus agrees to carry Inactive and Excess Inventory at no more than [*] ([*]) of Plexus’
latest fiscal quarterly revenue with Harmonic. Included in the [*] ([*]) calculation are the
End of Life components identified in Section 4 above. When reviewed monthly, if the [*] ([*])
threshold is exceeded, Plexus shall allow ninety (90) additional calendar days for the amount
in excess of the [*] ([*]) threshold to be consumed. If the amount is not consumed in such
ninety (90) calendar days, Harmonic shall pay Plexus a monthly carrying charge of [*] ([*]) on
the amount over the [*] ([*]) for a period not to exceed an additional ninety (90) calendar
days. If at the end of that time the Inactive and Excess Inventory is still not consumed,
Harmonic shall pay Plexus a cash deposit for the amount in excess of the [*] ([*]) plus MOH.
Obsolete Inventory shall be identified by Plexus and reported to Harmonic on a monthly basis.
Harmonic shall make reasonable commercial efforts to review such report and buy from Plexus
any Obsolete Inventory within ten (10) business days, but in no event later than twenty (20)
business days of receipt of such report. Plexus shall make reasonable commercial efforts to
consume or sell off commercial Obsolete, Inactive or Excess components on behalf of Harmonic
unless otherwise notified in writing by Harmonic.

 

			
	*	 	Information redacted pursuant to a confidential
treatment request by Harmonic Inc. under 17 C.F.R. §§ 200.80(b)(4), 200.83 and
240.24b-2 and submitted separately with the Securities and Exchange Commission.

			
	 
	Harmonic Inc. / Plexus Confidential
	 	Harmonic-Plexus PSA 17 September 03

Page 20

 

Exhibit E

Fulfillment Services

	1.	 	Fulfillment Services requested by Harmonic shall to be provided by Plexus shall be in
accordance with the following:
	 
	2.	 	Storage of completed shippable Product for thirty (30) calendar days;
	 
	3.	 	Distribution of Product per Harmonic’s instructions (any export activity shall be mutually
agreed by the parties prior to shipment);
	 
	4.	 	Plexus shall provide and Harmonic shall purchase sufficient warehousing space to store an
inventory of finished Products (the “Finished Goods Inventory”).
	 
	5.	 	Harmonic shall provide to Plexus in writing on a monthly basis a report specifying the
required levels of Finished Goods Inventory to be maintained on Plexus’ premises (the
“Finished Goods Authorization Schedule”).
	 
	6.	 	Harmonic shall have the right to audit the actual quantities of Products in Finished Goods
Inventory during normal Plexus business hours upon forty-eight (48) hours prior written
notice. In the event that the actual Finished Goods Inventory is less than Harmonic’s
accounting records, the difference shall be manufactured and delivered to Harmonic by Plexus
within two weeks at no cost to Harmonic. Plexus shall have the right to verify Harmonic’s
accounting records and Harmonic shall make reasonable disclosures to Plexus in order to affect
said audit.
	 
	7.	 	Fulfillment services are independent of and separate from any manufacturing services which
Plexus may provide.
	 
	8.	 	Plexus shall package, label, and ship the Products from Finished Goods Inventory on a
first-in first-out basis to Harmonic’s customers in quantities specified in weekly Releases
provided to Plexus by Harmonic and in accordance with Harmonic’s written instructions.
	 
	9.	 	Plexus shall provide a bill of lading and packing slip for each shipment pick-up.

			
	 
	Harmonic Inc. / Plexus Confidential
	 	Harmonic-Plexus PSA 17 September 03

Page 21

 

