Master Product Purchasing, Testing and Order Fulfillment Agreement between Netgear, Inc. and Celestica Asia, Inc.
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Netgear, Inc. and Celestica Asia, Inc. have entered into a one-year agreement, effective November 23, 1999, for Celestica to provide full turnkey production and fulfillment services for Netgear’s products. Celestica will handle planning, purchasing, inventory management, product testing, logistics, and returns processing at multiple global locations. The agreement outlines each party’s responsibilities, including quality control and supplier management, and allows for site-specific agreements as needed. The contract may be renewed after the initial term.
EX-10.13 3 f65217a1ex10-13.txt EXHIBIT 10.13 1 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. EXHIBIT 10.13 MASTER PRODUCT PURCHASING, TESTING AND ORDER FULFILLMENT AGREEMENT Effective Date: November 23, 1999 Term: 1 year (with possible renewal periods) This Master Product Purchasing, Testing and Order Fulfillment Agreement ("Agreement") is entered into between Netgear, Inc., a Delaware corporation ("Netgear"), and Celestica Asia, Inc., a Delaware corporation, on behalf of itself and its subsidiaries and Affiliates ("Celestica") and is made as of the Effective Date for the Term. Subject to the terms and conditions set forth in this Agreement, the parties have caused this Agreement to be executed by their duly authorized representatives on the date(s) shown below. The parties may execute this Agreement in two (2) or more counterparts (no one of which need contain the signatures of all parties), each of which will be an original and all of which together will constitute one and the same instrument. NETGEAR, INC. CELESTICA ASIA, INC. Signature /s/ PATRICK LO Signature /s/ ROBERT BEHLMAN -------------------------- -------------------------- Printed PATRICK LO Printed ROBERT BEHLMAN -------------------------- -------------------------- Title V.P. Title PRESIDENT, CELESTICA ASIA -------------------------- -------------------------- Date 11-23-99 Date 11-16-99 -------------------------- -------------------------- 4401 Great America Parkway 2222 Qume Drive P.O. Box 51815 San Jose, Ca. 95131 Santa Clara, CA 95052 2 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. In consideration of their mutual representations, promises and obligations, Netgear and Celestica agree as follows: 1. SCOPE OF THE AGREEMENT This Agreement sets forth the terms and conditions pursuant to which Celestica shall provide Netgear full turnkey production and fulfillment services (the "Services") as listed below in a timely, competent and cost effective manner at several different locations around the world, all as more fully described in the Statement of Work attached hereto as Exhibit 1: - planning and purchasing management - inventory management - product testing and inspection - product fulfillment and logistics - returns processing - supplier performance management - quality program and management This Agreement contains those terms that shall pertain to all of Celestica's locations. Celestica will initially conduct the majority of the Services in Kowloon, Hong Kong and San Jose, California. The parties may agree in the future if necessary to enter into subordinate agreements which contain specific terms unique to a site ("Site Agreement"), such as a list of products configured at the site, support teams, and the specific reporting requirements relevant to the site. Each such Site Agreement is hereby incorporated by reference into this Agreement. The terms of this Agreement shall take precedence over those of the Site Agreement unless specifically provided otherwise in the Site Agreement; the terms of the Site Agreement shall take precedence over the terms of any Build Plan, acknowledgment, invoice or other document. 2. DEFINITIONS The following words and expressions shall have the meanings set forth below: "Affiliate" means, with respect to a party hereto, a corporation that directly or indirectly controls, is controlled by, or is under common control with, that party. "Build Plan" means the build plan provided by Netgear to Celestica for each model of Product substantially in the form set forth as Exhibit 4 hereto, which specifies the quantity of Product to be purchased and the part number. "Celestica's Systems" means all software and systems used by Celestica in the performance of this Agreement, excluding any software or systems provided to Celestica by Netgear. "Confidential Information" means a party's proprietary, confidential or trade secret information. "Customer" means a customer purchasing Netgear Products. "Materials" shall mean any components and other materials comprising or comprised in Products. "Netgear Inventory Location" means the physical location (identified by Celestica) where Products will be staged prior to shipment to Customers. "Netgear Proprietary Information" means any information, technology, processes, or other proprietary property, including copyrights, trade secrets, know-how, mask work rights, moral rights patents and/or patent applications in any form or medium, developed or acquired by Netgear or its licensors from the Production Effort. 3 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. "Order" shall mean any order for Products placed by a Customer in accordance with the temps of this Agreement. "Prices" shall mean the prices for Products and/or Services and/or non-recurring expenditure (including without limitation, tooling and fixtures and other agreed items) agreed between the parties from time to time. "Products" shall mean the items listed in Exhibit 2 and described in the relevant Specification. "Specification" means Product technical information and related services and shall at minimum consist of the bill of materials, test procedures, quality goals, assembly documentation, circuit board art work, Gerber files, assembly and fabrication drawings, schematics, other design documents, business plan, and Services, as specified. The Specification for each Product shall be provided by Netgear and shall be timely reviewed by Celestica and agreed to by both parties. 3. PRODUCTION EFFORT, MATERIALS PROCUREMENT, INSPECTION AND TEST OF THE PRODUCTS, AND PRODUCT CHANGES 3.1. PRODUCTION EFFORT Celestica shall be responsible for the procurement, test and inspection of the Products (collectively, the "Production Effort") and shall ensure that each Product conforms to the Specification applicable to such Product at the time of manufacture. Celestica shall perform the Production Effort in accordance with this Agreement. 3.2. PRODUCT PURCHASING Celestica is solely responsible for performing purchasing services which shall include: placing and expediting purchase orders with OEMs and other suppliers, accepting shipments, managing quality issues, achieving cycle time reductions, measuring and communicating supplier performance, canceling and rescheduling product shipments in support of schedule changes, and other supplier management services that the Parties agree are relevant and appropriate. Netgear hereby authorizes Celestica to purchase Products and Netgear specified integrated circuits (I.C.'s) as necessary to fulfill Netgear forecasts. Any OEM or other source of supply shall be jointly qualified and managed by Celestica, subject to Netgear's prior written approval and consistent with the quality requirements set forth in the relevant Product Specification. Netgear's approval shall normally be provided within fourteen (14) days and, in any event, shall not be unreasonably withheld or delayed. The Parties acknowledge that in some instances only the component of a specified supplier may be used in a Product. Netgear or a designated third parry may perform inspections ("Source Inspection") of business systems and processes of a supplier or subcontractor facility whenever Netgear decides it is necessary. The Source Inspection shall be conducted during normal business hours and with prior notice to Celestica and may require participation by Celestica. 3.3. SCOPE OF TEST AND INSPECTION Celestica shall manage the execution of the test and inspection process for each Product, which includes testing Products, test capacity planning, and performing preventative maintenance on the test equipment. Celestica warrants that it will perform each and every test and inspection in conformance to the process and for the quantities identified in the relevant Specification. All Products delivered to Netgear and/or its Customers shall have passed all applicable tests and inspection in such Specification. 4 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. At the commencement of production of any Product, Netgear will qualify each piece of test equipment and each test process for such Product. No such equipment or process shall be changed or modified without the prior written consent of Netgear. Netgear shall provide certain Functional Test ("FT") equipment and test set ups, including test scripts, loop back connectors, and cables. Celestica will develop inspection capacity plans with every new Forecast (as defined below). Celestica shall consider upside volume percentage, preventative maintenance time, new product additions and holding of appropriate spare parts as part of its inspection capacity plan. 3.4. TEST EQUIPMENT MAINTENANCE COSTS Celestica agrees to be responsible for and to pay for all costs of maintaining all inspection equipment and related materials and shall perform preventative maintenance, which shall include, without limitation, repair and replacement of worn loopback connectors, cables, and backplanes or any other failing components due to normal wear. Notwithstanding the above, Netgear shall pay to upgrade or replace test equipment or fixtures which are rendered outdated because of Product design changes or changes in test requirements. 3.5. TEST RECORDS FOR PRODUCTS Celestica shall maintain adequate authenticated inspection and test documents for Products and shall make such documents available to Netgear upon request for a period of one year after the delivery of the last Product purchased, unless otherwise directed by Netgear. 