<PAGE>
Exhibit 10.14
OUTSOURCING AGREEMENT
BETWEEN
INTERNATIONAL BUSINESS MACHINES CORPORATION
AND
MANUFACTURERS' SERVICES WESTERN U.S. OPERATIONS, INC.
EFFECTIVE DATE
JUNE 1, 1998
----------
[*] = Information redacted pursuant to a confidential treatment request.
An unredacted version of this exhibit has been filed separately with the
Commission.
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OUTSOURCING BASE AGREEMENT
This Outsourcing Base Agreement and the five (5) attachments listed below which
are hereby incorporated by reference ("Agreement") is entered into by and
between International Business Machines Corporation, a corporation incorporated
under the laws of New York, U.S.A., having an office for the transaction of
business at 8501 IBM Drive, Charlotte, North Carolina 28262 ("IBM"), and
Manufacturers' Services Western US Operations, Inc., a corporation incorporated
under the laws of California, U.S.A., having an office for the transaction of
business at 5600 Mowry School Road, Newark, CA 94560 ("MSL").
WHEREAS, IBM desires to sell certain IBM assets and transition services to MSL
and MSL desires to purchase certain IBM assets and transition services from IBM
in order for MSL to manufacture and sell products to IBM, and
WHEREAS, MSL desires to employ certain IBM personnel and lease certain IBM space
in Charlotte, North Carolina, and IBM desires to make available certain IBM
personnel and lease certain IBM space to MSL in order for MSL to manufacture and
sell products to IBM, and
WHEREAS, MSL desires to manufacture and sell products to IBM and IBM desires to
purchase such products,
NOW THEREFORE, in consideration of the promises contained herein, IBM and MSL
(each a "Party" and together the "Parties") agree to the following terms and
conditions:
The Parties agree that this Agreement regarding this transaction consists of:
a) the Outsourcing Base Agreement
b) Attachment 1: Statement of Work and its Product Attachments, Appendices,
and Supplements
c) Attachment 2: Employee list and Benefits Information
d) Attachment 3: Asset List
e) Attachment 4: Expense Participation
f) Attachment 5: Equipment and Program Loan List
g) Agreement for Exchange of Confidential Information Number 4998S60076
h) IBM Purchase Orders
i) IBM Customer Orders
j) Equipment and Program Loan Agreement
The following is a related agreement between MSL and IBM:
IBM Corporation (Landlord) and MSL (Tenant) Lease Agreement
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By signing below, the Parties agree to the terms of this Agreement. Once signed,
1) any signed reproduction of this Agreement made by reliable means (for
example, photocopy or facsimile) is considered an original, and 2) all products
and services delivered by either Party to the other under this Agreement are
subject to the terms and conditions of this Agreement.
Agreed to: Agreed to:
Manufacturers' Services Western U.S. International Business Machines
Operations, Inc. Corporation
By: /s/ Kevin C. Melia By: /s/ R. G. Richter
-------------------- --------------------------
Authorized Signature Authorized Signature
Name: Kevin C. Melia Name: R. G. Richter
------------------ ------------------------
Date: May 5, 1998 Date: May 5, 1998
------------------ ------------------------
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SECTION 1.0 DEFINITIONS........................................ Page 4
SECTION 2.0 ORDER OF PRECEDENCE................................ Page 5
SECTION 3.0 SCOPE OF WORK...................................... Page 6
SECTION 4.0 TERM............................................... Page 6
SECTION 5.0 TERMINATION........................................ Page 6
SECTION 6.0 PAYMENT............................................ Page 9
SECTION 7.0 AUDIT.............................................. Page 10
SECTION 8.0 PURCHASE OF ASSETS................................. Page 11
SECTION 9.0 PERSONNEL.......................................... Page 12
SECTION 10.0 LEASE OF PREMISES................................. Page 13
SECTION 11.0 MANUFACTURING, FULFILLMENT, AND INTEGRATION....... Page 13
SECTION 12.0 TRANSITION SERVICES............................... Page 13
SECTION 13.0 INTELLECTUAL AND INDUSTRIAL PROPERTY.............. Page 13
SECTION 14.0 WARRANTIES........................................ Page 15
SECTION 15.0 INDEMNIFICATION AND LIMITATION OF LIABILITY....... Page 18
SECTION 16.0 GENERAL........................................... Page 19
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SECTION 1.0 DEFINITIONS
1.1 "Effective Date" shall mean the time when the Parties have acknowledged in
the certificate to be provided pursuant to Sections 14.1 and 14.2 that
approval has been obtained for all Governmental Actions required by all
Government Authorities necessary for each of the Parties to perform its
obligations under this Agreement including expiration or early termination
of the waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
1.2 "Execution Date" shall mean the date this Agreement is signed by
authorized representatives of both Parties.
1.3 "Days" shall mean business days as followed by a particular Work Center
(as defined below).
1.4 "Delivery Date" shall mean the committed ship date on the IBM Customer
Order or as specified by IBM.
1.5 "GMSV" shall mean Global Manufacturers' Services Valencia S.A. (an MSL
Related Company in Spain).
1.6 "Governmental Actions" shall mean any authorizations, consents, approvals,
waivers, exceptions, variances, franchises, permissions, permits, and
licenses of, and filings and declarations with Governmental Authorities
1.7 "Governmental Authority" shall mean any United States federal, state or
local, or other non-US court, governmental or administrative agency or
commission or other governmental agency, authority, instrumentality or
regulatory body.
1.8 "IBM Customer Order" shall mean orders from IBM and IBM customers that
will trigger the MSL fulfillment, manufacturing and/or integration
processes to meet the requested Delivery Date. Only orders received via
IBM's AAS, GEMS, EOSE, IPLS, IPRS, Q-Ship or an IBM Purchase Order shall
be authorization for MSL to build Products or provide services under this
Agreement.
1.9 "IBM" shall mean International Business Machines Corporation, Armonk, New
York, USA, and its Subsidiaries.
1.10 "Integration" shall mean a service associated with fulfillment for IBM
Customer Orders that require special treatment. Special treatment usually
consists of taking IBM and third party products and configuring the total
system to meet the integration statement of work.
1.11 "Miscellaneous Equipment Specification" ("MES") shall mean a set of Parts
used to upgrade Products.
1.12 "MSL Related Companies" shall mean Manufacturers' Services Limited
(Delaware, USA) and its Subsidiaries, including Global Manufacturers'
Services Valencia S.A.
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1.13 "Parts" shall mean parts, components, subassemblies and other materials
used by MSL to fulfill orders for IBM. Parts shall also include the
following:
(a) IBM Parts are those Parts which are purchased by MSL from
IBM,.
(b) IBM Designated Parts are those Parts purchased by MSL from IBM
nominated suppliers,
(c) IBM Consigned Parts are those Parts owned by IBM or IBM
customers which are consigned to MSL, and
(d) MSL Procured Parts are those Parts which are directly procured
by MSL and are other than IBM Parts or IBM Designated Parts.
1.14 "Products" shall mean Parts, a MES, machine types, request for price
quotation ("RPQ's"), model numbers and feature types purchased by IBM
under this Agreement and as further described in the Product Attachments.
1.15 "Product Attachment" shall mean Attachments A through G of the Statement
of Work and Exhibit 1 to Supplement 1 of the Statement of Work to this
Agreement which describes the details of a specific transaction or series
of transactions. Product Attachments are incorporated into and made a part
of this Agreement.
1.16 "Product Group" shall mean those Products relating to a particular
division's Product Attachment, each of which may include more than one
Product family.
1.17 "Purchase Order" shall mean a general order issued by IBM in which IBM
Customer Orders will be placed from IBM or its customers to MSL. Such
Customer Orders shall specify Products to be delivered to IBM, and shall
include Product identification, Delivery Dates, quantity and
specifications.
1.18 "Subsidiary" shall mean an entity during the time that more than 50% of
its voting stock (or, if no voting stock, decision-making power) is owned
or controlled, directly or indirectly, by another entity.
1.19 "Services" shall mean any services provided by one Party to the other,
which is not included in the services for specific Products described in
the applicable Product Attachment.
1.20 "Transition Services" shall mean services performed from the Effective
Date of Agreement through December 31, 1998, as described in Supplement 1
to the Statement of Work.
1.21 "Work Center" shall mean the MSL or MSL Related Company plant site
utilized to fulfill the obligations of this Agreement.
SECTION 2.0 ORDER OF PRECEDENCE
This Agreement replaces any prior oral or written communication between the
Parties with respect to the subject matter of this Agreement. Order of
precedence with regard to any conflict for this Agreement shall be as follows:
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1) Product Attachments
2) Appendices
3) Supplements
4) Statement of Work
5) Outsourcing Base Agreement, Employee List and Benefits
Information, Asset Lists
6) Purchase Orders
Notwithstanding the order of precedence set forth above, the following
sections of the Outsourcing Base Agreement shall not be modified or
superseded by any of the listed documents unless amended by a written
instrument duly executed by an authorized representative of each Party
making specific reference to such section:
i) Sections 5.1 and 5.2 of Termination,
ii) Section 8.0, Purchase of Assets,
iii) Section 13.0, Intellectual and Industrial Property,
iv) Section 14.0, Warranties, and
v) Section 15.0, Indemnification.
SECTION 3.0 SCOPE OF WORK
MSL will perform and manage selected manufacturing, Integration, and other
Services, as well as sell Products to IBM, as stated in the Statement of
Work and its Appendices, Attachments and Supplement for the Retail Store
Solutions ("RS"), Global Embedded Production Solutions ("GEPS"), Finance
Solutions, and other IBM business units.
SECTION 4.0 TERM
This Agreement shall become effective on the Effective Date and shall
continue for a period of three (3) years unless terminated as provided in
Section 5.0. This Agreement will automatically be renewed for periods of
twelve (12) months unless either Party gives six (6) months written
notice of its intent to terminate this Agreement. Such renewals shall
continue for successive periods under the same terms and conditions,
unless otherwise agreed in writing by both Parties.
SECTION 5.0 TERMINATION
5.1 Breach
Notwithstanding anything in this Agreement to the contrary, this Agreement
may be terminated by either Party for cause as follows:
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a) in the event of a material breach or default by the other Party of a
material obligation of such Party under the Agreement which is not
remedied within [*] Days after a written notice is given of such
default or breach;
b) upon the occurrence of any of the following:
i) the other Party resolves to go into voluntary liquidation;
ii) a court orders the other Party to cease doing business;
iii) a receiver or administrative receiver is appointed over the
whole or any part of the assets or property of the other
Party;
iv) the other Party becomes unable to pay its debts because it is
subject to a suspension of payments order, bankruptcy, or
other insolvency proceeding; or
v) substantially all of the shares or assets of one Party are
acquired by an entity that competes directly with the other
Party.
In the case of i to v above, termination may also be effected by serving
notice on the liquidator, administrator, acquirer, or receiver, as the
case may be.
c) notice of the inability of the other Party to perform due to the
existence of a Force Majeure event, as described in Section 16.17 of
this Agreement, which is reasonably determined by the terminating
Party to be a continuing condition.
Provided, however, that no such termination under this section after the
Effective Date shall operate to rescind the transfer of the assets, as
listed in Attachment 3: Asset List, unless IBM terminates this Agreement
pursuant to Section 5.0 for MSL's failure to pay for such assets, in which
case MSL shall return, at its cost, all such assets in MSL's possession at
termination.
5.2 Rights Upon Termination
a) Upon the expiration or termination for default of this Agreement,
MSL will:
i) within [*] Days after expiration or receipt of termination
notice for default of this Agreement from IBM, cancel all
Parts purchase orders, and within [*] Days, after such
expiration or termination notice, prepare and submit to IBM
a written inventory in reasonable detail of each of the
following items in MSL's possession as of the date of
termination:
1. All Parts and partially completed Products. MSL shall
continue to provide a detailed listing of Parts purchase order
cancellations weekly until all issues are agreed to and resolved by
the Parties.
2. All labeling and packaging material used for Products.
3. All completed Products covered by a Purchase Order not
previously shipped to IBM.
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4. All IBM owned tooling.
ii) assist in the transfer of MSL responsibilities and Products as
described in Attachment 1: Statement Of Work, to IBM or to
another party that IBM designates.
iii) within [*] Days after expiration or termination of this
Agreement, MSL shall return to IBM all copies of IBM Product
documentation and all copies of any IBM confidential
documents, discs, tapes and other media materials containing
IBM confidential information of IBM.
b) Upon termination by IBM due to a default by MSL pursuant to Section
5.1 above, IBM shall, at its option, elect to do one of the
following:
i) be entitled to terminate all outstanding Purchase Orders
without liability for such termination and purchase MSL's
inventory of Parts, including Parts to be delivered to MSL to
meet IBM's forecasted requirements, subject to the Supply
Flexibility set forth in Appendix 4 to the Statement of Work.
This purchase shall not include any Parts that are cancelable
or otherwise transferable to IBM:
ii) require delivery of all partially completed, and completed
Products and inventory of purchased Parts, and buy them. This
shall include Parts purchased and to be delivered to MSL to
meet IBM's forecasted requirements, subject to the Supply
flexibility set forth in Appendix 4 to the Statement of Work,
but shall not include any Parts that are cancelable or
otherwise transferable to IBM; or
iii) require completion and delivery of any remaining units of
Products on order as of the date of termination including
inventory of purchased Parts and Parts purchased and to be
delivered to MSL to meet IBM's forecasted requirements,
subject to the Supply Flexibility set forth in Appendix 4 to
the Statement of Work, but not including any Parts that are
cancelable or otherwise transferable to IBM, and buy them, in
which case MSL's obligations under 5.2 a) iii will be
suspended until [*] Days after the appropriate Delivery Date.
c) Upon termination by MSL due to default by IBM, pursuant to Section
5.1 above, MSL shall complete Product(s) on order as of the date of
termination, sell them to IBM, and deliver and sell to IBM Parts
inventory. This shall include Parts purchased and to be delivered to
MSL to meet IBM's forecasted requirements, subject to the Supply
Flexibility set forth in Appendix 4 to the Statement of Work, but
shall not include any Parts that are cancelable or otherwise
transferable to IBM.
5.3 Prices Upon Termination
a) The price for completed Product(s) including provisions relating
to IBM's [*] status shall be as described in Attachment 1;
Statement of Work. The Parties agree to negotiate in good faith
the price for partially completed Products, but in no
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event will MSL be required to accept a price for partially completed
Product that is lower than the completed Product price multiplied by
the "percentage of Product completion". Such a percentage shall
equal [*] times a fraction, the numerator of which is the cost of
[*] within, and the cost of [*] and [*] expended on, such partially
completed Products to the date of termination, and the denominator
of which is equal to the [*] cost, and [*] and [*] cost of the
Product if completed, all as determined by MSL in good faith and
subject to verification and agreement by IBM. In no event will IBM
be required to pay more for a partially completed Product than the
price for a completed Product.
[*]
b) The price for Parts, whether in inventory or on order to meet IBM's
forecasted requirements, shall be an amount equal to MSL's
cost for such [*] as provided in Apppendix I of the Statement of
Work. This shall not be applicable to Parts that are cancellable
or otherwise transferable to IBM.
SECTION 6.0 PAYMENT
6.1 IBM to MSL
a) MSL will invoice IBM [*] for all completed Products, after shipping
transactions have been processed by MSL. MSL will invoice IBM [*]
for all Integration work after shipping transactions have been
processed by MSL. For all other Services, MSL will invoice IBM [*].
IBM will pay MSL within [*] Days after receipt of an acceptable
invoice.
b) MSL may offset any amount owed IBM by MSL against any amounts owed
MSL by IBM upon written approval of IBM, provided any such debts
have been generated under this Agreement.
6.2 MSL to IBM
a) MSL will pay IBM within [*] Days of receipt of an acceptable invoice
from IBM.
IBM may offset any amounts owed IBM by MSL against any amounts owed
MSL by IBM under this Agreement, upon written approval of MSL
provided any such debts have been generated under this Agreement
b) Invoices must reference this Agreement by name, date, and Purchase
Order number. Invoices will be sent to the addresses below:
IBM Corporation
Accounts Payable
1701 North Street
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P.O. Box 8098
Endicott, NY. 13760
A copy of the invoice will be sent to:
IBM Corporation
8501 IBM Drive
Charlotte, N.C. 28262-8563
Attn: MSL Project Office
c) Upon IBM request, MSL will send originals and copies of invoices to
other IBM locations.
d) Any amounts owed IBM should be sent to:
IBM
8501 IBM Drive
Charlotte, NC 28262
Attn: MSL Project Office
6.3 Both parties agree to financially contribute to those activities defined
in Attachment 4: Expense Participation and at the stated contribution,
unless otherwise agreed to in writing.
SECTION 7.0 AUDIT
a) IBM may perform process audits at MSL's or an MSL Related Company's
Work Center or MSL's subcontractors' facilities to assure that
identified IBM specifications have been complied with. IBM shall
advise MSL [*] Days in advance of the scope and method by which
such audits are to be conducted. MSL will be given the opportunity
to comment upon these procedures prior to the audit taking place.
For all identified IBM specifications, MSL will maintain and
produce for IBM process documentation for use in all audits
performed by IBM and will have current copies of said documentation
available prior to the start of an audit.
b) Upon completion of all audits performed, IBM will provide written
documentation to MSL of the audit results in the form of an audit
report. MSL will be required to respond in writing to IBM on the
completion status of all actions and or requirements identified in
the audit report within [*] Days of receipt of the audit report.
SECTION 8.0 PURCHASE OF ASSETS
a) On the Effective Date, MSL shall purchase all tangible assets listed
in Attachment 3: Asset List, Part 1A and non-capitalized hand tools
used in the manufacture of Products for [*] U.S. dollars [*].
Within [*] days of the Effective Date, IBM shall give the tangible
assets listed in Attachment 3: Asset List, Part 1B to MSL. On the
Effective Date, MSL shall purchase
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the assets listed in Attachment 3: Asset List, Part 2 for the amount
stated on the bill of sale for such assets and pay for such assets
in full by or before December 1, 1998 (the "Payment Date").
b) The Parties acknowledge that the assets listed in Attachment 3:
Asset List, are a pro forma listing only and that within 10 (ten)
days of the Effective Date, both parties agree to perform a physical
audit of these assets listed and in IBM's possession as of the
Effective date to ascertain that the assets located during that
physical audit are verified. Within 20 (twenty) days after the
Effective Date, IBM will prepare a listing of the assets in
Attachment 3: Asset List, Part 1B to verify IBM's net book value of
the assets plus [*] for each non-capitalized printer. This listing
shall contain the price for each asset listed separately. MSL shall
notify IBM within 30 (thirty) days of the Effective Date if it does
not wish to receive all of the available tangible assets in
Attachment 3: Asset List, Part 1B by notifying IBM in writing of the
types of equipment it does not wish to receive. IBM shall choose
which equipment MSL will receive based on MSL's chosen equipment
type. The startup and investment expense defined in Attachment 4,
Section 3, shall be reduced by IBM's net book value of the assets in
Part 1B for the equipment accepted by MSL plus [*] U.S. dollars
[*] for each non-capitalized printer. In any event, the physical
audit for all assets shall result in a new listing for the assets
contemplated hereunder which listing shall be substituted for the
Attachment 3: Asset List that is attached to this Agreement at the
Effective Date. The amount stated on the bill of sale of the assets
listed in Part 2 shall reflect the results of a physical audit and
obsolescence review. Such adjustments shall be subject to the
mutual agreement of the Parties.
c) If by the Payment Date, MSL fails to pay IBM in full for the assets
listed in Attachment 3: Asset List, Part 2 at the price specified in
b) above, IBM may offset the balance owed by MSL as provided in
Section 6.2(a) above, and without MSL's further consent, until IBM
has recovered such balance.
d) MSL acknowledges that IBM has not made any representations or
warranties with respect to the assets listed in Attachment 3: Asset
List, except those expressly set forth in this Agreement, including,
but not limited to the representation and warranty of title. All
assets delivered to MSL pursuant to this section shall be provided
on an 'AS IS' basis. NO OTHER WARRANTIES, WHETHER EXPRESSED OR
IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR THE WARRANTY OF
NON-INFRINGMENT ARE PROVIDED HEREUNDER.
e) In the event of termination or expiration of this Agreement
pursuant to Section 5.0 above, IBM shall have an option, which
shall expire [*] days after such termination or expiration, to
purchase from MSL, at a reasonable price agreeable to the Parties,
all assets used by MSL to perform the manufacturing and fulfillment
functions
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outlined in Attachment 1: Statement of Work, to the extent owned or
transferable by MSL, and required by IBM to perform such functions.
f) Assets purchased by MSL and listed in Attachment 3: Asset List, Part
2 are to be used solely in Products purchased by IBM pursuant to the
Attachment 1: Statement of Work.
SECTION 9.0 PERSONNEL
a) Attachment 2 contains a list of the individuals employed by IBM at
the date hereof in connection with this Agreement, including active
employees and employees who are on leave of absence or sick leave
(herein the "Employees").
b) MSL will make an unconditional employment offer to the Employees,
listed in Attachment 2, to be effective on the Effective Date of
this Agreement. The Employees who accept employment offers from
MSL and who have begun their employment with MSL ("Transferred
Employees") will be employed by MSL in accordance with the terms set
forth below. IBM will terminate all Employees, listed in Attachment
2, at the Effective Date of this Agreement and IBM will be
responsible for any and all employment related liabilities up to the
Effective Date, including, but not limited to, vacation and sick
time, workers compensation claims, variable compensation, and
severance.
c) MSL agrees that all Transferred Employees will be continuously
employed by MSL for at least [*] after the Effective Date, except as
otherwise provided herein, and will receive a total compensation
package as identified in Attachment 2: Employee list and Benefits
Information. Furthermore, with respect to the Transferred Employees,
MSL shall grant, to the extent granted by IBM, credit for service
with IBM prior to the Effective Date for purposes of participation
and eligibility to participate under MSL's employee benefit plans
and other policies and programs of MSL.
d) Nothing in this Agreement shall operate in any way to limit or
prevent MSL from terminating any Transferred Employee at any time
for reasons of cause related to poor job performance or conditions
of employment.
e) If MSL suffers a substantially adverse change in its business,
related to a reduction in IBM's Products requirements, including
reductions of Products requirements due to migration to a
competitive supplier, for the [*] from the Effective Date of this
Agreement, MSL may terminate such number of Transferred Employees
as it deems necessary. However, IBM shall only reimburse MSL for
termination benefits paid to such Transferred Employees, which are
substantially similar to IBM's then severance package, and
provided that all MSL subcontractors and other MSL non management
employees assigned to the US Work Center have been terminated
prior to or along with the termination of the Transferred
Employees.
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f) IBM agrees that, for a period of [*] years from the Effective Date
of this Agreement, it will not in any way solicit for employment
any Transferred Employees without the prior written consent of MSL;
provided, however, that the foregoing will not restrict or prevent
IBM from a) employing any such person who contacts IBM on his or her
own initiative without any solicitation or encouragement from IBM
or b) by using general employment advertising or communications or
independent search firms, hiring any person who responds thereto,
provided that IBM does not direct or encourage such independent
search firms to solicit such Transferred Employees.
SECTION 10.0 LEASE OF PREMISES
The Lease of Premises Agreement is a separate agreement governing the
lease of certain IBM buildings to MSL, the execution of which is a
condition precedent to the effectiveness of this Agreement.
SECTION 11.0 MANUFACTURING, FULFILLMENT, AND INTEGRATION
Attachment 1 is the Statement of Work that outlines the manufacturing,
fulfillment, and Integration requirements and responsibilities of both
parties.
SECTION 12.0 TRANSITION SERVICES
Supplement 1 to the Statement of Work identifies the Transition Services
that the Parties are to perform in accordance with the prices set forth
therein and starting on the Effective Date of the Agreement. All
Transition Services will expire December 31, 1998.
SECTION 13.0 INTELLECTUAL AND INDUSTRIAL PROPERTY
13.1 IBM assumes and will assume ownership and MSL assigns and will assign all
intellectual and industrial property rights for hardware, software, design
and documentation of all Products delivered under this Agreement
IBM will also own and MSL will assign any invention made by MSL on
Products, and on any invention related to IBM processes and systems that
MSL makes while MSL uses those processes and systems in the performance of
this Agreement provided that nothing herein shall restrict MSL's right to
use such inventions in the performance of its obligations hereunder. MSL
shall not use any proprietary processes for the assembly, subassembly and
final tests, and quality testing of the Products subject to this Agreement
unless otherwise agreed to by the Parties in writing.
13.2 Confidential Information and Advertising
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a) IBM shall not receive confidential information from MSL under this
Agreement. However, if it becomes necessary for IBM to give certain
confidential information to MSL, it will be done so pursuant to the
Agreement for Exchange of Confidential Information ("AECI") Number
4998S60076.
b) All information considered confidential by IBM will be marked
confidential by IBM prior to the exchange. If the confidential
information is to be disclosed orally, IBM will promptly provide MSL
with a written summary following the disclosure. In the event, the
information is not marked confidential, it shall not be deemed
confidential.
c) Each time IBM wishes to disclose specific information to MSL, IBM
will issue a supplement to the above referenced AECI. All requests
to disclose confidential information must be approved by the
Relationship Managers. During the term of this Agreement and upon
the request of IBM, MSL shall return all confidential information
immediately.
d) Neither Party shall disclose the terms of this Agreement to any
third Party, including debt or financing institutions, without the
prior written consent of the other Party, which consent shall not be
unreasonably withheld or delayed, except as required by law. Each
Party shall provide the other with prior written notice of any such
required disclosure.
e) Neither Party shall make any public announcements regarding this
Agreement or matters pertaining hereto, other than as may be
expressly agreed upon in advance by the Parties in writing.
13.3 Licenses
a) Notwithstanding anything to the contrary in this Agreement, nothing
in this Agreement grants or may grant MSL any rights or licenses in
any preexisting intellectual property of IBM except that IBM grants
MSL a royalty-free license to use the confidential information
disclosed in connection with this Agreement under the AECI
referenced in 13.2 necessary to manufacture Products solely for IBM.
Any other license to IBM's intellectual property must be
accomplished through a separate written agreement signed by IBM.
b) As of the Effective Date, to the best of IBM's knowledge, IBM has
licenses and permits and other governmental authorizations and
approvals required for IBM's use of the assets in Attachment 3:
Asset List, except where the failure to have such licenses and
permits would not have a material adverse effect on IBM's ability to
use or operate the assets. All such licenses and permits held by IBM
which are material to the operation of the assets are valid and in
full force and effect and there are not pending or, to the knowledge
of IBM, threatened in a writing to IBM, any proceedings which could
result in the termination or impairment of any such license or
permit which termination or impairment would materially interfere
with the operation or use of the assets as
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presently operated or used by IBM. The Parties acknowledge that MSL
may be required to seek and that IBM is not responsible for
obtaining for MSL regulatory or other permitted transfers of, or
obtain through separate application for itself, any applicable
licenses and permits, including environmental licenses and permits,
which are required for MSL's operation or perfection ownership of
the assets.
SECTION 14.0 WARRANTIES
14.1 Representations and Warranties of IBM
IBM represents and warrants to MSL that the statements contained in this
Section 14.1 are correct and complete, and the following representations
and warranties shall be deemed to have been made again on and as of the
Effective Date. The effectiveness of this Agreement shall be subject to
the condition that IBM deliver to MSL a certificate on and as of the
Effective Date that such representations and warranties are correct and
complete as of such date.
"To the best of IBM's knowledge" shall be defined as the information
available to IBM Charlotte Management after due inquiry as of the
Effective Date. A materially adverse effect shall be defined as an outcome
where MSL is unable to acquire appropriate title for assets to be
purchased under this Agreement.
a) Organization of IBM
IBM is a New York corporation, duly organized, validly existing, and
in good standing under the laws of New York. IBM has all corporate
powers and all material governmental licenses, authorizations,
permits, consents, and approvals required to carry on its business
as now conducted.
b) Authorization of Transaction
IBM has the power and authority (including full corporate power and
authority) to execute and deliver this Agreement and all other
documents contemplated hereby and to perform its obligations
hereunder. All corporate and other actions or proceedings to be
taken by or on the part of IBM to authorize and permit the execution
and delivery by IBM of this Agreement and the instruments required
to be executed and delivered by IBM pursuant hereto, the performance
by IBM of its obligations hereunder, and the consummation by IBM of
the transactions contemplated herein, have been duly and properly
taken. This Agreement has been duly executed and delivered by IBM
and constitutes the legal, valid and binding obligation of IBM,
enforceable in accordance with its terms and conditions.
c) Noncontravention
Neither the execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby do or will
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i) conflict with or result in a breach of any provision of the
certificate of incorporation or bylaws of IBM, or
ii) result in or give rise to the imposition of any lien upon the
assets listed in Attachment 3: Asset List that would have a
materially adverse effect on the assets listed therein, or
iii) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling charge or other
restriction of any Governmental Authority to which IBM is
subject.
