<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 11, 2000
REGISTRATION NO. 333-96227
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
MANUFACTURERS' SERVICES LIMITED
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3679 04-3258036
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or organization) Industrial Classification Identification No.)
Code Number)
</TABLE>
300 BAKER AVENUE, SUITE 106, CONCORD, MASSACHUSETTS 01742
(978) 287-5630
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------------
KEVIN C. MELIA
300 BAKER AVENUE, SUITE 106
CONCORD, MASSACHUSETTS 01742
(978) 287-5630
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES OF ALL COMMUNICATIONS, INCLUDING COMMUNICATIONS SENT TO AGENT FOR
SERVICE, SHOULD BE SENT TO:
<TABLE>
<S> <C>
DAVID B. WALEK, ESQ. WINTHROP B. CONRAD, JR., ESQ.
Ropes & Gray Davis Polk & Wardwell
One International Place 450 Lexington Avenue
Boston, Massachusetts 02110 New York, New York 10017
(617) 951-7000 (212) 450-4000
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than the
underwriting discounts and commissions. All amounts shown are estimates, except
the Securities and Exchange Commission registration fee and the National
Association of Securities Dealers, Inc. filing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee........ $39,600
National Association of Securities Dealers, Inc. filing
fee...................................................... 15,500
New York Stock Exchange listing fee........................ *
Printing and engraving expenses............................ *
Legal fees and expenses.................................... *
Accounting fees and expenses............................... *
Blue sky fees and expenses................................. 5,000
Transfer Agent and Registrar fees.......................... 18,000
Miscellaneous.............................................. *
-------
Total.................................................... $ *
=======
</TABLE>
- --------------------------
* To be included by amendment.
Item 14. Indemnification of Directors and Officers.
The Registrant's Restated Certificate of Incorporation provides that the
Registrant's Directors shall not be liable to the Registrant or its stockholders
for monetary damages for breach of fiduciary duty as a director, except to the
extent that the exculpation from liabilities is not permitted under the Delaware
General Corporation Law as in effect at the time such liability is determined.
The Amended and Restated By-Laws provide that the Registrant shall indemnify its
directors to the full extent permitted by the laws of the State of Delaware.
Prior to the consummation of this offering, the Company will enter into
indemnification agreements with each of its directors and executive officers
that provide for indemnification and expense advancement to the fullest extent
permitted under the Delaware General Corporation Law.
Item 15. Recent Sales of Unregistered Securities.
In the three years preceding the filing of this Registration Statement, the
Registrant has issued the following securities which were not registered under
the Securities Act of 1933, as amended:
(1) On June 13, 1997, MSL issued:
(a) an aggregate of 20,833,334 shares of common stock to the DLJ
Entities for an aggregate of $25 million; and
(b) 629,000 shares of common stock to Kevin C. Melia pursuant to the
exercise of outstanding options for an aggregate of $629,000.
II-1
<PAGE>
(2) Between April 4, 1998 and November 29, 1999, MSL sold an aggregate of
1,504,915 shares of common stock to employees and persons having business
relationships with MSL for an aggregate of $1,464,598.
(3) On November 26, 1999, MSL sold an aggregate of 2,000,000 shares of
senior exchangeable preferred stock due 2006 to investment entities affiliated
with Donaldson, Lufkin & Jenrette, Inc. for an aggregate of $50 million.
(4) Between November 4, 1997 and January 24, 2000, MSL sold an aggregate of
2,412,778 shares of common stock to employees of MSL pursuant to the exercise of
outstanding options for an aggregate of $2,414,259 and in consideration of
services rendered.
The sales and issuances listed above in paragraphs (1), (2) and (3) were
deemed exempt from registration under the Securities Act by virtue of Section
4(2) thereof, as transactions not involving a public offering. The issuances of
securities listed in paragraph (4) were deemed exempt from registration under
the Securities Act by virtue of Rule 701. Defined terms used herein not
otherwise defined have the meanings ascribed to them in the prospectus, which
forms a part of this Registration Statement.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits:
<TABLE>
<C> <S>
*1.1 Form of Underwriting Agreement.
**2.1+ Securities Purchase Agreement dated as of January 20, 1995
by and among MSL and the parties listed therein.
**2.2 Warrant Agreement dated as of August 31, 1995 by and among
MSL, Bank of America National Trust and Savings
Association and the parties listed therein.
**2.3+ Preferred Stock and Warrant Subscription Agreement dated as
of November 26, 1999 by and among MSL and the parties
listed therein.
**2.4 Escrow Agreement dated as of November 26, 1999 by and among
MSL and the parties listed therein.
**2.5+ Asset Purchase Agreement dated as of November 19, 1999,
among 3Com Corporation, Manufacturers' Services Limited
and Manufacturers' Services Salt Lake City
Operations, Inc.
*3.1 Restated Certificate of Incorporation of MSL.
*3.2 Amended and Restated By-laws of MSL.
*3.3 Form of certificate representing shares of common stock,
$.001 par value per share.
**4.1 Stockholders Agreement dated as of January 20, 1995 by and
among MSL and the stockholders named therein.
**4.2 Stockholders Agreement Amendment dated as of November 26,
1999 by and among MSL and the stockholders names therein.
**4.3+ Credit Agreement dated August 21, 1998 among MSL, MSL
Overseas Finance B.V. and the lenders named therein.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
**4.4 First Amendment to Credit Agreement and Limited Waiver dated
as of February 26, 1999 by and among MSL, MSL Overseas
Finance B.V. and the lenders named in the Credit
Agreement.
**4.5 Second Amendment to Credit Agreement and Consent dated as of
November 23, 1999 by and among MSL, MSL Overseas Finance
B.V. and the lenders named in the Credit Agreement.
*5.1 Opinion of Ropes & Gray.
**10.1 Employment Agreement dated as of January 20, 1995 by and
between MSL and Kevin C. Melia.
**10.2 Employment Letter dated as of June 20, 1997 by and between
MSL and Robert E. Donahue.
**10.3 Employment Letter dated as of September 27, 1995 by and
between MSL and Rodolfo Archbold.
**10.4 Employment Letter dated as of January 4, 1996 by and between
MSL and Dale R. Johnson.
**10.5 Severance Letter dated June 25, 1996 by and between MSL and
Dale R. Johnson.
**10.6 Employment Letter dated as of January 23, 1998 by and
between MSL and James N. Poor.
**10.7 Second Amended and Restated Non-Qualified Stock Option Plan.
*10.8 Form of 2000 Equity Incentive Plan.
*10.9 Form of 2000 Employee Stock Purchase Plan.
*10.10 Form of Indemnification Agreement.
**10.11 Office/Warehouse Lease dated as of April 14, 1997 by and
between Amberjack, Ltd. and Manufacturers' Services
Limited - Roseville, Inc.
**10.12 Lease dated as of May 5, 1998 by and between International
Business Machines Corporation and Manufacturers' Services
Western U.S. Operations, Inc.
X10.13 Supply Agreement dated as of November 27, 1999 by and
between MSL and 3Com Corporation.
X10.14 Outsourcing Agreement dated as of June 1, 1998 by and
between International Business Machines Corporation and
Manufacturers' Services Western US Operations, Inc.
**X10.15 Manufacturing, Integration and Fulfillment Contract dated as
of June 26, 1998 by and between International Business
Machines S.A. and Global Manufacturers' Services -
Valencia.
X10.16 Global Requirements Agreement No. MSL 183G dated as of
July 30, 1997 by and between MSL and Iomega Corporation.
**X10.17 Supply Agreement dated as of November 27, 1999 by and
between MSL and Palm Computing, Inc.
X10.18 Manufacturing Services Agreement dated as of June 1, 1999 by
and between Hewlett-Packard Singapore Pte Ltd. and
Manufacturers' Services Singapore Pte Ltd.
*10.19 2000 Cash Incentive Compensation Plan.
**21.1 Subsidiaries of MSL.
**23.1 Consent of PricewaterhouseCoopers LLP.
*23.2 Consent of Ropes & Gray (included in the opinion filed as
Exhibit 5.1).
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
24.1 Power of attorney pursuant to which amendments to this
registration statement may be filed (included on the
signature page in Part II).
**27.1 Financial Data Schedule.
</TABLE>
- --------------------------
* To be filed by amendment.
** Previously filed.
X Confidential treatment requested on portions of this exhibit. An unredacted
version of this exhibit has been filed separately with the Commission.
+ MSL agrees to furnish supplementally to the Commission a copy of any omitted
schedule or exhibit to such agreement upon request by the Commission.
(b) Financial Statement Schedules.
The following financial statement schedule of the Company is included in
Part II of the Registration Statement:
<TABLE>
<S> <C>
Report of Independent Accountants on Financial Statement
Schedules................................................. S-1
Schedule II - Valuation and Qualifying Accounts............. S-2
</TABLE>
All other schedules for which provision is made in the applicable accounting
regulations of the Commission are not required under the related instructions,
are inapplicable or not material, or the information called for thereby is
otherwise included in the financial statements and therefore has been omitted.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement, certificates in such
denominations and registered in such manner as requested by the underwriters to
permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under "Item 14--Indemnification
of Directors and Officers" above, or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore,
II-4
<PAGE>
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Manufacturers' Services Limited has duly caused this Amendment No. 2 to the
Registration Statement on Form S-1 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Concord, Commonwealth of
Massachusetts, on this 11th day of April, 2000.
<TABLE>
<S> <C> <C>
MANUFACTURERS' SERVICES LIMITED
By: /s/ KEVIN C. MELIA
--------------------------------------
Name: Kevin C. Melia
Title: CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF THE BOARD
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Kevin C.
Melia and Thompson Dean and each of them singly, his or her true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement on Form S-1 to be filed by Manufacturers'
Services Limited, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to be
done in and about the premises, as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitutes, may lawfully do or cause to
be done by virtue hereof.
* * * *
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 to the Registration Statement on Form S-1 has been signed by the
following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <S> <C>
Chairman of the Board,
/s/ KEVIN C. MELIA Chief Executive Officer
---------------------------------------- (Principal Executive April 11, 2000
KEVIN C. MELIA Officer) and Director
/s/ ROBERT E. DONAHUE President (Principal
---------------------------------------- Financial and Accounting April 10, 2000
ROBERT E. DONAHUE Officer)
*
---------------------------------------- Director April 11, 2000
THOMPSON DEAN
</TABLE>
II-6
<PAGE>
<TABLE>
<C> <S> <C>
*
---------------------------------------- Director April 11, 2000
KARL WYSS
/s/ JOHN F. FORT, III
---------------------------------------- Director April 11, 2000
JOHN F. FORT, III
</TABLE>
The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 2 pursuant to the Power of Attorney executed by the above named
directors of the Registrant and previously filed with the Securities and
Exchange Commission on behalf of such directors.
<TABLE>
<S> <C> <C> <C>
*By: /s/ KEVIN C. MELIA
------------------------------------- Attorney-in-Fact April 11, 2000
KEVIN C. MELIA
</TABLE>
II-7
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<C> <S>
*1.1 Form of Underwriting Agreement.
**2.1+ Securities Purchase Agreement dated as of January 20, 1995
by and among MSL and the parties listed therein.
**2.2 Warrant Agreement dated as of August 31, 1995 by and among
MSL, Bank of America National Trust and Savings
Association and the parties listed therein.
**2.3+ Preferred Stock and Warrant Subscription Agreement dated as
of November 26, 1999 by and among MSL and the parties
listed therein.
**2.4 Escrow Agreement dated as of November 26, 1999 by and among
MSL and the parties listed therein.
**2.5+ Asset Purchase Agreement dated as of November 19, 1999,
among 3Com Corporation, Manufacturers' Services Limited
and Manufacturers' Services Salt Lake City
Operations, Inc.
*3.1 Restated Certificate of Incorporation of MSL.
*3.2 Amended and Restated By-laws of MSL.
*3.3 Form of certificate representing shares of common stock,
$.001 par value per share.
**4.1 Stockholders Agreement dated as of January 20, 1995 by and
among MSL and the stockholders named therein.
**4.2 Stockholders Agreement Amendment dated as of November 26,
1999 by and among MSL and the stockholders names therein.
**4.3+ Credit Agreement dated August 21, 1998 among MSL, MSL
Overseas Finance B.V. and the lenders named therein.
**4.4 First Amendment to Credit Agreement and Limited Waiver dated
as of February 26, 1999 by and among MSL, MSL Overseas
Finance B.V. and the lenders named in the Credit
Agreement.
**4.5 Second Amendment to Credit Agreement and Consent dated as of
November 23, 1999 by and among MSL, MSL Overseas Finance
B.V. and the lenders named in the Credit Agreement.
*5.1 Opinion of Ropes & Gray.
**10.1 Employment Agreement dated as of January 20, 1995 by and
between MSL and Kevin C. Melia.
**10.2 Employment Letter dated as of June 20, 1997 by and between
MSL and Robert E. Donahue.
**10.3 Employment Letter dated as of September 27, 1995 by and
between MSL and Rodolfo Archbold.
**10.4 Employment Letter dated as of January 4, 1996 by and between
MSL and Dale R. Johnson.
**10.5 Severance Letter dated June 25, 1996 by and between MSL and
Dale R. Johnson.
**10.6 Employment Letter dated as of January 23, 1998 by and
between MSL and James N. Poor.
**10.7 Second Amended and Restated Non-Qualified Stock Option Plan.
*10.8 Form of 2000 Equity Incentive Plan.
*10.9 Form of 2000 Employee Stock Purchase Plan.
*10.10 Form of Indemnification Agreement.
</TABLE>
<PAGE>
<TABLE>
<C> <S>
**10.11 Office/Warehouse Lease dated as of April 14, 1997 by and
between Amberjack, Ltd. and Manufacturers' Services
Limited - Roseville, Inc.
**10.12 Lease dated as of May 5, 1998 by and between International
Business Machines Corporation and Manufacturers' Services
Western U.S. Operations, Inc.
X10.13 Supply Agreement dated as of November 27, 1999 by and
between MSL and 3Com Corporation.
X10.14 Outsourcing Agreement dated as of June 1, 1998 by and
between International Business Machines Corporation and
Manufacturers' Services Western US Operations, Inc.
**X10.15 Manufacturing, Integration and Fulfillment Contract dated as
of June 26, 1998 by and between International Business
Machines S.A. and Global Manufacturers' Services -
Valencia.
X10.16 Global Requirements Agreement No. MSL 183G dated as of
July 30, 1997 by and between MSL and Iomega Corporation.
**X10.17 Supply Agreement dated as of November 27, 1999 by and
between MSL and Palm Computing, Inc.
X10.18 Manufacturing Services Agreement dated as of June 1, 1999 by
and between Hewlett-Packard Singapore Pte Ltd. and
Manufacturers' Services Singapore Pte Ltd.
*10.19 2000 Cash Incentive Compensation Plan.
**21.1 Subsidiaries of MSL.
**23.1 Consent of PricewaterhouseCoopers LLP.
*23.2 Consent of Ropes & Gray (included in the opinion filed as
Exhibit 5.1).
24.1 Power of attorney pursuant to which amendments to this
registration statement may be filed (included on the
signature page in Part II).
**27.1 Financial Data Schedule.
</TABLE>
- --------------------------
* To be filed by amendment.
** Previously filed.
X Confidential treatment requested on portions of this exhibit. An unredacted
version of this exhibit has been filed separately with the Commission.
+ MSL agrees to furnish supplementally to the Commission a copy of any omitted
schedule or exhibit to such agreement upon request by the Commission.
<PAGE>
Exhibit 10.13
SUPPLY AGREEMENT
BETWEEN
MANUFACTURERS' SERVICES SALT LAKE CITY OPERATIONS, INC.
and
3COM CORPORATION
- ----------
[*] = Information redacted pursuant to a confidential treatment request.
An unredacted version of this exhibit has been filed separately with the
Commission.
<PAGE>
TABLE OF CONTENTS
Page
----
1. DEFINITIONS ........................................................... 1
2. PRECEDENCE OF DOCUMENTS ............................................... 3
3. PURCHASE AND SUPPLY COMMITMENT ........................................ 3
4. PURCHASE ORDERS, FLEXIBILITY, RESCHEDULES, CANCELLATIONS .............. 4
5. ROLLING FORECAST ...................................................... 6
6. PURCHASES BY BUYER'S AUTHORIZED AGENTS ................................ 6
7. EXCESS MATERIALS ...................................................... 7
8. OBSOLETE MATERIALS .................................................... 7
9. TERM OF AGREEMENT ..................................................... 7
10. PRODUCTION CAPACITY ................................................... 7
11. FLEXIBILITY CAPABILITY ................................................ 8
12. MATERIALS TRANSFER .................................................... 8
13. PRICING ............................................................... 8
14. DELIVERY .............................................................. 9
15. PACK-OUT, PACKING, MARKING, AND SHIPPING INSTRUCTIONS ................. 9
16. QUALITY STANDARDS AND CERTIFICATION ................................... 9
17. INSPECTION, TESTING, AND ACCEPTANCE ................................... 11
18. RETURN OF PRODUCT ..................................................... 12
19. SUPPORT ............................................................... 13
20. WARRANTY .............................................................. 13
21. PAYMENT ............................................................... 15
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
24 CHANGES .............................................................. 15
23. PROTOTYPING AND ENGINEERING SERVICES ................................. 16
24. INTELLECTUAL PROPERTY RIGHTS ......................................... 17
25. TERMINATION FOR CAUSE ................................................ 18
26. TERMINATION FOR CONVENIENCE .......................................... 18
27. LIMITATION OF LIABILITY .............................................. 19
28. FORCE MAJEURE ........................................................ 19
29. NONASSIGNABILITY ..................................................... 20
30. NOTICES .............................................................. 20
31. COMPLIANCE WITH LAWS ................................................. 21
32. PATENT, COPYRIGHT AND TRADEMARK INDEMNITY ............................ 21
33. CAPACITY PLANNING .................................................... 23
34. GRATUITIES ........................................................... 23
35. INSURANCE AND STATUTORY OBLIGATIONS .................................. 23
36. INSURANCE COVERAGE ................................................... 24
37. CONFIDENTIAL INFORMATION ............................................. 24
38. PUBLIC ANNOUNCEMENTS ................................................. 25
39. COUNTRY OF ORIGIN .................................................... 26
40. PROPERTY FURNISHED BY BUYER .......................................... 26
41. GENERAL .............................................................. 26
EXHIBITS:
Exhibit A - Products and Pricing
-ii-
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
Exhibit B - Specifications
Exhibit C - Buyers' Pack-Out and Packaging Specifications
Exhibit D - Flexibility Parameters
Exhibit E - Buyer's Affiliates and Authorizing Agents
Exhibit F - Performance Standards
Exhibit G - Build Request Process Flow
Exhibit H - Long Leadtime Authorization Form
Exhibit I - Environmental Warranties
Exhibit J - Statement of Work
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<PAGE>
SUPPLY AGREEMENT
THIS SUPPLY AGREEMENT (hereinafter referred to as "the Agreement"), dated
and effective this 27th day of November 1999, ("Effective Date"), and the
schedules attached hereto between
Manufacturers' Services Salt Lake City Operations, Inc., a company
organized and existing under the laws of Delaware and having its principal place
of business at 5742 West Harold Gatty Drive, Salt Lake City, Utah 84116
("Seller") on the one hand and
3Com Corporation, a company organized and existing under the laws of
Delaware and having its principal place of business at 5400 Bayfront Plaza,
Santa Clara, California 95052 ("Buyer") on the other hand. "Seller and Buyer"
are hereinafter also collectively referred to as "Parties" and individually as a
Party.
