Document:

Exhibit 10.3

 

Confidential Portions of this documents have been
redacted and filed separately with the Commission.

[***] symbolizes language omitted
pursuant to an application for Confidential Treatment.

 

 

MANUFACTURING
SERVICES AGREEMENT

 

 

EFFECTIVE
AS OF

NOVEMBER 23,
2004

 

 

BY AND
BETWEEN:

 

OVERLAND
STORAGE, INC.

AND

SANMINA-SCI
CORPORATION

 

1

 

Confidential Portions of this documents have been
redacted and filed separately with the Commission.

[***] symbolizes language omitted pursuant to an
application for Confidential Treatment.

 

MANUFACTURING
SERVICES AGREEMENT

 

INDEX

 

	
  Section

  	
   

  	
  Section Name

  	
   

  
	
  1.

  	
   

  	
  TERM
  & DEFINITIONS

  	
   

  
	
  2.

  	
   

  	
  PRICING

  	
   

  
	
  3.

  	
   

  	
  PAYMENT
  TERMS

  	
   

  
	
  4.

  	
   

  	
  PURCHASE
  ORDERS/FORECAST/RESCHEDULE

  	
   

  
	
  5.

  	
   

  	
  DELIVERY

  	
   

  
	
  6.

  	
   

  	
  CHANGES

  	
   

  
	
  7.

  	
   

  	
  WARRANTY

  	
   

  
	
  8.

  	
   

  	
  CUSTOMER
  FURNISHED EQUIPMENT AND COMPONENTS

  	
   

  
	
  9.

  	
   

  	
  INDEMNIFICATION
  AND LIMITATION OF LIABILITY

  	
   

  
	
  10.

  	
   

  	
  TERMINATION

  	
   

  
	
  11.

  	
   

  	
  QUALITY

  	
   

  
	
  12.

  	
   

  	
  FORCE MAJEURE

  	
   

  
	
  13.

  	
   

  	
  CONFIDENTIALITY
  AND NON-SOLICITATION OF EMPLOYEES

  	
   

  
	
  14.

  	
   

  	
  INSURANCE

  	
   

  
	
  15.

  	
   

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  A.

  	
   

  	
  PRICING
  MODEL; PRODUCTS & PRICES

  	
   

  
	
  A-1

  	
   

  	
  SAMPLE PRICING CALCULATION

  	
   

  
	
  A-2

  	
   

  	
  PRODUCTS

  	
   

  
	
  B.

  	
   

  	
  LONG
  LEAD-TIME COMPONENTS

  	
   

  
	
  C.

  	
   

  	
  SPECIFICATIONS

  	
   

  
	
  D.

  	
   

  	
  CUSTOMER
  FURNISHED ITEMS

  	
   

  
	
  E.

  	
   

  	
  QUALITY
  REQUIREMENTS

  	
   

  
	
  F.

  	
   

  	
  NDF
  HANDLING CHARGES

  	
   

  
	
  G.

  	
   

  	
  CONSIGNED
  COMPONENTS

  	
   

  
					

 

2

 

Confidential Portions of this documents have been
redacted and filed separately with the Commission.

[***] symbolizes language omitted pursuant to an
application for Confidential Treatment.

 

MANUFACTURING SERVICES  AGREEMENT

 

THIS AGREEMENT (the “Agreement”) is effective as of the 23rd
day of November 2004 (the “Commencement Date”), by and between Overland Storage, Inc. a California corporation, having a
principal place of business at 4820 Overland Ave., San Diego, California
92123  (“CUSTOMER”) and SANMINA-SCI Corporation, a Delaware corporation, on behalf
of itself and its wholly-owned subsidiaries and having its principal place of
business at 2700 North First Street, San Jose, California 95134  (collectively, “SANMINA-SCI”).

 

1.                                      TERM & DEFINITIONS

 

1.1                                 Term.               The initial term of
this Agreement shall commence on the Commencement Date and shall continue
through the fifth (5th) anniversary of the Commencement Date unless
sooner terminated by mutual agreement or in accordance with this
Agreement.  Upon the expiry of the
initial term, this Agreement shall continue from year to year until either
party gives notice of non-renewal of the Agreement by giving at least six (6)
months prior written notice to the other party. 
During the term of this Agreement, CUSTOMER shall purchase from
SANMINA-SCI all of CUSTOMER’S requirements for all products sold or
manufactured by CUSTOMER on or after the Commencement Date (including but not
limited to successor products and products currently not in existence);
provided, however, that this exclusivity requirement shall not apply (i)  to products manufactured by a company
acquired by CUSTOMER after the Commencement Date; (ii) to products which
CUSTOMER decides to manufacture itself, (iii) in the event of an  acquisition of all or substantially all of
CUSTOMER’s assets or outstanding shares of CUSTOMER’s stock by a party who,
prior to such transaction, had no publicly reportable interest in CUSTOMER or
(iv) to new products which the parties reasonably and mutually agree
SANMINA-SCI does not have the technical expertise to build; [***] and further
provided that in the event of (ii), CUSTOMER does not contract with any third
party to manufacture CUSTOMER’s products prior to October 2009 (unless the
Agreement has been terminated by CUSTOMER for SANMINA’s breach pursuant to Section 10.3(b)).  The products manufactured by SANMINA-SCI
hereunder are collectively referred to as the “Products.”

 

1.2                                 Certain Definitions. 
The following capitalized terms shall have the following respective
meanings:

 

“Components” shall mean any raw materials, components
or parts purchased from a Vendor on the AVL.

 

“FOB Point” shall mean either (a) the Hub(s) in the
case of CUSTOMER’s Products designated for shipment to Hub(s) on Exhibit A-2 (“Hubbed
Product”) or (b) SANMINA-SCI’s factory in Rapid City, South Dakota, in the case
of all other Products.

 

“Hub(s)” shall mean any one or more SANMINA-SCI warehouse(s)
as specified by CUSTOMER and agreed to by SANMINA-SCI.

 

“Orders” shall mean purchase orders for Products
issued by CUSTOMER or, if the context requires, any electronic notification,
however designated, received by SANMINA-SCI by any of CUSTOMER’s customers to
release a Product from the Hub(s) for shipment.

 

2.                                      PRICING

 

2.1                                 Pricing.  During the
term, CUSTOMER shall purchase from SANMINA-SCI the Products set forth in
Exhibit A at a price calculated in accordance with the pricing formulas set
forth in Exhibit A hereto and including and excluding such items and costs
also specified in Exhibit A, as such Exhibit may be amended from time to time
(the “Prices”).  Nothing herein shall
require SANMINA-SCI to add any new product to Exhibit A if the parties reasonably
and mutually agree that SANMINA-SCI  is
not technically able to build such product. 
In addition, CUSTOMER shall have the right to purchase from SANMINA-SCI
spare Components as set forth in Section 4.3.  Prices
(a) are in U.S. Dollars, (b) exclude the items set

 

3

 

Confidential Portions of this documents have been
redacted and filed separately with the Commission.

[***] symbolizes language omitted pursuant to an
application for Confidential Treatment.

 

forth in Section 2.2, and (c) are based on (i) the specifications
attached hereto as Exhibit C as modified by the parties (the “Specifications”)
and (ii) the definitions and other assumptions set forth in Exhibit A.  The prices include [***].

 

2.2                                 Exclusions from Price. 
Prices do not include [***].

 

2.3                                 Other Price Adjustments:

 

(a)                                  In the event
SANMINA-SCI experiences an increase or decrease in costs as a result of changes
in the Specifications, the Prices shall be adjusted in accordance with Section 6.1.

 

(b)                                 Pricing and
costs will be reviewed, verified and benchmarked by both Parties on a [***] basis.  Prices may be adjusted, with CUSTOMER’s
approval, not to be unreasonably withheld, on a [***] basis.

 

(c)                                  Notwithstanding
and without limiting the generality of the foregoing, any [***] cost reductions
in Components or assembly and test processes will be [***]  For purposes of the foregoing, the “effective
date of such cost reductions” will be the date on which all Components “on hand”
or “on order” have either been (i) consumed, (ii) returned to Vendor or (iii)
bought down in accordance with and subject to Section 4.2.  For purposes of the foregoing, “bought down”
means a payment by CUSTOMER of the difference between the old price of the
Component and the new price of the Component.

 

2.4                                 Product Ordering & Manufacture.  Product ordering shall be in accordance with
the schedule or method of releases by Orders set forth in Article 4.  Products shall be manufactured at SANMINA-SCI’s
factory in Rapid City, South Dakota and shall not be manufactured at any other
location without the prior written consent of CUSTOMER, which shall not be
unreasonably refused in the event the relocation is to a facility in the lower
48 United States.

 

3.                                      PAYMENT TERMS

 

Payment terms are [***] after
CUSTOMER’s receipt of a properly issued, invoice; provided, however, that
CUSTOMER shall not be considered in breach of this Section unless any
payment is past due by more than [***] . Payment shall be made in U.S. Dollars.  In the event CUSTOMER disputes any
portion of any invoice, then (a) CUSTOMER shall pay the undisputed portion as
set forth above and (b) within five (5) business days CUSTOMER shall deliver to
SANMINA-SCI a notice that sets forth the basis of the dispute. The parties shall
work in good faith to resolve the dispute [***] after the notice.  In the event the dispute has not been
resolved by the parties within [***] period, the dispute shall be escalated to
each party’s President within [***] who shall use their respective best efforts
to immediately resolve the dispute.