3.6. CHANGES TO A PRODUCT Either party may propose in writing a change to the design, manufacture, or test procedure of any Product. The other party shall respond in writing within five business days to any such proposal. Where necessary and appropriate, Netgear shall initiate either an engineering change order ("ECO") or a temporary change to the Specification ("Deviation"). Celestica shall develop a list of the process steps, an estimate of the time necessary to complete the change, the hourly rate to complete the work, any excess or obsolete Materials (list and cost), and the increase or decrease, if any, in the price of the Products affected. Upon receipt of Celestica's response, Netgear shall determine if it wants to go forward with the change. If Netgear does want the change, the parties shall negotiate any open issues and set the implementation date. If either Netgear or Celestica identifies a change that must be implemented on a Product for reasons of safety ("Safety Change"), the parties shall cooperate so as to effect such Safety Change as soon as possible after discovery. Once such a Safety Change is discovered, no affected Products shall be manufactured or shipped until such Safety Change has been implemented. The parties shall cooperate in the implementation of such Safety Change on any Products shipped prior to discovery of the hazard. If a Safety Change is required due to Celestica's manufacturing process, then Celestica shall pay all costs associated with such change, otherwise, Netgear shall pay the costs associated with the Safety Change. 4. BUSINESS MANAGEMENT PROCEDURES 4.1. METHODOLOGY The parties intend to plan for and make corporate-wide business decisions as described in this Section 4, "Business Management Procedures". To manage the technical and business changes, Netgear and Celestica shall: 5 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. (a) Assign, and in most cases dedicate, business management teams whose goal is to provide consistent and efficient responses to program requirements. (b) Conduct quarterly business reviews for each business management team. (c) Create a process to communicate about and resolve issues promptly and to drive continuous improvement of the day-to-day operation. (d) Comply with reporting requirements as outlined in this Agreement. (e) Meet annually at the executive level to exchange business strategies with the specific purpose of working to ensure that each party's business goals can be met. 4.2. PRODUCT QUALITY GOAL Celestica agrees to adopt the quality assurance procedures and perform the quality control tests (collectively the "QA Procedures") described in Exhibit 1 ("Statement of Work"). The QA Procedures may be amended by mutual agreement of the parties from time to time, to ensure that all Products conform to the Specifications. 4.3. QUARTERLY REVIEWS Celestica and Netgear shall, in conjunction with each other, conduct quarterly operations reviews of the business processes and procedures of both Celestica and Netgear with the intent to improve overall supply chain performance. The review shall include, at a minimum, performance measurements of quality, delivery, customer satisfaction, costs, capacity, innovations and Price reductions for Products. Line capacity, test capacity, and staff allocation, and the plan to meet future requirements in these areas, shall be reviewed. The quarterly reviews shall be held in person at a Netgear's facility and Celestica agrees to comply at its own cost. 4.4. TARGET COST REDUCTION Celestica agrees to participate in periodic cost reviews with the intent to reduce the costs of the Services provided hereunder to an amount at or below the cost identified by Netgear. Such reviews shall be held in person at a Netgear's facility and Celestica agrees to comply at its own cost. 4.5. LOCATION OF CELESTICA'S OPERATIONS Celestica shall initially perform the Services for all Products from its facility in Kowloon, Hong Kong. Celestica shall transfer Products for North and South American Order Fulfillment to its San Jose, California facility. Products for all other Orders will be fulfilled from Celestica's Kowloon, Hong Kong facility or such other facilities as the parties may agree upon from time to time. Any deviation from this policy must be authorized by Netgear in writing. 4.6. RESOURCES AND PRODUCTION SUPPORT Throughout the life cycle of each Product, Celestica shall provide production capacity, yield information, corporate resources, necessary administrative processes, and adequate, qualified, timely staffing for each Product's introduction and the Production Effort in accordance with the terms of this Agreement. Celestica shall provide separate functional resources in support of new Products and mature Products. 6 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. 5. BUILD PLANS The parties acknowledge that they will continue to develop new procedures to increase schedule flexibility, reduce lead times, and improve forecasting. The parties shall incorporate such terms as an amendment to this Agreement or to the Site Agreements, if any, upon completion. Until such time, the parties shall manage the delivery of Products under the provisions of this Article 5. 5.1. THE BUILD PLAN Netgear shall issue to Celestica on a monthly basis a Build Plan for each model of Product covering a minimum of two months in advance of the desired ship date. Since current OEM supplier lead times are 60 days, each Build Plan issued by Netgear will be authorization for Celestica to issue purchase orders to OEM suppliers to cover the 60 day manufacturing lead time for products. The quantity of Products and the scheduled delivery dates for the Products purchased by Celestica will satisfy Netgear's projected requirements for the products as contained in the Build Plan. The Build Plan may be issued in writing, by mail or facsimile, or by electronic means as the parties may from time to time agree. Netgear shall have no obligation to purchase any Products from Celestica if the products were purchased in excess of the 60 day manufacturing lead time except as specified on such Build Plans placed in accordance with the terms of this Agreement. Celestica will notify Netgear of acceptance of a Build Plan within two business days of receipt of the Build Plan. Each Build Plan issued shall be governed by the terms of this Agreement as modified by the applicable Site Agreement (if any) to the extent of any conflict between the terms. The parties hereby expressly object to any additional or different terms contained in any Build Plan or acknowledgment other than as authorized by this Agreement and agree that such additional or different terms shall be of no effect. Celestica agrees to accept a Build Plan for each model of Product and to sustain the ability to procure and inspect Products and fulfill Orders for each model of Product for a minimum of one year. After one year, if Celestica desires to not maintain its ability to perform these services for a particular model of Product, Celestica will provide Netgear with written notification 180 days prior to the date Build Plans will no longer be accepted. Upon Netgear's request, Celestica shall ship to Netgear all documentation about the procurement, inspection and test of the Product. Documentation shall include any bills of material generated by Celestica, process instructions, test procedures and all other relevant documents. 5.2. FORECASTS OF PRODUCT REQUIREMENTS Netgear shall deliver to Celestica with its initial Build Plan for any model of a Product, a non-binding, rolling, forecast covering a period of four months beyond the Build Plan ("Forecast") which Celestica will use to communicate forecasted requirements to OEMs and product suppliers. Each Forecast shall be a good faith estimate of the anticipated requirements for the Products) listed for the periods indicated. 5.3. RESCHEDULE OR CHANGES TO BUILD PLAN Netgear may make changes to the scheduled shipment of products in the Build Plan. Mix changes are acceptable but must be mutually agreed upon within 30 calendar days. If such a change represents an acceleration or increase, Celestica shall make all reasonable commercial efforts to meet the request, subject to material and capacity availability. Based on the requested change, Celestica shall provide an "excess and on order" inventory report on the third day after change to Build Plan. If Netgear reduces or reschedules a requirement in the Build Plan prior to the scheduled delivery date, Celestica shall take all commercially reasonable steps to anticipate and identify all potential liability of Netgear for Materials or Products on order and minimize charges to Netgear which result from the change to the Build Plan. Provided that, and to the extent that Celestica complies with its obligations in the preceding sentence, and provided further that the aggregate out-of-pocket costs incurred by Celestica do not exceed the total purchase price of the Products impacted by the change, Netgear agrees to pay the out-of-pocket costs incurred by Celestica for cancellation of Materials or Products, and for proprietary materials which could not be returned or used in other 7 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. products and at other sites of Celestica and for any Materials on order which could not be canceled. Notwithstanding the foregoing, Celestica agrees that Netgear may reduce or reschedule any product forecast beyond the Build Plan without cost or liability to Netgear. 5.4. EXCESS INVENTORY CARRYING COSTS If Netgear cancels or reschedules the Build Plan and as a result Celestica has excess material inventory ("Excess Inventory") that is not fully consumed [*] Netgear agrees to either purchase the Excess Inventory, [*] calculated in U.S. dollars at the annual rate of the United States prime lending rate plus [*]%. Excess Inventory shall be calculated as the result of [*]. Netgear is obligated to purchase inventory [*]. 6. PRICES 6.1 PRICES FOR PRODUCTS The price for each Product shall be as set forth on the price list attached hereto as Exhibit 3 (the "Price List"). Celestica and Netgear agree that the price generally includes all Materials cost and Celestica's service fee. Celestica's service fee generally includes all overheads, allocations and two months inventory carrying costs with the exception of supplier inbound freight, customer outbound freight (Japanese customers), Celestica interplant freight, and duties. Celestica agrees to provide a breakdown of actual cost for each Product in final form on or before Monday of week ten in each quarter to meet Netgear's standards setting calendar requirements. 6.2 PRODUCT PRICE CHANGES The prices of a Product may change over the term of this Agreement but only by written agreement of the parties. If the parties agree to change the price of a Product, the new price and the effective date shall be set forth in the new or amended Price List within five days of the agreement to change. In its sole discretion, Netgear may buy down Celestica's existing inventory and work in process ("WIP") and any open Orders by issuing a purchase order equal to the difference between the existing standard price and the new lower price. Product prices are to be reviewed on a quarterly basis by both parties. Differences between the price paid by Netgear and the price paid by Celestica to the OEM suppliers will be charged to or reimbursed to Netgear on a quarterly basis. Additionally, the Celestica service fee will be reviewed and adjusted as agreed to by both parties on a quarterly basis. 