Except for the required filings under the Hart-Scott-Rodino Act, IBM
is not required by applicable law or other obligation to give any
notice to, make any filing with, or obtain any authorization,
consent, or approval of any Governmental Authority or other person
in order for the Parties to consummate the transactions contemplated
by this Agreement.
d) Assets Used by IBM to Conduct Business
The assets listed in Attachment 3: Asset List, Part 1 and in Attachment 5:
Equipment and Program Loan List are the tangible assets used by IBM up
until the Effective Date for the operation of the business to be conducted
by MSL on and after the Effective Date and pursuant to Attachment 1:
Statement of Work.
e) Inventory
The assets listed in Attachment 3: Asset Listing, Part 2 and in Attachment
5: Equipment and Program Loan List are the tangible assets used by IBM up
until the Effective Date to build to the IBM specification and designs to
be used by MSL in fulfilling its obligations on and after the Effective
Date and pursuant to Attachment 1: Statement of Work.
f) Title to Assets
IBM has good and marketable title to all assets listed on Attachment 3:
Asset Listing, free and clear of any liens or encumbrances and MSL shall
acquire a bill of sale transferring good and marketable title to said
assets, free of liens and encumbrances. However, in the event MSL
discovers any materially adverse lien or encumbrance that prevents MSL
from using or operating the assets, within sixty (60) days after such
notice to IBM, IBM shall clear all such materially adverse lien or
encumbrances. If IBM is unable to clear all such materially adverse liens
or encumbrances within sixty (60) days after notice, IBM shall complete
reasonable actions necessary, to provide MSL with materially unencumbered
enjoyment of the assets.
g) Employees
To the best knowledge of the Charlotte Program Director of General
Hardware and Communications, Procurement, no employee or group of
employees has any plans to refuse to accept any offer of employment from
MSL made in compliance with this Agreement.
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14.2 Representations and Warranties of MSL
MSL represents and warrants to IBM that the statements contained in this
Section 14.2 are correct and complete, and the following representations
and warranties shall be deemed to have been made again on and as of the
Effective Date. The effectiveness of this Agreement shall be subject to
the condition that IBM deliver to MSL a certificate on and as of the
Effective Date that such representations and warranties are correct and
complete as of such date.
a) Organization of MSL
MSL is a California corporation, duly organized, validly existing,
and in good standing under the laws of California. MSL has all
corporate powers and all material governmental licenses,
authorizations, permits, consents, and approvals required to carry
on its business as now conducted.
b) Authorization of Transaction
MSL has the power and authority (including full corporate power and
authority) to execute and deliver this Agreement and all other
documents contemplated hereby and to perform its obligations
hereunder. All corporate and other actions or proceedings to be
taken by or on the part of MSL to authorize and permit the execution
and delivery by MSL of this Agreement and the instruments required
to be executed and delivered by MSL pursuant hereto, the performance
by MSL of its obligations hereunder, and the consummation by MSL of
the transactions contemplated here, have been duly and properly
taken. This Agreement has been duly executed and delivered by MSL
and constitutes the legal, valid and binding obligation of MSL,
enforceable in accordance with its terms and conditions.
c) Noncontravention
Neither the execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby do or will:
i) conflict with or result in a breach of any provision of the
certificate of incorporation or bylaws of MSL or MSL Related
Companies, or
ii) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling charge or other
restriction of any Governmental Authority to which MSL or MSL
Related Companies is subject.
Except for the required filings under the Hart-Scott-Rodino Act,
neither MSL nor any of its subsidiaries is required by applicable
law or other obligation to give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any
Governmental Authority or other person in order for the Parties to
consummate the transactions contemplated by this Agreement.
d) I/T Solution Necessary to Conduct Business
To the best of MSL's Vice President, Information Technology's
knowledge and in reliance on IBM's representations in Section
14.1(d), MSL has an appropriate I/T
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Solution necessary to use the assets used by IBM as stated in
Section 14.1(d) to fulfill its obligations under Attachment 1:
Statement of Work.
SECTION 15.0 INDEMNIFICATION AND LIMITATION OF LIABILITY
15.1 Scope of MSL's Indemnity
MSL agrees to protect, defend, hold harmless, and indemnify IBM from and
against any and all claims, damages, liabilities, losses and expenses,
arising out of the following, whether alleged or actual:
a) infringement by MSL in rendering performance under this Agreement or
any Product Attachments or by any MSL procured Parts, processes,
designs, deliverables or any preexisting material contributed by MSL
from which any Products are prepared, of any patent, trademark,
trade name, copyright, mask work right or trade secret valid
anywhere in the world, except that MSL shall have no indemnity
obligation for any claim alleging infringement of any trademark
including any trade name, product name or similar right resulting
from the use of any name or mark selected by IBM;
b) failure of MSL to comply with any governmental law, statute,
ordinance, administrative order, rule or regulation relating to the
manner of or carrying on of MSL's operations and/or parts and
processes used in Products,
c) failure of MSL to perform MSL's warranty described in the Statement
of Work and support obligations or similar services as set forth in
any Product Attachment issued hereunder.
Notwithstanding the foregoing, MSL shall have no obligation to
indemnify IBM under this Section 15.1 to the extent that such third
party claim (i) is caused by MSL's material compliance with a
written specification provided by an authorized representative of
IBM or (ii) results from a defective design of a Product, to the
extent that such defect is the result of the written specifications
or designs provided by an authorized representative at IBM.
15.2 Payment and Cooperation
a) MSL shall pay all damages, settlements, expenses and costs,
including court costs and attorneys' fees, reasonably incurred by
IBM, arising out of the matters set forth in Section 15.1 provided
that such payment shall be contingent on:
i) prompt notice by IBM to MSL in writing of such claim to enable
MSL to defend;
ii) cooperation by IBM and MSL in the defense thereof; and
iii) IBM allowing MSL to control the defense or settlement of the
claim, provided that IBM may at its option participate in the
proceeding with its own counsel and at its own expense, but
MSL shall retain control of the defense of the claim.
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b) In the event that any occurrence within the scope of the indemnity
set forth in 15.1 above is alleged or proved, MSL may, at its sole
discretion and at its own expense in order to remedy any such
infringement for the future, procure any necessary license rights,
or make use of non-infringing designs, processes, Parts,
deliverables or other materials, so long as such substitute items do
not result in the Products failing to comply with the
specifications, requirements, and warranties set forth in this
Agreement.
15.3 Limitations of Liability
a) Neither Party will be liable to the other for lost profits,
consequential, punitive, or incidental damages, even if informed of
the possibility that such damages may be incurred.
b) The total liability for either Party, regardless of the form of
action, whether contract or tort, is limited to three percent (3%)
of the value of the bill of materials contained in the Products
delivered to IBM and IBM Customers by MSL in the period beginning
with the Effective Date of the Agreement through the resolution of
the action.
.
SECTION 16.0 GENERAL
16.1 Product, Technology and Process Changes
a) If IBM elects to amend the specification or the process for
manufacturing Products, IBM will notify MSL of the changes in
writing. MSL will promptly inform IBM of any changes to Delivery
Dates, lead times, process changes, Parts requirements, Parts
obsolescence, scrap, rework and any requested price changes that
will result from the required changes. If IBM then elects to proceed
in accordance with the changes proposed by MSL, IBM and MSL will
agree to a plan to address the issues described in the proceeding
sentence. MSL will thereafter implement the agreed to changes.
b) MSL will not implement any change to its specifications, technology,
materials or process that may affect form, fit, or function of
characteristics of Products without IBM's prior written consent. IBM
will make a reasonable effort to accommodate MSL's request for
change; however, IBM is not obligated to accept any changes proposed
by MSL.
c) Once a plan described in a. above has been agreed to, MSL will not
start any new units of Product which do not incorporate the agreed
change.
16.2 Assignment
Neither Party may assign, transfer or subcontract any rights or duties
under this Agreement without prior written approval by the other Party.
MSL may assign or subcontract all or any part of this Agreement to any MSL
Related Company with IBM's prior written consent which shall not be
unreasonably withheld or delayed. MSL may not assign or transfer any
rights or duties under this Agreement without prior written approval by
IBM. MSL shall
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provide IBM with all relevant details prior to implementing any change to
its use of subcontractors performing work relating to IBM's Purchase
Orders.
16.3 Gratuities
Each Party agrees that it shall maintain and enforce a corporate policy
designed to ensure that its employees, agents, or representatives will not
offer any gratuity to the other Party's employees, agents, or
representatives for any reason, including a view towards securing
favorable treatment from such other Party.
16.4 Compliance with Law
In the performance of this Agreement and related Purchase Orders the
Parties shall comply with the laws of the United States unless otherwise
specified, including but not limited to, those affecting price,
production, purchase, sale, use and export of Products, environmental and
labor laws.
16.5 Sale or Merger
During the term of this Agreement, if MSL decides to sell a substantial
portion of its assets or operations outside the ordinary course of its
business, or to merge or transfer ownership of MSL to a third Party, MSL
will immediately notify IBM. MSL warrants that any new company resulting
from the sale or merger of MSL will accept and assume full responsibility
for the performance of this Agreement.
16.6 Trademark
Nothing in this Agreement gives either Party the right to use the other
Party's name, trademark, or logo except where necessary in the ordinary
course to perform this Agreement or where otherwise authorized in writing
by the other Party in conjunction with this Agreement.
16.7 Assignees and Visits
If IBM determines that there is a business need for employees of IBM to
reside on the premises of MSL Work Centers. IBM will request MSL's
approval, and will request that MSL provide suitable working office space
and associated utilities for employees of IBM on the premises of MSL Work
Centers. MSL's approval and MSL's provision of office space and utilities
shall not be unreasonably withheld. MSL will also allow business visits by
employees of IBM and IBM customers to facilities of MSL. The details of
such visits will be agreed to between the Parties on a case-by-case basis.
Where business visits are exceptional and primarily for the benefit of
MSL, they will be paid for by MSL.
16.8 Failure to Enforce
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The failure of either Party to enforce at any time or for any period of
time the provisions of this Agreement shall not be construed to be a
waiver of such provisions or of the right of such Party to enforce each
and every provision in the future.
16.9 Governing Law
This Agreement and the performance of transactions under this Agreement
shall be governed by the substantive laws of the state of New York. The
parties expressly waive any right to a jury trail regarding disputes
related to this Agreement. Any legal or other action related to a breach
of this Agreement must be commenced no later than [*] years from the date
of the breach in a court sited within the State of New York.
16.10 Severability
If any of the provisions of this Agreement shall be held by a court or
other tribunal of competent jurisdiction to be unenforceable, the
remaining portions of this Agreement shall remain in full force and
effect.
16.11 Notices
Any notice which any Party desires or is obligated to give to the other
shall be given in writing or by telecopy and sent to the appropriate
address. Notices required under this section must be addressed to the
address shown below. All other notices shall be sent to the address
specified in the appropriate Product Attachment or, if none is specified,
to the address shown below or to such other address as the Party to
receive the notice may have last designated in writing.
The addresses for notices shall be:
IBM MSL
8501 IBM Drive 200 Baker Avenue
Charlotte, NC 28262 Concord, MA 01742
Attn: MSL Project Office Attn: General Counsel
Telephone: 704-594-1964 Telephone: 978-287-5630
Facsimile: 704-594-4108 Facsimile: 978-287-5635
Either Party may change its address for this section by giving written
notice to the other Party. The notifying Party must receive a confirmation
within seven (7) Days of notification.
16.12 Agency
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This Agreement does not create either a principal to agent, employer to
employee, partnership, joint venture, or any other relationship except
that of independent contractors between MSL and IBM.
16.13 Headings
Headings to paragraphs and sections of this Agreement are for the
convenience of the Parties only. They do not form a part of this Agreement
and shall not in any way affect its interpretation.
16.14 Records
The Parties agree to keep complete and accurate records related to the
manufacture of Products for a period of five (5) years after the
termination or expiration of the Product Attachment to which they relate.
16.15 Prohibited Suppliers
IBM may provide MSL a lists of suppliers with whom MSL is prohibited from
conducting any business in connection with this Agreement for the purposes
of ensuring that IBM comply with the requirements of any governing laws.
MSL agrees to abide by the reasonable requirements of these lists except
to the extend that such compliance itself would constitute a violation of
the laws of the United States or of any state or local government.
16.16 Entire Agreement
The provisions of this Agreement, including all Appendices, Supplements,
Attachments, and Purchase Orders, and all documents expressly incorporated
herein by reference, constitute the entire agreement between the Parties
and supersede all prior intentions, proposals, understandings, and
communications.
16.17 Force Majeure
Neither Party shall be liable to the other for its failure to perform any
of its obligations hereunder during any period in which such performance
is delayed by circumstances or events that were not foreseeable, or if
foreseeable could not have been reasonably avoided including, but not
limited to, fire, flood, war, embargo, strike, riot, prolonged scarcity of
necessary raw materials, inability to secure transportation or the
intervention of any governmental authority, provided that the Party
suffering such delay immediately notifies the other Party of the delay. If
such delay shall continue for more than [*] Days, the Party injured by
the inability of the other to perform shall have the right upon written
notice to either a) terminate this Agreement as set forth in Section
5.1 c or b) treat this Agreement as suspended during the delay and
reduce any commitment in proportion to the duration of the delay.
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16.18 No Third Party Beneficiaries
This Agreement shall not confer any rights or remedies upon any person
other than the Parties and their respective successors or permitted
assigns
16.19 Expiration of Representations and Warranties
All representations and warranties made by the Parties in this Agreement
or in any schedule, document, certificate or other instrument delivered by
or on behalf of the Parties pursuant to this Agreement shall expire on
the [*] anniversary of the Effective Date.
16.20 Remedies Cumulative
The remedies set forth in this Agreement are cumulative and are in
addition to any other remedies allowed at law or in equity. Resort to one
form of remedy shall not constitute a waiver of alternate remedies.
16.21 Excused Exceptions to MSL Performance
a) Notwithstanding anything herein to the contrary, MSL may, upon
written notice to IBM, delay or suspend performance to supply any
Products or Services to IBM (i) if MSL has received notice from a
third party, or based on the reasonable advice of legal counsel
reasonably believes, that the supply of such Products or Services
would subject MSL to liability for infringement or liability related
to a defective design to a Product caused by MSL's material
compliance with a written specification provided by an authorized
representative of IBM or (ii) if IBM, pursuant to the Equipment
Program and Loan Agreement, requires MSL to return a Loaned Item (as
defined in said Equipment Program and Loan Agreement) which MSL
reasonably believes is necessary to supply such Products or
Services. MSL's decision not to supply Products or Services as
provided in this Section 16.21 shall not constitute a breach or
other violation of this Agreement.
b) IBM may, at its sole discretion and at its own expense in order to
remedy any such suspensions listed in a) above, procure any
necessary license rights, or make use of non-infringing designs,
processes, Parts, deliverables, equipment or other materials, so
long as such substitute items do not result in the Products failing
to comply with the specifications, requirements, and warranties set
forth in this Agreement.
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<PAGE>
Amendment 001 to Outsourcing Agreement
between
IBM and MSL
This document amends Attachment 4 to the Outsourcing Base Agreement between
International Business Machines Corporation and Manufacturer's Services Western
U.S. Operations, Inc. The effective date of this Amendment is the date executed
by both parties.
The parties agree to make the following change:
Delete Item 3 a) of Attachment 4 to the Outsourcing Base Agreement in its
entirety and replace it with the following:
a) IBM shall pay MSL up to [*] U.S. dollars [*] for 1998 start up and
investment expenses related to the US Work Center. MSL may submit invoices to
IBM commencing on the Effective Date of the Agreement through March 31, 1999
for the following actual startup and investment expenses for the US Work
Center: I/T application set up including related travel and consultant fees,
hardware, software including application software and licenses, network
infrastructure, line servers and user workstations and training. MSL shall,
if requested by IBM, provide a projection of expenses by quarter.
All other terms and conditions of the Outsourcing Base Agreement and it's
attachments shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
by their respective authorized representatives.
ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO:
International Business Manufacturer's Services
Machines Corp. Western U.S. Operations, Inc
By: /s/ Roy B. Covington III By: /s/ Kevin C. Melia
------------------------------ ----------------------------
Roy B. Covington III Kevin C. Melia
------------------------------ ----------------------------
Print Name Print Name
Industry Solutions Production President, CEO
------------------------------ ----------------------------
Title Procurement Manager Title
6/15/98 6/15/98
------------------------------ ----------------------------
Date Date
<PAGE>
Amendment 002 to Outsourcing Agreement
between
IBM and MSL
The purpose of this document is to amend the Outsourcing Agreement between
International Business Machines Corporation ("IBM") and Manufacturer's Services
Western U.S. Operations, Incorporated ("MSL"), dated 05/05/98 ("Agreement"). The
effective date of this Amendment is the date executed by authorized
representatives of both parties.
The parties agree to make the following changes:
1. Delete Section 24.2(d) in Attachment 1, Statement of Work of the Agreement in
its entirety and replace with the following:
"d) MSL SLA (Service Level Agreement) requirements for local or remote systems
availability and performance will be negotiated in compliance with IBM's service
level expectation for a manufacturing process on or before October 31, 1998."
2. Delete Section 3 (vii) in Supplement 1 Transition Services, Section II- Sale
of IBM Services, Section 4.0 IBM Responsibilities in its entirety and replace
with the following:
"vii) create a net sum invoice to MSL weekly that represents monies owed to
MSL by IBM and monies owed IBM by MSL. Lease payments will not be netted with
this invoice."
All other terms and conditions of the Agreement and its attachments shall remain
in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
by their respective authorized representatives.
ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO:
By: International Business By: Manufacturer's Services
Machines Corp. Western U.S. Operations, Inc
/s/ Roy B. Covington III /s/ Dale Johnson
------------------------------ ----------------------------
Roy B. Covington III Dale R. Johnson
------------------------------ ----------------------------
Print Name Print Name
Industry Solutions Production
Procurement Exec. Vice President
------------------------------ ----------------------------
Title Title
9/23/98 9/23/98
------------------------------ ----------------------------
Date Date
<PAGE>
Amendment 003 to Outsourcing Agreement
between
IBM and MSL
The purpose of this document is to amend the Outsourcing Agreement between
International Business Machines Corporation ("IBM") and Manufacture's
Services Western U.S. Operations, Incorporated ("MSL"), dated May 5, 1998
("Agreement"). Once signed by both parties the effective date of this amendment
is January 1, 1999.
The parties agree to make the following changes:
1. Delete paragraph 2 in Supplement 1 to Attachment 1, Statement of Work, to the
Agreement in its entirety and replace with the following:
"This is a Supplement to Attachment 1, Statement of Work ("SOW"), and outlines
the Transition Services that will be performed by both Parties from the
Effective Date of the Agreement through February 25, 1999."
2. Delete Section 2.0 Term, SECTION I - Wedge Products in Supplement I to
Attachment 1. Statement of Work, to the Agreement in its entirety and replace
with the following:
The following replaces Section 2.0 of the SOW in its entirety.
This Supplement and its Attachments shall become effective upon execution of
the SOW and expire February 26, 1999 unless terminated as provided in Section
5.0 of the Base Agreement. This Supplement may be extended for periods of
three (3) months under mutually agreed to terms and conditions. Extensions
will be mutually agreed to in writing by both parties.
3. Delete Section 2.0 Term. SECTION II - Sale of IBM Services in Supplement 1
to Attachment 1, Statement of Work, to the Agreement in its entirety and
replace with the following:
"The following replaces Section 2.0 of the SOW in its entirety.
This Supplement and its Attachments shall become effective upon execution of
the SOW and expire February 26, 1999 unless terminated as provided in Section
5.0 of the Base Agreement. This Supplement may be extended for periods of
three (3) months under mutually agreed to terms and conditions. Extensions
must be mutually agreed to in writing by both parties.
4. Delete paragraph 2, Section 24.0 Information Technology Services ("I/T
Services"), Section II - Sale of IBM Services in Supplement 1 to Attachment 1,
Statement of Work, to the Agreement in its entirety and replace it with the
following:
"Within sixty (60) Days after the Effective Date of this Agreement, IBM and
MSL must develop a mutually acceptable written migration plan to migrate to
an MSL I/T solution for the U.S. Work Center. The migration plan will include
the systems and applications identified on the attached Application Matrix
below. All migration is to be completed by February 26, 1999. Any changes or
upgrades to the mutually acceptable written migration plan shall be
negotiated separately."
5. Delete Scope of Services: b), Section 24.0 Information Technologies Services
("I/T Services"), SECTION II - Sale of IBM Services in Supplement 1 to
Attachment 1, Statement of Work, to the Agreement in its entirety and replace it
with the following:
"b) Any extension of the I/T Services beyond the February 26, 1999 date, due to
an MSL delay, will be priced at IBM's then prevailing commercial rates."
<PAGE>
Amendment 003 to Outsourcing Agreement
between
IBM and MSL
6. In addition to the above IBM and MSL agree to the following:
a) Negotiate in good faith an adjustment to the payment amount stated in
Section 7.0 Price, SECTION II--Sale of IBM Services in Supplement 1 to
Attachment 1, Statement of Work, to the Agreement on or before January 15,
1999. At this time, it is as follows,
"Commencing on the Effective Date of the Agreement through December 31, 1998,
IBM will not charge MSL for the services provided under Transition Services
Section II--Sale of IBM Services. During any extension, due to any MSL delay,
of Transition Services beyond December 31, 1998, MSL's payment to IBM shall
be as mutually agreed to in writing by both parties and shall be [*] dollars
per month."
b) Amend the Application Matrix of SECTION II--Sale of IBM Services in
Supplement 1 to Attachment 1, Statement of Work, to the Agreement on or before
January 15, 1999.
All other terms and conditions of the IBM/MSL Outsourcing Agreement, its
attachments, and amendments shall remain in force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
by their respective authorized representatives.
ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO:
International Business Manufacturer's Services
Machines Corp. Western U.S. Operations, Inc.
By: /s/ Roy B. Covington III By: /s/ Dale Johnson
------------------------------- --------------------------------
Roy B. Covington III Dale R. Johnson
------------------------------- --------------------------------
Print Name Print Name
Industry Solutions Production
Proc Mgr Exec. V.P.
------------------------------- --------------------------------
Title Title
January 12, 1999 January 12, 1999
------------------------------- --------------------------------
Date Date
<PAGE>
Supplement I
Transition Services
(Amendment 003)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
Application Matrix
------------------------------------------------------------------------------------------------------------------
Application Name Description MSL Action
------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
------------------------------------------------------------------------------------------------------------------
AAS Corp Order Entry System Cont to Use via online access
------------------------------------------------------------------------------------------------------------------
Alternate Channel Planning Lotus Spreadsheets Cont to Use
------------------------------------------------------------------------------------------------------------------
ASPECT Eng for Technology Products N/A No longer
------------------------------------------------------------------------------------------------------------------
ATC EMLS transmission to Ger. Replace
------------------------------------------------------------------------------------------------------------------
Bwacs Box WAC Cost Application Replace
------------------------------------------------------------------------------------------------------------------
CADAM CAD Drawings Replace
------------------------------------------------------------------------------------------------------------------
Carrier Direct WT billing data & Mcs ships for Costs Replace
------------------------------------------------------------------------------------------------------------------
CATIA CAD Application MSL to use external license
------------------------------------------------------------------------------------------------------------------
Claim Ship Final Mach claims for Acct period Replace
------------------------------------------------------------------------------------------------------------------
COATS & Bridges COATS is corp bridges are local Replace
------------------------------------------------------------------------------------------------------------------
COLTS Purchasing Contracts Replace
------------------------------------------------------------------------------------------------------------------
Comp Trace Shell Plant Control Shell Replace
------------------------------------------------------------------------------------------------------------------
Conveyor Shell Plant Control Shell N/A No longer used
------------------------------------------------------------------------------------------------------------------
CPOPS Non Production Procurement Replace
------------------------------------------------------------------------------------------------------------------
CPQA CLT Product Quality Assurance Replace
------------------------------------------------------------------------------------------------------------------
CPS Common Purchasing Sys Replace
------------------------------------------------------------------------------------------------------------------
CPSLOCAL Common Purchasing Sys - Local Replace
------------------------------------------------------------------------------------------------------------------
CPS/CAPS Bridges CPOPS orders for RTP nightly Replace
------------------------------------------------------------------------------------------------------------------
DAE Distributed Application Environment Replace
------------------------------------------------------------------------------------------------------------------
DDB Boulder WT shipments Online Access
------------------------------------------------------------------------------------------------------------------
DDYS Distribution System Replace
------------------------------------------------------------------------------------------------------------------
DPRSBOX Development/Production Records Sys Replace w/DPRS Receiver
------------------------------------------------------------------------------------------------------------------
EMLS Demands Replace w/OEMLS interface
------------------------------------------------------------------------------------------------------------------
EMLS/EPRO Bridges EMLSBX for the Box plant Replace
------------------------------------------------------------------------------------------------------------------
EOSE Enterprise Order/Scheduling & Excc Interface
------------------------------------------------------------------------------------------------------------------
EPPS EXPRS Enterprise Prod Planning (feature planning) Replace
------------------------------------------------------------------------------------------------------------------
ERE Engineering Documentation Replace with EGLNET
------------------------------------------------------------------------------------------------------------------
ESDP Enterprise Supply & Demand Planning Interface
------------------------------------------------------------------------------------------------------------------
Financial MES MES Billing System Interface
------------------------------------------------------------------------------------------------------------------
Fourth Element Overhead Application Replace
------------------------------------------------------------------------------------------------------------------
FDR Financial Data Repository Interface
------------------------------------------------------------------------------------------------------------------
FQA Field Quality Assurance Replace
------------------------------------------------------------------------------------------------------------------
Gems Corp Order System Interface
------------------------------------------------------------------------------------------------------------------
Gems Billing Bridge Corp Order System Interface
------------------------------------------------------------------------------------------------------------------
Gems MPI Warranty Tracking Interface
------------------------------------------------------------------------------------------------------------------
ICS Inventory Control System N/A no longer used
------------------------------------------------------------------------------------------------------------------
IDS Code A system orders Replace
------------------------------------------------------------------------------------------------------------------
IPBILL Financial Billing System Replace
------------------------------------------------------------------------------------------------------------------
IPLS Corporate Interplant System Interface via EDI
------------------------------------------------------------------------------------------------------------------
IPOPS Interplant Parts Order Process Replace
------------------------------------------------------------------------------------------------------------------
L718 Trx Interface Pastes Serial # info into MCCS L718 scrn Replace
------------------------------------------------------------------------------------------------------------------
MAC Mfg Auto Control Sys...controls UWIPS Replace
------------------------------------------------------------------------------------------------------------------
Mach/Scl Costs to MCCS Replace
------------------------------------------------------------------------------------------------------------------
Maptools Batch load of ME/PC data to DPRS Replace
------------------------------------------------------------------------------------------------------------------
MAXI Mfg Inventory (Large parts) Interface
------------------------------------------------------------------------------------------------------------------
MCCS Material Cost & Control Sys Replace
------------------------------------------------------------------------------------------------------------------
MES EDI EDI Replace
------------------------------------------------------------------------------------------------------------------
MES FC MES Forecasting Replace
------------------------------------------------------------------------------------------------------------------
MES Global Labels MES shipping label reqts Replace
------------------------------------------------------------------------------------------------------------------
MES Local Explode MES BOMs Replace
------------------------------------------------------------------------------------------------------------------
MFG Rel Shell Plant control Inter to rel UWIPS Replace
------------------------------------------------------------------------------------------------------------------
MODLOAD Machine ships for ACCT period Replace
------------------------------------------------------------------------------------------------------------------
MPL History MPL History pgms in 'C' N/A no longer used
------------------------------------------------------------------------------------------------------------------
Office products LNOTES.VM.servers MSL IT Solution
------------------------------------------------------------------------------------------------------------------
OPAL Manual orders Replace
------------------------------------------------------------------------------------------------------------------
P12l's FFI's Manual Interface
------------------------------------------------------------------------------------------------------------------
</TABLE>
1/14199 Page 13 of 14
<PAGE>
Supplement I
Transition Services
(Amendment 003)
<TABLE>
<S> <C> <C>
------------------------------------------------------------------------------------------------------------------
Packaging Label set Label Printing Replace
------------------------------------------------------------------------------------------------------------------
Pallet Action set Serial Numbers per Pallet N/A not needed
------------------------------------------------------------------------------------------------------------------
Pallet Label Printing Prints label for NHD cust room & WH N/A No longer used
------------------------------------------------------------------------------------------------------------------
Pallet Shell Plant Control Shell Replace
------------------------------------------------------------------------------------------------------------------
PCA M'burg PCA data Interface
------------------------------------------------------------------------------------------------------------------
PCS Mach Shipping system Replace
------------------------------------------------------------------------------------------------------------------
PEP Paperless Eng Proc shadow Replace
------------------------------------------------------------------------------------------------------------------
Pick/Pack Validation Validates all comps picked thru MAC Replace
------------------------------------------------------------------------------------------------------------------
PIE Sourcing Approval System Interface
------------------------------------------------------------------------------------------------------------------
Plant Control Plant Floor Control System Replace
------------------------------------------------------------------------------------------------------------------
Plant Works MPL conveyor interface N/A no longer used
------------------------------------------------------------------------------------------------------------------
PLUMP Plant Local Update Min corp I/F MFI manual interface
------------------------------------------------------------------------------------------------------------------
PPP Interplant sourcing Replace
------------------------------------------------------------------------------------------------------------------
PM Product Manager/DPRS Receiver Interface via DPRS Receiver
------------------------------------------------------------------------------------------------------------------
PRP Procurement Planning data Interface
------------------------------------------------------------------------------------------------------------------
PTS (ELITE) Product Tracking System EDI interface(data services gateway)
------------------------------------------------------------------------------------------------------------------
QSHIP Shipping System Replace
------------------------------------------------------------------------------------------------------------------
RMAT Lotus Returns Tool Replace
------------------------------------------------------------------------------------------------------------------
RNB/BNR Rec'd not Billed/Billed not Rec'd Replace
------------------------------------------------------------------------------------------------------------------
Ship Audit Mach ships and Costs to PCS deltas Replace
------------------------------------------------------------------------------------------------------------------
TAXIS Engineering Development Manual lnterface
------------------------------------------------------------------------------------------------------------------
TEP Tracking Engineering Processes Replace
------------------------------------------------------------------------------------------------------------------
Transfer Price Financial Billing System Interface
------------------------------------------------------------------------------------------------------------------
User Tools SAS, QMF, Smartsuite MSL IT solution
------------------------------------------------------------------------------------------------------------------
USPS US Postal Orders Interface
------------------------------------------------------------------------------------------------------------------
VMMCCS VM Matr'l Cost & Cntl Sys Replace
------------------------------------------------------------------------------------------------------------------
WSC Workstation Integration Database Replace
------------------------------------------------------------------------------------------------------------------
WTBILL WT Billing/Ships to Boulder Interface
------------------------------------------------------------------------------------------------------------------
</TABLE>
1/14199 Page 14 of 14
<PAGE>
Amendment 004 to Outsourcing Agreement
between
IBM and MSL
The purpose of this document is to amend the IBM/MSL Outsourcing Agreement
between International Business Machines Corporation ("IBM") and Manufacture's
Services Western U.S. Operations. Incorporated ("MSL"), dated May 5, 1998
("Agreement"). This amendment will be effective upon execution by IBM and MSL
(each a Party and together the "Parties").