WHEREAS, Seller agrees to manufacture and sell to Buyer the Products (as
hereinafter defined) and Buyer agrees to purchase from Seller such Products,
subject to the terms and conditions of this Agreement.
1. DEFINITIONS
A. "Affiliate": with respect to any Party, any other party directly or
indirectly controlling, controlled by, or under common control with such Party.
For purposes of this definition, "control" when used with respect to any party,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such party, whether through the
ownership of voting securities, by contract or otherwise; the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
Buyer's Affiliates are identified in Exhibit E, which may be changed by written
notice from Buyer to Seller from time to time.
B. "BOM": Buyer's Bill of Materials.
C. Buyer's "Authorized Agent": any of Buyer's Affiliates, or any third
party suppliers, subcontractors or contract manufacturers who desire to purchase
Products or Materials and whose credit worthiness is reasonably acceptable to
Seller, who purchase on a letter of credit basis, or whose payment obligations
are guaranteed by Buyer. Buyer's Authorized Agents are identified in Exhibit E,
which may be changed from time to time by written agreement between Buyer and
Seller.
D. "Days": calendar days unless otherwise specified.
E. "Excess Materials": Unique Materials on hand and ordered consistent
with Buyer's forecast at agreed-upon leadtimes and for which the forecasted use
is in excess of [*]
<PAGE>
[*] resulting from Buyer's cancellations, reschedules or other delays or changes
caused by Buyer.
F. "Finished Goods Stockroom": the section of Seller's facility designated
as the area where the Product is delivered to Buyer.
G. "Materials": component line items on the BOM, which are collectively
assembled to produce the Product.
H. "Manufacturing Lead Time": the total aggregate lead time of that
component of the Product having the longest lead time, plus the time necessary
for receiving and inspecting all components for such Product, manufacturing the
Product, and systems integration, test and distribution, all as mutually agreed
upon by the Seller and Buyer.
I. "MRP": Materials requirements planning.
J. "NRE": non-recurring engineering expenses.
K. "Obsolete Materials": Unique Materials on hand and ordered consistent
with Buyer's forecast at agreed-upon leadtimes which can no longer be used for
their designated Product and/or for which there is no forecast for the following
[*]
L. "Performance Standards": those performance standards set forth in
Exhibit F, as may be modified from time to time by mutual written agreement of
the Parties.
M. "Product(s)": the product(s) identified by Buyer's part number or
assembly identification name as more fully described in Buyer's Specifications.
N. "Pull" means a replenishment driven process triggered by customer
consumption whereby Product is manufactured and delivered by Seller based upon
Buyer's replenishment demand, which is generated by actual use, disposition or
consumption of Product by Buyer; the overall objective being to minimize Seller
and Buyer's inventories while enabling greater flexibility and faster response
in fulfilling Buyer's variable replenishment demand.
O. "Build Request" is a document Buyer provides to Seller on an as-needed
basis and serves as a replenishment request. The Build Request indicates, among
other things, the part number(s), quantity(s), delivery date(s), and
destination(s) of the Product(s) being requested.
P. "Pull Product" shall mean Products, which may be purchased by Buyer
under a Pull Purchase Order pursuant to this Agreement, and for which Seller and
Buyer have jointly agreed are to be designated as pull Products.
Q. "Blanket Purchase Order" is Buyer's blanket Purchase Order for a
Product. Blanket Purchase Orders shall reference this Agreement and include the
mutually agreed Price (as defined in Section 13A), but do not bind Buyer or
Seller as to total quantities purchased, delivery dates, or the total dollar
commitment of such Blanket Purchase Order.
2
<PAGE>
R. "Purchase Order": Buyer's written purchase order form or other format
mutually agreed upon by the Parties and any documents incorporated therein by
reference.
S. "RMA": return material authorization.
T. "Specifications": Buyer's specifications as shown on Exhibit B,
attached, which also hereby by reference include IPC-610B Class 2 workmanship
standards as modified from time to time and the then currently accepted
commercial manufacturing practices.
U. "Unique Materials": Custom (i.e. specifically designed for the
Products) Materials or noncancellable and nonreturnable industry standard
Materials (i.e., that are not available from multiple suppliers or from a single
supplier with multiple customers).
2. PRECEDENCE OF DOCUMENTS
The precedence of documents between Buyer and Seller shall be:
A. This Agreement, as it may be amended in writing by mutual agreement
B. A Purchase Order
C. Buyer's non-binding forecast
3. PURCHASE AND SUPPLY COMMITMENT
A. Buyer agrees that it and its Authorized Agents shall purchase, and
Seller agrees to supply, a minimum of 5,000 production machine hours of
utilization per quarter at Buyer's Q2FY2000 standards on existing equipment as
of the Effective Date for existing Products (or applicable standards as mutually
agreed for new Products or new capital equipment for existing Products) during
the Initial Term of this Agreement. Notwithstanding the foregoing, if Seller
falls to meet the Performance Standards set forth in Exhibit F in all material
respects, or otherwise fails to comply with material obligations hereunder, or
Seller fails to make the minimum commitment available to Buyer in accordance
with Buyer's orders in any quarter due to a Materials shortage or otherwise (not
directly caused by Buyer), Buyer will be under no obligation to reach this
minimum in any quarter of such material noncompliance but will be under this
obligation in subsequent periods if such noncompliance is cured within the
Initial Term. Notwithstanding the foregoing, any failure of Seller to make
minimum commitments available to Buyer in accordance with Buyer's orders in any
quarter shall only relieve Buyer of its obligation to reach its minimum
commitment to the extent of such shortfall provided that Seller makes the
remainder of such commitment available in such quarter in accordance with
Buyer's orders.
B. Any overage in purchase of Products of no more than [*]% that occurs
during any quarter will be credited towards the subsequent quarterly period and
any deficit in purchase of Products of no more than [*]% in any quarter may be
made up in the next quarter to the extent there is not a deficit in such
subsequent quarter. This minimum purchase commitment takes precedence over the
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Flexibility Parameters of Exhibit D; Failure to meet the commitment is subject
to a [*] notice and cure period.
4. PURCHASE ORDERS, FLEXIBILITY, RESCHEDULES, CANCELLATIONS
A. Buyer will provide a minimum of [*] continuous, Blanket Purchase Order
coverage. Blanket Purchase Orders may be submitted in the form of hard copy, by
facsimile, or by electronic transfer if there is an electronic data interchange
("EDI") agreement in place between Buyer and Seller. Purchase Orders will
specify part numbers, quantity, prices, product revisions, requested delivery
dates and delivery locations all of which shall be consistent with the terms
hereof. Any terms or conditions contained in the Purchase Order or in Seller's
acknowledgement or other document which are inconsistent with or in conflict
with the terms and conditions contained in this Agreement or which increase or
impose additional obligations, liabilities, or risks upon the other Party are
hereby expressly rejected and shall have no effect. Blanket Purchase Orders will
be for one part number per purchase order and indicate: (1) agreed-upon purchase
Price; (2) method for shipping, receiving and billing of Product shipped per the
"Build Request Process Flow" method set out in Exhibit G or as otherwise
mutually agreed; and (3) payment terms as defined in this Agreement. Blanket
Purchase Orders quantities are not considered for liability purposes or for use
in Materials planning and forecast requirements. Materials liability is set
forth in Exhibit D. Buyer shall communicate demand for long range and weekly
increments consistent with the Build Request Process Flow set forth in Exhibit G
or as otherwise mutually agreed.
B. Alternatively, Buyer will provide a Blanket Purchase Order [*] at
the agreed-upon Price for the forecasted demand for [*]. Buyer will release
Build Requests for Products on a [*] basis for the quantities to be shipped
the following [*] based upon demand patterns and backlog status. On a
periodic basis at Buyer's discretion, Buyer may issue a Build Request
document to Seller, requesting delivery of Product pursuant to the Build
Request Process Flow set forth in Exhibit G. Such Build Requests shall be
Buyer's only commitment to purchase Products (subject to Section 3 above),
and Seller's only authorization to ship Product to Buyer. A Build Request may
be in electronic or written (including facsimile) form. Seller agrees to
multiple Build Requests per Day.
C. When Buyer issues a Build Request, Products must be scheduled for
delivery at least [*] after Seller's receipt of the Build Request. If Buyer
requests Seller to ship Products in fewer than [*] after Seller's receipt of the
Build Request, Seller agrees to make commercially reasonable efforts to
accommodate Buyer's request.
D. Buyer and Seller agree to, on a [*] basis, reconcile their respective
data records with respect to open Purchase Order quantity the quantity of
Product ordered, shipped and delivered pursuant to Buyer's Build Requests during
the previous [*] period.
E. Seller will use commercially reasonable efforts, and will allocate
excess capacity at the Salt Lake City facility pro-rata based on customer unit
order volume among Buyer and other customers (to the extent Seller does not have
enough capacity to meet Buyer's orders beyond forecast and minimum commitment)
to meet Buyer's requested increases in capacity beyond
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forecasted quantities within the Manufacturing Lead Time subject to Materials
availability, other scheduled manufacturing, and manufacturing capacity. If any
premium, expediting, or other increased charges over quoted costs are required
in order to meet Buyer's increased requirements, they must be approved in
advance by Buyer. Buyer agrees to pay for all such pre-approved costs that
represent out-of-pocket costs incurred by Seller. In addition, Seller commits at
no additional cost to Buyer to comply with the flexibility terms for Materials
and capacity availability as defined below provided that Seller is not obligated
to procure additional capital equipment to meet this obligation:
Materials and Capacity Availability Upside
[*] % Upside
0-2 [*]
2-4 [*]
4-8 [*]
>8 [*]
F. Exhibit D sets forth the allowable outward reschedules, cancellations
and upward flexibility.
G. Changes to Purchase Orders that are permissible under Exhibit D and
changes to its forecasts will be consolidated by Buyer who will take
commercially reasonable efforts to limit its requests to one request per [*]
H. Purchase Orders shall not be considered as accepted until confirmed in
writing by an authorized representative of Seller. Seller shall make
commercially reasonable efforts to confirm Purchase Orders (except by written
mutual arrangement) within [*] after receipt. Notwithstanding the foregoing, if
Seller fails to accept or reject within [*], Seller will be deemed to have
accepted that Purchase Order. No additional or different provisions proposed by
either Party shall apply unless expressly agreed to in writing by both Parties.
Seller will accept Purchase Orders which are consistent with the terms and
conditions of this Agreement.
I. Seller will meet the delivery dates specified by Buyer if such dates
are consistent with the Performance Standards set forth in Exhibit F.
J. On a [*] basis Seller will provide Buyer with a list of all Materials
with leadtimes exceeding [*] for review and mutual approval. Upon mutual
approval, Seller will update the MRP with the mutually agreed current leadtimes.
Any Unique Materials that are required to be purchased beyond mutually agreed
leadtimes requires completion of the "Long Leadtime Authorization Form" set
forth in Exhibit H.
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K. Any Unique Materials item whose cost will change, with inventory or
liability still available, but less than a forecasted [*] production, will
result in a Price change, using a [*] method:
[*]
L. or such other method as mutually agreed.
5. ROLLING FORECAST
Buyer will provide Seller with at least a [*] rolling non-binding
forecast, updated [*]. Buyer authorizes Seller to procure long lead-time
Materials consistent with Section 4J above in accordance with Buyer's forecasts
and flexibility requirements. Buyer further authorizes Seller to purchase
minimum buy items and reel quantities to support economic order quantities and
Materials requirement planning which may exceed authorized forecasts or Purchase
Orders. Seller agrees to inform Buyer of such purchases and Buyer shall have the
right to pre-approved all purchases of Unique Materials ordered in excess of
forecast. Some of Seller's orders to vendors and/or some Materials may be
designated by vendors as non-cancelable or non-returnable. All of these actions
may result in Materials procurement in excess of that required by Buyer's
Purchase Orders and forecasts. Buyer hereby authorizes Seller to make such
purchases as are reasonably necessary to meet Buyer's forecasts. Buyer will be
liable for, and Buyer's liability with respect to the procurement of Materials
will be limited to Excess and Obsolete Materials as set forth in Section 7 and
Section 8 below. For the avoidance of doubt, Seller will be responsible for
managing the disposition and liability of all industry standard Materials at no
expense or liability to Buyer (i.e., all non-Unique Materials). In addition,
Buyer may limit its liability hereunder by specifying to Seller in writing a
maximum amount. If Buyer elects to specify a maximum amount Seller will purchase
only to that amount and will notify Buyer of the impact to Buyer's
forecast/Purchase Orders.
6. PURCHASES BY BUYER'S AUTHORIZED AGENTS
Seller agrees that all of the Buyer's Authorized Agents, wherever located,
shall be entitled to make purchases under this Agreement, and all such
purchases shall apply to the purchase commitments in Section 3, subject to
their credit worthiness being reasonably acceptable to Seller, unless they
purchase on a letter of credit basis or their payments are guaranteed by Buyer.
Any payment timing and credit limitations placed on Buyer's Authorized Agents,
other than those presented in this Agreement, will be agreed upon in writing by
both Parties. Seller agrees to notify Buyer of any credit limitations applicable
to Buyer's Authorized Agents.
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7. EXCESS MATERIALS.
With respect to any Excess Materials on hand, Seller will notify Buyer of
the amount and the cost of such Excess Materials in a consolidated, monthly
report. Buyer shall either (i) pay carrying costs for Excess Materials at a rate
of [*] per month as it ages greater than [*] after receipt of such monthly
notice by Buyer; or (ii) buy all Excess Materials at [*] to be held in bonded
stock for consumption based upon a forecasted demand within the next [*]. Seller
will use reasonable commercial efforts to sell Excess Materials.
8. OBSOLETE MATERIALS
On a [*] basis, Seller will send Buyer a report which states the Materials
that are determined to be Obsolete Materials. Buyer will purchase Obsolete
Materials at [*] plus a [*] Materials acquisition charge. Buyer will provide
Seller a purchase order within [*] of confirmation of obsolescence. Seller will
use reasonable commercial efforts to sell Obsolete Materials.
9. TERM OF AGREEMENT
This Agreement shall become effective upon execution by authorized
representatives of both Parties. This Agreement shall expire twenty-four (24)
months after the date of execution by both Parties ("Initial Term"), unless
this Agreement is terminated earlier pursuant to Section 25 or 26 and shall
be automatically extended for one or more additional successive [*] periods
(each, a "Renewal Term"), unless one Party notifies the other Party in
writing at least [*] prior to the beginning of such additional period that it
desires not to extend. Minimum purchase obligations pursuant to Section 3
shall terminate upon expiration of the Initial Term and shall not be renewed
in any Renewal Term. The Initial Term, along with any Renewal Terms, is
referenced to herein as the "Term" of this Agreement.
10. PRODUCTION CAPACITY
All manufacturing will be conducted at Seller's Salt Lake City, Utah
facility unless otherwise agreed. Seller shall make available the necessary
capacity at such facility to meet Buyer's production requirements, as provided
by Buyer in Sections 4 and 5. Seller will notify Buyer on a [*] basis to confirm
that capacity is available for the forecasted period for the following [*] and
to advise Buyer of any capacity constraints for the remainder of the forecast
period. Buyer agrees to not unreasonably withhold approval of additional
production facilities in the event of extraordinary demand beyond Buyer's
forecasts. However, to the extent Seller does not have sufficient capacity to
meet Buyer's orders beyond forecast and minimum commitments, Seller will
allocate capacity at the Salt Lake City facility pro-rata among Buyer and other
customers, based on customer unit order volumes, and Buyer is under no
obligation to approve the manufacture of Products at any other of Seller's
locations if Buyer determines in its sole discretion that such location does not
meet Buyer's business needs.
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11. FLEXIBILITY CAPABILITY
Buyer may issue change requests for Product quantities and schedule dates,
and Seller shall maintain the necessary capacity to accommodate such changes, in
accordance with the Flexibility Parameters attached as Exhibit D (the
"Flexibility Parameters"). Changes made in accordance with the Flexibility
Parameters will not incur cost or liability for Buyer.
12. MATERIALS TRANSFER
Seller agrees to buy, from time to time, Buyer's on-hand Materials that
are in excess of Buyer's own production requirements and are needed for Seller's
production within the open Purchase order period. Seller also agrees to sell
Materials in excess of Seller's production requirements to Buyer, to any of
Buyer's Authorized Agents or anyone else designated by Buyer whose credit
worthiness is reasonably acceptable to Seller, who purchases on a letter of
credit basis, or whose payment obligations are guaranteed by Buyer. Transfer
quantities and payment terms will be mutually agreed on a case-by-case basis.
Prices shall be at Buyer's or Seller's, as the case may be, actual purchase
price for the transferred Materials.
13. PRICING
A. The prices for Products sold pursuant to this Agreement are set out in
Exhibit A to this Agreement (hereinafter referred to as "Prices"). Any change to
the Prices set forth in Exhibit A shall be identified by an amendment to Exhibit
A which must be approved by authorized representatives of both Parties. All
Prices shall be in US Dollars, unless otherwise negotiated and documented in
Exhibit A.
B. Delivery is at Seller's dock or the Seller's Finished Goods Stockroom,
whatever the case may be. Buyer shall pay all applicable out-bound freight
costs, out-bound export costs, including any pre-shipment inspection charges if
mandated by the authorities of the country of exportation, as well as all
out-bound export brokerage, documentation, processing, customs and any other
export fees and taxes for export out of the United States at Buyer's request.
Buyer also agrees to pay all sales and use taxes on Products or Materials sold
to Buyer to Seller's delivery point or furnish Seller with tax exemptions. Both
Parties agree that Prices shall include all costs of the Product manufacture,
including pack-out of finished goods, as well as charges such as packaging,
palletizing, packing, crating, and storage as needed.
C. All Materials shall be purchased from suppliers on Buyer's approved
vendor list (the "AVL") as revised from time to time. Buyer agrees to use
reasonably commercial efforts to have Buyer's suppliers extend to Seller (as
agreed to by the applicable supplier) any and all Buyer negotiated Materials
pricing solely for purchases for Products manufactured under this Agreement.
Buyer will consider requests by Seller to permit such pricing to be extended to
Seller for purchases for Seller's other customers (as agreed to by the
applicable supplier).
D. Any Materials inspection processes that are in place at the
manufacturing facility as of the Effective Date are included in the negotiated
Price. Materials cost reductions negotiated by
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Buyer with component suppliers will also be factored into Buyer's Materials
cost. Cost reductions negotiated by Seller for Buyer-controlled Materials from
alternate suppliers that are not on Buyer's approved vendor list, but which have
been approved by Buyer for inclusion on the AVL, will be [*] following first
production shipment of such components by the new supplier to Seller, after
which time the cost reduction will be factored fully into Buyer's Materials
cost.