Exhibit F

Harmonic Quality Specifications

TABLE OF CONTENTS

	 	 	 	 	 
	PARAGRAPH	 	TOPIC	 	PAGE
	1.0	 	Purpose
	 	2
	2.0	 	Scope
	 	2
	3.0	 	References
	 	2
	4.0	 	Procedure
	 	3
	4.1	 	NPI Support
	 	3
	4.2	 	Quality Planning
	 	4
	4.3	 	Quality Data Management
	 	4
	4.4	 	Agency and Industry Approvals
	 	4
	4.5	 	Process Development and Qualification
(Assembly, Inspection and Test)
	 	5
	4.6	 	Product Identification and Traceability
	 	5
	4.7	 	Workmanship Standard
	 	5
	4.8	 	Training and Certification
	 	6
	4.9	 	Equipment Maintenance, Schedule and Calibration
Compliance
	 	6
	4.10	 	First Article
	 	6
	4.11	 	Out of Box Audit
	 	7
	4.12	 	ESS/Burn-In
	 	7
	4.13	 	On-Going Reliability Test
	 	7
	4.14	 	RMA Repair (Customer Returns)
	 	7
	4.15	 	Harmonic Audits
	 	7
	4.16	 	ESD Compliance
	 	7
	4.17	 	Supplier Management
	 	8
	4.18	 	Source Inspection
	 	8
	4.19	 	Meetings
	 	8
	4.20	 	Disaster Recovery Plan
	 	8
	4.21	 	Restrictions
	 	9

			
	 
	Harmonic Inc. / Plexus Confidential
	 	Harmonic-Plexus PSA 17 September 03

Page 22

 

1.0 PURPOSE:

	1.1	 	To establish a procedure that defines the Quality Requirements for Contract Manufacturer (CM)
that provides products to Harmonic. The Contract Manufacturer referred in this procedure is
specific to the Electronic Manufacturer Services (EMS) whose products include the Printed
Circuit Board Assemblies (PCBA) and Box-Builds.
	 
	1.2	 	To inform the Contract Manufacturer (CM) that they should demonstrate and/or provide
evidences to ensure that the Quality Requirements will be met during the
manufacturing/production of Harmonic products. This document could be used to create the
Quality Plan for Harmonic Products. These evidences should include but not limited to the
following:

	 	1.2.1	 	QA Manual
	 
	 	1.2.2	 	Quality System
	 
	 	1.2.3	 	Quality Plan
	 
	 	1.2.4	 	Manufacturing/Production Process Procedures and Flow Chart
	 
	 	1.2.5	 	“Quality” Process Flow-Chart. (QA Inspection Gates/Stations)
	 
	 	1.2.6	 	Preventive and Corrective Action Request System (Supplier, Internal and
Customer Corrective Action System)
	 
	 	1.2.7	 	Internal Audit Process Procedure
	 
	 	1.2.8	 	Electrical / Functional Test Plan.
	 
	 	1.2.9	 	IQA Inspection Process (Turn Key Parts)
	 
	 	1.2.10	 	Discrepant Material Reporting (DMR) and Material Review Board (MRB)
	 
	 	1.2.11	 	SPC and other Quality Data Reporting System
	 
	 	1.2.12	 	Finished Product First Article (FA) / FQA Inspection Procedure

2.0 SCOPE:

The purpose of this document is to fulfill the Harmonic Quality Requirements for Contract
Manufacturer, specifically the Electronic Manufacturer Services; and to guide the Contract
Manufacturer to be compliant to the Harmonic Quality Requirements.

3.0 REFERENCES:

	3.1	 	Industry Standards

	 	 	 	 	 	 	 	 	 
	 

	 	 	3.1.1	 	 	IPC-A-610, Latest Rev.
	 	Acceptability of Electronic Assemblies
	 
	 

	 	 	3.1.2	 	 	IPC-A-600, Latest Rev.
	 	Acceptability of Printed Boards
	 
	 

	 	 	3.1.3	 	 	ANSI/J-STD-001, Latest Rev.
	 	Requirement for Soldered Electrical and Electronic
Assemblies
	 
	 

	 	 	3.1.4	 	 	ANSl/J-STD-002, Latest Rev.
	 	Solderability Tests for Component Leads,
Terminations, Lugs, Terminals and Wires
	 
	 