The Parties agree to amend the Agreement as follows:
1. Add to the Agreement as Attachment H, Product Attachment - Complementary
Products, to Attachment 1, Statement of Work to the Agreement. Attachment H will
be referred to as a Complementary Products. Complementary Products ("CP") is an
IBM business unit.
2. Delete the list of appendices, attachments, and supplements and associated
attachments as listed on page 1 of Attachment 1, Statement of Work to the
Agreement in its entirety and replace it with the following list:
a) Appendix 1 Markup
b) Appendix 2 Requirements Accuracy
c) Appendix 3 Performance Specifications
d) Appendix 4 Inventory Supply Flexibility
e) Appendix 5 EC Process Flow and EC Cycle Time
f) Attachment A - Product Attachment for RS
g) Attachment B - Product Attachment for GEPS
h) Attachment C- Product Attachment for Finance Solutions
i) Attachment D - Product Attachment for OEM Agreement A
j) Attachment E - Product Attachment for OEM Agreement B
k) Attachment F - Product Attachment for OEM Agreement C
l) Attachment G - Product Attachment for Security Products
m) Attachment H - Product Attachment for Complimentary Products ('CP")
n) Supplement 1 - Transition Services and associated Attachments as listed;
o) Exhibit 1 to Supplement 1 - Product Attachment for Wedge Products
p) Exhibit 2 to Supplement 1 - Wedge Inventory List
q) Agreement Exchange of Confidential Information Number 4998S60076
r) IBM Purchase Orders
s) IBM Customer Orders
t) Equipment and Program Loan Agreement
3. Delete the first sentence in Section 7.1 in Attachment 1, Statement of Work,
to the Agreement in its entirety and replace with the following:
MSL's price to IBM for the fulfillment of Products for RS and MSL's price
to IBM for the manufacturing and fulfillment of GEPS, Finance Products,
and CP will be determined according to the following formula:
<PAGE>
Amendment 004 to Outsourcing Agreement
between
IBM and MSL
4. Delete the table in Section 7.3 a) in Attachment 1, Statement of Work, to the
Agreement in its entirety and replace with the following:
SHIPMENT PROFIT RATE
<TABLE>
<CAPTION>
RS GEPS, Finance, and CP GEPS, Finance and CP
Fulfillment A-Sourced Mfg. and Fulfillment
<S> <C> <C> <C>
On Time [*] [*] [*]
1 Day delinquent [*] [*] [*]
2 or more Days delinquent [*] [*] [*]
</TABLE>
5. Delete the table in 1. a) of Appendix 1: Mark Up to Attachment 1, Statement
of Work of the Agreement in its entirety and replace it with the following:
a) Value Add and Profit Rates are per the following table:
<TABLE>
<CAPTION>
VALUE ADD RATES PROFIT RATES (*)
--------------- ----------------
<S> <C> <C>
RS Fulfillment (US & VALENCIA Work Centers [*] [*]
GEPS, Finance, CP, and Security Mfg & Fulfillment
A-Sourced Products [*] [*]
MSL Manufactured Products [*] [*]
Spares to Mechanicsburg and Amsterdam
US Work Center [*] [*]
Valencia Work Center [*] [*]
(Through September 30, 1998)
Valencia Work Center [*] [*]
(After September 30, 1998)
*Profit Rates are subject to the adjustments of Section 7.3, Attachment 1, SOW
</TABLE>
<PAGE>
Amendment 004 to Outsourcing Agreement
between
IBM and MSL
All other terms and conditions of the Agreement, its attachments, and
amendments shall remain in full force and effect.
IN WITNESS WHEREOF, the Parties hereto have caused this amendment to be executed
by their respective authorized representatives.
ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO:
International Business Manufacturer's Services
Machines Corp. Western U.S. Operations, Inc.
By: /s/ Roy B. Covington III By: /s/ Dale R. Johnson
---------------------------- ----------------------------
Roy B. Covington III Dale R. Johnson
---------------------------- ----------------------------
Print Name Print Name
Industry Solutions Production
Procurement Manager EXEC. V.P
---------------------------- ----------------------------
Title Title
2/9/99 2/10/99
---------------------------- ----------------------------
Date Date
<PAGE>
Amendment 005 to Outsourcing Agreement
Between IBM and MSL
The purpose of this document is to amend the IBM/MSL Outsourcing Agreement
between International Business Machines Corporation ("IBM") and Manufacture's
Services Western U.S. Operations, Incorporated ("MSL"), dated May 5, 1998
("Agreement"). This amendment will be effective upon execution by IBM and MSL
(each a Party and together the "Parties").
The Parties agree to amend the Agreement as follow:
1. Delete "October 31, 1998" from item 1. of Amendment 002 to the Agreement and
replace it with the following:
"April 3, 1999"
2. Delete "through February 26, 1999" from the end of sentence of item 1. in
Amendment 003 to the Agreement and replace it with the following:
"Up to October 31, 1999 for SECTION I - WEDGE PRODUCTS to Supplement 1, -
Transition Services to Attachment 1,Statement of Work to the Agreement and
through April 3, 1999 for SECTION II - SALE OF IBM SERVICES to Supplement
1, - Transition Service to Attachment 1, Statement of Work to the
Agreement."
3. Delete the item 2 in Amendment 003 in its entirety and replace it with the
following:
"The following replace Section 2.0 of the SOW in its entirety.
"This Supplement and its Attachments shall become effective upon
execution of the SOW and will terminate upon [*] Days notice by IBM TO
MSL. Termination will be with the period from August 31, 1999 to
October 31, 1999 unless terminated as provided in Section 5.0 of the
Base Agreement. This Supplement may be extended under mutually agreed
to terms and conditions. Extensions will be in writing and signed by
both Parties."
4. Delete the wording in Section 7.0 Price, SECTION I Supplement 1, Transition
Services to Attachment 1 Statement of Work to the Agreement in its entirety and
replace it with the following:
"The following replaces Section 7.0 of the SOW in its entirety.
Commencing on the Effective Date of this Agreement, IBM shall pay MSL [*]
dollars [*] on the first Day of each calendar month through March
31, 1999. Beginning April 1, 1999 and through the end of the period
defined in Section
<PAGE>
Amendment 005 to Outsourcing Agreement
between IBM and MSL
2.0 Term SECTION I - WEDGE PRODUCTS in Supplement 1 to Attachment 1,
Statement of Work to the Agreement, as amended in item 3 of Amendment 005.
IBM shall pay MSL [*] dollars [*] on the first day of each calendar
month. For any period of less than one month, the above amount shall be
apportioned based on the number of Days in the Month."
5. Delete "February 26, 1999" from item 3. of Amendment 003 to the Agreement and
replace it with the following:
"April 3, 1999"
6. Delete the last two sentences from item 3. of Amendment 003 to the Agreement
and replace them with the following:
"This Supplement may be extended under mutually agreed to terms and conditions.
Extensions will be in writing and signed by both parties."
7. Delete "February 26, 1999" from item 4. of Amendment 003 to the Agreement and
replace it with the following:
"April 3, 1999"
8. Delete item 5. of Amendment 003 to the Agreement in its entirety and replace
it with the following:
"b) Any extension of the I/T Services beyond the April 3, 1999 date, due to an
MSL delay, will be priced at IBM's then prevailing commercial rates.
If the implementation of the MSL I/T solution for the U.S. Work Center is
delayed beyond April 3, 1999 by IBM, other than for reasons attributable to
MSL, then IBM shall continue to provide I/T Services to MSL at no cost and
shall also bear all of MSL's incremental costs associated with such delay
including without limitation, hardware, software and consulting costs subject
to a maximum amount of [*] ([*] dollars) per month. For any period of less
than one month, the above amount shall be apportioned based on the number of
Days in that month."
9. Add the following, as a new paragraph, to the bottom of Page 1, following the
paragraph that reads "In addition, there may be associated features or accessory
part numbers (not included in the Bill of Material listing)." of Exhibit 1,
Product Attachment - Wedge Products to Supplement 1, Transition Services to
Attachment 1, SOW to the agreement.
<PAGE>
Amendment 005 to Outsourcing Agreement
between IBM and MSL
"The Wedge Machine Types and the ARCTIC product set will be phased out of the
transition services described in SECTION I - WEDGE PRODUCTS in Supplement 1 -
Transition Services prior to October 31, 1999."
Note: Wedge Machine Types 5308, 7429, 7526 no longer apply to Exhibit 1 -
Product Attachment - Wedge Products as they have been phased out.
10. Delete "January 15, 1999" from 6. a) from Amendment 003 to the Agreement and
replace it with the following:
"March 15, 1999"
All other terms and conditions of the Agreement, its attachments, and amendments
shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment 005 to be
executed by their respective authorized representatives.
ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO:
International Business Machines Corp. Manufacturer's Services
Western U.S. Operations, Inc.
By: /s/ Roy B. Covington III By: /s/ Dale Johnson
------------------------------------- -----------------------------
Roy B. Covington III Dale R. Johnson
------------------------------------- -----------------------------
Print Name Print Name
Ind. Solutions Production Procurement Exec. V.P.
------------------------------------- -----------------------------
Title Title
2/8/99 2/8/99
------------------------------------- -----------------------------
Date Date
<PAGE>
Amendment 006 to Outsourcing Agreement
between
IBM and MSL
The purpose of this document is to amend the IBM/MSL Outsourcing Agreement
between International Business Machines Corporation ("IBM") and Manufacture's
Services Western U.S. Operations, Incorporated ("MSL"), dated May 5, 1998
("Agreement"). This amendment will be effective upon execution by IBM and MSL
(each a Party and together the "Parties").
The Parties agree to amend the Agreement as follow:
1. Delete the following Product Attachments to Attachment 1, Statement of Work
to the Agreement in their entirety and replace them with the attached Product
Attachments, of the same name:
* Attachment A - Product Attachment - Retail Store Solutions ("RS")
* Attachment B - Product Attachment - GEPS, Global Embedded Production
Solutions
* Attachment C - Product Attachment - Finance Solutions
* Attachment D - Product Attachment - OEM A, Global Embedded
Production Solutions
* Attachment E - Product Attachment - OEM B, Global Embedded
Production Solutions
* Attachment F - Product Attachment - OEM C, Global Embedded
Production Solutions
* Attachment G - Product Attachment - Security Products
2. Delete the table in 1. a) of Appendix 1: Mark Up, as amended by Amendment
004, to Attachment 1, Statement of Work of the Agreement in its entirety and
replace it with the following:
a) Value Add and Profit Rates are per the following table:
<TABLE>
<CAPTION>
VALUE ADD RATES PROFIT RATES (**)
--------------- -----------------
<S> <C> <C>
RS Fulfillment (US & VALENCIA Work Centers [*] [*]
GEPS, Finance, CP, and Security Mfg & Fulfillment [*] [*]
[*] [*] [*]
Spares to Mechanicsburg and Amsterdam
US Work Center [*] [*]
Valencia Work Center [*] [*]
(Through September 30, 1998)
Valencia Work Center [*] [*]
(After September 30, 1998)
* [*] [*] [*]
</TABLE>
** Profit Rates are subject to the adjustments of Section 7.3, Attachment 1,
SOW
Page 1 of 2
<PAGE>
Amendment 006 to Outsourcing Agreement
between
IBM and MSL
All other terms and conditions of the Agreement, its attachments, and amendments
shall remain in full force and effect.
IN WITNESS WHEREOF, the Parties hereto have caused this Amendment 006 to be
executed by their respective authorized representatives.
ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO:
International Business Machines Corp. Manufacturer's Services
Western U.S. Operations, Inc.
By: /s/ Roy B. Covington III By: /s/ Dale Johnson
------------------------------------- -----------------------------
Roy B. Covington III Dale R. Johnson
------------------------------------- -----------------------------
Print Name Print Name
Ind Solutions Procurement MGR Exec. V.P.
------------------------------------- -----------------------------
Title Title
3/15/99 6/25/99
------------------------------------- -----------------------------
Date Date
Page 2 of 2
<PAGE>
Amendment 007 to Outsourcing Agreement
between
IBM and MSL
The purpose of this document is to amend the IBM/MSL Outsourcing Agreement
between International Business Machines Corporation ("IBM") and Manufacturer's
Services Western U.S. Operations, Incorporated ("MSL"), dated May 5, 1998
("Agreement"). This amendment will be effective upon execution by IBM and MSL
(each a Party and together the "Parties").
The Parties agree to amend the Agreement as follow:
1. Add Attachment I, Product Attachment - OEM Agreement D, and Attachment J,
Product Attachment - OEM Agreement E, to Attachment 1, Statement of Work to the
Agreement.
2. Delete the list of appendices, attachments, and supplements and associated
attachments as listed on page 1 of Attachment 1, Statement of Work to the
Agreement, and as amended by Amendment 004, in its entirety and replace it with
the following list:
a) Appendix 1 Markup
b) Appendix 2 Requirements Accuracy
c) Appendix 3 Performance Specifications
d) Appendix 4 Inventory Supply Flexibility
e) Appendix 5 EC Process Flow and EC Cycle Time
f) Attachment A - Product Attachment for RS
g) Attachment B - Product Attachment for GEPS
h) Attachment C - Product Attachment for Finance Solutions
i) Attachment D - Product Attachment for OEM Agreement A
j) Attachment E - Product Attachment for OEM Agreement B
k) Attachment F - Product Attachment for OEM Agreement C
l) Attachment G - Product Attachment for Security Products
m) Attachment H - Product Attachment for Complimentary Products ('CP")
n) Attachment I - Product Attachment for OEM Agreement D
0) Attachment J - Product Attachment for OEM Agreement E
p) Supplement 1 - Transition Services and associated Attachments as listed;
q) Exhibit 1 to Supplement 1 - Product Attachment for Wedge Products
r) Exhibit 2 to Supplement 1 - Wedge Inventory List
s) Agreement Exchange of Confidential Information Number 4998S60076
t) IBM Purchase Orders
u) IBM Customer Orders
v) Equipment and Program Loan Agreement
3. Delete the following Product Attachments to Attachment 1, Statement of Work
to the Agreement in their entirety and replace them with the attached Product
Attachments, of the same name:
Attachment F - Product Attachment - OEM C, Global Embedded Production
Solutions
Attachment H - Product Attachement - Complementary Products
Page 1 of 3
<PAGE>
Amendment 007 to Outsourcing Agreement
between
IBM and MSL
4. Delete the table in 1 a) of Appendix 1: Mark Up, as amended by Amendment 006,
to Attachment 1, Statement of Work of the Agreement in its entirety and replace
it with the following:
a) Value Add and Profit Rates are per the following table:
<TABLE>
<CAPTION>
VALUE ADD RATES PROFIT RATES (**)
--------------- -----------------
<S> <C> <C>
RS Fulfillment (US & VALENCIA Work Centers [*] [*]
GEPS, Finance, CP, and Security Mfg & Fulfillment
[*] [*] [*]
[*] [*]
Spares to Mechanicsburg and Amsterdam
US Work Center [*] [*]
Valencia Work Center [*] [*]
(Through September 30, 1998)
Valencia Work Center [*] [*]
(After September 30, 1998)
* [*] [*] [*]
* [*] [*] [*]
* [*] [*] [*]
* [*] [*] [*]
* [*] [*] [*]
</TABLE>
** Profit Rates are subject to the adjustments of Section 7.3, Attachment
1, SOW
5. Delete in Section 17.0 b) to Attachment 1, Statement of Work to the
Agreement, 12/31/98 and replace it with 12/31/99.
Page 2 of 3
<PAGE>
Amendment 007 to Outsourcing Agreement
between
IBM and MSL
All other terms and conditions of the Agreement, its attachments, and amendments
shall remain in full force and effect.
IN WITNESS WHEREOF, the Parties hereto have caused this Amendment 006 to be
executed by their respective authorized representatives.
ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO:
International Business Manufacturer's Services
Machines Corp. Western U.S. Operations, Inc.
By: /s/ Roy B. Covington III By: /s/ Dale R. Johnson
---------------------------- ----------------------------
Roy B. Covington III Dale R. Johnson
---------------------------- ----------------------------
Print Name Print Name
Industry Solutions Production
Procurement Manager EXEC. V.P
---------------------------- ----------------------------
Title Title
May 20, 1999 6/25/99
---------------------------- ----------------------------
Date Date
Page 3 of 3
<PAGE>
Amendment 008 to Outsourcing Agreement
between
IBM and MSL
The purpose of this document is to amend the IBM/MSL Outsourcing Agreement
between International Business Machines Corporation ("IBM") and Manufacturer's
Services Western U.S. Operations, Incorporated ("MSL"), dated May 5, 1998
("Agreement"). This amendment will be effective upon execution by IBM and MSL
(each a Party and together the "Parties").
The Parties agree to amend the Agreement as follow:
1. Add Attachment K, Product Attachment - IBM 5494 for NHD, to Attachment 1,
Statement of Work to the Agreement.
2. Delete the list of appendices, attachments, and supplements and associated
attachments as listed on page 1 of Attachment 1, Statement of Work to the
Agreement, and as amended by Amendment 007, in its entirety and replace it with
the following list:
a) Appendix 1 Markup
b) Appendix 2 Requirements Accuracy
c) Appendix 3 Performance Specifications
d) Appendix 4 Inventory Supply Flexibility
e) Appendix 5 EC Process Flow and EC Cycle Time
f) Attachment A - Product Attachment for RS
g) Attachment B - Product Attachment for GEPS
h) Attachment C - Product Attachment for Finance Solutions
i) Attachment D - Product Attachment for OEM Agreement A
j) Attachment E - Product Attachment for OEM Agreement B
k) Attachment F - Product Attachment for OEM Agreement C
l) Attachment G - Product Attachment for Security Products
m) Attachment H - Product Attachment for Complimentary Products ("CP")
n) Attachment I - Product Attachment for OEM Agreement D
o) Attachment J - Product Attachment for OEM Agreement D
p) Attachment K - Product Attachment for IBM 5494 for NHD
q) Supplement 1 - Transition Services and associated Attachments as listed;
r) Exhibit 1 to Supplement 1 - Product Attachment for Wedge Products
s) Exhibit 2 to Supplement 1 - Wedge Inventory List
t) Agreement Exchange of Confidential Information Number 4998S60076
u) IBM Purchase Orders
v) IBM Customer Orders
w) Equipment and Program Loan Agreement
Page 1 of 2
<PAGE>
Amendment 008 to Outsourcing Agreement
between
IBM and MSL
All other terms and conditions of the Agreement, its attachments, and amendments
shall remain in full force and effect.
IN WITNESS WHEREOF, the Parties hereto have caused this Amendment 008 to be
executed by their respective authorized representatives.
ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO:
International Business Manufacturer's Services
Machines Corp. Western U.S. Operations, Inc.
By: /s/ Roy B. Covington III By: /s/ Dale R. Johnson
---------------------------- ----------------------------
Roy B. Covington III Dale R. Johnson
---------------------------- ----------------------------
Print Name Print Name
Industry Solutions Production
Procurement Manager EXEC. V.P
---------------------------- ----------------------------
Title Title
6/7/99 July 5, 1999
---------------------------- ----------------------------
Date Date
Page 2 of 2
<PAGE>
Amendment 009 to Outsourcing Agreement
between
IBM and MSL
The purpose of this document is to amend the IBM/MSL Outsourcing Agreement
between International Business Machines Corporation ("IBM") and Manufacturer's
Services Western U.S. Operations, Incorporated ("MSL"), dated May 5, 1998
("Agreement"). This amendment will be effective upon execution by IBM and MSL
(each a Party and together the "Parties").
The Parties agree to amend the Agreement as follow:
1. Add Attachment 6: Software Installation Terms and Conditions to Outsourcing
Base Agreement.
2. Delete the list following the sentence "The Parties agree that this Agreement
regarding this transaction consist of:" found on Page 1 of the Outsourcing Base
Agreement in its entirety and replace it with the following:
a) the Outsourcing Base Agreement
b) Attachment 1: Statement of Work and its Product Attachments, Appendices, and
Supplements
c) Attachment 2: Employee list and Benefits Information
d) Attachment 3: Asset List
e) Attachment 4: Expense Participation
f) Attachment 5: Equipment and Program Loan List
g) Attachment 6: Software Installation Terms and Conditions
h) Agreement for Exchange of Confidential Information Number 4998S60076
i) IBM Purchase Orders
j) IBM Customer Orders
k) Equipment and Program Loan Agreement
All other terms and conditions of the Agreement, its attachments, and amendments
shall remain in full force and effect.
IN WITNESS WHEREOF, the Parties hereto have caused this Amendment 009 to be
executed by their respective authorized representatives.
ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO:
International Business Manufacturer's Services
Machines Corp. Western U.S. Operations, Inc.
By: /s/ Roy B. Covington III By: /s/ Dale R. Johnson
---------------------------- ----------------------------
Roy B. Covington III Dale R. Johnson
---------------------------- ----------------------------
Print Name Print Name
Industry Solutions Production
Procurement Manager EXEC. V.P, GENERAL COUNSEL
---------------------------- ----------------------------
Title Title
6/7/99 6/9/99
---------------------------- ----------------------------
Date Date
Page 1 of 1
<PAGE>
Amendment 010 to Outsourcing Agreement
between
IBM and MSL
The purpose of this document is to amend the IBM/MSL Outsourcing Agreement
between International Business Machines Corporation ("IBM") and Manufacturer's
Services Western U.S. Operations, Incorporated ("MSL"), dated May 5, 1998
("Agreement"). This amendment will be effective upon execution by IBM and MSL
(each a Party and together the "Parties").
The Parties agree to amend the Agreement as follow:
1. Delete "up to October 31, 1999 for SECTION I - WEDGE PRODUCTS to Supplement
1, Transition Services to Attachment 1, Statement of Work to the Agreement and
through April 3, 1999 for SECTION II - SALE OF IBM SERVICES to Supplement 1,
Transition Services to Attachment 1, Statement of Work to the Agreement.", as
amended in Amendment 005, from the end of sentence in paragraph 2 in Supplement
1 to Attachment 1, Statement of Work, to the Agreement, in its entirety and
replace with the following:
"through March 31, 2000 for SECTION I-WEDGE PRODUCTS to Supplement 1,
Transition Services to Attachment 1, Statement of Work to the Agreement
and through April 3, 1999 for SECTION II - SALE OF IBM SERVICES to
Supplement 1, Transition Services to Attachment 1, Statement of Work to
the Agreement."
2. Delete the wording in Section 2.0 Term, as last amended in Amendment 005,
from SECTION I - WEDGE PRODUCTS to Supplement 1, Transitions Services to
Attachment 1, Statement of Work to the Agreement, in its entirety and replace
with the following:
"The following replaces Section 2.0 of the SOW in its entirety.
This Supplement and its Attachments shall become effective upon execution
of the SOW and expire March 31, 2000 unless terminated as provided in
Section 5.0 of the Base Agreement. This supplement may be extended under
mutually agreed to terms and conditions. Extensions will be in writing
and signed by both Parties."
3. Delete the wording in Section 7.0 Price, as amended in Amendment 005, from
SECTION I - WEDGE PRODUCTS to Supplement 1, Transitions Services to Attachment
1, Statement of Work to the Agreement, in its entirety and replace with the
following:
"The following replaces Section 7.0 of the SOW in its entirety.
"Commencing on the Effective Date of this Agreement, IBM shall pay MSL
[*] dollars ([*]) on the first Day of each calendar month through March
31, 1999. Beginning April 1, 1999 and through October 31, 1999, IBM
shall pay MSL [*] dollars ([*]) on the first Day of each calendar month.
Beginning November 1, 1999 and through the end of the period defined in
Section 2.0 Term, SECTION I - WEDGE PRODUCTS in Supplement 1 to
Attachment 1 of Work to the Agreement, IBM shall pay MSL [*] dollars
([*]) on the first day of each calendar month. For any period of less
than one month, the above amount shall be apportioned based upon the
number of Days in that month."
Page 1 of 2
<PAGE>
Amendment 010 to Outsourcing Agreement
between
IBM and MSL
4. Delete the wording in the last paragraph of Specific Product Description as
added by Amendment 005, of Exhibit 1, Product Attachment - Wedge Products to
Supplement 1, Transition Services to Attachment 1, Statement of Work to the
Agreement, in its entirety and replace it with the following:
"The ARCTIC product set will be phased out of the transition services
described in SECTION I - WEDGE PRODUCTS prior to October 31, 1999. The
Wedge Machine Types will be phased out of the transitions services
described in SECTION I - WEDGE PRODUCTS on or before March 31, 2000".
5. Delete Attachment 5: Equipment and Program Loan List, to the Outsourcing Base
Agreement dated October 01, 1998 and replace it in its entirety with the
Attachment 5: Equipment and Program Loan List, to the Outsourcing Base Agreement
dated July 20, 1999.
All other terms and conditions of the IBM/MSL Outsourcing Agreement, its
attachments, and amendments shall remain in full force and effect.
IN WITNESS WHEREOF, the Parties hereto have caused this Amendment 010 to be
executed by their respective authorized representatives.
ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO:
International Business Manufacturer's Services
Machines Corp. Western U.S. Operations, Inc.
By: /s/ Nigel D. Davis By: /s/ Dale R. Johnson
---------------------------- ----------------------------
Nigel D. Davis Dale R. Johnson
---------------------------- ----------------------------
Print Name Print Name
[ILLEGIBLE] Procurement Mgr. EXEC. V.P
---------------------------- ----------------------------
Title Title
11-16-99 11/29/99
---------------------------- ----------------------------
Date Date
<PAGE>
ATTACHMENT 1
IBM/MSL Outsourcing Base Agreement Statement of Work
The Statement of Work ("SOW") is an Attachment issued under the IBM/MSL
Outsourcing Base Agreement ("Base Agreement") for the manufacturing,
fulfillment, Integration, and Services currently performed and managed by and
for IBM that are to be performed and managed by MSL for the Retail Store
Solutions ("RS"), Global Embedded Production Solutions ("GEPS"), Finance
Solutions, other IBM business units, and current IBM OEM Agreements.
By signing below, each of us agrees that the complete agreement between us
regarding this transaction document consists of the Outsourcing Base Agreement
and this SOW and associated Appendices, Attachments, and Supplements and
associated Attachments as listed:
a) Appendix 1 Markup
b) Appendix 2 Requirements Accuracy
c) Appendix 3 Performance Specifications
d) Appendix 4 Inventory Supply Flexibility
e) Appendix 5 EC Process Flow and EC Cycle Time
f) Attachment A - Product Attachment for RS
g) Attachment B - Product Attachment for GEPS
h) Attachment C - Product Attachment for Finance Solutions
i) Attachment D - Product Attachment for OEM Agreement A
j) Attachment E - Product Attachment for OEM Agreement B
k) Attachment F - Product Attachment for OEM Agreement C
l) Attachment G - Product Attachment for Security Products
m) Supplement 1 - Transition Services and associated Attachments as listed;
n) Exhibit 1 to Supplement 1 - Product Attachment for Wedge Products
o) Exhibit 2 to Supplement 1 - Wedge Inventory List
p) Agreement Exchange of Confidential Information Number 4998S60076
q) IBM Purchase Orders
r) IBM Customer Orders
s) Equipment and Program Loan Agreement
The following is a related agreement between MSL and IBM:
IBM Corporation (Landlord) and MSL (Tenant) Lease Agreement
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ATTACHMENT 1
IBM/MSL Outsourcing Base Agreement Statement of Work
Any signed copy of this SOW and its Attachments made by reliable means (for
example, photocopy or facsimile) is considered an original.