14. DELIVERY
A. Seller will deliver the Product no more than [*] before and [*] after
the agreed delivery date, but if deliveries are delayed by causes beyond
Seller's control, will promptly notify Buyer and may make partial deliveries.
If Seller continues to be unable to meet the agreed delivery date due to
supply constraints, it will provide Buyer a report of such supply constraints
and proposed actions to minimize the impact of these constraints. If delivery
is more than [*] late due to causes entirely within Seller's control, Seller
will pay the incremental cost of expedited shipment. Delivery terms are
Ex-Works (as defined in the International Chamber of Commerce "Incoterms"
1990 edition) from Seller's production facility. Title and risk of loss to
the Product passes to the Buyer at the point of delivery, i.e. Seller's dock
or Sellers' Finished Goods Stockroom.
B. Seller shall segregate and clearly designate the Products as belonging
to Buyer. Seller shall maintain insurance coverage in a form reasonably
acceptable to Buyer to cover risk of loss to the Products until delivery to the
common carrier.
15. PACK-OUT, PACKING, MARKING, AND SHIPPING INSTRUCTIONS
A. All Product shall be finished, packed-out, prepared and packed for
shipment in a commercially reasonable manner with the intent to secure the
lowest transportation rates and meet carrier's requirements and those set forth
in Buyer's Pack-Out and Packaging Specifications which are attached hereto as
Exhibit C.
B. Each shipping container shall be marked to show Buyer's Purchase Order
number, part number, revision level, lot number, quantity contained therein, and
destination. A packing list showing the Purchase Order number shall be included
in each container. Marking on all parts shall be per the Buyer's shipping
specification. Marking shall include date of manufacture, place of manufacture,
Seller's part number and revision number.
16. QUALITY STANDARDS AND CERTIFICATION
A. MANAGEMENT REVIEW PROCESS. The Parties intend to maintain active and
open communications at both the program level and at the strategic level, and
agree to engage in periodic reviews of all applicable activities encompassing
the relationship. Executive representatives from both Parties will meet no less
than [*] to review all major elements of this Agreement and to jointly agree
upon updated performance metrics for this Agreement. Initially, the Parties
intend to rotate these meetings between Seller's locations and Buyer's corporate
facilities in Santa Clara,
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California. Special attention will be paid to Buyer programs specific to the
host site, although the Parties will also follow a standard agenda covering the
total business. This agenda will include reviewing Buyer future Product roadmaps
and schedules, organizational updates, future manufacturing and process
improvements by Seller's business reviews, and performance metrics reflecting
activities during the period since the last review.
B. PERFORMANCE METRICS. Performance Metrics as set forth in Exhibit F will
include, but are not limited to, the following: (i) total Buyer-Seller business
level; (ii) Seller product quality and yields; (iii) Seller on-time delivery
performance; (iv) Buyer forecast accuracy; (v) Seller inventory summary; (vi)
Buyer EC activity; (vii) lead time characterization; (viii) Seller prototype
on-time delivery and quality performance; and (ix) Seller future/projected
manufacturing/process and cost improvements. Seller agrees to maintain quality
standards, measurement practices, quality reports, and inspection processes as
they exist at the Salt Lake City facility as of the Effective Date subject to
any changes as may be mutually agreed. In addition, Seller will work with Buyer
to develop mutually-agreeable closed-loop quality and corrective action
processes on a going forward basis. Seller shall maintain the quality plan in
effect at the Salt Lake City facility as of the Effective Date. The Parties
shall cooperate to develop a mutually acceptable quality plan incorporating such
existing plan at a minimum on a going forward basis. Upon request of either
Party, the Parties will cooperate to document such plan in writing. The Parties
shall engage in quarterly reviews and weekly conference calls to track
performance and update such plan.
C. Seller agrees that all Products will conform in all material respects
to the Specifications for the part number stated on the BOM or Buyer's Purchase
Order, the Specifications for the manufacture and pack-out of the Products, and
to the workmanship specifications of IPC-610B Class 2 as modified from time to
time, which are set forth in Exhibits B and C, and to the then currently
accepted commercial manufacturing practices. For the avoidance of doubt, as used
in this Agreement "material" includes without limitation any non-conformity that
may cause a customer to return a Product.
D. Seller will supply qualification samples to Buyer upon request. Buyer
shall provide written notification to Seller of the results of qualification
testing of each Product. If the sample is approved by Buyer, then Buyer will be
deemed to have accepted the BOM for the qualification samples and the processes
performed by Seller will be deemed to meet the appropriate Specifications.
E. Buyer shall have the right to purchase spare Materials for the Products
in order to perform internal maintenance, support, and repair and for lab stock
and testing purposes. Such purchases shall be governed by the applicable terms
and conditions set forth in this Agreement.
F. Seller will conform to the requirements of ISO 9002 at all times in
manufacturing the Products hereunder. Seller agrees that it currently is or
will, within twelve (12) months of the Effective Date of this Agreement become
certified under ISO 9002, and during the term of this Agreement will remain ISO
9002 certified. If at any time hereafter certification under ISO 9002 is no
longer generally appropriate, Seller will ensure that it is certified under
another comparable or higher standard which is reasonably acceptable to Buyer.
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G. Seller agrees that it will perform final "out-of-box" testing of a
sample of the Products to verify that the Products conform to the Specifications
in all material respects prior to delivery to Buyer. If any Products in the
sample deviate from the Specifications, Seller shall rework all defective
Products in the lot being sampled to render them compliant with the
Specifications in all material respects. Test methods and test procedures shall
be as currently in place at the Salt Lake City facility or as otherwise agreed
to by both Parties.
H. If Buyer returns defective Products to Seller, Seller agrees to
implement on a prompt basis appropriate actions as necessary to minimize the
possibility that additional defective Products will be delivered to Buyer, and
further agrees as soon as reasonably possible to implement appropriate
corrective actions as necessary to prevent reoccurrence of the defect. Seller
further agrees to conduct a detailed failure analysis and to report the failure
analysis data to Buyer within [*] of receipt of the defective Product at
Seller's location. Seller agrees to preserve and maintain all data associated
with Product failure analysis and corrective actions and to make that data
available to Buyer upon request at no charge provided that Seller shall not be
obligated to preserve and maintain such data beyond the period required by its
ISO 9002 certification or the warranty period for the Products, whichever is
greater. Seller agrees to participate in Buyer's closed-loop corrective action
process.
I. Seller agrees to advise Buyer in writing of any material changes to
manufacturing processes and any changes to Materials, sources of supply, or
process chemistries, test procedures, quality reporting or other major
processes, and to ensure that any such changes do not compromise specifications,
quality, or reliability of Products ordered pursuant to this Agreement. In the
case of changes to Materials or sources of supply, such notice shall be provided
no less than the [*] prior to the effectiveness of such change. Seller may not
make any such changes without prior written approval from Buyer. In the event a
Seller-proposed change fails Buyer's qualification, Seller is obligated to
provide the existing qualified Product until the proposed changed can be
qualified.
17. INSPECTION, TESTING, AND ACCEPTANCE
A. Products purchased pursuant to this Agreement shall be subject to
inspection, testing, and acceptance by Buyer, which shall occur within [*] of
delivery of Product.
B. All Products built by Seller for Buyer will have a specific set of
Product testing procedures and acceptance criteria as currently in place at the
Salt Lake City facility or as otherwise agreed to by both Parties. Upon request
of either Party, the Parties will cooperate to document such procedures and
criteria in writing. Should Products or Seller's processes be found to be
non-conforming, Seller will withhold shipping Product until such non-conformance
is resolved to Buyer's reasonable satisfaction. Buyer will not be responsible
for Products that fail to meet agreed upon acceptance criteria.
C. All Products are subject to Buyer's inspection and test at Buyer's
facility before final acceptance. Buyer has a [*] acceptance period after
delivery. In the event of non-conforming
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order (i.e. failure to meet Purchase Order or failure to meet warranty), Buyer
has the right to reject the order in whole or in part within such [*] period.
D. Upon [*] notice, Buyer shall have the right to perform vendor
qualifications and/or on-site inspections at Seller's manufacturing facilities
during Seller's normal business hours. If an inspection or test is made on
Seller's premises, Seller shall provide Buyer's inspectors with reasonable
facilities and assistance at no additional charge. In the event that any on-site
inspection of the Products indicates that the Products do not conform to the
requirements of this Agreement, Seller shall not ship such Products to Buyer
until such nonconformity has been corrected to Buyer's reasonable satisfaction
and Buyer has approved shipment of such Products in writing. This does not
preclude, prevent or limit Buyer's right to perform acceptance testing at
Buyer's facilities.
18. RETURN OF PRODUCT
A. In the event Buyer detects non-conforming Products prior to acceptance,
a Non-Conforming Materials Report (NCMR) and/or a Corrective Action request
(CAR) shall be provided to Seller and Seller shall submit an initial response to
such CAR within [*] after receipt. Seller must provide a Return Materials
Authorization (RMA) within [*] after receipt of request for an RMA from Buyer.
B. Buyer may reject and return any defective Product to Seller at Seller's
expense. Seller agrees to reimburse Buyer all reasonable and actual freight and
handling costs associated with return of any defective Product. Seller will
return conforming Products freight prepaid as per the following schedule to
Buyer or issue appropriate credit no later than [*] or as mutually agreed by
both Parties, from the date Seller receives the defective Product.
RMA Ouantity Days
------------ ----
[*] [*]
[*] [*]
[*] [*]
Any Product returned to Seller, which, after inspection and testing by Seller,
is found to be free of defects shall be subject to a "No Defect Found Charge" as
specified in Exhibit A. However, Seller will waive any NDF Charges on Products
returned for repair, if returned Products result in an NDF rate not exceeding
[*] of the monthly unit volume. For an NDF rate greater than [*] but not more
than [*] the Parties will mutually agree upon allocation of the NDF Charge.
C. If pending the analysis of returned Products by Seller Buyer is in
urgent need of Product, Buyer may issue a Purchase Order to replace the Products
to which the CAR pertains. Seller will expedite such Purchase Order at Buyer's
request and, if requested by Buyer, will ship the order by.
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premium transport as specified by Buyer, All costs of expedited handling of such
Purchase Order and any premium transport specified by Buyer shall be borne by
Buyer, unless there is a defect that is the fault of the Seller, in which case
it will be borne by Seller.
19. SUPPORT
Buyer may request reasonable on-site support from Seller, which Seller
shall provide, to solve problems with rejected shipment batches of Product as
well as to validate Buyer's inspection methodology. All costs will be borne by
the Party incurring them.
20. WARRANTY
A. WARRANTY. Subject to Section 20E below, Seller makes the following
warranties to Buyer:
(i) The Product will conform in all material respects to
the Specifications and the Materials will conform in all material respects to
the supplier's specifications for such Materials for a period of [*] from the
date of delivery to Buyer;
(ii) The Products will be free from defects in Seller's
workmanship and in Materials and meet the mutually-agreed testing criteria for a
period of fifteen (15) months from the date of delivery to Buyer;
(iii) All Products and Materials delivered under this
Agreement shall comply with the environmental warranties set forth in Exhibit I;
(iv) All Products and Materials delivered under this Agreement
shall be free and clear of any liens or encumbrances, and at the time of
delivery Seller shall have all rights necessary to transfer title to such
Products and Materials to Buyer;
(v) The Materials are Year 2000 ready such that they are
capable of correctly processing, providing, receiving and displaying date data,
as well as capable of exchanging accurate date data with all Products with which
the Materials are used within and between the twentieth and twenty-first
centuries; and
(vi) The Products and all Materials provided to Buyer under
this Agreement (other than those purchased from Buyer) are new products and do
not contain anything used, refurbished or reconditioned.
B. REPAIR OR REPLACEMENT. In the event that any Product fails to comply
with the warranties set forth in Section 20A above, Seller shall, at its
expense, correct any such defect by repairing or replacing such defective
Product in Seller's discretion subject to Buyer's reasonable approval. Buyer
shall return to Seller such defective Products and Materials to Seller's
designated facility pursuant to the RMA procedure set forth in Section 18 above.
The repaired or replaced item will be shipped to Buyer no later than ten (10)
business Days from receipt of the defective Product at
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Seller's facility subject to Materials availability. If repair or replacement is
not possible due to unavailability of needed Materials within the time required
by Buyer, at Buyer's option Seller will issue a refund in the form of a credit
to Buyer in an amount equal to the purchase Price of the defective Products that
Seller is unable to repair or replace. Replacement and/or repaired Products
shall be warranted for the [*].
C. EPIDEMIC DEFECT RATE. In addition to Section 20A above, Seller
agrees to repair or replace, at no charge to Buyer, any Epidemic Defects
found to exist in any of the Products at any time prior to [*] after the date
of delivery to Buyer of the affected Products. As used herein, "Epidemic
Defects" shall mean a product field failure for which Seller is responsible
pursuant to the warranty in Section 20A at a rate of [*] or more occurring
with the same or related Products with the same cause as measured during the
warranty period. In the case of any Epidemic Defects, Seller and Buyer shall
jointly agree regarding which of the following options to pursue, at Seller's
expense; (i) [*] no such corrective action is sufficient.
D. INDEMNIFICATION. If Seller discovers a material breach of any of the
representations and warranties in Section 20A, Seller shall promptly notify
Buyer of such breach in writing. In addition to repairing or replacing such
Products or Materials pursuant to Section 20B above; Seller shall defend,
indemnify and hold harmless Buyer and its officers, directors, employees,
agents, representatives, successors and assigns from any third-party claims,
liabilities, losses, demands or judgments arising from the breach of any of
Seller's representations and warranties set forth in Section 20A(iii) or (iv).
E. WARRANTY EXCLUSIONS.
Buyer will have no claim against Seller under the Product warranties set
forth in Section 20A, and Seller shall have no liability under Section 20A to
the extent that such claims are made for a Product defect:
(a) resulting from defective Buyer-supplied Materials;
(b) resulting from specific instructions provided by
Buyer in writing or electronically, covering design or test data,
Specifications, quality requirements, diagnostics, manufacturing processes or
other processes or Product descriptions; or
(c) that is caused by Buyer or anyone other than Seller
or its agents through misuse, excessive shock, accident, fire, or improper
maintenance procedures, improper storage, or modification by Buyer or anyone
other than Seller.
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Notwithstanding Section 20A above, Seller's sole liability under this
Section 20 with respect to Materials shall be to use reasonable commercial
efforts to obtain such warranties for Materials from its suppliers of Materials.
All warranties obtained by Seller on the Materials shall, if possible, be
assigned to Buyer at no additional cost. To the extent such warranties are not
assignable to Buyer at no additional cost to Seller, Seller shall at Buyer's
written request use reasonable commercial efforts to enforce such warranty
against the supplier, and Seller shall provide the benefits of such enforcement
to Buyer (subject to reimbursement of attorney's fees as provided below). In the
event that after using reasonable commercial efforts, Seller's initial efforts
to enforce such warranty against the Materials vendor are unsuccessful, Buyer
will reimburse Seller for the reasonable costs of pre-approved (by Buyer)
outside legal counsel to enforce such warranties. If Seller is successful in
such enforcement, Seller will repair the affected Products with the
non-defective, replacement Materials, if applicable, at no cost to Buyer to the
extent that such labor costs are included in the warranty. To the extent that
labor costs are not included in such warranty, upon request from Buyer, Seller
will repair the affected Products with the non-defective replacement Materials
at Seller's standard costs.
F. WARRANTY DISCLAIMER. THE FOREGOING EXPRESS WARRANTIES AND REMEDIES ARE
EXCLUSIVE AND ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, EITHER IN
FACT OR BY OPERATION OF LAW, STATUTORY OR OTHERWISE, INCLUDING WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ALL OF WHICH ARE HEREBY
DISCLAIMED.
21. PAYMENT
A. Payment shall be made by Buyer net [*] from the receipt of invoice or
the date of delivery of Product, whichever is later. All payments shall be made
without any discount whatsoever. Seller shall submit the invoices to the address
indicated by Buyer.
B. Unless otherwise specified in Exhibit A or agreed to in writing by the
Seller and the Buyer, payment shall be in U.S. Dollars.
22. CHANGES
A. The Parties recognize that from time to time Seller will request or
will be requested by Buyer to implement Engineering Change Orders (hereinafter
referred to as "ECOs"). The following outlines the proper procedure for such:
(i) Seller Requested Changes. Seller is to notify Buyer in
writing of proposed ECOs no less than [*] and will, if so requested, provide
Buyer with samples. The notification shall include the proposed Product
changes, anticipated price changes and implementation date. Notification
shall also include the appropriate documentation to support Buyer's
investigation of the impact of this proposal. Buyer will review the
feasibility of the implementation of the proposed ECO. If lead-time or new
costs are required for the ECO, lead time and new Prices will be reviewed.
Buyer is to advise Seller of its decision with respect to the proposed ECO
within [*] after receipt of Seller's written notifica-
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tion, Buyer will not be liable for any Excess or Obsolete Materials arising as a
direct result of such Seller ECO.
(ii) Buyer Requested Changes. Buyer agrees to notify Seller
in writing of all proposed ECOs. This notification will include the
appropriate documentation to support Seller's investigation of the impact of
this proposal. Seller is to report to Buyer within [*] of Buyer's request the
feasibility of the implementation of the ECO and if reasonably feasible, the
estimated charges that would be incurred for obsolete work-in-process
Materials, raw Materials, and on-order Materials. Buyer will review the labor
and Materials costs and impact for the implementation of the ECO. If new
Materials are required for the ECO, lead-time and new Product Price will be
reviewed and mutually agreed upon.
(iii) Buyer is to notify Seller in writing within [*] after
receipt of Seller's cost report of its decision as to the proposed ECO,
associated costs, and the implementation dates. Seller will execute an agreed
ECO per a mutually agreed upon phase-in plan, and will use reasonable
commercial efforts to meet Buyer's requested dates.
B. No ECO's shall be made by Seller without Buyer's prior written
approval, which may be withheld in Buyer's sole discretion.
23. PROTOTYPING AND ENGINEERING SERVICES
A. PROTOTYPE SERVICES. Buyer may engage Seller to render prototyping
services in connection with Products to be manufactured hereunder. In the event
that Buyer desires to engage Seller to render such services, the Parties shall
execute a Statement of Work which shall be in the form attached hereto as
Exhibit J or as otherwise mutually agreed, which shall include a description of
the services to be rendered, any milestones or delivery dates or other terms
relevant to such engagement.
B. OTHER ENGINEERING SERVICES. The Parties acknowledge that Buyer may
desire to engage Seller for other engineering services relating to the Products.
If Seller agrees to such engagement, the Parties shall execute a Statement of
Work in the form attached hereto as Exhibit J or as otherwise mutually agreed
and which shall include a description of the services to be rendered and any
milestones or delivery dates or other terms relevant to such engagement.
