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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
Commission File Number 001-00395
NCR CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 31-0387920
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1700 South Patterson Blvd.
Dayton, Ohio 45479
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (937) 445-5000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
----- -----
Number of shares of common stock, $.01 par value per share, outstanding as
of July 31, 1998 was 101,365,036.
<PAGE>
TABLE OF CONTENTS
PART I. Financial Information
<TABLE>
<CAPTION>
Description Page
----------- ----
<S> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Statements of Operations (Unaudited)
Quarter and Six Months Ended June 30, 1998 and 1997 3
Condensed Consolidated Balance Sheets
June 30, 1998 (Unaudited) and December 31, 1997 4
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three and Six Months Ended June 30, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
PART II. Other Information
Description Page
----------- ----
Item 6. Exhibits and Reports on Form 8-K 18
Signature 19
</TABLE>
2
<PAGE>
Part I. Financial Information
Item 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
In millions, except per share amounts
<TABLE>
<CAPTION>
Quarter Ended June 30 Six Months Ended June 30
--------------------- -------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue
Sales $ 861 $ 925 $1,520 $1,644
Services 713 720 1,363 1,390
------ ------ ------ ------
Total Revenue 1,574 1,645 2,883 3,034
------ ------ ------ ------
Operating Expenses
Cost of sales 566 641 1,024 1,124
Cost of services 536 546 1,033 1,052
Selling, general and administrative expenses 359 381 667 712
Research and development expenses 90 96 170 183
------ ------ ------ ------
Total Operating Expenses 1,551 1,664 2,894 3,071
------ ------ ------ ------
Income (Loss) from Operations 23 (19) (11) (37)
Interest expense 4 4 7 6
Other (income) expense, net (73) (25) (110) (30)
------ ------ ------ ------
Income (Loss) Before Income Taxes 92 2 92 (13)
Income tax expense 44 6 44 7
------ ------ ------ ------
Net Income (Loss) $ 48 $ (4) $ 48 $ (20)
====== ====== ====== ======
Net Income (Loss) per Common Share
Basic $ .47 $ (.04) $ .47 $ (.20)
Diluted $ .46 $ (.04) $ .46 $ (.20)
Weighted Average Common Shares Outstanding
Basic 102.6 102.1 102.9 101.8
Diluted 104.1 102.1 104.0 101.8
</TABLE>
See accompanying notes.
3
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEETS
In millions, except per share amounts
<TABLE>
<CAPTION>
June 30 December 31
1998 1997
----------- -----------
(Unaudited)
<S> <C> <C>
Assets
Current assets
Cash and short-term investments $ 770 $1,129
Accounts receivable, net 1,472 1,471
Inventories 451 489
Other current assets 207 182
------ ------
Total Current Assets 2,900 3,271
Reworkable service parts, net 234 248
Property, plant and equipment, net 867 858
Other assets 1,021 916
------ ------
Total Assets $5,022 $5,293
====== ======
Liabilities and Shareholders' Equity
Current liabilities
Short-term borrowings $ 69 $ 59
Accounts payable 304 378
Payroll and benefits liabilities 283 343
Customers' deposits and deferred service revenue 445 348
Other current liabilities 794 836
------ ------
Total Current Liabilities 1,895 1,964
Long-term debt 33 35
Pension and indemnity liabilities 333 342
Postretirement and postemployment benefits liabilities 813 813
Other liabilities 569 522
Minority interests 41 264
------ ------
Total Liabilities 3,684 3,940
------ ------
Commitments and contingencies
Shareholders' Equity
Preferred stock: par value $.01 per share, 100.0 shares
authorized, no shares issued or outstanding - -
Common stock: par value $.01 per share, 500.0 shares
authorized; 103.9 and 103.2 shares issued at June 30, 1998
and December 31, 1997, respectively; 101.7 and 103.2 shares
outstanding at June 30, 1998 and December 31, 1997, respectively 1 1
Retained earnings and paid-in capital 1,458 1,445
Other (121) (93)
------ ------
Total Shareholders' Equity 1,338 1,353
------ ------
Total Liabilities and Shareholders' Equity $5,022 $5,293
====== ======
</TABLE>
See accompanying notes.
4
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
In millions
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
---------------------- ---------------------
1998 1997 1998 1997
---- ---- ---- ----
Operating Activities
<S> <C> <C> <C> <C>
Net income (loss) $ 48 $ (4) $ 48 $ (20)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 87 94 184 186
Net gain on sales of assets (55) - (55) -
Changes in operating assets and liabilities:
Receivables (109) (110) 7 11
Inventories 7 18 (49) (78)
Payables and other current liabilities (3) 5 (88) (55)
Other operating assets and liabilities (92) 73 (140) 30
----- ----- ----- ------
Net Cash Provided by (Used in) Operating Activities (117) 76 (93) 74
----- ----- ----- ------
Investing Activities
Short-term investments, net 142 (40) 66 (277)
Expenditures for service parts (31) (44) (64) (66)
Expenditures for property, plant and equipment (23) (57) (84) (83)
Acquisition of minority interest in subsidiary (271) - (271) -
Proceeds from sales of facilities and other assets 172 - 172 -
Other investing activities 3 9 25 15
----- ----- ----- ------
Net Cash Used in Investing Activities (8) (132) (156) (411)
----- ----- ----- ------
Financing Activities
Purchases of Company common stock (78) - (78) -
Short-term borrowings, net (2) 12 10 28
Repayments of long-term debt (2) (8) (2) (12)
Other financing activities 22 18 39 18
----- ----- ----- ------
Net Cash Provided by (Used in) Financing Activities (60) 22 (31) 34
----- ----- ----- ------
Effect of exchange rate changes on cash and cash equivalents (9) 17 (13) (21)
----- ----- ----- ------
Decrease in Cash and Cash Equivalents (194) (17) (293) (324)
Cash and Cash Equivalents at Beginning of Period 787 856 886 1,163
----- ----- ----- ------
Cash and Cash Equivalents at End of Period $ 593 $ 839 $ 593 $ 839
===== ===== ===== ======
</TABLE>
See accompanying notes.
5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been prepared
by NCR Corporation (NCR) without audit pursuant to the rules and regulations of
the Securities and Exchange Commission and, in the opinion of management,
include all adjustments (consisting of normal recurring adjustments) necessary
for a fair presentation of the consolidated results of operations, financial
position, and cash flows for each period presented. The consolidated results for
interim periods are not necessarily indicative of results to be expected for the
full year. These financial statements should be read in conjunction with NCR's
1997 Annual Report to Stockholders and Form 10-K for the year ended December 31,
1997.
Certain prior years amounts have been reclassified to conform to the 1998
presentation.
2. SUPPLEMENTAL FINANCIAL INFORMATION (in millions)
<TABLE>
<CAPTION>
Periods Ended June 30
----------------------
Three Months Six Months
------------ ----------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) $ 48 $ (4) $ 48 $ (20)
Change in:
Additional minimum pension liability 16 - 15 -
Equity translation adjustment (33) 95 (40) 35
----- ----- ----- -----
Total comprehensive income $ 31 $ 91 $ 23 $ 15
===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
June 30 December 31
1998 1997
------- -----
<S> <C> <C>
Cash and Short-term investments
Cash and cash equivalents $593 $ 886
Short-term investments 177 243
---- ------
Total cash and short-term investments $770 $1,129
==== ======
Inventories
Finished goods $378 $ 353
Work in process and raw materials 73 136
---- ------
Total inventories $451 $ 489
==== ======
</TABLE>
3. CONTINGENCIES
In the normal course of business, NCR is subject to various regulations,
proceedings, lawsuits, claims, and other matters, including actions under laws
and regulations related to the environment and health and safety, among others.
Such matters are subject to the resolution of many uncertainties, and
accordingly, outcomes are not predictable with assurance. NCR believes the
amounts provided in its consolidated financial statements, as prescribed by
generally accepted accounting principles, are adequate in light of the probable
and estimable liabilities. However, there can be no assurances that the amounts
required to discharge alleged liabilities from various lawsuits, claims, legal
proceedings, and other matters, and to comply with applicable laws and
regulations, will not exceed the amounts reflected in NCR's consolidated
financial statements or will not have a material adverse effect on its
consolidated results of operations, financial condition, or cash flows. Any
amounts of costs that may be incurred in excess of those amounts provided as of
June 30, 1998 cannot presently be determined.
6
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Environmental Matters
NCR's facilities and operations are subject to a wide range of environmental
protection laws in the U.S. and other countries related to solid and hazardous
waste disposal, the control of air emissions and water discharges, and the
mitigation of impacts to the environment from past operations and practices. NCR
has investigatory and remedial activities underway at a number of currently and
formerly owned or operated facilities to comply, or to determine compliance,
with applicable environmental protection laws. NCR has been identified, either
by a government agency or by a private party seeking contribution to site
cleanup costs, as a potentially responsible party (PRP) at a number of sites
pursuant to a variety of statutory schemes, both state and federal, including
the Federal Water Pollution Control Act (FWPCA) and comparable state statutes,
and the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended (CERCLA), and comparable state statutes.
In February 1996, NCR received notice from the U.S. Department of the Interior,
Fish & Wildlife Service (USF&WS) that USF&WS considers NCR a PRP under the FWPCA
and CERCLA with respect to alleged natural resource restoration and damages to
the Fox River and related Green Bay environment (Fox River System) due to, among
other things, sediment contamination in the Fox River System allegedly resulting
from liability arising out of NCR's former carbonless paper manufacturing
operations at Appleton and Combined Locks, Wisconsin. USF&WS has also notified a
number of other manufacturing companies of their status as PRPs under the FWPCA
and CERCLA for natural resource restoration and damages in the Fox River System
resulting from their ongoing or former paper manufacturing operations in the Fox
River Valley. In addition, NCR has been identified, along with a number of other
companies, by the Wisconsin Department of Natural Resources (State) with respect
to alleged liability arising out of alleged past discharges that have
contaminated sediments in the Fox River System. In December 1996, USF&WS, two
Native American tribes, and other federal agencies (Federal Trustees) invited
NCR, the other PRP companies, and the State to enter into settlement
negotiations over these environmental claims. In January 1997, NCR and the other
PRP companies reached agreement on an interim settlement with the State. The
Federal Trustees are not parties to that agreement. In January 1997, the Federal
Trustees notified NCR and the other PRPs of the Federal Trustees' intent to
commence a natural resource damages lawsuit under CERCLA and the FWPCA within 60
days of the notice, unless a negotiated resolution of their claims could be
reached. In July 1997, the State, the United States Environmental Protection
Agency (USEPA), and the Federal Trustees entered into a Memorandum of Agreement
(MOA). The MOA states that it provides a framework under which the parties to
that agreement can coordinate remedial and restoration studies and actions
regarding the Fox River, including the assertion of claims against the PRPs, and
that removal of the PCB-contaminated sediments is expected to be the principal,
but not exclusive, action undertaken to achieve restoration of impaired natural
resources. In June 1997, USEPA announced its intention to propose the Fox River
for inclusion on the National Priorities List; shortly thereafter, the State of
Wisconsin announced its opposition to such listing. In July 1997, the USEPA sent
the PRPs a Special Notice Letter calling for formal negotiations on the
preparation of a remedial investigation and feasibility study (RI/FS) on the Fox
River; on July 15, 1997, the PRPs agreed to enter into such negotiations. In
December 1997, USEPA denied the PRPs' good faith proposal to perform the
official cleanup studies, took control of the cleanup study process, and is
working on the studies in conjunction with the State. According to the USEPA's
and State's schedule, the key studies may be done in approximately one year.
Based on past experience, it would be unusual to perform adequately such studies
within one year. Thus far, the PRPs and the Federal Trustees have agreed to
postpone litigation while negotiations over the cleanup studies have been taking
place. However, the tolling and standstill agreements between the Federal
Trustees and NCR and the other identified PRPs have expired. USEPA's recent
decision to take control over the cleanup studies appears to minimize the PRP's
ability to settle at this time and it is possible that litigation by the Federal
Trustees could be commenced during 1998. An estimate of NCR's ultimate share, if
any, of such cleanup costs or natural resource restoration and damages liability
cannot be made with certainty at this time due to (i) the unknown magnitude,
scope, and source of any alleged contamination, (ii) the absence of selected
remedial objectives and methods, and (iii) the uncertainty of the amount and
scope of any alleged natural resource restoration and damages. NCR believes that
there are additional PRPs who may be liable for such natural resource damages
and remediation costs. Further, in 1978, NCR sold the business to which the
claims apply. In this connection, NCR commenced litigation against the buyer and
its former parent alleging that they are responsible for the above-described
claims. Subsequent to December 31, 1997, the parties reached an interim partial
settlement and arbitration under which the parties are presently, and for the
foreseeable future will be, sharing both defense and liability costs.
It is difficult to estimate the future financial impact of environmental laws,
including potential liabilities. NCR accrues environmental provisions when it is
probable that a liability has been incurred and the amount of the liability is
reasonably
7
<PAGE>
estimable. Management expects that the amounts accrued from time to time, will
be paid out over the period of investigation, negotiation, remediation, and
restoration for the applicable sites, which may be ten to twenty years or more.
Provisions for estimated losses from environmental remediation are, depending on
the site, based primarily on internal and third-party environmental studies,
estimates as to the number and participation level of any other PRPs, the extent
of the contamination, and the nature of required remedial and restoration
actions. Accruals are adjusted as further information develops or circumstances
change. The amounts provided for environmental matters in NCR's consolidated
financial statements are the estimated gross undiscounted amount of such
liabilities, without deductions for insurance or third-party indemnity claims.
Except for the sharing arrangement described above with respect to the Fox
River, in those cases where insurance carriers or third-party indemnitors have
agreed to pay any amounts and management believes that collectibility of such
amounts is probable, the amounts are reflected as receivables in the
consolidated financial statements.
Legal Proceedings
In NCR's report on Form 10-Q for the quarter ended March 31, 1998, NCR reported
that there were approximately 70 product liability cases pending against NCR
alleging that its products caused so-called "repetitive strain injuries" or
"musculoskeletal disorders," such as carpal tunnel syndrome (the "RSI Cases").
The RSI Cases are now nearly concluded. Most of the RSI Cases either have been
decided in NCR's favor in the courts, dismissed voluntarily by the plaintiffs,
or are the subject of an agreement, which NCR expects to be concluded in the
near future, that resolves the underlying claims. That agreement, and NCR's
obligations thereunder, will not have a material impact on NCR's consolidated
results of operations, financial condition or cash flows. A small number of RSI
Cases remain pending in the courts, but resolution of them, whether by trial or
by agreement, is not expected to have a material impact on NCR's consolidated
results of operations, financial condition or cash flows.
NCR was named as one of the defendants in a purported class-action suit filed in
November 1996 in Florida. The complaint seeks, among other things, damages from
the defendants in the aggregate amount of $200 million, trebled, plus attorneys'
fees, based on state antitrust and common-law claims of unlawful restraints of
trade, monopolization, and unfair business practices. The portions of the
complaint pertinent to NCR, among other things, assert a purported agreement
between Siemens-Nixdorf entities (Siemens) and NCR regarding the servicing of
certain "ultra-high speed printers" manufactured by Siemens and the
agreement's impact upon independent service organizations, brokers, and end-
users of such printers. The case is still in the early stages of discovery. The
amount of any liabilities or other costs, if any, that may be incurred in
connection with this matter cannot currently be determined.
A former NCR employee (who currently has a separate federal court employment
action pending against NCR to contest her termination) and her husband, a former
NCR consultant, have filed suit against NCR in a federal district court under
the qui tam provisions of the False Claims Act. This Act permits private
individuals to bring suit on behalf of the federal government to enforce the Act
and to share in any recovery. The litigation involves allegations of billing and
other improprieties under the Office Automation Technology and Services (OATS)
contract with the U.S. Department of Transportation. The complaint does not
specify the total amount of money being sought. If certain of the allegations of
the complaint were true, however, the potential liability could range from
nominal sums representing interest for short periods of time, to tens of
millions of dollars if allegations of false billing are true. NCR has no
evidence, or reason to believe, that such false billing occurred, and believes
that with respect to the only specific allegations made the plaintiffs are
misstating internal reports from a secondary data collection system that had
nothing to do with actual bills to the government. The government, which is
obligated to investigate the allegations and determine whether to assume
prosecution of the action, has declined to intervene in the lawsuit but the
individual plaintiffs have continued to pursue this action, as they are entitled
to do. NCR intends to vigorously contest the allegations, which it believes to
be unfounded.
4. STOCK REPURCHASE PROGRAM
On April 16, 1998, NCR's Board of Directors approved a share repurchase program
authorizing the repurchase of shares valued up to $200 million. As of June 30,
1998, the Company had repurchased 2.2 million shares at a cost of $78 million.
5. ACQUISITION OF MINORITY INTEREST IN SUBSIDIARY
In April 1998, NCR's Board of Directors approved a cash tender offer to purchase
the outstanding 30% minority interest in NCR's Japanese subsidiary, NCR Japan,
Ltd. (NCR Japan). In June 1998, pursuant to the tender offer, NCR acquired an
8
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additional 27% ownership interest in NCR Japan at a cost of $271 million,
increasing NCR's ownership of the subsidiary to 97%. As a result of the
acquisition, which has been accounted for as a purchase, goodwill of
approximately $65 million was recorded by NCR and is being amortized on a
straight-line basis over 20 years. On a pro forma basis, the impact of the
transaction on NCR's consolidated net income (loss) and net income (loss) per
share for the six month periods ended June 30, 1998 and 1997 is not material.
6. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In July 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging." SFAS 133 provides guidance for the recognition and
measurement of derivatives and hedging activities. It requires an entity to
record, at fair value, all derivatives as either assets or liabilities in the
balance sheet, and it establishes specific accounting rules for certain types of
hedges. This Statement is effective for fiscal years beginning after June 15,
1999 and will be adopted by the Company when required. The impact, if any, of
adopting SFAS 133 on NCR's consolidated financial position, results of
operations and cash flows, has not been fully determined.
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-1 (SOP
98-1), "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." This Statement provides guidance on accounting for the costs of
computer software developed or obtained for internal use and establishes certain
capitalization criteria for such costs. SOP 98-1 is effective for fiscal years
beginning after December 31, 1998 and will be adopted by NCR when required. The
impact, if any, of adopting SOP 98-1 on NCR's consolidated financial position,
results of operations and cash flows, has not been fully determined.
9
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
The following table displays selected components of NCR's consolidated
statements of operations, expressed as a percentage of revenue.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
---------------- ----------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenue:
Sales 54.7% 56.2% 52.7% 54.2%
Services 45.3 43.8 47.3 45.8
----- ----- ----- -----
Total 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
Gross Margin:
Sales 34.3% 30.7% 32.6% 31.6%
Services 24.8 24.2 24.2 24.3
----- ----- ----- -----
Total 30.0 27.8 28.7 28.3
Selling, general and administrative expenses 22.8 23.2 23.1 23.5
Research and development expenses 5.7 5.8 5.9 6.0
----- ----- ----- -----
Income (loss) from operations 1.5% (1.2)% (0.4)% (1.2)%
===== ===== ===== =====
</TABLE>
Three Months Ended June 30, 1998 Compared to Three Months Ended June 30, 1997
- -----------------------------------------------------------------------------
Revenue
Revenue for the three months ended June 30, 1998 was $1,574 million, a decrease
of 4% from the second quarter of 1997. When adjusted for the unfavorable impact
of changes in foreign currency exchange rates, revenue was flat compared with
the second quarter of 1997.
Sales revenue decreased 7% to $861 million in the second quarter of 1998
compared to the second quarter of 1997. Revenue gains in the quarter in scalable
data warehousing products of 22% were more than offset by revenue declines in
retail products of 14%, financial products of 6% and other computer products of
18%. Services revenue decreased 1% to $713 million in the second quarter of 1998
compared to the second quarter of 1997.
Revenue in the second quarter of 1998 compared with the second quarter of 1997
decreased 21% in Japan, decreased 38% in the Asia Pacific region, excluding
Japan, increased 1% in the Americas and increased 4% in Europe/Middle
East/Africa (EMEA). When adjusted for the unfavorable impact of changes in
foreign currency exchange rates, revenue on a local currency basis decreased 8%
in Japan, decreased 24% in the Asia Pacific region, excluding Japan, and
increased 6% in EMEA. The Americas region comprised 52% of NCR's total revenue
in the second quarter of 1998, EMEA region comprised 31%, Japan comprised 11%
and the Asia Pacific region, excluding Japan, comprised 6%.
Gross Margin
Gross margin as a percentage of revenue increased 2.2 percentage points to 30.0%
in the second quarter of 1998 from 27.8% in the second quarter of 1997. Sales
gross margin increased 3.6 percentage points to 34.3% in the second quarter of
1998. This increase is attributable to favorable product mix, primarily from
increased sales of scalable data warehousing products. Services gross margin
increased 0.6 percentage points to 24.8% in the second quarter of 1998. The
improvement is mainly due to decreased costs resulting from reductions in
customer support personnel.
Operating Expenses
Selling, general and administrative expenses decreased $22 million, or 6%, in
the second quarter of 1998 from the second quarter of 1997. The decrease was
mainly driven by reductions in general and administrative expenses due to NCR's
continued focus on expense discipline. As a percentage of revenue, selling,
general and administrative expenses were 22.8% in the second quarter of 1998 and
23.2% in the second quarter of 1997. Research and development expenses decreased
$6 million to $90 million in the second quarter of 1998. As a percentage of
revenue, research and development
10
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expenses were 5.7% in the second quarter of 1998 and 5.8% in the second quarter
of 1997. The 1998 research and development expenses reflect the continued move
toward software and solutions development efforts, with less emphasis on
hardware, operating systems and middleware.
Income (Loss) Before Income Taxes
Operating income was $23 million in the second quarter of 1998 compared to an
operating loss of $19 million in the second quarter of 1997. Interest expense
was $4 million in both the second quarter of 1998 and 1997. Other income, net of
expenses, was $73 million in the second quarter of 1998 compared to $25 million
in the second quarter of 1997. The increase in other income was primarily due to
a gain of $55 million on the sale of NCR's TOP END(R) middleware technology and
product family to BEA Systems, Inc. (BEA).
Income before taxes was $92 million in the second quarter of 1998 compared to
income before taxes of $2 million in the second quarter of 1997.
Net Income (Loss)
The provision for income taxes was $44 million in the second quarter of 1998
compared to $6 million in the second quarter of 1997. NCR's second quarter 1997
tax provision resulted primarily from a normal provision for income taxes in
those foreign tax jurisdictions where its subsidiaries were profitable, and an
inability to reflect tax benefits from net operating losses and tax credits,
primarily in the United States.
Net income was $48 million in the second quarter of 1998, compared with a net
loss of $4 million in the same period in 1997.
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997
- -------------------------------------------------------------------------
Revenue
Revenue for the six months ended June 30, 1998 was $2,883 million, a decrease of
5.0% from the comparable period last year. When adjusted for the unfavorable
impact in foreign currency exchange rates, revenue decreased 1%.
Sales revenue decreased 8% to $1,520 million in the first six months of 1998
compared to the same period of 1997. Revenue gains in financial products of 2%
and scalable data warehousing products of 1% were more than offset by revenue
declines in retail products of 7%, other computer products of 18% and Systemedia
products of 4%. Services revenue decreased 2% to $1,363 million in the first six
months of 1998 compared to the same period of 1997. This decrease was the result
of declines in both customer support and professional services revenues.
Revenue in the first six months of 1998 compared with the first six months of
1997 decreased 21% in Japan, decreased 30% in the Asia Pacific region, excluding
Japan, decreased 1% in the Americas and increased 2% in EMEA. When adjusted for
the unfavorable impact in foreign currency exchange rates, revenue on a local
currency basis decreased 12% in Japan, decreased 13% in the Asia Pacific region,
excluding Japan, and increased 5% in EMEA. The Americas region comprised 52% of
NCR's total revenues in the first six months of 1998, EMEA region comprised 31%,
Japan comprised 11% and the Asia Pacific region, excluding Japan, comprised 6%.
Gross Margin
Gross margin as a percentage of revenue increased 0.4 percentage points to 28.7%
in the first six months of 1998 from 28.3% in the first six months of 1997.
Sales gross margins increased 1.0 percentage point to 32.6% in the first six
months of 1998. This increase is primarily due to improved margins in both
retail and financial products. Services gross margins were down 0.1 percentage
point to 24.2% in the first six months of 1998. This decrease was the result of
a decline in professional services margin, which more than offset improvements
in customer support services margin.
Operating Expenses
Selling, general and administrative expenses decreased $45 million, or 6.3%, in
the first six months of 1998. The decrease was primarily the result of NCR's
continued focus on expense discipline and the favorable impact on expenses of
foreign currency exchange rates. As a percentage of revenue, selling, general
and administrative expenses were 23.1% in the first six months of 1998 and 23.5%
in the same period of 1997. Research and development expenses decreased $13
million to $170 million in the first six months of 1998. As a percentage of
revenue, research and development expenses were 5.9% in the first six months of
1998 and 6.0% in the first six months of 1997. The 1998 research and development
expenses reflect the continued move toward software and solutions development
efforts, with less emphasis on hardware, operating systems and middleware.