Agreed To: Agreed To:
Manufacturers' Services Western International Business Machines Corporation
U.S. Operations, Inc.
By: /s/ Kevin C. Melia By: /s/ R. G. Richter
----------------------------- -----------------------------
Authorized Signature Authorized Signature
Name: KEVIN C. MELIA Name: R. G. Richter
--------------------------- ---------------------------
Date: May 5, 1998 Date: May 5, 1998
--------------------------- ---------------------------
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ATTACHMENT 1
IBM/MSL Outsourcing Base Agreement Statement of Work
SECTION 1.0 DEFINITIONS ............................................... Page 5
SECTION 2.0 TERM ...................................................... Page 6
SECTION 3.0 MSL RESPONSIBILITIES ...................................... Page 7
SECTION 4.0 IBM RESPONSIBILITIES ...................................... Page 8
SECTION 5.0 MUTUAL RESPONSIBILITIES ................................... Page 9
SECTION 6.0 PURCHASE OF PRODUCTS ...................................... Page 11
SECTION 7.0 PRICE ..................................................... Page 11
SECTION 8.0 PARTS PRICING ............................................. Page 16
SECTION 9.0 PREMIUM COST .............................................. Page 16
SECTION 10.0 ORDER MANAGEMENT, DELIVERY, AND SHIPMENT ................. Page 18
SECTION 11.0 PRODUCT FORECAST ......................................... Page 20
SECTION 12.0 ENGINEERING CHANGE ....................................... Page 21
SECTION 13.0 INVENTORY ................................................ Page 22
SECTION 14.0 INTEGRATION .............................................. Page 24
SECTION 15.0 DROP SHIPMENTS ........................................... Page 29
SECTION 16.0 PACKAGING ................................................ Page 30
SECTION 17.0 QUALITY .................................................. Page 30
SECTION 18.0 ACCEPTANCE TEST .......................................... Page 31
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SECTION 19.0 WARRANTY ................................................. Page 32
SECTION 20.0 COMMON TOOLING ........................................... Page 34
SECTION 21.0 TOOLING TO BE ACQUIRED ................................... Page 34
SECTION 22.0 RETURN OF PRODUCT - US AND VALENCIA WORK CENTER. ......... Page 36
SECTION 23.0 DISASTER RECOVERY ........................................ Page 37
SECTION 24.0 INFORMATION TECHNOLOGIES SERVICES ("I/T") SYSTEMS ........ Page 37
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ATTACHMENT 1
IBM/MSL Outsourcing Base Agreement Statement of Work
SECTION 1.0 DEFINITIONS
For purposes of this Attachment, the following capitalized terms shall
have the following meaning All other capitalized terms not otherwise
defined herein shall have the meaning assigned in the Agreement:
1.1 "AP" shall mean Asia and Pacific geographies.
1.2 "Bulk Shipment" shall mean a fulfillment sub process for Products
identified by part numbers, by which aggregate IBM Customer Orders are
delivered together to the IBM Customer.
1.3 "Code A" shall mean a service available from MSL to IBM 6:00am to Midnight
local Work Center time, and seven (7) days a week for the delivery of
emergency Parts requested by IBM, IBM Document VFM043.
1.4 "Delivery Point" shall mean the location where IBM is to take delivery of
Products, excluding Products which are Drop Shipments, from MSL as
described in the Product Attachments. This may be an MSL site, an IBM site
or such location as required by the Product Attachment. If no Delivery
Point is stated for a particular Product, it shall be the location
described in a separate IBM notice.
1.5 "Drop Shipment" shall mean a fulfillment sub process by which Products are
directly delivered from the IBM supplier to an IBM Subsidiary or IBM
customer. These Products do not pass physically through any MSL facility.
1.6 "EMEA" shall mean the Europe, Middle East and Africa geographies.
1.7 "End of Life" (EOL) shall mean the date after which IBM does not require
MSL to provide Products and/or Services for specific Products.
1.8 "Engineering Change" (EC) shall mean a mechanical or electrical design
and/or specification changes which, if made, would in the good faith
opinion of IBM, affect the schedule, performance, reliability,
availability, serviceability, appearance, dimensions, tolerance, safety or
cost of Products, and which, in IBM's good faith opinion, would eventually
require additional approval tests.
1.9 "Failure Analysis" shall mean first pass failure analysis investigation
and testing performed by MSL to identify the failing Parts. The Part level
to which MSL will conduct Failure Analysis is described in the Quality
Section 17.0.
1.10 "Field Bill of Materials" (FBM) shall mean a set of Parts for machine
upgrade.
1.11 "Follow on Product" shall mean a new IBM Product which has similar
functional characteristics to current Products and that is intended to
replace such current Products in the marketplace.
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1.12 "Hot line" shall mean a service available from 7:30 am to Midnight local
Work Center time, Mondays through Fridays for emergency problem resolution
requested from IBM customers, IBM Document VFM045.
1.13 "IBM Classified Part(s)" shall mean a Part subject to be managed by MSL
according to IBM asset control rule, IBM Document CP10.13.
1.14 "IBM Nominated Supplier" shall mean a supplier from which MSL is
specifically required by IBM to purchase specific Parts.
1.15 "NIC" shall mean MSL's out of pocket costs for freight, duty, customs,
clearance, and appropriate insurance, and any other costs it incurs to
bring Product into a Work Center.
1.16 "Order Fulfillment" shall mean MSL's disbursement of Products, including
Pick & Pack, any Integration, shipment and delivery in order to satisfy an
IBM Customer Order.
1.17 "Order Desk" shall mean the function consisting of 1) receiving IBM
Customer Orders, 2) communicating with the requesting IBM party to ensure
the fulfillment commitments satisfy the request, 3) scheduling delivery of
the order and 4) communicating with the necessary goods processing
organizations to ensure the order is delivered at the committed date and
place.
1.18 "Pick & Pack" shall mean fulfillment a sub process for individual IBM
Customer Orders, by which all items of an IBM Customer Order are
consolidated into an over pack. Pick & Pack ensures that all items of the
IBM Customer Order arrive together at the customer location.
1.19 "Product Recall" shall mean a systematic effort to locate all Products in
the field in order to repair or replace such Products.
1.20 "Relationship Managers" shall mean the primary contact of the Parties with
respect to this Agreement. The Relationship Managers or their delegates
are solely authorized to make commitments between the parties. Each Party
shall designate a Relationship Manager.
1.21 "Request Price Quotation" (RPQ), shall mean a customized Product
configuration.
1.22 "Wedge Products" shall mean Products as described in a specific Product
Attachment, which are fulfilled by MSL from IBM Consigned Parts from the
Effective Date of this Agreement through December 31, 1998.
SECTION 2.0 TERM
This Attachment and its Product Attachments shall become effective on the
Effective Date and shall continue for a period of three (3) years unless
terminated as provided in Section 5.0 of the Base Agreement. This
Attachment will automatically be renewed for periods of six (6) months
unless either party gives twelve (12) months written notice of its intent
to terminate this Agreement. Such renewals shall continue for successive
periods under the same terms and conditions, unless otherwise agreed in
writing by both Parties.
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ATTACHMENT 1
IBM/MSL Outsourcing Base Agreement Statement of Work
SECTION 3.0 MSL RESPONSIBILITIES
The following is a list of responsibilities that will be required of MSL
in order to fulfill the requirements of this Agreement. This list may not
be all inclusive.
MSL shall:
1) provide suitable installations, common tools and equipment,
skilled human resources, and adequate warehousing facilities
at all delivery points listed in the Product Attachments as
MSL may need for execution of this Agreement,
2) manage, control, and execute EC's,
3) qualify processes in accordance with IBM specified criteria,
4) review and update product inventory profiles semiannually,
5) purchase from IBM Nominated Suppliers based on IBM specified
terms and conditions,
6) utilize product forecasts to determine requirements and plans
to fulfill such requirement,
7) manage requirements generation for materials for Products,
plan the procurement of materials from suppliers, and identify
the Work Center where materials must be delivered,
8) commit sufficient supply for IBM business units for Products
with Product Attachments hereto and subject to the parameters
of Appendix 4 Supply Flexibility,
9) inspect incoming materials and supplies for compliance with
IBM specified criteria,
10) maintain appropriate stock to satisfy IBM Customer Orders
within the parameters of Appendix 4 Supply Flexibility,
11) manage inventory and associated liabilities,
12) manage inbound transportation and cost for all Part and
Products excluding those Parts considered IBM Consigned Parts,
13) handle the reception and management of worldwide IBM Customer
Orders, including new orders, alteration, reschedules,
Integration as per customer requirements and cancellations,
14) handle order processing, fulfillment and delivery for Products
and Bulk Shipments at defined Delivery Points,
15) provide account management, technical support and interface to
IBM customers for Integration,
16) provide packing and packaging for all Products and Parts,
17) deliver complete assembled, inspected and tested Products that
meet the requirements defined by the engineering documentation
and specifications as defined in the Product Attachments,
18) fulfill all obligations as outlined in the Integration Section
14.0,
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19) manage Drop Shipments of Products to designated IBM
Subsidiaries and/or foreign companies and prepare invoice for
the corresponding IBM country unit,
20) perform all distribution and shipping for Products from the US
Work Center, arrange for carriers for all outbound shipments
of Products to IBM customer destinations per the IBM Customer
Order,
21) perform kitting of parts as required for IBM,
22) provide machine level control when required by Product
specifications,
23) process returned Products in accordance with IBM criteria for
the same,
24) perform first pass Failure Analysis on returned Products,
25) manage and control of Consigned Products and equipment,
26) provide detailed reporting as defined in the Performance
Appendix,
27) fulfill obligations as outlined in the Transition Services
Supplement from the Effective Date of the Agreement to
12/31/98,
28) manage all Products to EOL dates as defined by IBM,
29) provide Code A and Hot Line support for all Products as
requested by IBM,
30) perform all forecasting for features,
31) supply spare Parts until EOL,
32) fulfill duties of Order Desk,
33) provide timely estimates of any new Product activity, and
34) support new Product introduction activities such as prototype
build, sourcing, test and manufacturing process development.
SECTION 4.0 IBM RESPONSIBILITIES
The following is a list of responsibilities that will be required of IBM
in order to fulfill the requirements of this Agreement. This list may not
be all inclusive.
IBM shall
1) negotiate and manage contracts and technical support with IBM
Nominated Suppliers,
2) supply to MSL required IBM Parts and needed IBM Consigned
Parts,
3) define allocation of IBM Customer Order deliveries if total
demand cannot be supported for a period of time,
4) approve all EC's for Products prior to MSL's implementation of
any change,
5) provide technical and business interface through the IBM
Relationship Manager,
6) fulfill obligations as outlined in the Transition Services
Supplement from the Effective Date to 12/31/98,
7) process qualification approval of all processes utilized by
MSL,
8) provide engineering documentation and specifications as needed
by MSL to manufacture and test Products as defined in the
Product Attachments,
9) execute approve tooling agreements as needed,
10) provide maintenance for IBM IT systems that IBM requires MSL
to use,
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11) provide a forecast to MSL on a monthly basis for all machine
types and models by geography,
12) approve/reject all requests for premium expenditures for
materials, labor and other extraordinary items,
13) provide EOL dates for all Products, at least [*] months prior
to desired EOL date, and
14) provide new product information required for estimates and new
product introduction activities which are requested of MSL.
SECTION 5.0 MUTUAL RESPONSIBILITIES
5.1 Delivery/Quality/Cost Performance Process
a) MSL and IBM will communicate weekly on measurements and reports for:
i) Weekly shipments
ii) On-time shipments
iii) Responsiveness as defined in Appendix 3
iv) Order-to-ship lead-time, Pick and Pack
v) Order-to-ship lead-time, Bulk Shipments
vi) Product invoice information
b) MSL and IBM will communicate monthly on measurements and reports for
i) Monthly shipments
ii) Inventory
iii) Product quality
iv) Serviceability to IBM plants as defined in Appendix 3
v) Serviceability to IBM services as defined in Appendix 3
c) MSL and IBM will perform monthly reconciliation of invoices for
Product shipments and will determine payment adjustments as defined
in Section 7.3 ,Payment Adjustments. Payments of credits and debits
that may result from reconciliation and payment adjustments will
take place within the month following the reconciled month.
d) MSL and IBM will meet [*] at the US Work Center and/or the
Valencia Work Center or a place to be mutually agreed to.:
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i) define prices for the coming [*] based upon procedures
defined in Section 7.5 e)i) below,
ii) determine credits and debits to material costs and NIC for the
previous [*] caused by [*] to the material costs from those
estimated at the prior [*] meeting, and
iii) determine Requirements Accuracy liabilities for the previous
[*] as defined in Section 13.0 Inventory and Appendix 2.
e) Measurements, Targets and Reports to be provided by MSL are
specified in Appendix 3.
5.2 Relationship Management
a) MSL expressly recognizes that only commitments made to MSL by the
IBM Relationship Managers or their delegates are IBM commitments to
MSL with respect to this Agreement. The following are some, but not
all of, the communications that MSL can validly receive from the
Relationship Managers or their delegates: requirements forecasts,
price approval, orders for Products or Services, approval of EC
applications, approval of premium expenses, and approval of price
reconciliation. These communications must be in writing by IBM.
b) In the event of a necessary or desired change in any material aspect
of the Agreement, the Parties shall mutually agree to any such
change in writing prior to its implementation. A proposed change
shall be initiated by the proposing Party in a written notice to the
other Party.
c) MSL and IBM shall appoint program managers to handle communications
specific to each Product Group related to this Agreement. Names of
the program managers will be listed in each Product Attachment.
d) Either Party may change its program manager by written notice.
e) Both Parties recognize that efficiency of operation may frequently
require direct communication between program managers, or other
individuals working for the Parties, without the intermediation of
the Relationship Managers. Notwithstanding the above, MSL accepts
that only commitments issued by the IBM Relationship Managers or
their delegates are valid IBM commitments with respect to this
Agreement. Also, IBM accepts that only commitments issued by the MSL
Relationship Managers or their delegates are valid MSL commitments
with respect to this Agreement.
f) The Relationship Managers or their delegates will also coordinate
review meetings and will provide each other assessments of the
performance and the business situation of the relationship
throughout the duration of this Agreement.
g) Each Party may at any time redesignate a person as Relationship
Manager by written notice to the other.
Relationship Managers:
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IBM/MSL Outsourcing Base Agreement Statement of Work
for US Work Center
IBM:
MSL:
IBM will separately designate a Relationship Manager for EMEA.
SECTION 6.0 PURCHASE OF PRODUCTS
Subject to the terms and conditions of this Agreement, MSL agrees to
produce and sell, and IBM agrees to purchase Products. This Agreement does
not authorize MSL to produce or deliver any Product.
6.1 Cancellation of Purchase Order
IBM may cancel any and all Purchase Orders against this Agreement at any
time. In the event IBM cancels Purchase Order as the result of MSL's
default, no cancellation charge shall be applicable. IBM's termination of
Purchase Orders for its convenience shall not relieve IBM of any cost
reimbursements under the Price section.
SECTION 7.0 PRICE
Pricing for all Products and related services of this Agreement are as
specified herein unless stated elsewhere in this Agreement. All prices
stated herein are defined in United States dollars, unless otherwise
noted.
7.1 Manufacturing and Fulfillment Pricing
MSL's price to IBM for the fulfillment of Products for RS and MSL's price
to IBM for the manufacturing and fulfillment of GEPS and Finance Products
will be determined according to the following formula:
{P=A+B+C+D}, where the following values are assigned to such formula:
a) 'P' shall mean 'Price' or the price IBM shall pay for Products
under this Agreement.
b) 'A' shall mean [*] or the cost of all MSL [*] and any [*] as
determined by the [*] described in Section 7.5 e) i) below. For
RS Products, manufactured by MSL, the cost of [*] shall be
consistent with the terms of section 7.2, below.
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c) 'B' shall mean 'MSL [*]' or a value determined by multiplying the
[*] times the [*]. [*] are listed in Markup Appendix 1.
d) 'C' shall mean 'MSL [*]' or a value determined by multiplying the
[*] times the [*]. [*] are listed in Markup Appendix 1.
e) 'D' shall mean [*] or a value determined by multiplying the [*]
times the [*]. [*] are listed in Markup Appendix 1.
7.2 Prices for MSL Manufactured RS Products and RS Integration
a) For RS Products, the cost of components manufactured by MSL, and not
sourced from third party suppliers, will be determined by the
following formula: {TMC = [*]}, where the following values are
assigned to such formula:
i) "TMC" shall mean Total Manufacturing Cost.
ii) "1" shall mean [*] or the cost of all [*] and any [*] as
determined by the [*] described in Section 7.5 e) i) below
iii) "2" shall mean [*] to be determined by multiplying MSL's
[*] by MSL's [*] rate per hour ([*] x MSL [*]). [*] are
stated in Product Attachment A. MSL's [*] Rate Per Hour
for [*] is as listed in the Markup Appendix 1.
iv) "3" shall mean [*] to be determined by multiplying the [*]
by the [*]. The [*] are as listed in the Markup Appendix 1.
v) "4" shall mean the [*] to be determined by multiplying the
[*]. The [*] are as listed in the Markup Appendix 1.
b) For RS orders that include Integration, MSL will invoice IBM the
Integration charges separately from the fulfillment price defined in
this Section 7.1. The price for integration will be determined by
multiplying the [*] times the [*] performed for the [*] services.
[*]. [*] are listed in the Markup Appendix 1. [*] are the direct
.
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[*] needed to integrate a unit for a specific Integration project.
[*] will be agreed to between MSL and IBM prior to the start of
each Integration project.
7.3 Payment Adjustment for Delinquent Shipments and MSL not Achieving
Responsiveness Objective.
a) For any calendar month, if a Work Center fails to ship any machine
type on at least a [*]% on time shipment rate to all committed
Delivery Points, and such failure is not a result of Force Majeure
activity under Section 16.17 of the Base Agreement, or a delay
caused substantially by IBM, the Profit Rates defined in Section
7.1(d) and Appendix 1, shall be based on the following table for all
delinquent shipments of such machine types, from that Work Center.
SHIPMENT PROFIT RATE
RS GEPS and Finance GEPS and Finance
Fulfillment A-Sourced Mfg. and Fulfillment
On Time [*] [*] [*]
1 Day delinquent [*] [*] [*]
2 or more Days delinquent [*] [*] [*]
b) For any calendar month, if MSL fails to achieve a responsiveness, as
defined in Appendix 3, of at least [*]% for any machine type, in a
Work Center, a penalty of [*]% will be applied to that Work Center's
monthly total material cost of that machine type multiplied by
([*]% minus actual responsiveness %). This penalty shall not apply
if requirements accuracy for that machine type, as defined in
Appendix 2, exceeds [*]% and demand, for that machine type, exceeds
Supply Flexibility as defined in Section 13.2 and Appendix 4. The
first month for which this penalty shall be effective is June 1998.
c) Any price adjustments that are due per Sections 7.3 a) or 7.3 b)
will be invoiced by IBM to MSL in the following calendar month.
7.4 [*]
Notwithstanding anything in this Agreement to the contrary, MSL represents
and warrants that
a) If MSL [*] to another [*] under similar terms and conditions
including without limitation, [*], to those [*] to IBM and in [*]
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or [*] during the same period, those [*] shall be made known and
available to IBM at the time of their availability to that [*].
b) In the event IBM reasonably questions whether it is receiving [*]
treatment as described in Section 7.4 a), and MSL cannot otherwise
provide IBM with proof of its compliance due to third party
restrictions, both parties agree to have an independent party
evaluate IBM's inquiry to determine whether IBM has received proper
treatment under this Section. IBM and MSL agree that the information
disclosed by MSL to the independent party pursuant to this Section
7.4 b), will be subject to the Confidentiality Agreement described
in the Agreement.
c) For purposes of this Section a [*] shall mean a [*] from a qualified
third party [*] that contains an ongoing sustainable [*], which is
more [*] than MSL's [*] and which is subject to comparable terms and
conditions and for substantially similar [*], to build Product(s)
as opposed to provide [*] services for the Products(s).
i) If IBM gets a [*] from an [*] resulting in a [*] which
demonstrates MSL [*], IBM will notify MSL. MSL shall have [*]
Days after written notice of such [*] to [*] or [*] such [*].
If MSL is unable to [*] the [*] subject to the conditions set
forth in ii) below, then IBM may [*] the Product to the [*],
and IBM and MSL shall mutually agree on a [*] plan for such
Product(s). In this case MSL shall have all remedies for [*]
in accordance with [*] of the Agreement.
ii) If MSL is unable or unwilling to [*] the [*] because IBM's [*]
for the Product has been below the minimum [*] parameter for
the prior [*] months, MSL shall have a grace period [*] months
from written notice of the [*] to make adjustments it deems
necessary to [*] the [*]. This grace period is contingent upon
MSL making, within [*] Days of notice of the [*], a commitment
to [*] the [*] at the end of the grace period.
d) In the event, IBM Latin America or IBM Asian Pacific were to receive
an [*] from a [*] that contains an ongoing [*], which is more [*]
than MSL's [*] and which is subject to comparable terms and
conditions and for substantially similar [*], to provide [*]
services for the Product(s), IBM will notify MSL. MSL shall have
[*] Days after written notice of such [*] to [*] or [*] such [*].
MSL shall have a grace period of [*] months from written notice of
the [*] to make adjustments it deems necessary to [*] the [*] quote
at the end of the grace period. If MSL is unable to [*] the [*]
then IBM may [*] the [*] to the [*] and IBM and MSL shall mutually
agree on a [*] plan for the Product(s).
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e) In the event, IBM were to receive an [*] from a [*] that
contains an ongoing [*], which is more [*] than MSL's [*] and
which is subject to comparable terms and conditions and for
substantially similar [*], to provide Integration for the
Product(s), IBM will notify MSL. MSL shall have [*] Days
after written notice of such [*] to [*] or [*] such [*]. If
MSL is unable to [*] the [*] then IBM may [*] the [*] to the
[*] and IBM and MSL shall mutually agree on a [*] plan for
the Product(s).
7.5 [*] of Product [*]. The unit [*] and elemental [*], i.e., [*], and [*],
listed in the Markup Appendix 1 and Product Attachments shall [*]
during the term of this Agreement subject to the following:
a) If [*] and/or elemental [*] are reduced by MSL or lower [*]
are [*] by MSL to other [*] for a [*] that is similar to [*]
under similar terms and conditions, including without
limitation [*], MSL will reduce the [*], or reduce the [*] to
IBM to the [*] as those [*] to other [*]. The [*] and [*] will
apply to all [*] IBM [*] and to all [*] Product deliveries
during the term of this Agreement.
b) If IBM or MSL negotiate or schedule a [*] for [*], the
corresponding [*] will be effective when MSL begins using and
shipping the [*].
c) A negotiated [*] could result if there is a significant
increase or decrease in the Product [*] from those assumed
for [*] definition. If this occurs, the parties shall
negotiate in good faith an appropriate adjustment to MSL's
[*]. The revised [*] will apply to all [*] which have been
[*] but not [*] and to all [*] releases during the term of
this Agreement.
d) A [*] increase or decrease may result if IBM makes an [*] to a
Product. Any [*] change will be per the terms of [*] and the
[*] of the changed Product will carry the same inherent [*]
as the original Product.
e) Proposals for updates to the initial [*] will be reviewed each
[*] on a [*] day cycle. The schedule will be as follows:
"T" shall be the date that MSL [*] and IBM [*] are ready for
table load; it is the last day of a calendar [*] end [*].
[*] Days before T, MSL shall initiate an update proposal.
[*] Days before T, MSL shall answer all IBM questions and
issues and revise its proposal.
Update reviews shall include:
i) Updates of [*] costs, including [*] costs, with
latest [*] of IBM [*] and MSL [*]. IBM [*] costs
will
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be updated to the latest IBM [*]. For Parts with a
low annual [*], the [*] costs will be updated to
the latest [*] costs.
ii) Update of MSL [*] for MSL [*] Product(s).
iii) Changes in MSL [*] and [*], in accordance with the
[*] and Product [*] conditions of Sections 7.4 and
7.5 a), b), c), and d).
iv) Changes in [*] for specific Integration projects
based on the latest IBM agreed to [*].
f) Any [*] or [*] necessary to update MSL [*] will be paid
through a specific purchase order and an acceptable invoice.
MSL [*] to be used will be the [*] costs used for [*] in the
previous quarter.
g) Any differences between [*] costs, as defined in Section 7.1,
assumptions used in determining [*] at the beginning of a [*]
and actual [*] by MSL during the [*] will be determined and
agreed in the first month of the following [*]. NIC will be
applied to [*] costs differences at the [*] defined in
Appendix 1 to this SOW. No other components of [*] will be
applied to [*] costs differences. Differences will be
invoiced separately to MSL or to IBM as the case may be.
SECTION 8.0 PURCHASE OF PARTS BY MSL
8.1 IBM Parts, IBM Strategic Parts, and IBM Designated Parts
MSL will purchase IBM Parts, IBM Strategic Parts, and IBM Designated Parts
solely for use in IBM Products. MSL will provide IBM Strategic Parts and
IBM Designated Parts as follows:
a) IBM procurement may sell IBM Strategic Parts to MSL by specifying
price, lead time and other terms with mutually agreed to ordering
processes such as;
i) MSL may order IBM Strategic Parts from IBM procurement through
standard purchase orders, and/or
ii) MSL may issue periodic blanket purchase orders to IBM
procurement for lineside stocking and pull logistics
requirements for IBM Strategic Parts.
b) MSL may purchase IBM Designated Parts through IBM nominated
suppliers, as agreed to by IBM. IBM will disclose, as confidential
to MSL, terms and conditions contained in the subject IBM nominated
supplier/IBM contract, which IBM determines are relevant to MSL's
performance under the Agreement. MSL shall be responsible for all
liabilities to IBM nominated suppliers for IBM Designated Parts
ordered by MSL. If an IBM nominated supplier objects, MSL shall
immediately inform IBM. IBM agrees to provide reasonable assistance
to MSL in resolving the situation. If such IBM nominated supplier
refuses to [*] to MSL at IBM's [*], IBM cannot use [*] from such
supplier to determine MSL [*] described in Section 7.5 e) i) above,
and upon written notice to IBM, MSL will be entitled to increase
the [*] of the [*] to
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reflect MSL's actual increase in IBM [*]. The corresponding [*]
increase will be effective when MSL begins using and shipping the
higher [*] IBM [*].
8.2 Parts Cost Reductions
a) In the event MSL can purchase the same parts as available through
IBM Procurement or IBM Designated Suppliers at lower costs, MSL will
identify those reduction opportunities to IBM on a monthly basis.
b) The Parties agree that [*]% of all Parts price reductions will be
[*] to IBM when MSL begins using and shipping the lower costs
Parts. However, if a specific price reduction is the direct result
of a previously IBM approved substantial engineering, design, or
resourcing change by MSL, that price reduction will be [*] for a
period of [*] months, then [*]% of the Parts price reduction will
be [*] to IBM.
SECTION 9.0 PREMIUM COST
Premium costs may be incurred in order to meet Delivery Dates.
a) MSL may submit premium costs to IBM for reimbursement that are in
addition to prices defined in Sections 7.1, and 7.2. Premium costs
include materials, labor and other extraordinary items.
b) The Parties agree that [*] of all Parts price reductions will be [*]
to IBM when MSL begins using and shipping the lower costs Parts.
However, if a specific price reduction is the direct result of a
previously IBM approved substantial engineering, design, or
resourcing change by MSL, that price reduction will be [*] for a
period of [*] months, then [*] of the Parts price reduction will be
[*] to IBM.
b) If Requirements Accuracy, as defined in Appendix 2, exceeds [*]%
and if demand is beyond Supply Flexibility as defined in Section
13.2 and Appendix 4, premium costs resulting solely from unplanned
demand shall be subject to reimbursement.
c) Total premium costs for any single event which are equal to or
exceed [*] must be pre-approved in writing by IBM prior to MSL
authorizing or expending the premium. Total premium costs for any
single event which are less than [*] may be incurred by MSL without
IBM authorization to later be negotiated with IBM in good faith.
d) MSL will use the following process for requesting authorization
and/or reimbursement of premium costs from IBM:
e) Premium Price
i) Material
MSL agrees to use commercially reasonable efforts to purchase
materials at the lowest possible cost within the lead times
required or authorized by IBM. However, when materials are not
available with IBM's lead times, premium cost for materials
may apply. Premium cost for Parts is the [*] (which will not
exceed MSL's actual cost paid to it's suppliers to be paid
by IBM when the
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Parts are required earlier than on the stated and mutually
agreed upon lead time. MSL's request for authorization
and/or reimbursement must state:
(a) Cost variance due to [*].
(b) Product(s) part number affected.
(c) Product(s) quantity affect.
(d) Justification for Premium.
ii) Labor
MSL shall have sole responsibility for setting the
compensation rates for its staff. MSL staff shall in no way be
deemed to be employees of IBM.
[*] rate is the rate at which [*] are charged to IBM (as
required by IBM), and will be in accordance with the [*]
basis. The [*] rate shall not exceed [*]([*]%) of [*] rate.