C. PERFORMANCE METRICS FOR SERVICES. Specific performance metrics for
Seller for a specific service may be set forth in the corresponding Exhibit J or
as otherwise mutually speed. Where none is set forth, Seller shall use
reasonable efforts to provide services in accordance with the policies,
procedures and practices in effect before the date hereof and shall exercise the
same care and skill as it exercises in performing similar services for itself.
D. PAYMENT TERMS. Prices for services shall be set forth in the applicable
Exhibit J. Seller shall invoice Buyer on a monthly basis for all charges for
services rendered pursuant to this Agreement. Such invoices shall be accompanied
by reasonable documentation or other reasonable
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explanation supporting such charges. Buyer shall pay Seller for all services
provided hereunder within [*] after receipt of an invoice therefor.
24. INTELLECTUAL PROPERTY RIGHTS
A. BUYER OWNERSHIP. Except as set forth in Section 24B below, Buyer shall
exclusively own all right, title and interest in all results and proceeds of the
services rendered by Seller hereunder (the "Services"), including without
limitation, in any work of authorship, mask work, idea, design, concept,
technique, invention or discovery, whether or not patentable or registerable
("Assigned Inventions"), and Seller hereby irrevocably transfers and assigns to
Buyer all right, title and interest, including without limitation all IP Rights,
in the Assigned Inventions. As used herein, "IP Rights" shall mean all
copyrights, maskwork rights, patents and other intellectual property or
proprietary rights. In addition, the Parties expressly agree to consider as
works made for hire those works ordered or commissioned by Buyer which qualify
as such in accordance with the copyright laws. For all of the Assigned
Inventions, Seller agrees to provide documentation satisfactory to Buyer to
assure the conveyance of the Assigned Inventions to Buyer. The Assigned
Inventions shall be kept in confidence by Seller and shall be used only in
performing this Agreement and may not be used for other purposes except upon
such terms as may be agreed upon between the Parties in writing. Seller also
agrees to acquire from its employees, agents and contractors, rights and
covenants as to assure that Buyer shall receive the rights provided for in this
Section 24A.
B. SELLER OWNERSHIP. Seller shall exclusively own all IP Rights in all
know-how, technology, processes, procedures, ideas and concepts developed by
Seller or its employees, agents, affiliates or contractors in the course of
manufacturing the Products, any modifications, enhancements, improvements to the
manufacturing processes for the Products, and any other idea, design, concept,
technique, invention or discovery related to the manufacture of the Products
during the Term of this Agreement ("Manufacturing Standards"). For the avoidance
of doubt, (i) Buyer shall retain all IP Rights to all manufacturing processes,
know-how and other information and materials provided by Buyer to Seller after
the Effective Date of this Agreement to manufacture the Products or perform the
Services ("Buyer IP"). and (ii) Seller shall retain all IP Rights to all
manufacturing processes, know-how, and other information owned by Seller or
developed by Seller other than in connection with the performance of this
Agreement.
C. LICENSE GRANTS. In consideration of Seller's obligations under this
Agreement, Buyer hereby grants Seller a non-exclusive, non-transferable,
royalty-free fully-paid license for the Term of this Agreement to use the Buyer
IP, but solely for the purpose of manufacturing and servicing the Products for
Buyer and any of Buyer's Authorized Agents who purchase under this Agreement,
unless otherwise notified in writing by Buyer. Seller hereby grants to Buyer a
non-exclusive, royalty-free, fully-paid license to use the Manufacturing
Standards in connection with the manufacture of Products by or for Buyer and to
make, have made and distribute the Products manufactured using the Manufacturing
Standards. Upon request from Buyer, Seller shall provide Buyer with such
documents reasonably necessary for Buyer to document and duplicate the
Manufacturing Standards for the Products.
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D. BUYER TRADEMARKS. Buyer authorizes Seller to affix and apply the Buyer
Trademarks to the Products as directed by Buyer for the sole purpose of
manufacturing the Products pursuant to this Agreement. Seller shall not use
Buyer Trademarks for any other purpose and only in such manner as to preserve
all rights of Buyer. Seller acquires no right to Buyer Trademarks by its use and
all uses by Seller of the Buyer Trademarks will inure to Buyer's sole benefit.
As used herein, "Buyer Trademarks" means those trademarks, trade names, service
marks, slogans, designs, distinctive advertising, labels, logos, and other
trade-identifying symbols as are or have been developed and used by Buyer or any
of its subsidiaries or affiliate companies and which Buyer owns or has the right
to use.
E. Nothing herein shall be deemed to modify the ownership, license or
other terms of the Intellectual Property License Agreement of even date herewith
between Buyer and Manufacturers' Services Limited ("MSL") or the Asset Purchase
Agreement dated as of November 19, 1999, between Buyer, on the one hand, and
Seller and MSL, on the other hand (the "Asset Purchase Agreement").
25. TERMINATION FOR CAUSE
This Agreement or any Purchase Order may be terminated immediately for
cause by either Party upon notice to the other Party for the following:
(i) the other Party makes a general assignment for the benefit
of creditors, or a receiver or similar officer is appointed to take charge of
any of the other Party's assets;
(ii) the other Party enters into any composition with
creditors or is subject to an order made or resolution passed for it to be wound
up or for the appointment of a judicial manager;
(iii) the other Party ceases to carry on its business or
operations;
(iv) a bankruptcy or similar petition is filed by or against
the other Party, and in the case of an involuntary petition, the proceeding is
not dismissed within sixty (60) Days; or
(v) the other Party fails to meet the Performance Standards
set forth in Exhibit F; or
(vi) the other Party fails to perform any material obligation
under this Agreement, and such failure is not cured within thirty (30) Days of
notice thereof.
26. TERMINATION FOR CONVENIENCE
Either Party may terminate this Agreement or any Purchase Order after
expiration of the Initial Term without cause by giving at least [*] written
notice to the other Party. Upon expiration or termination of this Agreement for
any reason, Seller will take commercially reasonable steps to reduce its
liability to vendors. Seller and Buyer may propose specific actions to be taken
in
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this regard, and if they are unable to reach agreement after a reasonable time,
Buyer will pay Seller an amount equal to the liability for cancelled orders as
set forth in Exhibit D. If the Parties agree to have Seller seek to re-stock or
re-market any Unique Materials, Buyer will compensate Seller for its reasonable
costs, which shall include but not be limited to, cancellation or restocking
charges, costs of preparation and packaging of assemblies or Materials for
shipment to Buyer or any third party authorized by Buyer, and costs of
terminating any open Purchase Orders or contracts which had been authorized by
Buyer. Buyer will have no liability with respect to the payment for non-Unique
Materials.
27. LIMITATION OF LIABILITY
EXCEPT WITH RESPECT TO DAMAGES TO THIRD PARTIES UNDER INDEMNIFICATION
OBLIGATIONS OR WITH RESPECT TO BREACH OF CONFIDENTIALITY OBLIGATIONS, NEITHER
PARTY SHALL BE LIABLE TO THE OTHER UNDER ANY CONTRACT, STRICT LIABILITY,
NEGLIGENCE OR OTHER THEORY FOR ANY INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES
INCLUDING WITHOUT LIMITATION LOST PROFITS IN CONNECTION WITH THE SUBJECT MATTER
OF THIS AGREEMENT OR ANY PURCHASE ORDER IRRESPECTIVE OF WHETHER SUCH PARTY HAD
ADVANCE NOTICE OR KNOWLEDGE OF THE POSSIBILITY OF SUCH DAMAGES. NOTWITHSTANDING
THE FOREGOING, THIS SECTION SHALL NOT LIMIT EITHER PARTY'S LIABILITY FOR INJURY
TO A PERSON OR RELIEVE BUYER'S LIABILITY TO PAY SELLER WHEN DUE THE PRICE FOR
PRODUCTS DELIVERED.
28. FORCE MAJEURE
Neither Party shall be liable hereunder by reason of any failure or delay
in the performance of its obligations hereunder (except for the payment of
money) on account of strikes, shortages, riots, insurrection, fires, flood,
storm, explosions, earthquakes, telecommunications outages, acts of God, war,
governmental action, or any other cause which is beyond the reasonable control
of such Party and could not have been avoided by the exercise of reasonable
prudence. In the event of the occurrence of any force majeure event, the
affected Party shall notify the other Party immediately in writing of its
invocation of this Section 28, and each Party's obligations hereunder (except
for the payment of money) to the other shall be suspended for the duration of
such force majeure event; provided, however, that the affected Party shall be
obligated to use its commercially reasonable efforts to restore performance
hereunder as soon as reasonably practicable, and provided, further, that if such
event continues for more than [*] in the aggregate in any [*] period, the
non-affected Party shall have the tight to terminate this Agreement at any time
upon written notice to the other Party. Seller's performance under this
Agreement in meeting delivery commitments shall be excused until such time as
Seller commences building and delivering Products or initial SAP implementation
is accepted by Seller, such acceptance not to be unreasonably withheld, provided
that, for the avoidance of doubt, such excuse does not constitute a force
majeure event.
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29. NONASSIGNABILITY
Neither Party may, directly or indirectly, in whole or in part, whether by
operation of law or otherwise, assign or transfer this Agreement, or any rights
or obligations hereunder, without the other Party's prior written consent, and
any attempted assignment, transfer or delegation without such prior written
consent shall be voidable at the sole option of such other Party.
Notwithstanding the foregoing, each Party (or its permitted successive assignees
or transferees hereunder) may assign or transfer this Agreement as a whole
without consent to an entity that succeeds to all or substantially all of the
business or assets of such Party. Without limiting the foregoing, this Agreement
will be binding upon and inure to the benefit of the Parties and their permitted
successors and assigns.
Notwithstanding the foregoing, Seller shall have the right upon written
notice to Buyer to assign this Agreement to a wholly-owned (direct or indirect)
subsidiary of Seller's ultimate parent, such arrangement not to affect the
guarantee by Manufacturers' Services Limited of this Agreement.
Nothing herein shall prohibit Seller from granting in favor of its lenders
a security interest in any accounts receivable by Seller from Buyer under this
Agreement.
30. NOTICES
A. All notices, reports, requests, acceptances, and other communications
required or permitted under this Agreement shall be in writing and shall
reference this Agreement. They will be deemed delivered:
(i) When delivered in person, or
(ii) When sent by confirmed telex or acknowledged facsimile or
acknowledged e-mail except that the communications referred to in Sections 20E,
25, 26, 28, 29, or 32 may not be sent by e-mail, or
(iii) One Day after having been sent by commercial overnight
courier with written verification of receipt or,
(iv) Five Days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or upon actual
receipt thereof, whichever occurs first. An acknowledged e-mail communication or
fax shall be deemed to be a communication in writing. All communication will be
sent to the receiving Party as follows or to such address that the receiving
Party may designate pursuant to this Section.
If to Seller: Manufacturers' Services Salt Lake City Operations, Inc.
5742 West Harold Gatty Drive
Salt Lake City, Utah 84116
Attention: Vice President
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with a copy to: Manufacturers' Services Limited
300 Baker Avenue
Concord, Massachusetts 01742
Attention: General Counsel
and to Rod Michael, VP of Corporate Accounts
[email protected]
If to Buyer: 3COM CORPORATION
5400 Bayfront Plaza
Santa Clara, California 95052
Attention: David Orr, Senior Director, Worldwide Contract
Manufacturing
[email protected]
with a copy to: 3COM CORPORATION
1800 West Central Road
Mount Prospect, Illinois 60053
Attention: Mark Slaven, Vice President, Supply Chain
Operations
[email protected]
with a copy to: 3COM CORPORATION
5400 Bayfront Plaza
Santa Clara, California 95052
Attention: General Counsel
Fax No. (408) 326-6434
31. COMPLIANCE WITH LAWS
Seller agrees that its performance under this Agreement shall comply with
all applicable laws including without limitation laws governing its relationship
with its employees, agents or subcontractors. Buyer agrees that its performance
under this Agreement shall comply with all applicable laws including without
limitation laws governing its relationship with its employees, agents or
subcontractors.
32. PATENT, COPYRIGHT AND TRADEMARK INDEMNITY
A. Indemnity by Seller. Seller will, at its expense, defend, indemnify and
hold Buyer, its Affiliates, officers and directors harmless from any costs,
expenses (including reasonable attorney's fees), losses, damages, court
judgments or awards or liabilities (collectively, "Damages") incurred as a
result of any claim that any Service or Product provided by Seller to Buyer
pursuant to this Agree-
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ment infringes or is alleged to infringe any patent, copyright, trade secret,
trademark mask work right or other proprietary right(s) of a third party, but
solely to the extant such infringement or alleged infringement arises out of or
relates to a Seller Responsibility; provided that Seller is promptly notified by
Buyer, rendered reasonable assistance by Buyer (at Seller's expense) and
permitted to control the defense or settlement of such claim. As used herein,
"Seller Responsibility" means any aspect of the manufacture of the Products or
performance of the Services that is not specifically required in writing by
Buyer in its specified designs, Materials, processes or other instructions and
with respect to which there is a non-infringing alternative available to
implement such requirements, or any deviations from such requirements by Seller
or its agents. For the avoidance of doubt, a Seller Responsibility occurs with
respect to any discretionary action by Seller in the manner of implementing
Buyer's requirements if a non-infringing alternative exists. Without limiting
the foregoing, such indemnification shall not apply to infringing combinations
to the extent arising from the combination of the Product with other items in
which the combination was not performed by Seller or its agents or from claims
for infringement to the extent arising from changes to the Products not made by
Seller or its agents.
B. Indemnity by Buyer. Buyer will, at its expense, defend, indemnify and
hold Seller and its Affiliates, officers and directors harmless from Damages
incurred as a result of any claim that any Product or Service provided by Seller
to Buyer hereunder infringes or is alleged to infringe any patent, copyright,
trade secret, trademark, mask work right or other proprietary right(s) of a
third party, except to the extent that such infringement or alleged infringement
arises out of or relates to a Seller Responsibility, and except to the extent
Seller has indemnification coverage from the applicable supplier with respect to
any Buyer-Specified Materials Infringement Claim; provided that Buyer is
promptly notified by Seller, rendered reasonable assistance by Seller (at
Buyer's expense) and permitted to control the defense or settlement of such
claim. Such indemnification shall not apply to infringing combinations arising
from the combination of Buyer's requirements with other items that are not
Buyer's requirements.
C. Buyer-Specified Materials Infringement Claim. Seller will use
reasonable commercial efforts to obtain indemnification protection covering
Seller (and Buyer if possible) from its suppliers of Buyer-Specified Materials
for any claim that the Buyer-Specified Materials provided by suppliers infringes
or is alleged to infringe any patent, copyright, trade secret, trademark, mask
work, or other proprietary right(s) of a third party (a "Buyer-Specified
Materials Infringement Claim"), and Seller will use reasonable commercial
efforts to pass through to Buyer any indemnification protection that is so
obtained. As used herein, "Buyer-Specified Materials" means any Materials that
are specifically required in writing by Buyer and with respect to which there is
no non-infringing alternative available to implement such requirement. Where
Seller has obtained indemnification protection from a supplier of
Buyer-Specified Materials and is unable to pass through such indemnification
protection to the Buyer and a Buyer-Specified Materials Infringement Claim is
made against Buyer, Seller agrees that it will indemnify Buyer for Buyer's
Damages incurred as a result of such Buyer-Specified Materials Infringement
Claim, but such indemnification by Seller shall be provided only to the extent
Seller is able to obtain indemnification from such supplier using reasonable
commercial efforts and after application of such indemnification amount against
Damages incurred by Seller in connection with such Buyer-Specified Materials
Infringement Claim.
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All reasonable costs of outside counsel pre-approved by Buyer to enforce such
indemnification protection from such supplier of Materials, to the extent
incurred in respect of Seller's indemnification of Buyer under this Section 32C,
shall be reimbursed by Buyer.
D. Additional Obligations. Should the use of any Product by Buyer or its
customers be enjoined because of a Seller Responsibility, Seller shall (or in
the event Seller wishes to minimize its potential liability hereunder arising
from an infringement claim based on a Seller Responsibility, Seller may) either
(i) substitute a fully equivalent non-infringing unit of the Product for each
affected unit of the Product sold to Buyer; (ii) modify the infringing Product
so that it no longer infringes but remains functionally equivalent (iii) obtain
for Buyer, at Seller's expense, the right to continue to make, use and sell the
Product; or if none of the foregoing is feasible (iv) refund to Buyer the
purchase price paid therefor and accept return of the infringing Products.
33. CAPACITY PLANNING
A. Seller agrees to review forecasts provided by Buyer and advise Buyer if
Seller anticipates that it will be unable to achieve the requested volumes.
Buyer's volume forecasts will be provided to Seller according to Section 5.
Seller may from time to time request Buyer to review Buyer's forecast and advise
of any changes and Buyer will do so. Seller agrees to provide Buyer with either
1) confirmation of feasibility of the forecast received, or 2) notice of
specific feasibility issues with the forecast received within [*] of receiving
said forecast.
B. If Buyer's rolling forecast exceeds Seller's available maximum capacity
for Buyer, Seller shall advise Buyer of the limitations in the capacity and
provide a response in writing as described in the Purchase Order and rolling
forecast articles.
34. GRATUITIES
Each Party represents and warrants that it has not offered or given and
will not offer or give any employee, agent, or representative of the other Party
any gratuity with a view toward securing any business from the other Party or
influencing such person with respect to the business between the Parties.
35. INSURANCE AND STATUTORY OBLIGATIONS
If either Party's work under this Agreement requires access to any of the
other Party's premises or the premises of the other Party's buyers, suppliers,
or locations where the other Party conducts business, or with material or
equipment furnished by the other Party, both Parties shall take all necessary
precautions to prevent the occurrence of any injury to persons or property
during the progress of such work and, except to the extent that such injury is
due to the other Party's negligence or willful misconduct, each Party shall
indemnify the other Party against all loss which may result in any way from any
negligence or willful misconduct of the Party, its employees, servants, agents,
or subcontractors, and each Party shall maintain such insurance as shall protect
the other Party from such risks and from any statutory liabilities arising
therefrom and shall provide evidence of such insurance to the other Party upon
request.
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36. INSURANCE COVERAGE
A. Seller will provide evidence of product liability insurance in a form
reasonably acceptable to Buyer in the amounts of [*] per occurrence and [*]
aggregate per year, will maintain in effect such insurance for a period of [*]
after termination of such Agreement, and will provide Buyer with a certificate
of insurance.
B. Buyer will provide evidence of product liability insurance in a form
reasonably acceptable to Seller in the amounts of [*] per occurrence and [*]
aggregate per year, and will maintain in effect such insurance for a period of
[*] after termination of such Agreement and will provide Seller with a
certificate of insurance.