11
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Income (Loss) Before Income Taxes
Operating loss was $11 million in the first six months of 1998 compared to an
operating loss of $37 million in the first six months of 1997. Interest expense
was $7 million in the first six months of 1998 compared to $6 million in the
comparable period of 1997. Other income, net of expenses, was $110 million in
the first six months of 1998 compared to $30 million in the first six months of
1997. The increase over 1997 primarily reflects the $55 million gain on the sale
of TOP END to BEA.
Income before taxes was $92 million in the first six months of 1998 compared to
a loss before taxes of $13 million in the first six months of 1997.
Net Income (Loss)
The provision for income taxes was $44 million in the first six months of 1998
compared to $7 million in the first six months of 1997. NCR's tax provision in
the first six months of 1997 resulted primarily from a normal provision for
income taxes in those foreign tax jurisdictions where its subsidiaries were
profitable, and an inability to reflect tax benefits from net operating losses
and tax credits, primarily in the United States.
Net income was $48 million in the first six months of 1998 compared to a net
loss of $20 million for the same period in 1997.
FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES
NCR's cash and short-term investments totaled $770 million at June 30, 1998
compared to $1,129 million at December 31, 1997.
Net cash flows used in operating activities were $93 million in the first six
months of 1998 compared to $74 million provided by operating activities in the
first six months of 1997. 1998 operating activities included a $55 million gain
on the sale of TOP END to BEA. In addition, in the second quarter of 1997, net
cash flows provided by operations included the receipt of approximately $90
million from AT&T Corp. (AT&T) in accordance with certain tax allocation
agreements entered into at the time NCR was spun-off from AT&T. No similar
payments were included in the 1998 cash flows.
Net cash flows used in investing activities were $156 million in the first six
months of 1998 and $411 million in the same period of 1997. In 1998, NCR
purchased the minority interest of its Japanese subsidiary for $271 million.
This use of cash was partially offset by proceeds from the sale of NCR's TOP END
middleware technology to BEA and the sale of NCR's retail and computer systems
manufacturing operations to Solectron Corporation (Solectron). Short-term
investment activity provided $66 million of cash in the first six months of 1998
compared to a $277 million use of cash in the comparable period in 1997, when
NCR was beginning to implement its overall cash management strategy after being
spun-off from AT&T. Capital expenditures were $148 million for the first half of
1998 and $149 million for the comparable period in 1997. Capital expenditures
generally relate to expenditures for reworkable parts used to service customer
equipment, expenditures for equipment and facilities used in research and
development, and expenditures for facilities to support sales and marketing
activities.
Net cash flows used in financing activities were $31 million in the first six
months of 1998 compared to $34 million provided by financing activities in the
same period of 1997. In April 1998, NCR implemented a share repurchase program
which resulted in the use of $78 million of cash in the second quarter of 1998.
NCR believes that cash flows from operations, its credit facility, and other
short- and long-term financings, if any, will be sufficient to satisfy its
future working capital, research and development, capital expenditure, and other
financing requirements for the foreseeable future.
12
<PAGE>
FACTORS THAT MAY AFFECT FUTURE RESULTS
Management's Discussion and Analysis and other sections of this Form 10-Q
contain information based on management's beliefs and forward-looking statements
that involve a number of risks, uncertainties, and assumptions. Any Annual
Report to Stockholders, Form 10-K, Form 8-K, and other written or oral
statements made by the Company or its representatives may also contain such
forward-looking statements. These statements are not guarantees of future
performance. Therefore, actual outcomes and results may differ materially from
what is expressed or forecasted in such forward-looking statements. The Company
undertakes no obligation to update publicly any forward-looking statements,
whether as a result of new information, future events, or otherwise.
Business Strategy
NCR's future operating results are dependent upon the Company's ability to
implement, successfully and in a timely manner, its business strategy. This
strategy focuses on, among other things, profitable revenue growth, improved
gross margins, continued expense discipline, and an improved effective tax rate.
The results, costs, and benefits associated with implementing NCR's strategy and
business plan could vary significantly from those expected. The success of NCR's
strategy is dependent upon, among other things, the technologies, actions,
products, and strategies of NCR's current and future competitors, general
domestic and foreign economic and business conditions, the condition of the
information technology industry and the industries in which NCR's customers
operate, and other factors, including those described below.
Competition
NCR operates in the extremely competitive information technology industry. The
markets for this industry are characterized by rapidly changing technology,
evolving industry standards, frequent new product introductions, and price and
cost reductions. In addition, the movement toward common industry standards
continues to increase the commoditization of products, including servers and
other computer products, making differentiation more difficult. NCR's future
operating results are dependent upon its ability to rapidly design, develop, and
market, or otherwise obtain and introduce new solutions and related products and
services that are competitive in the marketplace. The Company must commit
significant resources in advance of bringing its business solutions to the
marketplace. There are numerous risks and uncertainties inherent in this complex
process, including proper identification of customer needs, technological
changes, timely and cost-effective development and introduction, differentiation
from NCR's competitors, and market acceptance.
New Solutions Introductions
NCR provides its customers with solutions composed of hardware, software,
consulting, installation, or maintenance services. NCR also provides selected
products and services to its customers on a stand-alone basis. The Company
continually refines its current solutions and develops new solutions for its
customers. The success of these efforts is dependent upon a number of factors
and can be adversely impacted by: development or manufacturing delays; changes
in costs; and delays in customer purchases of existing solutions and related
products and services in anticipation of the introduction of new offerings,
among other factors. In addition, the timing of introductions of new products or
services offered by competitors could impact the future operating results of
NCR, particularly when these introductions coincide or precede the introduction
of NCR's own new solutions and related products and services. Likewise, some of
NCR's new solution offerings may replace or compete with the Company's current
offerings.
Emerging Markets
NCR's future operating results are also dependent upon its timely recognition of
and expansion into new and emerging markets. In addition, NCR's future success
may be impacted by its ability to forecast the proper mix of business solutions
and related products and services to meet the demands of its customers in these
markets as well as established markets.
13
<PAGE>
Margin Pressure
In recent years, the significant competition in the information technology
industry has decreased gross margins for many companies and could continue to do
so in the future. Future operating results will depend in part on NCR's ability
to manage such margin pressure by maintaining a favorable mix of solutions and
other revenues and by achieving component cost reductions and operating
efficiencies. Changes in the mix of NCR's solutions and related products and
services revenues could cause operating results to vary.
Reliance on Third Parties
Due to NCR's focus on providing complex integrated solutions to customers, the
Company frequently relies on third parties to provide significant elements of
NCR's offerings, which must be integrated with those elements provided by the
Company. NCR has from time to time formed alliances with third parties, such as
Solectron, that have complementary products, services and skills. These business
practices often require the Company to rely on the performance and capabilities
of third parties which are beyond NCR's control. NCR's reliance on third
parties, including Solectron, introduces a number of risks to NCR's business,
including the risk of non-performance by alliance partners or other third
parties, difficulties with integrating elements provided by NCR with those of
third parties, and delays in the introduction of new NCR solutions. Further, the
failure of any of these third parties to provide products or services that
conform to NCR's specifications or quality standards could impair the Company's
ability to offer solutions that include such third party elements or may impair
the quality of such solutions.
A number of NCR's solutions rely on specific suppliers for microprocessors and
operating systems. The Company also uses many standard parts and components. NCR
believes there are a number of competent vendors for most parts and components.
However, there are a number of important components, microprocessors, and
operating systems that are developed by and purchased from single sources due to
price, quality, technology, or other considerations. In some cases, these items
are available only from single sources. For example, NCR's computer systems are
based on microprocessors and related peripheral chip technology designed by
Intel Corporation. NCR incorporates UNIX (R) and Microsoft Windows NT(R)
operating systems into certain of its solutions and may utilize Oracle
Corporation's and Informix Corporation's commercial databases for NCR's High
Availability Electronic Commerce solution portfolio. Accordingly, NCR's results
of operations are dependent upon the Company's ability to secure alternative
providers for such parts, components, microprocessors, and operating systems and
upon the ability of such technologies to remain competitive.
Key Personnel
NCR's success is also dependent on, among other things, its ability to attract
and retain the highly-skilled technical, sales, and other personnel necessary to
enable the Company to successfully develop and sell new and existing solutions
and related products and services.
Seasonality
NCR's sales are historically seasonal, with revenue higher in the fourth quarter
of each year. Consequently, during the three quarters ending in March, June, and
September, NCR has historically experienced less favorable results than in the
quarter ending in December. Such seasonality also causes NCR's working capital
cash flow requirements to vary from quarter to quarter depending on the
variability in the volume, timing, and mix of product sales. In addition, in
many quarters, a large portion of NCR's revenue is realized in the third month
of the quarter. Operating expenses are relatively fixed in the short term and
often cannot be materially reduced in a particular quarter if revenue for that
quarter falls below anticipated levels.
International Operations
In the first half of 1998, NCR's international operations represented
approximately 56% of the Company's consolidated revenue. Specifically, Japan,
the United Kingdom, Germany, and France represented approximately 11%, 6%, 5%,
and 4% of consolidated revenue, respectively. Although the diversity of NCR's
operations may help to mitigate certain of the risks associated with geographic
concentrations of operations (for example, adverse changes in foreign currency
exchange rates and business disruptions due to natural disasters and economic or
political uncertainties), there are numerous other risks inherent in operating
abroad. Such operations may be significantly impacted by a variety of factors,
many of which cannot be readily foreseen and over which NCR has no control. In
addition, a significant change in the value of the dollar or other functional
currencies against the currency of one or more countries where NCR recognizes
revenues or earnings or maintains net asset investments may significantly impact
future operating results. NCR enters into foreign currency
14
<PAGE>
contracts in an attempt to mitigate the impact of changes in currency exchange
rates, generally over the short- or medium-term.
Income Taxes
NCR's tax rate is dependent upon the geographical composition of taxable
earnings and NCR's ability to realize the benefits from tax losses in certain
tax jurisdictions. To the extent that NCR is unable to reflect tax benefits from
net operating losses and tax credits, arising primarily in the United States, to
offset provisions for income taxes attributable to its profitable foreign
subsidiaries, NCR's overall effective tax rate could increase.
Contingencies
In the normal course of business, NCR is subject to regulations, proceedings,
lawsuits, claims, and other matters, including actions under laws and
regulations related to the environment and health and safety, among others. Such
matters are subject to the resolution of many uncertainties, and accordingly,
outcomes are not predictable with assurance. Although NCR believes that amounts
provided in its financial statements are currently adequate in light of the
probable and estimable liabilities, there can be no assurances that the amounts
required to discharge alleged liabilities from lawsuits, claims, and other legal
proceedings and environmental matters, and to comply with applicable
environmental laws, will not impact future operating results.
Year 2000
Year 2000 compliance issues concern the inability of certain computerized
information systems to properly process date-sensitive information as the year
2000 approaches. Systems that do not process such information may require
modification or replacement prior to the year 2000. Year 2000 issues impact NCR
and substantially all companies in the industries in which NCR operates. NCR has
developed plans to address the potential risks it faces as a result of Year 2000
issues. These risks include, among other things, the possible failure or
malfunction of NCR's internal information systems, problems with the products
and services NCR has provided to its customers, the potential for increased
warranty, contract and other claims, and possible problems arising from the
failure of the Company's suppliers' systems. No litigation has been initiated
against NCR in connection with Year 2000 issues, although suits have been
brought against other manufacturers of computers and retail equipment, and such
claims may be advanced against NCR in the future.
NCR's Year 2000 plans involve replacing or upgrading affected internal
information systems, developing Year 2000 qualified products, designating those
products that will not be rendered Year 2000 qualified and, in some
circumstances, making Year 2000 upgrades available for products. Pursuant to
these plans, the Company has completed its analysis of the Year 2000 issues
associated with critical internal information systems and the products it
offers. The majority of the products NCR presently develops and provides to
customers are Year 2000 qualified. The Company expects that the remainder of the
products it presently develops and provides to customers will be Year 2000
qualified by or about the end of 1998. However, certain products that NCR does
not intend to qualify for Year 2000 may continue to be requested by customers.
NCR will evaluate such requests and may, under certain circumstances, provide
these products to customers. NCR also expects to complete the modification of
its critical internal information systems by or about the end of 1998. Worldwide
implementation of these Year 2000 system changes is anticipated to be completed
by the end of 1999. The Company has also completed its analysis of non-critical
internal information systems and has developed plans to address the associated
Year 2000 issues, where appropriate.
In addressing the Year 2000 issues associated with its internal information
systems, management believes it is most efficient to incorporate Year 2000
changes with other anticipated non-Year 2000 system changes, when possible.
Accordingly, NCR does not separately identify the cost incurred to resolve Year
2000 issues from the costs of other non-Year 2000 system changes, as many of
these changes are being implemented concurrently. NCR estimates the combined
cost of such Year 2000 and non-Year 2000 internal information system changes to
be approximately $135 million. These costs consist primarily of compensation for
NCR's information technology employees and contractors, and related hardware and
software costs. Approximately $17 million of the Year 2000 and other non-Year
2000 system upgrade and replacement costs were incurred in 1997. During 1998 and
1999, the Company expects to incur system replacement and upgrade costs,
including Year 2000, of approximately $65 million and $35 million, respectively.
NCR intends to capitalize or expense these costs as required by generally
accepted accounting principles. In addition, the Company expects to fund these
costs through operating cash flows and, because they will be funded through a
reallocation of NCR's overall information
15
<PAGE>
technology and administrative spending, such costs are not expected to result in
significant increases in information technology expenditures.
In addition, NCR is evaluating the potential impact of Year 2000 on the products
and services provided by its suppliers and has established Year 2000 guidelines
for its suppliers. NCR is conducting audits or reviews of its critical suppliers
in accordance with these guidelines and plans to substantially complete such
activity by the end of 1998. Failure by NCR's critical suppliers to address
potential Year 2000 issues or adhere to these guidelines could adversely impact
the Company's consolidated results of operations, financial condition, and cash
flows.
NCR continues to evaluate the estimated costs associated with Year 2000 issues;
however, the impact of Year 2000 on the Company is not fully determinable.
Furthermore, there can be no assurances that there will not be delays in
implementing the plans described above or increased costs associated with Year
2000 issues or that such delays or costs will not have a material impact on
NCR's consolidated results of operations, financial condition, and cash flows.
16
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
NCR is exposed to market risk, including changes in foreign currency exchange
rates and interest rates. NCR uses a variety of measures to monitor and manage
these risks, including derivative financial instruments. Qualitative disclosures
about these risks and derivative instruments are discussed more fully in NCR's
Annual Report to Stockholders for the year ended December 31, 1997.
The table below summarizes information about instruments sensitive to currency
exchange rates, primarily foreign currency forward contracts, options, and swaps
at June 30, 1998 (in millions except for average contract rates). This table
should be read in conjunction with the information presented in NCR's Annual
Report to Stockholders for the year ended December 31, 1997.
U.S. Dollar Value of Net Foreign
Exchange Contracts
<TABLE>
<CAPTION>
Net
Underlying Average
Currency Contract
Exposure Rate
Associated (Foreign
with Firmly Currency
Committed Notional per US
Transactions Value Dollar) Gain/(Loss)
------------ -------- -------- -----------
<S> <C> <C> <C> <C>
Forward Contracts:
British Pound 267 585 .62 5
Japanese Yen 194 194 131.81 7
Canadian Dollar 16 68 1.42 (3)
Cross-dollar, non-U.S. 332 351 N/A (30)
Other 194 195 N/A (2)
Options:
British Pound - 82 .62 -
French Franc 23 37 5.94 (1)
Other - 37 N/A -
Swaps:
Cross-dollar, non-U.S. 171 171 N/A (25)
</TABLE>
In the second quarter of 1998, NCR revised its foreign currency hedging program
to increase the use of option contracts to hedge forecasted transactions.
Accordingly, the table above reflects the resulting increase in option contracts
held as compared with the information contained in NCR's 1997 Annual Report to
Stockholders. There have been no significant changes in the carrying value, fair
value, maturity schedule, or other information related to NCR's outstanding
borrowings at June 30, 1998, as compared with that reported in its Annual Report
to Stockholders for the year ended December 31, 1997.
17
<PAGE>
Part II. Other Information
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Purchase and Manufacturing Agreement, effective April 27,
1998, by and between NCR Corporation and Solectron
Corporation. Confidential treatment has been requested with
respect to certain portions of this exhibit pursuant to an
Application for Confidential Treatment filed with the
Commission under Rule 24b-2(b) under the Securities Exchange
Act of 1934, as amended.
27 Financial Data Schedule
(b) Reports on Form 8-K
(1) On June 2, 1998, NCR filed a Current Report on Form 8-K with
respect to its news release on the announcement that BEA
Systems, Inc. will acquire NCR Corporation's TOP END
Enterprise Middleware product family.
(2) On July 16, 1998, NCR filed a Current Report on Form 8-K,
including unaudited consolidated balance sheets as of June
30, 1998, and unaudited consolidated statements of
operations, consolidated revenue summary, and condensed
consolidated statements of cash flows for the quarter ended
June 30, 1998, with respect to its news release on the
second quarter financial results of 1998.
UNIX is a registered trademark in the United States and other countries,
exclusively licensed through X/OPEN Company Limited.
Windows NT is a registered trademark of Microsoft Corporation.
TOP END is a registered trademark of BEA Systems, Inc.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
NCR CORPORATION
Date: August 13, 1998 By: /s/ John L. Giering
--------------------------------------
John L. Giering, Senior Vice-President
and Chief Financial Officer
19
<PAGE>
EXHIBIT INDEX
EXHIBIT
NO.
---
10.1 Purchase and Manufacturing Agreement, effective April 27, 1998, by and
between NCR Corporation and Solectron Corporation. Confidential
treatment has been requested with respect to certain portions of this
exhibit pursuant to an Application for Confidential Treatment filed
with the Commission under Rule 24b-2(b) under the Securities Exchange
Act of 1934, as amended.
27 Financial Data Schedule
<PAGE>
EXHIBIT 10.1
[ ] Confidential treatment has been requested pursuant to an Application for
Confidential Treatment filed with the Commission under Rule 24b-2(b) under
the Securities Exchange Act of 1934, as amended. The confidential portion
that is omitted has been filed separately with the Commission.
PURCHASE AND MANUFACTURING SERVICES
AGREEMENT
Agreement Number 98-M-SU-0005
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
Solectron Corporation NCR CORPORATION
847 Gibraltar Drive 1700 S. Patterson Blvd.
Milpitas, CA 95035 Dayton, OH 45479
- --------------------------------------------------------------------------------
</TABLE>
This Agreement is effective on April 27, 1998 and will terminate on April 30,
2003, unless renewed in accordance with the Agreement.
- --------------------------------------------------------------------------------
Under this agreement, NCR will purchase personal computers, entry level and
server computers from Solectron and have Solectron build MPP computers, point of
sale devices and retail scanners.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
ARTICLE I - GENERAL TERMS AND CONDITIONS........................................................... 3
ARTICLE II - OEM................................................................................... 10
ARTICLE III - MANUFACTURING SERVICES............................................................... 19
EXHIBIT A - PRODUCT SPECIFICATIONS................................................................. 29
EXHIBIT B - PRICING, LEADTIME, FLEXIBILITY, ORDER RESCHEDULING, CANCELLATION,
AND RETURNED EVALUATION EQUIPMENT.................................................................. 33
EXHIBIT C - QUALITY................................................................................ 36
EXHIBIT D - SUPPORT SERVICE REQUIREMENTS........................................................... 47
EXHIBIT E - SAFETY AND REGULATORY REQUIREMENTS..................................................... 50
EXHIBIT F - SERVICE LEVEL AGREEMENT................................................................ 56
EXHIBIT G - ELECTRONIC DATA INTERCHANGE............................................................ 76
EXHIBIT H - NCR AND THIRD PARTY SOFTWARE........................................................... 80
EXHIBIT I - YEAR 2000.............................................................................. 89
</TABLE>
<PAGE>
NCR CORPORATION, a Maryland corporation, having a place of business at 1700 S.
Patterson Blvd., Dayton, OH 45479 USA ("NCR") and Solectron Corporation,
having a place of business at 847 Gibraltar Drive, Milpitas, CA 95035
("Solectron "),
AGREE AS FOLLOWS:
This document sets forth a set of agreements between the parties. Each
agreement consists of Article I (General Terms and Conditions) together with a
consecutively number article and any exhibits referenced therein ("Agreement").
For example, Article I and Article II (OEM) make up a contract between the
parties; and Article I and Article III (Manufacturing Services) make up a
separate contract between the parties.
AGREED by the following authorized representatives:
SOLECTRON CORPORATION NCR CORPORATION
BY: /s/ SUSAN A. WANG BY: /s/ WILLIAM J. EISENMAN
------------------------------- ------------------------------
NAME: SUSAN A. WANG NAME: WILLIAM J. EISENMAN
------------------------------ -----------------------------
TITLE: CHIEF FINANCIAL OFFICER TITLE: SENIOR VICE PRESIDENT
----------------------------- ----------------------------
DATE: APRIL 14, 1998 DATE: APRIL 13, 1998
------------------------------ -----------------------------
Page 2
<PAGE>
ARTICLE I
General Terms and Conditions
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
1. CONFIDENTIAL MATERIALS................................... 3
2. NOTICES.................................................. 4
3. AUDIT.................................................... 4
4. DISPUTES................................................. 5
5. GENERAL.................................................. 6
5.1 Assignment.......................................... 6
5.2 Severability........................................ 6
5.3 Excused Performance................................. 6
5.4 Choice of Law....................................... 6
5.5 Constrained Capacity................................ 6
5.6 Affiliate Participation............................. 6
5.7 Waiver or Delay..................................... 6
5.8 Solectron Disaster Plan............................. 7
5.9 Duty Drawback....................................... 7
5.10 Country of Origin.................................. 7
5.11 Compliance with Laws............................... 7
5.12 Personal Warranties................................ 7
5.13 Relationship of Parties............................ 7
5.14 Periods of Time.................................... 7
5.15 Publication of Agreement........................... 7
5.16 Limitation of Liability............................ 7
5.17 Entire Agreement................................... 8
6. OTHER OBLIGATIONS........................................ 8
6.1 Reduction [ ]........................................ 8
6.2 Tooling............................................. 8
6.3 [ ]................................................. 8
6.4 Year 2000 Test...................................... 8
7. DEFINITIONS.............................................. 8
</TABLE>
1. CONFIDENTIAL MATERIALS
For a period of 5 years from the date of receipt, the recipient will use
the same degree of care to prevent the disclosure of Confidential
Information to any other person as it uses to protect other information of
a similar nature which it owns or possesses, but in no event less than
reasonable care, unless disclosure is required by law. The recipient may
disclose Confidential Information only to those of its employees with a
legitimate need to know. Unless the discloser provides written notice to
the contrary, the recipient may disclose Confidential Information to its
affiliates or contractors with a legitimate need to know who agree in
writing to confidentiality obligations consistent with this
Page 3
<PAGE>
Section. All materials containing Confidential Information are and remain
the discloser's property, and upon written request the recipient will
promptly return them, and all copies of them, except a single archival
copy.
2. NOTICES
Except as otherwise specifically provided herein, notices and other
communications will be delivered by any method providing for proof of
delivery, except that a notice of default or termination may be delivered
by facsimile transmission if the original document is also promptly
delivered to the recipient. A notice will be deemed given on the date of
receipt at the following address(es): the addresses shown on the cover page
of this Agreement, with an additional copies to:
General Counsel/Notices WHQ-5 Susan Wang
NCR Corporation Senior Vice President and CFO
Dayton, OH 45479 Solectron Corporation
847 Gibraltar Drive
Vice President, Supplier Management Milpitas, CA 95035
NCR Corporation
3325 Platt Springs Rd. Legal Department
West Columbia, SC 29170 Solectron Corporation
847 Gibraltar Drive
Vice President, Supplier Management Milpitas, CA 95035
NCR Corporation
2651 Satellite Blvd.
Duluth, GA 30096
Either party may change its address upon notice as required by this
Section.
3. AUDIT
3.1 During the term of this Agreement, Solectron agrees to keep all usual and
proper records and books of account and all usual and proper entries
relating to the compliance with provisions concerning quality control,
third party software licenses procured by NCR in connection with this
Agreement, NCR software, component and Part price information required to
be disclosed by Solectron to NCR in connection with Exhibit B, Year 2000
and Safety regulatory warranties, Sections 5.5, 5.9, 5,10, 5.11 of Article
I, Section 6.9 of Article II, Section 5.9 of Article III, Section 5.2 of
Exhibit D, Exhibit F, royalties reported under Exhibit B, and most favored
pricing. Solectron shall maintain on Solectron premises such records for
itself and for each Solectron subsidiary which exercises rights under this
Agreement.
3.2 In order to verify Solectron's compliance with the terms of this Agreement
expressly set forth in Section 3.1 of Article I and any third party or
governmental audit requirements, NCR may cause (i) an audit to be made of
Solectron's and/or Solectron's subsidiaries' books and records directly
related to the audited matters and/or (ii) an inspection to be made of
Solectron's and/or Solectron's subsidiaries' facilities and procedures.