	 	 	3.1.5	 	 	ANSI/J-STD-003, Latest Rev.
	 	Solderability Tests for Printed Boards

	3.2	 	Harmonic Procedures (Latest Revisions)

	 	 	 	 	 	 	 	 	 
	 

	 	 	3.2.1	 	 	QA0201
	 	Quality Policy Manual
	 
	 

	 	 	3.2.2	 	 	QA0601
	 	AVL Procedure
	 
	 

	 	 	3.2.3	 	 	QA0604
	 	First Article Procedure
	 
	 

	 	 	3.2.4	 	 	QA0908
	 	Workmanship Standard Procedure
	 
	 	 	 	 	 	 	 	 
	 

	 	 	3.2.5	 	 	QA0910
	 	Cosmetic Inspection Standard Procedure
	 
	 

	 	 	3.2.6	 	 	QA1001
	 	Supplier Product Assurance Procedure
	 
	 

	 	 	3.2.7	 	 	QA1011F
	 	QA Source Inspection Report
	 
	 

	 	 	3.2.8	 	 	MA1502
	 	Handling, Storage, Packaging and Preservation Policy
	 
	 

	 	 	3.2.9	 	 	SP250-0051167-1
	 	Serialization and date of manufacture labeling requirement

4.0 PROCEDURE:

			
	 
	Harmonic Inc. / Plexus Confidential
	 	Harmonic-Plexus PSA 17 September 03

Page 23

 

The Contract Manufacturer’s response to the Harmonic Quality Requirement should include, but
not limited to, the paragraphs stated below. The Contract Manufacturer should demonstrate
and provide evidences that will ensure that the manufacturing/production will consistently
meet the Harmonic Quality Requirements in these areas.

	4.1	 	NPI SUPPORT:

	 	4.1.1	 	General:

	 	4.1.1.1	 	Set-up communication center via focal points (single point of contact for
Harmonic Inc. and Contract Manufacturer) for Purchasing, Production and Quality
issues and resolution, respectively.
	 
	 	4.1.1.2	 	CM shall review drawing package from Harmonic prior to release to production.
	 
	 	4.1.1.3	 	CM shall establish a robust ECN process to ensure effective implementation of
the ECN’s.
	 
	 	4.1.1.4	 	CM develops an internal MPI to implement assembly processes and control
processes such as Rework Instructions, Revision Change, Revision Control, SBR,
others.

	 	4.1.2	 	Prototype Builds: It is preferred that the CM support build of new products. The CM will:

	 	4.1.2.1	 	Participate in the Design Reviews upon request from Harmonic.
	 
	 	4.1.2.2	 	Will perform DFX reviews and submit the reports to Harmonic immediately after
the Protobuild.

	 	4.1.3	 	Pilot / Production NPI Builds:

	 	4.1.3.1	 	CM shall work with Harmonic Team to transition the product from Proto to
Pilot/production build according to the Manufacturing Engineering’s NPI Plan.
	 
	 	4.1.3.2	 	CM shall work with Harmonic Quality/Manufacturing Engineering to set-up
manufacturing routing for new products.
	 
	 	4.1.3.3	 	CM shall establish all applicable processes outlined below on this document.

	 	4.1.4	 	Component Engineering Support: CM shall provide Harmonic with Component
Engineering support on turnkey parts on an on-going basis. The support activities will
include:

	 	4.1.4.1	 	Identification of alternative sources or components for better quality,
availability of cost
	 
	 	4.1.4.2	 	Notification of Harmonic representatives on device end of life notices. A
documented process is required.
	 
	 	4.1.4.3	 	Advance notification of process, specification, part number change or
components.
	 
	 	4.1.4.4	 	Obtain samples of alternate components for qualification.
	 
	 	4.1.4.5	 	Conduct qualification (visual, electrical, functional tests) of alternate
components and report result to Harmonic.