37. CONFIDENTIAL INFORMATION
A. "Confidential Information" means any information: (i) disclosed by one
Party (the "Disclosing Party") to the other (the "Receiving Party"), which, if
in written, graphic, machine-readable or other tangible form is marked as
"Confidential" or "Proprietary," or which, if disclosed orally or by
demonstration, is identified at the time of initial disclosure as confidential
and is summarized in writing and similarly marked and delivered to the Receiving
Party within thirty (30) Days of initial disclosure; (ii) which at the time it
is disclosed is or should reasonably be known by the Receiving Party to be
proprietary or confidential information of the Disclosing Party, or (iii) which
is otherwise deemed to be "Confidential Information" by the terms of this
Agreement. Notwithstanding the foregoing, Buyer's Confidential Information shall
include without limitation all Specifications of the Product. As used in this
Section 37A, the terms "Receiving Party" and "Disclosing Party" may be
understood to include, as appropriate under the circumstances, 3Com or its
subsidiaries or Palm or its subsidiaries, as applicable, and MSL or the MSL
Affiliates.
B. Confidential Information Exclusions. Confidential Information will
exclude information that the Receiving Party can demonstrate is: (i) now or
hereafter, through no unauthorized act or failure to act on Receiving Party's
part, in the public domain; (ii) known to the Receiving Party from a source
other than the Disclosing Party (including former employees of the Disclosing
Party) without an obligation of confidentiality at the time Receiving Party
receives the same from the Disclosing Party, as evidenced by written records;
(iii) hereafter furnished to the Receiving Party by a third party as a matter of
right and without restriction on disclosure; (iv) furnished to others by the
Disclosing Party without restriction on disclosure; or (v) independently
developed by the Receiving Party without use of the Disclosing Party's
Confidential Information. Nothing in this Agreement shall prevent the Receiving
Party from disclosing Confidential Information to the extent the Receiving Party
is legally compelled to do so by any governmental investigative or judicial
agency pursuant to proceedings over which such agency has jurisdiction;
provided, however, that prior to any such disclosure, the Receiving Party shall
(a) assert the confidential nature of the Confidential Information to the
agency; (b) immediately notify the Disclosing Party in writing of the agency's
order or request to disclose; and (c) cooperate fully with the Disclosing Party
in protecting against any such disclosure and/or obtaining a protective order
narrowing the scope of the compelled disclosure and protecting its
confidentiality.
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C. Confidentiality Obligation. The Receiving Party shall treat as
confidential all of the Disclosing Party's Confidential Information and shall
not use such Confidential Information except as expressly permitted under this
Agreement. Without limiting the foregoing, the Receiving Party shall use the
same degree of care and means that it utilizes to protect its own information of
a similar nature, but in any event not less than reasonable ease and means, to
prevent the unauthorized use or the disclosure of such Confidential Information
to third parties. The Confidential Information may be disclosed only to
employees or contractors of the Receiving Party with a "need to know" who are
instructed and agree not to disclose the Confidential Information and not to use
the Confidential Information for any purpose, except as set forth herein;
provided, however, in the case of Buyer, the term "employees or contractors of a
Receiving Party" shall include employees and contractors of Buyer and its
Authorized Agents (but with respect to Authorized Agents who are not Affiliates
disclosure shall be limited to the extent necessary to enable such Authorized
Agents to purchase under this Agreement). The Receiving Party shall have
appropriate written agreements with any such employees or contractors sufficient
to comply with the provisions of this Agreement. A Receiving Party may not
alter, decompile, disassemble, reverse engineer, or otherwise modify any
Confidential Information received hereunder and the mingling of the Confidential
Information with information of the Receiving Party shall not affect the
confidential nature or ownership of the same as stated hereunder.
D. Confidentiality of Agreement. Each Party agrees that the terms and
conditions, but not the existence, of this Agreement will be treated as the
other Party's Confidential Information and that no reference to the terms and
conditions of this Agreement or to activities pertaining thereto may be made in
any form of press release or public statement without first consulting with the
other Party; provided, however, that each Party may disclose the terms and
conditions of this Agreement: (i) as may be required by law; (ii) to legal
counsel of the Parties; (iii) in connection with the requirements of an initial
public offering or securities filing; (iv) in confidence, to accountants, banks,
and financing sources and their advisors; (v) in confidence, in connection with
the enforcement of this Agreement or rights under this Agreement; or (vii) in
confidence, in connection with a merger or acquisition or proposed merger or
acquisition, or the like.
E. No Confidential Information of Other Parties. Each Party represents and
warrants to the other that it has not used and shall not use in the course of
its performance hereunder, and shall not disclose to the other, any confidential
information of any third party, unless it is expressly authorized in writing by
such third party to do so.
F. Required Disclosure. In the event the Receiving Party is required to
disclose the Disclosing Party's Confidential Information pursuant to the order
or requirement of a court, administrative agency, or other governmental body,
the Receiving Party shall provide prompt notice thereof to the Disclosing Party
and shall use its reasonable efforts to obtain a protective order or otherwise
prevent public disclosure of such information.
38. PUBLIC ANNOUNCEMENTS.
Seller and Buyer agree to consult with each other before issuing any press
release or making any public statement with respect to this Agreement prior to
the Closing Date (as such term is
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defined in the Asset Purchase Agreement) and, except as may be required by
applicable law will not issue any such press release or make any such public
statement prior to such consultation. Seller and Buyer agree that the initial
press release to be jointly issued by the Parties with respect to the
transactions contemplated by this Agreement shall be in the form heretofore
agreed.
39. COUNTRY OF ORIGIN
For each Product purchased under this Agreement, Seller shall furnish
Buyer with country of origin (manufacture), by quantity and part number (Buyer's
and Seller's).
40. PROPERTY FURNISHED BY BUYER
Any tools, drawings, specifications, or other Materials furnished by Buyer
for use by Seller in its performance under this Agreement or any Purchase Order
issued hereunder shall be identified and shall remain the property of Buyer and
shall be used by Seller only in its performance hereunder and Seller shall, at
Buyer's expense, take such action as Buyer may reasonably request to give full
legal effect to Buyer's rights therein. Such property shall be returned to Buyer
at Buyer's cost, upon request, to destination specified by Buyer in good
condition, except for normal wear and tear. Buyer shall maintain, or pay to
maintain, any Buyer-owned property in use by Seller.
41. GENERAL
A. Any obligations and duties which, by their nature, extend beyond the
expiration or earlier termination of this Agreement, including Sections 18, 20,
24, 26, 27, 30, 32, 36, 37, 40, and 41 (collectively, the "Surviving
Obligations") shall survive any such expiration or termination and remain in
effect. Termination shall not relieve any Party from its liability for breach.
B. If any provision or provisions of this Agreement shall be held to be
invalid, illegal or unenforceable, such provision shall be enforced to the
fullest extent permitted by applicable law and the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby. Any waiver of any kind by a Party of a breach of this
Agreement must be in writing, shall be effective only to the extent set forth in
such writing and shall not operate or be construed as a waiver of any subsequent
breach. Any delay or omission in exercising any right, power or remedy pursuant
to a breach or default by a Party shall not impair any right, power or remedy
which either Party may have with respect to a future breach or default.
C. To the extent the laws of the United States are applicable, Seller
hereby gives assurance to Buyer that it shall not export, re-export or otherwise
disclose, directly or indirectly, technical data received from Buyer or the
direct product of such technical data to any person or destination when such
export, re-export or disclosure is prohibited by the laws of the United States
or regulations of a Department of the United States. This Agreement is
considered to be Buyer and Seller Confidential Information.
D. The entire agreement between the Parties is incorporated in this
Agreement and Exhibits, and it supersedes all prior discussions and agreements,
both oral and written, between the Parties
26
<PAGE>
relating to the subject matter hereof. This Agreement can be modified only by a
written amendment duly signed by persons authorized to sign agreements on behalf
of both Parties, and shall not be supplemented or modified by any course of
dealing or trade usage. Variance from or addition to the terms and conditions of
this Agreement in any Purchase Order, or other written notification from Seller
will be of no effect. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective when each party hereto shall have received a counterpart
hereof signed by the other party hereto.
E. Exhibits specified in this Agreement shall be attached hereto and by
this reference are made a part hereof. The following is a list of exhibits so
incorporated:
Exhibit A: Products and Pricing and No Defect Found Charge
Exhibit B: Specifications and IPC 610B Class 2
Exhibit C: Buyer's Pack-Out and Packaging Specifications
Exhibit D: Flexibility Parameters
Exhibit E: Buyer's Affiliates and Authorized Agents
Exhibit F: Performance Standards
Exhibit G: Build Request Process Flow
Exhibit H: Long Leadtime Authorization Form
Exhibit I: Environmental Warranties
Exhibit J: Statement of Work
F. The construction, validity, and performance of this Agreement and any
Purchase Order issued under it shall be governed by the laws of the State of New
York. The United Nations Convention on Contracts for the International Sale of
Goods is hereby expressly excluded from application to this Agreement.
G. Each of the Parties agrees that all actions, suits or proceedings
arising out of or based upon this Agreement or the subject matter hereof shall
be brought and maintained exclusively in the state or federal courts located in
the State of New York. Each of the parties by execution hereof (i) hereby
irrevocably submits to the jurisdiction of the state and federal courts located
in the Borough of Manhattan, City of New York, State of New York for the purpose
of any action, suit or proceeding arising out of or based upon this Agreement or
the subject matter hereof and (ii) hereby waives to the extent not prohibited by
applicable law, and agrees not to assert, by way of motion, as a defense or
otherwise, in any such action, suit or proceeding, any claim that it is not
subject personally to the jurisdiction of the above-named court, that it is
immune from extraterritorial injunctive relief, that his or its property is
exempt or immune from attachment or execution, that any such action, suit or
proceeding may not be brought or maintained in the above-named court should be
dismissed on the grounds of forum non conveniens, should be transferred to any
court other than the above-named court, should be stayed by virtue of the
pendency of any other action, suit or proceeding in any court other than the
above-named court, or that this Agreement or the subject matter hereof may not
be enforced in or by the above-named court. Each of the parties hereto hereby
consents to service of process in any such suit, action or proceeding in any
manner permitted
27
<PAGE>
by the laws of the State of New York, agrees that service of process by
registered or certified mail, return receipt requested, at the address specified
in or pursuant to Section 30 hereof is reasonably calculated to give actual
notice and waives and agrees not to assert by way of motion, as a defense or
otherwise, in any such action, suit or proceeding any claim that service of
process made in accordance with Section 30 hereof does not constitute good and
sufficient service of process. The provisions of this Section 41G shall not
restrict the ability of any party to enforce in any court any judgment obtained
in the state or federal courts located in the State of New York. [*]
H. Buyer and Seller agree to conduct joint quarterly business reviews with
Senior Management of both Parties for the purpose of reviewing the ongoing
operational performance of Buyer and Seller as it relates to this Agreement,
discuss anticipated business conditions, corrective and preventive action plans
as necessary and appropriate respective strategic business decisions.
28
<PAGE>
IN WITNESS, the authorized representatives of the Parties have executed this
Agreement.
For the Buyer: For the Seller:
/s/ Randy R. Heffner /s/ Robert E. Donahue
- ----------------------------------------- --------------------------------------
Signature Signature
Name: Randy Heffner Name: Robert E. Donahue
----------------------------------- --------------------------------
Title: Senior Vice President Title: President
Manufacturing Operations --------------------------------
----------------------------------
11/27/99 11/27/99
- ----------------------------------------- --------------------------------------
Date Date
MSL hereby joins this Agreement for the purposes set forth in this
paragraph. MSL hereby guarantees to Buyer the performance by Seller of the
obligations of Seller under this Agreement, and, in the event of default by the
Seller of any such obligations, MSL agrees to perform all such obligations as if
MSL were Seller under this Agreement (subject to any limitations which would
apply if MSL were Seller under this Agreement), and to indemnify and hold
harmless Buyer from any loss, costs or damages arising out of any failure of the
Seller to perform any such obligations (subject to any limitations which would
apply if MSL were Seller under this Agreement).
MSL hereby expressly waives (a) diligence, presentment, demand for
payment, acceptance or protest under this Agreement; (b) discharge due to the
disability of Seller with respect to its obligations under this Agreement; (c)
any requirement that Buyer exhaust any right, power or remedy or proceed against
Seller or any other person that may be liable for any obligations of Seller
hereunder and (d) notice of acceptance of its obligations under this Agreement
and notice of non-performance by Seller. MSL specifically agrees that it shall
not be necessary or required, and MSL shall not be entitled to require, that
Buyer (i) file suit or proceed to assert any claim for personal judgement
against Seller in respect of any obligations hereunder, (ii) make any effort at
collection, enforcement or recovery of all or any part of any obligations
hereunder from Seller; or (iii) exercise or assert any other right or remedy to
which Buyer is or may be entitled in connection with any such obligations
hereunder. Following the Effective Date, Seller and Buyer may amend or modify
this Agreement, or settle or comprise any claim hereunder or thereunder, without
consent of or notice to MSL. MSL assumes all responsibility for keeping apprised
of the financial condition of Seller and its performance under this Agreement.
To the extent any of the following are deemed applicable, MSL expressly waives,
to the extent permitted by law, the benefit of California Civil Code Sections
2809, 2810, 2819, 2839, 2845, 2848, 2849, 2850, 2899 and 1432. MSL further
agrees to be bound by Section 41G in connection with disputes arising under this
Agreement. MSL hereby represents and warrants to Buyer that it has all requisite
power and authority to join this Agreement for the limited purposes stated in
this paragraph and perform its obligations pursuant to this Agreement. MSL's
29
<PAGE>
obligations hereunder shall survive any termination of this Agreement with
respect to the Surviving Obligations and any liability of Seller arising out
of the terminated Agreement.
For MSL:
/s/ Kevin C. Melia
- ------------------------------
Signature
Name: Kevin C. Melia
------------------------
Title: Chief Executive Officer
-----------------------
11/27/99
- ------------------------------
Date
30
<PAGE>
EXHIBIT A
PRODUCTS AND PRICING AND NO DEFECT FOUND CHARGE
PRICING
Prior to the end of each [*], or as mutually agreed by both parties, the
Parties will conduct a review of the unit price of the Bill of Material (BOM)
for each Product manufactured hereunder. Any price reductions in the unit
price of the Product's BOM that Buyer controls that is in excess of what
Buyer would have otherwise attained that results from Seller's negotiations
of Materials cost or design or design or other improvements originated by
Seller [*]. [*] associated with [*] will be [*]. Any price reductions in the
Product's BOM that Buyer controls that are a result of normal takedown rates
in the market or are initiated by Buyer [*]. During such meetings the Parties
will, in addition to reviewing the previous [*] takedowns, also review
projections for the next [*].
Pricing will be done at a SKU or Product level.
Prices for Products will be set [*] for the subsequent [*] and will be
established based on the following approach:
Buyer Controlled Materials - Prices for Buyer Controlled Materials will
be provided by Buyer, and [*]. If it is expected that [*] will [*] then a [*]
will be used. In any event, any [*] on Buyer Controlled Materials [*] subject
to [*] at a Materials level.
Seller Controlled Materials - Prices for Seller Controlled Materials
will be established by applying the [*]. The [*] for these Materials are the
[*] for such Materials.
Value Add - Prices for the [*] following the Closing [*] are shown in
[*]. Prices for the [*] will be established by applying [*].
[*]
SKU Price = [*]
A-1
<PAGE>
For Products not produced in [*] but produced in a [*], the pricing on
Seller Controlled Materials and Value Add will be computed [*]. [*] on the
Seller Controlled Materials may be [*] prior to the start of the [*].
Pricing on new Products:
Prices on new Products will be established as follows:
Buyer Controlled Materials - [*]
Seller Controlled Materials - [*]. New Materials to be negotiated.
Value Add - [*]
[*]
From time to time, [*] may be put in to [*]. The Value Add price per
unit [*].
If the Product is deemed by both Parties to be unlike any other in the SLC
factory then the pricing will be determined on a [*] unless otherwise mutually
agreed by both parties.
Example,
[*]
This approach applies if the Product is required to meet load commitments.
A-2
<PAGE>
SKU Price = [*].
PRICE REDUCTIONS
Required [*] for the Initial Term of the Agreement are set forth in
Table A-1 (provided that such required [*] shall be subject to [*]. For the
avoidance of doubt, it shall not be [*].
A-3
<PAGE>
[*]
A-4
<PAGE>
[*]
[*]
A-5
<PAGE>
Definitions: o "Buyer Controlled" Materials under this Exhibit A shall
mean those Materials in the BOM [*].
o "Seller Controlled" Materials under this Exhibit A shall
mean those Materials in the BOM [*].
o Value Add - Encompasses all [*]
o Materials prices are [*]
[*] ABOVE THRESHOLD LEVEL
Within any given [*] if Buyer's [*] set forth below, then [*].
The exception to this [*] is if the [*] were due to [*].
[*]
A-6
<PAGE>
3COM PRODUCTS MANUFACTURING AND PACK-OUT
All products falling in the following categories and families
MMD
[*]
MD
[*]
A-7
<PAGE>
EXHIBIT B
SPECIFICATION AND IPC610B CLASS 2
Specifications shall be the existing specifications for the Products in
use at the Salt Lake City facility, or as otherwise mutually agreed. Upon
request from either Party, the Parties will mutually agree on additional
documentation of such Specification.
B-1
<PAGE>
EXHIBIT C
BUYER'S PACK-OUT AND PACKAGING SPECIFICATIONS
Specifications shall be the existing specifications for the Products in
use at the Salt Lake City facility, or as otherwise mutually agreed. Upon
request from either Party, the Parties will mutually agree on additional
documentation of such Specification.
C-1
<PAGE>
EXHIBIT D
FLEXIBILITY PARAMETERS
Cancellation and Change Schedule:
A. Cancellations:
Buyer may cancel Purchase orders at any time with the following liability:
[*]
Excess and Obsolete Materials are subject to the charges as described in
Sections 7 and 8.
B. Outward Reschedules:
Days before scheduled Delivery Date Allowable percentage of Reschedules
----------------------------------- -----------------------------------
[*] [*]
Flexibility Reschedules: Buyer and Seller will mutually determine the
amount of materials to be held in inventory to provide flexibility. Seller will
drive initiatives to create Product and component flexibility through innovative
Demand Pull signals that trigger demand to build product based upon Seller sales
order activity. This demand signal will be used as a pull signal throughout the
Seller's manufacturing process. The SMT line should be triggered to build upon
demand and trigger pulling raw components into the factory from a VMI model.
Days before
scheduled delivery
date Committed flexibility
------------------ -----------------------------------------------------
[*] [*]
Buyer and Seller will review all options available and any premiums
required to provide Buyer both expedited replenishment and maximum upward
flexibility.
D-1
<PAGE>
EXHIBIT E
BUYER'S AFFILIATES AND AUTHORIZED AGENTS
Affiliates: None
Authorized Agents: None
E-1
<PAGE>
EXHIBIT F
PERFORMANCE STANDARDS
Performance Standards for the [*] following the Effective Date shall be
[*], or as otherwise mutually agreed. Upon request from either Party, the
Parties will mutually agree on additional documentation of such Performance
Standards. Performance Standards for [*] shall be mutually agreed by the
Parties prior to the commencement of the [*] following the Effective Date and
shall include [*]
F-1
<PAGE>
EXHIBIT G
BUILD REQUEST PROCESS FLOWCHART
BUILD REQUEST
PROCESS FLOW
[*]
<PAGE>
EXHIBIT H
LONG LEADTIME AUTHORIZATION FORM
The following is a sample of the long leadtime authorization form to be
completed by Seller and submitted to Buyer for approval in accordance with
Section 4J. The parties may amend this form upon mutual agreement.