 

4.                                         PURCHASE ORDERS/FORECAST/RESCHEDULE

 

4.1                                 Purchase Orders.

 

(a)                                  CUSTOMER
will issue to SANMINA-SCI specific Orders for Product covered by this
Agreement.  Each Order shall be in the
form of a written or electronic communication and shall contain the following
information: (i) a description of the Product by model number; (ii) the
quantity of the Product; (iii) the delivery date or shipping schedule; (iv) the
location to which the Product is to be shipped (if other than the Hub(s)); and
(v) transportation instructions, if applicable. 
Each Order shall provide an Order number for billing purposes, and may
include other instructions and terms as may be appropriate under the
circumstances.

 

(b)                                 All
Orders shall be confirmed by SANMINA-SCI within [***] of receipt.   If SANMINA-SCI does not acknowledge receipt
of the Order within the [***] period, the Order shall be deemed rejected by
SANMINA-SCI.  In the event SANMINA-SCI is
unable to meet the delivery schedule set forth in a proposed Order, or
finds the schedule to be unacceptable for some other reason, the parties
shall negotiate in good faith to resolve the disputed matter(s).

 

4

 

Confidential Portions of this documents have been
redacted and filed separately with the Commission.

[***] symbolizes language omitted pursuant to an
application for Confidential Treatment.

 

4.2                                 Forecasts and Obsolete Inventory.

 

(a)                                  Initial Forecast.  Upon the execution of this Agreement,
CUSTOMER shall provide SANMINA-SCI with a rolling forecast for Product
requirements [***] (“Forecast”).  The
Forecast will be updated [***].  The
Forecast will be provided to SANMINA-SCI for estimation purpose only, and will
not be construed as a commitment by CUSTOMER to purchase any of the Products in
such Forecast, except as expressly provided herein.  The parties acknowledge that while this
Agreement is a “requirements contract,” except as otherwise expressly agreed
upon in writing, CUSTOMER shall not be required to make any minimum purchase
hereunder.

 

(b)                                 Cancellations. CUSTOMER shall have
the right to cancel an Order at any time prior to [***].  In the event CUSTOMER replaces the Order with
a like or greater quantity substitute Order, then CUSTOMER’s liability shall be
limited [***]

 

(c)                                  Commitments.   SANMINA-SCI shall make purchase commitments
(including purchase commitments for Long Lead-time Components) to its Component
manufacturers or suppliers (“Vendors”) based upon the Forecast, and [***] shall
be required to pay for and will receive delivery of any Non-Standard Components
purchased in support of CUSTOMER’s then-current Forecast.  For the purpose of this Section, the term “Non-Standard
Component” shall mean and include any Component which (i) cannot be currently
used by SANMINA-SCI in the manufacture of a product for any of its other
customers or (ii) which cannot be returned to the Vendor.  For all other purposes, however, the Forecast
shall be non-binding.

 

(d)                                 Increases.  If requested by CUSTOMER, SANMINA-SCI agrees
to increase the quantities produced for CUSTOMER for Products under this
Agreement over the quantities in the applicable [***] after the notice amounts
below over the Forecast for such period at a minimum as follows:

 

	
  Amount of Notice

  	
   

  	
  Increase Over Forecast (“Increase”)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
   

  	
   

  

 

Provided that CUSTOMER
gives SANMINA-SCI at least [***] advance notice, SANMINA-SCI will not impose
any additional labor charges to meet the Increase; in the event CUSTOMER gives
SANMINA-SCI fewer than [***] notice, SANMINA-SCI shall have the right to
invoice CUSTOMER for any [***] provided that SANMINA-SCI has obtained CUSTOMER’s
prior approval to incur such charges.  In
addition, the Parties acknowledge that any increased Component costs directly
attributable to the Increase, will be included in SAMNINA-SCI’s “Delivered
Costs” as set forth in Exhibit A. 
Notwithstanding the foregoing, in the event CUSTOMER requests an
increase in the quantity of the Products beyond the accelerated amounts listed
above, SANMINA-SCI agrees to use its best efforts to increase the quantities
for Products under this Agreement; provided, however, that CUSTOMER agrees to
pay for [***] provided that SANMINA-SCI has obtained CUSTOMER’s prior approval
to incur such charges.

 

(e)                                  MRP Process.

 

(1)                                  SANMINA-SCI
shall take the Forecast and generate a Master Production Schedule (“MPS”)
for a [***] period in accordance with the process described in this
Section.  The MPS shall define the master
plan on which SANMINA-SCI shall base its procurement, internal capacity
projections and commitments.

 

(2)                                  SANMINA-SCI
shall process the MPS through industry-standard software (the “MRP Software”)
that will break down CUSTOMER’s Product requirements into Component
requirements.  When no Product testing
(in-circuit or functional testing) is required by CUSTOMER, SANMINA-SCI will
use commercially reasonable efforts to schedule delivery of all Components
to SANMINA-SCI [***] before the Products are scheduled to ship to CUSTOMER; in
the event Product

 

5

 

Confidential Portions of this documents have been
redacted and filed separately with the Commission.

[***] symbolizes language omitted pursuant to an
application for Confidential Treatment.

 

testing is required,
SANMINA-SCI will use commercially reasonable efforts to schedule delivery
of all Components to SANMINA-SCI [***] before the Products are scheduled to
ship to CUSTOMER.

 

(3)                                  SANMINA-SCI
will release (launch) its purchase orders to Vendors (including other
SANMINA-SCI facilities) prior to the anticipated date that the Components are
needed at SANMINA-SCI. The date on which these orders are launched will depend
on the lead time determined between the Vendor and SANMINA-SCI and SANMINA-SCI’s
manufacturing or materials planning systems.

 

(4)                                  A
list of all Components with lead times greater than [***] (“Long Lead-time
Components”) is set forth in Exhibit B to this Agreement.  SANMINA-SCI shall use reasonable efforts to
update the list of Long Lead-time Components every quarter and present an
updated list of Long Lead-time Components to CUSTOMER at the time SANMINA-SCI
presents the CUSTOMER with the E&O List described in Section 4.2(f).  Each revised Long Lead-time Item list shall
be deemed an amendment to Exhibit B.  In
the event SANMINA-SCI fails to present an updated list of Long Lead-time
Components, (i) the parties shall continue to rely on the preceding list (as
updated in writing by the parties) and (ii) CUSTOMER will pay for and receive
delivery of any Long Lead Time Components, provided that such Components were
ordered in accordance with the then-current Vendor lead times and consistent
with the CUSTOMER’s Forecast.

 

(5)                                  CUSTOMER
acknowledges that SANMINA-SCI will order Components in quantities sufficient to
support CUSTOMER’s Forecast.  In
determining the quantity of Components to order, SANMINA-SCI divides the
Components into three classes, “Class A,” “Class B” and “Class C.”  Class A Components are comprised of the
approximately [***] of Components constituting approximately [***] of the
Product’s total Component cost.  Class C
Components are comprised of the approximately [***] of Components constituting
approximately [***] of the Product’s total Component cost.  Class B Components are comprised of the
remaining [***] of Components constituting approximately [***] of the Product’s
total Component cost.  SANMINA-SCI will
place orders with its Vendors for approximately [***] of Class A Components,
[***] of Class B Components and [***] of Class C Components.  SANMINA-SCI will provide a monthly update of
such Components classifications. A summary of SANMINA-SCI’s purchase
commitments is set forth in the table below.

 

	
  Part Class

  	
   

  	
  Expected Percentage

  of Total Parts

  	
   

  	
  Expected Percentage

  of Total Value (of

  Gross Requirements)

  	
   

  	
  Maximum Periods

  Worth of Supply to be

  Bought with Each

  Order

  	
   

  
	
  A

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  B

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  C

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  

 

(6)                                  CUSTOMER
acknowledges that SANMINA-SCI will be required to order Components in
accordance with the various minimum buy quantities, tape and reel quantities,
and multiples of packaging quantities required by the Vendor.  In addition, CUSTOMER acknowledges that there
is a lag time (but no longer than [***]) between any CUSTOMER cancellation and
the cancellation of the Components required to support production.

 

(7)                                  CUSTOMER
acknowledges that the Vendor lead times can be significant, and understands
that it is possible for SANMINA-SCI to have Components on order which would
support the last week of CUSTOMER’S Forecast. 
For example, assuming a vendor lead time of forty (40) weeks and a “B”
Component, SANMINA-SCI would place an order for [***] (see table above) of such
Component approximately forty (40) weeks prior to the date on which the first
Component is expected to be used.

 

6

 

Confidential Portions of this documents have been
redacted and filed separately with the Commission.

[***] symbolizes language omitted pursuant to an
application for Confidential Treatment.

 

(8)                                  CUSTOMER
agrees that it is financially responsible for all Components ordered in
accordance with the foregoing provided that SANMINA-SCI complies with its
mitigation duties set forth in Section 4.2(g).  Nonetheless, any expenditures or commitments
by SANMINA-SCI other than as expressly provided in this Agreement shall be
solely at SANMINA-SCI’s risk and expense.

 

(f)                                    Obsolete Inventory.  Within [***] after the end of each calendar
month, SANMINA-SCI shall advise CUSTOMER in writing of any slow moving or
obsolete Components purchased solely for the manufacture of CUSTOMER’s Products
but remaining in its inventory and the Delivered Cost of such Components (the “E&O
List”).   For the purpose of this
Agreement, (i) the phrase “obsolete Component” shall mean any on-hand
Component, ordered in accordance with this Section, for which there is no
demand for the next [***] period, according to the most current
Forecast(whether as a result of an ECO or otherwise), (ii) the term “slow moving
Component” shall mean any on-hand Component, ordered in accordance with this
Section, which is not required to meet CUSTOMER’s requirements (1) for the
ensuing [***] period for “A” Components, (2) for the ensuing [***] period for “B”
Components or (3) for the ensuing [***] period for “C” Components(ii) the term “Delivered
Cost” shall mean [***].    Within [***]
of receiving SANMINA-SCI’s E&O List, CUSTOMER shall advise SANMINA-SCI of
any Component that it believes is not slow moving or obsolete.  Within [***] after receiving SANMINA-SCI’s
E&O List, SANMINA-SCI and CUSTOMER shall finalize the E&O List, and
CUSTOMER (i) shall issue to SANMINA-SCI an Order for all obsolete Components on
the E&O List at a price equal to the Delivered Cost of such Component [***].  CUSTOMER shall pay SANMINA-SCI in accordance
with Section 3.