	4.2	 	QUALITY PLANNING:

	 	4.2.1	 	CM shall develop process specific Quality Plan for all Harmonic products.
	 
	 	4.2.2	 	The Quality Plan is composed of activities required of the Contract
Manufacturer (CM) to ensure and to consistently meet both their internal and Customer
Quality Requirements (Harmonic). As a minimum, the CM’s Quality Plan should
include:

	 	4.2.2.1	 	A closed-loop process diagram
	 
	 	4.2.2.2	 	Audit and inspection points throughout the manufacturing / test processes.
	 
	 	4.2.2.3	 	Methodology and sampling techniques for audit or inspection
	 
	 	4.2.2.4	 	Acceptance or rejection criteria
	 
	 	4.2.2.5	 	Process Audit

4.2.2.6 Quality Data collection and other QR requirements
	 
	 	4.2.2.7	 	Control and feedback mechanism.
	 
	 	4.2.2.8	 	Preventive and Corrective Action System.

	 	4.2.3	 	Harmonic will review and provide comments on CEM’s process and quality documentation.

	4.3	 	QUALITY DATA MANAGEMENT:

	 	4.3.1	 	All Quality Data on the products shall be shared with Harmonic.
	 
	 	4.3.2	 	Harmonic and the CM shall meet periodically, preferably weekly, to review
quality data and discussed action item as needed. CM shall submit a regular Quality
Summary Report to Harmonic for review and for data analysis. The reports shall
include, but not limited to, the following information:

			
	 
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	 	4.3.2.1	 	CM shall collect data on all critical processes. As a minimum, CM is
required to collect data for the following process steps:

	 	 	 	4.3.2.1.1  Incoming Inspection
	 
	 	 	 	4.3.2.1.2  Post solder re-flow (before touch-up)
	 
	 	 	 	4.3.2.1.3 Post wave soldering (before touch-up)
	 
	 	 	 	4.3.2.1.4 BGA X-ray and AOI
	 
	 	 	 	4.3.2.1.5 In-circuit test or other product specific test(s) (if applicable)
	 
	 	 	 	4.3.2.1.6 Pre-ESS/Burn-in functional test (if applicable)
	 
	 	 	 	4.3.2.1.7 ESS/Burn-in test (if applicable)
	 
	 	 	 	4.3.2.1.8 Post ESS/Burn-in functional test (if applicable)
	 
	 	 	 	4.3.2.1.9 Hi-pot Test (if applicable)
	 
	 	 	 	4.3.2.1.10 Final Inspection (FQA)
	 
	 	 	 	4.3.2.1.11 Out-of-Box Audit (OBA)
	 
	 	 	 	4.3.2.1.12 Harmonic source/in-house inspection result
	 
	 	 	 	4.3.2.1.13 RMA repair data

	 	4.3.2.2	 	Test yield by product and by process
	 
	 	4.3.2.3	 	Defect Pareto by product and by process
	 
	 	4.3.2.4	 	Pareto for top 5 defects on the high failure products.
	 
	 	4.3.2.5	 	Root cause analysis and corrective action on top 3 high failure products
	 
	 	4.3.2.6	 	Test throughput yield by product
	 
	 	4.3.2.7	 	Weekly overall test throughput yield.

	4.4	 	AGENCY AND INDUSTRY APPROVALS/CERTIFICATIONS:

	 	4.4.1	 	The Quality System of the CM is required to be compliant to the ISO standard.
	 
	 	4.4.2	 	Minimum certification requirement is lSO-9002.
	 
	 	4.4.3	 	CM manufacturing processes shall comply with the related, UL or other industry standards.
	 
	 	4.4.4	 	CM will provide Harmonic with proof of Agency and Industry certification(s) and/or approval(s).
	 
	 	4.4.5	 	Upon selection, CM will be added to Harmonic AVL on specified approved products.
	 
	 	4.4.6	 	CM shall develop and implement a control process for all regulated components
(such as safety and critical components).
	 