The actual [*] will be negotiated on a case-by-case basis by
IBM and MSL and will not exceed MSL's actual [*] paid to its
[*] and [*]. MSL's request for authorization and/or
reimbursement must state:
(a) Purchase price variance due to [*] or [*].
(b) Quantity of [*] by Product(s) part number.
(c) Quantity of units to be shipped due to [*].
(d) [*] Rate: US dollars/hour.
(e) Justification for [*].
MSL agrees that it will invoice quoted Direct Labor Hours for
actual Products Delivered.
iii) Extraordinary Items
MSL may propose premium rates for expedited tooling orders,
premium transportation, and other extraordinary requirements.
If IBM agrees that the resources are required, MSL and IBM
will negotiate in good faith the price for such resources.
MSL will report all open premium costs, which are subject to
request for reimbursement by IBM as a part of monthly
Measurements.
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SECTION 10.0 ORDER MANAGEMENT, DELIVERY, AND SHIPMENT
10.1 Order Management
a) IBM Customer Orders will be placed from IBM to MSL. MSL will fulfill
these orders according to the Performance Appendix 3 unless IBM
gives MSL specific written instruction otherwise. MSL will ship and
deliver these Products in accordance with the ship and delivery
dates stated on the order. In the case of Integration, shipments and
deliveries will be made in accordance to the customer roll out
schedules provided by IBM. MSL will conform to the stated lead times
agreed to and published by IBM to the Delivery Point as long as the
requested Delivery Date on the IBM Customer Order falls within MSL's
commitment to the forecast. Product lead times are published in the
Product Attachments.
b) MSL will manage the applicable IBM Customer Order back logs. These
include but are not limited to AAS, EOSE, GEMS, IPRs, Q-Ship, MES
and others as defined by IBM. In conjunction with these IBM ordering
channels MSL will perform Order Desk responsibilities. MSL will
review all orders requesting delivery improvements, improving these
order to satisfy the customer required delivery dates given supply
continuity and available capacity. At [*] to IBM, MSL will accept
[*]. Deferments will be requested of MSL through the IBM ordering
systems mentioned above, or in writing from IBM. MSL will
reschedule the deferred orders to meet the requested ship dates.
In addition MSL will accept request to alter order content if Parts
and capacity are available. MSL will respond to all request to
improve, defer and/or alter orders in [*] Days. MSL agrees to
maintain the above mentioned IBM Customer Order backlogs keeping
these back logs up to date. MSL agrees to maintain local Order
Desk support in the geography specific Work Center.
c) MSL agrees to perform materials requirement planning ("MRP") on top
level requirements input and acquire the appropriate Parts to
support Delivery Dates and IBM Customer Orders. This includes the
placing of purchase orders and/or IPRs on suppliers, some of which
may be IBM locations.
d) Due to the high commonality of Parts in IBM's Products, MSL will
allow IBM to revise Product model mix as required. MSL will
acknowledge IBM's Product mix changes within [*] Days after receipt
of IBM's change notice.
10.2 Schedule / On Time Delivery
a) MSL will maintain [*] ([*]%) on time shipment. Specifically
Product(s) are to arrive in full at the Delivery Points on the
Delivery Date.
b) MSL agrees to track and report on shipments/deliveries to IBM
customers per the IBM Customer Orders at the request of IBM.
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10.3 Delivery
a) Title and risk of loss to Products shall pass to IBM at the time of
shipment from the Delivery Point unless otherwise stated in Section
15.0.
b) If Product shipments are made prior to the Delivery Date without
IBM's prior written approval, IBM may elect to delay passage of the
title until the Delivery Date. If the delivery is late then transfer
of Product title will be made on the later date. In addition MSL
will not deliver Products in quantities in excess of those set forth
in on the IBM Customer Order, without IBM's prior written approval.
10.4 Delays in Shipment
MSL shall notify IBM immediately of any anticipated late deliveries and
any impending plant or facility shut downs for any reasons. If MSL fails
to ship Product to the Delivery Point on schedule for any reason other
than Force Majeure or delays caused substantially by IBM, MSL shall ship
Product to the Delivery Point by air or in the most expeditious manner
possible. After MSL delivers Product to the Delivery Point, MSL will ship
Product to the designation stated on the IBM Customer Order by air or in
the most expeditious manner possible. MSL will be responsible for any
additional premium costs associated with the late shipment of Product
not only to the [*] but also to the [*] stated on the IBM Customer
Order.
10.5 Shipment Terms
a) The prices set forth in Section 7.0 Product Price include MSL's out
of pocket costs for freight, duty, customs, clearance, and
appropriate insurance, and any other costs related to the shipment,
export, or import of the Products before delivery to IBM. The cost
are the responsibility of MSL. The method of transportation shall be
suitable surface or air transport to the Delivery Point, Customer
location, or point of entry sufficient to meet IBM's Delivery Date.
The Product Attachment(s) shall state the Delivery Points.
b) MSL shall arrange shipment with IBM carriers that will deliver
product to the destination on the IBM Customer Order in time for the
product to arrive on the committed arrival date which is stated on
the Customer Order. MSL shall utilize IBM carriers for all outbound
shipments, unless prior written approval from IBM to do otherwise.
IBM's approval will not be unreasonably withheld. Contractual
conflict with IBM carriers, or added IBM cost are some, but not all,
reasonable causes for denial of IBM approval.
SECTION 11.0 PRODUCT FORECAST
11.1 MSL agrees to participate in the IBM supply and demand process adhering to
the IBM EMLS corporate calendar. MSL will utilize the EMLS regen and or
provide the input into EMLS to insure a successful supply and demand
interlock. The EMLS regen must include all part numbers consumed in the
Charlotte Work Center.
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11.2 Each month IBM will provide MSL, one rolling [*] month forecast by machine
type, model, and by geography. This forecast will be MSL's authorization
to order/purchase Parts only for the fulfillment of orders, in accordance
to the IBM published lead-times for such materials. Products shall be
produced and delivered according to actual intake of IBM Customer Orders.
MSL will participate in the process of requirements planning by giving the
best Product supply projection and participating in cross functional
meetings when required.
The following will apply:
a) The forecast will contain anticipated Delivery Dates for specified
quantities of machine types, models and geographies and lead-time
profile updates, as required, for specific Parts.
b) MSL will notify IBM within [*] Days of receipt of a forecast if MSL
is unable to meet the quantities and Delivery Dates. If MSL fails to
notify IBM within the [*] Days, MSL will be deemed to have accepted
the quantities and Delivery Dates and will be bound by them;
provided, however, that MSL's actual or deemed acceptance of any
forecast shall be subject to the availability of IBM Parts and IBM
Designated Parts as needed, and MSL shall not be subject to any
penalties (and IBM shall not be able to reject any proposed
rescheduling of Delivery Dates) under this Agreement for failure to
meet Delivery Dates due to the unavailability of such Parts at the
times necessary to meet Delivery Dates, provided further however
that such unavailability of IBM Parts or IBM Designated Parts is not
due to MSL's failure to properly order such Parts or otherwise
properly manage its relationship with the provider of such Parts.
c) If MSL notifies IBM that it cannot meet the quantities and Delivery
Dates in IBM's forecast, MSL's notification will include the
quantities MSL can deliver within the forecast's Delivery Dates and
proposed schedule of Delivery Dates for delivering the quantities
MSL cannot deliver within the forecast. IBM shall notify MSL in
writing, within [*] Days of receipt of MSL's notification, of its
decision either, in its sole discretion to:
i) agree to the quantities and Delivery Dates in MSL's
notification, which will then become binding upon both
parties; or
ii) agree to the quantities that will meet the forecast's Delivery
Dates, which will then become binding on both parties, and
either begin good faith negotiations with MSL to resolve any
shortfall or reject MSL's proposed schedule for the remaining
quantities; or provided, however that IBM may not reject MSL's
proposed schedules if the reason for MSL's inability to meet
the Delivery Dates is directly attributable to a breach of
this Agreement by IBM. MSL may, with IBM's prior written
approval and at MSL's expense, employ another manufacturer for
the quantities that MSL cannot deliver within the forecast for
the affected products. Notwithstanding any other term of this
Agreement, if IBM rejects all or any part of MSL's proposal,
IBM shall also be free to seek
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another manufacturer (internally or externally) for the
quantities MSL can not deliver within the forecast for the
affected Products.
iii) If good faith negotiations fail to resolve the shortfall
within [*] Days, IBM shall have the option to reject MSL's
whole proposal.
d) The forecasts provided by IBM, or agreed to by IBM hereunder, do not
obligate IBM to purchase any Product.
11.3 Feature Forecast
a) MSL agrees to perform all feature forecasting as part of their
responsibilities. MSL agrees to forecast features in full support of
the requirements forecast that IBM passes at a machine type level
per Section 11.1 above.
b) MSL will notify IBM within [*] Days of receipt of the monthly
requirements forecast, at the machine type level, if MSL is unable
to support the features necessary to meet the Delivery Dates of the
machine types per Section 11.1 above of this Agreement.
SECTION 12.0 ENGINEERING CHANGE
a) MSL is required to inform IBM of any necessary or required EC which
would be applicable to the Products in general. In no event shall
MSL make any changes or incorporate any modification to Products
without the prior written agreement of IBM.
b) IBM may, at its option, propose ECs to the Products to be delivered,
in which event MSL will be notified in writing. MSL agrees that IBM
shall have the right to require the incorporation of such ECs and
MSL shall, within [*] Days of such notification, give to IBM a
written evaluation of EC stating the cost increase or cost decrease
to the Products. In addition, this evaluation should include, but is
not limited to, MSL's evaluation of the ECs effect on the inventory,
delivery schedules and impact effect on function, reliability and
performance of Products. If such evaluation cannot be completed
within such period, notice to this effect shall be given by MSL as
soon as MSL learns that such evaluation cannot be completed and in
no event later than the [*] Days following notification. MSL will
give IBM a future completion date and reason for delay in such
notice.
c) Upon completion of MSL's evaluation, IBM and MSL agree that 1) MSL
will implement the EC after MSL has received IBM's consent in
writing to the mutually agreed upon cost and delivery schedule, 2)
MSL will provide additional information that IBM may reasonably
require to further evaluate the EC, or 3) IBM will cancel the
specific EC.
d) ECs will be brought to the attention of MSL via Engineering Change
Notifications (ECNs), that may have various forms, and may come from
IBM or IBM designated parties. However, the ECN is not an
authorization to execute the change. Upon receipt of an ECN, MSL
will respond by quoting the cost of that EC to IBM. MSL will not
implement any EC without an explicit authorization from IBM to
implement it. The
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ECN will contain information such as priority of change (routine,
expedited, emergency), description of change, machines effected,
requested implementation date, marked up prints, marked up bill of
materials, dispositions and recommended/specified sourcing. Appendix
5 contains requirements for EC process flow and EC cycle times.
e) MSL will process ECs according to IBM rules and specific IBM
requirements, and will enter corresponding data in EC application
systems. MSL will need to have the capability to receive IBM
development released ECs in both the Charlotte Work Center and the
Valencia Work Center.
f) EC administration cost are included in the prices as defined in
Section 7.0.
SECTION 13.0 INVENTORY
a) MSL is fully responsible for inventory ownership, excluding
consigned inventory, however MSL agrees to manage all inventories.
MSL will manage the material in the supply pipeline, as well as own
and manage work in process and finished goods until shipment of the
Product to the IBM Customer Order. On the Effective Date, MSL will
accept responsibility and liability for all open purchase orders and
IPRs for Parts, excluding Consigned Parts, which are required by
Products listed in the Product Attachments. MSL owns inventory,
excluding consignment, until title transfer at the time of shipment.
IBM will not be responsible for any associated carrying costs,
warehousing costs, excess and or scrap of MSL owned inventory. If
requested by IBM, MSL will subcontract to IBM the scrapping of Parts
owned by MSL. Actual costs charged to IBM by certified scrap
suppliers for the scrapping of Parts owned by MSL will be invoiced
by IBM to MSL.
b) MSL will control all inventories in support of this Agreement per
IBM's guidelines concerning value classified parts, IBM Document
CP10.13.
c) MSL will also be responsible for the data management necessary to
separate IBM consigned inventory from MSL inventory within the same
facility and systems.
d) MSL will perform Rotating Inventory Audits and Counts (RIA/RIC) on
IBM consigned inventory in compliance to IBM's instructions.
e) MSL and IBM will review inventory monthly, during this review MSL
will provide a written report that includes the items detailed under
Inventory in the Performance Appendix.
f) MSL prices include charges for MSL inventory management and
ownership. Both parties agree that IBM has no liability for
inventories that MSL purchases for the purposes of this contract,
providing that forecast (requirements) accuracy is equal to or
greater than the level defined in Appendix 2. If Requirements
Accuracy falls below [*]% liabilities for any machine type for any
quarter, IBM will compensate MSL according to the method describe in
Appendix 2.
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13.1 Consigned Products
a) MSL acknowledges that it will manage inventory consigned to MSL by
IBM. As it relates to Integration, MSL will manage not only IBM
consigned inventory but also inventory consigned to MSL by IBM's
customers.
b) MSL will be [*]% for inventory accuracy within the logistics
systems and related financial liability for all consigned
Products under MSL's control. MSL will be responsible for all lost,
damaged, or destroyed Parts. MSL will provide replacement value
insurance coverage for consigned Products. IBM will be named as a
joint insured with respect to consigned Products for its interest.
IBM shall have the right at all reasonable times to audit and
inspect the consigned Products. MSL will take no actions that
might encumber IBM's consigned Products.
c) MSL will also provide the following services as it pertains to
managing IBM consigned Products; receiving, storage, disbursement,
handling, order management, order fulfillment, packaging, light
manufacturing, and shipping.
d) MSL will provide inventory reports on all consigned Parts. These
reports will contain at least the information required in the
Performance Appendix 3. In case of Integration consigned inventory
will be reported by customer account.
e) MSL agrees to furnish resources, at no additional cost, as part of
this agreement to assist in the annual physical inventory audit of
consigned inventory that MSL is managing on IBM behalf.
f) MSL must assist IBM in processing any scrap for consigned Products
without additional charge to IBM.
g) If IBM and MSL mutually agree to change a Part from a non-consigned
Products to a consigned Products, the Parties agree that IBM will
purchase MSL's inventory of affected Parts on the date of the change
at MSL actual cost that was paid to the supplier plus NIC.
h) MSL shall store all consigned Products in separate locations from
all other Parts and or Products belonging to any other person or
company so as to clearly identify the consigned Products as property
of IBM. In the case of Integration consigned inventory will be
stored and identified in logistics and physically by customer
account.
i) Work labor and materials applied to the management of the consigned
inventory by MSL in the course of the performance of this Agreement
shall be paid for by IBM, as defined in Section 7.0, in accordance
with the terms of this Agreement and shall not at any time give rise
to any claim over the consigned Products. MSL hereby waives any
rights it may have to claim any liens against consigned Products.
j) MSL will handle the scrapping of IBM consigned inventory per IBM's
guidelines concerning scrap.
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13.2 Supply Flexibility
a) MSL will ensure flexibility for volumes, as specified in the Supply
Flexibility Appendix 4.
b) Quarterly, MSL will update IBM on progress in improving Supplier
Flexibility.
c) IBM will use commercially reasonable efforts to transfer LSS and SSS
arrangements with IBM suppliers to MSL.
d) [*] months before EOL, MSL and IBM will agree on a transition plan
to regulate the flexibility.
e) Cost of the Supply Flexibility as defined in Appendix 4 is included
in Product pricing per Section 7.0. IBM will have no liability for
unused flexibility.
13.3 End of Life ("EOL") Inventory
a) IBM agrees to share an annual plan with quarterly updates on product
EOL activity. Included will be the following scheduled events:
product withdrawal, end of manufacture, and transfer to IBM, if
applicable.
b) MSL agrees to provide inventory planning support and squared set
analysis on these inventories participating in EOL activities prior
to any transfer to IBM. Any inventories not transferred to IBM will
remain the sole responsibility of MSL.
13.4 Sale of Inventory
MSL agrees not to sell excess or surplus inventory purchased by MSL in
support of this Agreement without the prior written approval of IBM which
shall not be unreasonably withheld.
SECTION 14.0 INTEGRATION
14.1 Overview
The typical Integration consists of: assembly, unit testing, code load,
system test, personalization, repackaging and distribution.
14.2 Customer Integration Statement of Work (Integration SOW)
IBM will provide MSL with a work scope for Integration for each
Integration project. Based on the work scope, MSL will provide IBM with a
SOW and the associated direct labor hours. This will be the base from
which future modification to the individual SOW will be based.
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14.3 MSL Account Coordinator
The account coordinator is the primary interface with IBM project managers
and/or customers for the delivery of Integration Products. This person
will be responsible for insuring that the necessary IBM Products which are
delivered by MSL are on order, that a roll out schedule is received by
MSL, the necessary consigned Products are received in sufficient time
prior to their need in the Integration process and/or delivery to the
customer, the required software is received, the line processes are in
place, the necessary pilots have been performed and the work is properly
scheduled on the line to insure an on time delivery. They are the prime
contact for problem resolution, issues, concerns, delivery tracking and
all other issues which affect customer satisfaction.
14.4 Responsibilities
a) IBM will be responsible for defining the process to be used on the
Integration line, for the assembly and test of those Products being
customized, tested or passed through the process. MSL will be
responsible for defining the process to be used on the Integration
line, for the code load and system test of units requiring this
work.
b) MSL will be responsible for the implementation and execution of
these processes. MSL will be responsible for maintaining the
necessary technical support to implement these processes and
identify problems in the integration process. Process deficiencies
will be brought to the attention of the IBM Integration program
manager staff for resolution. Deficiencies realized due to customer
provided items will be resolved directly with the customer through
the MSL account coordinator or by the technical staff, whichever is
appropriate.
c) MSL will own the entire manufacturing and delivery process and be
the sole interface with the customer (IBM and/or end user) through
the account coordinators.
14.5 Inventory Management
a) Provide a secure environment for the management and control of
consigned Products. This area should be fenced, with limited access
and within a reasonable distance from the manufacturing area and the
receiving docks.
b) An automated inventory management system must be used to track
receipts, disposition and balance on hand at any point in time.
Information required by IBM personnel performing project management
activities for customers will be provided on an 'as required' basis
and will be readily available to such personnel. This inventory must
be labeled (bar coded) and separated by customer.
c) Physical inventory counts are to be performed as needed for all
consigned inventory, for each customer, counted at least every [*]
Days with a accuracy target of [*]. This target is based on the
delta between the actual inventory count and the inventory
management system. Discrepancies are to identified, root cause
analysis performed, results reported (quarterly) and corrective
actions initiated. MSL is responsible for the cost associated with
the replacement of IBM and/or IBM customer
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consigned Products which have been received by MSL and need to be
replaced as the result of theft or negligence.
d) All consigned inventory is the responsibility of MSL until Delivery.
14.6 Manufacturing
a) The integration line should use a line control system that ties to
an automated ordering system that provides order accuracy, tracking,
disposition and history. The work environment should be kept
presentable and organized and available for customer tours.
b) Incomplete shipments, with the customer approval, should use a
deviation process and be documented with the customer authorization.
c) The manufacturing process must continue to use the line break in,
pilot and certification process currently in use unless mutually
agreed to in writing.
14.7 On Site Repairs
a) The consigned Product set may include both IBM and non-IBM Products,
new as well as used which may or may not be covered by a new product
warranty, IBM maintenance or another maintenance provider. In the
case of IBM logo Products, MSL will initiate repair of these
Products in the most cost effective and efficient manner. In the
case of repairs required to be performed by the third party
maintainers, MSL will provide a suitable work area for these repairs
and ensure that the necessary security requirements are met when
visited by non IBM personnel. When consigned Product defects are to
be returned to the manufacturer for either repair/replacement, MSL
will control this process.
b) Out of box failures of RS Products will be replaced from inventory
or repaired as directed by IBM. These replacements are to be given
priority over new orders during times of product constraints.
14.8 Packaging
Integrated machines may require unique packaging based on their
configuration and the individual customers requirement. MSL will design
these boxes in accordance with IBM design criteria to insure that they
provide maximum protection against in route damage. All shipping
containers must be labeled in accordance with the guidelines outlined in
the Section 16.0 Packaging and in addition to any unique labeling customer
requirements.
14.9 Security
a) Sufficient security must be provided for work in process items,
customer and MSL/IBM provided. In addition, secured spaces will be
required from time to time for individual customers depending on the
nature of the work. Currently there is a contractual requirement for
secured space to perform the US Postal Service, hard drive, code
load program.
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b) All reasonable precautions must be exercised to prevent unauthorized
access, use, modification, tampering or theft of software and
hardware consigned to MSL for the execution of Integration. Also,
these precautions must prevent unauthorized access to a customer's
remote system used in the performance of Integration.
14.10 Scheduling
Product orders placed on MSL by IBM, in most cases, the CRAD (Customer
Required Arrival Date) will tie to the Integration roll out delivery date.
In those cases where there is a difference, MSL will validate the correct
delivery date with the IBM project manager. If an improvement or deferral
is required in the Product build schedule and based on Product
availability, MSL will schedule the Product build to insure arrival by the
required CRAD.
14.11 Delivery
MSL will maintain [*] percent ([*]%) on time delivery, measured against
the CRAD date in the integration roll out schedule. Due to the nature of
the integration orders, there is no [*] option, unless agreed to prior to
shipment by the IBM project manager and/or the customer.
14.12 Customer Satisfaction
Customer satisfaction is the responsibility of MSL. IBM will measure the
customer satisfaction via surveys. MSL commits to a customer satisfaction
target of [*]. This will be a reflection of MSLs on time deliveries,
flexibility in meeting the customers unplanned requirements, the quality
of the services performed and MSL's relationship, in general with IBM's
customers. The customer set will include the IBM Global Services project
managers and IBM's customers.
14.13 Integration Quality
The service being performed is to be of high quality and free from process
defects. The target objective will be [*]%, measured monthly. MSL will be
responsible for the repair and/or replacement of Parts and Products which
have been damaged during the performance of the Integration. MSL will be
responsible for cost incurred by IBM as a direct result of MSL's failure
to follow the Integration procedures subject to the limitations contained
in Section 15.3 of the Base Agreement.
14.14 Price
a) IBM will establish a list of those items which are standard
components of the Integration process. IBM and MSL will agree upon
an execution time and a price, as stated in Section 7.2 b), for each
standard item. Integration requirements outside of these standard
items will be individually determined. Once these prices for these
standard items are established they will remain in effect during
the entire term of this Agreement.
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b) MSL will be responsible to track items which are beyond the
individual Integration SOW being executed when performed at IBM's
request and provide sufficient documentation to support the price
along with IBM's authorization of the added cost. MSL will invoice
IBM weekly for these costs. In those cases when a specific request
becomes standard, or a change in effort is requested by a customer,
a revision to the Integration SOW will be made and the contracted
price between IBM and MSL will be updated.
c) MSL will be responsible for any cost beyond the agreed to [*] if
these costs were within the control of MSL.
14.15 Transportation
a) Premium outbound transportation may be used when requested by a
customer. In these cases, MSL must provide sufficient documentation
of the customer approval, and to support the cost.
b) If premium outbound transportation is necessary due to MSL's
failure to ship on time, this cost is the responsibility of MSL
and IBM will invoice MSL for these costs.
14.16 Integration SOW Completion
At the completion of an individual Integration SOW, a complete
reconciliation will be completed within 60 Days. This reconciliation will
be between MSL and the IBM project manager/customer and will include, but
not limited to, an inventory reconciliation, any outstanding cost and
disposition of all customer software and hardware in MSL's possession.
14.17 Equipment
IBM will identify the current equipment, owned by IBM, needed to perform
Integration and it will be made available to MSL at an agreed to price per
Attachment 3 of the Base Agreement. If, at any time, MSL chooses to
replace Integration support equipment and the associated programs, IBM's
written concurrence will be required.
14.18 Restrictions and Limitations
Nothing in this Agreement authorizes MSL to use any of IBM's tangible,
real or intangible property for the performance of any services
contemplated hereunder on IBM Logo products or for Integration services of
non-IBM Logo products related to a customer for whom Integration is being
provided by IBM. In any event, MSL will ensure that the IBM customer
delivery schedules will not be impacted based on other performance
obligations it may have during the term of the Agreement.
14.19 Measurements/Reports
a) MSL will be required to provide IBM with monthly reports detailing
their performance in relation to these Integration.
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ATTACHMENT 1
IBM/MSL Outsourcing Base Agreement Statement of Work
These monthly report should provide at a minimum:
i) On time delivery
ii) Quality
iii) Inventory management
b) The specific targets are covered in this document under their
appropriate sections. These measurements should include a root cause
analysis, MSL actions to resolve and an action plan to achieve the
targeted objectives when there are deficiencies.
SECTION 15.0 DROP SHIPMENTS
MSL will complete processes required to meet the following obligations
within [*] Days following the Effective Date.
a) For Drop Shipments to IBM, MSL will be responsible for all
activities required to deliver the Products to the destination port
of the IBM company in the destination country. MSL will issue an IBM
invoice to the destination IBM company on behalf of the IBM business
area invoiced by MSL for these deliveries. MSL will ensure that
invoices and other required documentation are ready at the
destination port for timely importation into the country, but, MSL
will not be responsible for importation into the destination
country.
b) For Drop Shipments in AP, MSL will transfer title to IBM when
Products are in "highseas" and after MSL has exported them through
the customs of the country of origin of the goods.
c) For Drop Shipments to IBM customers, MSL will be responsible for all
activities required to deliver products to the customer in the
destination country, independently of when MSL transfers title of
property to IBM. MSL will be responsible for importation into the
destination country and delivery of Products to the customer after
clearing customs in that country. MSL will provide information to
IBM to allow IBM to issue an invoice to the final customer.
d) For Drop Shipments to IBM US or IBM CANADA customers, MSL will
transfer title to IBM at the port of entry at USA or CANADA after
MSL has imported them through USA or CANADA customs.
e) MSL will ensure timely distribution operations, irrespective of
whether MSL or another subcontractor is selected for outbound
distribution.
f) MSL will comply with the IBM Import/Export Operation Application and
Instructions.
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ATTACHMENT 1
IBM/MSL Outsourcing Base Agreement Statement of Work
SECTION 16.0 PACKAGING
MSL must meet requirements of IBM specification GA219261. MSL must also
package all Products according to packaging Specifications listed in the
Product Attachments. Each delivered container must be labeled and marked
so that the contents of the package can be identified without opening and
all boxes and packages must contain packing sheets listing contents. IBM's
part number, quantity and appropriate purchase order number must appear on
all packing sheets and bills of lading. In addition to standard IBM
packaging requirements, MSL must meet packaging, labeling and packing
sheet requirements of OEM customers.
SECTION 17.0 QUALITY
17.1 Commitment
MSL commits to provide all Products and related processes and material in
conformance in all material respects with the requirements of all
applicable IBM and MSL specifications. MSL shall ensure that with respect
to assembly and workmanship, all material requirements, IBM's quality
requirements and all applicable industry standards are met.
17.2 Quality Requirements
a) MSL's target is [*]% defect free production. MSL shall follow an
established continuous improvement program directed toward zero
defect production. MSL will report progress quarterly to IBM. MSL
will provide quality reports monthly as defined in the Product
Attachments.
b) MSL shall at all times maintain ISO 9001 or 9002 registration. MSL
will achieve ISO 14001 Environmental Management Certified, by
12/31/98, for all Work Centers that are active in the execution of
this contract. Other specific standard compliance requirements are
defined in the Product Attachments.
c) For MSL's programs described in 17.2 a above, MSL will maintain
pertinent control charts in fundamental variables or attributes that
affect IBM's specifications. These charts will be updated on a
periodic basis, and provided to IBM upon request. Exceptions to the
limits will be highlighted to IBM along with corrective action
plans.
d) A philosophy of continuous improvement shall be stated and
practiced. This means that effort will be expended to improved
processes by reducing or eliminating causes of variability, even
after the process is "in control" to meet specifications.
e) Modifications, adds or deletions, to process steps by MSL must be
done with concurrence by IBM.
f) MSL will take demonstrable action whenever a process goes out of
control parameters. The record of what was done and what results
were achieved shall be clearly documented and related directly on
the control charts.
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ATTACHMENT 1
IBM/MSL Outsourcing Base Agreement Statement of Work
g) MSL will maintain an ongoing reliability test program for Products
requested by IBM (quality plan attachments) and will submit reports
as specified in the appropriate specification(s) listed in the
Product Attachment(s).
h) MSL shall supply a Failure Analysis report for rejected material
within [*] weeks after receipt. After the Failure Analysis plan is
completed, MSL shall forward a corrective action plan for MSL
Procured Parts that is acceptable to IBM. MSL is responsible for
first pass Failure Analysis (i.e. identification of the failure to
the level of material provided to MSL by IBM) on IBM provided
materials. IBM may provide engineering support to investigate any
IBM Nominated Supplier components which are confirmed defective by
MSL failure analysis, but which are reported NDF (No defect found)
by the IBM Nominated Supplier.
i) IBM and MSL will conduct regular meetings together to cover open
issues. Both parties will share openly their problems relevant to
the relationship.
j) MSL shall follow the quality specifications identified in the
Product Attachments.