Any audit and/or inspection shall be conducted during regular business
hours at such facilities, with 5 business days notice. Any audit may be
conducted by NCR or an independent
Page 4
<PAGE>
certified public accountant selected by NCR (other than on a contingent fee
basis) reasonably acceptable to Solectron. Such third party auditor shall
enter into a nondisclosure agreement with Solectron and shall only report
to NCR on Solectron's compliance with respect to the audited matter.
3.3 Solectron agrees to provide NCR's designated audit or inspection team
access to the relevant Solectron's and/or Solectron's subsidiaries' records
and facilities, except to the extent such access may be limited or
prohibited by Solectron's agreements with its other customers.
3.4 Prompt adjustment shall be made to compensate for any errors or omissions
disclosed by such audit unless Solectron objects to the results of the
audit in writing. Any such audit shall be paid for by NCR unless material
discrepancies are disclosed. If material discrepancies are disclosed,
Solectron agrees to pay NCR for the reasonable costs associated with the
audit. In no event shall audits be made more frequently than semi-annually
unless the immediately preceding audit disclosed a material discrepancy.
4. DISPUTES
4.1 In the event any controversy or claim arises between the parties to this
Agreement, they will attempt in good faith to negotiate a solution to their
differences by elevating the issue to senior management for resolution and,
if negotiation does not result in a resolution within 30 days, they agree
to participate in good faith mediation as administered by the American
Arbitration Association. In the event of threatened or actual irreparable
harm, a party may elect to bypass this Section and proceed directly
pursuant to Sections 4.2 or 4.4.
4.2 Any controversy or claim between the parties to this Agreement, whether
based on contract, tort, statute, or other legal theory (including but not
limited to any claim of infringement, fraud or misrepresentation), which
cannot be resolved by negotiation or mediation will be resolved by
arbitration pursuant to this section and the then-current Commercial Rules
and supervision of the American Arbitration Association. The duty to
arbitrate will extend to any employee, officer, shareholder, agent, or
affiliate of a party hereto making or defending a claim which would be
subject to arbitration if brought by a party hereto. If any part of this
section is held to be unenforceable, it will be severed and will not affect
either the duty to arbitrate hereunder or any other part of this section.
4.3 The arbitration will be held in the US headquarters city of the party not
initiating the claim before a sole arbitrator who is knowledgeable in
business information and electronic data processing systems. The
arbitrator's award will be final and binding and may be entered in any
court having jurisdiction thereof. The arbitrator will not have the power
to award any damages excluded by, or in excess of, any damage limitations
expressed in this Agreement. Issues of arbitrability will be determined in
accordance solely with the federal substantive and procedural laws relating
to arbitration; in all other respects, the arbitrator will be obligated to
apply and follow the substantive law of the state or nation specified in
this Agreement. Each party will bear its own attorney's fees associated
with the arbitration and other costs and expenses of the arbitration will
be borne as provided by the rules of the American Arbitration Association.
4.4 If a party breaches any provision of this Agreement related to the other
party's or the other party's supplier's intellectual property, the other
party will have no adequate
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remedy at law and may petition a court of law for injunctive relief to
protect the intellectual property.
5. GENERAL
5.1 Assignment.
-----------
No assignment of this Agreement by a party will be valid without the prior
written consent of the other party which will not be unreasonably withheld.
As used in this Section, "assignment" shall not include mergers,
consolidations or the acquisition of the majority of the outstanding voting
shares or other controlling interest in the party. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns. NCR, if it sells an operating unit that
is using this Agreement, may replicate this Agreement to such operating
unit.
5.2 Severability. If any provision of this Agreement shall be held to be
-------------
illegal, invalid, or unenforceable, the remaining provisions shall remain
in full force and effect provided the intent of the parties has not been
materially frustrated.
5.3 Excused Performance. Neither party will be liable for damages because of
--------------------
delays in or failure of performance when the delay or failure is due to
supplier shortages beyond Solectron's reasonable control, acts of God, acts
of civil or military authority, fire, flood, strikes, war, epidemics,
shortage of power, or other cause beyond such party's reasonable control
and without its fault or negligence, if the party (a) uses best efforts to
promptly notify the other in advance of conditions which will result in a
delay in or failure of performances (b) uses commercially reasonable
efforts to avoid or remove the conditions (including transferring
production to other manufacturers who are not affiliated with Solectron),
and (c) immediately continues performance when the conditions are removed.
5.4 Choice of Law. This Agreement shall be governed by and construed in
--------------
accordance with the laws of the State of New York, as applied to contracts
entered into and performed entirely in that State, specifically excluding
its rules on conflicts of law.
5.5 Constrained Capacity. During times of constrained capacity, Solectron will
--------------------
use all commercially reasonable efforts to utilize capacity planned for
NCR to meet NCR requirements. In the event of such constrained capacity,
Solectron will provide NCR first priority within NCR's forecasts, as
regards available capacity allocation and in no event will NCR's available
allocation be lower than the proportion of NCR's pre-allocation Orders as a
percentage of Solectron's business for the Products and/or Parts. Subject
to Section 5.3, acceptance by NCR of such percentage of its Orders will not
be a waiver of any rights or remedies which NCR may have as a result of
Solectron's failure to ship all ordered Products and Parts.
5.6 Affiliate Participation. All rights granted to NCR in this Agreement may
-----------------------
be exercised by any Affiliate of NCR agreeing to be bound by the terms of
this Agreement. NCR agrees to guarantee the performance of its Affiliates
that exercise rights under this Agreement.
5.7 Waiver or Delay. Failure to enforce any provision of this Agreement is not
---------------
a waiver of future enforcement of that or any other provision.
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5.8 Solectron Disaster Plan. Upon NCR's request, Solectron will provide NCR an
-----------------------
opportunity to review Solectron's disaster recovery plan which will be
prepared within 180 days after the Effective Date. At a minimum, the plan
shall address production interruptions and the contingencies indicated in
Section 5.3 of Article I.
5.9 Duty Drawback. NCR will be entitled to claim duty drawback on Products and
-------------
Parts exported by or for NCR. Solectron will submit, for any Products and
Parts containing imported components, a Manufacturing Drawback Entry and/or
Certificate (Customs Form 331 or other as applicable), will retain all
records required by U.S. statutes and regulations and identified in any
drawback contract covering Products and Parts, and will assist NCR as
reasonably requested by providing relevant information to NCR, in order to
claim duty drawback for Products and Parts.
5.10 Country of Origin. Solectron will provide to NCR, prior to the first
-----------------
delivery of any Product hereunder, a certificate of origin stating the
country of origin for the Product or Part and if applicable a NAFTA
certificate of origin. If the country of origin for any Product should
change, Solectron will provide a new certificate of origin prior to the
first delivery of any Product affected by the change.
5.11 Compliance with Laws. Both parties will, in the manufacture/sale of the
--------------------
Products and parts, and in all other performance under this Agreement,
fully comply with all applicable federal, state, local and other
governmental laws and regulations.
5.12 Personal Warranties. Each party represents and warrants that it has the
-------------------
right and power to enter into this Agreement.
5.13 Relationship of Parties. The relationship of Solectron and NCR as
-----------------------
established under this Agreement will be and remain one of independent
contractors, and neither party will at any time or in any way represent
itself as being a dealer, agent or other representative of the other party
or as having authority to assume or create obligations or act in any manner
on behalf of the other party. Nothing in this Agreement creates a
partnership, joint venture, agency, or franchise relationship.
5.14 Periods of Time. Saturdays, Sundays, and holidays will be included when
---------------
computing the number of days required or permitted for notice, response, or
other action on the part of either party.
5.15 Publication of Agreement. Except as may be required by law or by the
------------------------
order of a court of competent jurisdiction, neither Solectron nor NCR will
publicize or otherwise advertise the existence of this Agreement or its
terms without the prior written consent of the other party. In the event
this Agreement must be disclosed, the party disclosing the Agreement shall
inform the other party of the requirement and shall, as requested by such
other party, provide all reasonable assistance in seeking a protective
order or confidential treatment of this Agreement.
5.16 Limitation of Liability. EXCEPT AS EXPRESSLY INDICATED IN THIS AGREEMENT
-----------------------
OR OTHERWISE EXPRESSLY AGREED IN WRITING, IN NO EVENT WILL EITHER PARTY BE
LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL
DAMAGES UNDER THIS AGREEMENT, EVEN IF IT HAS BEEN NOTIFIED OF THE
POSSIBILITY OF ANY SUCH DAMAGES.
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5.17 Entire Agreement. This document and any referenced documents sets out the
-----------------
entire agreement of the parties, and supersedes all prior communications
regarding its subject matter. A waiver or amendment of any provision may
only be made in writing signed by the authorized representatives of both
parties.
5.18 Further, this Agreement shall take precedence over any conflicting terms
in any Exhibit hereto or any Purchase Orders hereunder.
6. OTHER OBLIGATIONS
6.1 Reduction []. If, within [ ] after the Effective Date, NCR's unit volume
------------
purchases from Solectron's [ ], are materially less than the [ ].
6.2 Tooling. If, within [ ] after the Effective Date (or such longer time
-------
over which [ ]), NCR's unit volume purchases from Solectron's [ ]
6.3 [ ]
6.4 Year 2000 Test. The parties agree that they will test the ability of their
--------------
systems that support the business covered by this Agreement to confirm that
there are no Year 2000 incompatibilities or problems with these systems and
their interfaces. The parties will perform this test by the end of Q1 1999
so that the parties can make any necessary changes to each party's
respective systems. Each party will bear its own costs with respect to the
test and changes needed to its own systems.
7. DEFINITIONS
7.1 "Affiliate" shall mean any corporation that has outstanding voting
securities, at least fifty percent (50%) of which are directly held by NCR.
7.2 "Confidential Information" is information reasonably related to this
Agreement that complies with this paragraph. Confidential Information
disclosed in documents or other tangible form must be clearly marked as
confidential at the time of disclosure. Confidential Information in oral
or other intangible form must be identified as confidential at the time of
disclosure, and summarized in tangible form clearly marked as confidential
and delivered to the recipient within 10 calendar days thereafter.
Confidential Information will also include any information which the
recipient knows or should know to be confidential even if not marked.
Confidential Information does not include information which is or becomes
available without restriction to the recipient or any other person through
no wrongful act.
7.3 "Effective Date" means the first day of the initial term of this Agreement.
7.4 The term "Products for which NCR or RSG or CSG has design ownership"
(whether capitalized or not) or similar forms shall mean Products for which
NCR has provided the engineering design to Solectron other than pursuant to
the Asset Purchase Agreement between the parties dated April 1, 1998
despite the actual owner of the intellectual property in the design. The
term "Products for which Solectron has design ownership" (whether
capitalized or not) or similar forms shall mean Products for which
Solectron has engineering design responsibility, despite the actual owner
of the intellectual property in the design. The foregoing definitions of
"Products for which Solectron has
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design ownership" includes, but is not limited to, Entry Level Computers
designed by NCR's engineering team before the Effective Date of this
Agreement.
Page 9
<PAGE>
ARTICLE II
OEM
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
1. BACKGROUND................................................................ 11
1.1 Scope................................................................ 11
1.2 Leading Technology................................................... 11
1.3 Commitment........................................................... 11
1.4 Exceptions........................................................... 11
1.5 Right of First Negotiation........................................... 11
2. DEFINITIONS............................................................... 11
3. FORECAST/ORDER PLACEMENT/FLEXIBILITY...................................... 12
4. PRICES.................................................................... 12
5. SERVICE SUPPORT REQUIREMENTS.............................................. 12
6. LEAD TIME, DELIVERY, AND PAYMENT.......................................... 12
7. TAXES..................................................................... 14
8. QUALITY................................................................... 14
9. LICENSE OF SOFTWARE AND DOCUMENTATION..................................... 14
10. OTHER OBLIGATIONS......................................................... 15
10.1 New Products........................................................ 15
10.2 Service Level Agreement............................................. 15
10.3 Leading Edge Procurement............................................ 15
10.4 Executive Reviews................................................... 15
11. WARRANTY AND PRODUCT LIABILITY............................................ 15
11.1 General Warranty.................................................... 15
11.2 DOA................................................................. 16
11.3 Services............................................................ 16
11.4 Safety and Regulatory Agency Requirements........................... 16
11.5 Epidemic Failures................................................... 16
11.6 Indemnification..................................................... 16
11.7 Contribution........................................................ 16
11.8 Insurance........................................................... 16
11.9 Year 2000........................................................... 17
12. INDEMNIFICATION FOR INFRINGEMENT.......................................... 17
13. TERM AND TERMINATION...................................................... 17
14. MANUFACTURING LICENSE..................................................... 18
</TABLE>
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<PAGE>
1. BACKGROUND
1.1 Scope. NCR is in the business of producing, marketing, and integrating
-----
data processing systems and related equipment, software, supplies and
services. Solectron provides products and services related to the business
of NCR and, subject to the terms and conditions set forth herein, agrees to
sell or license its Products and Parts to NCR for either NCR's internal use
or NCR's resale or license to NCR's customers. NCR will at its option
procure Product from Solectron which may or may not be resold under NCR's
logo. From time to time, the parties may agree to additional products or
features that will be defined by their specifications and acknowledged and
added to this Agreement through the new product/feature process set out in
Exhibit F.
1.2 Leading Technology. The parties intend that NCR shall be a leading edge
------------------
supplier of computer products. To this end, subject to any confidentiality
agreements Solectron may have, Solectron will both inform and provide a
commercially reasonable opportunity for acquisition of new and emerging
Solectron and industry technology. At a minimum NCR will be informed by
Solectron at least on a concurrent basis with Solectron's other OEM
customers in the same or similar markets of such emerging Solectron or
industry technology.
1.3 Commitment. [ ]
1.4 Exceptions. The commitment in Section 1.3 of Article II does not [ ]
1.5 Right of First Negotiation. Subject to NCR's current agreements, NCR shall
--------------------------
provide Solectron with a twenty (20) day right of first negotiation for any
future terminals, network computers, or mass storage subsystems which
Solectron has the capability to provide.
2. DEFINITIONS
2.1 "Entry Level Computers" shall mean general purpose personal computers and
server computers which use up to 4 microprocessors and have a mass storage
device such as a hard disk drive or a removable disk drive and are for
resale to end users under NCR's brand name. Entry Level Computers do not
include terminals, network computers, mass storage subsystems, parts, or
computers specifically identified by an NCR customer.
2.2 "Forecast" - A non-binding, administrative document setting forth the
anticipated requirements for Products or Parts during a specific time frame
of 9 months, used to facilitate the placement of individual Purchase
Orders. Forecasts are not Orders.
2.3 "Master Purchase Order" or "MPO" - NCR's purchase authorization to
Solectron for Products, Parts or services under this Agreement in
preparation of the receipt of Purchase Orders. It is understood that MPO's
are for planning and administrative purposes and are not Purchase Orders.
2.4 "Part" - Any component, subassembly, field replaceable unit, or other
module of the Product sold under this Agreement.
2.5 "Product" - An item, including Solectron's standard products, services and
Software, as described in the Specifications attached to Exhibit A,
including any and all modifications, changes and improvements made during
the term of this Agreement.
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2.6 Purchase Order", "Sales Order" or "Order" - A document issued by NCR for
the purpose of ordering specific Products or Parts pursuant to this
Agreement. Purchase Orders, Sales Orders or Orders may include an NCR
Purchase Order Form, an NCR Release Order Form written against an MPO, or a
defined Electronic Data Interface (EDI) Order transmission as defined by
the Solectron and NCR in an EDI Agreement attached as Exhibit G. The only
parts of a Purchase Order that become part of this Agreement are the
quantity, price, description, delivery date and delivery terms.
2.7 "Software" - Versions of computer programs including software or firmware.
2.8 "Specifications" - The specifications for the Product attached hereto as
Exhibit A, including any and all modifications, amendments or changes
thereto made pursuant to this Agreement.
3. FORECAST/ORDER PLACEMENT/FLEXIBILITY
Provisions related to Forecasts, Order placement and flexibility are set
forth in Exhibit B.
4. PRICES
4.1 [ ]
4.2 Pricing. Pricing will be determined as indicated in Exhibit B of this
-------
Agreement.
4.3 Cost Reductions. Solectron will continue throughout the term of this
---------------
Agreement to reduce costs for all Products and Parts. All cost reductions
will be shared in accordance with Exhibit B.
5. SERVICE SUPPORT REQUIREMENTS.
Solectron will provide Product support in accordance with Exhibit D.
6. LEAD TIME, DELIVERY AND PAYMENT
6.1 Lead Time for Products and Parts. Purchase Orders will be placed in
--------------------------------
advance of the required delivery date, allowing for the lead time specified
in Exhibit C, unless a shorter lead time is mutually agreed to in a
specific Order.
6.2 Shipment. All Products and regular Orders for Parts purchased under this
--------
Agreement will be sold "ex-works" at each Solectron plant and made
available for pick up by carriers designated by NCR in the Purchase Order.
NCR shall pay the freight carrier directly. [ ] Solectron will notify NCR
prior to shipping a partial quantity of a particular Order of Products or
Parts. [ ]
6.3 Delivery Timing. NCR and Solectron will work together to ensure maximum
---------------
order delivery flexibility. A maximum of 3 days early and 0 days late
shall be allowed for all deliveries, unless NCR specifically requests other
delivery terms. Provided NCR is not the sole cause of any delay, if
Solectron is unable, for any reason, to supply any portion of NCR's
requirements of the Products or Parts as established by Purchase Orders,
such portion will be considered to have been purchased from Solectron for
purposes of determining price when price is based on Product or Part
quantity purchased by NCR.
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This will not, however, limit any other remedy to which NCR may be entitled
on account of Solectron's inability to supply NCR's requirements.
6.4 Title and Risk of Loss. Title, risk of loss and damage will pass from
----------------------
Solectron to NCR upon receipt of Products and Parts from Solectron by NCR's
selected common carrier at the designated Solectron plant (i.e. Duluth, GA,
W. Columbia, SC, Dublin, Ireland, or other designated Solectron
manufacturing facilities) or when delivered to NCR's representative.
6.5 Payment. Payment for all Orders will be [ ] from the date of NCR's
-------
receipt of a proper EDI invoice. Solectron will not invoice NCR prior to
the shipping of the relevant Product or Parts. All prices and payments will
be in US Dollars. Solectron's invoices shall contain the following
information: a) NCR's Purchase Order numbers; b) NCR's Product I.D., part
number or other relevant number; c) a description of the items shipped; d)
the quantity of items shipped; e) the unit and extended price applicable
thereto; and f) Solectron's serial number if applicable. Payment to
Solectron will be made by wire transfer including remittance information or
other electronic means selected by NCR to an account as Solectron notifies
NCR from time to time.
6.6 Shipping. NCR may provide shipping information electronically. Solectron
--------
will meet the following shipping requirements unless NCR requests
otherwise:
a) Ship the material complete unless otherwise instructed.
b) Ship all Products, Parts, and other items in accordance with "ex-
works" terms.
c) Initiate shipments in accordance with routing instructions given
by NCR.
d) Enclose a packaging memorandum with each shipment and, when more
than one package is shipped, identify the package containing the
memorandum.
e) Mark the Purchase Order number on all packages and shipping
papers.
f) Mark with the NCR part number.
g) Mark the NCR freight account code on the bill of lading for truck
shipments, or in the shipper's reference field on the air waybill,
or in the reference field for UPS or RPS shipments.
h) All shipments are to be consolidated via the same mode on any one
day to one consignment address under one bill of lading.
i) Include specific shipping instructions for spare parts as
specified in Exhibit D.
6.7 Failure to Comply. If Solectron fails to comply with the terms of the
-----------------
agreed to shipping instructions, Solectron authorizes NCR to charge back
any increased shipping costs incurred by NCR as a result of Solectron's
noncompliance plus an administrative fee of twenty dollars ($20) for each
shipment which is not in compliance. NCR will provide Solectron with
detailed shipping charges incurred by NCR as a result of Solectron's
noncompliance.
6.8 Classification. Each company agrees to determine Harmonized Tariff and
--------------
Export Control Classification Number data for each Product or Part that it
designs, designs and manufactures, or procures from another vendor, and
subsequently delivers to the other company. Upon request, each company
will provide the other with all available
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<PAGE>
information and assistance to permit an independent classification of the
Product or Part.
6.9 Export Documentation. NCR will be responsible for the preparation of all
---------------------
shipping documents required to support the export of Products and Parts,
including the export (commercial) invoice, SLI/SED, air/ocean waybills and
Certificate of Origin. Solectron will be responsible for completing any
documents required to convey Products and Parts to NCR's designated carrier
and/or courier.
7. TAXES.
Unless otherwise stated, Product and Part prices do not include applicable
federal, state or local sales, use, property, excise, value added or
similar taxes that may be levied upon Solectron as a result of sale or
delivery of any Product or Part under this Agreement. All such taxes will
be assumed and paid by NCR except any taxes refundable to or creditable by
Solectron. If a resale certificate or other document is required in order
to exempt the sale of Products or Parts from taxes, NCR will furnish
Solectron with appropriate documentation at Solectron's request. If
Solectron pays any such taxes at NCR's request, NCR will reimburse
Solectron upon being appropriately invoiced for the exact amount of such
taxes and being provided with documentation which will allow NCR to claim a
credit for such taxes. Solectron shall be responsible for all taxes based
upon its personal property ownership and gross or net income.
8. QUALITY
Solectron will use data driven processes based on continuous improvement
and defect prevention with a goal of delivering defect free Products, Parts
and services to NCR and its customers. Solectron will implement all
quality processes that will contribute to meeting the quality and
reliability requirements defined in Exhibit C.
9. LICENSE OF SOFTWARE AND DOCUMENTATION
9.1 Software. As to Software authored by Solectron (the "Solectron Software")
---------
which may be provided separately or with the Product(s), Solectron hereby
grants to NCR and its software reproducer a perpetual, worldwide, non-
exclusive, non-transferable, royalty-free license to resell and reproduce
copies of the Software for distribution for use with the Products and
Parts. NCR will license the Solectron Software to its customers pursuant
to NCR's standard terms and conditions. Solectron grants to NCR a
perpetual, worldwide, non-exclusive, royalty-free license to use
Solectron's trademarks and tradenames on or in connection with the
Solectron Software copies made under this Agreement. NCR agrees to take
such reasonable steps as may be necessary to preserve copyrights to the
Software and Software documentation. Solectron also agrees to use its
commercially reasonable efforts to procure for NCR and its software
reproducer, a similar license to Software supplied to NCR by Solectron in
connection with the Products which Software is not authored by Solectron
and will notify NCR if Solectron is unable to procure such a license.
9.2 Documentation. Solectron will provide documentation and marketing
--------------
materials set out in Exhibit A ("Documentation"). Solectron will deliver
the Documentation in electronic format. NCR may order copies of
Documentation which Solectron specifies as orderable under the same terms
as Products. Solectron hereby grants to NCR and its designated
Documentation reproducer a perpetual, worldwide, non-exclusive, non-
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<PAGE>
transferable, royalty-free license to reproduce, distribute, perform and
display copies and create derivative works of the Documentation for use
with the Products and Parts. The foregoing includes any medium such as
Internet access (FTP, WWW) and CD-ROM.
9.3 NCR or Third Party Software. Solectron will comply with the provisions of
---------------------------
Exhibit H with respect to any software provided to Solectron by NCR or a
third party. Solectron shall also reimburse NCR for any penalties, late
fees, finance charges or other payments NCR must make to the extent such
payments are caused by Solectron failure to comply with this Section.
10. OTHER OBLIGATIONS
10.1 New Products If Solectron acquires or develops a type of product which is
------------
like the Product, or performs a similar function, or would obsolete the
Product due to new technology, Solectron will give NCR notice as soon as
reasonably possible with a target of at least 180 days prior to the release
of a new product and furnish NCR with the specifications and other
pertinent information and, at the request of NCR, arrange an engineering
evaluation of the product immediately upon the availability of a working
model. Solectron's provision of such information shall be subject to any
confidentiality and non-disclosure agreements Solectron may have entered.
At its option, NCR may elect to substitute the new product for the Product
under this Agreement at a price mutually agreeable between the parties
consistent with the pricing model indicated in Exhibit B of this Agreement.
The new product will thereafter be considered the Product under the terms
and conditions of this Agreement as if initially included. However,
Solectron will continue to make Parts available for the original Product,
as required under Section 5.0 of Exhibit D.
10.2 Service Level Agreement. The parties will adhere to the service level
-----------------------
agreement set out in Exhibit F which describes requirements, measurements,
and activities needed to deliver, release and support Products.
10.3 Leading Edge Procurement. NCR and Solectron will proactively seek
------------------------
opportunities to implement leading edge procurement processes such as
demand pull, vendor managed inventory, electronic data interchange, etc.
Prior to implementation, the specific details of such processes shall be
documented and added as an exhibit to this Agreement. Solectron is to
proactively pursue similar activities with its suppliers.
10.4 Executive Reviews. In addition to other meetings called for in this
-----------------
Agreement, senior management from NCR and Solectron will meet quarterly for
executive reviews to discuss the status of the relationship as well as
strategic and other important issues.