6.3. CURRENCY EXCHANGE RATE All prices shall be in US$ CONFIDENTIAL INFORMATION Page 7 8 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. 6.4. COMPONENT SALES AND COMPONENT PROCUREMENT FEE. Netgear negotiates costs directly with manufacturers of semiconductor components. These component costs are frequently less than the costs for the same component if purchased by an OEM supplier from the same manufacturer. Celestica will purchase components based upon receipt of a monthly Build Plan from Netgear, which will contain quantity requirements covering the lead time of each component part. Celestica will sell these component parts to the OEM suppliers authorized by Netgear. The component parts will be sold to the OEM suppliers at a price authorized by Netgear. Any and all profit or loss on the sale of these component parts will be remitted to Netgear. Celestica's component procurement fee will be [*]% of the component cost paid by Celestica on their purchase order with the component manufacturer. Payment of the component procurement fee is made net [*] days from the date of shipment of the components to the authorized OEM supplier. Celestica will provide notification of component shipments to OEM suppliers and to Netgear on the date of shipment. 6.5. MANAGEMENT OF COMPONENT PRICE REDUCTIONS Not applicable 7. ORDER FULFILLMENT AND PAYMENT 7.1. ORDER FULFILLMENT AND RETURNS Netgear's call centers in the U.S. will handle all of Netgear's Order processing functions. Celestica will be responsible for fulfilling all Orders including the preparation of all shipping documents and coordination with a common carrier. Immediately prior to preparation of a Customer invoice, Celestica will conduct a ship transaction between the Celestica system and the Netgear system (the "SunSystem") and generate an invoice to Netgear for the same product. 7.2. PAYMENT Payment shall be made based upon a purchase order receipt transaction performed in Netgear's SunSystem to transfer products into a Netgear Inventory Location. Payment shall be made net 30 days [*] from Celestica, provided, however, that payment shall not constitute acceptance of nonconforming products. All amounts shall be calculated in US Dollars. Netgear shall invoice Celestica upon return of products to Celestica and receipt into Celestica's Systems. All amounts properly due shall be paid within 30 days [*] from Netgear. Payment shall not constitute acceptance of nonconforming products. All amounts shall be calculated in US Dollars. Netgear may, with the approval of Celestica, choose to issue a debit memo against existing accounts payable with Celestica rather than issuing an invoice for accounts receivable. 7.3. SHIPMENT SUCCESS REQUIREMENTS Netgear requires that all shipments be made on the scheduled shipment day or up to three days before the scheduled shipment day: Celestica shall make every shipment on time; however, if Celestica fails to deliver Product on time due to reasons which are within its reasonable control, Celestica shall pay to Netgear the amount of the difference between normal shipping expense and expedited shipping expense. If delays are not attributable to Celestica as set forth above, then Netgear shall pay the difference between normal shipping expense and expedited shipping expense. CONFIDENTIAL INFORMATION Page 8 9 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. 7.4. TAXES AND DUTIES Netgear will pay as a separate item on an invoice any tax lawfully imposed on the sale of the Products or on the provision of Services to Netgear or will provide Celestica with a certificate of exemption acceptable to the appropriate taxing authority. Celestica agrees to provide reasonable assistance without charge in any proceeding for the refund or abatement of any such taxes Netgear is required to pay. Without limiting the generality of the foregoing, Netgear shall have no obligation to pay taxes based upon Celestica's net income. 7.5. TITLE AND RISK OF LOSS AND SHIPMENT Title to the Products will pass to Netgear upon delivery to the Netgear Inventory Location. Prior to title passing, Celestica shall bear risk of all loss, damage or theft. Shipping instructions shall be specified in the Build Plan and Netgear will designate default shipping instructions. Celestica will provide proof of shipment upon request and will provide reasonable assistance to Celestica at no charge in any claim it may make against a carrier or insurer for misdelivery, loss or damage to Products. 8. INVENTORY MANAGEMENT Products will be received into the Netgear Inventory Location using purchase order receipts on Netgear's SunSystem. Title will pass, and Netgear will take financial ownership, and will be invoiced, only for Products received into the Netgear Inventory Location on SunSystem purchase orders. Products returned from Netgear Customers will be initially received into the Netgear Inventory Location using the Sales Order Return transaction in SunSystem. Celestica will have the responsibility to inspect, test, repackage or return Products to suppliers based upon disposition of the return. Sixty days of carrying costs associated with all Netgear Products held by Celestica are included in the standard pricing contained in Section 6.1. All financial obligations associated with product purchases or returns between Celestica and its suppliers are the sole responsibility of Celestica. 9. TERM AND TERMINATION 9.1 TERM This Agreement will commence on the Effective Date and continue for a period of one year. Unless terminated earlier pursuant to the terms of this Agreement, this Agreement will automatically renew for successive one-year periods upon expiration of the term of this Agreement. 9.2 TERMINATION A party shall be in default under this Agreement if it: (a) ceases conducting business in the normal course, makes a general assignment for the benefit of creditors, suffers or permits the appointment of a receiver for its business or assets, or becomes subject to any proceeding under any statute of any governing authority relating to insolvency or the protection of rights of creditors; or (b) fails to perform any material obligation required to be performed by it under this Agreement for a period of 30 days after receipt of written notice by the other party of such failure. CONFIDENTIAL INFORMATION Page 9 10 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. New Celestica AgmtV25 In such event, the non-defaulting party shall have the right to terminate this Agreement immediately by giving written notice to the other. 9.3. EFFECT OF EXPIRATION OR TERMINATION Upon expiration or any termination of this Agreement by either party: (a) Netgear shall pay all undisputed amounts or charges owed to Celestica as provided in this Agreement, provided that Netgear shall have the right to set-off any such amounts or charges owed to Celestica against any amounts owing to Netgear by Celestica pursuant to this Agreement. If the aggregate amount owing by Netgear to Celestica is less than the aggregate amounts owing by Celestica to Netgear, Celestica shall pay such net amount owing to Netgear promptly and in full within forty-five days of the date which is the earliest of expiration or termination, as the case may be. (b) Celestica shall complete all partially completed Products and deliver such Products as provided above in accordance with the terms of this Agreement which would have otherwise applied to such Production Effort or Services, as applicable. Provided Netgear has made all payments required pursuant to paragraph (a) above, Celestica shall deliver within three (3) weeks of the later of the date of expiration or termination or such payment, if required, to Netgear all finished and partially-finished Products and Materials relating thereto in exchange for payment by Netgear of the full cost for Products, direct cost for work-in-process and Material, to the locations designated by Netgear. (c) The provisions of this Agreement relating to Confidential and Proprietary Information (Section 10), Intellectual Property Rights (Section 11) except the license granted to Celestica in Section 11.3, Warranties (Section 12), Indemnification (Section 13) and Section 14.12, shall remain in effect beyond any expiration or termination. (d) Celestica shall return all Netgear Proprietary Information, and under Netgear's supervision, destroy or erase all copies of such Netgear Proprietary Information in the possession of Celestica or any of its Affiliates or their respective employees, consultants, agents or representatives, including copies on paper or other hard copy and copies on computer or other storage media. 9.4. DUTY TO FULFILL Notwithstanding any termination or expiration of this Agreement, Celestica agrees to procure, inspect and fulfill all Orders placed prior to the date of expiration or termination in accordance with the terms of this Agreement if such Orders have not previously been cancelled. 10. CONFIDENTIAL AND PROPRIETARY INFORMATION 10.1 PROTECTION OF INFORMATION During the term of this Agreement, the parties anticipate that each shall disclose to the other in connection with this Agreement certain of its Confidential Information. The recipient shall protect the disclosed Confidential Information by using the same degree of care to prevent the unauthorized use, dissemination, or publication of the Confidential Information as the recipient uses to protect its own confidential information of alike nature, but no less than a reasonable degree of care. Recipient's duty to protect the Confidential Information disclosed under this Agreement shall expire three years from the expiration or termination of this Agreement, except that source code shall be protected hereunder indefinitely. Except as permitted by this Agreement, the recipient shall disclose no part of such Confidential Information to anyone except to those of its employees or contractors who have (i) a need to know the same to accomplish the purposes of this Agreement, (ii) signed an Agreement under which they shall keep confidential such Confidential Information (iii) before receiving access to the Confidential Information, acknowledged its confidential, proprietary and trade secret nature, (iv) agreed to use such Confidential Information only for the purposes of performing recipient's obligations under this Agreement. The terms of this Agreement may also be disclosed to directors, officers, employees, attorneys, accountants, contractors, banks or actual or potential Page 10 11 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. New Celestica AgmtV25 financing sources of recipient, but only if and to the extent such persons need to know the information for the performance of their duties and are subject to confidentiality agreements or fiduciary duties of confidentiality to recipient and agree to use such information only for such duties. This Agreement imposes no restriction upon the recipient with respect to disclosure or use of information: (a) that was in the recipient's possession before receipt from the discloses; (b) that is or becomes (prior to such disclosure or use) a matter of public knowledge through no fault of the recipient; (c) that is received by the recipient from a third party without a duty of confidentiality; (d) that is disclosed by the discloser to a third party without a duty of confidentiality on the third party; (e) is independently developed by the recipient; (e) to the extent disclosed in accordance with the order or requirement of a court, administrative agency, or other governmental body (provided, however, that the receiver shall provide prompt notice thereof to enable the discloser to seek a protective order or otherwise prevent such disclosure); or (f) that is disclosed by the recipient with the discloser's prior written approval; or (g) as required by the federal securities law and rules and regulations thereunder: 10.2 PUBLICITY All press releases and printed material using the name, logo or other identifying characteristics of a party shall be subject to prior approval of the other party. 