 

(g)                                 Customer Component Liability.  CUSTOMER’s total “Component Liability” shall
be equal to the lesser of (a) the purchase price for the Products for which
such Components were purchased or (b) SANMINA-SCI’s Delivered Cost of all
Components ordered in support of the Forecast in a manner consistent with the
standard lead times, less the Delivered Cost of those Components which are
returnable to Vendor (less any cancellation or restocking charges) [***].  At CUSTOMER’S request, SANMINA-SCI shall use
commercially reasonable efforts to minimize CUSTOMER’S Component Liability by
attempting to return Components to the Vendor; [***].

 

4.3                                 Repair
Parts.                       During
the term of this Agreement and for a period of [***] thereafter, SANMINA-SCI
shall provide CUSTOMER the ability to procure from SANMINA-SCI all Components
for the Products, subject to the Parties agreeing to the ordering procedure,
delivery term, prices, payments and other terms and conditions applicable to
the sale and supply of Components.

 

4.4                                 Disaster Recovery Plan. 
SANMINA-SCI will develop and maintain a disaster recovery plan
reasonably acceptable to CUSTOMER (the “DRP”). 
The DRP will be updated at least annually and will include as a minimum
a detailed schedule for the resumed manufacture of Products at the
earliest possible date.  The plan will
include the formation of a disaster recovery team made up of representatives of
both CUSTOMER and SANMINA-SCI which will monitor and report the updating and
implementation of the disaster recovery plan.

 

5.                                         DELIVERY

 

5.1                                 Delivery to Hub(s). 
For the Hubbed Products SANMINA-SCI shall deliver the
finished Products made according to the Forecast to one or more SANMINA-SCI
Hub(s) where the Products will be stored for subsequent distribution to
locations designated by CUSTOMER (the “Product Destinations”).  The costs of transporting the Hubbed Products
to the Hub shall be paid as set forth in Section 2.2(a).    SANMINA-SCI shall manage and maintain the
Hub(s) and shall be responsible for all costs associated with Hub(s) operation,
except for the warehousing and order fulfillment charges set forth on Exhibit A
which shall be paid by CUSTOMER.

 

5.2                                 Delivery To FOB POINT. 
Title and risk of loss shall pass to the CUSTOMER at the FOB
POINT.  SANMINA-SCI shall [***], mark,
pack, package, crate, transport, ship and store Product to ensure

 

7

 

Confidential Portions of this documents have been
redacted and filed separately with the Commission.

[***] symbolizes language omitted pursuant to an
application for Confidential Treatment.

 

(a) delivery of the
Product to the FOB POINT in safe condition, (b) compliance with all
requirements of the carrier and destination authorities, and (c) compliance
with any special instructions of CUSTOMER, including any unique requirements
specified by CUSTOMER for CUSTOMER’s customers. 
CUSTOMER shall be responsible for [***] to the extent set forth in Section 2.2(a).

 

5.3                                 Hub(s) Inventory. 
SANMINA-SCI shall maintain CUSTOMER specified inventory levels at all
times at the Hub(s) for [***], after which the system level Products will be
reconfigured and restocked for a reasonable reconfiguration and restocking fee.

 

5.4                                 Delivery to CUSTOMER or CUSTOMER’S Designated Location.   For delivery of the Products from the
factory to CUSTOMER’s designated ship to location, CUSTOMER will issue an
Order.  For delivery of the Products from
the Hub(s) to CUSTOMER’s designated ship to location, CUSTOMER or CUSTOMER’S
customers will issue an electronic notification including the same information
as is required to be included in an Order by Section 4.1(a).  All Products shall be pulled from the Hub on
a first in-first out basis.  SANMINA
shall (i) [***] mark, pack, package and, crate the Products for shipment and
(ii) shall manage carrier and delivery services [***], arranging for the
transporting the Products from the FOB POINT to CUSTOMER’S designated “ship to”
location. [***].  SANMINA-SCI shall
arrange transportation by the form and carrier of transport specifically
requested by CUSTOMER.

 

5.5                                 Late Deliveries. 
If SANMINA-SCI is more than [***] late in making shipments from its
factory or from the Hub against mutually agreed upon ship date(s), then CUSTOMER,
at its option, may demand that expedited shipment methods be utilized by
SANMINA-SCI to ship Products. 
SANMINA-SCI shall thereupon utilize expedited shipment methods for such
Orders, the incremental cost of which (i.e., the difference between the cost of
normal delivery and expedited delivery) will be SANMINA-SCI’s
responsibility.  SANMINA-SCI may use
acceptable forwarders, freight agents, brokers, or similar agents of its choice
to seek the lowest possible cost for the expedited shipment(s). This section states
CUSTOMER’s sole remedy for such late delivery.

 

5.6                                 Customs Compliance.

 

(a)                                  SANMINA-SCI
shall be solely responsible for the importation into the United States of all
Components that will be incorporated by SANMINA-SCI into the Products, as well
as all transportation costs associated with transporting all Components,
whether imported or otherwise, to SANMINA-SCI’s manufacturing facility.

 

(b)                                 Except as
set forth in Section 2.2(a) SANMINA-SCI shall [***] comply with all
applicable import and export laws.  At
CUSTOMER’s request, SANMINA-SCI will provide CUSTOMER with copies of all
importation and exportation documents, and shall be responsible for obtaining
any required export licenses and preparing all import and export documentation
required under all applicable law. 
SANMINA-SCI shall provide CUSTOMER with a certificate of origin for the
Products if applicable.

 

(c)                                  CUSTOMER
shall be responsible for the exportation of the Products from and after the FOB
POINT.  CUSTOMER shall be responsible for
all applicable duty fees, customs broker fees, exporting fees, the obtaining of
required export licenses, and any other costs associated with the importation
or exportation of Products from and after the FOB POINT.

 

5.7                                 Acceptance
of the Product shall occur [***] after the invoice date (which shall be no
earlier than the shipment date).  Once a
Product is accepted, all Product returns shall be handled in accordance with Article 7
(Warranty).

 

6.                                         CHANGES

 

6.1                                 General. 
SANMINA-SCI shall not make any changes in the Specifications or any
other process and/or design changes in the Products without prior written
approval from CUSTOMER.  CUSTOMER may
upon sufficient notice make changes within the general scope of this Agreement.
Such changes may include, but are not limited to changes in (1) drawings,
plans, designs, procedures,

 

8

 

Confidential Portions of this documents have been
redacted and filed separately with the Commission.

[***] symbolizes language omitted pursuant to an
application for Confidential Treatment.

 

Specifications, test specifications or BOM, (2) methods of
packaging, or (3) CUSTOMER-Furnished Items. 
All such changes shall be requested pursuant to an Engineering Change
Notice (“ECN”) and, finalized in an Engineering Change Order (“ECO”) if the ECO
is accepted by CUSTOMER.  If any such ECO
causes either an increase or decrease in SANMINA-SCI’s actual cost or the time
required for performance of any part of the work under this Agreement the
Prices and/or delivery schedules shall be adjusted in a manner which would
adequately compensate the parties for such change.

 

6.2                                 ECN’s. 
[***].  Within [***] after an ECN
is received, SANMINA-SCI shall notify CUSTOMER in writing (a) of any change in
Prices or delivery schedules resulting from the ECN and (b) the Delivered Cost
of any finished Products, work-in-process or Component rendered obsolete as a
result of the ECN (collectively the “ECN Charge”).   Unless otherwise stated, ECN Charges are
valid for [***] from the date the CUSTOMER receives such notice.

 

6.3                                 ECO’s.   In the event CUSTOMER desires to proceed
with the change after receiving the ECN Charge pursuant to Section 6.2,
CUSTOMER shall advise SANMINA-SCI in writing and shall pay the portion of the
ECN Charge set forth in Section 6.2(b) according to Section 3.  In the event CUSTOMER does not desire to
proceed with the Change after receiving the ECN change, it shall so notify
SANMINA-SCI.  In the event SANMINA-SCI
does not receive written confirmation of CUSTOMER’s desire to proceed with the
change within [***] after SANMINA-SCI provides CUSTOMER with the ECN Charge,
the ECN shall be deemed cancelled.

 

6.4                                 Process Change Notices. Process Change Notices (the “PCN”)
shall be issued by SANMINA-SCI to CUSTOMER as needed for changes in the
manufacturing process and will be subject to CUSTOMER’s approval.

 

7.                                         WARRANTY

 

7.1                                 SANMINA-SCI Warranty.  SANMINA-SCI warrants that title to all
Products purchased by and delivered to CUSTOMER pursuant to this Agreement or
any extension or renewal thereof, shall be free and clear of all liens,
encumbrances, security interests, or other adverse interests or claims.  SANMINA-SCI’s warranty period is for [***]
from date of manufacture and is limited to correction of defects in SANMINA-SCI
workmanship.  For the purpose of this
Section, “workmanship” shall mean manufacture in accordance with the most
current version of IPC-A-600 or IPC-A-610, SANMINA-SCI’s manufacturing
workmanship standards or the CUSTOMER’s written workmanship standards set forth
in the Specifications (the “Standards”). 
Unless otherwise agreed in writing, Products shall be considered free
from defects in workmanship if they are manufactured in accordance with the
Standards and successfully complete any acceptance test performed by
SANMINA-SCI (an “Acceptance Test”). 
SANMINA-SCI shall, at CUSTOMER’S option and at its expense, repair,
replace or issue a credit for Product found defective during the warranty
period; [***].  In addition, SANMINA-SCI
will pass on to CUSTOMER all manufacturers’ Component warranties to the extent
that they are transferable, but will not independently warrant any
Components.  ALL CLAIMS FOR BREACH OF
WARRANTY MUST BE RECEIVED BY SANMINA-SCI NO LATER [***] AFTER THE EXPIRATION OF
THE WARRANTY PERIOD.