11. WARRANTY AND PRODUCT LIABILITY
11.1 General Warranty. Solectron warrants that all Products manufactured or
----------------
supplied herein will [ ]. Claims for Products not complying with the above
warranty will be submitted by NCR [ ]. For Parts and Software, Solectron
will [ ]. For Parts and Software, Solectron will [ ] Furthermore,
Solectron warrants that [ ]. Solectron will [ ] Solectron will [ ] The
warranty set forth above is [ ] This warranty shall not apply to [ ]
EXCEPT AS SET FORTH IN THIS AGREEMENT, SOLECTRON MAKES NO WARRANTIES,
WHETHER EXPRESS OR IMPLIED, OR STATUTORY REGARDING
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<PAGE>
OR RELATING TO THE PRODUCTS, PARTS, SOFTWARE OR DOCUMENTATION, OR ANY
MATERIALS OR SERVICES PROVIDED TO NCR UNDER THIS AGREEMENT. SOLECTRON
SPECIFICALLY DISCLAIMS ALL IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR
PURPOSE AND NON-INFRINGEMENT WITH RESPECT TO THE PRODUCTS, PARTS, SOFTWARE,
DOCUMENTATION, AND SAID OTHER MATERIALS AND SERVICES, AND WITH RESPECT TO
THE USE OF ANY OF THE FOREGOING.
11.2 DOA. If a Product or Part [ ], Solectron will[ ]. NCR will [ ].
---
Solectron will []
11.3 Services. Solectron will perform services by properly trained personnel
--------
with care appropriate to ensure world class execution.
11.4 Safety and Regulatory Agency Requirements. Solectron warrants that all
-----------------------------------------
Products, Parts and packaging material will comply with all applicable
country (as indicated by NCR in writing or in Exhibit E-1), federal, state
and other governmental regulations in effect at the time of manufacture
(including without limitation and similar regulations concerning safety,
EMI and equipment labeling). Products and Parts will be listed or certified
by a nationally recognized testing laboratory with Solectron's name,
Solectron's trade name, Solectron's trademark and file number. Additional
Product specific safety and regulatory requirements may be indicated in the
Product Specifications. Solectron will promptly repair or replace, at its
option and expense, non-complying Products or Parts, at the end user site,
or alternately, will pay NCR its costs of remedying the non-compliance at
the end user site. Any shipment of non-complying Products or Parts by NCR
to Solectron, and the return shipment of repaired or replacement Products
or Parts by Solectron to NCR under this Section 11.4, will be at
Solectron's expense. NCR will take title to replacement Products and Parts
at the Solectron facility that are intended for export and arrange for
their shipment to the end-user site.
11.5 Epidemic Failures. An Epidemic Failure is defined as [ ]. Solectron
-----------------
provides [ ]. Solectron will [ ]. Solectron will [ ]. In the event of
a claim of epidemic failure, [ ]. Solectron will [ ]. The parties agree
that in the event of an Epidemic Failure regarding software, [ ].
Solectron shall [ ].
11.6 Indemnification. [ ]
---------------
11.7 Contribution. Nothing in this Agreement [ ]
------------
11.8 Insurance. Solectron will maintain, at its expense, General Liability
---------
insurance including but not limited to Premises Operations,
Products/Completed Operations, Contractual Liability, Independent
Contractors, Broad Form Property Damage and Personal/Advertising Injury
with minimum limits of US[ ] combined single limit per occurrence,
Excess/Umbrella Liability insurance with minimum limits of US[ ] per
occurrence. The insurance will a) name NCR as an additional insured; b)
carry an endorsement that the insurance will be primary; c) if coverage is
on a "Claims Made" form, then a policy must be maintained during the term
of this Agreement and for a period of [ ] thereafter. Solectron will
also, maintain, at its expense, Workers' Compensation/Employer's Liability
insurance with statutory limits. Each insurance policy required by this
agreement shall be issued by an insurance carrier with an A.M. Best rating
of "A-" or better and shall be kept in force throughout performance of the
services required by this Agreement. Certificates of insurance showing
compliance with these
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requirements will be furnished by Solectron prior to the signing of this
Agreement and sent to: NCR, Corp., Risk Management Department, 1700 S.
Patterson Blvd. WHQ-3E, Dayton, OH 45479. Certificates will state that the
policy or policies have been issued and are in force, will not expire or
lapse, and will not be canceled or changed so as to affect the insurance
described in he certificate. Compliance or non-compliance with the
requirements of this Section shall not relieve Solectron from any
responsibility to indemnify NCR or its liability to NCR as specified in any
other provision of this Agreement. Indemnity obligations specified
elsewhere in this Agreement shall not be negated or reduced by virtue of
any insurance carrier's denial of insurance coverage for the occurrence or
event which is the subject matter of the claim; or refusal to defend any
named insured.
11.9 Year 2000. Solectron warrants that all Solectron Software will fully
---------
comply with the "NCR Year 2000 Qualification Requirements Definition,"
attached as Exhibit I. At NCR's request, Solectron will provide evidence
demonstrating adequate testing of the Products to assure compliance with
the Definition. Solectron acknowledges that NCR may make similar warranties
to its resellers, distributors, end users or other customers in reliance
upon the foregoing. Solectron agrees to defend, indemnify, and hold NCR
harmless from and against any demand or claim made by any third party
(including but not limited to NCR's resellers distributors, end users or
other customers) directly or indirectly alleging a Product's failure to
comply with the warranty contained herein. [ ]
12. INDEMNIFICATION FOR INFRINGEMENT
12.1 IP Indemnification by Solectron. Solectron will [ ]. This Section states
-------------------------------
Solectron's entire liability for infringement of patents, copyrights, trade
secrets, and other intellectual property rights. For the purpose of this
Section, [ ]
12.2 Parts Indemnification. Solectron also agrees to [ ]. Solectron will [ ]
----------------------
12.3 IP Indemnification by NCR. If an actual or threatened claim of
-------------------------
infringement of intellectual property rights is asserted against Solectron
or its Affiliates due to [ ], NCR will [ ]. Except as expressly set out
in another written agreement signed by both parties, this Section states
NCR's entire liability for infringement of patents, copyrights, trade
secrets, and other intellectual property rights with respect to any
products.
13. TERM AND TERMINATION
13.1 Unless earlier terminated under any other provision of this Agreement,
this Agreement will continue for an initial term as set out on the first
page of this Agreement and, after that, will automatically continue in
force until NCR or Solectron gives 180 days notice of termination, or
unless earlier terminated under any other provision of this Agreement.
13.2 Either party may terminate this Agreement upon 60 days prior written
notice to the other party for failure of the other party to fulfill any of
its material obligations, including failure due to causes specified in
Section 5.3 of Article I; unless during such 60 day period the other party
remedies the failure, in which case this Agreement will continue in effect
as if the failure had not occurred. Termination of this Agreement by
either Solectron or NCR under this Section will not prejudice or otherwise
affect any manufacturing license to which NCR may be entitled. Termination
of this Agreement by either party will not prejudice it or the other party
to recover any money amounts or require performance of any obligations due
at the time of the termination.
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<PAGE>
13.3 The following Sections will survive termination of this Agreement:
Sections 1, 3, 4, 5.4, 5.9, 5.10, 5.11, 5.16 of Article I; Sections 1.1, 5,
9, 11, 12, 13.4, of Article II; the intellectual property provisions of
Section 1.3 of Article II; and the continuation engineering portions of
Exhibit F.
13.4 In the event of termination or expiration of this Agreement, or in the
event NCR decides, subject to Section 1.3 of Article II to transfer
manufacturing of a Product or Part to another person, Solectron will use
reasonable efforts to efficiently transition the manufacture of Products or
Parts to the other person. Solectron will bear its own costs of such
transition except in the event of expiration of this Agreement or
termination of this Agreement by Solectron for NCR's breach in which case
NCR will pay for Solectron's reasonable out of pocket costs for
transitioning the manufacture of Products or Parts to such other person.
Solectron will deliver to NCR and grant NCR the worldwide, perpetual,
royalty free right to copy, use, and create derivative works from the
tooling and manufacturing test software used in production of the Products
or Parts solely for the purpose of manufacturing and supporting products
and parts that NCR will sell; provided that Solectron will have no
obligation to provide any manufacturing test software which was developed
by Solectron for use with the manufacture of products other than the
Products and Parts. Solectron will grant NCR license to copy, use, and
create derivative works from such non NCR specific manufacturing test
software solely for the purpose of manufacturing and supporting products
and parts that NCR will sell for a reasonable royalty taking into account
any value that NCR has previously provided. NCR may exercise the foregoing
licenses directly or have another person exercise them on its behalf. In
addition, if NCR requests Solectron to consult with it or its manufacturer
on questions related to the manufacturing of Products or Parts, Solectron
will provide such consultation on a reasonable time and materials basis.
14. MANUFACTURING LICENSE
In the event that NCR desires to manufacture any Product or Part through
one of its subsidiaries due to regional deployment or volume constraint,
the parties will negotiate in good faith a site specific licensing
agreement to be amended to this Agreement. NCR agrees to provide to
Solectron opportunity to bid for a period of 30 days for manufacturing such
Products or Parts. If the Agreement is terminated by NCR due to
Solectron's material breach of this Agreement or if Solectron discontinues
the manufacture or marketing of the Product or Part, or is unable to supply
NCR with NCR's reasonable requirements of Products or Parts ordered,
Solectron will promptly grant a non-exclusive, world-wide license to NCR
and provide all relevant information so that NCR may use, modify, copy,
sell, distribute, manufacture, or have manufactured, Solectron's Products
or Parts for the sole purpose of supplying Products or Parts to NCR's
resellers, distributors, end users, or other customers. Such license shall
apply only to Products and Part models that were purchased during the
initial term of this Agreement. Such license shall apply only to Products
and Part models that were purchased during the initial term of this
Agreement.
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ARTICLE III
Manufacturing Services
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
1. BACKGROUND................................................................ 20
1.1 Scope................................................................ 20
1.2 Leading Technology................................................... 20
1.3 Commitment........................................................... 20
1.4 Exceptions........................................................... 20
2. DEFINITIONS................................................................ 20
3. FORECAST/ORDER PLACEMENT/FLEXIBILITY...................................... 21
4. PRICES.................................................................... 21
5. LEAD TIME, DELIVERY, AND PAYMENT.......................................... 21
6. LICENSE OF SOFTWARE AND DOCUMENTATION..................................... 23
7. SERVICE SUPPORT REQUIREMENTS; EMERGENCY SPARE PARTS....................... 24
8. TAXES..................................................................... 24
9. QUALITY................................................................... 24
10. WARRANTY................................................................. 24
10.1 General Warranty.................................................... 24
10.2 DOA................................................................. 24
10.3 Services............................................................ 24
10.4 Safety and Regulatory Agency Requirements........................... 24
10.5 Year 2000........................................................... 25
10.6 Epidemic Failures................................................... 25
11. SPECIFICATION, ENGINEERING AND OTHER CHANGES............................. 25
12. INDEMNIFICATION.......................................................... 26
12.1 IP Indemnification by Solectron..................................... 26
12.2 Parts Indemnification............................................... 26
12.3 IP Indemnification by NCR........................................... 26
12.4 Litigation by Others................................................ 26
12.5 Insurance........................................................... 26
13. OTHER OBLIGATIONS........................................................ 27
13.1 Service Level Agreement............................................. 27
13.2 Leading Edge Procurement............................................ 27
13.3 Executive Reviews................................................... 27
14. TERM AND TERMINATION..................................................... 27
</TABLE>
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<PAGE>
1. BACKGROUND
1.1 Scope. NCR is in the business of producing, marketing, and integrating data
-----
processing systems and related equipment, software, supplies and services.
Solectron provides manufacturing and other services related to the business
of NCR and, subject to the terms and conditions set forth herein, agrees to
sell or license its Products and Parts it has manufactured on behalf of NCR
to NCR for either NCR's internal use or NCR's resale or license to NCR's
customers. NCR will at its option procure Product from Solectron which may
or may not be resold under NCR's logo. From time to time, the parties may
agree to additional products or features that will be defined by their
specifications and acknowledged and added to this Agreement through the new
product/feature process set out in Exhibit F. The parties may agree from
time to time to additional services that Solectron will perform for NCR.
Such additional services may be added by an amendment to this Agreement or
by execution of a separate agreement. Solectron shall have no right to sell
any Products or NCR designed Parts covered by this Article III to anyone
other than at NCR explicit direction.
1.2 Leading Technology. The parties intend that NCR shall be a leading edge
------------------
supplier of information technology products. To this end Solectron will
both inform and provide a commercially reasonable opportunity for
acquisition of new and emerging Solectron and industry technology and
manufacturing capabilities. At a minimum NCR will be informed by Solectron
at least on a concurrent basis with Solectron's other OEM customers in the
same or similar markets of such emerging Solectron or industry technology
or manufacturing capabilities.
1.3 Commitment. [ ]
----------
1.4 Exceptions. The commitment in Section 1.3 of Article III does not [ ]
----------
2. DEFINITIONS
2.1 "Committed Ship Date" ("CSD") - The date Solectron agrees to deliver to a
factory an order release or replenishment signal.
2.2 [ ]
2.3 "Desired Receipt Date" ("DRD") - The date NCR requests in an Order or
Release Order that Products or parts be delivered to NCR.
2.4 "Forecast" - A planning tool which expresses NCR's estimated Product
demand, typically in weekly and/or monthly buckets, spanning a minimum of 9
months. It is understood that the Forecast is for planning and
administrative purposes only, and that NCR will have no obligation to
purchase any or all of the Products or parts identified in an NCR Forecast,
except as otherwise provided herein.
2.5 "Lead Time" - The number of calendar days measured from the time Solectron
receives an Order and/or sends a replenishment signal until Solectron ships
the Product.
2.6 [ ]
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<PAGE>
2.7 "Master Purchase Order" or "MPO" - NCR's purchase authorization to
Solectron for Products, Parts or services under this Agreement in
preparation of the receipt of Purchase Orders. It is understood that MPO's
are for planning and administrative purposes and are not Purchase Orders.
2.8 "Part" - Any component, subassembly, field replaceable unit, or other
module of the Product sold under this Agreement.
2.9 "Product" - Any finished assembly, subassembly or module built by Solectron
under this Agreement according to NCR Specifications.
2.10 "Purchase Order", "Sales Order" or "Order" - A document issued by NCR for
the purpose of ordering Product or Parts pursuant to this Agreement.
Purchase Orders, Sales Orders or Orders may include an NCR Purchase Order
Form, an NCR Release Order Form written against an MPO, or a defined
Electronic Data Interface (EDI) Order transmissions as defined by Solectron
and NCR in an EDI Agreement attached as Exhibit G.
2.11 "Release Order" - A firm Order written against and referencing an existing
MPO. A Release Order may also take the form of an Electronic Data
Interface (EDI) Order transmissions as defined by Solectron and NCR in an
EDI Agreement attached as Exhibit G.
2.12 "Specifications" - NCR provided prototypes, engineering drawings, diagrams
and other documentation specific to a particular Product as amended from
time to time.
2.13 "Software" - Versions of computer programs including software or firmware.
3. FORECAST/ORDER PLACEMENT/FLEXIBILITY
Provisions related to Forecasts, Order placement and flexibility are set
forth in Exhibit B.
4. PRICES
4.1 [ ]
4.2 Pricing. Pricing will be determined as indicated in Exhibit B of this
-------
Agreement.
4.3 Cost Reductions. Solectron will continue throughout the term of this
---------------
Agreement to reduce costs for all Products and Parts. All cost reductions
will be shared in accordance with Exhibit B.
5. LEAD TIME, DELIVERY, AND PAYMENT
5.1 Lead-time. Purchase Orders will be received by Solectron in advance of the
----------
required delivery date, allowing for the lead time specified in Exhibit C,
unless a shorter lead time is mutually agreed to in a specific Order.
5.2 Shipment. All Products and regular Orders for Parts purchased under this
--------
Agreement will be sold "ex-works" at each Solectron plant and made
available for pick up by carriers designated by NCR in the Purchase Order.
NCR shall pay the freight carrier directly. [ ]
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<PAGE>
Solectron will notify NCR prior to shipping a partial quantity of a
particular Order of Products or Parts. [ ]
5.3 Delivery Timing. NCR and Solectron will work together to ensure maximum
---------------
order delivery flexibility. A maximum of 3 days early and 0 days late
shall be allowed for all deliveries, unless NCR specifically requests other
delivery terms. Provided NCR is not the sole cause of any delay, if
Solectron is unable, for any reason, to supply any portion of NCR's
requirements of the Products or Parts as established by Purchase Orders,
such portion will be considered to have been purchased from Solectron for
purposes of determining price when price is based on Product or Part
quantity purchased by NCR. This will not, however, limit any other remedy
to which NCR may be entitled on account of Solectron's inability to supply
NCR's requirements.
5.4 Title and Risk of Loss. Title, risk of loss and damage will pass from
----------------------
Solectron to NCR upon receipt of Products and Parts from Solectron by NCR's
selected common carrier at the designated Solectron plant (i.e. Duluth, GA,
W. Columbia, SC, Dublin, Ireland, or other designated Solectron
manufacturing facilities) or when delivered to NCR's representative.
5.5 Payment. Payment for all Orders will be [ ] from the date of NCR's
-------
receipt of a proper EDI invoice. Solectron will not invoice NCR prior to
the shipping of the relevant Product or Parts. All prices and payments will
be in US Dollars. Solectron's invoices shall contain the following
information: a) NCR's Purchase Order numbers; b) NCR's Product I.D., part
number or other relevant number; c) a description of the items shipped; d)
the quantity of items shipped; e) the unit and extended price applicable
thereto; and f) Solectron's serial number if applicable. Payment to
Solectron will be made by wire transfer including remittance information or
other electronic means selected by NCR to the following account an account
as Solectron notifies NCR from time to time.
5.6 Shipping. NCR may provide shipping information electronically. Solectron
--------
will meet the following shipping requirements unless NCR requests
otherwise:
a) Ship the material complete unless otherwise instructed.
b) Ship all Products, Parts, and other items in accordance with "ex-
works" terms.
c) Initiate shipments in accordance with routing instructions given
by NCR.
d) Enclose a packaging memorandum with each shipment and, when more
than one package is shipped, identify the package containing the
memorandum.
e) Mark the Purchase Order number on all packages and shipping
papers.
f) Mark with the NCR part number.
g) Mark the NCR freight account code on the bill of lading for truck
shipments, or in the shipper's reference field on the air waybill,
or in the reference field for UPS or RPS shipments.
h) All shipments are to be consolidated via the same mode on any one
day to one consignment address under one bill of lading.
i) Include specific shipping instructions for spare parts as
specified in Exhibit D.
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<PAGE>
5.7 Failure to Comply. If Solectron fails to comply with the terms of the
-----------------
agreed to shipping instructions, Solectron authorizes NCR to charge back
any increased shipping costs incurred by NCR as a result of Solectron's
noncompliance plus an administrative fee of twenty dollars ($20) for each
shipment which is not in compliance. NCR will provide Solectron with
detailed shipping charges incurred by NCR as a result of Solectron's
noncompliance.
5.8 Classification. Each company agrees to determine Harmonized Tariff and
--------------
Export Control Classification Number data for each Product or Part that it
designs, designs and manufactures, or procures from another vendor, and
subsequently delivers to the other company. Upon request, each company
will provide the other with all available information and assistance to
permit an independent classification of the Product or Part.
5.9 Export Documentation. NCR will be responsible for the preparation of all
---------------------
shipping documents required to support the export of Products and Parts,
including the export (commercial) invoice, SLI/SED, air/ocean waybills and
Certificate of Origin. Solectron will be responsible for completing any
documents required to convey Products and Parts to NCR's designated carrier
and/or courier.
6. LICENSE OF SOFTWARE AND DOCUMENTATION
6.1 Software. As to Software authored by Solectron (the "Solectron Software")
---------
which may be provided separately or with the Product(s), Solectron hereby
grants to NCR and its software reproducer a perpetual, worldwide, non-
exclusive, non-transferable, royalty-free license to resell and reproduce
copies of the Solectron Software for distribution for use with the Products
and Parts. NCR will license the Software to its customers pursuant to
NCR's standard terms and conditions. Solectron grants to NCR a perpetual,
worldwide, non-exclusive, royalty-free license to use Solectron's
trademarks and trade names on or in connection with the Solectron Software
copies made under this Agreement. NCR agrees to take such reasonable steps
as may be necessary to preserve copyrights to the Software and Software
documentation. Solectron also agrees to use its commercially reasonable
efforts to procure for NCR and its software reproducer, a similar license
to Software supplied to NCR by Solectron in connection with the Products
which Software is not authored by Solectron and will notify NCR if
Solectron is unable to procure such a license.
6.2 Documentation. Solectron will provide documentation and marketing
--------------
materials set out in Exhibit A ("Documentation"). Solectron will deliver
the Documentation in electronic format. NCR may order copies of
Documentation which Solectron specifies as orderable under the same terms
as Products. Solectron hereby grants to NCR and its designated
Documentation reproducer a perpetual, worldwide, non-exclusive, non-
transferable, royalty-free license to reproduce, distribute, perform and
display copies and create derivative works of the Documentation for use
with the Products and Parts. The foregoing includes any medium such as
Internet access (FTP, WWW) and CD-ROM.
6.3 NCR or Third Party Software. Solectron will comply with the provisions of
---------------------------
Exhibit H with respect to any software provided to Solectron by NCR or a
third party.
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<PAGE>
7. SERVICE SUPPORT REQUIREMENTS; EMERGENCY SPARE PARTS
Solectron will provide Product support in accordance with Exhibit D.
8. TAXES
Product prices do not include applicable federal, state or local sales,
use, property, excise, or similar taxes that may be levied upon Solectron
as a result of sale or delivery of any Product under this Agreement. All
such taxes will be assumed and paid by NCR except any taxes refundable or
creditable to Solectron. If a resale certificate or other document is
required in order to exempt the sale of Products from taxes, NCR will
furnish Solectron, at Solectron's request, with appropriate documentation
prior to shipment by Solectron. If Solectron pays any such taxes at NCR's
request, NCR will reimburse Solectron upon being appropriately invoiced for
the exact amount of such taxes and being provided with documentation which
will allow NCR to claim a credit for such taxes. Solectron shall be
responsible for all taxes based upon its personal property ownership and
gross or net income.
9. QUALITY
Solectron will use data driven processes based on continuous improvement
and defect prevention with a goal of delivering defect free Products, Parts
and services to NCR and its customers. Solectron will implement all
quality processes that will contribute to meeting the quality and
reliability requirements defined in Exhibits C.
10. WARRANTY
10.1 General Warranty. Solectron warrants that all Products manufactured or
----------------
supplied herein will [ ]. Claims for Products not complying with this
warranty will be submitted by NCR [ ]. For Parts and Software, Solectron
will [ ]. For Parts and Software, Solectron will [ ]. Furthermore,
Solectron warrants that [ ]. Solectron will [ ]. Solectron will [ ]. The
warranty set forth above is [ ]. This warranty shall not apply to [ ].
EXCEPT AS SET FORTH IN THIS AGREEMENT, SOLECTRON MAKES NO WARRANTIES,
WHETHER EXPRESS OR IMPLIED, OR STATUTORY REGARDING OR RELATING TO THE
PRODUCTS, PARTS, SOFTWARE OR DOCUMENTATION, OR ANY MATERIALS OR SERVICES
PROVIDED TO NCR UNDER THIS AGREEMENT. SOLECTRON SPECIFICALLY DISCLAIMS ALL
IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT
WITH RESPECT TO THE PRODUCTS, PARTS, SOFTWARE, DOCUMENTATION, AND SAID
OTHER MATERIALS AND SERVICES, AND WITH RESPECT TO THE USE OF ANY OF THE
FOREGOING.
10.2 DOA. If a Product or Part [ ], Solectron will [ ]. NCR will [ ].
---
Solectron will [ ]
10.3 Services. Solectron will perform services by properly trained personnel
--------
with care appropriate to ensure world class execution.
10.4 Safety and Regulatory Agency Requirements. Solectron warrants that all
------------------------------------------
Products, Parts and packaging material will comply with all applicable
country (as indicated by NCR in writing or in Exhibit E-III), federal,
state and other governmental regulations in effect at the time of
manufacture (including without limitation and similar regulations
concerning safety, EMI and equipment labeling). Products and Parts will be
listed or
Page 24
<PAGE>
certified by a nationally recognized testing laboratory with NCR's name,
NCR's tradename, NCR's trademark and file number. Additional Product
specific safety and regulatory requirements may be indicated in the Product
Specifications. Solectron will promptly repair or replace, at its option
and expense, non-complying Products or Parts, at the end user site, or
alternately, will pay NCR its costs of remedying the non-compliance at the
end user site. Any shipment of non-complying Products or Parts by NCR to
Solectron, and the return shipment of repaired or replacement Products or
Parts by Solectron to NCR under this Section, will be at Solectron's
expense. NCR will take title to replacement Products and Parts at the
Solectron facility that are intended for export and arrange for their
shipment to the end-user site.