10.3 PROTECTION OF CELESTICA INFORMATION Each party agrees that the price of components negotiated by it and provided to the other party shall be deemed to be Confidential Information of that party. Each party agrees not to discuss the origins of such information with any third party. Each party agrees not to use such information to solicit a discount from the disclosing supplier, from any of the supplier's competitors or from any other supplier for use by the recipient other than for the purposes of performing its obligations under this Agreement. Each party acknowledges that unauthorized disclosure of such information may irreparably damage the discloser's relationship with its suppliers and that any benefit accruing to the recipient shall belong to Netgear and/or the disclosing party. 10.4 INJUNCTIVE RELIEF Each party acknowledges that damage from improper disclosure of Confidential Information is irreparable and that it would be extremely impracticable to measure the resulting damages. Accordingly, in addition to any other rights and remedies that a party may have, the injured party is entitled to equitable review, including preliminary and permanent injunction, and the other party expressly waives the defense that a remedy in damages will be adequate. 10.5 RETURN OF CONFIDENTIAL INFORMATION If this Agreement is terminated, and upon request of the discloser, the recipient shall promptly return all Confidential Information received from the discloser, together with all copies, or if requested by the discloser, certify that all such Confidential Information has been destroyed. 11. INTELLECTUAL PROPERTY RIGHTS OF THE PARTIES 11.1 RESERVATION OF PROPRIETARY RIGHTS Netgear reserves all proprietary rights in the Products and in all associated original works, documentation, computer programs, discoveries, inventions, patents, know-how, techniques, designs, engineering details and other data developed by Netgear or Celestica, either singly or jointly, as a result of work performed under this Agreement. Celestica agrees to reproduce any appropriate copyright notice for Netgear on all Products manufactured under this Agreement. Netgear further reserves all right, title and interest in prototype layouts, post-layout simulation results, post-layout specifications, test tapes and test fixtures developed or produced pursuant to this Agreement. The foregoing reservations shall not, however, apply to proprietary rights, original works, computer programs, Page 11 12 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. New Celestica AgmtV25 discoveries, inventions, patents, know-how, techniques, designs, engineering details and other data developed solely by Celestica as a result of work performed under this Agreement that (i) does not relate to (x) the Products or the Specification, or (y) to Netgear actual or demonstrably anticipated research or development, (ii) does not result from work performed by Celestica solely for Netgear, or (iii) relates generally to manufacturing methods and processes. In each such case, the foregoing shall be the sole property of Celestica. 11.2 LICENSE TO MANUFACTURE Netgear hereby grants to Celestica a non-exclusive license to use the Specifications, including all software programs contained therein and all related proprietary data and know-how necessary to perform the Services pursuant to this Agreement. This license is non-transferable, may be used only in connection with the performance of the Services for Netgear under this Agreement, and shall expire on the date on which Celestica's obligations to perform the Services terminates under this Agreement. 11.3. TOOLING: OWNERSHIP AND LICENSE Netgear acknowledges that Celestica shall retain title to the internal tooling developed by Celestica in connection with this Agreement, and Celestica acknowledges that Netgear shall have the right to use such tooling in the event of a material default by Celestica as defined elsewhere in this Agreement only in order to fulfill Celestica's obligations hereunder prior to such default. Celestica agrees that each Product created is for Netgear's exclusive use and further agrees that Celestica has no right to sell or otherwise transfer any interest in a Product to any party unless Netgear has provided permission in writing prior to any such sale or transfer. 11.4. CAPITAL ASSETS In order to perform the Production Effort as stipulated in Article 3, Celestica may have to use certain capital equipment specified by Netgear. If Celestica can use the equipment for current or future applications other than for Netgear assemblies, this equipment shall be the property of Celestica and shall be funded as such. If the capital equipment cannot be used by other non-Netgear applications, such equipment shall be solely the properly of Netgear and shall have Netgear asset tags affixed to the equipment. Such property shall be funded by Netgear. Maintenance of all equipment shall be per Article 3 above. Celestica shall maintain inventory of all capital assets, regardless of ownership, and shall provide inventory records to Netgear on demand. Inventory records should include, but not be limited to, date of acquisition, description of asset, serial number, and location. 12. WARRANTIES 12.1. FREE FROM DEFECTS Celestica warrants that except for refurbished products, the Products shall be new and unused at the time of delivery to the Netgear Inventory Location. 12.2. TITLE, INFRINGEMENT Celestica warrants that: (a) it has and shall pass to Netgear good title to the Products free and clear of all liens and encumbrances; (b) no claim or action is pending or threatened against Celestica or, to Celestica's knowledge, against any licensor or supplier of Celestica that would adversely affect the ability of Celestica to procure and deliver the Products or the right of Netgear or any Customer of Netgear to use the Products for their intended use, and (c) it has all rights and powers necessary to perform its obligations under this Agreement. Page 12 13 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. New Celestica AgmtV25 12.3. SERVICES Celestica warrants that all Services performed under this Agreement will be performed in a competent, professional manner and in accordance with the Statement of Work and the applicable Specifications under this Agreement. 12.4. REMEDIES FOR PRODUCTS UNDER WARRANTY Not applicable. 12.5. LATENT DEFECTS Not applicable. 12.6. YEAR 2000 WARRANTY Subject to the provisions of this Section below, Celestica further covenants and represents that Celestica Systems shall (a) process date and time related data without causing any processing interruptions, abnormal terminations, or changes in performance characteristics, and (b) shall process and manipulate all date and time related functions correctly. Without limiting the generality of the foregoing, the Celestica Systems shall: (a) Correctly handle date and time related data before, during and after January 1, 2000, including accepting date and time input, providing date and time output, and performing ongoing operations on dates and times and portions of dates and times including calculating, comparing and sequencing of dates and times (in both forward and backward operations spanning century boundaries); (b) Correctly handle leap year calculations, including, identification of leap years, interval calculations (in both forward and backward operations spanning century boundaries), day-in-year calculations, day-of-the-week calculations, and week-of-the-year calculations); (c) Correctly handle all two digit date and time related input in a manner that resolves ambiguity as to century in a disclosed, defined and predetermined manner; and (d) Correctly store, retrieve and provide output of all date and time data in a manner that is unambiguous as to century. Celestica shall promptly correct any failure of the Celestica Systems to conform to the above warranty. 12.7. LIMITATIONS THIS CLAUSE 12.7 SETS OUT THE SUPPLIER'S SOLE OBLIGATION AND LIABILITY, AND NETGEAR'S EXCLUSIVE REMEDIES, FOR CLAIMS BASED ON DEFECTS IN OR FAILURE OF ANY PRODUCT OR SERVICE OR THE SUBJECT MATTER OF ANY SERVICE AND REPLACES ALL OTHER WARRANTIES AND CONDITIONS, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OR CONDITIONS OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE PROVIDED ALWAYS THAT THE SUPPLIER DOES NOT EXCLUDE OR LIMIT ITS LIABILITY FOR DEATH OR PERSONAL INJURY RESULTING FROM ITS NEGLIGENCE NOR LIABILITY FOR BREACH OF ANY TERM IMPLIED BY STATUTE TO THE EXTENT THAT SUCH LIABILITIES CANNOT BY LAW BE LIMITED OR EXCLUDED. Page 13 14 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. New Celestica AgmtV25 13. INDEMNIFICATION 13.1. INDEMNIFICATION BY NETGEAR Netgear will, at its expense and at Celestica's request, defend any claim or action brought against Celestica by a third party (i) to the extent that it is based on a claim that any Specification provided under this Agreement infringes or violates any patent, copyright, trademark, trade secret or other proprietary right of the third party or (ii) to the extent caused by any grossly negligent act or omission or willful misconduct of Netgear; and Netgear will indemnify and hold Celestica harmless from and against any costs and liability reasonably incurred by Celestica that are attributable to that claim, subject to compliance with the notice provisions below. Netgear shall have no liability if the alleged infringement is the result of Celestica's modification or alteration of the Specification; or Netgear's compliance with Celestica's specifications, designs, or processes; or if Celestica had actual notice that use of such Specification or its incorporation into a product would cause such infringement; provided, however, that if Celestica has such actual notice and promptly informs Netgear of such actual notice, Celestica shall not be liable for failure to deliver Products hereunder, but only to the extent that such failure is a result of such actual notice. 