 

7.2                                 ARM Procedure.  CUSTOMER shall obtain an Authorized Returned
Material (ARM) number from SANMINA-SCI prior to return shipment.  All returns shall state the specific reason
for such return, and will be processed in accordance with SANMINA-SCI’s
Authorized Returned Material Procedure, a copy of which is available from
SANMINA-SCI upon request.   SANMINA-SCI
shall pay all transportation costs for valid returns of the Products to
SANMINA-SCI and for the shipment of the repaired or replacement Products to
CUSTOMER, and shall bear all risk of loss or damage to such Products while in
transit. For “invalid” or “no defect found” returns which [***] of CUSTOMER’s
total returns in any given month, CUSTOMER shall pay both the transportation
charges set forth in the preceding sentence and a handling charge as set forth
in Exhibit F. Any repaired or replaced Product shall be warranted as set forth
in this Article for a period equal to the greater of (i) the balance of
the applicable warranty period relating to such Product or (ii) [***] after it
is received by CUSTOMER.

 

9

 

Confidential Portions of this documents have been
redacted and filed separately with the Commission.

[***] symbolizes language omitted pursuant to an
application for Confidential Treatment.

 

7.3                                 Exclusions From Warranty.  This warranty does not include Products that
have defects or failures resulting from (a) CUSTOMER’s unmodified design of
Products including, but not limited to, design functionality failures,
specification inadequacies, failures relating to the functioning of Products in
a manner other than for the intended purpose or in the specific end user’s
environment; (b) neglect, abuse, misuse, improper handling, testing, storage or
installation including improper handling in accordance with static sensitive
electronic device handling requirements; (c) alterations, modifications or
repairs by CUSTOMER or third parties or (d) defective CUSTOMER-provided test
equipment or test software.  CUSTOMER
bears all design related warranty responsibility for the Product.

 

7.4                                 Remedy.  THE SOLE REMEDY UNDER THIS WARRANTY SHALL BE
THE REPAIR, REPLACEMENT OR CREDIT FOR DEFECTIVE PARTS AS STATED ABOVE. THIS
WARRANTY IS IN LIEU OF ANY OTHER WARRANTIES EITHER EXPRESS OR IMPLIED,
INCLUDING MERCHANTABILITY, NONINFRINGEMENT AND FITNESS FOR A PARTICULAR
PURPOSE.

 

7.5                                 Epidemic Defects.   In the event of an Epidemic Defect
attributable to a breach of SANMINA-SCI’s warranty, SANMINA-SCI shall extend
the [***] warranty period set forth in Section 7.1 by an additional [***],
for a total of [***].  “Epidemic Defect”
is defined as a defect in the Product or any Component thereof that is
attributed to the common root cause where the annual failure rate exceeds
[***].  Defects resulting from normal “wear
and tear” are excluded.

 

8.                                         CUSTOMER FURNISHED  EQUIPMENT AND  COMPONENTS

 

8.1                                 Customer-Furnished Items.  CUSTOMER shall provide SANMINA-SCI with the
equipment, tooling, Components or documentation set forth in Exhibit D (collectively
the “CUSTOMER-Furnished Items”).   The
CUSTOMER-Furnished Items shall be in good working condition and useable, and
shall be delivered to SANMINA-SCI in a timely manner. Documentation (including
BOM’s, drawings and artwork) shall be current and complete.  CUSTOMER shall be responsible for schedule delay
caused by the incompleteness, late delivery or non-delivery of the
CUSTOMER-Furnished Items.

 

8.2                                 Care of Customer-Furnished Items.  All CUSTOMER-Furnished Items shall remain the
property of CUSTOMER. SANMINA-SCI shall clearly identify all CUSTOMER-Furnished
Items by an appropriate tag and shall utilize such CUSTOMER-Furnished Items
solely in connection with the manufacture of CUSTOMER’s Product.  SANMINA-SCI shall not make or allow
modifications to be made to the CUSTOMER-Furnished Items without CUSTOMER’s
prior written consent. SANMINA-SCI shall use best commercial efforts to care
for and protect any CUSTOMER-Furnished Items and perform routine maintenance
and repairs of any CUSTOMER-Furnished Items, but shall not be responsible for
major repairs or replacements or repair or replacement of failed
CUSTOMER-Furnished Item unless such failure was caused by SANMINA-SCI’s
negligence or willful misconduct.  All
CUSTOMER-Furnished Items shall be returned to CUSTOMER at CUSTOMER’s expense
upon request. SANMINA-SCI’s production and warranty obligations which require
the utilization of the returned CUSTOMER-Furnished Items will cease upon
SANMINA-SCI’s fulfillment of the CUSTOMER’s request.  SANMINA-SCI shall (a) maintain each CUSTOMER
Furnished Item at SANMINA-SCI’s Rapid City facility,  and may not remove it from said location
without CUSTOMER’s prior written consent; (b) not sell, assign its rights
hereunder, or in any manner encumber, pledge or otherwise cause a lien on the
CUSTOMER Furnished Items; (c) protect the CUSTOMER Furnished Items from any and
all third party claims; (d) use the CUSTOMER Furnished Items exclusively for
the purpose for which it was provided by CUSTOMER; (e) preserve and maintain the
CUSTOMER Furnished Items in the condition in which it was received; (f) notify
CUSTOMER immediately, by telephone and in writing, of any claim, demand, labor
dispute, litigation, or any other lien that might affect the CUSTOMER Furnished
Items (g) notify CUSTOMER in writing of any change in or discontinuance of
SANMINA-SCI’s business or SANMINA-SCI’s place or places of business, or
SANMINA-SCI’s insolvency, bankruptcy or proposed reorganization under
bankruptcy laws; and (h) maintain insurance policies insuring the CUSTOMER
Furnished Items fully against loss in transit, loss by fire, theft and other
hazards and naming CUSTOMER as an additional insured.

 

10

 

Confidential Portions of this documents have been
redacted and filed separately with the Commission.

[***] symbolizes language omitted pursuant to an
application for Confidential Treatment.

 

8.3                                 Customer-Furnished Components.  CUSTOMER-furnished Components shall (a)
include all Components on Exhibit G, as updated [***] as mutually agreed, and
(b) be handled in accordance with SANMINA-SCI’s procedures regarding
CUSTOMER-Furnished Items.

 

8.4                                 Sale Of Equipment To SANMINA-SCI.                                In the event
SANMINA-SCI desires to purchase equipment, Components or finished goods inventory
from CUSTOMER, SANMINA-SCI shall issue a purchase order to CUSTOMER.  Such purchase shall be subject to the price,
terms and conditions to be mutually agreed by CUSTOMER and SANMINA-SCI, but
shall include a right of CUSTOMER to repurchase such unique items upon the same
terms (subject to appropriate price adjustments if any).

 

9.                                          INDEMNIFICATION AND LIMITATION OF LIABILITY

 

9.1                                 SANMINA-SCI’s Indemnification.  SANMINA-SCI shall indemnify, defend, and hold
CUSTOMER and CUSTOMER’s affiliates, shareholders, directors, officers,
employees, contractors, agents and other representatives (the “CUSTOMER-Indemnified
Parties”) harmless from all third party demands, claims, actions, causes of
action, proceedings, suits, assessments, losses, damages, liabilities,
settlements, judgments, fines, penalties, interest, costs and expenses
(including fees and disbursements of counsel) of every kind (each a “Claim,”
and, collectively “Claims”) (i) based upon personal injury or death or injury
to property (other than damage to the Product, for which CUSTOMER’s exclusive
remedy is as set forth in the warranty) to the extent any of the foregoing is
proximately caused either by any manufacturing defect or the negligent or
willful acts or omissions of SANMINA-SCI or its officers, employees,
subcontractors or agents and/or (ii) arising from or relating to any actual or
alleged infringement or misappropriation of any patent, trademark, mask work,
copyright, trade secret or any actual or alleged violation of any other
intellectual property rights arising from or in connection with SANMINA-SCI’s
manufacturing processes.

 

9.2                                             CUSTOMER’s Indemnification.  CUSTOMER shall indemnify, defend, and hold
SANMINA-SCI and SANMINA-SCI’s affiliates, shareholders, directors, officers,
employees, contractors, agents and other representatives (the “SANMINA-SCI-Indemnified
Parties”) harmless from all third party Claims (i) based upon personal injury
or death or injury to property to the extent any of the foregoing is
proximately caused either by a defective Product design or the negligent or
willful acts or omissions of CUSTOMER or its officers, employees,
subcontractors or agents and/or (ii) arising from or relating to any actual or
alleged infringement or misappropriation of any patent, trademark, mask work,
copyright, trade secret or any actual or alleged violation of any other
intellectual property rights arising from or in connection with the Products’
design, except to the extent that such infringement exists as a result of use
by CUSTOMER of SANMINA-SCI’s manufacturing processes.