	 	4.4.7	 	Harmonic or agencies will periodically audit CM process for compliance.

	4.5	 	PROCESS DEVELOPMENT AND QUALIFICATION (ASSEMBLY, INSPECTION AND TEST)

The CM shall develop detailed product specific process instruction for individual Harmonic
product. Harmonic will review and approve the process instructions prior to start of
production. Process instruction shall include as a minimum:

	 	4.5.1	 	Process Development

	 	4.5.1.1	 	Detailed process steps
	 
	 	4.5.1.2	 	Associated tools/equipment
	 
	 	4.5.1.3	 	Critical process parameters and machine settings
	 
	 	4.5.1.4	 	Identification of direct/indirect materials
	 
	 	4.5.1.5	 	Handling of non-conformities
	 
	 	4.5.1.6	 	Product handling precaution and training requirement
	 
	 	4.5.1.7	 	Data collection
	 
	 	4.5.1.8	 	Escalation process

	 	4.5.2	 	Process Qualification:

	 	4.5.2.1	 	Harmonic may select to conduct process qualification on all new builds.
	 
	 	4.5.2.2	 	Qualification lot quantity will be in the range of 10 to 100 units depending
on the type of product. Qualification quantity will be defined in the PO.
	 
	 	4.5.2.3	 	CM shall develop a complete set of documentation prior to start of
qualification. The documentation includes:

	 	4.5.2.3.1	 	Quality Plan
	 
	 	4.5.2.3.2	 	Process Instruction
	 
	 	4.5.2.3.3	 	Critical Process Goal Target

			
	 
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	 	4.5.2.3.4	 	Training and Certification record

	 	4.5.2.4	 	CM shall run the qualification lot in presence of Harmonic representative and
complete the qualification lot in agreed upon time frame.
	 
	 	4.5.2.5	 	Harmonic will conclude the qualification run upon completion. If CM fails to
achieve the predetermined process goals, a re-qualification is required.
	 
	 	4.5.2.6	 	Re-qualification can only be started after necessary adjustment, correction
or improvement is made.

	4.6	 	PRODUCT IDENTIFICATION AND TRACEABILITY: (MARKING/LABELING AND SERIALIZATION)

Harmonic Inc. product lines may have common Part Numbers across product lines. It is,
therefore, necessary to distinguish carefully which product is being built to avoid
confusion.

	 	4.6.1	 	Configuration Control Plan will be necessary. (Part No., Revision,
Serialization, Date of Manufacture/Lot Date Code)
	 
	 	4.6.2	 	Product identification should be in accordance with Harmonic Document No.
SP250-0051167, Latest Rev. -Intelligent Date of Manufacture (DoM)
	 
	 	4.6.3	 	In cases where there are mother-daughter boards, serialization of the
assemblies should be linked and tracked.
	 
	 	4.6.4	 	There should be Record Retention and Retrieval System. This includes:

	 	4.6.4.1	 	All inspection and test results are captured based on the serial numbers.
	 
	 	4.6.4.2	 	All rework, repair, and upgrade data are captured based on the serial numbers
	 
	 	4.6.4.3	 	In cases of Drop-ship, serial numbers are traceable to Harmonic customer name
and Sales Order Numbers.

	4.7	 	WORKMANSHIP STANDARD:

	 	4.7.1	 	Components shall meet manufacturer’s requirements
	 
	 	4.7.2	 	Bare PCBs shall meet IPC-A-600, Class II (latest revision)
	 
	 	4.7.3	 	PCBAs shall meet IPC-A-610, Class II (latest revision)
	 
	 	4.7.4	 	Finished goods shall meet Harmonic product specific Manufacturing Instruction
(Ml) and Test Instruction (TI).
	 
	 	4.7.5	 	Finished goods shall meet Harmonic Cosmetic requirement — Harmonic: QA0910.

	4.8	 	TRAINING AND CERTIFICATION:

	 	4.8.1	 	CM shall only have trained and certified operators performing assembly, tests,
inspection and packing of Harmonic products.
	 