13.2. INDEMNIFICATION BY CELESTICA Celestica will, at its expense and at Netgear's request, defend any claim or action brought against Netgear by a third party to the extent caused by any negligent act or omission or willful misconduct of Celestica or its Affiliates; and Celestica will indemnify and hold Netgear harmless from and against any costs and liability reasonably incurred by Netgear that are attributable to that claim, subject to compliance with the notice provisions below. 13.3. PROCEDURE FOR INDEMNIFICATION If any claim or action shall be brought or asserted against an indemnified party as provided above (the "Indemnified Party") in respect of which indemnity may be sought from an indemnifying party under such Sections (the "Indemnifying Party") the Indemnified Party shall promptly notify the Indemnifying Party who shall assume the defense thereof and the payment of all expenses; except that any delay or failure to so notify the Indemnifying Party shall only relieve the Indemnifying Party of its obligations hereunder to the extent, if at all, that it is prejudiced by reason of such delay or failure. The Indemnified Party shall have the right to employ separate counsel in any such claim or action and participate in the defense thereof, but the fee and expenses of such counsel shall be at the expense of the Indemnified Party, unless (i) the employment thereof shall have been specifically directed and required by the Indemnifying Party or (ii) the Indemnifying Party shall have elected not to assume the defense and employ counsel. Without the consent of the Indemnified Party, the Indemnifying Party shall have no right to settle or compromise on any non-monetary matter. 13.4. LIMITATION OF LIABILITY TO THE MAXIMUM EXTENT PERMITTED BY LAW, UNDER NO CIRCUMSTANCES AND UNDER NO LEGAL THEORY, TORT, CONTRACT, OR OTHERWISE, SHALL NETGEAR BE LIABLE TO SUPPLIER OR ANY OTHER PERSON FOR ANY INDIRECT (INCLUDING BUT NOT LIMITED TO LOST PROFITS), SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, EVEN IF NETGEAR SHALL HAVE BEEN INFORMED OF THE POSSIBILITY OF SUCH DAMAGES, OR FOR ANY CLAIM BY ANY OTHER PERSON. TO THE MAXIMUM EXTENT PERMITTED BY LAW, UNDER NO CIRCUMSTANCES AND UNDER NO LEGAL THEORY, TORT, CONTRACT, OR OTHERWISE, SHALL SUPPLIER BE LIABLE TO NETGEAR OR Page 14 15 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. New Celestica AgmtV25 ANY OTHER PERSON FOR ANY INDIRECT (INCLUDING BUT NOT LIMITED TO LOST PROFITS), SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, EVEN IF SUPPLIER SHALL HAVE BEEN INFORMED OF THE POSSIBILITY OF SUCH DAMAGES, OR FOR ANY CLAIM BY ANY OTHER PERSON. 14. GENERAL PROVISIONS 14.1. ACCESS TO FACILITIES Netgear shall have the right to review and audit Celestica's facilities, operations, purchase orders, agreements, and procedures at any reasonable time with reasonable notice for purposes of determining compliance with the requirements of this Agreement. From time to time Netgear's Customers will request the right to review Celestica's facilities and operations for the purpose of qualification. Celestica agrees to permit such Customer surveys with five to ten working days notice, provided Celestica does not consider such Customer of Netgear to be a competitor of Celestica or one of Celestica's customers. 14.2. FORCE MAJEURE "Force Majeure" shall include all acts or events beyond the control of a party, including but not limited to acts of God, government restrictions, continuing domestic or international problems such as wars or insurrections, strikes, fires, floods, work stoppages, and embargoes, which prevent totally or partially the fulfillment of the obligations of either party. A party affected by an event of Force Majeure shall be released without any liability on its part from the performance of its obligations (other than an obligation to pay money) under this Agreement and the applicable Site Agreement, if any, but only to the extent and only for the period that its performance of such obligations is prevented by circumstances of Force Majeure and provided that such party shall have given prompt notice to the other party. Such notice shall include a description of the nature of the event of Force Majeure, its cause, and its possible consequences. The party claiming circumstances of Force Majeure shall promptly notify the other party of the conclusion of the event. The period of Force Majeure shall be deemed to commence on the date that the event of Force Majeure first occurs. Regardless of the excuse of Force Majeure, if either party is not able to perform within ninety (90) days after such event, the other party may terminate the Agreement. Termination of this Agreement shall not affect the obligations of either party which exist as of the date of termination. During the period that the performance by one of the parties of its obligations under this Agreement or a Site Agreement has been suspended by an event of Force Majeure, the other party may likewise suspend the performance of all or part of its obligations under this Agreement. 14.3. COUNTRY OF ORIGIN In the event that Netgear requires information concerning component origin due to government contract requirements or other U.S. reporting requirements, Netgear will provide Celestica with a written outline of the specific information requirements, which Products such requirements apply to, and the reason or legal basis for the requirement. Upon receipt of such information, Celestica will use commercially reasonable efforts to support Netgear's requirements. 14.4. NOTICES All notices shall be sent by certified mail, postage prepaid, by personal delivery, courier service, or by facsimile or other form of recorded communication to the parties at their respective addresses set forth below. Any notices given 15 16 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. New Celestica AgmtV25 shall be deemed to have been received as follows: if sent by facsimile or other form of recorded communication, when transmitted; if sent by certified mail, on the date of delivery as shown on the return receipt; and if by courier service, on the date delivered. Either party may change its notice address by written notice to the other. If to Celestica: If to Netgear: Celestica Asia, Inc.North America Inc. Netgear, Inc. 2222 Qume Drive 4401 Great America Parkway San Jose, Ca. 95131 Santa Clara, CA 95052-8185 Attention: Director of Operations Attention: VP of Materials With a copy to CFO at the same address 14.5. EXPORTS AND CUSTOMS Each party agrees that it will not knowingly (i) export or re-export, directly or indirectly, any technical data (as defined by the U.S. Export Administration Regulations), including software received from the other under this Agreement or (ii) export or re-export, directly or indirectly, any direct product of such technical data, including software, to any destination to which such export or re-export is restricted or prohibited by U.S. or applicable non-U.S. law without obtaining prior authorization from the U.S. Department of Commerce and/or other competent government authorities to the extent required by those laws. This clause shall survive termination or cancellation of this Agreement. Celestica shall certify quarterly to Netgear the correct country of origin of each Product determined in accordance with the rules of origin set out in the applicable laws and treaties. Celestica shall notify Netgear at least sixty (60) days in advance of any change in the origin of a Product. Celestica shall maintain supporting documentation sufficient to meet the requirements of any audit of the origin information by Netgear or by any governmental entity. Celestica shall obtain from each of its suppliers the appropriate certificate of origin of Materials and shall provide to Netgear, on the last day of each calendar quarter, a report identifying which suppliers of Materials have, and which suppliers have not, certified the country of origin for all Materials supplied by it to Celestica for manufacture of the Products. All Products must be marked with their country of origin. The degree of permanence of the origin marking on the Product shall be sufficient to ensure that, in any reasonably foreseeable circumstance, the marking shall remain on the Product throughout its expected life. Both the Product's immediate packaging and the outermost containers shall also be marked to indicate the country of origin. Celestica shall be solely responsible for all fines, penalties, costs and seizures resulting from inadequate marking, packaging of labeling. Unless otherwise set forth in this Agreement, Celestica shall take all administrative actions required to produce customs invoices and country of origin documents for all shipments crossing international borders which comply with all laws, treaties and regulations of both the exporting country and the importing country. If a Product includes Materials having different countries of origin, the different countries of origin must be identified on the customs invoices, along with the related quantities/serial numbers of such Materials. Celestica shall be solely responsible for all fines, penalties and costs resulting from a customs invoice not being so compliant. Celestica shall perform all administrative actions required to determine the eligibility of each Product for preferential treatment under the rules of any applicable trade treaties/agreements and, if eligible, provide the necessary documentation and obtain such preferential treatment. Celestica shall use it's best efforts to minimize any penalties and costs resulting from any such documents subsequently determined to be invalid, shall maintain all documentation to support the eligibility and shall respond in a timely manner to verification questionnaires or reviews. 16 17 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. 14.6. AMENDMENT, MODIFICATION OR WAIVER The provisions of this Agreement may be amended or waived only by an instrument in writing signed by the authorized representatives of each party, except as otherwise expressly provided in this Agreement. 14.7. DISASTER RECOVERY PLAN Celestica agrees to develop and maintain a disaster recovery plan to be put into effect in the event that it becomes unable to fulfill Orders for any reason for a period of more than 15 calendar days. The disaster recovery plan shall be submitted by Celestica to Netgear for review within 15 days of the Effective Date of this Agreement, and shall be reviewed yearly thereafter. Celestica agrees that the disaster recovery plan must enable Celestica to continue to fulfill Orders in accordance with the time schedules required under this Agreement. 