 

9.3                                             Procedure. 
A party entitled to indemnification pursuant to this Article (the “Indemnitee”)
shall promptly notify the other party (the “Indemnitor”) in writing of any
Claims covered by this indemnity. 
Promptly after receipt of such notice, the Indemnitor shall assume the
defense of such Claim with counsel reasonably satisfactory to the Indemnitee.
If the Indemnitor fails, within a reasonable time after receipt of such notice,
to assume the defense with counsel reasonably satisfactory to the Indemnitee
or, if in the reasonable judgment of the Indemnitee, a direct or indirect
conflict of interest exists between the parties with respect to the Claim, the
Indemnitee shall have the right to undertake the defense, compromise and
settlement of such Claim for the account and at the expense of the Indemnitor.
Notwithstanding the foregoing, if the Indemnitee in its sole judgment so
elects, the Indemnitee may also participate in the defense of such action by
employing counsel at its expense, without waiving the Indemnitor’s obligation
to indemnify and defend. The Indemnitor shall not compromise any Claim or
consent to the entry of any judgment without an unconditional release of all
liability of the Indemnitee to each claimant or plaintiff.

 

9.4                                       Limitation of Liability.   IN NO EVENT SHALL EITHER PARTY BE LIABLE TO
THE OTHER PARTY FOR ANY CONSEQUENTIAL, INCIDENTIAL, INDIRECT, PUNITIVE OR
SPECIAL DAMAGES, EVEN IF SUCH OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES.  THE LIMITATION SET
FORTH IN THIS SECTION SHALL APPLY WHETHER THE DAMAGES ARISE OUT OF OR
RELATE TO THIS AGREEMENT AND WHETHER THE CLAIM IS BASED ON CONTRACT, TORT OR
OTHER THEORY.  THE LIMITATIONS OF
LIABILITY SET FORTH

 

11

 

Confidential Portions of this documents have been
redacted and filed separately with the Commission.

[***] symbolizes language omitted pursuant to an
application for Confidential Treatment.

 

IN THE PRECEDING SENTENCE
APPLY TO EVERYTHING HEREIN CONTAINED. 
THE LIMITATIONS OF LIABILITY CONTAINED IN THE FOLLOWING SENTENCE DO NOT
APPLY TO [***].   NOTWITHSTANDING THE
FOREGOING, (I) NEITHER PARTY SHALL BE LIABLE FOR ANY DAMAGES RESULTING FROM A
FORCE MAJEURE AND (II) [***]. 
Notwithstanding the foregoing, this Section shall not (i) affect
CUSTOMER’s obligation for termination payments in accordance with Section 10
or (ii) prevent the Indemnitor from indemnifying the Indemnitee from and
against any license fees and/or royalties the Indemnitee is required to pay to
any third party.

 

10.                                  TERMINATION

 

10.1                           Termination for Cause. 
Either party may terminate this Agreement or an Order hereunder for
default if the other party materially breaches this Agreement; provided,
however, no right of default shall accrue until [***] after the defaulting
party is notified in writing of the material breach and has failed to cure or
give adequate assurances of performance within the [***] period after notice of
material breach.  After the expiration of
such [***], the non-defaulting party may issue a notice of termination
effective upon the six month anniversary of the earlier date of notice of
material breach.

 

10.2                           Termination For Convenience. CUSTOMER shall
have the right to terminate this Agreement in the event the conditions for such
termination in Section 1.1 are met, but shall have no other right to
terminate this Agreement for convenience. 
Any such termination shall be effective provided that CUSTOMER provides
SANMINA-SCI with at least six (6) months’ prior written notice.

 

10.3                           Termination for Insolvency.  If either party becomes insolvent, is unable
to pay its debts when due, files for bankruptcy, is the subject of involuntary
bankruptcy that is not dismissed in [***] days or has a receiver appointed,
this Agreement shall automatically terminate.

 

10.4                           Consequences of Termination.

 

a.                                       Termination for Reasons other than SANMINA-SCI’s Breach.  In the event this Agreement or an Order
hereunder is terminated for any reason other than a breach by SANMINA-SCI, CUSTOMER
shall pay SANMINA-SCI, termination charges equal to (1) the contract price for
all finished Product existing at the time of termination; (2) SANMINA-SCI’s
Delivered Cost for all work in process; and (3) any applicable CUSTOMER’S
Component Liability pursuant to Section 4.2(g).

 

b.                                      Termination Resulting From SANMINA-SCI’S Breach.  In the event CUSTOMER terminates this
Agreement or any Order hereunder as a result of a breach by SANMINA-SCI,
CUSTOMER shall, [***].  Notwithstanding
the foregoing, CUSTOMER will purchase any remaining Components in the
possession of SANMINA-SCI before purchasing them from any third parties.

 

c.                                       Any Termination. 
In the event of any expiration or termination of this Agreement, (i) any
payment or production obligations of either party under any surviving Order
shall survive, (ii) SANMINA-SCI shall immediately return to CUSTOMER all
CUSTOMER-Furnished Items and any of CUSTOMER’s Confidential Information and
(iii) SANMINA-SCI shall furnish CUSTOMER with a statement, showing the quantity
of the Products both in the finished and unfinished state and the Components,
which are in the possession of SANMINA-SCI. Upon payment of any applicable
termination charges, SANMINA-SCI shall immediately deliver all such finished
Products, work in process and paid for Components to CUSTOMER. In addition, the
following sections shall survive: Section 4.2, 4.4 and Articles 7, 9, 13,
14 and 15, as well as any other section which, by its nature, shall be
reasonably expected to survive.

 

10.5                           Termination Assistance.  
Immediately upon receipt written notice of termination, expiration or
cancellation of this Agreement for any reason, for the entire period until the
effective date of termination, and provided that CUSTOMER complies with the
last sentence of this section, SANMINA-SCI shall (a) continue to meet CUSTOMER’s
Forecast and Order requirements; (b) render all necessary assistance to
CUSTOMER and deliver copies of the relevant information needed to enable
CUSTOMER

 

12

 

Confidential Portions of this documents have been
redacted and filed separately with the Commission.

[***] symbolizes language omitted pursuant to an
application for Confidential Treatment.

 

to obtain Components directly from the Vendors at the best
available market price; (c) use its commercially reasonable efforts to transfer
the manufacture of Products and otherwise cooperate fully with CUSTOMER to
transfer manufacturing of the Products from SANMINA-SCI’s facilities to
CUSTOMER or to any third party designated by CUSTOMER in a manner that (i)
minimizes the time to complete such transfer, (ii) maintains the highest
quality of Products without interruption, and (iii) minimizes any disruption to
CUSTOMER’s requirements; and (d) make available to CUSTOMER all documentation,
personnel, equipment, training, consultation and other resources in addition to
such personnel, equipment and other resources that are necessary under the
circumstances to maintain CUSTOMER’s manufacturing operations fully operational
at the same level at which it was operating on the Commencement Date.  CUSTOMER shall have a license to use the
items provided under Section (d) solely for the purpose of manufacturing
the Products.  SANMINA-SCI shall be
reimbursed for its transfer obligations under its normal schedule of
licensing and other fees, except that shall be reimbursed at SANMINA-SCI’s “direct
cost” if the termination is due to the exercise by CUSTOMER of its termination
rights based upon a breach by SANMINA-SCI. 
Notwithstanding anything to the contrary herein contained, nothing
herein shall require SANMINA-SCI to transfer any of SANMINA-SCI’s proprietary
technology, trade secret or similar item to any third party, and without
limiting the generality of Section 13, CUSTOMER shall not transfer such
proprietary technology, trade secret or similar item to any third party.

 

11.                                  QUALITY

 

11.1                           Specifications.  Product shall be manufactured by SANMINA-SCI
in accordance with the Specifications set forth in Exhibit C, as modified via
written ECO’s in accordance with this Agreement. Neither party shall make
any change to the Specifications, to any Components described therein, or to
the Products (including, without limitation, changes in form, fit, function,
design, appearance or place of manufacture of the Products or changes which
would affect the reliability of any of the Products) unless such change is made
in accordance with Section 6.1 and SANMINA-SCI’s ECO procedure.  Notwithstanding the foregoing, SANMINA-SCI
shall be permitted to make changes in its manufacturing process at any time, so
long as such changes do not affect the Products’ passing the Acceptance Tests,
or modify the form, fit or function of the Products or SAMNINA-SCI’s warranty
obligations under this Agreement and a PCN has been mutually agreed upon as
required by Section 6.4.

 

11.2                           Content of Specifications.  The Specifications shall include, but shall
not be limited to (i) detailed electrical, mechanical, performance and
appearance specifications for each model of Product, (ii) the BOM; (iii)
tooling specifications, along with a detailed description of the operation
thereof, (iv) art work drawings, (v) Component specifications, (vi) supplier
cross references.

 

11.3                           Quality of Components.  SANMINA-SCI shall use in its production of
Products such Components of a type, quality, and grade specified by CUSTOMER to
the extent CUSTOMER chooses to so specify, and shall purchase Components only
from Vendors appearing on CUSTOMER’s approved vendor list (“AVL”); provided,
however, that in the event SANMINA-SCI cannot purchase a Component from a
Vendor on CUSTOMER’S AVL for any reason, SANMINA-SCI shall be able to purchase
such Component from an alternate Vendor, subject to CUSTOMER’s prior written
approval, which approval shall not be unreasonably withheld or delayed.  SANMINA-SCI will [***], (a) submit to
CUSTOMER such number of samples of the Components as CUSTOMER shall reasonably
specify prior to the utilization by SANMINA-SCI thereof, and (b) not utilize in
the manufacture of the Products the Components until such time as it shall have
received from CUSTOMER written notice of its approval of the samples thereof;
provided, however, that, unless otherwise agreed, CUSTOMER will reimburse
SANMINA-SCI [***] for such samples that are not returned to SANMINA-SCI in a
useable form.  CUSTOMER shall have [***]
of such third party parts samples to respond and propose a parts approval plan.

 

11.4                           Quality Specifications.  SANMINA-SCI shall comply with the additional
quality specifications set forth in Exhibit E and in SANMINA-SCI’s Quality
Manual, incorporated by reference herein.