10.5 Year 2000. Solectron warrants that all Solectron Software will fully
---------
comply with the "NCR Year 2000 Qualification Requirements Definition,"
attached as Exhibit I. At NCR's request, Solectron will provide evidence
demonstrating adequate testing of the Products to assure compliance with
the Definition. Solectron acknowledges that NCR may make similar warranties
to its resellers, distributors, end users or other customers in reliance
upon the foregoing. Solectron agrees to defend, indemnify, and hold NCR
harmless from and against any demand or claim made by any third party
(including but not limited to NCR's resellers distributors, end users or
other customers) directly or indirectly alleging a Product's failure to
comply with the warranty contained herein. [ ]
10.6 Epidemic Failures. An Epidemic Failure is defined as [ ]. Solectron
-----------------
provides [ ]. Solectron will [ ]. Solectron will [ ]. In the event of
a claim of epidemic failure, [ ]. Solectron will [ ]. The parties agree
that in the event of an Epidemic Failure regarding software, [ ].
Solectron shall [ ]
11. SPECIFICATION, ENGINEERING AND OTHER CHANGES
11.1 NCR Changes. The Specifications may only be amended by the NCR design
-----------
release process. Prior to any change becoming effective, all Products
shipped by Solectron to NCR will conform to the existing Specifications,
unless NCR otherwise requests. If any such change affects the price,
delivery, quality or performance of said Product, an equitable adjustment
will be negotiated between the parties prior to the implementation of the
change. After an agreed upon effective date between NCR and the Solectron
site for implementing changes, all Products shipped by Solectron will
conform to the changed Specifications. Drawing corrections and minor
changes which have no effect on form, fit, function or interchangeability
will not be considered a change in the Specifications.
11.2 Solectron Changes. Solectron must not make design, supplier, or component
-----------------
part changes to Product(s) manufactured for NCR without submitting a
written Request for Change ("RFC") notice and NCR approving the changes and
NCR will not unreasonable reject such changes. NCR will review Solectron's
RFC and shall consider the feasibility of all proposed changes. Within the
time frame set out in Exhibit F, NCR will furnish to Solectron a written
response regarding the proposed changes, including its willingness to
implement the change, and the time schedule required for implementation if
appropriate.
11.3 Product Obsolescence and Phase Out. Solectron will accept all service
----------------------------------
part Orders for new builds [ ] and the service repair costs shall be
mutually agreed upon. Solectron will
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<PAGE>
provide NCR at least [ ] written notice prior to the termination within the
[ ]. If during the [ ], Solectron has difficulty with production or repair
of parts because of components becoming obsolete and Solectron has
knowledge of component obsolescence, then Solectron will notify NCR at
least [ ] prior to production termination. Prior to this production
termination, NCR may develop a Forecast and make a final buy of the
component parts so ongoing production or repairs may continue.
12. INDEMNIFICATION
12.1 IP Indemnification by Solectron. Solectron will [ ]. This Section states
-------------------------------
Solectron's entire liability for infringement of patents, copyrights, trade
secrets, and other intellectual property rights.
12.2 Parts Indemnification. Solectron also agrees to [ ]. Solectron will [ ]
----------------------
12.3 IP Indemnification by NCR. If an actual or threatened claim of
-------------------------
infringement of intellectual property rights is asserted against Solectron
due to [ ], NCR will [ ]. This Section states NCR's entire liability for
infringement of patents, copyrights, trade secrets, and other intellectual
property rights.
12.4 Litigation by Others.
---------------------
12.4.1 Except for claims regarding intellectual property infringement
covered in Sections 12.1 and 12.2 of this Agreement, [ ]
12.4.2 [ ]
12.4.3 [ ]
12.4.4 For purposes of any arbitration conducted between NCR and Solectron
with respect to [ ]
12.5 Insurance. Solectron will maintain, at its expense, General Liability
---------
insurance including but not limited to Premises Operations,
Products/Completed Operations, Contractual Liability, Independent
Contractors, Broad Form Property Damage and Personal/Advertising Injury
with minimum limits of US[ ] combined single limit per occurrence,
Excess/Umbrella Liability insurance with minimum limits of US[ ] per
occurrence. The insurance will a) name NCR as an additional insured; b)
carry an endorsement that the insurance will be primary; c) if coverage is
on a "Claims Made" form, then a policy must be maintained during the term
of this Agreement and for a period of [ ] thereafter. Solectron will
also, maintain, at its expense, Workers' Compensation/Employer's Liability
insurance with statutory limits. Each insurance policy required by this
agreement shall be issued by an insurance carrier with an A.M. Best rating
of "A-" or better and shall be kept in force throughout performance of the
services required by this Agreement. Certificates of insurance showing
compliance with these requirements will be furnished by Solectron prior to
the signing of this Agreement and sent to: NCR, Corp., Risk Management
Department, 1700 S. Patterson Blvd. WHQ-3E, Dayton, OH 45479.
Certificates will state that the policy or policies have been issued and
are in force, will not expire or lapse, and will not be canceled or changed
so as to affect the insurance described in he certificate. Compliance or
non-compliance with the requirements of this Section shall not relieve
Solectron from any responsibility to indemnify NCR or its liability to NCR
as specified in any other provision of this Agreement. Indemnity
obligations specified elsewhere in this Agreement shall not be
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<PAGE>
negated or reduced by virtue of any insurance carrier's denial of insurance
coverage for the occurrence or event which is the subject matter of the
claim; or refusal to defend any named insured.
13. OTHER OBLIGATIONS
13.1 Service Level Agreement. The parties will adhere to the service level
-----------------------
agreement set out in Exhibit F which describes requirements, measurements,
and activities needed to release and support the Products.
13.2 Leading Edge Procurement. NCR and Solectron will proactively seek
------------------------
opportunities to implement leading edge procurement processes such as
demand pull, consignment, electronic data interchange, etc. Prior to
implementation, the specific details of such processes shall be documented
and added as an exhibit to this Agreement. Solectron is to proactively
pursue similar activities with its suppliers.
13.3 Executive Reviews In addition to other meetings called for in this
-----------------
Agreement, senior management from NCR and Solectron will meet quarterly for
executive reviews to discuss the status of the relationship as well as
strategic and other important issues.
14. TERM AND TERMINATION
14.1 Unless earlier terminated under any other provision of this Agreement,
this Agreement will continue for an initial term as set out on the first
page of this Agreement and, after that, will be automatically continue in
force until NCR or Solectron gives 180 days notice of termination, or
unless earlier terminated under any other provision of this Agreement.
14.2 Either party may terminate this Agreement upon 60 days prior written
notice to the other party for failure of the other party to fulfill any of
its material obligations, including failure due to causes specified in
Section 5.3 of Article I; unless during such 60 day period the other party
remedies the failure, in which case this Agreement will continue in effect
as if the failure had not occurred. Termination of this Agreement by
either Solectron or NCR under this Section will not prejudice or otherwise
affect any manufacturing license to which NCR may be entitled. Termination
of this Agreement by either party will not prejudice it or the other party
to recover any money amounts or require performance of any obligations due
at the time of the termination.
14.3 The following Sections will survive termination of this Agreement:
Sections 1, 3, 4, 5.4, 5.9, 5.10, 5.11, 5.16 of Article I; Sections 1.1, 6,
7, 10, 12, 14.4, of Article III; and the continuation engineering portions
of Exhibit F.
14.4 In the event of termination or expiration of this Agreement, or in the
event NCR decides, subject to Section 1.3 of Article III to transfer
manufacturing of a Product or Part to another person, Solectron will use
reasonable efforts to efficiently transition the manufacture of Products or
Parts to the other person. Solectron will bear its own costs of such
transition except in the event of expiration of this Agreement or
termination of this Agreement by Solectron for NCR's breach in which case
NCR will pay for Solectron's reasonable out of pocket costs for
transitioning the manufacture of Products or Parts to such other person.
Solectron will deliver to NCR and grant NCR the worldwide, perpetual,
royalty free right to copy, use, and create derivative works from the
tooling and manufacturing test software used in production of the Products
or Parts
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<PAGE>
solely for the purpose of manufacturing and supporting products and parts
that NCR will sell; provided that Solectron will have no obligation to
provide any manufacturing test software which was developed by Solectron
for use with the manufacture of products other than the Products and Parts.
Solectron will grant NCR license to copy, use, and create derivative works
from such non NCR specific manufacturing test software solely for the
purpose of manufacturing and supporting products and parts that NCR will
sell for a reasonable royalty taking into account any value that NCR has
previously provided. NCR may exercise the foregoing licenses directly or
have another person exercise them on its behalf. In addition, if NCR
requests Solectron to consult with it or its manufacturer on questions
related to the manufacturing of Products or Parts, Solectron will provide
such consultation on a reasonable time and materials basis.
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<PAGE>
EXHIBIT A
---------
PRODUCT SPECIFICATIONS
----------------------
This Exhibit specifies the products that are covered by the Agreement.
This Exhibit is divided into three parts (A-I, A-II, A-III).
Part A-I specifies [ ]
Part A-II specifies [ ]
Part A-III specifies [ ]
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A-I [ ]
1.0 PRODUCT SPECIFICATIONS
NCR will provide Solectron a New Product Specification for each NCR product
or feature to be developed by Solectron. The Product Specification will be
comprised of one or more NCR produced documents that, in their entirety,
provide the following required Product Information.
[ ]
2.0 PREFERRED SUPPLIER
Solectron will [ ]
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A-II [ ]
In the event of any conflict between the terms of the Product CLASS
Specification(s) listed in this Exhibit and the provisions contained in the
Agreement, the terms of the Agreement shall prevail.
THE FOLLOWING TABLE (SECTION 1) LISTS THE PRODUCTS THAT WILL BE ORDERABLE
THROUGH SOLECTRON. [ ]
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<PAGE>
A-III [ ]
IN THE EVENT OF ANY CONFLICT BETWEEN THE TERMS OF THE PRODUCT CLASS
SPECIFICATION(S) LISTED IN THIS EXHIBIT AND THE PROVISIONS CONTAINED IN THE
AGREEMENT, THE TERMS OF THE AGREEMENT SHALL PREVAIL.
The following tables (section 1) list the products that will be orderable
through Solectron. The lists are [ ]
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EXHIBIT B
---------
PRICING, LEADTIME, FLEXIBILITY, ORDER RESCHEDULING, CANCELLATION, AND RETURNED
EVALUATION EQUIPMENT SCHEDULE
1. PRODUCT and PART PRICING:
Pricing for Orderable Products shall be established [ ] using the formula
below. [ ]. The price will be [ ]. The pricing will [ ].
The pricing formula is as follows:
[ ]
Affiliates. If Solectron uses any of its affiliates to provide products,
board assemblies, sub-assemblies, upgrade kits and components or perform
other services under this Agreement, Solectron will ensure:
[ ]
Columbia Lease. [ ]
2. DEFINITIONS:
[ ]
3. [ ] REVIEWS:
The NCR Cost Management Team will meet [ ] with the Solectron Cost
Management Team to [ ]
4. [ ] REVIEWS:
E. Solectron will provide [ ]
5. [ ]
6. [ ]
7. PRICING FOR MANUFACTURING SERVICES:
[ ]
8. NCR Cost Improvement Commitments:
[ ]
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9. [ ]
10. [ ]
11. PURCHASE ACTIVITY REPORTING
To the extent the facilities acquired from NCR do so prior to the Effective
Date, Solectron shall do the following:
[ ]
12. LEADTIMES
[ ]
13. RETURNED EVALUATION EQUIPMENT
[ ]
Equipment deliveries will adhere to Committed Ship Dates. If the delivery
is late, [ ]
14. [ ] PRICING:
[ ]
15. CONTINUOUS IMPROVEMENTS
All items listed in this Exhibit will be managed via a continuous
improvement process. The process to be used is the Supplier Value Add
(SVA) process. Solectron agrees to commit appropriate resources to
facilitate this process.
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EXHIBIT C
---------
QUALITY
-------
Quality Exhibit C
Table of Contents
Exhibit C1 - Quality
1.0 Purpose
2.0 Scope
3.0 Terms and Definition
4.0 Quality Performance Requirements
5.0 Notification of Change
6.0 RMA Requirements
7.0 Formal Reviews and Audits
8.0 Reliability Programs
9.0 NCR Supplier Management Process
10.0 Weights and Measures
11.0 Laser Safety
12.0 Supplier Responsibilities
Exhibit C2- Performance Requirements and Metrics
1.0 Purpose
2.0 Metrics
3.0 NCR 1998 Balanced Scorecard Objectives
Exhibit C3 - Software Quality Assurance - Replication and Development
Installation Services
1.0 Definitions
2.0 Gold Drive Loads
3.0 Records Keeping
4.0 General
5.0 Additional Support Requirements
Software Development or Modification of Existing Software Component
1.0 Statements of Work
2.0 Acceptance Testing
3.0 Closed Loop Corrective Action
4.0 Additional Support Requirements
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Exhibit C1--Quality
-------------------
1.0 PURPOSE
The purpose of Exhibit C1 (Quality) is to provide an overview of the
quality requirements which are directly linked to the metrics defined in
Exhibit C2 (Performance Requirements and Metrics). Additional requirements
may be indicated in each Product Specification as well as NCR's Business
Level Agreement. The content of Exhibit C1 also establishes a mutual
understanding of NCR's qualitative objectives.
1.1 RESPONSIBILITY
Solectron must provide quality data in to NCR each month for review
maintaining the same content and form that is currently in place. In the
event that Solectron does not meet the requirements defined in Exhibit C2,
immediate action must be taken to contain and correct all non-conformances.
Solectron must submit a corrective action plan to NCR identifying all root
causes and planned actions. NCR agrees to work with Solectron in a
proactive manner to meet the stated goals. Solectron and NCR will work
together to manually agree on ownership of expenses related to any non-
conformances.
2.0 SCOPE
The parties commit to data driven processes based on continuous improvement
and defect prevention with a goal of delivering defect free Products, Parts
and Services to NCR and it's customers. This exhibit also establishes NCR's
quality reporting requirements which will be used to measure Supplier
performance against the requirements established in Exhibit C2. The intent
is to establish Solectron's responsibilities for meeting NCR's quality /
reliability goals and business objectives.
3.0 TERMS AND DEFINITIONS
3.1 Defective Product or Part. A defective Product or Part is one that
-------------------------------
does not meet applicable warranty, functionality or other specified
requirements indicated in this Agreement, the Exhibits or the
Specifications.
3.2 Metrics. Specific measures that will be used to assess Supplier
-------------
performance with the primary focus on [ ]
3.7 Quality Improvement Plan (QIP). A formal method to be used by
-----------------------------------
Solectron to address and improve processes or products.
3.8 Return Material Authorization (RMA). Returned Material Authorization
----------------------------------------
is a process agreed to between Solectron and NCR for return of non-
conforming Products or Parts, or incomplete / incorrect orders. Specific
requirements are defined in section 6.0.
[ ]
3.10 Product Maturity. This is a point in time when results from Supplier
-----------------------
tests demonstrate a product is ready for general availability to customers.
This is determined
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using NCR's Product Readiness Assessment (PRA) model or mutually accepted
equivalent.
3.11 Ongoing Reliability Tests. Ongoing Reliability Tests are a series of
--------------------------------
tests run on a continuous, statistically-based sample of production-level
Products or Parts to validate reliability.
[ ]
3.16 New Product Introduction Plan (NPI) A NPI plan defines product
-----------------------------------------
specific quality objectives, strategies and methodologies and will be
developed concurrent with product development (refer to section 4.6 for
further details).
[ ]
4.0 QUALITY PERFORMANCE REQUIREMENTS
Specific quality performance requirements will be stipulated in Exhibit C2
Performance Requirements and Metrics. If performance levels are not
consistently maintained, [ ]
4.1 Quality Improvement Plan (QIP). The Quality Improvement Plan must
-----------------------------------
define the improvements and action needed to achieve the goals defined in
Exhibit C2. Requirement must be manually agreed upon between NCR and
Solectron. The plan must specify the quality metrics to be used to quantify
improvement. NCR and Solectron will work together to jointly develop the
quality plan. NCR will be responsible for providing quality data when
applicable. This does not relieve Solectron of the responsibility to
complete the plan and submit it to NCR for review and approval. Covered
topics for Products and Parts manufactured for NCR will include, but are
not limited to, [ ]. Owners and target dates will be included for each
defined initiative. This document will be reviewed and updated [ ] or
more often as needed, and will be managed by NCR and Solectron.
4.1.1 Software Quality Improvement. In the event that NCR elects to
-----------------------------------
contract with Solectron for the design modification or reengineering of
software products, Solectron will work with NCR to update Solectron's
Quality Improvement Plan to reflect planned initiatives and actions to
satisfy the software quality criteria and software metrics defined in this
document Exhibit C3. NCR will be responsible for providing quality data
when applicable.
[ ]
4.3 Quality Management System. Solectron must establish and maintain a
------------------------------
quality system capable of measuring and evaluating product quality. [ ]
4.4 Quality Reporting. Solectron must be capable of providing [ ] quality
----------------------
data as defined in Exhibit C2 and data collection should be consistent with
NCR's quality information strategy in a manner consistent with NCR's Pre-
Acquisition Practices. Any data currently being provided by the pre-
transition NCR Manufacturing Operations organizations to any functional
organization remaining with NCR must be continued in format and content by
Solectron. This includes [ ]. Data elements not previously discussed under
this
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Agreement, or other Specifications may also be required based on business
needs and requirements.
4.4.1 Quality Information System Requirements. NCR requires Solectron to
----------------------------------------------
[ ]
4.4.2 Product Configuration. For each product set, NCR will [ ]
----------------------------
4.4.3 Product/Component quality history. [ ]
4.5 Quality Goals. Solectron will be responsible for meeting or exceeding
------------------
all quality goals as defined in Exhibit C2 and / or the Quality Plan. On a
product by product basis or by product families, NCR and Solectron will
jointly develop goals using the [ ] and other quality based metrics as
defined in Exhibit C2.
4.6 New Product Quality Plan/New Product Introduction (NPI). Solectron
------------------------------------------------------------
shall develop and maintain a New Product Introduction (NPI) plan for all
new hardware and software products designed for NCR in a manner consistent
with NCR's Pre-Acquisition Practices. Prior to release of a Product or
Part, NCR will review with Solectron the NPI plan requirements. NCR's
review and acceptance of the plan does not relieve Solectron of the
responsibility for achieving the quality and reliability terms defined in
the plan. As applicable the minimum plan elements are:[ ]
The NPI plan must also include the following elements to the extent
consistent with NCR's Pre-Acquisition Practices:
[ ]
4.7 In Process Quality Control / Quality Audits. The section below defines
-------------------------------------------------
NCR's requirements for in process quality control and quality auditing.
[ ]
4.8 Material Handling. Solectron is responsible for exercising proper
----------------------
material handling procedures. This includes [ ]
4.8.1 Environmental Requirements. Solectron must adhere to state and
---------------------------------
federal laws for the storage and disposal of all hazardous materials.
4.9 Supply Line Management. To the extent jointly agreed by NCR and
----------------------------
Solectron, [ ]
4.9.1 Approved Vendor List (AVL). Solectron must develop and maintain an
----------------------------------
AVL for products that they design. NCR will [ ]
4.9.2 Commodity Strategies. Solectron will review their key commodity
----------------------------
strategies with NCR on a regular basis. These strategies will [ ]
4.10 Change Control Process. For Products and Parts designed for NCR,
-----------------------------
Solectron must establish and maintain a change control process capable of
managing Engineering Change Orders. [ ]
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4.11 Resources. NCR and Solectron will work in good faith to maintain
----------------
adequate resources to meet NCR's improvement goals and objectives.
4.12 Software Quality Assurance. Any functional or test software design
---------------------------------
or revision (includes BIOS, firmware, and testware) performed by Solectron
that impacts equipment purchased by NCR will be performed using controlled
processes documenting industry-accepted Software Quality Assurance
practices. Specific requirements are defined in Exhibit C3 and
include [ ].
4.13 Customer Satisfaction Issues. For products or parts designed or
----------------------------------
manufactured for NCR, Solectron will [ ].
5.0 NOTIFICATION OF CHANGE
The reference to "changes" in this section refers to changes to [ ]. The
notice of change from Solectron must include at a minimum the following:
1. [ ]
5.1 Unless otherwise agreed for all design related changes, Solectron is
required to submit Notification of Change to the identified NCR contacts.
NCR and Solectron will agree to the appropriate response time in line with
the requirements necessary to meet end-user demand. It is expected that
Solectron will notify NCR of intended changes [ ].
5.2 [ ]
5.5 NCR will respond in writing with the approval or rejection of the
change request.
[ ]
7.0 FORMAL REVIEWS AND AUDITS
NCR at it's own discretion shall have the right to perform formal audit and
reviews of all Solectron processes affecting products purchased by NCR in
accordance with Section 3 of Article I of the Agreement. NCR will provide
Solectron with written advance request of such audit. Solectron must permit
reasonable access to all processes and procedures to provide the necessary
support for successful completion of the audit. This includes and is not
limited to any requested data or information as it applies to the products
being manufactured or designed. The following are classified as formal
reviews:
1. [ ]
All formal reviews and audit findings shall be documented along with
corrective action plans and action items. Audit findings will be documented
and reported using the supplier corrective action process. NCR may or may
not perform all of the above reviews. Solectron will provide all
reasonable assistance with any such requested review by NCR. Performance
of such will be based on business needs.
8.0 RELIABILITY PROGRAMS
The purpose of this section 8 is to define Solectron's responsibility for
meeting NCR's [ ] requirements as defined in Exhibit C2 and/or the Product
Specifications. [ ]
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9.0 NCR SUPPLIER MANAGEMENT PROCESS
NCR expects Solectron to be a participatory partner in applying NCR's
supplier development and Supplier Value Add (SVA) processes. [ ]
Both parties will work together to coordinate and align NCR's SVA and QIS
programs with Solectron's Customer Satisfaction Index (CSI).
10.0 WEIGHTS AND MEASURES
Products being shipped into or within European Union countries are required
to be manufactured in facilities that have a Quality System Approved to
Council Directive 90/384/EC, Non Automatic weighing Instruments. Solectron
must comply to this requirement. These products include and are not limited
to Scales, Scanner Scales, and POS terminals that interface to non-
automatic weighing systems.
11.0 LASER SAFETY
Solectron must comply to Laser Safety standards as defined by [ ]
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Exhibit C2 -Performance Requirements and Metrics
1.0 PURPOSE
The purpose of Exhibit C2 is to define NCR's quality metrics and to
establish Solectron's performance requirements for 1998 in a manner
consistent with NCR's Pre-Acquisition Practice. [ ]
2.0 METRICS
The metrics shown in the subsequent sections are taken directly from NCR's
Balanced Score Card. The Score Card represents metrics that are critical to
the success of NCR's business. They will be used to measure Solectron's
performance on a monthly basis to determine if the stated requirements are
being met
[ ]
3.0 NCR 1998 Balanced Scorecard Objectives
Solectron must provide the data represented below each month, along
with [ ]
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Exhibit C3 Software Quality Assurance - Replication and Development
Purpose
The purpose of this section is to specify quality assurance terms when
Solectron performs software installation services or Software development
services.
I INSTALLATION SERVICES
1.0 Definitions
----------------
1.1 "Preinstalled Software Product" - shall mean a copy of the Software
Product installed on each Product hard disk or on a CD Rom.
1.2 "Software Development Product" - shall mean software developed or
modified by Solectron for NCR.
1.3 "Software Product" - shall mean any copyrighted and/or patented
software product(s) (including where applicable, Software Product in object
code form, Software Product documentation) owned by NCR or a third party.
1.4 "Software Product Deliverables" - shall mean (i) Software Product
in object code form (ii) installation utilities, if applicable (iii) a
single copy of Software Product documentation; and (iv) or otherwise
identified by Software Product publisher as Software Product Deliverables.
1.5 "Statement of Work" (SOW) - shall mean a document negotiated by NCR
and Solectron amended to this Agreement that contains the business terms
and technical descriptions for each Software Development Product.
2.0 GOLD DRIVE LOADS (Master Software Loads)
---------------------------------------------
NCR will provide Solectron with written instructions indicating specific
Software Products which may only be installed on specific Products.
Solectron may not install or distribute the Software Product in any other
manner other than described in these written instructions and then only
within the parameters specified in this Exhibit and Exhibit H. Solectron
shall distribute Software Product only in the Product configurations
specified by NCR.
3.0 Record Keeping and Inspections
-----------------------------------
Solectron agrees to keep all usual and proper records and books of account
and all usual and proper entries relating to each Software Product licensed
sufficient to substantiate the number of copies of Software Product and the
number of Products distributed for NCR. Solectron agrees to report to NCR
in the form provided by NCR, information concerning Software Products
installed, including, without limitation, the number of units of each
Software Product installed and/or the number of packages
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inserted, corresponding NCR model number(s), and shipment destination; and,
the number of units of Software Product packages in inventory.
4.0 General
------------
4.1 NCR shall have the right to inspect actual incidents of the loads of
Software Products.
4.2 Solectron shall document and communicate to NCR its procedures for
executing software loads.
4.3 Solectron will document and adhere to procedures for the physical
security of any gold drives provided by NCR. In addition Solectron will
document tests and procedures to assure that no virus or other harmful code
is introduced to the gold drives or Products intended to be loaded by the
gold drives.
5.0 Additional Support Requirements
------------------------------------
[ ]
II. SOFTWARE DEVELOPMENT OR MODIFICATION OF EXISTING SOFTWARE COMPONENT
Purpose
-------
In the event that NCR elects to contract with Solectron for software
development or the design modification of existing software products, the
balance of this Part II of this Exhibit and Exhibit H shall apply.