14.8. MANUFACTURING PROCESS INSTRUCTIONS In the event of a disaster or material default by Celestica under this Agreement, at no cost and within three business days, Celestica shall make available to Netgear all process instructions such that Netgear may, at its discretion, have the Products produced by third parties. 14.9. INDEPENDENT CONTRACTOR This Agreement shall not constitute Celestica the agent or legal representative of Netgear for any purpose and Celestica shall not hold itself out as an agent of Netgear other than as expressly provided in this Agreement. This Agreement creates no relationship of joint venturers, partners, associates, employment or principal and agent between the parties, and both parties are acting as independent contractors. Neither party shall have the right to exercise any control or direction over the operations, activities, employees or agents of the other party in connection with this Agreement. Celestica is not granted any right or authority to, and shall not attempt to, assume or create any obligation or responsibility for or on behalf of Netgear: Celestica shall not have any authority to bind Netgear to any contract, whether of employment or otherwise, and Celestica shall bear all of its own expenses for its operations, including, without limitation, the compensation of its employees and sales people and the maintenance of its offices, service, warehouse and transportation facilities. Celestica shall be solely responsible for its own employees and sales people and for their omissions, acts and the things done by them. Netgear expressly disclaims any liability for any commitments on behalf of Netgear made by Celestica. 14.10. CELESTICA RESPONSIBLE FOR ITS SUBCONTRACTORS The acknowledgment by Netgear of any subcontractor of Celestica shall in no way be construed to relieve Celestica of any of its duties, responsibilities and obligations to Netgear under this Agreement. 14.11. NO ASSIGNMENT Neither this Agreement nor any right or obligation under it shall be assigned or delegated by Celestica or by Netgear, voluntarily or by operation of law, without the prior written consent of the other party, which consent may not be unreasonably withheld. Any attempted assignment shall be deemed voidable. An attempted assignment shall be deemed to occur in the event of a sale or transfer of substantially all of the assets of, or a majority interest in, the voting shares to, or the merger or consolidation with or into, any other entity . CONFIDENTIAL INFORMATION Page 17 18 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. 14.12. APPLICABLE LAW All issues and questions concerning the construction, validity, enforcement, interpretation and performance of this Agreement, the rights and obligations arising hereunder and any purchase made hereunder shall be governed by the laws of the State of California and the federal laws of the United States applicable therein, without reference to the UNCITRAL Conventions on Contracts for the International Sale of Goods and without giving effect to any choice of law or conflict of law, rules or provisions (whether of California or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than California. The parties hereto submit to and consent to the nonexclusive jurisdiction of the courts located in the State of California. 14.13. RIGHTS CUMULATIVE Except as otherwise expressly provided in this Agreement or in any Site Agreement, all rights and remedies conferred by this Agreement, by any other instrument, or by law are cumulative and may be exercised singularly or concurrently. 14.14. SEVERABILITY If any one or more of the provisions of this Agreement for any reason shall be held to be invalid, illegal, or unenforceable in any respect by any law or regulation of any government or by any court, such provision shall not affect any other provision, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never existed, except in those instances where removal or elimination of such provision would result in a failure of consideration under this Agreement. 14.15. ENTIRE AGREEMENT This Agreement and each Site Agreement, including all Exhibits, constitutes the entire Agreement between the parties pertaining to the subject matter of this Agreement. This Agreement supersedes all prior agreements and understandings between the parties, written or oral, with respect to such subject matter. No representations or statements of any kind made by any representative of Netgear which are not stated in this Agreement shall be binding on Netgear. No course of dealing or course of performance shall be relevant to explain or supplement any term expressed in this contract. CONFIDENTIAL INFORMATION Page 18 19 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. New Celestica AgmtV25 20 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. STATEMENT OF WORK BETWEEN CELESTICA AND NETGEAR, INC. - -------------------------------------------------------------------------------- EXHIBIT 1: STATEMENT OF WORK The following Statement of Work (SOW) is for the Netgear Operations. Netgear enters into this contract with Celestica with the understanding that Celestica will commit the proper mixture of resources and display the attributes of continuous improvement, initiative, innovation, accountability, responsibility, and integrity in support of Netgear business goals. All functions described in this statement of work will be performed at a level of good manufacturing practices with the goal of being "best in class". All functions performed by Celestica will be subject to Audit by Celestica's own Quality System and internal corrective action procedures. There are nine (9) KEY AREAS OF THIS SOW. Each Key Area contains detailed information about Netgear's requirements. The Key Areas are: o Business Management Procedures & Reporting o Information Systems Integration o Planning and Purchasing Management o Inventory Management o Product Testing and Inspection o Product Fulfillment and Logistics o Returns Processing o Supplier Performance Management o Supplier Product Quality Program and Management KEY AREAS IN DETAIL: BUSINESS MANAGEMENT PROCEDURES & REPORTING - We intend to mutually plan for and make corporate-wide business decisions. To manage the technical and business changes, Netgear and Celestica shall: o Provide dedicated Program Management personnel whose goal is to provide consistent and efficient responses to program requirements. o Possess a strong support organization which can be drawn upon in support of Netgear business needs on a worldwide basis. o Provide Netgear Functional Organizational Chart. o Provide Job Descriptions, Roles and Responsibilities for all Netgear Program personnel. o Conduct quarterly business reviews for each business management team. o Create a process to communicate about and resolve issues promptly and to drive continuous improvement of the day-to-day operations. o Provide general reporting which supports Netgear's Operations Goals: - - Warranty Return Rate @ < .5% cy98, <.2% cy99 - product return activity reports - returned product test yield reports - defects per million on returned product - pareto of defects on returned product warranty and non-warranty receipts activity - - incoming inspection test doa units @ < 1% cy1999, < .5 % cy2000 - incoming defects per million by product - incoming defects per million by supplier - pareto of defects by product by supplier - - purchase order receipt reports by supplier by product - on time receipts by supplier by product - product lead-time reports. - - shipping errors @ < 1% cy1999, < .5 % cy2000 confidential information page 1 21 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. STATEMENT OF WORK BETWEEN CELESTICA AND NETGEAR, INC. - -------------------------------------------------------------------------------- - - Value of shipments at standard cost reports. - - Shipment activity reports. - - On Time Shipment @ 98% (Actual Ship Date Vs Scheduled Ship Date). - - Order Fulfillment Lead-time @ 95% 5 Days ARO (After Receipt of Order). - - Inventory Variance @ $500 per $Million. - - Inventory Turns @ 12. - Separate Turns calculations for IC inventory and Product inventories. - On hand Inventory by item by location. - Inventory aging reports by item to track slow moving and excess inventory. BUSINESS MANAGEMENT PROCEDURES & REPORTING (CONTINUED) o Provide additional reporting required determining root cause for management action in support of Operations Goals. This additional reporting may include activity levels, cost per activity, productivity, cycletime, process quality, accuracy, or any other measurement determined to be a key measurement by Netgear management. o Reports will require information sorted by customer, supplier, product, inventory location, or activity, as applicable. o Produce reports which enable Supplier to benchmark performance to Good Manufacturing Practice (GMP), Best -in-Class, and World-Class Manufacturing (WCM). o Prepare and participate in Quarterly performance review. o Produce both hard and soft (electronic) files of reports. INFORMATION SYSTEMS INTEGRATION - Netgear will provide the database platform for the control of Sales and Inventory. This database will be installed at Netgear, with access provided to the supplier at the supplier's location(s). The supplier will be required to: o Maintain the data integrity of all transactions associated with the receipt, storage, transfer, issue, and shipment of materials and products. o The supplier will work with Netgear to ensure proper separation of duties, password access over system functionality, etc. in order to comply with proper internal controls and financial audit requirements. o The supplier will provide on-going systems support for the Netgear database as required. CONFIDENTIAL INFORMATION Page 2 22 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. STATEMENT OF WORK BETWEEN CELESTICA AND NETGEAR, INC. - -------------------------------------------------------------------------------- PLANNING AND PURCHASING, MANAGEMENT - Planning and Purchasing Management is defined as the management of all controlled activities associated with the requirements planning and purchase of Netgear material and product. Requirements are: o Maintain inventory levels per Netgear forecasts by use of material requirements planning (MRP) and order action (purchase orders) while achieving 12 inventory turns. o Issue Purchase Orders to Netgear suppliers within 5 business days of receipt of Build Plan. o Product or item due dates on purchase orders issued will reflect the actual requested and confirmed delivery date for the product or item ordered on the purchase order. o Provide purchase order history reports detailing purchase order number, purchase order date, product, supplier name, due date, quantity ordered, unit price, and extended value. o Provide hard copy of all purchase orders issued to Netgear suppliers