In accordance with Section 4J of the Supply Agreement dated as of November
27 1999, between Seller and Buyer, Seller requests authorization from Buyer to
order Materials beyond the quoted leadtime plus [*] period based on unique
circumstances for the following devices.
Affected Buyer division:
Buyer Part Number:
Description of material:
Affected assemblies:
Name of supplier(s) of material:
Reason, justification for requested authorization:
New order leadtime period requested:
Duration of this long leadtime authorization:
Seller
By:_________________________________________________
Print Name:_________________________________________
Title:______________________________________________
Date:_______________________________________________
Approved:
____________________________________________________
Buyer
By:_________________________________________________
Print Name:_________________________________________
Title:______________________________________________
Date:_______________________________________________
H-1
<PAGE>
EXHIBIT I
ENVIRONMENTAL WARRANTIES
To the extent the Products manufactured at the Salt Lake City facility are
compliant with the following as of the Effective Date and with respect to any
changes made by Seller after the Effective Date, Seller represents and warrants
to Buyer that upon and after the Effective Date of this Agreement:
(i) Seller will not provide any Product to Buyer which has come into
physical contact with: (i) a Class I substance, as defined in Article 611 of the
Federal Clean Air Act (the "Act"), during any portion of the manufacturing
process; or (ii) a Class II substance, as defined in the Act and Title 40, Code
of Federal Regulations, Article 82 (the "Code"), during any portion of the
manufacturing process, where there has been a determination by the U.S.
Environmental Protection Agency that there is a substitute product or
manufacturing process for such product which does not rely on the use of such
Class II substance, that reduces overall risk to human health and the
environment, and that is currently or potentially available, in accordance with
the Code.
(ii) Buyer shall not be subjected to any warning or labeling requirements
regarding a Class I substance or a Class II substance pursuant to the Act or any
regulation promulgated under the Act, as a result of any Product provided by
Seller to Buyer under this Agreement. Seller shall comply with applicable
environmental regulations involving recyclable packaging to the extent such
packaging is not specified by Buyer.
(iii) The Products will not contain or be manufactured using ozone
depleting substances including without limitation chloroflourocarbons, halons,
methylchloroforms and carbon tetrachlorides.
In the event that the Salt Lake City facility is not compliant with any of
the foregoing as of the Effective Date, the Parties will work to develop and
implement a plan to achieve compliance on a going-forward basis.
I-1
<PAGE>
EXHIBIT J
STATEMENT OF WORK
PROTOTYPING SERVICES:
[*]
Buyer expects some ongoing small runs of builds (typically [*] units) for
component qualification purposes (using production boards). Buyer expects to
give [*] notice, have turnaround time of [*], and pay [*] premium on top of
normal information cost. Urgent [*] turn requests for the same purposes will be
paid at [*] premium on top of normal information cost.
J-1
<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.
<PAGE>
IBM Confidential
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
Page 1
Dated 05/05/98
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IBM Confidential
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
------------------ ------------------------
Page 2
Dated 05/05/98
<PAGE>
IBM Confidential
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
Page 3
Dated 05/05/98
<PAGE>
IBM Confidential
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.
Page 4
Dated 05/05/98
<PAGE>
IBM Confidential
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:
Page 5
Dated 05/05/98
<PAGE>
IBM Confidential
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:
Page 6
Dated 05/05/98
<PAGE>
IBM Confidential
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 [*] 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 [*] after expiration or receipt of termination notice
for default of this Agreement from IBM, cancel all Parts
purchase orders, and within [*], 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 [*] 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 [*] 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) [*] 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 [*]. 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 [*]. 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 [*] 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 [*] 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 [*]. Within [*] 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 [*] 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 [*] 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, [*] 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 [*] 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 [*].
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
Page 20
Dated 05/05/98
<PAGE>
IBM Confidential
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 [*] 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
Page 21
Dated 05/05/98
<PAGE>
IBM Confidential
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 [*], 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.
Page 22
Dated 05/05/98
<PAGE>
IBM Confidential
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.
Page 23
Dated 05/05/98
<PAGE>
IBM Confidential
[The remainder of this page intentionally left blank]
Page 24
Dated 05/05/98
<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 [*] 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 [*] 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 [*] 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 [*] 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 [*] 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 [*]
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 [*] 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 [*] 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 [*] 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 [*]
([*]) 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
[*] ([*]) 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 [*] ([*]) 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
IBM Confidential Page 1 of 39
sow501.lwp
<PAGE>
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
--------------------------- ---------------------------
IBM Confidential Page 2 of 39
sow501.lwp
<PAGE>
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
IBM Confidential Page 3 of 39
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<PAGE>
ATTACHMENT 1
IBM/MSL Outsourcing Base Agreement Statement of Work
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
IBM Confidential Page 4 of 39
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<PAGE>
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.
IBM Confidential Page 5 of 39
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<PAGE>
ATTACHMENT 1
IBM/MSL Outsourcing Base Agreement Statement of Work
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 [*] years unless
terminated as provided in Section 5.0 of the Base Agreement. This
Attachment will automatically be renewed for periods of [*] unless either
party gives [*] 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.
IBM Confidential Page 6 of 39
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<PAGE>
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,
IBM Confidential Page 7 of 39
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<PAGE>
ATTACHMENT 1
IBM/MSL Outsourcing Base Agreement Statement of Work
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 [*] 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 [*] 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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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=[*]}, 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 [*] as determined by the [*] described in
Section 7.5 e) i) below. For RS Products, manufactured by MSL, the
[*] shall be consistent with the terms of section 7.2, below.
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c) 'B' shall mean [*] or a value determined by [*].
d) 'C' shall mean [*] or a value determined by [*].
e) 'D' shall mean [*] or a value determined by [*].
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 [*].
ii) "1" shall mean [*] or the [*] as determined by the [*]
described in Section 7.5 e) i) below
iii) "2" shall mean [*] to be determined by [*]. MSL's [*] is as
listed in the Markup Appendix 1.
iv) "3" shall mean [*] to be determined by [*]. The [*] are as
listed in the Markup Appendix 1.
v) "4" shall mean the [*] to be determined by [*]. 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
[*].
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[*] needed to integrate a unit for a specific 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 [*]
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[*] shall be made known and available to IBM at the time of their
availability [*].
b) In the event IBM reasonably questions whether [*] as described in
Section 7.4 a), and MSL cannot otherwise provide IBM with proof of
its compliance [*], both parties agree to have an independent party
evaluate IBM's inquiry to determine whether IBM [*]. 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 [*] that contains an [*].
i) If IBM [*] from [*] resulting in [*], IBM will notify MSL.
MSL shall have [*] after written notice of [*]. If MSL [*]
subject to the conditions set forth in ii) below, then IBM
may [*], and IBM and MSL shall mutually agree on a [*]. In
this case MSL shall [*].
ii) If MSL [*] because IBM's [*], MSL shall have [*] from written
notice of [*] to make adjustments it deems necessary [*].
This [*] is contingent upon MSL making, within [*].
d) In the event, [*] were to receive an [*], IBM will notify MSL. MSL
shall have [*] after written notice of [*]. MSL shall have [*] from
written notice of [*] to make adjustments it deems necessary [*].
If MSL [*] then IBM may [*] and IBM and MSL shall mutually agree on
a [*].
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e) In the event, IBM were to receive an [*], IBM will notify MSL. MSL
shall have [*] after written notice of [*]. If MSL [*] then IBM may
[*] and IBM and MSL shall mutually agree on a [*].
7.5 [*] The [*] shall [*] during the term of this Agreement subject to the
following:
a) If [*] by MSL or [*] by MSL [*], MSL will [*]. The [*] will apply to
[*] and to [*] during the term of this Agreement.
b) If IBM or MSL [*], the corresponding [*] will be effective when MSL
[*].
c) A [*] could result if there is a [*]. If this occurs, the parties
shall [*]. The [*] will apply to [*] and to [*] during the term of
this Agreement.
d) A [*] may result if [*]. Any [*] will be per the terms of [*] and
the [*] of the [*] will carry the [*].
e) [*] will be reviewed each [*] on a [*]. The schedule will be as
follows:
"T" shall be the date that MSL [*] are ready for [*]; it is the [*].
[*] before T, MSL shall initiate an [*].
[*] before T, MSL shall answer all IBM questions and issues [*].
[*] shall include:
i) [*], with [*]
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[*] to the [*]. For [*] the [*] will be [*].
ii) [*] for [*].
iii) [*], in accordance with [*] Sections 7.4 and 7.5 a), b), c),
and d).
iv) [*] based on the [*].
f) Any [*] necessary [*] will be paid through a specific purchase
order and an acceptable invoice. MSL [*] to be used will be the
[*]
g) Any differences between [*], as defined in Section 7.1, assumptions
used in determining [*] will be determined and [*]. No other
components of [*]. 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 [*], IBM cannot [*] described in Section 7.5 e) i) above,
and upon written notice to IBM, MSL will be entitled to [*] to
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[*]. The corresponding [*] will be effective when MSL begins using
and shipping the [*].
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 [*] will be [*] to IBM when MSL
begins using and shipping the [*]. However, if a specific [*] is the
direct result of [*], that [*] will be [*] for a period of [*], then
[*] of the [*] 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) 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. [*]
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Parts are required earlier than on the stated and mutually
agreed upon lead time. MSL's request for [*] must state:
(a) [*].
(b) Product(s) part number affected.
(c) Product(s) quantity affect.
(d) [*].
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.
[*] is the [*] at which [*], and will be in accordance with
[*]. The [*] shall not exceed [*]. The [*] will be [*] and
will not exceed [*]. MSL's request for [*] must state:
(a) [*].
(b) Quantity of [*] by Product(s) part number.
(c) Quantity of units to be shipped due to [*].
(d) [*].
(e) [*].
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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IBM/MSL Outsourcing Base Agreement Statement of Work
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. [*]. 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
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 [*] 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. [*]
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 [*] of receipt of a forecast if MSL is
unable to meet the quantities and Delivery Dates. If MSL fails to
notify IBM within the [*], 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 [*] 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 [*] 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 [*] 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 [*] 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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IBM/MSL Outsourcing Base Agreement Statement of Work
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) [*] 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 [*] on time delivery, measured against the CRAD date in
the integration roll out schedule. [*]
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. [*]
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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) [*]
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) [*]
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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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 [*] 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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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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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 [*] 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 [*] after receipt of goods by IBM. If IBM
has not notified MSL of any defects in a unit of Product within [*]
of receipt, such unit shall
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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 [*] 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 [*] unless
otherwise stated in the applicable Product Attachment, or
agreed to by IBM in writing.
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v) MSL will warrant its workmanship for [*] 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 [*] after receipt from IBM. Upon
or before the [*], 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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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
[*] 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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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 [*] 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 [*] from the Delivery Date.
i) Products returned to the US Work Center will be [*].
ii) For Products returned to the Valencia Work Center, [*].)
iii) MSL will [*] the returned Product [*] IBM for such
Product within [*] of receipt of the return by MSL.
iv) MSL's [*] for the acceptance of returned non-warranty Products
shall be [*] IBM for such Product [*]).
v) For the Valencia Work Center, 22.1 b) iii) and iv) will be
processed as [*] IBM [*] within [*] 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 [*] per 22.1 b) iii and iv) to [*] 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 [*].
viii) When [*] are shipped, MSL must [*].
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 [*] 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>
IBM Confidential Page 1 of 7
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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.
IBM Confidential Page 2 of 7
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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 [*] 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 [*] 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 [*]. You follow the same methodology for [*] looking at
the forecast [*] 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 [*] prior to the end of the quarter, using a [*]
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>
[*]
</TABLE>
Payments for these liabilities will be made via a separate invoice.
IBM and MSL Confidential Page 3 of 7
<PAGE>
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 [*] 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 [*] 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 [*].
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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 [*] 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.
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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 [*] 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 [*], 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.
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ATTACHMENT 5: EQUIPMENT AND PROGRAM LOAN LIST July 20, 1999
HARDWARE
ASSET IDENTIFIER
OR SERIAL NUMBER DESCRIPTION QUANTITY COMMENT VERIFIED
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ATTACHMENT 5: EQUIPMENT AND PROGRAM LOAN LIST July 20, 1999
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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
[*] [*] [*] [*] [*]
<PAGE>
ATTACHMENT 5: EQUIPMENT AND PROGRAM LOAN LIST July 20, 1999
SOFTWARE
ASSET IDENTIFIER
OR SERIAL NUMBER DESCRIPTION QUANTITY COMMENT VERIFIED
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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
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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
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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
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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 [*] 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
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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
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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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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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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 [*] 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) [*] 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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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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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 [*] 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 [*] 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
ATT6.1wp Page 18 of 19
<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
ATT6.1wp Page 19 of 19
<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 [*] 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 [*] 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 [*] 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
<PAGE>
Exhibit 10.16
IOMEGA CORPORATION
GLOBAL REQUIREMENTS AGREEMENT
NO. MSL183G
THIS SUPPLY AGREEMENT (hereinafter referred to as "the Agreement"), dated and
effective this 30th day of July 1997, ("Effective Date"), between
Manufacturers' Services Limited, a company organized and existing under the laws
of Delaware and having its principal place of business at 200 Baker Ave., #205,
Concord, MA 01742, USA ("Seller") and
Iomega Corporation, a Delaware corporation of the United States of America,
having its principal place of business at 1821 West Iomega Way, Roy, Utah 84067,
USA ("Buyer")
Seller and Buyer hereinafter also collectively referred to as "Parties" and
individually as "Party".
WHEREAS, Seller agrees to manufacture and sell to Buyer Product (as hereinafter
defined) and Buyer agrees to purchase from Seller such Product, subject to the
terms and conditions of this Agreement.
0. DEFINITIONS
A. "Affiliate"
"Affiliate" shall mean any entity in which Seller and or Buyer, as the
case may be, directly or indirectly owns a majority equity interest or
otherwise owns a controlling interest. Buyer's Affiliates are identified
in Exhibit E, which may be changed by notice from Buyer to Seller from
time to time.
B. Buyer's "Authorized Agent"
Buyer's "Authorized Agent" shall mean Iomega Suppliers, Subcontractors, or
Contract Manufacturers who produce Iomega products and whose credit
worthiness is acceptable to the Seller. Buyer does not guarantee the
Purchase Orders of Buyer's Authorized Agents but Buyer does hereby
guarantee payment and performance by its Affiliates of all indebtedness
and obligations owing, from time to time, to Seller. Buyer's Authorized
Agents are identified in Exhibit E, which may be changed from time to time
by agreement between Buyer and Seller. Prior to any performance of any
obligations under this Agreement, such Authorized Agent shall execute and
deliver to Buyer and Seller an Accession Agreement satisfactory to both
Parties whereby such Authorized Agent agrees to be bound by the terms
hereof.
C. "Products"
"Products" shall mean the products, the specifications of which are
attached as Exhibit B, hereinafter referred to as "Specifications" sold by
Seller to Buyer, Buyer's Affiliates or Buyer's Authorized Agents subject
to the terms and conditions of this Agreement which are defined in Exhibit
B of this Agreement (and those products added to Exhibits A and B by
written amendment and in mutual agreement between the Parties at any time
hereafter).
- ----------
[*] = Information redacted pursuant to a confidential treatment request.
An unredacted version of this exhibit has been filed separately with the
Commission.
- --------------------------------------------------------------------------------
Iomega WS, Supplier RM Rev. P, July 30, 1997
-- --
Page 1 of 26
- --------------------------------------------------------------------------------
<PAGE>
D. "Specifications"
"Specifications" shall mean the specifications attached as Exhibit B,
and shall also include as modified from time to time [*] workmanship
standards and the then currently accepted commercial manufacturing
practices.
E. Precedence of Documents
The precedence of agreements between the Buyer, its Affiliates, and its
Authorized Agents on the one hand and Seller on the other hand shall be:
1. This Agreement
2. Any Buyer, Buyer's Affiliate, or Buyer's Authorized Agent Purchase
Order
3. Any subsequent agreement between Buyer and Seller that is not
expressly stated to be an amendment to this Agreement.
4. Non-Binding Forecast (PSI) provided pursuant to Section 2.D.
1. INTENT
A. Both parties intend to enter into a strategic supplier relationship. In
consideration thereof, both parties agree to cooperate to achieve mutual
long term program goals by sharing Product road-map information,
technology migration, engineering and other resources when applicable.
Goals include: shortening Product lead-times, increasing volume
flexibility, achieving Just-in-Time delivery, achieving ongoing cost
reductions, specific quality goals, and continuous quality improvement.
B. Seller agrees to provide design recommendations to Buyer, and to
manufacture, sell, and deliver Products to Issuing Parties. Buyer
agrees to purchase, and to cause those of its Affiliates and Authorized
Agents who purchase, to purchase from Seller such Products,
subject to and in accordance with the terms and conditions of
this Agreement.
C. Buyer and its Affiliates intend to purchase, and Seller intends to
supply, between [*] of Buyer's and buyer's Affiliates' requirements
during the term of this Agreement for the Products listed in Exhibit
"A".
2. PRODUCT ORDERS
A. Purchase Orders
Purchase Orders ("Purchase Orders") for Product shall be submitted by
Buyer, Buyer's Affiliates, or Buyer's Authorized Agents to Seller on
separate, Purchase Order forms, in the [*] (other than the [*]) during
the term of this Agreement for the [*], except when component lead-time
exceeds [*], in which case Purchase Orders will be given to lead time
or other arrangements will be made which are mutually agreed by Buyer
and Seller. Each Purchase Order shall at least include the following:
a) Ordering entity and location;
b) Purchase Order number and issue date;
c) Reference to this Agreement;
d) Product quantity;
e) Product requested delivery dates;
f) Product requested delivery location(s);
g) Product revision level, and
h) Price
- --------------------------------------------------------------------------------
Iomega , Supplier Rev. P, July 30, 1997
-- --
Page 2 of 26
- --------------------------------------------------------------------------------
<PAGE>
B. Acceptance of Purchase Orders
Purchase Orders shall not be considered as accepted until accepted in
writing (confirmation) by an authorized representative of Seller. Seller
shall make commercially reasonable efforts to send confirmation (except by
written mutual arrangement) of Purchase Orders within five (5) working
days after receipt. If Seller fails to return the acknowledgment
(confirmation) within five (5) working days, Seller will be deemed to have
accepted that Purchase Order. No additional or different provisions
proposed by either Party shall apply unless expressly agreed to in writing
by both parties. Seller will accept Purchase Orders for Product which are
in compliance with the terms and conditions of this Agreement.
C. Delivery Dates
Delivery dates shall be identified by the Buyer, Buyer's Affiliate, or
Buyer's Authorized Agent. Seller will acknowledge its commitment to the
dates or offer alternative dates that reflect the Seller's commercially
reasonable efforts to meet the identified delivery dates. The delivery
date will be the confirmed date that is mutually agreed to in writing by
Seller and the person who issued the relevant Purchase Order (the "Issuing
Party") but in any event shall, unless otherwise agreed by the Seller and
Issuing Party, be a date which is consistent with Seller's commitment to
supply Product under this Agreement.