1.0 Statements of Work
-----------------------
1.1 The requirements shall be included as part of a negotiated Statement
of Work.
[ ]
1.2 System Testing
1.2.1 Solectron agrees to fully test the identified deliverables to ensure
that the system [ ]
1.2.4 The following criteria must be met for Solectron to release the
deliverables to NCR:
[ ]
1.2.5 A system test report shall be generated by Solectron at the
completion of system testing and promptly communicated to NCR. The test
report shall include the following information:
[ ]
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1.2.6 NCR reserves the right to send a software quality assurance
representative to Solectron to be present during the system testing to
audit the processes and results of Solectron's system testing efforts.
2.0 Acceptance Testing
-----------------------
2.1 NCR shall conduct, or have conducted, acceptance testing on the
deliverables provided by Solectron. Such testing shall generally include
the following:
[ ]
2.1.3 NCR will communicate the results of its acceptance testing to
Solectron, via a written report.
3.0 Closed Loop Corrective Action
----------------------------------
During the execution of the technical and non-technical requirements
contained within the Statement of Work, Solectron shall comply with the
Closed-Loop-Corrective-Action requirements (CLCA) as indicated in Exhibit C
of the Agreement.
4.0 Additional Support Requirements
------------------------------------
4.1 Configuration Management. Solectron shall ensure that full software
configuration management is done for all Software projects. This shall
include, but not be limited to:
[ ]
4.2 Solectron will provide [ ]
[ ]
4.4 NCR reserves the right to make, or have made, version changes to the
developed Software component.
4.5 If specified in the SOW, Solectron shall provide the deliverables,
including source code and/or documentation (information products) to an
escrow agent identified by NCR. NCR reserves the right to audit the escrow
account to ensure compliance with the escrow requirement.
4.6 Solectron must provide full Product(s) support including communication
with NCR, as necessary, to resolve system level problems. This includes
[ ] In the event the Agreement is terminated Product support will continue
as described.
[ ]
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EXHIBIT D
---------
SUPPORT SERVICES REQUIREMENTS
-----------------------------
1.0 SCOPE
Unless otherwise specified, all defined terms in the Agreement have the
same meaning when used in this Exhibit. NCR will act as the primary point
of contact for all Customers experiencing Product problems. Solectron
plays a key role in enabling NCR to support its Customers. This Exhibit
details Solectron's responsibilities with respect to that support and is
the definitive agreement for Service Parts and Service related items. In
addition, Solectron will [ ].
2.0 TECHNICAL INFORMATION
2.1 To the extent available now, [ ], and during the life of this
Agreement, Solectron will provide the following, collectively referred to
as "Technical Information," [ ]
2.2 Where available documentation will be in Microsoft Word electronic
format suitable for reproduction, and will be updated by new documentation
from time-to-time as it becomes available at no cost to NCR. Documentation
currently available will be provided to NCR as soon as practicable, but not
more than thirty (30) days following the signing of this Agreement. New
documentation will be provided to NCR within thirty (30) days following its
creation.
2.3 NCR will have the right to copy, modify and use, and have copied,
modified and used, the Documentation provided by Solectron for the purpose
of providing desired manuals, training or support materials, or the like
concerning the Product, provided that any Solectron and Solectron vendor
copyrights therein are appropriately safeguarded. Such manuals, training
or support materials shall be used solely to support the Products.
Solectron will include with each unit of Product purchased a complete set
of Documentation agreed upon by NCR and Solectron relating to the operation
and/or maintenance thereof as is customarily supplied to end users.
3.0 TRAINING
Solectron will provide Product training ("Train the Trainer") [ ].
Solectron authorizes NCR to video tape such classes and grants to NCR a
royalty-free license to duplicate and distribute the tape and any related
class materials to NCR authorized support providers.
4.0 TECHNICAL SUPPORT
4.1 General Description. [ ]
4.2 Levels of Support
[ ]
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4.3 Response, Update and Resolution Guidelines. When Solectron has been
engaged in problem resolution, it will comply with the following
guidelines. These guidelines will enable NCR to meet customer commitments.
Time measurement begins when Solectron is first contacted by NCR. Time
frames stated in days are contiguous calendar days.
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------
[
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
]
- ------------------------------------------------------------------------------------------------------
</TABLE>
4.4 Solectron Point(s) of Contact. Solectron's point(s) of contact for
Technical Support and Emergency Service Parts will be provided to NCR
as soon as practicable, but not more than thirty (30) days following
the signing of this Agreement.
4.5 Continuing Availability. Solectron's Technical Support as described
in this Section 4 shall be available to NCR during [ ]
4.6 Reporting. The NCR business critical customer environments dictate
that timely analysis of failed Part(s) be performed and that
subsequent data be reported back to NCR for presentation to the end-
user. NCR expects Solectron to provide detailed failure information
in accordance with the provisions Exhibit C. Solectron will also
provide NCR with a [ ]
5.0 PARTS
5.1 Identification. A complete orderable Parts list with NCR Part numbers
for the Products and Parts will be provided to NCR at least thirty (30)
days prior to the delivery of the first Product of each type ordered by
NCR. Such lists shall include the following for each Part: [ ]
5.2 Availability. Solectron will make available to NCR such Parts as NCR
may require for all Products purchased by NCR from Solectron during the
Product production. For a period of not less than [ ] after the date of
delivery by Solectron of the last unit of the Product delivered, Solectron
shall also undertake the following: [ ]
5.3 Lead Time. Solectron will carry inventory adequate to meet [ ]
5.4 Emergency Orders. Solectron agrees to [ ]
5.5 Reworkable Parts. Reworkable Parts are Parts which have failed but
may be economically reworked to perform in accordance with their
Specifications. [ ]
5.6 Packaging. Solectron will package parts individually in a protective
package that is suitable for individual distribution, labeled and barcoded
as described in the NCR Supplier Guide, hereby incorporated by reference
and provided to Solectron under separate cover.
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5.7 EDI. Solectron and NCR agree to use EDI to exchange data between the
two companies. Transactions are, but not limited to, Purchasing,
acknowledgment, shipping, invoicing, and defective receipt. (Refer to
exhibit G)
5.8 Pricing. [ ]
6.0 PRODUCT CHANGES
6.1 NCR Approval. Notwithstanding NCR's approval of Product Changes,
Solectron agrees to the following with respect to any change in the Product
or its Parts that Solectron has design ownership or supply line
management responsibility.
[ ]
7.0 WARRANTY REIMBURSEMENT
[ ]
8.0 SUPPLIER'S SUPPORT SERVICES PERFORMANCE
Support Services performance will be measured using the [ ] The results
of which will trigger appropriate management escalation processes.
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EXHIBIT E
---------
SAFETY AND REGULATORY AGENCY REQUIREMENTS
-----------------------------------------
EXHIBIT E IS DIVIDED INTO TWO PARTS:
PART E-1 APPLIES TO PRODUCTS COVERED BY THE AGREEMENT FOR WHICH SOLECTRON
HAS DESIGN OWNERSHIP.
PART E-2 APPLIES TO PRODUCTS COVERED BY THE AGREEMENT FOR WHICH NCR HAS
DESIGN OWNERSHIP.
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<PAGE>
EXHIBIT E, PART E-1
FOR SOLECTRON ENGINEERED PRODUCTS
SAFETY AND REGULATORY AGENCY REQUIREMENTS BY COUNTRY
Solectron is responsible for assuring that product design complies with the
applicable regulatory requirements, obtaining the appropriate regulatory
certifications, and manufacturing products in compliance with the
appropriate regulatory requirements. These responsibilities apply to
requirements, set out below, set out in the Specification for the Product,
or any other requirements that apply in the jurisdictions set out below or
in the Specification for the Product. One copy of each international
certification documentation with the testing and compliance investigation
reports, shall be maintained by Solectron for at least ten years beyond the
last date of manufacture, or provided to NCR for archival purposes. NCR may
update this Exhibit from time to time as regulatory or safety requirements
change.
United States Requirements - For Products intended for release in the
---------------------------------------------------------------------
United States:
-------------
A. Product Safety - The Product will be Listed , per UL Standard 1950 for use
as Information Technology Equipment, by Underwriters Laboratories or other
Nationally Recognized Test Laboratories. Each unit will be marked with the
appropriate safety agency labeling requirements.
B. Electro-Magnetic Emissions - The Product will comply with Federal
Communications Commission (FCC) requirements CFR Title 47, Parts 2 and 15.
Each unit will be labeled appropriately for Class A or Class B and
documentation will contain user statements as required per the FCC rules.
C. Telecommunication Equipment - All equipment that connects directly to a
telecommunication network, either public or private, will comply with
Federal Communications Commission (FCC) requirements CFR Title 47, Part 68.
Each unit will be labeled appropriately as required by the FCC rules.
D. Laser Containing Devices - All Products which contain laser devices
(scanners, printers, CD devices, etc.) must comply with the Department of
Health and Human Services (DHHS) regulations CFR Title 21, Subchapter J.
Each unit will bear a DHHS compliance label and any caution labels
appropriate for the class laser device integrated into the Product per the
regulations. All Product documentation must contain the required user
warning statements. In addition, Products must comply with individual
state laws (i.e., New York) that require additional registration and/or
approval.
E. Ozone Depleting Chemicals - Seller will label all Products and Parts
(including all packaging) as required by the United States Environmental
Protection Agency's regulations in effect at the time of delivery of the
Product or Parts. As of September 1993, the basic regulations may be found
at Volume 40 of the Code of Federal Regulations, Part 82, entitled
"Protection of Stratospheric Ozone," Subpart E, entitled "The Labeling of
Products Using Ozone Depleting Substances."
International Requirements - For Products intended for release outside the
--------------------------------------------------------------------------
U.S.:
----
Check off applicable regulatory requirements for countries and regions
where Product release and installations are planned outside the United
States.
A. Product Safety:
__X__ Canada - The Product will be certified by the Canadian
Standards Association for compliance with the latest edition of the CSA
Standard C22.2 No. 950, Safety of
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Information Technology Equipment. As an alternate, Underwriters
Laboratories may be used for certification to CSA Standard C22.2 No. 950.
__X__ European Community (EC) - Product compliance with EC Directive
73/23/ECC (Low Voltage Directive) is required. Testing and certification by any
national "notified Body" (VDE, TUV, BSI, etc.) for compliance to EN 60950
"Safety of Information Technology Equipment" is acceptable. Products should be
appropriately labeled with the European CE mark.
__X__ CB Scheme - A CB Certificate and Report verifying compliance to IEC
950/EN6050 including Nordic deviations must be provided.
__X__ Mexico - Certification to NOM-019 is required.
__X__ Saudi Arabia - Certification by SASO is required
__X__ Russia - GOST-R Certification is required.
__X__ Other International Countries - Product compliance with IEC 950,
"Safety of Information Technology Equipment" is required.
B. Electro-Magnetic Emissions:
__X__ Canada - Compliance with U.S. FCC rules is satisfactory for Canadian
requirements but Additionally each Product must be labeled and documentation
statements included per the Canadian Department of Communications Radio
Interference Regulations.
__X__ European Community (EC) - Product compliance with EC Directive
89/336/ECC (EMC Directive) is required. Testing for compliance is required to
the following European standards: EN55022 (emissions), EN50082-1 (immunity),
EN61000-3-2 (harmonic currents) and EN61000-3-3 (flicker). All test results are
to be documented in a formal report and provided to NCR. Products should be
appropriately labeled with the European CE mark.
__X__ Japan - Products must be tested and certified for Japanese VCCI
compliance. Products must be labeled per VCCI requirements.
__X__ Korea - Products must be tested and certified by the Korean Radio
Research Laboratory for compliance with the Korean Ministry of Communication
Ordinance 825.
__X__ Australia/New Zealand - Products must be tested and certified for
compliance with AS/NZS 3548: 1995. All test results are to be documented in a
formal report and provided to NCR. Products should be appropriately labeled with
the C-Tick mark per the requirements of the Australian Communications Authority.
__X__ Taiwan - Products must be in compliance with the "Commodity EMC
Regulation" and tested for compliance to Chinese National Standard 13438 by a
laboratory approved by the bureau of Commodity Inspection & Quarantine (BCIQ).
Products should be appropriately labeled with the Taiwan Certification mark per
the requirements of the BCIQ.
C. Telecommunication Equipment Approvals:
__X__ Canada - The Product must have an equipment grant issued by the
Canadian Department of communications (DOC) verifying compliance with the
Standard for Technical Equipment CS-03.
__X__ European Community (EC) - Product compliance with EC Directive
91/263/ECC (Telecom Directive) is required. Testing and certification for
compliance is required to the appropriate European Common Technical
Requirements (CTR's). Products should be appropriately labeled with the
European CE mark and any country specific requirements.
__X__ Other International Countries - Most countries outside the U.S.
require permission (which may be in the form of a license) to be obtained from a
local PTT authority prior to connection to
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a telecommunications network. Specific country PTT approvals for the purchased
Product should be specified below. Products should be appropriately labeled with
any country specific requirements.
__________________________________________________________
__________________________________________________________
__________________________________________________________
__________________________________________________________
D. Laser Containing Products:
__X__ Outside the U.S. - Products containing laser devices must show
evidence of compliance with IEC 825 "Safety of Laser Devices".
NOTE: All products must be certified and labeled in accordance with the
specific requirements for the regulatory approvals required above in this
Exhibit E, Part E-II. As new national statutory and regulatory requirements
emerge, and as current requirements are revised, Solectron will be responsible
for maintaining compliance of product design accordingly. Solectron will be
responsible for insuring that production units are modified as needed to
maintain compliance to such new requirements.
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EXHIBIT E, PART E-2
FOR NCR ENGINEERED PRODUCTS
SAFETY AND REGULATORY AGENCY REQUIREMENTS BY COUNTRY
NCR is responsible for assuring that product design complies with the
applicable regulatory requirements. Solectron will be responsible for
manufacturing products in compliance with the appropriate regulatory
requirements. Solectron must assess the potential impact of build changes
on regulatory compliance and consult with NCR's Regulatory Compliance Team
as needed prior to making such changes. Any changes to components,
materials, or suppliers should be reviewed and approved by NCR's Regulatory
Compliance staff prior to implementation. NCR's Product Safety Engineer
should have access to Solectron's manufacturing facility to perform audits
for safety compliance. These responsibilities apply to requirements, set
out below, set out in the Specification for the Product, or any other
requirements that apply in the jurisdictions set out below or in the
Specification for the Product. One copy of each international certification
documentation with the testing and compliance investigation reports, shall
be maintained by NCR for at least ten years beyond the last date of
manufacture. NCR may update this Exhibit from time to time as regulatory or
safety requirements change.
United States Requirements - For Products intended for release in the
---------------------------------------------------------------------
United States:
-------------
A. Product Safety - NCR is responsible for obtaining UL Listing or
Recognition per UL Standard 1950 for use as Information Technology
Equipment, by Underwriters Laboratories or other Nationally Recognized Test
Laboratories. Solectron will assure that each unit will be marked with the
appropriate safety agency logo and the required safety warnings (both
markings and documentation) shall be provided as specified by NCR.
Solectron will manufacture products in accordance with safety agency
requirements and provide the necessary documentation to identify materials
and components available for UL Field Representatives during inspections.
Solectron shall also perform production-line testing in accordance with
safety agency requirements and insure that products are constructed in
accordance with the safety agency's Follow-up Service Procedure.
B. Electro-Magnetic Compatibility- NCR is responsible for insuring that
product design complies with Federal Communications Commission (FCC)
requirements CFR Title 47, Parts 2 and 15. Solectron will assure that each
unit will be labeled appropriately for Class A or Class B and documentation
will contain user statements as required per the FCC rules and as specified
by NCR. For products which incorporate intentional transmitters, each unit
should be labeled with the required FCC ID number.
C. Telecommunication Equipment - All equipment that connects directly to a
telecommunication network, either public or private, will comply with
Federal Communications Commission (FCC) requirements CFR Title 47, Part 68.
Each unit will be labeled appropriately as required by the FCC rules.
D. Laser Containing Devices - All Products which contain laser devices
(scanners, printers, CD devices, etc.) must comply with the Department of
Health and Human Services (DHHS) regulations CFR Title 21, Subchapter J.
Each unit will bear a DHHS compliance label and any caution labels
appropriate for the class laser device integrated into the Product per the
regulations. All Product documentation must contain the required user
warning statements. In
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addition, Products must comply with individual state laws (i.e., New York)
that require additional registration and/or approval.
E. Ozone Depleting Chemicals - Seller will label all Products and Parts
(including all packaging) as required by the United States Environmental
Protection Agency's regulations in effect at the time of delivery of the
Product or Parts. As of September 1993, the basic regulations may be found
at Volume 40 of the Code of Federal Regulations, Part 82, entitled
"Protection of Stratospheric Ozone," Subpart E, entitled "The Labeling of
Products Using Ozone Depleting Substances."
International Requirements - For Products intended for release outside the
--------------------------------------------------------------------------
U.S.:
----
A. Product Safety:
Solectron will assure that each unit will be marked with the appropriate
safety agency logos and the required safety warnings (both markings and
documentation) shall be provided as specified by NCR. Solectron will
manufacture products in accordance with safety agency requirements and have
the necessary documentation to identify materials and components available
for safety agency representatives during inspections. Solectron shall also
perform production-line testing in accordance with safety agency
requirements.
NCR insure that product design complies with safety agency requirements for
the countries where products will be sold and obtain the necessary agency
certifications. As noted below:
Canada - The Product will be certified by the Canadian Standards
Association for compliance with the latest edition of the CSA Standard
C22.2 No. 950, Safety of Information Technology Equipment. UL certification
for Canada (C-UL) in accordance with UL 1950 3/rd/ Edition may be obtained
in lieu of CSA certification.
European Community (EC) - Product compliance with EC Directive
73/23/ECC (Low Voltage Directive) is required. Testing and certification by
any national "notified body" (VDE, TUV, BSI, etc.) for compliance to EN
60950 "Safety of Information Technology Equipment" is acceptable. Units
destined for EU countries should have the CE mark on the product ID label
and carton.
European Free Trade Association (EFTA) Countries - Product testing and
certification by NEMKO (or equivalent) for compliance to EN 60950 is
required.
Mexico -. Certification to NOM-019 is required
Saudi Arabia - Certification by SASO.
Russia - GOST-R Certification is required.
Other International Countries - Product compliance with IEC 950,
"Safety of Information Technology Equipment" is required.
B. Electro-MagneticCompatibility
Solectron will assure that each unit will be labeled appropriately
for Class A or Class B and documentation will contain user statements as
required and as specified by NCR. NCR shall insure that product design
complies with the EMC requirements for the respective countries where
products will be sold and obtain the necessary certifications as noted
below:
Canada - Each product must be labeled and documentation statements
included per the Canadian Department of Communications Radio Interference
Regulations.
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European EU Countries -Compliance with the EU's EMC Directive 89/336/EEC,
EN 55022 (CISPR 22) and EN50082-1.Units destined for EU countries should have
the CE mark on the product ID label and carton.
European EFTA Countries - Products must comply with the requirements of
CISPR 22 or EN 55022.
Japan - Products must be tested and certified for Japanese VCCI compliance.
Korea - Products must be tested and certified by the Korean Radio Research
Laboratory for compliance with the Korean Ministry of Communication Ordinance
825.
New Zealand and Australia - Products must be tested and certified for
compliance in accordance with the Electromagnetic Compatibility Framework using
AS/NZS 3548:1995 and bear the C-Tick mark and the Australian Company Number
(ACN).
Taiwan - Products must be tested and certified for compliance with CNS
13438. Product should be marked with BCIQ (Bureau of commodity Inspections &
Quarantine) certification number and marking.
Other International Countries - Evidence of compliance with CISPR 22 is
required.
For products which incorporate intentional transmitters, the required
certifications will be obtained by NCR. Solectron shall insure that each unit
should be labeled with the required certification numbers.
C. Telecommunication Equipment Approvals:
Canada - The Product must have an equipment grant issued by the Canadian
Department of Communications (DOC) verifying compliance with the Standard for
Technical Equipment CS-03.
United Kingdom - The Product must be authorized by the British Approvals
Board for Telecommunications (BABT) for connection to a telecommunication
network.
Other International Countries - Most countries outside the U.S. require
permission (which may be in the form of a license) to be obtained from a local
PTT authority prior to connection to a telecommunications network. Specific
country PTT approvals for the purchased Product should be specified below.
____________________________________________________________
____________________________________________________________
____________________________________________________________
D. Laser Containing Products:
Outside the U.S. - Products containing laser devices must show evidence of
compliance with IEC 825 "Safety of Laser Devices".
NOTE: All products must be labeled in accordance with the specific requirements
for the regulatory approvals required above in this Exhibit E, Part E-III. As
new national statutory and regulatory requirements emerge, and as current
requirements are revised, NCR will be responsible for maintaining compliance of
product design accordingly. Solectron will be responsible for insuring that
production units are modified as needed to maintain compliance to such new
requirements.
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EXHIBIT F
---------
SERVICE LEVEL AGREEMENT
-----------------------
This exhibit contains four distinct sections pertaining to the relationship
between Solectron and NCR. The sections have been separated to add clarity to
service levels required for each.
Section I: NCR RSG design owned product sourced and/or manufactured from
Solectron
Section II: NCR CSG design owned product sourced and/or manufactured from
Solectron
Section III: Solectron design owned product sourced and/or manufactured from
Solectron
Section IV: NCR Staging Definition and Implementation
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Service level agreement
SECTION I: NCR RSG design owned product sourced and/or manufactured from
Solectron
Table of Contents
1.0 Purpose
2.0 Definition of Terms
3.0 Cost Tracking Requirements
3.1 [ ]
4.0 Customer Delivery Requirements
4.1 [ ]
5.0 Quality Performance
6.0 New Product Introduction
6.1 [ ]
7.0 Continuation Engineering
7.1 [ ]
8.0 Export and Import Compliance
9.0 Customer Order, Shipment, and Inventory System Requirements
10.0 Supply Line Management
10.1 Supplier Base
10.2 Commodity Responsibilities
10.3 Engineering Support
10.4 Continuous Improvement
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1.0 Purpose
This Service level agreement outlines the minimum acceptable expectations
for the Manufacturing Partnership between Solectron and NCR-RSG. [ ]
Detailed process information supporting these service level expectations
are included in the Business level agreement which is expected to be a
living document which NCR and Solectron associates use to guide themselves
in their day-to-day work activities.
2.0 Definition of Terms
2.1 B-models: Pre-production models of a new product. At NCR's option, NCR
may request that Solectron build B-models. See the B-model
manufacturing paragraph in the New Product Introduction section 6.0
for more detail.
2.2 A-models or Prototype: For the purpose of this agreement, there is no
difference between A-models, Prototypes, and B-models.
2.3 C-models: Full production quality units. Although production units for
a product that have been in production for a year are technically "C-
models", the term is most often used to describe the first set of
production units that are used to run final product acceptance
testing, and are expected to either be sold to end customers or to be
functionally identical to the first units sold to customers.
2.4 ICI: Initial Customer Installation: The first customer installation of
C-models of a new product that have completed all of the required NCR
certifications. The term ICI is sometimes used to refer to the product
development milestone, ICI-ready, where the first C-model units have
been built and are ready to be sold and shipped to a customer.
2.5 GCA: General Customer Availability: Product is ready for volume
shipments with no special controls or filters on incoming orders.
2.6 CD/E: Controlled Deployment and Evaluation: Typically, the period of
time between [ ].
2.7 FBOM: NCR's Featurized Bill of Materials used to control the certified
configurations of the Product. The FBOM includes [ ].
2.8 EBOM or Preliminary FBOM: [ ].
2.9 MCC Product cost: The cost/price at which Solectron transfers product
to NCR as described in Exhibit B.
2.10 RSG Products: Products that Solectron manufactures for NCR as defined
in the RSG section of Exhibit A. New products will be added to this
exhibit in the future.
2.11 NCR SLM: NCR's Supply Line Management organization - responsible for
supplier qualification, supplier management, and material purchasing,
among other things.
2.12 NCR OLM: NCR's Order and Logistics Management - responsible for
accepting customer orders and scheduling production, among other
things.
2.13 PRT or PRT team: NCR's cross functional product development management
team -responsible for product definition, development, and deployment.
Team composition typically includes representatives from [ ]
2.14 Gold disk or Gold drive: A master copy of a hard disk with a binary
image of an operating system and other software loaded onto it. This
Gold Disk is then used in the manufacturing process to create multiple
copies of which are to be used in NCR POS terminals
2.15 SCER: Special Construction Estimate/Engineering Request - A process
that NCR uses to [ ].
2.16 Commodity management: Tasks associated with [ ]
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2.17 Supplier management: Tasks associated with managing the continuous
improvement of supplier performance in all aspects of a business
relationship.
2.18 Acceptance Test (ACT): The ACT is a test process performed to certify
the manufacturing process and the Supply Line Management Procurement
Process. To make this test meaningful [ ].