 

13

 

Confidential Portions of this documents have been
redacted and filed separately with the Commission.

[***] symbolizes language omitted pursuant to an
application for Confidential Treatment.

 

11.5                           Inspection of Facility.  Upon reasonable advance written notice,
CUSTOMER may inspect the Products and Components held by SANMINA-SCI for
CUSTOMER at SANMINA-SCI’s facilities during SANMINA-SCI’s regular business
hours, provided that such inspection does not unduly affect SANMINA-SCI’S
operations.  CUSTOMER and its
representatives shall observe all security and handling measures of SANMINA-SCI
while on SANMINA-SCI’s premises.  
CUSTOMER and its representatives acknowledge that their presence on
SANMINA-SCI’s property is at their sole risk. 
Inspection may include such activities as witnessing operations in
progress, witnessing inspections and tests, performing Product and inventory
inspections, reviewing quality assurance documents and records, and performing
audits.  SANMINA-SCI also agrees that it
will accord its full cooperation and assistance to the personnel of CUSTOMER in
the inspection.

 

11.6                           Quality Records. 
SANMINA-SCI shall have a system for the collection and maintenance of
quality assurance records as described on Exhibit E.  A document describing such system shall be
submitted to CUSTOMER (for information and approval) prior to beginning
work.  Quality assurance records shall be
adequately protected from deterioration or damage, and shall be made available
for CUSTOMER’s inspection on reasonable notice. 
SANMINA-SCI shall maintain all quality assurance records pertaining to
this Agreement [***]. CUSTOMER’s written approval shall be required for
destruction of the records or shipment to CUSTOMER.

 

11.7                           Reports. 
SANMINA-SCI shall provide CUSTOMER daily, weekly, and monthly reports,
including reports that are specific to CUSTOMER’s customers, as identified and
requested by CUSTOMER.  These reports
shall include, but shall not be limited to: tracking of on-line defects,
process quality and final inspection reports (i.e. in-line inspection, finished
goods, sampling and source inspection, and out-of-box inspection reports),
reliability testing reports (i.e. early life performance, ORT (on-going
reliability)/rolling reliability, and long-term life), and test data of the
on-going production stage.

 

11.8                           Certifications.  
SANMINA-SCI hereby represents and warrants to CUSTOMER that it has
obtained, will maintain and implement throughout the term of this Agreement its
ISO 9002-2000 certifications (or higher) and any other applicable
certifications for the factories in which the Products will be manufactured or
processed.

 

11.9                           Testing. 
SANMINA-SCI shall maintain and preserve, and make available to CUSTOMER,
copies of reports of actual test results, indicating part, serial, and test
specification/procedure numbers.  Test
results shall not be averaged, deleted, nor omitted from the record, unless
specifically required by the test specification.

 

11.10                     Remedial Actions. 
If, the Products so manufactured hereunder fail to meet the quality
requirements of this Agreement (as provided to SANMINA-SCI prior to the
Commencement Date), CUSTOMER shall give written notice thereof to SANMINA-SCI
together with such directions as CUSTOMER may deem necessary in order to enable
SANMINA-SCI to improve the quality of the Products so as to meet the quality
requirements. SANMINA-SCI agrees that upon receipt of such notice it will, at
its sole cost and expense, take such reasonable steps as may be necessary in
order to meet the quality requirements in the manner directed by CUSTOMER until
SANMINA-SCI receives written notice from CUSTOMER that the Products meet such
quality requirements.  CUSTOMER
acknowledges that any changes in its quality requirements shall be made through
the ECO process and may result in an increase or decrease in the Product price.

 

14

 

Confidential Portions of this documents have been
redacted and filed separately with the Commission.

[***] symbolizes language omitted pursuant to an
application for Confidential Treatment.

 

12.                                  FORCE MAJEURE

 

12.1                           Force Majeure Event.  For purposes of this Agreement, a “Force
Majeure Event” shall mean the occurrence of unforeseen circumstances beyond a
party’s control and without such party’s negligence or intentional misconduct,
including, but not limited to, any act by any governmental authority, act of
war, terrorism, natural disaster, strike, shortages, the inability of a vendor
to timely deliver components, boycott, embargo, riot, lockout, labor dispute,
civil commotion.

 

12.2                           Notice of Force Majeure Event.  Neither party shall be responsible for any
failure to perform due to a Force Majeure Event, provided that such party gives
notice to the other party of the Force Majeure Event as soon as reasonably
practicable, but not later than [***] after the date on which such party knew
or should reasonably have known of the commencement of the Force Majeure Event,
specifying the nature and particulars thereof and the expected duration
thereof; provided, however, that the failure of a party to give notice of a
Force Majeure Event shall not prevent such party from relying on this Section except
to the extent that the other party has been prejudiced thereby

 

12.3                           Termination of Force Majeure Event.   The party claiming a Force Majeure Event shall
use reasonable efforts to mitigate the effect of any such Force Majeure Event
and to cooperate to develop and implement a plan of remedial and reasonable
alternative measure to remove the Force Majeure Event; provided, however, that
neither party shall be required under this provision to settle any strike or
other labor dispute on terms it considers to be unfavorable to it.  Upon the cessation of the Force Majeure
Event, the party affected thereby shall immediately notify the other party of
such fact, and use its best efforts to resume normal performance of its obligations
under the Agreement as soon as possible.

 

12.4                           Limitations.  Notwithstanding that a Force Majeure Event
otherwise exists, the provisions of this Article shall not excuse (i) any
obligation of either party, including the obligation to pay money in a timely
manner for Product actually delivered other liabilities actually incurred, that
arose before the occurrence of the Force Majeure Event causing the suspension
of performance; or (ii) any late delivery of Product, equipment, materials,
supplies, tools, or other items caused solely by negligent acts or omissions on
the part of such party.

 

12.5                           Termination for Convenience.  In the event a party fails to perform any of
its obligations because of a Force Majeure Event for a cumulative period of
[***] or more from the date of such party’s notification to the other party,
then the other party at its option may extend the corresponding delivery period
for the length of the delay, or terminate this Agreement for convenience
immediately upon delivery of written notice.

 

13.                                  CONFIDENTIALITY AND NON-SOLICITATION OF EMPLOYEES

 

13.1                           Definitions.  For the purpose of this Agreement,

 

(a)                                  “Confidential
Information” means information (in any form or media) regarding a party’s
customers, prospective customers (including lists of customers and prospective
customers), methods of operation, engineering methods and processes (include
any information which may be obtained by a party by reverse engineering,
decompiling or examining any software or hardware provided by the other party
under this Agreement), programs and databases, patents and designs, billing
rates, billing procedures, vendors and suppliers, business methods, finances,
management, or any other business information relating to such party (whether
constituting a trade secret or proprietary or otherwise) which has value to
such party and is treated by such party as being confidential; provided,
however, that Confidential Information does not include information that
(i) is known to the other party prior to receipt from the disclosing party
hereunder, which knowledge shall be evidenced by written records, (ii) is
independently developed as evidenced by written records, (iii) is or becomes in
the public domain through no breach of this Agreement, or (iv) is received from
a third party without breach of any obligation of confidentiality.

 

15

 

Confidential Portions of this documents have been
redacted and filed separately with the Commission.

[***] symbolizes language omitted pursuant to an
application for Confidential Treatment.

 

(b)                                 “Person”
shall mean and include any individual, partnership, association, corporation,
trust, unincorporated organization, limited liability company or any other
business entity or enterprise.

 

(c)                                  “Representative”
shall mean a party’s employees, agents, or representatives, including, without
limitation, directors, financial advisors, lawyers, accountants, experts, and
consultants.

 

13.2                           Nondisclosure Covenants.

 

(a)                                  In
connection with this Agreement, each party (the “Disclosing Party”) may furnish
to the other party (the “Receiving Party”) or its Representatives certain
Confidential Information.  For a period
of [***] of Confidential Information by either party,  the Receiving Party (a) shall maintain as
confidential all Confidential Information heretofore or hereafter disclosed to
it by the Disclosing Party, (b) shall not, directly or indirectly, disclose any
such Confidential Information to any Person other than those Representatives of
the Receiving Party whose duties justify the need to know such Confidential
Information and then only after each Representative has agreed to be bound by
this Confidentiality Agreement and clearly understands his or her obligation to
protect the confidentiality of such Confidential Information and to restrict
the use of such Confidential Information and (c) shall treat such Confidential
Information with the same degree of care as it treats its own Confidential
Information (but in no case with less than a reasonable degree of care).

 

(b)                                 The
disclosure of any Confidential Information is solely for the purpose of
enabling each party to perform under this Agreement, and the Receiving Party
shall not use any Confidential Information disclosed by the Disclosing Party
for any other purpose.

 

(c)                                  Except as otherwise set forth in this
Agreement, all Confidential Information supplied by the Disclosing Party shall
remain the property of the Disclosing Party, and will be promptly returned by
the Receiving Party upon receipt of written request therefor.

 

(d)                                 If
the Receiving Party or its Representative is requested or becomes legally
compelled to disclose any of the Confidential Information, it will provide the
Disclosing Party with prompt written notice. 
If a protective order or other remedy is not obtained, then only that
part of the Confidential Information that is legally required to be furnished
will be furnished, and reasonable efforts will be made to obtain reliable
assurances of confidentiality.

 

13.3                           Non-Solicitation of Employees.  [***], without the consent of the other
party, neither party shall directly solicit or recruit (or attempt to solicit
or recruit) any of the other party’s employees; provided, however, that this
shall not prohibit a party from (a) advertising for open positions provided
that such advertisements are not targeted solely at the employees of the other
party; (b) or employing any individual who initiates contact with such party on
his or her own initiative, whether in response to an advertisement or otherwise.