D. Rolling Forecast
Buyer agrees to use its commercially reasonable efforts to provide to
Seller during the last full week of each month (hereinafter "N") during
the term of this Agreement a written rolling Product purchase forecast
(the "Rolling Forecast"), indicating the total quantity of Product to be
shipped and/or anticipated to be shipped, in each of the next twelve (12)
months, including the period already covered by outstanding Purchase
Orders.
The Rolling Forecast structure shall be as follows:
a)[*]
b)[*]
The Purchase Orders shall be the only documentation for ordering
quantities. Forecasts are for information and capacity planning only.
E. Seller agrees that all of the Buyer's Authorized Agents and Affiliates,
wherever located, shall be entitled to make purchases under this
Agreement, subject to their credit worthiness being acceptable to Seller,
unless guaranteed by Buyer. Any payment timing and credit limitations
placed on Buyer's Affiliates, other than those presented in this
Agreement, will be agreed upon in writing by both parties. Seller agrees
to notify Buyer of any credit limitations applicable to Buyer's Authorized
Agents.
- --------------------------------------------------------------------------------
Iomega , Supplier Rev. P, July 30, 1997
-- --
Page 3 of 26
- --------------------------------------------------------------------------------
<PAGE>
3. TERM OF AGREEMENT
A. Term of Agreement
This Agreement shall become effective upon execution by authorized
representatives of both Parties. This Agreement shall expire
twenty-four (24) months after the date of execution by both parties,
unless this Agreement is terminated earlier pursuant to article 13,
14, or 16 and shall be automatically extended for two additional twelve
(12) month periods, unless one Party notifies the other Party in writing
at least three (3) months prior to the beginning of such additional
period that it desires not to extend.
B. Multiple and Fully Qualified Manufacturing Facilities:
Seller shall provide adequate, qualified manufacturing facilities where
the Buyer's Products can be manufactured/produced. Detailing of additional
quality requirements shall be defined in Quality Supplements to be
mutually agreed from time to time, and to be attached as Exhibit C (a
"Quality Agreement"). Seller shall build Buyer's Products only in
facilities that have been approved and certified by Buyer unless prior
written consent has been obtained.
C. Production Capacity
Seller shall make available the necessary capacity to meet Issuing
Parties' production requirements, as provided by Issuing Parties in
Sections 2.A and 3. D. Buyer agrees to not unreasonably withhold approval
of additional production facilities in the event of extraordinary demand.
D. Flexibility Capability
Issuing Party may issue change requests for Product quantities and
schedule dates, and Seller shall maintain the necessary capacity to
accommodate such changes, in accordance with the Flexibility Agreement
attached as Exhibit D (the "Flexibility Agreement"). Changes made in
accordance with the Flexibility Agreement will not incur cost or liability
for Issuing Party, unless said changes cause Seller to violate or exceed
Component suppliers' Flexibility Agreements, as negotiated by Buyer from
time to time. If such a situation occurs, then Issuing Party will be
liable only for that portion of the change which exceeds the Component
suppliers' Flexibility Agreements. Seller warrants that it will use its
commercially reasonable efforts, and will cooperate with Buyer as needed,
in order to minimize Buyer's liability exposure under this Flexibility
Agreement. Buyer warrants that it will use its commercially reasonable
efforts to enforce the Component suppliers' Flexibility Agreements in
cooperation, as needed, with Seller.
E. Inventory Transfer
Seller agrees to buy, from time to time, Buyer's on-hand inventory that is
in excess of Buyer's own production requirements and is needed for
Seller's production. Seller also agrees to make inventory in excess of
Seller's production requirements available for sale to the Buyer, to any
of Buyer's Affiliates or Authorized Agents or anyone else designated by
Buyer. Seller's obligation to sell such inventory to any Buyer's
Authorized Agent or to anyone else designated by Buyer, is subject to
Seller's determining such entities' credit worthiness is acceptable to
Seller. Transfer quantities and payment terms will be mutually agreed on a
case-by-case basis. Prices shall be [*].
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F. Obsoleted Material
Any unique, non-returnable or non-cancelable material ordered by the
Seller in order to fulfill Purchase Orders placed by the Buyer, Buyer's
Affiliates, and Buyer's Authorized Agents, which is made obsolete, or is
made excess through Purchase Order changes outside of the Flexibility
Agreement, will be the liability of the Issuing Party. Seller and Issuing
Party will determine future demand at the end of each month based on
Issuing Party's PO's and forecasts. Issuing Party will purchase such
inventory from the Seller within thirty days after the Seller's notice to
the Issuing Party of the obsolete status.
4. PRICING
A. Price for Product
The prices for Product sold pursuant to this Agreement are set out in
Exhibit A to this Agreement (hereinafter referred to as "Prices") and
shall be reviewed and negotiated at least [*] prior to each [*] during the
term of this Agreement and any extension thereof. Any change to the Prices
set forth in Exhibit A shall be identified by an amendment to Exhibit A
which shall be approved by authorized representatives of both Parties. All
prices shall be in US Dollars, unless otherwise negotiated and documented
in Exhibit A.
B. Charges
Seller shall pay all applicable export costs, including any pre-shipment
inspection charges if mandated by the authorities of the country of
exportation, as well as all export brokerage, documentation, processing,
customs and any other export fees and taxes. Seller also agrees to pay all
sales and use taxes to Issuing Party's delivery point. All Products shall
be shipped Delivered Duty Paid (DDP) as defined in Incoterms (1990), but
freight collect, and DDP costs invoiced with Product.
Both Parties agree that prices shall include all charges such as
packaging, palletizing, packing, crating, and storage as needed.
C. Components
Buyer shall negotiate and deliver all Component pricing to Seller. All
components shall be purchased from suppliers on Buyer's Approved Vendor
List (the "AVL") as revised from time to time.
As used herein the term "Component" shall mean any Class A Component, any
Class B Component and any Class C Component, as designated in the
Specifications.
D. Opportunity Cost Savings
During Production, Seller shall maintain a vigorous cost reduction program
to ensure that Product pricing, subject to the price of Components, is
competitive at all times. After the execution of this Agreement, the
actual all-in net benefit of cost reduction opportunities identified by
Seller (i) of which Buyer and Buyer's Affiliates were not aware at the
time Seller notified Buyer of them, (ii) which do not result from a price
reduction by a supplier on the AVL and (iii) which are accepted by Buyer,
on Class A Components, Class B Components and Class C Components [*]. The
benefits shared with Seller shall be in the form of increased margin on
Products sold by
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Seller which incorporate the cost reduction for a period of [*] after
implementation or until the termination of this Agreement, if earlier.
During New Product Introduction (NPI), in exchange for providing pricing
during the pilot, preproduction and manufacturing ramp-up stage equivalent
to that provided during the volume manufacturing period for any new
Product Buyer identifies to Seller and which is added to this Agreement,
Seller will retain [*] of any purchase price variance (as defined in the
second sentence of the preceding paragraph) identified by Seller during
the NPI phase, for a period of [*] after implementation or until the
termination of the Agreement, if earlier, and [*] thereof during the [*]
period starting on the last day of such [*] period or until termination
of this Agreement, if earlier.
E. Price Auditing
Buyer reserves the right to review all Component pricing, contracts,
Purchase Orders, and payment schedules applicable to Seller's activities
in providing Product in connection with this Agreement. Audits are
intended to ensure Supplier compliance with Buyer's contractual pricing
and delivery requirements. Seller shall provide such access to its books,
records, facilities, and officers and employees as may reasonably be
requested by Buyer in connection with any such audit, which shall take
place during Seller's business hours and shall not unreasonably interfere
with Seller's operations.
5. DELIVERY
A. Lead Time
Lead time represents the period of time required by Seller to procure
Components, manufacture and deliver a finished Product beginning with the
receipt of a Purchase Order for the Product and ending with the shipment
of the finished Product. Seller shall provide Issuing Party a lead time
which, at a maximum, represents the longest Component lead time plus one
week.
B. Timely delivery is an important requirement of Buyer. Delivery performance
shall be measured by on-dock date against the agreed delivery date. The
delivery target is either the specified delivery date or the immediately
preceeding day.
C. To achieve Buyer's Just-In-Time goals, Seller agrees to perform frequent
on-time deliveries, maintain regional warehouses, or establish "in-house
stores" maintained at the Buyer's production sites.
D. Unless otherwise set forth in the Purchase Order, and mutually agreed in
writing by both Parties, title and risk of loss shall pass to Issuing
Party at the named place of destination as indicated by the Issuing Party.
Seller shall consult the Issuing Party on the freight method and carrier
and, when Issuing Party is paying for freight, use Issuing Party's
prescribed freight method and carrier.
E. If Seller delivers Product before the specified delivery date, Issuing
Party may, at its option, return such Product at Seller's risk and expense
for subsequent delivery on the specified delivery date or retain such
material and make payment to terms as if the shipment had been delivered
on the specified delivery date.
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F. Changes to delivery dates may only be approved by the authorized
purchasing representatives for the Issuing Party. The Issuing Party may,
without cost or liability, issue change requests for Product quantities
and schedule dates in accordance with the Flexibility Agreement. Written
confirmation or rejection of any change request will be sent by Seller to
the Issuing Party within three (3) business days of receiving a change
request, and the Issuing Party shall provide a confirming Purchase Order
change within three (3) business days of receiving Seller's confirmation.
Seller must accept any change requests within the terms of the Flexibility
Agreement Requests that fall outside the scope of the Flexibility
Agreement will be mutually agreed to as to quantity, timing, and cost, and
will become effective only after Parties reach a mutual agreement.
G. Seller shall notify Issuing Party in writing immediately if Seller has
knowledge of any event which could result in any change to the agreed
delivery plan.
H. In the event that Product scheduled for delivery is more than [*]
business days late, Seller agrees to use Issuing Party's preferred carrier
(or other transportation mode) if requested by Issuing Party. Seller
agrees to absorb any incremental premium transportation cost on such late
shipment. In the event that Product scheduled for delivery is more than
[*] business days late the Issuing Party may purchase substitute Product
elsewhere with no liability to Seller whatsoever, except to the extent
that failure to deliver is caused by Issuing Party, Seller will not be
liable for late delivery.
6. PACKING, MARKING, WORKMANSHIP, AND SHIPPING INSTRUCTIONS
A. All Product shall be prepared and packed in a commercially reasonable
manner so as to secure the lowest transportation rates and meet carrier's
requirements and those set forth in Buyer's Packaging Specifications
(Iomega Document: 00201400: "Spec, Iomega Packaging").
B. Each shipping container shall be marked to show Issuing Party's Purchase
Order number, part number, revision level, lot number, quantity contained
therein, and destination. A packing list showing the Purchase Order number
shall be included in each container. Marking on all parts should be per
the Buyer's shipping specification. Symbolization should include date of
manufacture, place of manufacture, Seller's part number and revision
number.
C. Seller agrees to standardize the count multiples used in shipments of
Product.
7. QUALITY
A. Buyer and Seller shall establish one or more Quality Agreements acceptable
to both Parties, if needed.
B. At Buyer's or Seller's request, each Party will facilitate reasonable
on-site visits and inspections by the other Party during normal business
hours. Inspections shall in no way relieve either Party of obligations to
deliver or correctly use conforming Product.
C. Seller agrees to provide relevant outgoing inspection, quality, and
reliability data upon Buyer's request.
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D. Seller agrees that all Products will conform to the Specifications for the
part number and revision level stated on Issuing Party's Purchase Order,
to the workmanship specifications of IPC-610B Class 2 as modified from
time to time, and to the then currently accepted commercial manufacturing
practices.
E. Seller agrees to advise Buyer in writing of any changes to process,
materials, or sources of supply no less than the Components' lead time
plus [*] and to ensure that such changes do not compromise specifications,
quality, or reliability of Products ordered pursuant to this Agreement. In
the event a Seller-proposed change fails the Buyers qualification, the
Seller is obligated to provide the existing qualified product until the
proposed changed can be qualified.
8. INSPECTION AND ACCEPTANCE
A. Products purchased pursuant to this Agreement shall be subject to
inspection and testing by Issuing Party, which shall occur within [*]
business days of receipt, with a goal to reduce same to [*]. Unless
otherwise specified in the Purchase Order, final inspection and acceptance
of Product by Buyer shall be at Buyer's, Buyer's Affiliates, or Buyer's
Authorized Agent's facilities. Buyer reserves the right to reject Product
which does not conform to the Specifications and the Quality Agreement, if
any. Buyer may either return non-conforming Product for full credit of the
purchase price plus any transportation charges paid by Buyer to prevent
line-down situations, or require prompt repair or replacement, at Seller's
option, of non-conforming Product, which rights shall be in addition to
such other rights as Buyer may have in law or equity. Repaired or replaced
Product-shall be subject to the same inspection and warranty provisions of
this Agreement as Product originally delivered under any Purchase Order.
In the event non-conforming Product is received by Issuing Party, the
Seller will be notified and a satisfactory remedy will be negotiated.
Remedial action will include Corrective Action Reports (CARs), Return
Material Authorizations (RMAs), and a plan to proceed. If non-conforming
Product is received, Issuing Party will provide Seller with the
opportunity to remedy. Issuing Party has the right to immediately "screen"
such Product to prevent a line-down situation. However, the Issuing Party
will supply the Seller an estimation of the amount of Product to be
screened, along with the costs involved. The-actual labor costs will be
applied for each direct labor man-hour expended by Buyer, Buyer's
Affiliates, or Buyer's Authorized Agents, and the actual costs of
supplies. In the event a subcontractor is needed for additional inspection
and/or screening, the actual cost incurred by Buyer, Buyer's Affiliates,
or Buyer's Authorized Agents will be charged to the Seller.
B. Return of Rejected Product
In the event Buyer, Buyer's Affiliates, or Buyer's Authorized Agent
detects non-conforming Product, a Non-Conforming Material Report (NCMR)
and/or a Corrective Action Request (CAR) shall be provided to Seller.
Seller has [*] from the return receipt of non-conforming Product to
confirm the reason for rejection. Seller must provide a Return Material
Authorization (RMA) within [*] after receipt of samples of suspected
Product.
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If Seller accepts the CAR, the following procedures (the "RMA Procedures")
shall apply with respect to the relevant Product:
1. Buyer shall return the discrepant Products to Seller accompanied by
the RMA number and send a debit note (invoice) to Seller
representing the Prices and quantity of the returned Product; and
2. Buyer may send a Purchase Order to Seller to replace parts at
Buyer's discretion; and
3. Seller shall expedite such Purchase Order at Buyer's request by
premium transport. Incremental transportation cost shall be absorbed
by Seller. Seller shall also conform to the Buyer's closed loop
corrective action process.
4. Seller shall credit Buyer's account for the amount of the debit
note.
If Seller does not accept the CAR the following procedures (the "Seller
Analysis Procedures") shall apply with respect to the relevant Product:
1. Seller shall request Buyer to send samples of rejected Product to
Seller for detailed analyses;
2. Seller shall analyze samples within [*] business days after receipt
of such samples. After analyses of those samples, Seller shall issue
an RMA or give a written explanation of denial.
3. In the case that an RMA is issued, the RMA Procedures shall apply
and the CAR shall be accepted.
4. In the case of Product with No Defect Found, a mutually agreed
charge will apply.
If pending the analysis of samples by Seller pursuant to the Seller
Analysis Procedures, Buyer is in urgent need of Product, Buyer may issue a
Purchase Order to replace the Products to which the CAR pertains. Seller
will expedite such Purchase Order at Buyer's request and, if requested by
Buyer, will ship the order by premium transport as specified by Buyer.
Unless an RMA is issued, all costs of expedited handling of such Purchase
Order and any premium transport specified by Buyer shall be borne by
Buyer.
C. Support
Buyer may request reasonable on-site support from Seller, which Seller
shall provide, to solve problems with rejected shipment batches of Product
as well as validating inspection methodology further specified in the
Quality Agreement. All costs will be borne by the entity incurring them.
D. Other
For purposes of this Section 8 the term Buyer shall mean Buyer, or, if
different, the Issuing Party except that the provisions of Section 8.A
concerning Screening and additional inspection shall, once invoked, apply
equally to Buyer, Buyer's Affiliates, and Buyer's Authorized Agents and in
the event of dispute among Issuing Parties, Buyer shall make the final
determination. To the extent any of Buyer's Affiliates is obligated to
Seller under this Section 8, Buyer will cause it to perform its
obligations.
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9. WARRANTY
A. Seller warrants that title to all Products delivered to Buyer under
this Agreement shall be free and clear of all liens, encumbrances,
security interests or other claims.
B. Seller warrants that Products delivered hereunder shall be free from
defects in workmanship under normal use and service for a period of [*]
from date of acceptance of Products by Issuing Party. Seller further
warrants that all Products shall conform to the Specifications. Seller
makes no warranty on Components except to the extent that a Component
is covered by the Component manufacturers' or another persons' warranty
that is enforceable and collectable. If a failed Component is not
covered by its manufacturer's or another person's warranty which is
enforceable and collectable, Buyer shall [*] unless the non-coverage is
Seller's fault. Seller shall, upon request, assign Components
warranties to Buyer in which event Seller shall have no responsibility
for the components covered thereby.
The warranty for replaced or repaired Product will be the same as for
the original Product. Products which are "samples" and/or "prototypes"
are sold "as is", with all faults and with no warranty whatsoever.
C. Non-conforming Product discovered during Buyer's manufacturing or
assembly processes are not considered to be a warranty repair and shall
be corrected in accordance with paragraph 8.
D. Seller agrees that in case of epidemic failure (greater than [*]
combined failure rate of delivered Product, after [*] units have been
produced, for the same or multiple causes in any [*] period). Seller
will provide corrective action in accordance with Paragraph 8 and
Seller will provide a written corrective Action Report addressing the
steps that will be taken to eliminate the cause of the problem in
accordance with Buyer's Corrective Action process. Failures due to
Component issues will be cooperatively resolved between Buyer, Buyer's
Affiliate, or Buyer's Authorized Agent, Seller and Component supplier.
E. Seller agrees to work with Buyer during the development phase in order
to make sure that the products are fit for the intended use, but Seller
does not warrant such fitness. Especialy in the development phase, both
Buyer and Seller have the responsibility to give each other immediate
feedback on fit-for-use issues and potential defect mechanisms. Buyer
has the sole responsibility to make sure that the Specifications
reflect the fit-for-use criteria.
F. If during the applicable warranty period, (i) Seller is notified
promptly in writing upon discovery of any non-conformity in the
Products, including a detailed description of such defect; (ii) such
Products are returned to Seller's Failure Analyses and Corrective
Action facility accompanied by Seller's Return Material Authorization;
and (iii) such Products are defective and such defects are not caused
by accident, abuse, neglect, alteration, improper installation, repair
or alteration by someone other than Seller, improper testing, or use
contrary to any instructions issues by Seller within a reasonable time
and not in opposition to Product's Specifications, Seller shall [*].