	 	4.8.2	 	CM should maintain Training Records and Certifications in all areas/stages of
production.
	 
	 	4.8.3	 	Training matrix for the personnel should be posted and available to Harmonic
personnel upon request.

	4.9	 	EQUIPMENT MAINTENANCE, SCHEDULE AND CALIBRATION COMPLIANCE

	 	4.9.1	 	Calibration:

Supplier must plan ahead with calibration process to avoid line shutdowns.

	 	4.9.1.1	 	Consigned Equipment:

	 	4.9.1.1.1	 	The CM is expected to assume responsibility for calibration
of Harmonic consigned test equipment.
	 
	 	4.9.1.1.2	 	The CM shall inform Harmonic of any “Out of Tolerance”
calibration immediately so that a pertinent analysis can be done
to assess the impact on products shipped to Harmonic and/or its
customers

	 	4.9.1.2	 	CM Equipment:

	 	4.9.1.2.1	 	Provide Preventative Schedule and Records for all equipment
used in production as requested.
	 
	 	4.9.1.2.2	 	Calibration and Recall List Records
	 
	 	4.9.1.2.3	 	Certification and Maintenance Records

			
	 
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	 	4.9.2	 	Preventive Maintenance:

	 	4.9.2.1	 	Based on mutually agreed terms and conditions, the CM is expected to
assume the responsibility for performing preventive maintenance (PM)
on the equipment used to test Harmonic products.
	 
	 	4.9.2.2	 	Harmonic is responsible for the cost and replacement of parts/systems if due
to the normal usage for test.

	4.10	 	First Article Process/Procedure:

	 	4.10.1	 	CM is required to submit a detailed and itemized First Article Report with the First
Article Unit to Harmonic.
	 
	 	4.10.2	 	CM should not proceed with mass production until receiving approval of the First
Article from Harmonic.
	 
	 	4.10.3	 	If CM chooses to proceed with mass production without gaining approval of the First
Article, CM will bear the responsibility for any consequences.
	 
	 	4.10.4	 	First Article include:

	 	4.10.4.1	 	Product built by CM for the first time (new product),
	 
	 	4.10.4.2	 	ECN validation
	 
	 	4.10.4.3	 	Build Re-start (> 3 months of no production),
	 
	 	4.10.4.4	 	Process validation and/or major process change
	 
	 	4.10.4.5	 	Fabricated components such as Cable Assemblies, PCB, Plastics, Sheet Metals,
Power Supplies, Programmable Device

	 	 	4.10.5 First Article Inspection Result

	 	4.10.5.1	 	CM shall document and maintain the First Article inspection result for future tracking.
	 
	 	4.10.5.2	 	CM shall provide the First Article Report along with the unit(s) to Harmonic.

	4.11	 	Out-of-Box Audit (OBA):

	 	4.11.1	 	CM shall establish an independent out-of-box audit for ALL sub-assemblies and
finished goods that shipped to Harmonic or Harmonic customers
	 
	 	4.11.2	 	CM shall use a standard based sampling inspection plan for out-of-box audit. Audit
should include both visual inspection and electrical acceptance tests, where
applicable. Acceptance limit, C, shall always be zero.
	 
	 	4.11.3	 	Weekly OBA report shall be reviewed with Harmonic as part of the weekly Quality reviews.

	4.12	 	ESS/BURN-IN:

	 	4.12.1	 	It is preferred for the CM to provide box build product accommodations such as hot
room or chamber for ESS/Burn-in for Harmonic products.
	 
	 	4.12.2 The ESS/Burn-in parameters will be set by Harmonic.
	 
	 	4.12.3 The ESS/Burn-in criteria will be developed by Harmonic.

	4.13	 	ON-GOING RELIABILITY TEST:

	 	4.13.1	 	Based on mutual agreement, CM shall support Harmonic with box build products on-going
reliability test (ORT) process for mean time between failure (MTBF) demonstration of
mature products
	 
	 	4.13.2	 	Harmonic Reliability Engineering will set up the specific ORT, coordinate failure
analysis, and analyze/report the data.
	 