 

13.4                           Injunctive Relief Authorized.  Any material breach of this Section by a
party or its Representatives may cause irreparable injury and the non-breaching
party may be entitled to equitable relief, including injunctive relief and
specific performance, in the event of a breach. 
The above will not be construed to limit the remedies available to a
party.  In addition, the prevailing party
will be entitled to be reimbursed for all of its reasonable attorneys’ fees and
expenses at all levels of proceedings and for investigations, from the
non-prevailing party.

 

13.5                           No Publicity.  Each party agrees not
to publicize or disclose the existence or terms of this Agreement to any third
party without the prior consent of the other party (which shall not be unreasonably
withheld) except as may be necessary by CUSTOMER to CUSTOMER’s vendors,
customers, or Representatives or as may be required by law (in which case, the
party seeking to disclose the information shall give reasonable notice to the
other party of its intent to make such a disclosure) or to stock analysts,
shareholders, employees and  investors
and governmental agencies, in which case the party making the disclosure shall
provide a copy of the proposed disclosure to the other party and shall give the
other party an opportunity to comment on the proposed disclosure.  In the event the parties do

 

16

 

Confidential Portions of this documents have been
redacted and filed separately with the Commission.

[***] symbolizes language omitted pursuant to an
application for Confidential Treatment.

 

not agree to the form of the
disclosure, neither party will issue the disclosure unless the disclosure is
required by law.

 

14.                                 INSURANCE.

 

SANMINA-SCI agrees, at its own cost and expense,  to maintain during the term of this
Agreement  (a) workers’ compensation
insurance as prescribed by the law of the state in which SANMINA-SCI’s services
are performed; (b) employer’s liability insurance with limits of at least [***]
per occurrence; (c) commercial 
automobile liability insurance if the use of motor vehicles is required,
with limits of at least [***] for bodily injury and property damage for each
occurrence; (d) commercial general liability insurance, including blanket contractual
liability and broad form property damage, with limits of at least [***]
combined single limit for personal injury and property damage for each
occurrence; and (e) commercial general liability insurance endorsed to include
products liability and completed operations coverage in the amount of [***] for
each occurrence.  The policy of such
insurance must be reasonably acceptable to CUSTOMER and will name CUSTOMER as
an additional insured thereunder.  Such
policy coverage shall include transit insurance covering full replacement value
for the Products and “All Risks Property” (with standard policy exclusions)
covering full replacement value of any CUSTOMER Furnished Items.  SANMINA-SCI shall furnish to CUSTOMER
certificates or evidence of the foregoing insurance indicating the amount and
nature of such coverage and the expiration date of each policy.  Each party agrees that it and its insurer(s)
shall have no claim, right of action or right of subrogation against the other
party and the other party’s affiliates, directors, officers and employees based
on any loss or liability insured against under the insurance required by this
Agreement.

 

15.                                  MISCELLANEOUS

 

15.1                           Integration Clause. This Agreement
(including the Orders and order acknowledgements, but exclusive of the
preprinted terms and conditions stated therein or any terms and conditions
inconsistent with this Agreement, and the Exhibits and Schedules to this
Agreement) constitutes the entire agreement of the parties, superseding all
previous Agreements covering the subject matter.  This Agreement shall not be changed or
modified except by written Agreement, specifically amending, modifying and
changing this Agreement, signed by an authorized officer of SANMINA-SCI and of
CUSTOMER.

 

15.2                           Order of Precedence.  All quotations, Orders, acknowledgments and
invoices issued pursuant to this Agreement are issued for convenience of the
Parties only and shall be subject to the provisions of this Agreement and the
Exhibits hereto.  When interpreting this
Agreement, precedence shall be given to the respective parts in the following
descending order: (a) this Agreement; (b) Schedules and Exhibits to this
Agreement; and (c) if Orders are used to release product, those portions of the
Order that are not pre-printed and which are accepted by SANMINA-SCI. The
Parties acknowledge that (y) the preprinted provisions on the reverse side of
any such quotation, Order, acknowledgment or invoice and (z) all terms other
than the specific terms set forth in Section 4(a)(i)-(iv) shall be deemed
deleted and of no effect whatsoever.  No
modification to this Agreement, the Exhibits or any Order shall be valid
without the prior written consent of the Representatives (as defined in Section 15.6)
of SANMINA-SCI and CUSTOMER.

 

15.3                           Assignment. Neither this Agreement
nor any rights or obligations hereunder shall be transferred or assigned by
either party without the written consent of the other party, which consent
shall not be unreasonably withheld or delayed. 
Notwithstanding the foregoing, without the necessity of obtaining
consent but upon written notice to the other party, this Agreement may be
assigned by either party to (a) any corporation controlling, controlled by or
under common control with its parent corporation or (b) to any successor to
substantially all the business of the party provided that either case that such
successor is not a competitor of the other party.

 

17

 

Confidential Portions of this documents have been
redacted and filed separately with the Commission.

[***] symbolizes language omitted pursuant to an
application for Confidential Treatment.

 

15.4                           Notices.  Wherever one party is required or permitted
or required to give written notice to the other under this Agreement, such
notice will be from an authorized officer and given by hand, by certified U.S.
mail, return receipt requested, by overnight courier, or by fax and addressed
as follows:

 

	
  If to Buyer:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  OVERLAND
  STORAGE, INC.

  	
   

  	
   

  
	
  4820 Overland Ave.

  	
   

  	
   

  
	
  San Diego, CA  92123-1599

  	
   

  	
   

  
	
  Att’n:  Chief Financial Officer

  	
   

  	
   

  
	
  Phone:  [***]

  	
   

  	
   

  
	
  Fax: [***]

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  If to Seller:

  	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
  SANMINA-SCI Corporation

  	
   

  	
  SANMINA-SCI Corporation

  
	
  2700 N. First
  Street

  	
   

  	
  2700 N. First
  Street

  
	
  San Jose, California 
  95134

  	
   

  	
  San Jose, California 
  95134

  
	
  Att’n:  President

  	
   

  	
  Att’n:  Vice President & Corporate Counsel

  
	
  Phone:  [***]

  	
  Phone:  [***]

  
	
  Fax: [***]

  	
  Fax: [***]

  

 

All such notices shall be
effective upon receipt.  Either party may
designate a different notice address from time to time upon giving ten (10)
days’ prior written notice thereof to the other party.

 

15.5                           Disputes/Choice of Law.  The parties shall attempt to resolve any
disputes between them arising out of this Agreement through good faith
negotiations. In the event the parties cannot resolve a dispute, the parties
acknowledge and agree that the state courts of California and the federal
courts located in the State of California shall have exclusive jurisdiction and
venue to adjudicate any and all disputes arising out of or in connection with
this Agreement. The parties consent to the exercise by such courts of personal
jurisdiction over them and each party waives any objection it might otherwise
have to venue, personal jurisdiction, inconvenience of forum, and any similar
or related doctrine.  This Agreement
shall be construed in accordance with the substantive laws of the State of
California (excluding its conflicts of laws principles).

 

15.6                           Contract Liaison Representative.             CUSTOMER and
SANMINA-SCI shall each assign an individual to serve as the contract liaison
representative (the “Representative”) for the implementation of this
Agreement.  All communications between
the Parties with respect to the implementation of this Agreement, or a copy
thereof, should be directed to such persons. 
Either party may change such Representative, from time to time, but
shall notify the other in the event of such change.  The designated Representative of CUSTOMER and
SANMINA-SCI shall meet quarterly to consider all elements of performance under
this Agreement, including, without limitation, production, deliveries, product
quality, supporting equipment and data, proposed changes, product plans,
manufacturing loading, and future schedules.

 

	
  CUSTOMER Representative:

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  
	
  SANMINA-SCI Representative:

  	
   

  	
  [***]

  

 

15.7                           Independent Contractor.             It is understood and
agreed that in performing the services for CUSTOMER hereunder, SANMINA-SCI
shall act in the capacity of an independent contractor and not as an employee
or agent of CUSTOMER.  SANMINA-SCI agrees
that it shall not represent itself

 

18

 

Confidential Portions of this documents have been
redacted and filed separately with the Commission.

[***] symbolizes language omitted pursuant to an
application for Confidential Treatment.

 

as the agent or legal
representative of CUSTOMER for any purpose whatsoever.  SANMINA-SCI shall be solely responsible for
the remuneration of and the payment of any and all taxes with respect to its
employees and subcontractors and any claims with respect thereto and shall be
solely responsible for the withholding and payment of all U.S. and/or foreign
federal, state, and local income taxes as well as all FICA and FUTA taxes
applicable to it, its employees, and its subcontractors.  SANMINA-SCI acknowledges that as an
independent contractor, neither it nor any of its employees or subcontractors
shall be eligible for any CUSTOMER employee benefits, including, but not
limited to, vacation, medical, dental, or pension benefits.

 

15.8                           Trademark.                               SANMINA-SCI
acknowledges that CUSTOMER is the sole owner of the trademarks to be used on
and with the Products and Product packaging (the “Trademarks”).  SANMINA-SCI agrees that it will restrict the
use of the Trademarks to only such Products as are manufactured by SANMINA-SCI
for sale to CUSTOMER under and pursuant to and in full compliance with all of
the terms of this Agreement.  The size,
design, position, and appearance of the Trademarks to be placed on the Products
shall be as described by CUSTOMER.