17.3 MSL Support for IBM Customer Warranty
MSL agrees to:
a) provide IBM a monthly shipment list by machine type and serial
number, as listed in the attached Performance Appendix,
b) identify at product level all units to facilitate recall or
notification,
c) obtain supplier support to implement needed changes,
d) support IBM services planning groups on warranty cost reduction task
forces as needed,
e) receive warranty and quality claims from the field, including OEM
customers, perform first pass failure analysis when needed, and
forward data and materials to their sources, or to IBM under IBM
instruction,
f) provide warranty replacement support to OEM customers to include
receiving, tracking; and fulfillment of parts replacement to OEM
customers and,
g) provide Part traceability to machine serial number as defined in
Product Attachments.
SECTION 18.0 ACCEPTANCE TEST
a) IBM may conduct, at its own expense, source inspection, , and/or
acceptance tests to assure that Products furnished by MSL conform to
specification, samples and/or descriptions as set forth in this
Agreement and the Product Attachment(s). IBM may reject any units of
Product which it finds in good faith not to meet the specifications
of this Agreement in any material respects. IBM should perform
incoming inspection within [*] Days after receipt of goods by IBM.
If IBM has not notified MSL of any defects in a unit of Product
within [*] Days of receipt, such unit shall
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ATTACHMENT 1
IBM/MSL Outsourcing Base Agreement Statement of Work
be deemed to be accepted. Acceptance by IBM of Product shall not
relieve MSL of any responsibility for latent non-conformance with
IBM specifications, fraud, negligence, title defects, or
infringement or warranty. Failure by IBM to perform testing shall
not be construed as a waiver to later asserting claims based on such
above mentioned defects.
b) Acceptance of new Products by IBM shall not occur until a letter
documenting acceptance and any conditions of acceptance has been
issued to MSL by IBM. New Products are not subject to the [*] Day
from receipt requirement defined in the preceding paragraph.
18.1 Nonconforming Acceptance
a) IBM may choose to accept Products which fail to conform to the
specifications established in a Product Attachment without prejudice
to its right to reject nonconforming items in the future. If IBM so
chooses, IBM will notify MSL of its intent to accept nonconforming
items. MSL agrees to negotiate in good faith a price reduction for
such items based upon IBM's reasonable added expense to correct and
otherwise deal with such deficiencies. After the parties agree on a
price, IBM will notify MSL that IBM has accepted the nonconforming
items. No items for which IBM has issued a notice of nonconformance
shall be deemed accepted, except as provided in the first sentence
of this Section.
b) IBM's payments for Products shall not signify that IBM has accepted
Product.
SECTION 19.0 WARRANTY
19.1 Scope of Warranty
a) MSL expressly warrants that all Products, MSL supplied materials and
Parts, and work prepared for IBM will conform in all material
respects to the specifications, drawings, or other descriptions
furnished or adopted by IBM, and will be of specified quality, good
workmanship, and free from defect subject to the following terms:
i) MSL's warranty for IBM Designated Parts will be as long as,
and will be on the same terms and conditions as the Parts
supplier's warranty stated in the relevant purchasing
contract.
ii) MSL will not provide a warranty for IBM Parts. However, MSL
will provide Failure Analysis for such parts. MSL will process
such failed Parts as "Return to MSL for credit to IBM" in a
timely manner.
iii) MSL will not provide a warranty for consigned Products.
However, MSL will provide failure analysis for such Products.
MSL will process such failed Products per IBM's instruction in
a timely manor.
iv) MSL will warrant all MSL Procured Parts for [*] months unless
otherwise stated in the applicable Product Attachment, or
agreed to by IBM in writing.
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ATTACHMENT 1
IBM/MSL Outsourcing Base Agreement Statement of Work
v) MSL will warrant its workmanship for [*] months unless other
stated in the applicable Product Attachment.
b) All of the above described warranty periods will commence on the
date that the Products containing the above Parts are delivered to
IBM. The above warranties shall survive acceptance test, and IBM's
Product test procedure. MSL's warranty described above also covers
latent defects resulting from MSL's specification, workmanship,
process, and/or Parts purchased from MSL's suppliers and IBM's
Nominated Suppliers.
19.2 Defective Field Replaceable Units
a) A defective FRU shall be a FRU that does not conform in all material
respects to that Product's particular specifications.
b) IBM will return defective FRUs that are under warranty to MSL
freight collect. MSL will perform Failure Analysis and incoming
inspection and testing as described in the applicable Product
Attachment for FRU's rejected or returned to MSL which are still
under warranty. If the rejected FRU passes all inspection and test
criteria, the FRU shall be classified as NDF and such FRU shall be
returned to IBM freight collect.
19.3 Exclusions
The warranty set forth above specifically excludes and does not apply to
defects caused by a) the use or operation of the Product in an application
or environment other than as described in or contemplated by the
specifications issued by IBM or b) IBM or the end user through misuse,
excessive shock or improper maintenance procedures.
19.4 Title
MSL warrants that the title to all Products purchased by and delivered to
a Delivery Point under this Agreement shall be free and clear of all
liens, encumbrances, security interests or other adverse interests or
claims. Title and risk of loss shall pass from MSL to IBM at time of
shipment per the IBM Customer Order, unless otherwise stated in Section
10.0.
19.5 Returned Product Turn Around Time
MSL shall set an objective to complete Failure Analysis, repair or
replacement of defective Products, within [*] Days after receipt from IBM.
Upon or before the [*] Day, MSL will ship the repaired or replaced
Product, to IBM at MSL's expense. If repair or replacement is not
possible, MSL will refund to IBM, MSL's price associated with the failed
Product, that is under warranty and the price paid by IBM to MSL or any
third parties or the intercompany transfer price for IBM Parts, for all
Parts, if the price of such Parts were not included in MSL's price.
19.6 Implied Warranties
a) MSL'S WARRANTY OBLIGATIONS DESCRIBED IN THIS SECTION 19 ARE IN LIEU
OF AND ENTIRELY REPLACE ALL OTHER TERMS AND CONDITIONS RELATING TO
THE QUALITY, MERCHANTABILITY, CONFORMANCE TO
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ATTACHMENT 1
IBM/MSL Outsourcing Base Agreement Statement of Work
SPECIFICATION AND/OR FITNESS FOR PURPOSE OF THE PRODUCTS, WHETHER
EXPRESS OR IMPLIED, WHICH OTHER TERMS AND CONDITIONS ARE HEREBY
EXPRESSLY EXCLUDED.
b) IBM'S WARRANTIES CONTAINED HEREIN AND ANY PRODUCT ATTACHMENT WITH
RESPECT TO PARTS, IF ANY, ARE IN LIEU OF AND ENTIRELY REPLACE ALL
OTHER TERMS AND CONDITIONS RELATING TO THE QUALITY, MERCHANTABILITY,
CONFORMANCE TO SPECIFICATIONS AND/OR FITNESS FOR PURPOSE WHETHER
EXPRESS OR IMPLIED, WHICH OTHER TERMS AND CONDITIONS ARE HEREBY
EXPRESSLY EXCLUDED.
19.7 Epidemic Failure
In the case where any specific Product, shipped to IBM from MSL within any
[*] month experiences a defect rate of [*]% or greater, resulting from a
common cause due to MSL's non-conformance to specifications, drawings,
other descriptions furnished or adopted by IBM, or due to workmanship, MSL
will accept the cost of a Product Recall.
SECTION 20.0 COMMON TOOLING
Tools commonly used in production and/or Integration will be owned and
managed by MSL.
SECTION 21.0 TOOLING TO BE ACQUIRED
21.1 Purchase
a) MSL will submit requests for additional tooling, if any, quarterly
for inclusion in IBM's capital request process.
b) MSL shall not purchase any tooling or other capital equipment on
IBM's account without IBM's prior written approval.
i) If specifically required in a Product Attachment, IBM will
supply tooling for Products to MSL. It shall be IBM's option
whether the tooling will be consigned by IBM to MSL or
purchased by MSL.
ii) If IBM elects to have MSL purchase tooling, MSL shall be
responsible for the design, cost and build of all new or
replacement tooling which shall be capable of producing
Product in accordance with the IBM specification in the
Product Attachment. MSL warrants that the tooling used under
this Agreement shall be capable of producing the quantity of
Product as specified by IBM.
iii) If IBM elects to have MSL purchase the tooling, MSL shall
invoice IBM for the cost of such tooling at such time as the
tooling is placed into service. The cost of such tooling
includes, but is not limited to, the cost of any purchased
components (including parts and complete items), fully
burdened MSL engineering and/or manufacturing labor use in the
design and/or construction of such tools, duties, insurance,
transportation, installation, costs and costs of
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ATTACHMENT 1
IBM/MSL Outsourcing Base Agreement Statement of Work
money, if any. MSL agrees that MSL engineering will be priced
to IBM on a "most favored customer" basis.
iv) Both parties may agree to amortize the tooling and shall put
such agreement in writing and any terms and conditions
associated with such amortization. If IBM and MSL agree to
amortize the tooling, IBM agrees to pay for the tooling and
any associated carrying cost agreed to between the Parties via
an amortization charge in addition to the respective Product
price as defined in Section 7.0. The amortization period for
each tool will be stated in the applicable Product Attachment
and shall be triggered by the initial delivery of the
Product(s) for which the tooling expenses are incurred.
IBM will state the estimated ship quantity and maximum monthly
ship rate for the amortization period. MSL will define the
total tooling cost to support the maximum ship rate. The total
tooling cost will be divided by the estimated ship quantity
provided by IBM. This unit amortization cost will be itemized
in MSL's quotes as "tooling adder".
v) The tooling cost recovery, via the "tooling adder", will be
analyzed during each quarterly review meeting between IBM and
MSL. The intent is to adjust the "tooling adder" based upon
volume changes, such that the total tooling cost will be
recovered by the end of the amortization period. If at the end
of the amortization period the tooling cost have been over or
under recovered, an adjustment invoice will be processed
accordingly.
c) MSL acknowledges and agrees that its utilization of any tooling for
other customers will not impact IBM's product requirements. MSL will
obtain IBM's written approval prior to entering into a contract with
a third party involving tooling for Products listed in the Product
Attachment.
d) In the event that MSL owns the tooling and has received a bona fide
third party offer to purchase any or all of the tooling, before MSL
may accept such offer, MSL shall notify IBM in writing, and IBM
shall have [*] Days after such notice to agree to purchase such
tooling on the same terms and conditions as such third party offer.
e) All tools, dies, jigs, patterns, equipment or Parts purchased,
furnished, charged to or paid for by IBM and any replacement thereof
shall become and remain the property of IBM. IBM agrees to provide
MSL appropriate technical support for IBM owned tooling at no charge
to MSL. IBM shall have the option of removing IBM owned tooling from
MSL directly, depending upon Product strategy and production.
21.2 Care
MSL is responsible for protection, calibration, maintenance and care of
all tooling owned by IBM and shall be liable for loss or damage of such
tooling while in MSL's possession or control. IBM agrees to insure tooling
it owns. Where possible, MSL will be jointly insured with respect to the
IBM owned tooling for its interest. This tooling shall be subject to
inspection by IBM upon notice and shall be returned in an acceptable
condition, reasonable wear and tear excepted, upon demand or notice by
IBM. MSL will be responsible for
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ATTACHMENT 1
IBM/MSL Outsourcing Base Agreement Statement of Work
removing and shipping IBM owned tooling from MSL's plant. IBM shall be
responsible for transportation cost for the return of tooling to IBM's
facility as designed by IBM.
21.3 Inspection
MSL will identify the location of tooling and at any reasonable time allow
IBM or IBM's designee to inspect the equipment and to purchase related
parts. MSL shall not mortgage, pledge, or take any other action that might
encumber IBM owned tooling in any way.
SECTION 22.0 RETURN OF PRODUCT - US AND VALENCIA WORK CENTER.
22.1 Return to MSL by IBM
a) MSL agrees to manage Products and Parts that can be returned to the
US and Valencia Work Centers through the following, but not limited
to, IBM processes, IBM Document PC 2801:
i) shipped and uninstalled,
ii) returns per IBM contracts with IBM Business Partners, and
iii) new defective
b) MSL will accept the return of all shipped Products returned to MSL
within [*] Days from the Delivery Date.
i) Products returned to the US Work Center will be shipped
freight [*] to MSL.
ii) For Products returned to the Valencia Work Center, MSL will
pay IBM the NIC for the returned Products (NIC is the [*]
multiplied by the NIC rates defined in Section 1.b)ii) of
Appendix 1.)
iii) MSL will buy back the returned Product at [*]% of the amount
invoiced to IBM for such Product within [*] Days of receipt of
the return by MSL.
iv) MSL's price for the acceptance of returned non-warranty
Products shall be [*]% of the amount invoiced to IBM for such
Product [*] NIC (NIC is the [*] multiplied by the NIC rates
defined in Section 1.b) ii) of Appendix 1).
v) For the Valencia Work Center, 22.1 b) iii) and iv) will be
processed as MSL buying back the returned Product at [*]% of
the amount invoiced to IBM [*] NIC within [*] Days of
receipt of the return by MSL.
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ATTACHMENT 1
IBM/MSL Outsourcing Base Agreement Statement of Work
vi) IBM may use payments due IBM per 22.1 b) iii) and iv) to
offset amounts owed to MSL or request reimbursement from
MSL at IBM's sole discretion.
vii) Any defective Product returned to MSL will be returned with a
copy of any applicable IBM inspection report and will
reference MSL's Return Material Authorization ("RMA").
viii) When replacement or repaired Products are shipped, MSL must
submit a new invoice.
SECTION 23.0 DISASTER RECOVERY
MSL will have a documented disaster recovery program which would allow MSL
to resume all responsibilities under the terms and conditions of this
Agreement within [*] Days of a disaster. A copy of the MSL documented
disaster recovery program will be submitted to IBM for IBM's approval
within sixty (60) Days after the Effective Date.
SECTION 24.0 INFORMATION TECHNOLOGIES SERVICES ("I/T") SYSTEMS
24.1 System Access
a) MSL's access to IBM applications, tools, licenses, networks, and
equipment will be based upon business need determined by IBM. IBM
shall grant MSL, under a separate written agreement, the right to
use certain versions of IBM owned software resident on the
workstations to be transferred from IBM to MSL during the Transition
Period. MSL must obtain a license from the software owner of any
nontransferable third party or IBM software identified by IBM. IBM
retains the right to audit. IBM conveys to MSL no software title or
license under the intellectual property rights of IBM or of any
third party except as may be otherwise provided herein. MSL is
responsible for obtaining all licenses for third party software. MSL
conveys to IBM no software title or license under the intellectual
property rights of MSL or of any third party.
b) Neither IBM or MSL will be provided any license rights and/or source
code to any software subject to this Agreement unless approved by
the owning Party.
c) No software may be installed on either IBM or MSL systems by its
employees or contractors without the prior written consent of the
owning Party. MSL may install software on MSL-owned or provided I/T
assets which are isolated from and not a part of the networks. MSL
will not install software that adversely impacts IBM systems or
networks.
24.2 General I/T
a) MSL must provide the required information and interfaces to IBM's
systems, as needed for execution of this Agreement. MSL must
participate in any upgrade and testing of local and corporate
applications, interfaces, and tools during its use of IBM owned
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ATTACHMENT 1
IBM/MSL Outsourcing Base Agreement Statement of Work
applications or environments and insure continuous application
operation as changes are made. IBM agrees to participate in the
testing of IBM interfaces changed as a result of any upgrade
activity. IBM will provide visibility and the necessary technical
details on IBM system changes to ensure MSL is able to update their
systems and processes.
b) MSL prices for I/T costs are included in the prices as defined in
Section 7.0 and Appendix 1 Markup. Costs for implementing any change
requested by IBM after the Transition Period that substantially
impact MSL's systems and processes will be sized separately.
c) MSL will support IBM's EPRG/ECPS using a separate location code for
Charlotte.
d) MSL SLA (Service Level Agreement) requirements for local or remote
systems availability and performance will be negotiated in
compliance with IBM's service level expectation for a manufacturing
process within sixty (60) Days of the Effective Date.
e) MSL will be responsible for the service and support of any asset
transferred from IBM ownership to MSL. System or end user software
or requests for version upgrades will be under separate agreement.
f) MSL will transmit reports and data files as IBM requires for
history, audit, validation, and measurements as defined in Appendix
3.
g) MSL will provide the necessary capability to accommodate non
AAS/GEMS orders and provide confirmation/status information as
required.
h) Except as otherwise provided herein, MSL will obtain the systems ,
applications, and licenses they deem necessary by their own means.
i) MSL agrees to have all MSL applications Year 2000 compliant prior to
migrating any IBM data into it's applications or data bases.
j) MSL must obtain IBM's Global Services' written permission prior to
making any connection to any IBM network or system other than the
networks and systems subject to the Agreement.
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APPENDIX 1: MARK UP
1. Prices for manufacturing and fulfillment of Products will be per the
formula of section 7.1 with the following rates:
a) Value Add and Profit Rates are per the following table:
<TABLE>
<CAPTION>
VALUE ADD RATES PROFIT RATES(*)
--------------- ---------------
<S> <C> <C>
RS Fulfillment (US & VALENCIA Work Centers [*]
GEPS, Finance, and Security Mfg & Fulfillment
[*]
Spares to Mechanicsburg and Amsterdam
US Work Center
Valencia Work Center
(Through September 30, 1998)
Valencia Work Center
(After September 30, 1998)
</TABLE>
*Profit Rates are subject to the adjustments of Section 7.3,
Attachment 1, SOW
b) Other Cost Provision rate is equal to the Scrap Rate plus the NIC Rate
where:
i) The Scrap Rate is equal to [*] except no scrap provision will be
applied to OEM Products
ii) The following NIC rates will be multiplied by the material costs by
geographical source to derive an average NIC Rate for each Product
<TABLE>
<CAPTION>
NIC RATE
--------
<S> <C>
US WORK CENTER: [*]
Valencia to US work Center
Far East to US Work Center
US Suppliers to US Work Center
Mexico/Canada to US Work Center
South America to US Work Center
Line Side Stocked Products to US Work Center
Mfg to Fulf./Integration within US Work Center
</TABLE>
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<TABLE>
<CAPTION>
NIC RATE
--------
<S> <C>
VALENCIA WORK CENTER: [*]
Far East to Valencia Work Center
US to Valencia Work Center
European (non-Spanish) Suppliers to VALENCIA Work Center
Spanish Suppliers to Valencia Work Center
Line Side Stocked Products to Valencia Work Center
Mfg to Fulf./Integration within Valencia Work Center
</TABLE>
** No NIC will be applied to the final assembly cost of a Product
manufactured by MSL that is subsequently shipped against a Customer
Order within the same Work Center (ie, fulfillment and/or Integration
is within the same Work Center). NIC for the Parts used in a Product
Manufactured by MSL will be calculated using the above NIC rates.
2. For RS Products with components manufactured by MSL, the price for MSL
manufacturing services will be per the formula of Section 7.2 with the
following rates:
a) Asm/Test/Handling, Unburden Labor Rate:
<TABLE>
<S> <C>
US Work Center: [*]
Valencia Work Center
</TABLE>
b) MBA burden absorption rate of [*]
MBA will be reviewed by IBM and MSL if the annual volume of
manufactured Products is less than [*] or greater than [*]. Adjustments
shall be mutually agreed upon by IBM and MSL, and shall be based on
but not limited to volumes, mix of Products, and costs.
c) Component NIC rate is per Appendix 1, b) ii
3. RS Integration prices will be per the formula of Section 7.2.b with the
following rates:
<TABLE>
<S> <C>
US Work Center [*]
Valencia Work Center
</TABLE>
*Without MSL account coordinator.
4. All prices are effective for the US Work Center on the Effective Date.
All prices for Valencia Work Center manufactured Products and their
fulfillment are effective on the Effective Date.
All other prices excluding spares (see 1 a) above) are effective for the
Valencia Work Center on June 1, 1998.
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APPENDIX 2: REQUIREMENTS ACCURACY
The formula for measuring the accuracy of requirements placed on MSL for a
given quarter accompanied with an explanation, is the following:
Requirements Accuracy % = [*]
Where [*] represents the performance [*] months prior to the last month of
the quarter in which you are measuring the Requirements Accuracy. The
Forecast represents the requirements that was passed by IBM [*] months prior,
for the total volume by machine type for the quarter that is being measured.
Actual Order Load represents the final amount of orders scheduled for the
quarter being measured. For example when measuring the [*] for the first
quarter in 1998 you would calculate [*] by taking the [*] that was passed [*]
for the first [*] in [*] and subtract the actual [*] for that [*]. Then
divide by the forcast and multiply by [*]. You follow the same methodology
for [*] looking at the forecast [*] months prior to the last month of the
quarter being measured. Once [*] through [*] is calculated you apply these
results to the formula above.
[*]
The formula measures the accuracy of requirements placed on MSL for a given
quarter, each month, starting [*] months prior to the end of the quarter,
using a [*] weighted calculation.
The following percentages will be multiplied by the material cost of the
volume of the machine type shipped in the quarter that fell below [*]% of the
Requirements Accuracy calculation.
<TABLE>
<CAPTION>
REQUIREMENTS ACCURACY INCREMENTAL %
AS DEFINED ABOVE APPLIED TO MATERIAL COST
<S> <C>
[*] and Greater [*]%
Less than [*]% [*]%
</TABLE>
Payments for these liabilities will be made via a separate invoice.
IBM and MSL Confidential Page 3 of 7
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APPENDIX 3: PERFORMANCE SPECIFICATIONS
The following SPECIFICATIONS apply to MSL services at each work center:
<TABLE>
<CAPTION>
Measurement Period Target
------------------------ ------ ------
<S> <C> <C>
On-time shipment (a)(c) [*]
Responsiveness (b)(c)
Order to ship leadtime (Pick&Pack) (d)
Order to ship leadtime (Bulk) (d)
Product quality
Serviceability to IBM Plants
Serviceability to IBM Services
</TABLE>
(a) Percentage of finished orders that are shipped from MSL and delivered to
IBM on the committed Delivery Date.
(b) Percentage of finished orders that are shipped from MSL and delivered to
IBM in line with the requested supply ship date, and according to the IBM
Customer Order requested arrival date and the published IBM distribution
lead times.
(c) With IBM's approval, MSL may normalize this measurement for errors that
are beyond MSL's control. Errors must be in the categories of: integration
orders, IBM system errors, system updates that are IBM's responsibility,
orders requesting delivery dates which exceed Requirements Accuracy, as
defined in Appendix 2, of [*] and are not within Supply Flexibility as
defined in Section 13.2 and Appendix 4.
(d) These are IBM Customer Orders. Order to ship leadtime is the number of
Days from MSL receipt of a valid IBM Customer Order to planned and
committed MSL ship date.
MSL will also provide to IBM the following information reports:
<TABLE>
<CAPTION>
REPORTS PERIOD
--------------------- ------
<S> <C>
Weekly shipments (1) [*]
Monthly shipments (2)
Inventory (3)(4)(5)
Product Invoice Information (6)
Product quality (7)
Requirements accuracy (8)
Consigned tooling
MSL Procured Parts (9)
Planning Parameters (10)
</TABLE>
(1) List of shipments by machine type, serial number and delivery program
(COATS, Q Ship, IPR, industry standard, integration, other).
(2) List of shipments by machine type and serial number, to requesting IBM
organizations.
IBM and MSL Confidential Page 4 of 7
<PAGE>
(3) MSL will report, by business area, MSL owned inventory by machine type
and/or part number, with detail of item quantity and value including Parts,
work in process and finished goods. IBM Parts, IBM Designated Parts and MSL
Procured Parts will be reported separately, IBM document CAI 97-11. MSL will
report how each inventory price is formed monthly upon request. MSL will
identify separately the inventory of all street value parts and IBM
classified parts by using IBM's guidelines.
(4) MSL will report, by business area, the inventory of IBM Consigned Parts by
machine type and/or part number, with detail of item quantity and value
including Parts, work in process and finished goods.
MSL will report how each inventory price is formed monthly and upon request.
All IBM Consigned Parts in Integration will be reported separately and by
customer monthly and upon request.
MSL will identify the location of IBM Consigned Parts by location within the
MSL Work Center.
MSL will identify separately the inventory of all street value parts and IBM
classified parts by class using IBM's guidelines.
(5) MSL will identify the volume and value in the LS, S, SSS, and MSL owned
inventory buffers and additional information that would define MSL's
inventory posture as it relates to product availability.
This information will be reported for [*] months after the Effective Date.
(6) For shipment invoices, MSL will provide validation information as follows:
Invoice number
Currency and currency rate
Order type, order label
IFC, Division, ITC, date, invoice type, ST., STALL
MSL value of goods, MSL emergency, MSL special casing
IBM value of goods, IBM emergency, IBM special casing
This information will be supplied at invoice level, detail (S/A or P/N) and
also at feature level.
(7) As per the Product Attachments.
(8) Formula for requirements accuracy is as per Requirements Accuracy Appendix.
(9) At the beginning of each year of operation, MSL will identify to IBM the MSL
sources from which MSL buys MSL Procured Parts and will provide latest
source quotes for each one. At the beginning of each quarter, MSL will
report to IBM any changes in MSL sources and any changes in their costs.
(10) This note applies only to the Valencia Work Center. A report of the type
regularly produced by the MSL Valencia Work Center as "EPRG parameters
Exxx". The report contains values for parameters associated with a REGEN:
a) Parameters defined at plant level, i.e. currency, value class start
month, value class length, inventory carrying rate, box explosion
offset, stock to dock time, effective code date, excess, surplus and
scrap at start of month, unit price, % add value, dollar rate,
etc.
b) Parameters defined at source level, for each source, i.e. MS, FZI,
FZO, FZC, MI, MO, CH, OAT, DTS, DEL COST, DEL R.OUT, NTT, ETT, LCT,
AI, AC, etc.
c) Parameters defined at Value-class level, for each value class, i.e.
flags, PPS, PS, MIC, FDS, MAC, Min D Val, Max Del Val, FZI, FZO, ZC,
MRI, MRO, CH, High Val Limit, DN, OH, etc.
d) Parameters defined at P/N family level *(management group level),
for each family/group, i.e. OPC, FDS, CII, NSI, PS, AI, mdq, Mdq,
OAT, DI, OC, SED, description, etc.
IBM and MSL Confidential Page 5 of 7
<PAGE>
(11) In addition MSL will provide on demand a history of all shipments for a
given period of time by order, configuration, ship to address, and date of
shipment.
MSL will report to IBM the measurements separately for each Work Center.
REPORTING
MSL will transmit the reports described in the Appendix 3, the Product
Attachment and those agreed upon by the Parties by facsimile, electronic data
interchange, or otherwise, as IBM reasonably requires. MSL also agrees to
establish, maintain and link the related complete and accurate data base
system to IBM's specified systems and other electronic communication links as
are deemed necessary and agreed to by both parties.
IBM and MSL Confidential Page 6 of 7
<PAGE>
APPENDIX 4: SUPPLY FLEXIBILITY
MSL agrees to maintain Supply Flexibility to meet requirements increase on
forecasted volumes as follows:
<TABLE>
<CAPTION>
MONTH M(CURRENT MO.) M+1 M+2 M+3 M+4 M+5
<S> <C> <C> <C> <C> <C> <C>
Additional % on plan [*]
</TABLE>
The Supply Flexibility will be available at model and feature level.
IBM and MSL Confidential Page 7 of 7
<PAGE>
ATTACHMENT 4 - EXPENSE PARTICIPATION
1. Valencia Product Engineering and New Program Management Support
Commencing on the Effective Date of the Agreement, but not before July 1,
1998, IBM shall pay MSL [*] pesetas on the first day of each calendar
month during the term of the Agreement for MSL's completion of the product
engineering and new program management responsibilities defined in Product
Attachment A of the Statement of Work. For any period of less that one
month, the above amount shall be apportioned based on the number of days
in that month.
2. MVS License for the Valencia Work Center
The terms and conditions, including pricing, governing the use of IBM's
MVS software shall be granted under a separate licensing agreement between
IBM Spain and MSL. For MVS software modules (including additions and
upgrades) that IBM agrees in writing, before fees are incurred, are
required by MSL to fulfill this Agreement, IBM shall reimburse MSL the
actual MVS license charges through separate invoices and payments. MSL
agrees that these payments will not take place before MSL has made the
corresponding payment for the license fees.
3. Startup and Investment Expenses for the US Work Center
a) IBM shall pay MSL up to [*] U.S. dollars [*] for 1998 startup and
investment expenses related to the US Work Center. MSL may submit invoices
to IBM commencing on the Effective Date of the Agreement through
December 31, 1998 for the following actual startup and investment expenses
for the US Work Center: I/T application set up including related travel
and consultant fees, AS 400 hardware and software, application software
and licenses, network infrastructure, line servers and user workstations,
training, radio frequency equipment, tooling, material handling equipment,
shelving, furniture, line fitup and facilities fitup expenses.
b) IBM has budgeted a total of [*] to relocate manufacturing lines from
Building 103 to Building 002; and for non-manufacturing fit up. Relocation
of the manufacturing lines is budgeted at [*], and non-manufacturing fit
up is budgeted at [*]. MSL will be responsible for any overruns of these
budgets incurred as a result of MSL's requests.
c) MSL acknowledges and agrees that its utilization of any tooling and/or
I/T systems for other customers shall not impact IBM's product
requirements. MSL shall obtain IBM's written approval prior to entering
into a contract with a third party involving tooling and/or I/T systems
charged to IBM as part of the US Work Center startup.
d) IBM reserves the right of first refusal to purchase any tooling and
equipment, that was reimbursed by IBM as part of the US Work Center
startup, at any time for MSL's [*] or [*], whichever is less.