	 	4.13.3	 	ORT monitoring is done by CM
	 
	 	4.13.4	 	CM shall provide failure analysis support on units that failed reliability testing.
If failure is CM related, a formal corrective action report will be submitted to
Harmonic.

	4.14	 	RMA REPAIR: (CUSTOMER RETURNS)

Harmonic requires RMA repair capability at the CM’s. Based on mutual agreement:

	 	4.14.1	 	CM will process all Harmonic customer returned products for repair and upgrade.
	 
	 	4.14.2	 	CM shall develop an RMA process to inspect, re-test and repair/upgrade the returned products
	 
	 	4.14.3	 	CM shall get access to Vantive Database to enter RMA Repair Data on to capture
product specific return rate, inspection/test/repair data for all returns. All data
should be entered in the Vantive Database in real time basis.
	 
	 	4.14.4	 	CM shall submit RMA Summary Report along with root cause analysis and corrective
action to Harmonic on a regular basis

			
	 
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	 	4.14.5	 	CM shall complete the analysis and repair of the returns within two weeks or on a mutually agreed time frame.

	4.15	 	HARMONIC AUDITS:

	 	4.15.1	 	Harmonic conducts scheduled and UN-announced CM audits and visits.
	 
	 	4.15.2	 	Harmonic audits can be process, process capability and quality systems audits.
	 
	 	4.15.3	 	Harmonic shall set-up audits with corresponding CM representatives (ME, QE,
Production Engineers).
	 
	 	4.15.4	 	CM to provide and make available internal data and Audit Plan for Quality and Process
compliance
	 
	 	4.15.5	 	CM to establish streamlined, easy access to and availability of Records/SPC data during

	4.16	 	ESD COMPLIANCE:

CM shall have the following:

	 	4.16.1	 	ESD Procedure
	 
	 	4.16.2	 	ESD Inspection Log
	 
	 	4.16.3	 	Area and Station Audit Tag/Certification
	 
	 	4.16.4	 	Employee Records Training and Certification

			
	4.17	 	SUPPLIER MANAGEMENT: SUPPLIER QUALIFICATION, PERFORMANCE MEASUREMENT AND AUDIT PLAN

	 	4.17.1	 	Supplier should develop performance measurement process for sub-tier suppliers.
	 
	 	4.17.2	 	CM shall have or develop the following Supplier Management procedures:

	 	4.17.2.1	 	Supplier Qualification Process/Procedure
	 
	 	4.17.2.2	 	Supplier Audits
	 
	 	4.17.2.3	 	Supplier Rating System Procedure
	 
	 	4.17.2.4	 	Supplier Performance Data
	 
	 	4.17.2.5	 	Supplier Disqualification

	 	4.17.3	 	The CM supplier performance measurement criteria shall include, as a minimum:

	 	4.17.3.1	 	Quality
	 
	 	4.17.3.2	 	Technical capability
	 
	 	4.17.3.3	 	Delivery
	 
	 	4.17.3.4	 	Cost
	 
	 	4.17.3.5	 	Responsiveness

	 	4.17.4	 	CM shall provide on an agreed upon frequency the relevant supplier performance
metrics to Harmonic for review.

	4.18	 	SOURCE INSPECTION:

	 	4.18.1	 	Source Inspection may be performed at the Supplier site at Harmonic discretion.
	 
	 	4.18.2	 	CM is required to provide adequate space for the Harmonic Source Inspector to conduct
the inspection.
	 
	 	4.18.3	 	Mutually agreed goals will be set for the source inspection.
	 
	 	4.18.4	 	Sampling Plan is in accordance with Single Sampling Plan for Normal Inspection
(Reference: Mil-Std-105E, Tables I and 
II — A) : Level II, 2.5% AQL with an option to
perform 100% inspection.
	 