2.19 Design Qualification Test (DQT): The DQT is a test process performed
to certify that the design of the product meets the criteria as
defined in the product functional specification. [ ]
2.20 Development Release (DR): The DR process is the process used by NCR to
issue engineering change orders and the introduction/release of new
products into manufacturing. For this document, the term DR includes
[ ]
2.21 Manufacturing Trial Order (MTO): The MTO process is used to validate
the manufacturing process and the end unit test process before the
actual break-in of a DR. NCR and Solectron will jointly decide if an
MTO is required for a new product or change DR.
2.22 Field Retrofit Order (FRO): Process executed due to a safety or
reliability issue on an NCR product [ ]
2.23 Printed Circuit Board (PCB) layout: The PCB layout process is used to
do the physical layout of circuit boards. Designers work from
schematics to define the position of components and their
interconnecting copper lines.
2.24 Request For Change (RFC): The RFC process is a formalized process for
requesting engineering changes and manufacturing deviations for part
substitutions. It is intended for use by NCR and Solectron as the
vehicle for requesting all product changes
2.25 Stop Order/Stop Order Release (SO/SOR): The SO/SOR process is used as
a method of controlling procurement, build and shipment of products.
[ ]
2.26 WSL: NCR's inventory warehouse at Peachtree
2.27 CDC: Customer Delivery Center - NCR consolidation and staging center.
2.28 Material Requisition (MR): The MR process is used to order items from
manufacturing stock. It requires a charge number for the item to be
charged to.
2.29 Managed Support and Service Planning (MSSP): The MSSP group is an NCR
group charged with planning all support activity and assuring the
necessary steps are taken to support a new product or changes to an
existing product.
2.30 SPPR: Service Parts Procurement Request
2.31 [ ]
2.32 Replacement Product- a product with a new or modified product set
specification which meets all the following criteria:
1. [ ]
2.35 New Product - a product with a new product specification which meets
all of the following criteria:
1) [ ]
2.36 Replacement Service: A new service which provides essentially the same
results as an existing service covered by the Agreement, although
possibly at an improved level of performance. If delivered at an
improved level of performance, the improvement is considered a normal
outcome of continuous improvement processes.
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2.37 New Service: A new service which establishes a significant new
capability/result or a significant enhancement to an existing
service which would not normally be the outcome of normal
commercial continuous improvement processes. The party receiving
the service would normally be expected to compensate the service
provider for this New Service if it was provided at the request
of the receiver and if there is a material incremental cost
incurred by the service provider to develop this service
capability and if the receiver agrees to pay for said service.
3.0 Cost Tracking Requirements
3.1 Pricing: Product transactions between Solectron and NCR RSG will be
priced according to Exhibit B.
3.2 Cost Attack Team (CAT) Process
3.2.1 [ ]
3.3 Cost Reviews: All cost reviews will be conducted in accordance with
Ex B.
4.0 Customer Delivery Requirements - Forecasting, Order Fulfillment
4.1 Forecasting: [ ]
4.2 Order Management: Solectron will also be responsible for all order
fulfillment activities, [ ]
4.3 Order Change Flexibility - NCR RSG currently measures [ ]
4.4 Order Responsiveness - [ ]
4.5 Invalid Order Configurations - [ ]
4.6 Shipment Records - Solectron will send shipment transaction data to
NCR [ ] This data will be used by NCR to update the [ ].
4.6.1 [ ]
4.7 Product Life Cycle Management - New Product Introduction
4.7.1 [ ]
4.8 Product Life Cycle Management - Product, Feature, Cable and Kit
Discontinuation
4.8.1 [ ]
5.0 Quality Performance
Solectron shall meet the requirements set forth in Exhibit C for NCR
RSG designed products.
6.0 New Product Introduction
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This New Product Introduction section defines the service level
expectations associated with the release of a new product from engineering
to manufacturing. There are some common processes used in New Product
Introduction as well as in Continuation Engineering. These processes may be
documented in the Continuation Engineering section. It is expected that
Solectron will provide [ ]
6.24 [ ]
7.0 Continuation Engineering
This Continuation Engineering section defines the service level
expectations associated with maintaining a product through the normal
production life cycle. There are some common processes used in New Product
Introduction as well as in Continuation Engineering. These processes may be
documented in the New Product Introduction section. It is expected that
Solectron will provide [ ].
Access to systems and data currently available is required in the execution
of processes in this document. This is required to maintain and improve
quality and productivity through electronic interfaces and automation.
[ ]
8.0 Export and Import Compliance
8.1 Solectron will be totally responsible for all import activities
associated with materials that Solectron procures.
8.2 Solectron will be the exporter of record for all
products/components/subassemblies it ships to other Solectron
organizations.
8.3 NCR will be the exporter of record for all products, components,
subassemblies, software and documentation ordered by NCR or its
affiliates for export from the country of manufacture - currently the
United States and Ireland.
8.4 The exporter of record will be separately accountable to the
applicable government agencies for complying with all relevant
regulations when importing or exporting Solectron products,
components, subassemblies, software and documentation.
8.5 At NCR's request, Solectron will provide NCR with complete Bill of
Materials (BOM) identifying country of origin and Solectron cost for
each part or component separately integrated into its products. NCR
will require this information where products manufactured in the
United States are proposed for transactions involving the Agency for
International Development (AID) or EX-IMBank. Further, NCR may require
this information to determine if products manufactured outside the US
are subject export controls based on US parts content.
9.0 Customer Order, Shipment and Inventory System Requirements
9.1 [ ]
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10.0 Supply Line Management
10.1 Supplier Base
10.1.1 [ ]
10.2 Commodity Responsibilities
10.2.1 [ ]
10.2.2 [ ]
10.3 Engineering Support
10.3.1 [ ]
10.4 Continuous Improvement
10.4.1 Solectron agrees to drive continuous improvement throughout
all aspects of the supplier relationship.
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Service level agreement
SECTION II: NCR CSG design owned product sourced and/or manufactured from
Solectron
Table of Contents
1.0 Purpose
2.0 Definition of Terms
3.0 Cost Tracking Requirements
3.1 [ ]
4.0 Customer Delivery Requirements
4.1 [ ]
5.0 Quality Performance
6.0 New Product Introduction
6.1 [ ]
7.0 Continuation Engineering
7.1 [ ]
8.0 Export and Import Compliance
9.0 Customer Order, Shipment, and Inventory System Requirements
10.0 Supply Line Management
10.1 Supplier Base
10.2 Commodity Responsibilities
10.3 Engineering Support
10.4 Continuous Improvement
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1.0 Purpose
This Service level agreement outlines the minimum acceptable expectations
for the Manufacturing Partnership between Solectron and NCR-CSG. [ ]
Detailed process information supporting these service level expectations
are included in the Business level agreement which is expected to be a
living document which NCR and Solectron associates use to guide themselves
in their day-to-day work activities.
2.0 Definition of Terms
2.1 B-models: Pre-production models of a new product. At NCR's option, NCR
may request that Solectron build B-models. See the B-model
manufacturing paragraph in the New Product Introduction section 6.0
for more detail.
2.2 A-models or Prototype: For the purpose of this agreement, there is no
difference between A-models, Prototypes, and B-models.
2.3 C-models: Full production quality units. Although production units for
a product that have been in production for a year are technically "C-
models", the term is most often used to describe the first set of
production units that are used to run final product acceptance
testing, and are expected to either be sold to end customers or to be
functionally identical to the first units sold to customers.
2.4 ICI: Initial Customer Installation: The first customer installation of
C-models of a new product that have completed all of the required NCR
certifications. The term ICI is sometimes used to refer to the product
development milestone, ICI-ready, where the first C-model units have
been built and are ready to be sold and shipped to a customer.
2.5 GCA: General Customer Availability: Product is ready for volume
shipments with no special controls or filters on incoming orders.
2.6 CD/E: Controlled Deployment and Evaluation: Typically, the period of
time between [ ]
2.7 FBOM: NCR's Featurized Bill of Materials used to control the certified
configurations of the Product. The FBOM includes [ ].
2.8 EBOM: [ ]
2.9 MCC Product cost: The cost/price at which Solectron transfers product
to NCR as described in Exhibit B.
2.10 CSG Products: Products that Solectron manufactures for NCR as defined
in the CSG section of Exhibit A. New products will be added to this
exhibit in the future.
2.11 NCR SLM: NCR's Supply Line Management organization - responsible for
supplier qualification, supplier management, and material purchasing,
among other things.
2.12 NCR OLM: NCR's Order and Logistics Management - responsible for
accepting customer orders and scheduling production, among other
things.
2.13 PRT or PRT team: NCR's cross functional product development management
team -responsible for product definition, development, and deployment.
Team composition typically includes representatives from [ ]
2.14 ERT or DRT team: NCR's cross-functional Engineering/Development
Realization Team responsible for new product development, development
schedules, product design, product certification, product requirements
adherence and quality. Team composition typically includes [ ]
2.15 PRP/GRP: NCR's Program Realization Process used for the life cycle
management of the Product from Product Conception through Product end-
of-life.
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2.16 Gold disk or Gold drive: A master copy of a hard disk with a binary
image of an operating system and other software loaded onto it. This
includes firmware. Master copies of any software or firmware may be on
writable media (e.g.: disk or PROM) or may be reserved in a designated
electronic file agreed to by both NCR and Solectron. This Gold Disk is
then used in the manufacturing process to create multiple copies of
which are to be used in NCR Servers.
2.17 SCER: Special Customer Engineering Request - A process that NCR uses
to [ ].
2.18 Commodity management: Tasks associated with [ ].
2.19 Supplier management: Tasks associated with managing the continuous
improvement of supplier performance in all aspects of a business
relationship.
2.20 Acceptance Test (ACT): The ACT is a test process performed to certify
the manufacturing process and the Supply Line Management Procurement
Process. To make this test meaningful [ ]. Exceptions to the test will
be provided in a report to NCR.
2.21 Design Qualification Test (DQT): The DQT is a test process performed
to certify that the design of the product meets the criteria as
defined in the product functional specification. [ ]
2.22 Development Release (DR): The DR process is the process used by NCR to
issue engineering change orders and the introduction/release of new
products into manufacturing. For this document, the term DR includes
[ ].
2.23 Manufacturing Trial Order (MTO): The MTO process is used to validate
the manufacturing process and the end unit test process before the
actual break-in of a DR. NCR and Solectron will jointly decide if an
MTO is required for a new product or change DR.
2.24 Field Retrofit Order (FRO): Process executed due to a safety or
reliability issue on an NCR product, [ ].
2.25 Printed Circuit Board (PCB) layout: The PCB layout process is used to
do the physical layout of circuit boards. Designers work from
schematics to define the position of components and their
interconnecting copper lines.
2.26 Request For Change (RFC): The RFC process is a formalized process for
requesting engineering changes and manufacturing deviations for part
substitutions. It is intended for use by NCR and Solectron as the
vehicle for requesting all product changes
2.27 Stop Order/Stop Order Release (SO/SOR): The SO/SOR process is used as
a method of controlling procurement, build and shipment of products.
[ ]
2.28 WSL: NCR's inventory warehouse.
2.29 CDC: Customer Delivery Center - NCR consolidation and staging center.
2.30 Material Requisition (MR): The MR process is used to order items from
manufacturing stock. It requires a charge number for the item to be
charged to.
2.31 Managed Support and Service Planning (MSSP): The MSSP group is an NCR
group charged with planning all support activity and assuring the
necessary steps are taken to support a new product or changes to an
existing product.
2.32 SPPR: Service Parts Procurement Request
2.33 [ ]
2.34 [ ]
2.35 [ ]
2.36 Replacement Product- a product with a new or modified product set
specification which meets all the following criteria:
1. [ ]
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2.37 New Product - a product with a new product specification which meets all of
the following criteria:
[ ]
2.38 Replacement Service: A new service which provides essentially the same
results as an existing service covered by the Agreement, although possibly
at an improved level of performance. If delivered at an improved level of
performance, the improvement is considered a normal outcome of continuous
improvement processes.
2.39 New Service: A new service which establishes a significant new
capability/result or a significant enhancement to an existing service which
would not normally be the outcome of normal commercial continuous
improvement processes. The party receiving the service would normally be
expected to compensate the service provider for this New Service if it was
provided at the request of the receiver and if there is a material
incremental cost incurred by the service provider to develop this service
capability and if the receiver agrees to pay for said service.
3.0 Cost Tracking Requirements
3.1 Pricing: Product transactions between Solectron and NCR CSG will be
priced according to Exhibit B.
3.2 Margin Improvement Team (MIT)
3.2.1 [ ]
3.3 Cost Reviews: All cost reviews will be conducted in accordance with
Ex B.
4.0 Customer Delivery Requirements - Forecasting, Order Fulfillment
4.1 [ ]
4.2 Order Management: Solectron will also be responsible for [ ]
4.3.1 Order Change Flexibility - NCR CSG currently measures [ ]
4.4 Order Responsiveness - [ ]
4.5 Invalid Order Configurations - [ ]
4.6 Shipment Records - Solectron will send shipment transaction data to
NCR [ ]. This data will be used by NCR to update the World Wide
Inventory Transfer System.
4.6.1 [ ]
4.7 Product Life Cycle Management - New Product Introduction
4.7.1 [ ]
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4.8 Product Life Cycle Management - Product, Feature, Cable and Kit
Discontinuation
4.8.1 [ ]
5.0 Quality Performance
Solectron shall meet the requirements set forth in Exhibit C for NCR CSG
designed products.
6.0 New Product Introduction
This New Product Introduction section defines the service level
expectations associated with the release of a new product from engineering
to manufacturing. [ ] Specific timelines for any project will be negotiated
on a project-by-project basis.
There are some common processes used in New Product Introduction as well as
in Continuation Engineering. These processes may be documented in the
Continuation Engineering section. All Solectron provided services
documented in this section are expected to be provided at no additional
cost to NCR.
6.1 [ ]
7.0 Continuation Engineering
This Continuation Engineering section defines the service level
expectations associated with maintaining a product through the normal
production life cycle. There are some common processes used in New
Product Introduction as well as in Continuation Engineering. These
processes may be documented in the New Product Introduction section.
Access to systems and data currently available is required in the
execution of processes in this document. This is required to maintain
and improve quality and productivity through electronic interfaces and
automation.
[ ]
8.0 Export and Import Compliance
8.1 Solectron will be totally responsible for all import activities
associated with materials that Solectron procures.
8.2 Solectron will be the exporter of record for all
products/components/subassemblies it ships to other Solectron
organizations.
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8.3 NCR will be the exporter of record for all products, components,
subassemblies, software and documentation ordered by NCR or its
affiliates for export from the country of manufacture - currently the
United States and Ireland.
8.4 The exporter of record will be separately accountable to the
applicable government agencies for complying with all relevant
regulations when importing or exporting Solectron products,
components, subassemblies, software and documentation.
8.5 At NCR's request, Solectron will provide NCR with complete Bill Of
Materials (BOM) identifying country of origin and Solectron cost for
each part or component separately integrated into its products. NCR
will require this information where products manufactured in the
United States are proposed for transactions involving the Agency for
International Development (AID) or EX-IM Bank. Further, NCR may
require this information to determine if products manufactured outside
the US are subject export controls based on US parts content.
9.0 Customer Order, Shipment and Inventory System Requirements
9.1 [ ]
10.0 Supply Line Management
10.1 Supplier Base
10.1.1 [ ]
10.2 Commodity Responsibilities
[ ]
10.3 Engineering Support
10.3.1 [ ]
10.4 Continuous Improvement
10.4.1 Solectron agrees to drive continuous improvement throughout all
aspects of the supplier relationship.
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Service level agreement
SECTION III: Solectron designed products sourced and/or manufactured from
Solectron
This Statement of Work provides a general description of the deliverables
Solectron will provide for NCR, and the activities Solectron will perform for
NCR, related to new Product Introduction of Solectron engineered products.
Many of the interfaces and expectations for Solectron designed products will
remain consistent with those detailed in Section II: NCR-CSG Engineered
Products. These sections are noted below and will not be repeated in this
section. Additional terms are as noted in the following sections.
Applicable Sections from Section II
Definition of Terms
Customer Delivery Requirements
Forecasting
Order Management
Order Change Flexibility
Order Responsiveness
Invalid Order Configurations
Shipment Records
Product Life Cycle Management - New Product Introduction
Product Life Cycle Management - Product, Feature, Cable, and Kit
Discontinuation
Quality Performance
Continuation Engineering
Request for Change
Stop Order / Stop Order Release
Export and Import Compliance
Customer Order, Shipment, and Inventory System Requirements
Supply Line Management
Continuous Improvement
1.0 Program Manager
---------------
NCR and Solectron shall each appoint a Program Manager and Technical Contact
(may be the same individual) who shall be responsible for all communications
with the other party, including those related to product qualification, testing,
and support. Supplier program managers shall provide program and deliverables
schedules with updates on a regular basis as mutually agreed to by respective
program managers.
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2.0 Product Qualification and Acceptance (PQA) Procedure.
----------------------------------------------------
[ ]
3.0 New Product Planning
--------------------
3.1 Participation in Roadmap Development and Product Definition
Solectron will provide regular presentations (on a TBD basis) to NCR of
potential and committed Roadmaps. NCR will treat these as confidential
briefings but will have the ability to share such roadmap information with
major accounts. Solectron will use its best efforts to incorporate NCR feedback
into future Roadmaps, and to the extent NCR is funding the design work,
Solectron will incorporate NCR's feedback into the Roadmap. In conjunction
with these reviews, NCR shall also participate in the architectural phase of
system development and in the definition of product content.
4.0 Support for New Product Introduction
------------------------------------
4.1 PC & ELS System Deliveries
[ ]
4.2 Prototype Deliveries
Prototype systems will be supplied to NCR by Solectron with quantity and
schedule to be negotiated on a program-by-program basis. Such units may include
custom components ("non-standard" adapters, colors, logos, labels, "generic"
versions of many components) and prototype releases of BIOS and other
Firmware/Software as necessary.
4.3 Production Deliveries
Production Models representing full production-ready systems (including BIOS and
other Firmware/Software) shall be provided to NCR by Solectron for final
verification with quantity and schedule to be negotiated on a program-by-program
basis. Production models for first article inspection by indirect channel
customer may also be required. Such inspections will usually be performed on
Solectron premises and will require support of manufacturer's personnel
4.4 Certifications
Solectron shall perform operating System Certifications for NT, Solaris, MP-RAS
(as appropriate) and other Ready-to-Run Operating Systems as defined by the
Product Requirements document. Solectron shall put in place a process for
obtaining Operating System and Agency Certifications of NCR "special features"
(e.g., adapters that are not a part of the standard offering) as required. Such
certifications may include components that may be custom for special customers
(including indirect channel).
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Safety certifications shall be provided as indicated in Exhibit E of this
Agreement.
4.5 Feature Management
[ ]
4.6 Technical Documentation
Solectron will provide NCR technical and end-user documentation [ ]. Both pre-
release and final release versions of the documentation will be made available
to NCR on a mutually agreed upon product-by- product schedule. Solectron will
deliver end-user documentation in electronic Microsoft Word format in generic
format with references to COMPANY NAME or COMPANY product names limited to the
following components: book cover, preface, copyright, headers, and footers.
Exceptions are references to or publications for OEM products which will
continue to display the COMPANY name and/or logo. NCR may order copies of
documentation which Solectron specifies as orderable under the same terms as
Products.
4.7 Product Packaging
Solectron will develop and provide shipping packaging to meet NCR requirements.
All Products will be packed by Solectron in accordance with generally accepted
industry standards, as well as other requirements set forth in the NCR packaging
specifications. Under no circumstances will Solectron utilize any packaging
material consisting in whole or in part of polystyrene foam manufactured through
a process using any of the following blowing agents: CFC-11, CFC-12, CFC-113,
CFC-114, OR CFC-115. In compliance with certain state statutes, Solectron
certifies that the packaging and/or packaging components associated with the
Products have been manufactured without the intentional addition of lead,
cadmium, mercury or hexavalent chromium. and that the sum concentration levels
of the four metals is less than 100 parts per million. Solectron will package
parts individually (except for small parts, such as screws) with appropriate
protective material to guarantee safe arrival (e.g., plug-in boards should be in
static controlled packaging and in foam-lined packs or padded cartons). Each box
will contain Products ordered under a single Purchase Order, but multiple boxes
may be placed in a larger container. Solectron will, when so requested by NCR
and without additional charge, provide and affix to each Product's packaging,
bar code labels as specified in Exhibit D.
4.8 Product Training
Solectron will provide Product training in the following areas: [ ] .
Solectron authorizes NCR to video tape such training events conducted for or
attended by NCR and grants to NCR a royalty-free license to duplicate and
distribute the tape and any related training materials to NCR associates and
NCR authorized sales, services, and support providers. NCR may also create
additional training using this information and materials.
4.9 NCR ID Capability
Solectron shall maintain the capability to logo products per NCR's requirements
as well as the requirements of NCR's indirect channel customers.
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4.10 Manufacturing Deliverables to PRT / Feature Release Teams
Solectron shall [ ].
4.11 Continuation Engineering
Solectron is responsible for Continuation Engineering problem resolution and
life-cycle management for all NCR past, current, and future released Personal
Computers, Entry Level Servers and features. Solectron will retain
Continuation Engineering responsibility for any new platforms / features
developed by Solectron and as released in the future.
4.12 Short Term Loaner
Equipment to Support New Product Introduction: Solectron will provide NCR with a
small number (typically 1 or 2) of new products (in this paragraph, new product
is defined as a New Product, Replacement Product or an existing product covered
by this Agreement that has an engineering change made to it) for a short term
"loan" period, typically not more than 1 week, to support new product
introductions. NCR and Solectron will agree on the financial inventory tracking
methodology to support this process; NCR currently uses the "request for NCR
built equipment" process to remove the product from manufacturing inventory and
the manufacturing representative to the PRT performs the necessary transactions
to return the product to manufacturing inventory. There are no refurbishment
charges associated with the return of these products unless they have been
damaged or require upgrade due to product changes which may have occurred during
the "loan" period.
5.0 Requirements for Certification of Operating Systems and Support for Server
Management Software:
5.1 Microsoft NT -
. Platforms must be on Microsoft NT Server, Back Office, Wolfpack, and
Cluster Server Hardware Compatibility Lists for most recent versions of
both NT Server and NT Server Enterprise Edition under the NCR system name,
and must be designated in the HCLs as "Designed for Windows NT".
. Within [ ] of a new version of Windows NT (5.0 , NT 64-bit, etc.), existing
platforms must appear on the above Compatibility Lists.
. Platform must conform to the "Hardware Design Guide for Microsoft Windows
NT" published by Intel Corporation and Microsoft Corporation.
. Platforms must not require a specialized Hardware Abstraction Layer (HAL)
for Windows NT. Platforms must be fully supported with a standard
Microsoft-delivered HAL within [ ]
5.2 Solaris
. Platforms must perform and pass Solaris Hardware Compatibility Tests (HCT)
for most recent version of the operating system, and be included on Solaris
Hardware Compatibility Lists for Solaris Intel Edition.
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. Within [ ] of a new version of Solaris, existing platforms must pass the
HCT.
. Platforms must not require a specialized Hardware Abstraction Layer (HAL)
for Solaris. Platforms must be fully supported by the shrink-wrapped
Solaris OS within [ ]
5.3 NCR UNIX MP-RAS
. For Entry Level and Mid-Range platforms specified by NCR, tests will be run
and test reports will be provided. NCR will provide test plans and test
cases. NCR will provide and support unreleased peripheral boards for the
testing, with the level of support, board type, and board quantity to be
negotiated.
. [ ]
6.0 Major Bid Support
For certain major bids, NCR will require Solectron to provide commitments for
lead-time and capacity to support a large customer rollout of product. [ ]
7.0 Special Customer Engineering Request Support
[ ]
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SECTION IV: NCR Staging Definition and Implementation
[ ]
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EXHIBIT G
---------
ELECTRONIC DATA INTERCHANGE
---------------------------
1. PURPOSE
1.1 Solectron and NCR Corporation desire to execute the transactions listed in
Attachment 1G ("Transactions") by transmitting and receiving the data sets
implementing those Transactions ("Documents") electronically rather than in
paper form, and to provide for the legal validity and enforceability of those
Documents.
1.2 Documents will be transmitted electronically to each party either as
specified in Attachment 1G directly or through any third party service provider
("Provider") with which either party may contract. Either party may modify its
election to use, not use, or change a Provider thirty (30) days after written
notice under Section 7.2 has been accomplished.
2. PREREQUISITES
2.1 We each must, at our respective expense, provide and maintain the
equipment, software, and services necessary to transmit, receive, store and
handle Documents under this Exhibit. Charges specific to Third Party network,
if any, are outlined in Attachment 1G.
2.2 We each must implement security procedures (including those specified in
Attachment 1G, if any) which are reasonably designed to ensure that all Document
transmissions are authorized and to protect our respective business records from
improper access.
2.3 We each agree to adopt as a signature an electronic identification (e.g.,
a Duns Number) consisting of symbols or codes which will be transmitted with
each Document to authenticate that Document ("Signature").
2.4 The contacts for issues in this Exhibit are set out in Attachment 2G.
3. DOCUMENT TRANSMISSIONS
3.1 All Document transmissions must conform to the standards listed in
Attachment 1G ("Standards").