to Netgear within 10 business days of issue to Netgear suppliers. If at any time a change order is issued to an existing purchase order, a hard copy of the changed purchase order will be provided to Netgear within 10 business days of issue to Netgear suppliers. o Provide open purchase order reports to Netgear on a weekly basis. The content of the open purchase order report will contain the purchase order number, purchase order date, product, supplier name, due date, quantity ordered, unit price, and extended value. o Provide purchase order receipts report to Netgear on a weekly basis. The content of the purchase order receipts report will contain the product ordered, supplier name, purchase order number, issue date of purchase order, due date, date received, receipt quantity, unit price, and extended value of quantity received. o Engage in daily communications with suppliers if necessary to manage on time delivery of products or items ordered. Expedite or reschedule orders as required to satisfy fluctuations in demand for Netgear products and to achieve inventory plans. o Measure on time delivery performance of suppliers. o Measure actual lead-time performance of suppliers. o On a daily basis, provide accurate reporting of product availability against product demand (available-to-promise report) to include the following information: - - Total quantity on hand by product by location. - - Total quantity of booked orders by product by location. - - Total quantity of products "drop-shipped" (in-transit to a location but not received against an open purchase order) by product by destination location. - - Total quantity of products in inventory but in-transit between locations (received off purchase orders into inventory and shipped from one location to another) by product by destination location. - - Net product available versus total demand (total on hand versus total ordered) by product by location. - - A "remarks" section for each product or item where information concerning delivery schedules and any relevant actions being taken to satisfy product demand are noted. o Report on a daily basis the status of all inbound materials in-transit to inventory locations. Report will detail product, quantity shipped, supplier invoice number, forwarding information, and estimated arrival date at destination. o Schedule production of bundled products or conversion of products from one version to another version on a daily basis to satisfy product demand. o Provide activity reports on a monthly basis to Netgear for use in monthly forecast creation and master product planning purposes. CONFIDENTIAL INFORMATION Page 3 23 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. STATEMENT OF WORK BETWEEN CELESTICA AND NETGEAR, INC. - -------------------------------------------------------------------------------- INVENTORY MANAGEMENT - Inventory Management is defined as the management of all controlled activities associated with the receipt, storage, security, transfer, accuracy, and shipment of Netgear material and product. The requirements for Inventory Management apply to materials and products controlled by Celestica in Celestica's SAP Inventory System and Netgear's SunSystem Inventory System. Requirements are: o First - In, First - Out (FIFO) process control. o Lot tracking process for material purge / stop shipment requirements. o Bar-Code / Auto - Identification processes. o Bin storage and ESD (Electro-Static Discharge) protection for handling and storage of LC.'s. o Assume financial responsibility for loss of product or materials owned by Netgear in Netgear's SunSystems inventory locations due to shrinkage, pilferage, transaction error, physical inventory adjustment, or any damage to Netgear product caused by Celestica personnel. o Perform all inventory transactions in both Celestica's SAP and Netgear's SunSystems databases. o Develop procedures to control and ensure that inventory transactions on Celestica's SAP and Netgear's SunSystem are performed in the proper sequence for inventory reconciliation between the two systems. o Establish procedures to ensure inventory transactions performed by Celestica personnel in both Celestica's SAP and Netgear's SunSystems reflect actual material or product movements. Ensure source documents are used to perform inventory transactions. Examples of such source documentation are inventory transfer documents, inventory issue documents, inventory receipt documents, material travelers, inventory receipt documents, inventory shipment documents, delivery receipts, cargo receipts, bills of lading, etc., in support of inventory transactions performed on either SAP or SunSystems databases. Maintain records of all source documents used for inventory transactions in a manner that facilitates internal or external audit requirements. o Provide support from qualified personnel to audit compliance to financial period end for proper revenue recognition. o Maintain inventory accuracy through management of cycle-count program, including ABC count criteria and count frequency. o Perform Physical Inventories as directed for both SAP and SunSystems. Provide proper oversight and audit of physical inventories to comply with reporting requirements from internal or external auditors. o Inventory accuracy to be maintained at $500 per $Million. o Perform incoming quality control (IQC) on all products. o Establish and maintain controlled inventory locations to segregate materials and products by condition, type, status, or other attributes as agreed. Examples are: - - By condition: Maintain separate inventory locations for goods returned from customers, whether returned as unsold products (stock rotations) or defective product (warranty returns) until product is dispositioned. - - By Type: Raw materials such as integrated circuits, power supplies, packaging material, etc. should be maintained in separate inventory locations from completed products (finished goods). - - By status: Establish and maintain separate inventory locations for materials and products undergoing incoming inspection. o On a weekly basis, provide to Netgear inventory reports detailing quantity on hand by product, unit cost, extended value, by location. Reports may also detail inventory aging to identify slow moving or excess inventory for disposition. o On a monthly basis, provide inventory reports to Netgear to support monthly forecast creation, master product planning, and standard cost setting processes. CONFIDENTIAL INFORMATION Page 4 24 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. STATEMENT OF WORK BETWEEN CELESTICA AND NETGEAR, INC. - -------------------------------------------------------------------------------- PRODUCT TESTING AND INSPECTION - Celestica shall manage the testing and inspection of all products received from Netgear suppliers. Product testing will be performed in conformance to Netgear specification. Product inspection will be performed to standards and practices as contained in Celestica's quality control procedures. Requirements are: o Perform required tests on all products received in conformance to Netgear approved process and specification. o Perform preventative maintenance on all test equipment as required. o Ensure test equipment calibration between Celestica equipment and supplier equipment per specification. o Ensure correct revisions of all test programs are used in the test process for all products. o Manage the formal release process through Celestica document control procedures for the release or change to test equipment and test programs. o Initiate required actions with suppliers when test equipment or test results indicate nonconformance to specification. o Maintain adequate authenticated documents on preventative maintenance and calibration of all test equipment. o Celestica shall not place into service and test equipment or program until written approval of the test equipment or program has been received from Netgear. o Maintain and submit to Netgear on a monthly basis the list of all test equipment, detailing Netgear owned or Celestica owned, with adequate description of equipment. o For all Netgear owned equipment, Celestica will ensure such equipment is properly identified per Netgear fixed asset requirements. o Celestica shall maintain adequate authenticated inspection procedures covering but not limited to the following processes: - - Documented inspection procedures - - Sampling plans - - Use of defect codes - - Workmanship standards - - Cosmetic standards - - International standards - - First article approvals - - Ship-to-Stock program - - Training and certification of inspection personnel o Provide product functional test and inspection yields and pareto of defects report to Netgear on a monthly basis. o Maintain adequate authenticated inspection and test documents. CONFIDENTIAL INFORMATION Page 5 25 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. STATEMENT OF WORK BETWEEN CELESTICA AND NETGEAR, INC. - -------------------------------------------------------------------------------- PRODUCT FULFILLMENT AND LOGISTICS - Fulfillment is defined as the process of assembling, picking, packaging, inspecting, and shipping Netgear products to Netgear customers. Logistics is defined as the management of inbound and outbound transportation, customs, material classifications in compliance with international import and export regulations, and compliance to export controls. Requirements are: o Ship the same day on Netgear customer orders received by Noon. o Order consolidation process (multiple orders, same destination) o Provide partial shipments of orders, as needed. o Pick, pack, and ship orders to Netgear customers in less than case pack quantities if required. o Ensure all shipments are audited for accuracy prior to delivery to transportation providers. Shipment audits must be performed by authorized Quality Control personnel. o Follow customer routing for all outbound customer shipments. Ship using customer's shipping account numbers. o Manage carrier dispatching, airline flight or ocean booking activity. o Handle international customs documentation, including the preparation of Shipper's Letter of Instructions, Cargo Receipts, Bills of Lading, Commercial Invoices, Certificates of Origin, etc. as required by the customs agencies of the origin and destination countries. o Handle all documentation as required for shipments tendered on Letter of Credit, Sight Draft, etc. o In support of resolution of delivery disputes between Netgear and Netgear customers, investigate disputed claims and provide proof of delivery documentation or other information to Netgear as required to resolve such disputes. o Provide documentation to Netgear in support of all shipments on a daily basis. Maintain shipment activity logs and all source documentation required by internal or external auditors in compliance with proper revenue recognition requirements. o