	 	4.18.5	 	If CM fails to achieve the source inspection target for 3 consecutive months,
Harmonic will resume source inspection effort at CM’s cost.

	4.19	 	MEETINGS:

	 	4.19.1	 	CM shall attend scheduled Quality Meetings with Harmonic.
	 
	 	4.19.2	 	Meeting schedules/frequency will be established between CM and Harmonic representatives.
	 
	 	4.19.3	 	Attendants from CM shall include but not limited to the following:

	 	4.19.3.1	 	Program Manager
	 
	 	4.19.3.2	 	Process Engineer/ Manager
	 
	 	4.19.3.3	 	Quality Engineer/ Manager
	 
	 	4.19.3.4	 	Production Supervisor / Manager

	 	4.19.4	 	CM shall prepare and publish meeting agenda and minutes.

			
	 
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	4.20	 	DISASTER RECOVERY PLAN:

	 	4.20.1	 	CM shall have a Disaster Recovery Plan

	4.21	 	RESTRICTIONS:

	 	4.21.1	 	CM shall not transfer Harmonic product to other manufacturing location(s) without
written approval from Harmonic.
	 
	 	4.21.2	 	CM shall not sub-contract any portion of the manufacturing, test, and inspection
without written approval from Harmonic.
	 
	 	4.21.3	 	CM must purchase parts to Harmonic’s approved AVL with no exceptions allowed. AVL
additions must be formally approved by Harmonic by a Harmonic MCO before use is
authorized.
	 
	 	4.21.4	 	CM shall obtain written authorization from Harmonic for any major process changes.
Such changes include:

	 	4.21.4.1	 	Elimination of any of the required manufacturing, test, and inspection process steps.
	 
	 	4.21.4.2	 	Changes in ISO, BABT, UL or other agency approval.
	 
	 	4.21.4.3	 	Changes in manufacturing, test, and inspection process flow.
	 
	 	4.21.4.4	 	Parts and components changes (BOM changes)

			
	 
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EXHIBIT
10.32

CERTAIN INFORMATION FROM THIS DOCUMENT HAS BEEN REDACTED PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST BY HARMONIC INC. UNDER 17 C.F.R. §§ 200.80(B)(4), 200.83 AND 240.24B-2 AND SUBMITTED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

Amendment to the Professional

Services Agreement for Manufacturing

This Amendment made this 6th day of January, 2006, between Harmonic Inc., hereinafter
called “HARMONIC” and Plexus Services Corp., hereinafter called “PLEXUS”.

WITNESSETH:

WHEREAS, HARMONIC AND PLEXUS entered into a Professional Services Agreement dated September 22,
2003 (“PSA”) for the purpose of Plexus providing Harmonic with manufacturing services of electronic
products for resale to Harmonic’s customers.

WHEREAS, HARMONIC and PLEXUS wish to modify and amend the PSA;

NOW, THEREFORE, in consideration of the above premises and the mutual promises contained herein,

IT IS HEREBY AGREED that the PSA shall be and hereby is modified and amended as follows:

	 	1.	 	In the fifth (5th) line in Section 7 of Exhibit D, change the carrying
charge of [*] ([*]) to [*] ([*]).
	 
	 	2.	 	All of the other terms and conditions of the PSA shall remain in full force and
effect, except as specifically amended herein.

IN WITNESS WHEREOF, the parties have executed this First Amendment as of the day and year first
written above.

	 	 	 	 	 	 	 	 	 
	HARMONIC INC.	 	PLEXUS SERVICES CORP.	 	 
	 
	 	 	 	 	 	 	 	 
	BY:

	 	 	 	BY:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	TITLE:

	 	 	 	TITLE:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	DATE:

	 	 	 	DATE:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 

 

			
	*	 	Information redacted pursuant to a confidential
treatment request by Harmonic Inc. under 17 C.F.R. §§ 200.80(b)(4), 200.83 and
240.24b-2 and submitted separately with the Securities and Exchange Commission.

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