IBM Confidential Page 1 of 3
att4016.lwp
<PAGE>
ATTACHMENT 4 - EXPENSE PARTICIPATION
e) MSL shall report all open startup and investment expenses, which are
subject to request for reimbursement by IBM, as part of the monthly
measurement reviews in 1998.
4. Personnel Expense Participation
4.1 Salary Participation
a) Commencing on the Effective Date of the Agreement, IBM shall compensate
MSL for the salaries of Transferred Employees, as defined in Attachment 2
of the Base Agreement, that are actually retained by the US Work Center
and supporting this Agreement. IBM's payment to MSL shall be determined by
the following formula: {Salary Payment = A x B}, where the following
values are assigned to such formula:
i) "A" shall mean actual Transferred Employees, as defined in
Attachment 2 of the Base Agreement, that are retained by MSL
at the US Work Center and supporting this Agreement as of the
last day of a quarter.
ii) "B" shall mean the IBM's salary participation rate as defined
in Attachment 4,4.1 b).
b) IBM's quarterly salary participation rates shall be:
Year 1 Year 2 Year 3
------ ------ ------
[*] [*] [*]
c) For any period of less than [*], the amount determined by (a) above,
shall be apportioned based on the actual number of days in that quarter.
d) Payment for these liabilities shall be made via a separate invoice
quarterly.
e) IBM shall make no payments for any extension periods to the
Agreement.
4.2 Medical and Vision Plan Participation
a) Commencing on the Effective Date of the Agreement, MSL shall offer to
Transferred Employees medical and vision plans that have employee
contribution rates equal to the IBM contribution rates that IBM offers to
its employees for that calendar year.
b) IBM shall pay MSL [*] dollars [*] on the Effective Date of the
Agreement for IBM's participation in the medical and vision plans
for Transferred Employees for the term of the Agreement. IBM shall make
no payments for any extension periods to the Agreement.
IBM Confidential Page 2 of 3
att4016.lwp
<PAGE>
ATTACHMENT 4 - EXPENSE PARTICIPATION
4.3 401K Plan Participation
a) Commencing on the Effective Date of the Agreement, MSL shall offer to
Transferred Employees a 401K plan that reflects a [*] percent employer
matching contribution.
b) IBM's payment to MSL for a quarter shall be MSL's actual employer
matching contributions for the Transferred Employees minus MSL
participation as defined by Attachment 4, 4.3 c). IBM shall make no
payments for Transferred Employees that are not retained by MSL at the US
Work Center and supporting this Agreement as of the last day of the
quarter.
c) MSL's 401K Plan participation for the Transferred Employees shall be
based on the following percentages of salary:
Year 1 Year 2 Year 3
------ ------ ------
[*] [*] [*]
d) For any period of less than [*] months, the amount determined by (a)
above, shall be apportioned based on the actual number of days in that
quarter.
e) Payment for these liabilities shall be made via a separate invoice
quarterly.
f) IBM shall make no payments for any extension periods to the Agreement.
IBM Confidential Page 3 of 3
att4016.lwp
<PAGE>
ATTACHMENT 5: EQUIPMENT AND PROGRAM LOAN LIST July 20, 1999
HARDWARE
<TABLE>
<CAPTION>
ASSET IDENTIFIER
OR SERIAL NUMBER DESCRIPTION QUANTITY COMMENT VERIFIED
<S> <C> <C> <C> <C>
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 verified Wayne Cato, 07/08/99
[*] [*] 1 [*] verified Wayne Cato, 07/08/99
[*] [*] 1 [*] verified Wayne Cato, 07/08/99
<PAGE>
ATTACHMENT 5: EQUIPMENT AND PROGRAM LOAN LIST July 20, 1999
[*] [*] 1 [*] verified Wayne Cato, 07/08/99
[*] [*] 1 [*] verified Wayne Cato, 07/08/99
[*] [*] 1 [*] verified Wayne Cato, 07/08/99
[*] [*] 1 [*] verified Wayne Cato, 07/08/99
[*] [*] 1 [*] verified Wayne Cato, 07/08/99
[*] [*] 1 [*] verified Wayne Cato, 07/08/99
[*] [*] 1 [*] verified Wayne Cato, 07/08/99
[*] [*] 1 [*] verified Wayne Cato, 07/08/99
[*] [*] 1 [*] verified Wayne Cato, 07/08/99
[*] [*] 1 [*] verified Wayne Cato, 07/08/99
[*] [*] 1 [*] verified Wayne Cato, 07/08/99
[*] [*] 1 [*] verified Wayne Cato, 07/08/99
[*] [*] 1 [*] verified Gary Holman, 07/19/99
[*] [*] 1 [*] verified Gary Holman, 07/19/99
[*] [*] 1 [*] verified Gary Holman, 07/19/99
One (1) item is located in the Bldg. 002 structure but cannot be individually
identified as a unit
ASSET IDENTIFIER
OR SERIAL NUMBER DESCRIPTION QUANTITY COMMENT VERIFIED
[*] [*] 1 [*] verified Wayne Cato, 07/08/99
<PAGE>
ATTACHMENT 5: EQUIPMENT AND PROGRAM LOAN LIST July 20, 1999
SOFTWARE
ASSET IDENTIFIER
OR SERIAL NUMBER DESCRIPTION QUANTITY COMMENT VERIFIED
[*] [*] 1 [*] verified Donovan Dandurand, 6/16/99
[*] 1 [*] verified Donovan Dandurand, 6/16/99
[*] 1 [*] verified Donovan Dandurand, 6/16/99
[*] 1 [*] verified Donovan Dandurand, 6/16/99
[*] 1 [*] verified Donovan Dandurand, 6/16/99
[*] 1 [*] verified Donovan Dandurand, 6/16/99
[*] 1 [*] verified Donovan Dandurand, 6/16/99
[*] 1 [*] verified Donovan Dandurand, 6/16/99
[*] 1 [*] verified Donovan Dandurand, 6/16/99
[*] 1 [*] verified Donovan Dandurand, 6/16/99
[*] 1 [*] verified Donovan Dandurand, 6/16/99
[*] 1 [*] verified Donovan Dandurand, 6/16/99
[*] 1 [*] verified Donovan Dandurand, 6/16/99
[*] 1 [*] verified Donovan Dandurand, 6/16/99
[*] 1 [*] verified Donovan Dandurand, 6/16/99
[*] 1 [*] verified Donovan Dandurand, 6/16/99
[*] 1 [*] verified Donovan Dandurand, 6/16/99
[*] 1 [*] verified Donovan Dandurand, 6/16/99
[*] 1 [*] verified Donovan Dandurand, 6/16/99
[*] 1 [*] verified Donovan Dandurand, 6/16/99
[*] 1 [*] verified Donovan Dandurand, 6/16/99
[*] 1 [*] verified Donovan Dandurand, 6/16/99
</TABLE>
<PAGE>
ATTACHMENT 6
SOFTWARE INSTALLATION TERMS AND CONDITIONS
The purpose of this Attachment 6 is to provide terms and conditions under which
MSL may install IBM Software Packages on Products. MSL shall not prepare a
preload image of an IBM Software Package or install any IBM Software Packages,
unless authorized by IBM in writing or expressly instructed under this
Attachment 6. All Appendices and Exhibits referred to in this Attachment 6 are
incorporated herein by reference. If there is a conflict between the Agreement
and this Attachment 6, the terms of this Attachment 6 will prevail.
1.0. DEFINITIONS. For purposes of this Attachment 6 only, the following
definitions shall apply:
1.1 "Approved Location" is a location at which IBM has expressly authorized MSL
in writing to perform its IBM Software Package installation responsibilities
under the Agreement, and which has also been so authorized by Microsoft
Corporation ("MS");
1.2 "Code" shall mean statements or instructions, whether in a human readable
"source" form or machine readable "object" form of programming code,
intended to bring about a certain result in the operation of a computer.
Code shall include (a) all supporting documentation, including but not
limited to all documentation needed to assist each Party in understanding
all technical aspects of the Code and all applicable end user documents and
materials, and (b) all corrections, modifications and enhancements to
Code.
1-3 "Customers" shall mean IBM, IBM subsidiaries, distributors, retailers, IBM
authorized resellers, end users and others as may be specified by IBM.
1.4 "Derivative Work" shall mean a work that is based upon one or more
pre-existing copyrighted or patented works, such as a revision, enhancement,
modification, translation, abridgment, condensation, expansion,
compilation or any other form in which such pre-existing work may be recast
transformed or adapted.
1.5 "End User" is any one who acquires Products for its own use and not for
resale.
1.6 "Harmful Code" shall mean any computer code, programming instruction, or set
of instructions that is constructed with the ability to damage, interfere
with, or otherwise adversely affect computer programs, data, files, or
hardware, without the consent or intent of the computer user. This
definitions includes, but is not limited to, self-replicating and self
propagating programming instructions commonly called viruses and worms.
1.7 "IBM Software Package" shall mean a software package that is owned by or
licensed to IBM, and is provided to MSL only for purposes of this Attachment
6 and the Agreement.
IBM Confidential June 2, 1999
ATT6.1wp Page 1 of 19
<PAGE>
ATTACHMENT 6
SOFTWARE INSTALLATION TERMS AND CONDITIONS
1.8 "Preload," "Preloading," and "Preloaded" refer to the process by which MSL
is authorized, subject to the terms and conditions of the Agreement, to load
a single copy of the IBM Software Package only onto the hard drive of a
Product;
1.9 "Products" shall mean IBM and OEM machine types as defined in Product
Attachments to the IBM/MSL Outsourcing Base Agreement Statement of Work.
2.0. SOFTWARE PACKAGE REQUIREMENTS
2.1. When authorized by IBM in writing or expressly instructed under this
Attachment 6, MSL agrees to prepare the IBM Software Package Preload image
in support of Products.
2.2. MSL agrees to Preload IBM Software Packages (only at Approved Locations) on
Products as set forth in this Attachment 6.
2.3. MSL shall establish and maintain electronic installation records (as
described in Exhibits 2, 3, and 4 of Appendix A to this Attachment 6) of all
IBM Software Packages installed, and maintain adequate business controls to
prevent unauthorized use or copies of any IBM Software Package.
2.4. MSL shall establish, maintain and report to IBM the number of individual
software programs (including operating systems and program applications)
included in IBM Software Packages that are (a) installed on Products, (b)
shipped with Products, and (c) shipped without Products for purposes of
Product support. MSL shall secure IBM's prior written permission regarding
any IBM Software Package shipped without the Product to ensure that all
licenses to IBM are adhered to by MSL.
2.5. MSL acknowledges that MS requires additional restrictions on its operating
system Code and other Code and documentation from MS, and therefore, MSL
agrees to also comply with the additional obligations set forth in Exhibit 5
of Appendix A of this Attachment 6 for all Code and documentation from MS.
IBM Confidential June 2, 1999
ATT6.1wp Page 2 of 19
<PAGE>
ATTACHMENT 6
SOFTWARE INSTALLATION TERMS AND CONDITIONS
3.0. ADDITIONAL WARRANTIES
MSL represents and warrants that at all times:
3.1. MSL will not copy or permit the copying (including back-up copies) of all
or any part of the IBM Software Packages, except to the extent required for
MSL to perform its obligations hereunder for IBM's benefit;
3.2. MSL will not sublicense, rent, lease, distribute, assign or otherwise
transfer (including distributing back-up copies of) all or any part of the
IBM Software Packages, except as expressly authorized by IBM in writing;
3.3. MSL will not reverse engineer, disassemble, or decompile all or any part of
the IBM Software Packages;
3.4. MSL will not remove any intellectual property marking or identification
code that may be in the IBM Software Packages;
3.5. MSL will not add to, delete from, or otherwise modify any Code included in
the IBM Software Packages, or create any Derivative Work therefrom, except
as expressly authorized by IBM in this Attachment 6 or otherwise authorized
herein.
3.6. MSL will comply with the additional requirements set forth in this
Attachment 6 and its Appendix A (including its Exhibits);
3.7. MSL will not export any IBM Software Package to any country without IBM's
prior express written permission (such permission, if any, shall not relieve
MSL of its obligations hereunder, and MSL shall remain fully responsible for
all such exporting).
IBM Confidential June 2, 1999
ATT6.1wp Page 3 of 19
<PAGE>
ATTACHMENT 6
SOFTWARE INSTALLATION TERMS AND CONDITIONS
4.0. ADDITIONAL AUDIT RIGHTS
IBM may regularly monitor, inspect and/or audit any software installation
location utilized or planned to be utilized hereunder pursuant to Section 7.0 of
the Outsourcing Base Agreement.
MSL will not utilize any location in performance of this Attachment 6 which
is not an Approved Location. MSL agrees to provide IBM at least ninety (90)
calendar days advanced written notice for any MSL facility planned to be used
(including the intended activity for each such facility) in the performance
of work hereunder, to allow IBM, and/or MS, to inspect each such facility.
MSL agrees to promptly correct any deficiencies discovered in such
inspections. Such IBM inspections, approvals and deficiency corrections shall
not in any way relieve MSL of its ongoing obligations under the Agreement.
IBM shall have the option to monitor, inspect, audit and take other necessary
actions in order to comply with IBM's requirements to MS regarding any of MS's
Code, or documentation, used hereunder.
IBM's right to audit hereunder shall continue for a period up to [*] years
following expiration or termination of the Agreement.
Any audit provided for herein shall be conducted during MSL's normal business
hours, after reasonable advance notice, and shall not unreasonably interfere
with MSL's normal operations.
IBM Confidential June 2, 1999
ATT6.1wp Page 4 of 19
<PAGE>
ATTACHMENT 6
SOFTWARE INSTALLATION TERMS AND CONDITIONS
APPENDIX A
ADDITIONAL OBLIGATIONS FOR MICROSOFT CODE AND DOCUMENTATION
1. AUTHORIZATION.
1.1. ATTACHMENT 6. The terms and conditions of this Attachment 6 are in addition
to, and not in lieu of, the terms and conditions of the Agreement.
1.2. SCOPE. The additional restrictions in this Appendix A shall apply to the MS
Code referenced in Exhibit 1 of this Appendix A, including any and all
revisions, enhancements, supplements or releases thereto (collectively, "MS
Software Images") and related MS documentation, if such MS Software Images
are made available by IBM to MSL. If required by MS, IBM has the right,
without limitation, to include additional Code as "MS Software Images" and
documentation by notifying MSL in writing. Provided that MSL complies fully
with the terms and conditions of this Attachment 6 pursuant to the terms of
the MS License to IBM ("MS License), IBM hereby authorizes MSL at Approved
Locations only to Preload MS Software Images on Products and to distribute
Preloaded Products as otherwise permitted in the Agreement. IBM may revoke
these authorizations in whole or in part at any time in its sole discretion.
1.3. MSL'S AUTHORIZED SUBSIDIARIES. With prior written approval from IBM, which
approval may be withheld in IBM's sole discretion, MSL may authorize its
Subsidiaries that are authorized to assemble and test Products pursuant to
the Agreement to Preload MS Software Images only at Approved Locations in
accordance with the terms, and conditions of the Agreement, including
Attachment 6, PROVIDED THAT MSL hereby unconditionally guarantees each of
its authorized SUBSIDIARIES' full and complete compliance with the terms and
conditions of the Agreement, including Attachment 6. Pursuant to this
guarantee, IBM shall not be required to make demand upon MSL's Subsidiary as
a condition to making demand upon MSL. Each authorized Subsidiary shall
execute an agreement with MSL sufficient to COMPLY with MSL's obligations to
IBM under this Attachment 6, and the term "MSL" as used elsewhere herein
shall include any authorized Subsidiaries who execute such an agreement and
are approved in writing by IBM to Preload MS Software Images as provided
herein.
IBM Confidential June 2, 1999
ATT6.1wp Page 5 of 19
<PAGE>
ATTACHMENT 6
SOFTWARE INSTALLATION TERMS AND CONDITIONS
APPENDIX A
ADDITIONAL OBLIGATIONS FOR MICROSOFT CODE AND DOCUMENTATION
1.4. MS APPROVAL. Notwithstanding anything herein to the contrary, MSL,
Subsidiaries of MSL, and Approved Locations, are subject to approval or
immediate revocation in writing by MS as provided in the MS License. MSL is
prohibited from Preloading the MS Software Image at any Preload location not
approved by MS. MSL shall provide IBM with the addresses of its
headquarters, the proposed Preload location(s) for which approval is
requested, the business profiles in the English language (including years in
business, ownership profile, nature of principal business activities,
general description of site security procedures, any nonstandard reporting
procedures from MSL site to IBM, and a summary of any prior experiences with
installation or replication of MS products), and such other relevant
information as MS or IBM may request, at least ninety (90) calendar days in
advance of the anticipated first installation date for such location
2. MSL'S RESPONSIBILITIES. MSL represents, warrants and agrees that it shall:
(a) Comply full), and completely with all of the terms and conditions
of this Attachment 6 and the MS License, including, but not limited to,
all terms regarding Preloading MS Software Images and related MS
documentation. Further, MSL represents, warrants and agrees:
(i) to create an electronic assembly record for each Product
in the format prescribed by IBM and transmit it to IBM prior
to shipment of Product, via electronic data transmission after
completion of assembly;
(ii) to include, in unmodified form, all publications, license
agreements, certificates of authenticity, labels and ship
groups with each Product as set forth in the Product's Bill of
Materials;
(iii) to use the master media, and the MS Software Images
obtained therefrom, only at an Approved Location and only to
Preload, in a manner expressly permitted by IBM, a single copy
of the Software Image designated for each Product in the Bill
of Materials onto the approved Product, and for no other
purpose whatsoever;
(iv) to maintain adequate business controls for the master
media, and the MS Software Images and supporting MS
documentation obtained therefrom, to prevent unauthorized use
or copies of any MS Software Image and supporting MS
documentation;
IBM Confidential June 2, 1999
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<PAGE>
ATTACHMENT 6
SOFTWARE INSTALLATION TERMS AND CONDITIONS
APPENDIX A
ADDITIONAL OBLIGATIONS FOR MICROSOFT CODE AND DOCUMENTATION
(v) not to copy or permit the copying (including back-up
copies) of all or any part of any MS Software Image and MS
supporting documentation, except as expressly authorized by
this Attachment 6; and
(vi) not to sublicense, rent, lease, distribute, assign or
otherwise transfer (including distributing back-up copies of)
all or any part of any MS Software Image including supporting
documentation, except as expressly authorized by this
Attachment 6;
(b) When expressly authorized by IBM in writing, implement one, or
more, of the following separate processes, which are described more
fully in Exhibits 2, 3 and 4 of this Appendix A, at each Approved
Location to ensure protection of the MS Software Image during the
Preload process:
(i) PROCESS ONE. An IBM or IBM contractor employee (who is not
an employee of MSL) shall periodically monitor the Preload
process, and the IBM or IBM contractor employee or an employee
of MSL shall ensure that the master media containing the MS
Software Image used for the Preload process is retained in a
secure area accessible only to such IBM or IBM contractor
employee or by MSL when not in use by the MSL (any oversight
on the part of IBM shall not relieve MSL of any of its
obligations hereunder); and/or
(ii) PROCESS TWO. MSL may use the recovery CD for the product
(if any) that ships with, or is designated by IBM for, the
Product to Preload Software Images onto each such Product. MSL
will maintain the recovery CD in a secure area until it is
used for installation and returned to a secure place or
packaged with the Product or its accompanying ship group. MSL
shall run image verification testing on all Products Preloaded
using a recovery CD; and/or
(iii) PROCESS THREE. The master media containing the MS
Software Image used for the Preload process shall be located
exclusively on a server system where it will be accessible
only by an IBM or IBM contractor employee or by MSL,
replication of the MS Software Image shall be performed only
under the authorization of IBM or MSL, and all copies shall be
monitored and tracked to an individual Product serial number.
IBM Confidential June 2, 1999
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<PAGE>
ATTACHMENT 6
SOFTWARE INSTALLATION TERMS AND CONDITIONS
APPENDIX A
ADDITIONAL OBLIGATIONS FOR MICROSOFT CODE AND DOCUMENTATION
If Process One or Process Two is selected, MSL shall take all necessary
steps to ensure that only IBM and IBM contractor employees and
designated MSL employees shall have access to such secured area where
the master image or recovery CDs are maintained when not in use,
including, without limitation, installing locks and ensuring no other
possible access through doors, ceilings, walls, or floors. If Process
Three is selected, MSL shall designate a dedicated server system for
such purpose, and access to the data and master images stored on such
server shall be limited to IBM and IBM contractor employees and
designated MSL employees through passwords, keyboard lock, and a locked
cover over all diskette drives and CD drives. Further, MSL shall take
all necessary steps to protect such server system from unauthorized
use. MSL's compliance with such processes will be subject to audit by
IBM and/or MS as provided herein in this Attachment 6 and in the
Agreement;
(c) Comply fully and completely with the obligations of the MS License,
including, but not limited to, those specifically set forth in Exhibit
5 of Appendix A, the Additional MS Provision: MS License Obligations
Imposed On MSL hereto, in the same manner and to the same extent that
IBM is required to comply with such obligations; provided, however,
that, except as expressly provided in this Attachment 6 (including, but
not limited to, any Appendices and Exhibits), this provision is not a
sublicense or assignment of any rights of IBM under the MS License, and
MSL shall not have any right or license to use, reproduce or distribute
any MS Software Images. Copies of the MS License are available for
review upon request, subject to the requirements of Subsection (d)
below;
(d) Prior to the receipt of any confidential information obtained from
MS, execute a non-disclosure agreement sufficient to comply with IBM's
confidentiality obligations to MS;
(e) Provide access to MSL's premises during normal business hours (with
prior notice of at least 48 hours) to inspection teams sent on behalf
of MS and/or IBM if MS or IBM has reason to believe that MSL may be in
violation of this Attachment 6, in order that such team may perform an
inspection of the MSL'S procedures to determine compliance with the
terms of this Attachment 6;
(f) Immediately stop Preloading of all MS Software Images upon notice
from IBM or MS of termination, as set forth in Section 7 of this
Appendix A of this Attachment 6, the MS License, or the Agreement;
IBM Confidential June 2, 1999
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<PAGE>
ATTACHMENT 6
SOFTWARE INSTALLATION TERMS AND CONDITIONS
APPENDIX A
ADDITIONAL OBLIGATIONS FOR MICROSOFT CODE AND DOCUMENTATION
(g) Distribute Products Preloaded with MS Software Images only to IBM
or IBM Subsidiaries, or on behalf of IBM or IBM Subsidiaries to the
extent permitted in the Agreement;
(h) Reimburse MS's and IBM's reasonable attorney's fees and costs if MS
or IBM employs attorneys to enforce any rights arising out of this
Attachment 6;
(i) Record, track and report to IBM (for consolidated reporting to MS)
in the form, manner and at intervals required by IBM, information
concerning MS Software Images Preloaded and supporting MS
documentation, including without limitation, the number of units, the
model number, the configuration, the name or part number of the MS
Software Image Preloaded, and the unique serial number of the Products
Preloaded and distributed with an MS Software Image.
3. ADDITIONAL WARRANTY BY MSL. MSL further represents, warrants and agrees to
notify IBM immediately in writing of any suspected or actual noncompliance with
the terms and conditions of this Attachment 6 or the MS License by MSL, its
employees, Subsidiaries, or agents.
4. THIRD PARTY BENEFICIARY. Notwithstanding Section 16.18 of the Outsourcing
Base Agreement, MS is an intended third party beneficiary of this Attachment 6
only, with full rights to enforce the terms of this Attachment 6 on its own
behalf, but only to the extent that the terms of this Attachment 6 pertains to
the MS Software Images and related MS documentation.
5. ADDITIONAL INDEMNIFICATION. MSL agrees to indemnify and hold harmless MS and
IBM, its Subsidiaries, employees, and directors, from all fines, claims and
expenses of any kind (including reasonable attorneys' fees and expenses)
incurred by IBM or MS arising from or connected with (a) any breach, default or
noncompliance by MSL of its representations, warranties or obligations under
this Attachment 6, (b) alteration or modification by MSL of any MS Software
Image, (c) installation on a Product of an image or Code other than the IBM
Software Package, and (d) any unauthorized use, reproduction or distribution of
MS Software Images or related documentation by MSL, or its employees or agents,
whether or not authorized by MSL; provided, however, that MSL shall not be
liable only to the extent that any such fines, claims or expenses are
attributable to IBM's gross negligence or willful misconduct or to written
instructions provided by an authorized representative of IBM to MSL.
IBM Confidential June 2, 1999
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<PAGE>
ATTACHMENT 6
SOFTWARE INSTALLATION TERMS AND CONDITIONS
APPENDIX A
ADDITIONAL OBLIGATIONS FOR MICROSOFT CODE AND DOCUMENTATION
6. ADDITIONAL MODIFICATION AND AMENDMENT RIGHTS. IBM may modify, add or delete
terms or conditions of this Attachment 6 (including its Appendices and Exhibits)
in response to a modification or amendment of the MS License by providing MSL
thirty (30) calendar days advance written notice or the same period of time MS
gives IBM to comply with a modification or amendment, if such period is less
than thirty (30) calendar days. MSL agrees to comply with such modifications,
additions, or deletions to this Attachment 6 if it continues to Preload MS
Software Images on Products after such notice period.
7. ADDITIONAL TERMINATION RIGHTS. In addition to the termination provisions
provided in Section 5.0 of the Outsourcing Base Agreement, IBM may terminate
this Attachment 6, in whole or in part ("in part" including any or all
provisions regarding MS Software Images), without liability, due to: (a) the
expiration or termination of the MS License; or (b) the expiration or
termination of the Agreement, including without limitation, termination of
this Attachment 6 as specified below:
(i) IBM may, at IBM's sole discretion, terminate all rights granted to
MSL under this Attachment 6 (and its associated Exhibits and
Appendices), with cause immediately upon written notice to MSL;
(ii) MS may terminate this Attachment 6 in part (i.e., to the extent MS
Software Images are included in this Attachment 6) immediately upon
written notice to MSL and IBM in the event that MS learns of any
unauthorized use, reproduction or distribution of MS Intellectual
property by MSL, or its employees or agents;
IBM Confidential June 2, 1999
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<PAGE>
ATTACHMENT 6
SOFTWARE INSTALLATION TERMS AND CONDITIONS
EXHIBIT I OF APPENDIX A
MS SOFTWARE IMAGES
The term "MS Software Images" consists of the following Microsoft Corporation
products:
A. [*]
B. [*]
IBM Confidential June 2, 1999
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<PAGE>
ATTACHMENT 6
SOFTWARE INSTALLATION TERMS AND CONDITIONS
EXHIBIT 2 OF APPENDIX A
EXTERNAL DOWNLOAD PROCESS
EXTERNAL DOWNLOAD PROCESS. The following process shall comply with the
requirements set forth in Subsection 2(c)(i) of Appendix A, Attachment 6:
(a) download tools (which are "off the shelf products") used to perform
installation process are not required to be in a secured area (1,2);
(b) the master image is retained in a secured area (which is either a locked
room or cabinet) when not in use;
(c) the installation process is periodically monitored by an IBM employee or IBM
contractor employee (who is not an employee of MSL);
(d) if the image is installed on a hardfile prior to installation of the
hardfile on the Product, such installed hardfile serial numbers will be
separately tracked and any such hardfiles that are not installed in a Product by
the end of the work session will be secured in the secured area;
(e) the hardfile on which the image is installed is electronically verified and
associated to the Product unit serial number;
(f) MSL electronically tracks the system unit serial number, hardfile serial
number, and designated model number;
(g) access to the secured area where the master image is retained when not in
use is limited to an IBM employee, IBM contractor employee, or MSL;
(h) the MS Certificate of Authenticity (COA) serial number is electronically
associated by MSL to the Product serial number;
Notes:
1. Customer Product model and serial number electronically captured via
the vital product data.
2. IBM proprietary software, maintained and accessible only by IBM or MSL, shall
be used for the download process.
IBM Confidential June 2, 1999
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<PAGE>
ATTACHMENT 6
SOFTWARE INSTALLATION TERMS AND CONDITIONS
EXHIBIT 3 OF APPENDIX A
RECOVERY CD INSTALLATION
RECOVERY CD INSTALLATION. The following process shall comply with the
requirements set forth in subsection 2(c)(ii) of Appendix A, Attachment 6:
(a) download tools (which are "off the shelf products") used to perform the
installation process are not required to be in a secured area;
(b) the recovery CDs are retained in a secured area when not in use;
(c) the installation process is periodically monitored by an IBM employee or IBM
contractor employee (who is not an employee of MSL);
(d) the hardfile on which the image is installed is electronically verified and
associated to the Product serial number;
(e) MSL electronically tracks the Product serial number, hardfile serial number,
and designated model number;
(f) access to the secured area where the recovery CDs are retained when not in
use is limited to an IBM employee, IBM contractor employee or MSL;
(g) the MS Certificate of Authenticity (COA) serial number is electronically
associated to the Product serial number by the MSL.