Prepare and submit to Netgear Shipment accuracy reports on a monthly basis. o Prepare and submit to Netgear On Time Shipment reports on a monthly basis. o Prepare and submit to Netgear Order Fulfillment Lead-time reports on a monthly basis. o Traffic and Customs expertise for cost control, import and export compliance (record retention, ECCN, H.T.S.U.S. classification, etc.) o Manage mode selection (Airfreight or Seafreight) and enforce Netgear routing instructions. o Demonstrate proper control of all negotiable documents required for inbound customs clearance. o Negotiate freight costs with transportation providers as required. o Perform Landed Cost Analysis for use in determining accurate product unit price adjustments in support of changes in terms of sale with Suppliers. CONFIDENTIAL INFORMATION Page 6 26 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. STATEMENT OF WORK BETWEEN CELESTICA AND NETGEAR, INC. - -------------------------------------------------------------------------------- RETURNS PROCESSING - Returns processing is defined as the management of the receipt, verification, inspection, testing, disposition, re-packaging, and reporting of product returns from Netgear customers. Netgear issues two basic types of authorizations to it's customers: Warranty return authorizations for defective products and Stock Rotation returns for unsold slow moving products from customer inventory. Celestica will maintain proper separation of warranty and stock rotation products throughout the following functions: o Physically receive shipments of returned products from Netgear customers. o Verify returned products are received in good physical condition, noting any and all shipping damage on commercial documents (cargo receipts, bills of lading, delivery receipts, etc.) prior to signing delivery documents. o Upon acceptance, verify valid return material authorization (RMA) exists for returned products. o Report any unauthorized returns to Netgear on date of receipt. o Verify returned goods received match product and quantity authorized on Netgear return material authorization. o Verify o Report any discrepancy between product and quantity received and product and quantity authorized on date of receipt. o Complete Netgear Returned Material Receipt Report (RMRR) and fax to Netgear on date of receipt. o Prepare and submit to Netgear a daily return material receipts report, detailing the customer name, RMA number, product and quantity, and value on the date of receipt. If no receipt activity occurs on any given day, the return receipts report will still be sent, noting "No Receipts". o In support of resolution of delivery disputes on returned products between Netgear and Netgear customers, investigate disputed claims and provide proof of delivery documentation or other information to Netgear as required to resolve such disputes. o Perform incoming inspection on all returned products per agreed processes. o Perform functional test on all warranty defective product returns. o Provide returned product functional test and inspection yields and pareto of defects report to Netgear on a monthly basis. o Maintain separate inventory locations for product receipt, work in process test, inspection or test failure products, inspection or test accepted products, and refurbished products per agreed process. o Establish procedures to ensure inventory transactions performed within or between established returned product inventory locations by Celestica personnel in Netgear's SunSystems reflect actual material or product movements. Ensure source documents are used to perform inventory transactions. Examples of such source documentation are inventory transfer documents, inventory issue documents, inventory receipt documents, material travelers, inventory receipt documents, inventory shipment documents, delivery receipts, cargo receipts, bills of lading, etc., in support of inventory transactions performed on Netgear's SunSystems database. Maintain records of all source documents used for inventory transactions in a manner that facilitates internal or external audit requirements. o Arrange for timely disposition and return to original manufacturer all inspection or test failure products which are still under manufacturer's warranty. o Refurbish products per agreed process as directed by Netgear. CONFIDENTIAL INFORMATION Page 7 27 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. STATEMENT OF WORK BETWEEN CELESTICA AND NETGEAR, INC. - -------------------------------------------------------------------------------- SUPPLIER PERFORMANCE MANAGEMENT-- Celestica will provide dedicated management personnel to Netgear in support of the Supplier Performance Management requirements below. LOGISTICS o Ensure Suppliers provide Advice of Shipment notifications on date of shipment to Celestica and Netgear personnel for all supplier shipments of product and materials. o Measure and report monthly on number of shipments advised Vs. number of shipments. o Ensure Suppliers provide forwarding information and adequately authentic documentation that will meet import/export customs requirements, ensure smooth customs clearances, and assure proper accounts payable aging. o Measure and report monthly on number of conforming shipments Vs. number of shipments. o Resolve any issues with Suppliers that delay or could potentially delay the receipt of Netgear products into Celestica's Distribution Centers. o Monitor and report on each Supplier's ability to manage shipment scheduling to meet expected levels of service and transit times. Initiate corrective actions as required with suppliers to ensure predictable levels of service for all transportation modes. o Ensure Suppliers conform to good practice in consolidating shipments to minimize cost. DELIVERY o Engage in daily communications with suppliers if necessary to manage on time delivery of products or items ordered. Expedite or reschedule orders as required to satisfy fluctuations in demand for Netgear products and to achieve inventory plans. o Measure and report monthly the on time delivery performance of suppliers. o Measure and report monthly the actual lead-time performance of suppliers. o Measure and report monthly the accuracy of Suppliers commitments (Actual Vs. Advised) o Report monthly purchase order receipts by supplier by product. QUALITY o Measure and report monthly Incoming Defects per Million by Product o Measure and report monthly Incoming Defects per Million by Supplier o Measure and report monthly Pareto of Defects by Product by Supplier o Measure and report monthly Supplier Corrective Actions issued. o Measure and report monthly Supplier Corrective Action Aging Report o Measure and report monthly Supplier Ship-to-Stock Status by product. o Measure and report monthly Cost of Quality by Supplier. CONFIDENTIAL INFORMATION Page 8 28 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. STATEMENT OF WORK BETWEEN CELESTICA AND NETGEAR, INC. - -------------------------------------------------------------------------------- SUPPLIER PRODUCT QUALITY PROGRAM AND MANAGEMENT - Celestica agrees to adopt the product quality assurance requirements, perform quality control tests, and provide the quality control functions described below. Celestica will provide dedicated Quality management personnel to Netgear in support of the quality assurance program requirements. When deemed appropriate and by mutual consent, additional resources can be drawn upon from Celestica's Corporate Quality Organization in support of Netgear business needs on a worldwide basis. Celestica's Product Quality Management Program will use adequately authenticated methods to mange Product Quality Assurance, Document Control, and Supplier Quality Engineering efforts. Celestica's Product Quality Management Program will encompass, but not be limited to, the attributes of the Product Quality Program Requirements as follows. PRODUCT QUALITY ASSURANCE O QUALITY PLANNING - - Internal Procedure - - Workmanship Standards - - Customer Requirements - - International Standards - - First Article Approval - - Process Release - - New Product Introduction / Process Verification Test Approval - - Quality Stamp/Lot Label Control - - Quality Training Program o CUSTOMER QUALITY IMPROVEMENT - - Customer Interface - - Closed Loop Corrective Action (CLCA) Feedback: Problem Discovery / Root Cause Investigation / Determine Corrective Action / Implement Corrective Action / Verify Effectiveness of Corrective Action / Closure Requirements / Management Reporting - - Material Review Board - - Statistical Process Control - - Cost of Quality Metrics and Reporting - - Material Traceability o AUDIT AND DATA ANALYSIS - - ISO System Audit - - Process Audit - - Product Audit - - Material Audit - - ESD Audit - - Data Analysis and Reporting DOCUMENT CONTROL o Document Center o Document Transfer procedures o Specification Library o ECO Management o Quality Manual CONFIDENTIAL INFORMATION Page 9 29 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. STATEMENT OF WORK BETWEEN CELESTICA AND NETGEAR, INC. - -------------------------------------------------------------------------------- SUPPLIER QUALITY ENGINEERING o Supplier Engineering - Supplier Survey - - Supplier Qualification / Disqualification - - Supplier Audits - - New Product Readiness - - Component Approval - - Approved Vendor List (AVL) Management - - AVL Change Approval - - Supplier Rating - - Supplier Performance Management and Reporting - - Supplier Closed Loop Corrective Action Process - - Suppler Certification Process and Criteria o INCOMING QUALITY CONTROL - - Inspection Procedures - - Qualified Personnel - - First Article Approval - - Tooling Approval: Conditional, first shots, texturing. - - Functional Test Process - - Test Equipment and Test Programs Qualification, Calibration, Preventative Maintenance - - Equipment Lock-Out Controls - - Mechanical, Cosmetic, and Workmanship Standards - - Source Inspections - - Statistical AQL Sampling Plans - - Use of Defect Codes - - Ship-to-Stock Qualification, Measurement, and Reporting o SUPPLIER PERFORMANCE REPORTING - - Incoming Defects per Million (DPM) by product, by supplier - - Pareto of Defects - - On Time Delivery - - Supplier Corrective Action Status Report: Quantity of Corrective Actions issued, status of open actions, age of corrective actions, duration until closure. - - Cost of Quality by Supplier. - - Warranty return rate by supplier, by product. - - Returned product Defects per Million by Supplier, by product. - - Returned product Dead On Arrival (DOA) rate, by supplier, by product. - - Returned product pareto of defects by supplier, by product. CONFIDENTIAL INFORMATION Page 10 30 * Portions denoted with an CONFIDENTIAL TREATMENT REQUESTED asterisk have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. EXHIBIT 2: LIST OF PRODUCTS
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