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3.2 Unless the Standards specify otherwise, after receiving a Document, the
receiver must promptly electronically transmit a functional acknowledgment. A
functional acknowledgment is conclusive evidence of receipt of a Document, but a
Document is not deemed to be transmitted under this Agreement except as Section
5.2 of this Exhibit provides.
3.3 The receiver of a garbled or unintelligible Document must promptly notify
the originator (if identifiable from the received Document) in a reasonable
manner. If the receiver reasonably could have given that notice but did not,
the originator's records of the contents of that Document will control.
4. TRANSACTION TERMS
4.1 Except to the extent a Document expressly provides otherwise, each
Transaction will be subject to this Exhibit and to the OEM Purchase and
Manufacturing Services Agreement ("Agreement"). If there is a conflict between
any term of this Exhibit and any term of the Agreement, the terms of this
Exhibit will control.
4.2 No information contained in any Document or otherwise exchanged between us
under this Exhibit is confidential except as provided for in this Exhibit, a
separate written agreement between us, or applicable law.
5. VALIDITY AND ENFORCEABILITY DOCUMENTS
5.1 This Exhibit confirms our intent to enter into binding Transactions by
electronically transmitting and receiving the appropriate Documents. Our
conduct under this Exhibit, including our use of Signed Documents, is for all
purposes a course of dealing and a course of performance which we accept in
furtherance of this Exhibit and any Transaction.
5.2 A Document has no effect under this Exhibit until (i) that Document is
intelligible at the receiver's Receipt Computer designated in Attachment 1G
except as provided in Section 3.3 above, and (ii) if the Transaction requires
acceptance of that Document, the originator of that Document has received the
corresponding acceptance Document. Any electronic transmission which is not a
Document has no effect except to the extent specified in a separate written
agreement between us.
5.3 Any Document effective under Section 5.2 is for all purposes (i) a
"writing" and "in writing," and (ii) an "original" when printed from electronic
records established and maintained in the normal course of business.
Transmission of a Signature with a Document effective under Section 5.2 will be
sufficient to verify that the owner of the
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Signature originated that Document ("Signed Document"). A Signed Document is for
all purposes "signed."
5.4 We each agree not to contest the validity or enforceability of any Signed
Document because of the electronic origination, transmission, storage, or
handling of that Signed Document. We each agree that Signed Documents, if
introduced on paper in any judicial, arbitration, mediation, or administrative
proceeding, will be admissible to the same extent and under the same conditions
as other business records originated and maintained in documentary form.
Neither of us may contest the admissibility of copies of Signed Documents under
either the business records exception to the hearsay rule or the best evidence
rule on the basis that the Signed Documents were originated and maintained in
electronic form.
6. TERMINATION
6.1 This Exhibit will be effective until one of us terminates it by giving the
other at least 30 days prior written notice under Section 6.2 specifying the
effective date of termination. No termination of this Exhibit will affect our
respective rights or obligations arising under any Document or otherwise under
this Exhibit before the effective date of termination.
6.2 Written notices under this Exhibit shall be directed to:
NCR Corporation Solectron
Contact: Contact:
[ ]
6.3 Attachment 1G may be revised by both parties executing a revised version
which will supersede and replace the previous version. This Exhibit does not
obligate either of us to enter into any Transaction.
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ATTACHMENT 1G
STANDARDS, DOCUMENTS, RECEIPT COMPUTERS,
THIRD PARTY NETWORKS, AND SECURITY PROCEDURES
[ ]
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EXHIBIT H
---------
NCR AND THIRD PARTY SOFTWARE
----------------------------
FORM OF AGREEMENT
This NCR and Third Party Software Agreement ("Agreement") is made and
entered into this ____ day of _________, 19___ ("Effective Date") by and between
NCR Corporation, a Maryland corporation and its subsidiaries ("NCR") and
Solectron Corporation, a Delaware corporation and its subsidiaries("Solectron").
Recitals
Whereas, NCR owns or has licensed certain software product(s) as described
in Exhibit A below ("TP Software"); and
Whereas, NCR desires to have Solectron install the TP Software on NCR
Products or Parts and/or ship TP Software packages with of NCR's Products or
Parts;
Now, Therefore, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
Agreement
1. Definitions.
------------
a. "APM" or "Associated Product Materials" shall mean materials specified
by Microsoft to be distributed as part of TP Software which may include a
certificate of authenticity, an end user license agreement, an Microsoft product
registration card, and/or other materials designated by Microsoft.
b. "Authorized Replicator" shall mean a third party approved by Microsoft
from which NCR has acquired TP Software reproduced in accordance with Microsoft
specifications.
c. "MS/OEM License" shall mean the OEM License Agreement between NCR and
Microsoft under which NCR licenses some of the TP Software from Microsoft.
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d. "TP Software Packages" shall mean Microsoft TP Software documentation,
TP Software, and/or APM as received from NCR, or an Authorized Replicator on
behalf of NCR.
e. All other capitalized terms will have the meaning given to them in the
OEM Purchase and Manufacturing Services Agreement between NCR and Solectron
dated _________.
2. Solectron Obligations and License.
----------------------------------
a. Subject to the terms and conditions of this Agreement, Solectron
shall, as specifically directed by NCR: (i) install the TP Software in object
code form on specific NCR Product models using the installation utilities and
master copy of TP Software provided by NCR, (ii) distribute TP Software with
Products.
b. Installation and/or packaging of TP Software shall be performed by
Solectron employees or contractors only at the specific Solectron premises
indicated in Section 11.
c. Solectron shall deliver the Products with installed TP Software only
on behalf of NCR in accordance with NCR's instructions.
d. Solectron shall halt reproduction of TP Software or any specific
version, or product thereof upon notice from NCR. Upon receipt of such notice,
Solectron shall not use nor employ such TP Software as part or portion of any
product that Solectron may use, sell, assign, lease, license or transfer to
third parties unless permitted to do so under a separate agreement. Solectron
shall cease and desist from all use of such TP Software's name(s) and associated
trademark(s) and, upon request, deliver to NCR or its authorized representatives
or destroy all material upon which such TP Software's name(s) and the associated
trademark(s) appear. Solectron shall be compensated for its direct, out of
pocket costs in connection with halting reproduction of such TP Software, except
in the case of breach of this Agreement by Solectron.
e. Solectron shall not reverse engineer, decompile or disassemble any TP
Software.
f. Solectron will strictly comply with any requirements related to
licensing the TP Software such as special installation instructions or placing a
notice over either the Product power switch in the "off" position or the power
inlet connector which informs the end user that turning on the Product indicates
acceptance of the terms of the end user license agreement, or such other
procedure as is authorized by NCR.
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g. Solectron shall maintain the inventory of any such TP Software
received on behalf of NCR, separate from inventory of similar TP Software, if
any, in Solectron's possession.
3. TP Software Owned by Microsoft.
-------------------------------
The following terms shall also apply to TP Software owned by Microsoft.
[ ]
4. Copyright and Patent Notices. Solectron will not remove, modify, or
-----------------------------
obscure any copyright, trademark or patent notices that appear in or on the TP
Software or its packaging as delivered.
5. Term. This Agreement shall commence on the Effective Date and continue
-----
until the earlier of (i) termination by NCR pursuant to Section 6; or (ii)
_________________.
6. Default and Termination.
-------------------------
a. NCR may terminate this Agreement if any of the following events of
default occur: (i) if Solectron materially fails to perform or comply with any
provision of this Agreement; (ii) if Solectron makes TP Software available
separately from NCR's Products; (iii) if Solectron becomes insolvent, enters
bankruptcy, reorganization, composition or other similar proceedings under
applicable laws, whether voluntary or involuntary, or admits in writing its
inability to pay its debts, or makes or attempts to make an assignment for the
benefit of creditors; or (iv) upon notice from Microsoft to NCR that NCR shall
cease use of Solectron.
b. Termination resulting from default as outlined in this Section shall
be effective upon notice to Solectron, except that in the case of Section
10(a)(iii), termination shall be effective upon notice or as soon thereafter as
is permitted by applicable law.
7. Obligations Upon Termination. Within ten (10) days after the earlier of:
-----------------------------
(i) termination or expiration of this Agreement; or (ii) notice to Solectron
from NCR MS of termination or expiration of the MS/OEM License, Solectron shall
return the installation "master" and any TP Software in its possession or under
its control to NCR. From and after termination or expiration, Solectron shall
not use nor employ any TP Software as part or portion of any product that
Solectron may use, sell, assign, lease, license or transfer to third parties
unless permitted to do so under a separate agreement. Solectron shall cease and
desist from all use of any TP Software's name(s) and associated trademark(s)
and, upon request, deliver to NCR or its authorized
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representatives or destroy all material upon which the TP Software's name(s) and
the associated trademark(s) appear.
8. Confidentiality. Solectron shall keep confidential the TP Software
----------------
installation tools and materials contained in the TP Software installation kit,
the terms and conditions of this Agreement, and other non-public information and
know-how related to the TP Software disclosed to Solectron by NCR, and Solectron
will make no use of such materials, information and know-how except for
Solectron's internal use in accordance with the terms of this Agreement.
Solectron may disclose the terms and conditions of this Agreement in confidence
to its immediate legal and financial consultants as required in the ordinary
course of Solectron's business.
9. Audits.
------
a. During the term of this Agreement, Solectron agrees to keep all usual
and proper records and books of account and all usual and proper entries
relating to the compliance with this Agreement. Solectron shall maintain on
Solectron premises such records for itself and for each Solectron subsidiary
which exercises rights under this Agreement.
b. In order to verify statements issued by Solectron and Solectron's
compliance with the terms of this Agreement and any third party or governmental
audit requirements, NCR may cause (i) an audit to be made of Solectron's and/or
Solectron's subsidiaries' books and records and/or (ii) an inspection to be made
of Solectron's and/or Solectron's subsidiaries' facilities and procedures. Any
audit and/or inspection shall be conducted during regular business hours at such
facilities, with or without notice. Any audit may be conducted by NCR or an
independent certified public accountant selected by NCR (other than on a
contingent fee basis).
c. Solectron agrees to provide NCR' designated audit or inspection team
access to the relevant Solectron records and facilities.
d. Prompt adjustment shall be made to compensate for any errors or
omissions disclosed by such audit unless Solectron objects to the results of the
audit in writing. Any such audit shall be paid for by NCR unless material
discrepancies are disclosed. "Material" shall mean the lesser of $10,000.00 or
five percent (5%) of the amount that was reported. If material discrepancies
are disclosed, Solectron agrees to pay NCR for the reasonable costs associated
with the audit.. In no event shall audits be made more frequently than semi-
annually unless the immediately preceding audit disclosed a material
discrepancy.
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10. MS as Third Party Beneficiary.
------------------------------
a. The parties agree that their respective promised performances under
this Agreement are intended for the benefit of Microsoft Corporation and any
other owner of the TP Software ("Third Party Beneficiaries"). For this reason,
the parties further agree that the Third Party Beneficiaries have the right to
enforce the parties' performance of their respective obligations and duties
under this Agreement, and pursuant to such right, may sue to enforce any claim
for breach of this Agreement.
b. The Third Party Beneficiaries' right to enforce the obligations of a
party to this Agreement shall not be subject to any defenses that such party may
have against the party to whom performance is promised.
11. Notices.
---------
(a) Except as otherwise specifically provided herein, notices and other
communications will be delivered by any method providing for proof of delivery,
except that a notice of default or termination may be delivered by facsimile
transmission if the original document is also promptly delivered to the
recipient. A notice will be deemed given on the date of receipt at the
following address(es):
Solectron: NCR:
---------- ----
(b) The work to be performed under this Agreement will take place at
Solectron's premises located at (or such other location as NCR and Solectron
shall agree to from time to time):
______________________________________
______________________________________
______________________________________
______________________________________
Telephone:____________________________
Fax:__________________________________
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12. Controlling Law; Attorneys' Fees Arbitration.
----------------------------------------------
a. This Agreement shall be construed and controlled by the laws of the
State of New York, and.
b. Process may be served on either party by U.S.A. mails, postage
prepaid, certified or registered, return receipt requested or sent by air
express courier, charges prepaid, as well as any other method or procedure
authorized by applicable law or court rule.
c. In the event that NCR employ attorneys to enforce any rights arising
out of or relating to this Agreement, Solectron agrees to pay such attorneys'
fees.
d. In the event any controversy or claim arises between the parties to
this Agreement, they will attempt in good faith to negotiate a solution to their
differences by elevating the issue to senior management for resolution and, if
negotiation does not result in a resolution within 30 days, they agree to
participate in good faith mediation as administered by the American Arbitration
Association. In the event of threatened or actual irreparable harm, a party may
elect to bypass this Section and proceed directly pursuant to Section 12(g).
e. Any controversy or claim between the parties to this Agreement,
whether based on contract, tort, statute, or other legal theory (including but
not limited to any claim of infringement, fraud or misrepresentation), which
cannot be resolved by negotiation or mediation will be resolved by arbitration
pursuant to this section and the then-current Commercial Rules and supervision
of the American Arbitration Association. The duty to arbitrate will extend to
any employee, officer, shareholder, agent, or affiliate of a party hereto making
or defending a claim which would be subject to arbitration if brought by a party
hereto. If any part of this section is held to be unenforceable, it will be
severed and will not affect either the duty to arbitrate hereunder or any other
part of this section.
f. The arbitration will be held in the US headquarters city of the party
not initiating the claim before a sole arbitrator who is knowledgeable in
business information and electronic data processing systems. The arbitrator's
award will be final and binding and may be entered in any court having
jurisdiction thereof. The arbitrator will not have the power to award any
damages excluded by, or in excess of, any damage limitations expressed in this
Agreement. Issues of arbitrability will be determined in accordance solely with
the federal substantive and procedural laws relating to arbitration; in all
other respects, the arbitrator will be obligated to apply and follow the
substantive law of the state or nation specified in this Agreement. Each party
will bear its own attorney's fees associated with the arbitration and other
costs and expenses of the arbitration will be borne as provided by the rules of
the American Arbitration Association.
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g. If a party breaches any provision of this Agreement related to its or
its supplier's intellectual property, the other party will have no adequate
remedy at law and may petition a court of law for injunctive relief to protect
the intellectual property.
13. Export Restrictions. Solectron agrees that it will not export or re-export
--------------------
TP Software to any country, person, entity or end user subject to U.S.A. export
restrictions. Restricted countries currently include, but are not necessarily
limited to Cuba, the Federal Republic of Yugoslavia (Serbia and Montenegro, U.N.
Protected Areas and areas of Republic of Bosnia and Herzegovina under the
control of Bosnian Serb forces), Iran, Iraq, Libya, North Korea, and Syria.
Solectron warrants and represents that neither the U.S.A. Bureau of Export
Administration nor any other federal agency has suspended, revoked or denied
Solectron's export privileges.
14. Miscellaneous.
--------------
a. Notwithstanding any other limitation, Solectron shall indemnify,
defend and hold NCR harmless from and against all liability (including attorneys
fees, costs and expenses resulting from any and all claims by third parties or
violations of NCR's intellectual property rights arising from or related to any
breach of this Agreement by Solectron.
b. No assignment of this Agreement by Solectron will be valid without the
prior written consent of NCR which will not be unreasonably withheld. As used
in this Section, "assignment" shall include mergers or consolidations
(regardless of whether the party is the surviving person) or the acquisition of
more than 10% of the outstanding voting shares or other controlling interest in
the party. This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and permitted assigns. NCR may
replicate this Agreement to any NCR business unit that operates under it that
NCR divests itself of.
c. If any provision of this Agreement shall be held to be illegal,
invalid, or unenforceable, the remaining provisions shall remain in full force
and effect provided the intent of the parties has not been materially
frustrated.
d. This document sets out the entire agreement of the parties, and
supersedes all prior communications regarding its subject matter. A waiver or
amendment of any provision may only be made in writing signed by the authorized
representatives of both parties.
In Witness Whereof, the parties have executed this Agreement as of the date set
forth above on their own behalf and for the benefit of MS. All signed copies of
this Agreement shall be deemed originals.
Page 84
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NCR: ________________________ Solectron: ______________________
______________________________________________________________________
By (Signature) By (Signature)
______________________________________________________________________
Name (Print) Name (Print)
______________________________________________________________________
Title Title
_____________________________________________________________________
Date Date
Page 85
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EXHIBIT A
---------
TP Software
-----------
Page 86
<PAGE>
EXHIBIT I
---------
YEAR 2000
----------
NCR
Year 2000
Qualification Requirements Definition
Version 2.1
4/2/97
Document Title: Year 2000 Qualification Requirements Definition
Document Owner: Freddy J. Worthington
Organization Name: Corporate Technology
Telephone Number: (937)-445-1455
VoicePlus Number: 622-1455
e-mail: [email protected]
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Change Control Page
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
NCR NUMBER: DATE:
Year 2000 Qualification Requirements REVISION:
<S> <C> <C>
Definition 2.1 4/2/97
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Revision Date Description Approval
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1.0 11/13/96 Original Issue Y2K Solution Team
- ------------------------------------------------------------------------------------------------------------------------
2.0 3/12/97 . Wording changes made to synchronize with warranty language and Y2K Solution Team
to address general qualification.
. Qualification assumes use of date expansion with convention
being a documented exception.
- ------------------------------------------------------------------------------------------------------------------------
2.1 4/2/97 . Modified VII Contracts statement Y2K Solution Team
Deleted OS & APPLICATION Question: "Dependent on other products
being Year 2000 Qualified in order to attain Qualification"
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
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NCR and Year 2000 Qualification
Meaning of "Year 2000 Qualification"
The purpose of this document is to provide NCR's customers, partners, suppliers,
and employees a definition for Products that are "Year 2000 Qualified." This
document will evolve over time as more information about the requirements and
testing are known.
I. "Year 2000 Qualification" means that a Product has been reviewed to confirm
that it stores, processes (including sorting and performing mathematical
operations), inputs, and outputs data containing date information correctly
regardless of whether the data contains dates before, on, or after January 1,
2000. Products which do not perform date manipulation, and which do not alter
any date information that flows through them, are also considered Year 2000
Qualified.
II. Specifically:
Dates before, on or after January 1, 2000 may be interpreted and stored using
either "FORMAT" or "CONVENTION" techniques. As used by NCR, "Year 2000
Qualification" means that the FORMAT technique is used. However, Qualification
by CONVENTION may be used in circumstances where compliance by FORMAT is
impractical, or where CONVENTION is required to meet specific external interface
requirements; in that case the convention used must be specifically documented.
"FORMAT" and "CONVENTION" have the following definitions:
FORMAT: All dates are stored, processed, input, and output in formats that
preserve century, decade, and year information.
CONVENTION: Dates are stored, input, or output in a format that preserves only
decade and year information, but are processed through a "sliding window"
calculation. For example, if the year is 00 to 70, add 2000, and if the year is
71 to 99, add 1900. There is no industry standard for the "cut-off" date used
in such calculations, and therefore interfaces may not work correctly between
programs or systems using different conventions. Any Product achieving
Qualification through CONVENTION must clearly document the cut-off date and any
other necessary information relating to the bridging calculation used. This
documentation must be included in the product's entry in the NCR Year 2000
Qualification List.
III. Leap Year
The year 2000 itself must be correctly processed as a leap year. In other
words, the two days following February 28, 2000 must properly be interpreted as
Tuesday, February 29, 2000, and Wednesday, March 1, 2000.
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<PAGE>
IV. Display
Any display of a date, whether on screens or in reports, should use a four-digit
year (YYYY). However, if two-digit display of a date is commonly accepted and
does not cause confusion, the year field may be displayed as two digits.
V. Firmware and Hardware
Any firmware, hardware, or networking component in a Year 2000 Qualified
computer platform must process dates in accordance with this Definition.
Vl. System Integration
Year 2000 Qualification extends only to the specific product configuration
tested, and does not include other software, firmware, or hardware products
which may be used in conjunction with the tested configuration. For a Product
configuration consisting of multiple components to be considered "Year 2000
Qualified," each constituent component, regardless of vendor, must be "Year 2000
Qualified" in accordance with this Definition, and the system as a whole must be
tested for Year 2000 Qualification. "Constituent components" include all
software (including operating systems, programs, packages, and utilities),
firmware, hardware, networking components, and peripherals provided as part of
the configuration.
Vll. Contracts
All contracts with vendors for products to be used in the computer system or
platform MUST state that Year 2000 Qualification is a performance requirement.
VIII. Year 2000 Product Qualification Requirements
All of the following questions must be answered as indicated or "NA" for any
Product to be identified as "Year 2000 Qualified." Any deviations from these
responses must be specifically documented, and approved by NCR.
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<PAGE>
<TABLE>
<CAPTION>
[x] DATE MANIPULATION QUESTIONS NA No Yes
<S> <C> <C> <C>
Does the product:
1. Use December 31, 1999 as a regular end of year without special meaning? X
2. Treat September 9, 1999 as a regular day with no special meaning? X
3. Do any of the following date field manipulations? X
4. . 99 indicates last record X
5. . 00 to indicate a null record X
6. . 99 and 00 default values X
7. . Special interpretations of 00 X
8. . Hard coded 19 in 4-digit year field X
9. . Separate manipulations of century digits X
10. Include any license date expiries associated with the end of 1999? X
11. Use dates in name constructions? X
12. Mix date data and control information in commands or flags which are interpreted as one X
or the other depending on their values?
13. Use a date as part of the key of an indexed file? X
YEAR AND CENTURY QUESTIONS NA No Yes
Does the product:
1. Recognize 2000 as a leap year? X
2. Allow itself to be set to any date after 12/31/1999 including 02/29/2000? X
3. Indicate the correct day, date and time when the following test is performed: X
With the date set to 12/31/1999, power the product off and then back on when
the time will be in 1/1/2000.
4. Indicate the correct day, date, and time when the following test is performed: X
With the date set to some time after 1/1/2000, power the product off and back
on.
5. Display the date correctly as 2/29/2000 when the following test is performed: X
With the date set to 2/28/2000, power the product off, and then back on when
the next day has been reached.
6. Treat January 1, 2000, a Saturday? X
7. Treat February 29, 2000, a Tuesday? X
8. Treat March 1, 2000, a Wednesday? X
9. Treat February 28, 2001, a Wednesday? X
10. Treat March 1, 2001, a Thursday? X
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
DATA BASE ACCESS AND STORAGE NA No Yes
<S> <C> <C> <C>
Does the product:
1. Code all years as in a manner that preserves century, decade, and year X
information?
2. Correctly perform all of the following manipulations across the century X
boundary?
3. . Computations of time spans, due-dates, etc. X
4. . Sorting of data. X
5. . Selections based on key fields X
6. . Selections based on non-key fields X
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
OS & APPLICATION QUESTIONS NA No Yes
<S> <C> <C> <C>
Does the product:
1. Display the year as an unambiguous value with a minimum of two digits? X
2. Correctly handle data with dates before 1/1/2000, on 1/1/2000 and after X
1/1/2000 with the system clock set to today's date?
3. Correctly handle data with dates before 1/1/2000, on 1/1/2000 and after X
1/1/2000 with the system clock set to 1/1/2000?
4. Correctly handle data with dates before 1/1/2000, on 1/1/2000 and after X
1/1/2000 with the system clock set after 1/1/2000?
5. Correctly handle data with dates before 1/1/2000, on 1/1/2000 and after X
1/1/2000 with the system clock set to 12/31/1999?
6. Correctly process dates with the system clock set to 12/31/1999 and processing X
allowed to continue across the century boundary?
7. Correctly handle date comparisons where one date is not greater than 12/31/1999 X
and the other date is not less than 1/1/2000?
8. Use a sliding window for year calculations? X
9. Contain a date format that does not preserve century information? X
10. Create and/or store data in files or log files or, or generate reports that do X
not preserve century information in date fields?
11. Use a 32 bit incrementing signed value for date and time? X
12. Correctly set and maintain the century digits in the real time clock, if the X
product uses "AT"-class PC's (286 through Pentiums and clones), does the
operating system or your system software correctly set and maintain the century
digits in the real-time-clock?
13. Correctly handle all time interval calculations based on the century transition X
- both looking back into the past, and looking forward into the future?
14. Correctly handle future time interval calculations that span the century X
transition?
15. If required, correctly handle date and time interval calculations based on the X
use of data previously stored by the product or previous versions of the
product?
16. Formally tested for year 2000 Qualification? X
</TABLE>
Page 93
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FOR NCR
CORPORATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AT JUNE 30, 1998 AND
THE CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED JUNE
30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 593
<SECURITIES> 177
<RECEIVABLES> 1,472
<ALLOWANCES> 0
<INVENTORY> 451
<CURRENT-ASSETS> 2,900
<PP&E> 2,185
<DEPRECIATION> 1,318
<TOTAL-ASSETS> 5,022
<CURRENT-LIABILITIES> 1,895
<BONDS> 33
0
0
<COMMON> 1
<OTHER-SE> 1,337
<TOTAL-LIABILITY-AND-EQUITY> 5,022
<SALES> 861
<TOTAL-REVENUES> 1,574
<CGS> 566
<TOTAL-COSTS> 1,102
<OTHER-EXPENSES> 449
<LOSS-PROVISION> 0
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<CHANGES> 0
<NET-INCOME> 48
<EPS-PRIMARY> .47
<EPS-DILUTED> .46
</TABLE>