IBM Confidential June 2, 1999
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<PAGE>
ATTACHMENT 6
SOFTWARE INSTALLATION TERMS AND CONDITIONS
EXHIBIT 4 OF APPENDIX A
SECURED SERVER DOWNLOAD PROCESS
SECURED SERVER DOWNLOAD PROCESS. The following process shall comply with the
requirements set forth in Subsection 2(c)(iii) of Appendix A, Attachment 6:
(a) the master image shall be maintained on a secured server with access limited
to an IBM employee, an IBM contractor employee, or MSL;
(b) the server shall be accessible only to an IBM employee, an IBM contractor
employee, or MSL through keyboard locks and power-on passwords;
(c) only operators with valid user ids and passwords are authorized to initiate
download. The IBM employee or IBM contractor employee need not be present for
installation process;
(d) the server electronically logs the model number, serial number, user id, and
image part number when the installation process is initiated;
(e) MSL electronically tracks the Product serial number, hardfile serial number
and designated model number;
(f) the MS COA serial number is electronically associated by MSL to the Product
serial number
IBM Confidential June 2, 1999
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<PAGE>
ATTACHMENT 6
SOFTWARE INSTALLATION TERMS AND CONDITIONS
EXHIBIT 5 OF APPENDIX A
ADDITIONAL MS PROVISIONS:
MS LICENSE OBLIGATIONS IMPOSED ON MSL
1. INSTALLATION OBLIGATIONS. MSL represents, warrants and agrees that when
performing work pursuant to this Attachment 6, it shall:
(a) install no more than one (1) copy of the MS Software Image on each
Product system hard disk ("Preinstalled MS Software");
(b) unless expressly authorized by IBM in writing to perform otherwise,
pre-install the MS Software Image as the "default" operating system on each
Product distributed with the MS Software Image (i.e., the MS Software Image
will set up and execute unless the End User Customer configures the Approved
Product otherwise). MSL shall preinstall the MS Software Image solely in
accordance with the installation instructions set forth in this Attachment 6
and as further directed by IBM in Appendices. MSL may use the tangible forms
of the programming code (tools and software) provided by IBM solely to
preinstall the MS Software Image in accordance with this Attachment 6 and
for no other purpose;
(c) distribute, to IBM and IBM's subsidiaries, Products with only one
(1) copy each of the Preloaded MS Software and related documentation as
directed by IBM in writing; PROVIDED, HOWEVER, that if IBM provides MSL
with a recovery CD of the MS Software Image ("Recovery CD") or back-up copy
of the MS Software Image on CD ("Back-up Copy") in a Product's ship group,
MSL shall distribute one copy of such Recovery CD or Back-up CD along with
the Product, if so directed by IBM in writing;
(d) distribute MS Software Image(s) and MS Software Image documentation
only with Product(s) and only inside the Product package;
(e) except as expressly authorized by IBM in writing, not modify, in any
way, or delete any aspects of the MS Software Image and MS related
documentation provided by IBM to MSL;
(f) except as provided in this Attachment 6 or expressly authorized by
IBM in writing, not remove or modify the package contents of any MS Software
Image package or modify or translate any related End User documentation;
IBM Confidential June 2, 1999
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<PAGE>
ATTACHMENT 6
SOFTWARE INSTALLATION TERMS AND CONDITIONS
EXHIBIT 5 OF APPENDIX A
ADDITIONAL MS PROVISIONS:
MS LICENSE OBLIGATIONS IMPOSED ON MSL
(g) include an IBM-specified MS Software Image package with each Product
distributed with an MS Software Image; A COA must be affixed to or accompany
each copy of the MS Software Image documentation, and the COA serial number
must be registered with the Product during the assembly process as provided
in Exhibits 2, 3, and 4 of Appendix A of this Attachment 6.
(h) if expressly authorized by IBM to distribute the MS Software
Images(s) on media other than installed on the Product hard disk, distribute
the MS Software Image(s) on separate media (e.g., separate diskettes,
CD-ROM disc, etc.) from other software, except for distribution of a
Recovery CD approved by IBM and MS;
(i) Preload MS Software Images on Products, and place MS Software Image
packages in Product packages, only at an Approved Location and solely by
MSL's employees or contractors;
(j) not reverse engineer any MS Software Image provided by IBM to MSL,
except as permitted by applicable law without the possibility of contractual
waiver. Except as necessary to Preload MS Software Images or as otherwise
permitted in Attachment 6, MSL shall not reproduce the MS Software Image or
any part of the related documentation. MSL shall make no use of the tangible
MS Software Image and related documentation except as expressly described in
this Attachment 6;
(k) not distribute MS Software Images or any part of the related
documentation in encrypted form, unless provided by IBM in such form and
expressly directed by IBM to distribute in such form;
(l) where MSL distributes Preinstalled MS Software within the Products,
place 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 system indicates acceptance of the terms of the End User License
Agreement ("EULA"), or comply with such other procedure authorized by IBM
to ensure EULA acceptance;
IBM Confidential June 2, 1999
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<PAGE>
ATTACHMENT 6
SOFTWARE INSTALLATION TERM AND CONDITIONS
EXHIBIT 5 OF APPENDIX A
ADDITIONAL MS PROVISIONS:
MS LICENSE OBLIGATIONS IMPOSED ON MSL
(m) if IBM expressly authorizes MSL in writing to enter End User
information on behalf of End Users in the boxes provided for the on-screen
End User registration process for the MS Software Image, not to enter
Supplier's own name or make any other false or fictional registrations. MSL
shall not (A) relieve End Users of their obligations to enter COA
registration numbers in the on-screen End User registration process and to
reply to on-screen EULA inquiries or (B) insert COA registration numbers or
reply to EULA inquiries for or on behalf of End Users;
(n) unless expressly authorized by IBM in writing, not install multiple
versions of MS Software Images;
(o) except as expressly authorized by IBM in writing, not distribute
more than one MS Windows operating system (i.e., [*]) with the same
Product.
2. INTELLECTUAL PROPERTY NOTICES. MSL will not remove, modify or obscure any
copyright, trademark, patent, or mask work notices that appear on the MS
Software Image or related documentation as delivered to MSL.
3. OBLIGATIONS UPON TERMINATION.
(a) Except as otherwise provided in Subsection 3(b) below, within [*]
calendar days after termination or expiration of the Agreement (or this
Attachment 6, in the event of termination in part) for any reason,
MSL shall return to IBM all MS Software Image(s) master media and all MS
Software Image documentation which has not been placed in a Product package
prior to such termination or expiration, and MSL shall provide written
notice to IBM signed by a representative certifying that MSL has fulfilled
such requirements.
(b) Except as otherwise provided in this Subsection 3(b), upon
termination or expiration of the Agreement (or this Attachment 6, in the
event of termination in part) for any reason, MSL's authority to Preload MS
Software Images and to place MS Software Image documentation in Product
packages shall immediately cease.
IBM Confidential June 2, 1999
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<PAGE>
ATTACHMENT 6
SOFTWARE INSTALLATION TERMS AND CONDITIONS
EXHIBIT 5 OF APPENDIX A
ADDITIONAL MS PROVISIONS:
MS LICENSE OBLIGATIONS IMPOSED ON MSL
4. ADDITIONAL AUDITS AND INSPECTIONS.
(a) During the Term of the Agreement, and for [*] years thereafter,
MSL agrees to keep all usual and proper records and books of account and
all usual and proper entries relating to each MS Software Image sufficient
to substantiate the number of copies of MS Software Image packages acquired
and placed into Product packages, the number of copies of MS Software Images
installed, and the number of Products distributed by MSL. MSL shall maintain
on MSL's premises (or commercial archive facility) such records, and all
other records required to be kept by this Attachment 6, for itself and for
each Subsidiary of MSL that exercises rights under this Attachment 6. Any
audit must be initiated within [*] years after termination or expiration of
this Attachment 6, the Agreement, or of the MS License, whichever occurs
last.
(b) In order to verify statements issued by MSL and Subsidiaries of MSL
and compliance with the terms and conditions of this Attachment 6, IBM or MS
may, at IBM's or MS's sole discretion, cause (i) an audit to be made of
MSL's and/or MSL's Subsidiaries' books and records and/or (ii) an inspection
to be made of those portions of MSL's and/or MSL's Subsidiaries' facilities
and procedures reasonably necessary to verify such compliance. Except as
otherwise provided in the Agreement, any audit and/or inspection shall be
conducted during regular business hours at MSL's and/or MSL's Subsidiaries'
facilities, with at least forty-five (45) calendar days prior written
notice. Any audit and/or inspection shall be conducted (other than on a
contingent fee basis) by an independent certified public accountant which is
either (1) jointly selected by MSL and IBM (or MS, as applicable), (2) has
been agreed to by the Parties for any prior audit of any MSL/IBM (or MS, as
applicable) license or agreement, or (3) has been agreed to by IBM and MS
for any prior audit of any IBM/MS license or agreement.
(c) MSL agrees to provide the audit or inspection team reasonable access
to the relevant MSL's and/or MSL's Subsidiaries' records and facilities for
the purpose of performing the audit.
IBM Confidential June 2, 1999
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<PAGE>
ATTACHMENT 6
SOFTWARE INSTALLATION TERMS AND CONDITIONS
EXHIBIT 5 OF APPENDIX A
ADDITIONAL MS PROVISIONS:
MS LICENSE OBLIGATIONS IMPOSED ON MSL
(d) Prompt adjustment shall be made to compensate for any errors or
omissions disclosed by such audit. Any such audit shall be paid for by IBM
(or MS, as applicable) unless material discrepancies are disclosed.
"Material" shall mean an underaccounting of installed MS Software Images
valued at more than [*]. If material discrepancies are disclosed, MSL
agrees to pay IBM or MS for the costs associated with the audit. Further,
MSL agrees to indemnify IBM and its subsidiaries for any additional costs
incurred by IBM as a result of any unauthorized copies or copies which were
not reported to IBM. In no event shall audits be made more frequently than
semiannually unless the immediately preceding audit disclosed a material
discrepancy.
5. EXPORT OR RE-EXPORT. MSL agrees that it will not export or re-export an MS
Software Image to any country to which such export is restricted by export
administration regulations, without prior written consent, if required, of
the Office of Export Administration of the U.S. Department of Commerce, or
such other governmental entity as may have jurisdiction over such export.
Restricted countries currently include, but are not necessarily limited to,
Cuba, Sudan, Iran, Iraq, Libya, North Korea, and Syria. MSL warrants and
represents that neither the U.S.A. Bureau of Export Administration nor any
other federal agency has suspended, revoked or denied MSL's export
privileges. MSL further agrees that it shall not export or re-export an MS
Software Image in violation of applicable laws or regulations to (i) any End
User who MSL knows will utilize an MS Software Image in the design,
development or production of nuclear, chemical or biological weapons; or
(ii) any End User who has been prohibited from participating in U.S.A.
export transactions by any federal agency of the U.S.A. government.
6. CONFIDENTIALITY. As provided in the Agreement, the terms and conditions of
this Attachment 6 (including this Exhibit 5 of Appendix A of Attachment 6) are
confidential, and MSL shall not disclose the terms or conditions to any third
party without the prior written approval of IBM.
IBM Confidential June 2, 1999
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<PAGE>
IBM AGREEMENT FOR EXCHANGE
OF CONFIDENTIAL INFORMATION
Document Number: 4998S60076
International Business Machines Corporation
Armonk, New York 10504
Page 1 of 5
<PAGE>
[GRAPHIC OMITTED]
Agreement for Exchange of Confidential Information
IBM ============================================================================
Our mutual objective under this Agreement is to provide appropriate
protection for Confidential Information (Information) while maintaining
our ability to conduct respective business activities. Each of us agree
that the following terms apply when one of us (Disclose) discloses
Information to the other (Recipient) under this Agreement.
SECTION 1 ASSOCIATED CONTRACT DOCUMENTS
Each time one of the parties wishes to disclose specific Information to
the other, the Discloser will issue a Supplement to this Agreement
(Supplement) before disclosure.
The Supplement will identify the Recipient's person designated to be its
Point of Contact for the disclosure and will contain the Initial and Final
Disclosure Dates. If either of these dates is omitted from the Supplement,
such date will be deemed to be the actual date of disclosure. Information
becomes subject to this Agreement on the Initial Disclosure Date. The
Supplement will also contain a non-confidential description of the
specific Information to be disclosed and any additional terms for that
Information.
The only time Recipient and Discloser are required to sign the Supplement
is when it contains additional terms. When signatures are not required,
the Recipient indicates acceptance of Information under the terms of this
Agreement by participating in the disclosure, after receipt of the
Supplement.
SECTION 2 DISCLOSURE
The Discloser and Recipient's Point of Contact will coordinate and control
the disclosure. Information will be disclosed either:
1) In writing;
2) By delivery of items;
3) By initiation of access to information, such as may be
contained in a data base; or
4) By oral and/or visual presentation.
Information should be marked with a restrictive legend of the Discloser.
If Information is not marked with such legend or is disclosed orally:
1) The Information will be identified as confidential at the time
of disclosure, and
2) The Discloser will promptly provide the Recipient with written
summary.
SECTION 3 OBLIGATION
The Recipient agrees to:
1) use the same care and discretion to avoid disclosure,
publication or dissemination of the Discloser's Information as
it uses with its own similar Information that it does not wish
to disclose, publish or disseminate; and
2) use the Discloser's Information for the purpose for which it
was disclosed or otherwise for the benefit of the Discloser.
The Recipient may disclose Information to:
Page 2 of 5
<PAGE>
1) its employees and employees of its parent and subsidiary
companies who have a need to know; and
2) any other party with the Discloser's prior written consent.
Before disclosure to any of the above parties, the Recipient will have a
written agreement with such party sufficient to require that party to
treat information in accordance with this Agreement.
The Recipient may disclose Information to the extent required bylaw.
However, the Recipient must give the Discloser prompt notice to allow the
Discloser a reasonable opportunity to obtain a protective order.
SECTION 4 CONFIDENTIALITY PERIOD
Information disclosed pursuant to this Agreement will be subject to the
terms of this Agreement for [*] years following the Final Disclosure Date.
SECTION 5 EXCEPTIONS TO OBLIGATIONS
The Recipient may disclose, publish, disseminate, and use Information that
is:
1) already in its possession without obligation of
confidentiality;
2) developed independently;
3) obtained from a source other than the Discloser without
obligation of confidentially;
4) publicly available when received, or thereafter becomes
publicly available through no fault of the Recipient; or
5) disclosed by the Discloser to another party without obligation
of confidentially.
SECTION 6 RESIDUAL INFORMATION
The recipient may disclose, publish, disseminate, and use the ideas,
concepts, know-how and techniques, related to the Recipient's business
activities, which are contained in the Discloser's information and
retained in the memories of Recipient's employees who have had access to
the Information pursuant to this Agreement (Residual Information).
Nothing contained in this Section gives the Recipient the right to
disclose, publish, or disseminate, except as set forth elsewhere in this
Agreement:
1) the source of Residual Information;
2) any financial, statistical or personnel data of the
Discloser; or
3) the business plans of the Discloser.
SECTION 7. DISCLAIMERS
THE DISCLOSER PROVIDES INFORMATION ON AN "AS IS" BASIS.
The discloser will not be liable for any damages arising out of use of
Information disclosed hereunder.
Neither this Agreement nor any disclosure of Information hereunder grants
the Recipient any right or license under any trademark, copyright or
patent now or hereafter owned or controlled by the Discloser.
Disclosure of Information containing business plans is for planning
purposes only. The Discloser may change or cancel its plans at any time.
Use of such Information is at the Recipient's own risk.
The receipt of Information pursuant to this Agreement will not preclude,
or in any way limit, the Recipient from:
Page 3 of 5
<PAGE>
1) providing to others products or services which may be
competitive with products or services of the Discloser;
2) providing products or services to others who compete with the
Discloser; or
3) assigning its employees in any way it may choose.
SECTION 8 GENERAL
This Agreement does not require either party to disclose or to receive
Information.
Neither party may assign, or otherwise transfer, its rights or delegate
its duties or obligations under this Agreement without prior written
consent. Any attempt to do so is void.
The Recipient will comply with all applicable United States and foreign
export laws and regulations.
Only a written agreement signed by both of us can modify this Agreement.
Either party may terminate this Agreement by providing [*] month's written
notice to the other. Any provisions of this Agreement which by their
nature extend beyond its termination remain in effect until fulfilled,
and apply to respective successors and assignees.
If there is a conflict between the terms of this Agreement and a
Supplement, those of the Supplement prevail. Except as modified by a
Supplement, the terms of this Agreement remain in full force and effect.
The laws of the State of New York govern this Agreement.
Page 4 of 5
<PAGE>
This Agreement and its Supplements are the complete and exclusive
agreement regarding our disclosures of Information, and replace any prior
oral written communications between us. By signing below for our
respective enterprises, each of us agrees to the terms of this Agreement.
Once signed, any reproduction of this Agreement made by reliable means
(for example, photocopy or facsimile) is considered an original.
International Business Machines Manufacturer Services Limited
Corporation 200 Baker Avenue
Armonk, New York Concord, Massachusetts
By: /s/ Craig Bloszinsky By:
---------------------------------- ----------------------------------
Authorized Signature Authorized Signature
Name: Craig Bloszinsky Name:
---------------------------------- ----------------------------------
Date: 3/10/98 Date:
---------------------------------- ----------------------------------
Agreement Number 4998S60076
International Business Machines Corporation
Armonk, New York 10504
Page 5 of 5
<PAGE>
EQUIPMENT AND PROGRAM LOAN AGREEMENT
between
IBM Corporation
and
Manufacturers' Services Western US Operations, Inc.
<PAGE>
[GRAPHIC OMITTED]
IBM Equipment and Program Loan Agreement
============================================================================
This is an Equipment and Program Loan Agreement ("EPLA") between International
Business Machines Corporation (hereinafter called "IBM"), a New York
corporation, with an address for the purpose of this Agreement at 8501 IBM
Drive, Charlotte, NC 28262, and Manufacturers' Services Western US Operations,
Inc. (hereinafter called "MSL"), with an address at 5600 Mowry School Road,
Newark, CA 94560.
IBM and MSL agree that the following terms and conditions apply when IBM loans
MSL equipment and programs including associated user manuals and similar
documentation (Loaned Items). Loaned Items may also be referred to as Loaned
Equipment or Loaned Programs, as applicable.
SECTION 1 ASSOCIATED CONTRACT DOCUMENTS
Attachment 5 of the Outsourcing Agreement lists the Loaned Items. A
revised Attachment 5 sets forth any additions or deletions to the listed
Loaned Items. MSL's continued use of the Loaned Items or acceptance of
additional Loaned Items after its receipt of a revised Attachment 5 will
constitute its acceptance of such Attachment.
The loan of Loaned Items is made in conjunction with the IBM and MSL
Outsourcing Agreement dated _____________________ ("Referenced
Agreement") for the purpose of MSL fulfilling its responsibilities and
obligation as stated in the Reference Agreement.
SECTION 2 TERM AND TERMINATION
Unless otherwise mutually agreed, the EPLA will be in effect for as long
as the Referenced Agreement is effective.
SECTION 3 LOANED PERIOD
IBM will provide the Loaned Items to MSL on or about the Effective Date of
the Referenced Agreement. The Loan Period for each Loaned Item will extend
from the actual date IBM delivers the Loaned Items(s) to MSL, until the
earliest of:
a) the applicable return date specified in the Attachment or revised
return date specified in a revised Attachment;
b) the date MSL acquires i) title to the Loaned Equipment or ii) a
continuing license to the Loaned Program, should such acquisition or
licensing be available to MSL under Section 12: or
c) on the Referenced Agreement expiration date.
SECTION 4 AUTHORIZED USE
IBM provides Loaned Items to MSL solely for use in accordance with the
terms of this Agreement and for the Purpose of the loan described either
in this Agreement or in the Referenced Agreement (Authorized Use). There
are no charges for Authorized Use of the Loaned Items. MSL may not use the
Loaned Items for any other purposes.
EPL00L(CLT-EPL 1.1-02/93) Page 2 of 7
<PAGE>
SECTION 5 OWNERSHIP AND LICENSE
IBM or another party retains title to all Loaned Items. MSL may not
transfer Loaned Items to anyone else. For Loaned Programs which are not
subject to IBM's or another supplier's or publisher's license agreement,
IBM grants MSL a license to use, store, modify and make sufficient copies
to support MSL's Authorized Use under this Agreement. Such copies will be
deemed to be Loaned Items. For Loaned Programs which are subject to
another supplier's or publisher's license agreement, however, the terms
and conditions of that supplier or publisher are passed to MSL through
IBM. Such terms and conditions will be shipped with the Loaned Program.
For Loaned Programs which IBM licenses to others under an IBM license, the
terms of the applicable IBM license which are not inconsistent with this
Agreement apply. IBM will provide such terms to MSL upon request Any
authorized copies made by MSL will be deemed to be Loaned Items.
SECTION 6 LICENSED INTERNAL CODE
If the Loaned Equipment contains Licensed Internal Code (Code), so
identified by IBM, IBM grants MSL a license only to execute such Code to
enable the Loaned Equipment to perform in accordance with IBM's official
published specifications. MSL may not reverse assemble, reverse compile,
decode, translate, or make any other copies of the Code. MSL must return
the original copy of the Code to IBM at the conclusion of the Loan Period.
SECTION 7 DELIVERY AND INSTALLATION
IBM will deliver the Loaned Items to 8501 IBM Drive, Charlotte, NC 28262.
MSL will:
1) set-up all Loaned Equipment, and
2) install all Loaned Programs
SECTION 8 RISK OF LOSS OR DAMAGE
IBM relieves MSL of the risk of loss of, or damage to, all Loaned Items,
except for loss or damage resulting from MSL's breach of this Agreement
including use other than Authorized Use.
SECTION 9 SECURITY
MSL will provide, at no cost to IBM, adequate security to protect the
Loaned Items from theft, damage or misuse.
MSL will use reasonable care in the use of all Loaned Items. MSL will
provide an operating environment for the Loaned Items consistent with the
related user documentation.
MSL will keep the Loaned Items at the Installation Address specified in
the Attachment. MSL will not move the Loaned Items to another location
without IBM's prior written approval.
SECTION 10 SERVICE AND SUPPORT
During the time the Loaned Items are in MSL's possession, MSL shall, at
its own expense:
a) Develop and maintain the expertise to operate the Equipment
independent of IBM and ensure that the Equipment complies at all
times with all federal, state, and local governmental safety and
other requirement (including OSHA regulations). If MSL determines
that any of the Loaned Items received from IBM fails to comply with
any such requirements, MSL shall promptly notify IBM, and IBM shall
EPL00L(CLT-EPL 1.1-02/93) Page 3 of 7
<PAGE>
either replace the Loaned Item or instruct MSL to modify the Loaned
Item so that it compiles, at IBM's expense.
b) Service the Loaned Items and maintain them in good operating
condition at all times.
c) Replace or repair all items lost, damaged or destroyed except to the
extent MSL proves to IBM that such loss, damage or destruction is
caused by circumstances beyond MSL's control. All replacement of
Loaned Items Shall become IBM property and shall be Subject to all
the terms and conditions of this Agreement.
MSL will permit IBM personnel full, free and safe access to MSL's
facilities, during normal business hours, after reasonable notice, for the
purpose of inspection and inventory as IBM deems necessary.
SECTION 11 ALTERATIONS AND ATTACHMENTS
MSL may make an alteration to Loaned Equipment (e.g., a change in the
structure of the equipment) only upon IBM's prior written approval. MSL
may make an attachment to Loaned Equipment (e.g., coupling a printer to a
loaned personal computer) without notice to IBM.
MSL will remove any alteration or attachment and restore Loaned Equipment
to its unaltered condition before its return to IBM or upon IBM's notice
to MSL that the alteration or attachment creates a safety hazard or
renders maintenance of the Loaned Equipment impractical.
SECTION 12 DISPOSITION OF LOANED ITEMS
12.1 Return to IBM
MSL will return the Loaned Equipment to IBM at the end of the Loan Period,
except as may be provided for in this Section. MSL will return the Loaned
Equipment to IBM in the same condition as when delivered to MSL,
reasonable wear and tear excepted.
MSL will return the original and all copies of the Loaned Programs at the
end of the Loaned Period, except as may be provided in this Section.
MSL will permit IBM personnel access during IBM's normal business hours to
allow IBM to remove the Loaned Items.
12.2 Acquisition and Continued Licensing
IBM will determine the availability of Loaned Equipment for MSL's
acquisition and Loaned Programs for MSL's continued licensing beyond the
applicable Loan Period. MSL must inform IBM, prior to the end of the
applicable Loan Period, of MSL's interest in the acquisition of specific
Loaned Equipment or the continued licensing of specific Loaned Programs.
IBM will then notify MSL in writing either;
1) of the terms and conditions under which MSL may acquire such
Loaned Equipment or continue to license such Loaned Programs,
or
2) that the Loaned Items are not available for acquisition or
continued licensing.
Continued Licensing of Loaned Programs will be governed by the provisions
of the applicable IBM license agreement or another supplier's or
publisher's license agreement. IBM will identify to MSL the applicable
agreement which governs such licensing.
EPL00L(CLT-EPL 1.1-02/93) Page 4 of 7
<PAGE>
SECTION 13 DISCLAIMER OF WARRANTY
IBM PROVIDES LOANED ITEMS ON AN "AS IS" BASIS. IBM MAKES NO WARRANTY,
EXPRESS OR IMPLIED, WITH RESPECT TO SUCH ITEMS, INCLUDING THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
SECTION 14 PATENTS AND COPYRIGHTS
If the operation of a Loaned Item becomes, or IBM believes is likely to
become, the subject of a claim that it infringes a patent or copyright in
the United States or Puerto Rico, MSL will permit IBM, at its option and
expense, either to secure the right for MSL to continue using the Loaned
Item or to replace or modify it so that it becomes noninfringing. However,
if neither of the foregoing alternatives is available on terms which are
reasonable in IBM's judgment, MSL will return the Loaned Item upon IBM's
written request.
IBM will have no obligation with respect to any such claim based upon
MSL's modification of IBM equipment, programs or programming or their
combination, operation or use with any non-IBM apparatus, data or
programs.
IBM will not have any liability regarding patent or copyright infringement
for non-IBM Loaned Items.
This Section states IBM's entire obligations to MSL regarding infringement
or the like.
SECTION 15 LIMITATION OF REMEDIES
IBM's entire liability and MSL's exclusive remedy for actual damages from
cause whatsoever relating to the subject matter of this Agreement will be
limited to the amount of $25,000. This limitation will apply, except as
otherwise stated in this Section, regardless of the form of action,
whether in contract or in tort, including negligence. This limitation will
not apply to claims by MSL for bodily injury or damage to real property or
tangible personal property for which IBM is legally liable.
In no event will IBM be liable for any lost profits, lost savings,
incidental damages, or other economic consequential damages, even if IBM
has been advised of the possibility of such damages. In addition, IBM will
not be liable for any damages claimed by IBM based on any third party
claim.
In no event will IBM be liable for any damages caused by MSL's failure to
perform MSL's responsibilities.
SECTION 16 GENERAL
MSL may not assign this Agreement without IBM's prior written consent. Any
attempted assignment without such consent is void.
Loaned Items are to be installed only in the United States or Puerto Rico.
IBM will pay destination charges, both from and to IBM-designated
locations, for each Loaned Item shipped in accordance with IBM's then
current shipping practice. MSL will pay any rigging charges. MSL will
furnish all labor for unpacking and packing except as IBM otherwise
specifies or when performed at an IBM-designated location.
IBM may provide services described in this Agreement by using IBM-selected
independent contractors.
Neither party is responsible for failure to fulfill its obligations under
this Agreement due to causes beyond its control.
EPL00L(CLT-EPL 1.1-02/93) Page 5 of 7
<PAGE>
Neither party may bring an action, regardless of form, arising out of this
Agreement more than [*] years after the cause of action arose.
In the event of termination or expiration of this Agreement, the
provisions of this Agreement which, by their nature, extend beyond the
expiration or termination of this Agreement shall remain in effect beyond
such expiration or termination until fulfilled.
If there is a conflict between this Agreement and an Attachment, the terms
and conditions of the Attachment will prevail. Except as modified by an
Attachment the terms of this Agreement remain in full force and effect.
The terms of any Attachment not inconsistent with a subsequent Attachment
remain in full force and effect.
This Agreement and the rights and obligations of the parties hereto shall
be construed in accordance with the substantive laws of the State of New
York.
EPL00L(CLT-EPL 1.1-02/93) Page 6 of 7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective authorized representatives.
ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO:
IBM Corporation Manufacturers' Services Western
US Operations, Inc.
--------------------------------------------------------------------------
By: /s/ Craig A. Bloszinsky By: /s/ Kevin C. Melia
--------------------------------------------------------------------------
CRAIG A. BLOSZINSKY KEVIN C. MELIA
--------------------------------------------------------------------------
Print Name Print Name
PURCHASING PROGRAM DIRECTOR PRESIDENT, CEO
--------------------------------------------------------------------------
Title Title
5/1/98 MAY 5, 1998
--------------------------------------------------------------------------
Date Date
EPL00L(CLT-EPL 1.1-02/93) Page 7 of 7