 

15.9                           Governmental Regulations.                                            SANMINA-SCI
shall, at SANMINA-SCI’s sole cost and expense, promptly comply with all laws
and ordinances and notices, orders, decrees, rules, regulations and
requirements of all federal, state and municipal governments and appropriate
departments, commissions, boards and officers thereof of the country in which
the Products are manufactured (collectively, “Governmental Regulations”)
relating to SANMINA-SCI’S performance of any SANMINA-SCI’S services required
under this Agreement including but not limited to occupational safety,
environment, transportation, importation and exportation.  All applicable certificates and associated
data shall be maintained on site by SANMINA-SCI.  SANMINA-SCI shall defend, indemnify and hold
CUSTOMER harmless from and against any and all Claims by reason of a
SANMINA-SCI violations of Governmental Regulations or arising from or
incidental to its failure to obtain and maintain any permits, approvals and
licenses it is obligated to obtain or maintain under this Agreement.

 

IN WITNESS  WHEREOF, the
parties hereto have caused this Agreement to be executed effective as of the
date on page one, by their officers, duly authorized.

 

	
  SANMINA-SCI CORPORATION

  	
   

  	
  OVERLAND STORAGE, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Donald W. Johnson

  	
   

  	
   

  	
  By:

  	
  /s/
  Vernon A. LoForti

  	
   

  
	
   

  	
  Signature

  	
   

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
   

  	
  Donald W. Johnson

  	
   

  	
   

  	
   

  	
  Vernon A. LoForti

  	
   

  
	
   

  	
  Typed Name

  	
   

  	
   

  	
   

  	
  Typed Name

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Executive Vice President

  	
   

  	
   

  	
   

  	
  Vice President & CFO

  	
   

  
	
   

  	
  Title

  	
   

  	
   

  	
   

  	
  Title

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  November 24, 2004

  	
   

  	
   

  	
   

  	
  November 23, 2004

  	
   

  
	
   

  	
  Date

  	
   

  	
   

  	
   

  	
  Date

  
												

 

19

 

Confidential Portions of this documents have been
redacted and filed separately with the Commission.

[***] symbolizes language omitted pursuant to an
application for Confidential Treatment.

 

EXHIBIT A

 

PRICING MODEL; PRODUCTS AND PRICING

 

A.                                   Pricing
Formula:

 

[***]

 

20

 

Confidential Portions of this documents have been
redacted and filed separately with the Commission.

[***] symbolizes language omitted pursuant to an
application for Confidential Treatment.

 

EXHIBIT
A-1

 

Sample Pricing Calculation

 

 

[***]

 

21

 

Confidential Portions of this documents have been
redacted and filed separately with the Commission.

[***] symbolizes language omitted pursuant to an
application for Confidential Treatment.

 

EXHIBIT A-2

 

PRODUCTS

 

Products shall include models or spare parts set forth
below.  New Products may be added to the
Agreement from time to time as agreed by the Parties.  Such new Products and the applicable
specifications and the prices for such new Products shall be described in
Addendums to this Exhibit A. The terms and conditions of this Agreement shall
apply to such new Products with pricing, specification, and other terms
specific to the new Products described in the Addendums.

 

 

	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

[***]

 

22

 

Confidential Portions of this documents have been
redacted and filed separately with the Commission.

[***] symbolizes language omitted pursuant to an
application for Confidential Treatment.

 

EXHIBIT B

LONG LEAD-TIME COMPONENTS

 

TO BE PROVIDED BY SANMINA-SCI

 

23

 

Confidential Portions of this documents have been
redacted and filed separately with the Commission.

[***] symbolizes language omitted pursuant to
an application for Confidential Treatment.

 

EXHIBIT C

 

SPECIFICATIONS

 

TO BE PROVIDED BY OVERLAND

 

 

[***]

 

 

	
  ATTACHMENT #
        

  	
   

  	
  PRODUCT:

  

 

24

 

Confidential Portions of this documents have been
redacted and filed separately with the Commission.

[***] symbolizes language omitted pursuant to
an application for Confidential Treatment.

 

EXHIBIT D

 

CUSTOMER FURNISHED ITEMS

 

TO BE PREPARED BY OVERLAND

 

 

25

 

Confidential Portions of this documents have been
redacted and filed separately with the Commission.

[***] symbolizes language omitted pursuant to
an application for Confidential Treatment.

 

EXHIBIT E

 

QUALITY
REQUIREMENTS

 

This exhibit defines and
describes the specific quality requirements for the manufacture of CUSTOMER
product by SANMINA-SCI.

 

Supply Chain Management

 

SANMINA-SCI will maintain
a documented procedure, approved by CUSTOMER, the describing the controls for
the suppliers of material, parts, assemblies, or services.  SANMINA-SCI will maintain an Approved Vendor
List (AVL) of all such suppliers, and the list will be open for review at any
time by CUSTOMER.

 

When a new supplier is
engaged, “First Article Reports” for the parts being purchased will be
provided to CUSTOMER for review. 
CUSTOMER reserves the right to inspect any new parts.

 

General Manufacturing
Requirements

 

All product built by
SANMINA-SCI for CUSTOMER, Inc. will be manufactured to the specifications and
procedures provided in this Agreement.

 

Workmanship standards are
indicated on the piece part drawing or the method sheet.  In the absence of a standard, the
SANMINA-SCI  workmanship procedure will
apply.

 

Firmware Control

 

SANMINA-SCI will control
the version of firmware shipped with each unit. 
The firmware version will be traceable to the serial number of each
unit.

 

SANMINA-SCI will control
all versions of the firmware to protect it from damage or corruption.  Back-up copies will be maintained in case
problems occur with the original.

 

Product Traceability

 

SANMINA-SCI will maintain
records of regulatory controlled or CUSTOMER designated parts or
assemblies.  These shall be controlled by
serial number or date code.  The records
will be available to CUSTOMER upon request.

 

Closed Loop Corrective
Action

 

SANMINA-SCI will maintain
a closed loop corrective action system that is applied to supplier, customer,
and internal issues.  The system will
required root cause identification and corrective action that successfully
addresses the root cause.

 

26

 

Confidential Portions of this documents have been
redacted and filed separately with the Commission.

[***] symbolizes language omitted pursuant to an
application for Confidential Treatment.

 

Issues directly affecting
CUSTOMER parts or product will be submitted immediately upon completion to
CUSTOMER for review.

 

Out –Of-Box Audit (OBA)

 

SANMINA-SCI will un-box
and audit a minimum of 10% of all Products shipped to specified criteria.  The inspection criteria will be approved by
CUSTOMER.  Any OBA failures will require
a formal corrective action as well as a clearance of the previous and
subsequent units.  The plan for the
clearance will be approved by CUSTOMER’s quality assurance department.

 

New product will be 100%
inspected to a pre-determine number of acceptable units before the audit may
begin.

 

On-Going Reliability
Testing (ORT)

 

The ORT plan will be
modeled in accordance with MIL STD 781, Probability Ratio Sequential Test
(PRST). ORT testing is the process whereby the Product MTBF is verified on an
on-going basis.  In addition ORT is to
monitor the outgoing quality level from production, assure the process is in
manufacturing control, and minimize the 
potential for “early life or field” failures.

 

The conditions and
criteria for the continuous ORT shall be mutually defined and agreed to by
CUSTOMER and SANMINA-SCI.  Failures
causing test to enter the failure zone will be reported immediately to CUSTOMER’s
quality assurance department.  Failures
that do not cause the test to enter the failure zone will be reported within 24
hrs.  In both cases a Corrective Action
will be issued.

 

Production Testing

 

CUSTOMER’s test methods
are based on verification of all critical parameters as defined by the product
specification.  Therefore, SANMINA-SCI
will not make any changes to the content of the test protocols supplied by
CUSTOMER without prior written permission from CUSTOMER.

 

27

 

Confidential Portions of this documents have been
redacted and filed separately with the Commission.

[***] symbolizes language omitted pursuant to
an application for Confidential Treatment.

 

EXHIBIT F

 

NDF HANDLING CHARGES

 

TO BE PREPARED BY SANMINA-SCI

 

28

 

Confidential Portions of this documents have been
redacted and filed separately with the Commission.

[***] symbolizes language omitted pursuant to
an application for Confidential Treatment.

 

EXHIBIT G

 

CONSIGNED COMPONENTS

 

TO BE PREPARED BY OVERLAND

 

29Exhibit 10.1

 

	
  Executive Officer

  	
   

  	
  2004
  Bonus

  	
   

  	
  2005
  Base Salary

  	
   

  	
  2005
  Target Bonus

  (% of Base Salary)(1)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Henry E. Blair

  President and Chief Executive Officer

  	
   

  	
  $

  	
  102,300

  	
   

  	
  $

  	
  500,000

  	
   

  	
  40%

  	
   

  
	
  Stephen S. Galliker

  Executive Vice President, Finance and

  Administration, and Chief Financial

  Officer

  	
   

  	
  $

  	
  74,597

  	
   

  	
  $

  	
  280,081

  	
   

  	
  35%

  	
   

  
	
  Ivana Magovcevic,
  Ph.D., J.D.

  Senior Vice President Legal Affairs,

  Chief Patent Counsel and Asst. Secretary

  	
   

  	
  $

  	
  59,125

  	
   

  	
  $

  	
  281,875

  	
   

  	
  30%

  	
   

  
	
  Clive R. Wood, Ph.D.

  Senior Vice President Discovery Research

  and Chief Science Officer

  	
   

  	
  $

  	
  56,875

  	
   

  	
  $

  	
  275,000

  	
   

  	
  30%

  	
   

  
	
  Lynn G. Baird, Ph.D.

  Senior Vice President, Development

  	
   

  	
  $

  	
  51,638

  	
   

  	
  $

  	
  261,375

  	
   

  	
  28%

  	
   

  

 

(1)     The target bonus opportunity can be
exceeded by up to 20% of the target for exceptional performance. For example,
an executive with a target bonus of 30% who has outstanding performance can
receive a bonus of as much as 36% of base salary.

 

1

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