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G. Prior to any return of Products by Issuing Party pursuant to this
Paragraph, Issuing Party shall afford Seller the opportunity to inspect
such Products at issuing Party's location, and any such Products so
inspected shall not be returned to Seller prior to receipt of an RMA.
H. Seller shall return Products repaired or replaced under this warranty to
Issuing Party transportation prepaid. Seller shall also reimburse Issuing
Party for the transportation charges paid by Issuing Party, if any, for
repaired, replaced, or returned-for-credit Products. Performance of this
warranty does not extend the warranty period for any unreturned Products
beyond that period applicable to the Products when originally delivered.
Repaired or replaced Products shall have full warranty coverage from date
of final delivery to Issuing Party.
I. The foregoing warranty constitutes Seller's exclusive liability, and the
exclusive remedy of the Issuing Party, for any breach of warranty or other
nonconformity of accepted Products covered by this Agreement.
10. END OF LIFE
A. In the event Seller determines that the manufacture of any Product covered
by this agreement should be discontinued, Seller shall notify Buyer in
writing of Products' End of Life [*] in advance. Seller shall allow Buyer
the opportunity to purchase sufficient quantities of Product necessary to
maintain and support Buyer's requirements for a minimum of [*] after
Buyer's receipt of Seller's notification. The parties agree to negotiate
the timing of such discontinuance and the purchase of final life-time buy
quantities (including price and delivery).
B. In the event Buyer determines that the manufacture of any Product covered
by this agreement should be discontinued, Buyer shall notify Seller in
writing of Products' End of Life. Buyer and Seller shall negotiate the
timing of such discontinuance and the dispostion of finished goods, work
in progress, and Buyer unique materials that have been purchased within
lead time by Seller to fulfill Issuing Party's Purchase Order(s). In no
case shall Issuing Party's liability exceed the purchase of all finished
goods, work in progress, and Buyer unique materials that have been
purchased within lead time by Seller to fulfill Issuing Party's Purchase
Order(s), and reimbursement to Seller for cancellation and/or return
charges for standard products that have been purchased within lead time,
and cannot be used on any other Product, by Seller to fulfill Issuing
Party's Purchase Order(s). Components which are purchased pursuant to
minimum order quantities to fulfill Issuing Party's Purchase Order(s)
shall be included under this paragraph.
11. PAYMENT AND SET-OFF
A. Payment shall be made by Issuing Party net [*] days from the date of
receipt of product. Payment of invoices shall not constitute final
acceptance of the Product.
B. Issuing Party retains the right to set-off rejections of Product (per
Paragraph 8) against future invoices.
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C. Except as provided in Section 11.B all payments shall be made without any
discount whatsoever. Seller shall submit the invoices to the address
indicated by Buyer.
D. Unless otherwise specified in Exhibit A or agreed to in writing by the
Seller and the Issuing Party, payment shall be in U.S. Dollars. Both
Parties agree to wire transfer as the method of payment, Seller and each
Issuing Party shall specify accounts to which funds should be transferred.
12. CHANGES
A. Product Modification
The Parties recognize that from time to time Seller will request or will
be requested by Buyer to implement Engineering Change Orders (hereinafter
referred to as "ECOs"). The following outlines the proper procedure:
1. Seller Requested Changes
Seller is to notify Buyer in writing of proposed ECOs no less than lead
time of the Components plus [*] and will, if so requested, provide Buyer
with samples. The notification shall include the proposed product changes,
anticipated price changes and implementation date. Notification shall also
include the appropriate documentation to support Buyer's investigation of
the impact of this proposal. Buyer will review the feasibility of the
implementation of the proposed ECO. If lead time or new costs are required
for the ECO, lead time and new prices will be reviewed. Buyer is to advise
Seller of its decision with respect to the proposed ECO within [*] after
receipt of Seller's written notification.
2. Buyer Requested Changes
Buyer agrees to notify Seller in writing of all proposed ECOs. This
notification will include the appropriate documentation to support
Seller's investigation of the impact of this proposal. Seller is to report
to Buyer within [*] of Buyer's request the feasibility of the
implementation of the ECO and if possible, the estimated charges that
would be incurred for obsolete work-in-process material, raw material, and
on-order material. Buyer will review the labor and material costs and
impact for the implementation of the ECO. If new material is required for
the ECO, lead time and new Product price will be reviewed and mutually
agreed upon.
Buyer is to notify Seller in writing within [*] after receipt of Seller's
cost report of its decision as to the proposed ECO, associated costs, and
the implementation dates. Seller will execute an agreed ECO per a
mutually-agreed upon phase-in plan that will not, under any circumstances,
exceed the maximum of lead-time for new or different Components plus two
weeks.
B. No changes shall be made by Seller as defined in Section 7.E nor in the
form, fit, or function of Products purchased hereunder without Buyer's
prior written approval.
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13. TERMINATION FOR CAUSE
A. Seller may terminate this Agreement and/or any Purchase Order issued
hereunder at any time by written notice in the event Buyer, Buyer's
Affiliate, or Buyer's Authorized Agent:
1. Fails to comply with any material provision of this Agreement and,
in the case of a breach which is capable of remedy, fails to remedy
same within [*] of notification of said breach, or
2. Becomes insolvent or makes an assignment for the benefit of
creditors, or a receiver or similar officer is appointed to take
charge of all or a part of the Buyer's, Buyer's Affiliate's, or
Buyer's Authorized Agent's assets or is the subject of any
bankruptcy or insolvency proceedings and such condition is not cured
within [*].
3. Assigns, or attempts to assign, or subcontracts or attempts to
subcontract, any or all of its rights or obligations under this
Agreement or any Purchase Orders issued hereunder to a third party,
other than Buyer's Affiliates, without the Seller's prior written
approval. Approval of assignment to Buyer's Affiliates will not be
unreasonably withheld under this paragraph, but Buyer shall remain
liable for Buyer's Affiliate's obligations.
In addition, if Buyer, Buyer's Affiliate, or Buyer's Authorized
Agent fails to make payment when due or within any applicable grace
or notice period, unless such obligation to pay is in a bona fide
dispute, or any of the events in paragraph 13.A above occur (not
counting any grace or notice period) Seller may suspend its
performance hereunder.
B. Buyer may terminate this Agreement and/or any Purchase Order issued
hereunder at any time by written notice in the event Seller:
1. Fails to comply with any material provision of this Agreement and in
the case of a breach which is capable of remedy, fails to remedy
same within [*] of notification of said breach, or
2. Becomes insolvent or makes an assignment for the benefit of
creditors, or a receiver or similar officer is appointed to take
charge of all or a part of Seller's assets or is the subject any
bankruptcy or insolvency proceedings and such condition is not cured
within [*].
3. Assigns, or attempts to assign, or subcontracts or attempts to
subcontract, any or all of its rights or obligations under this
Agreement or any Purchase Orders issued hereunder to a third party,
other than Seller's Affiliates whose facilities are approved per
paragraph 3.B, without the Buyer's prior written approval. Approval
of assignment to Seller's other Affiliates will not be unreasonably
withheld under this paragraph.
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C. Upon termination by Seller of the Agreement and/or any Purchase Order
issued under Section 13.A above:
1. Seller shall immediately cease to incur expenses pursuant to this
Agreement and/or any Purchase Order that has been terminated unless
otherwise directed in the termination notice. Seller shall also take
all reasonable steps to mitigate impact of terminating this
Agreement and/or any Purchase Order.
2. Subject to Section 27.A, Issuing Party's entire liability shall be
to pay any balance due for non-conforming Products received from
Seller before notice of termination, purchase all finished goods,
work in progress, and Buyer unique Components that have been
purchased within lead time by Seller to fulfill Issuing Party's
Purchase Order(s), and to reimburse Seller for cancellation and/or
return charges for non-unique Components that have been purchased
within lead time by Seller to fulfill Issuing Party's Purchase
Order(s).
D. Upon termination by Buyer of the Agreement and/or any Purchase Order
issued under section 13.B above:
1. Seller shall immediately cease to incur expenses pursuant to this
Agreement and/or any Purchase Order that has been terminated unless
otherwise directed in the termination notice. Seller and Buyer shall
also take all reasonable steps to mitigate impact of terminating
this Agreement and/or any Purchase Order.
2. Buyer shall have the option to purchase any Components, work in
progress, or finished goods which Seller may have purchased or
processed for the fulfillment of any Purchase Order [*].
3. Subject to Section 27.A, Buyer shall have no liability beyond
payment for any balance due for conforming Products received from
Seller before notice of termination.
14. TERMINATION FOR CONVENIENCE
A. Buyer may terminate this Agreement at any time for any reason or for its
convenience upon giving [*] written notice of termination to the Seller
("Termination Period"). Buyer warrants that all provisions of this
Agreement will be upheld throughout the Termination Period. Upon receipt
of such notice, Seller shall immediately cease to incur expenses, except
those necessary for execution of remaining Purchase Orders, pursuant to
this Agreement. Buyer may terminate on shorter notice but if it does,
Buyer shall pay Seller a negotiated amount. Seller and Buyer shall also
take all reasonable steps to mitigate the cost to both Parties for
terminating this Agreement. Seller shall immediately notify Buyer of costs
incurred through the last day of the Termination Period, and Buyer shall
be liable for such costs. In no event shall such cost exceed the unpaid
balance due:
1. for conforming Product delivered per Issuing Party's Purchase Orders
prior to the actual termination date and an amount for Product that
would have been delivered through the Termination Period, which
shall be negotiated between the Parties.
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2. for all finished goods, work in progress, and Buyer unique
Components that have been purchased within lead time by Seller to
fulfill Issuing Party's Purchase Order(s), and to reimburse
Seller for cancellation and/or return charges for non-unique
Components that have been purchased within lead time by Seller to
fulfill issuing Party's Purchase Order(s).
B. Seller may terminate this Agreement at any time for any reason or for
its convenience upon giving [*] written notice of termination to the
Buyer ("Termination Period"). Seller warrants that all provisions of
this Agreement will be upheld throughout the Termination Period. Seller
agrees to assist Buyer, upon Buyer's request, to locate and secure
sufficient capacity for Product to meet Buyer's demand before the end
of the Termination Period. Seller and Buyer shall use best efforts to
mitigate the cost to Buyer for terminating this Agreement including,
but not limited to, minimizing the inventory of Buyer-unique,
non-cancelable and/or non-returnable material at the end of the
Termination Period and Buyer may elect to purchase Components, work in
process and finished goods at [*].
15. LIMITATION OF LIABILITY
A. IN NO EVENT SHALL EITHER PARTY'S LIABILITY FOR ANY BREACH OR ALLEGED
BREACH OF THIS AGREEMENT EXCEED THE TOTAL PURCHASE PRICE FOR THE
PRODUCTS IN QUESTION SUPPLIED UNDER THIS AGREEMENT WITHOUT CREDIT FOR
ANY PAYMENTS PREVIOUSLY MADE THEREFOR, NOR SHALL EITHER PARTY BE LIABLE
FOR ANY LOSS OF PROFITS (LOSS OF PROFITS SHALL NOT BE CONSTRUED TO LIMIT
THE OBLIGATION TO PAY THE PRICE FOR COMPLYING PRODUCTS OR THE
NEGOTIATED AMOUNT REFERRED TO IN 14.A), LOSS OF USE, SPECIAL,
INCIDENTAL, PUNITIVE, INDIRECT, EXEMPLARY OR CONSEQUENTIAL DAMAGES
RESULTING FROM SUCH BREACH OR ALLEGED BREACH, AND IRRESPECTIVE OF
WHETHER SELLER HAS ADVANCE NOTICE OR ADVANCE KNOWLEDGE OF THE
POSSIBILITY OF SUCH DAMAGES.
16. FORCE MAJEURE
A. Neither Party shall be liable for its failure to perform any of its
obligations hereunder during any period in which performance is delayed
by fire, flood or other severe weather, war, embargo, riot,
intervention of any government authority, labor unrest or any other
cause beyond Party's control ("Force Majeure"), provided that the Party
suffering such delay immediately notifies the other Party of the delay
and proceeds immediately upon occurance to eliminate such Force Majeure
or limit its effects. If, however, Seller's performance is delayed for
reasons set forth above for a consecutive period of [*] or more, Seller
will make its best effort to transition its production for the duration
of the Force Majeure to an alternate source (including a competitor).
In the event Seller is not able to establish an alternative source, the
Buyer, notwithstanding any other provision of this Agreement to the
contrary, may terminate this Agreement and/or any Purchase Order(s)
issued hereunder by notice to Seller. In the event of such termination,
Buyer's and/or Issuing Party's sole liability hereunder will be for the
payment to Seller of any balance due and owing for conforming Product
delivered by
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<PAGE>
Seller prior to Seller's notification of delay to Buyer. Buyer shall have
the option to purchase any Components, work in progress, or finished goods
which Seller may have purchased or processed for the fulfillment of any
Purchase Order at Seller's cost plus a negotiated amount for any value
already added by Seller. In the event the Parties do not terminate this
Agreement and/or Purchase Order due to a Force Majeure, the time for
performance or cure will be extended for a period equal to the duration of
the Force Majeure.
17. NOTICES
A. All notices, reports, requests, acceptances, and other communications
required or permitted under this agreement shall be in writing and shall
reference this agreement. They will be deemed delivered:
1. When delivered in person, or
2. When sent by confirmed telex or acknowledged facsimile or acknowledged
e-mail except that the communications referred to in Sections 13, 14, and
16 may not be sent by e-mail, or
3. One day after having been sent by commercial overnight courier with
written verification of receipt or,
4. Five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or upon actual receipt thereof,
whichever occurs first.
An acknowledged e-mail communication shall be deemed to be a communication
in writing. All communication will be sent to the receiving Party as
follows or to such address that the receiving party may designate pursuant
to this Section.
- --------------------------------------------------------------------------------
If to Seller: If to Buyer
Manufacturers' Services Limited IOMEGA CORPORATION
200 Baker Ave. 1821 WEST IOMEGA WAY
Concord, MA 01742-2121 ROY, UTAH 84067
USA USA
ATTN.: General Counsel ATTN.: Procurement Director
- --------------------------------------------------------------------------------
with a copy to: with a copy to:
Manufacturers' Services Limited IOMEGA CORPORATION
607 North Juanita 1821 WEST IOMEGA WAY
Unit B ROY, UTAH 84067
Redondo Beach, CA 90277 USA
USA
ATTN.: General Counsel
ATTN: Rod Michael, VP Business Dev.
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<PAGE>
18. COMPLIANCE WITH LAWS
A. All Product supplied and work performed under this Agreement shall comply
with all applicable laws and regulations in effect. In particular, Seller
agrees that its performance under this Agreement shall comply with all
laws governing its relationship with its employees, agents or
subcontractors and with the chlorofluorocarbon labeling requirements of
the U.S. Clean Air Act of 1990. Upon request, Seller agrees to certify
compliance with such applicable laws and regulations.
19. PATENT, COPYRIGHT AND TRADEMARK INDEMNITY
A. Buyer shall, at its own expense, indemnify and hold Seller harmless from
and against any claim, expense, damage or loss resulting from, and shall
defend at its own expense (including reasonable attorneys fees and
expenses) any claim or suit that may be made against Seller for any
alleged infringement of any patent, trade mark, copyright, or other
proprietary right related to the Products covered by this Agreement to the
extent that the alleged infringement arises from Seller's compliance with
Specifications and instructions issued by Buyer and/or an Issuing Party.
Seller shall give Buyer prompt notice in writing of any such suit or claim
and its documentation and permit Buyer, through counsel of Buyer's choice,
to answer the charge of infringement and defend such suit and control the
settlement thereof. Seller shall cooperate with Buyer at Buyer's expense,
in the defense and/or settlement of such suit or claim. Buyer shall not be
responsible or liable for any settlement made without its prior written
consent. In addition, in the event that an infringement suit results in a
judgment against Buyer's designs, Buyer's liability shall also be to
purchase at Seller's cost all materials obsoleted by the judgment,
including finished goods, work in progress, and Buyer unique materials
that have been purchased within lead time by Seller to fulfill Buyer's
Purchase Order(s), and to reimburse Seller for cancellation and/or return
charges for obsoleted standard products that have been purchased within
lead time by Seller to fulfill Buyer's Purchase Orders.
B. Seller shall, at its own expense, indemnify and hold Buyer and each
Issuing Party harmless from and against any claim, expense, damage, or
loss resulting from, and shall defend at its own expense (including
reasonable attorneys fees and expenses), any claim or suit that may be
made against any of them for any alleged infringement of any patent, trade
mark, copyright, or other proprietary right related to the Products
covered by this Agreement except to the extent that the alleged
infringement arises from Seller's compliance with Specifications and
instructions issued by Buyer and the Issuing Party. Buyer and the Issuing
Party shall give Seller prompt notice in writing of any such suit or claim
and its documentation and permit Seller, through counsel of Seller's
choice, to answer the charge of infringement and defend such suit and
control the settlement thereof. Buyer and the Issuing Party shall
cooperate with Seller at Seller's expense, in the defense and/or
settlement of such suit or claim. Seller shall not be responsible or
liable for any settlement made without its prior written consent.
C. This Section 19, as limited by Section 15, allocates the total
responsibility and liability for, and the sole remedy for, any actual or
alleged infringement of any patent, trademark or copyright by any Products
or services delivered hereunder, or any part thereof. This Section 19 is
in lieu of and replaces any other expressed, implied, or statutory
warranty against infringement. If a supplier of Components is or may be
required to indemnify,
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<PAGE>
defend or hold Seller, Buyer or an Issuing Party harmless with respect to
any alleged infringement, Seller agrees to coordinate its activities with
respect to such supplier with Buyer and to assign its rights with respect
to such supplier to Buyer upon request.
D. Seller is authorized to use Buyers logo and trademarks only to the extent
necessary to meet the required specification for the Product(s) and only
after Buyer's prior review and approval of each use. No other rights with
respect to Buyer's trademarks, trade names or brand names are conferred,
either expressly or by implication, upon Seller.
20. CAPACITY PLANNING
A. Seller agrees to review forecasts provided by Buyer and advise Buyer if
Seller anticipates that it will be unable to achieve the requested
volumes. Buyer's volume forecasts will be provided to Seller according to
Section 2.D. Seller may from time to time request Buyer to review Buyer's
forecast and advise of any changes and Buyer will do so.
B. If Buyer's Rolling Forecast exceeds Seller's available maximum capacity
for Buyer, Seller shall advise Buyer of the limitations in the capacity
and provide a response in writing as described in the Purchase Order and
Rolling Forecast articles.
21. GRATUITIES
Each Party represents and warrants that it has not offered or given and
will not offer or give any employee, agent, or representative of the other
Party any gratuity with a view toward securing any business from the other
Party or influencing such person with respect to the business between the
parties.
22. INSURANCE AND STATUTORY OBLIGATIONS
If either Party's work under this Agreement requires access to any of the
other Party's premises or the premises of the other Party's customers,
suppliers, or locations where the other Party conducts business, or with
material or equipment furnished by the other Party, both Parties shall
take all necessary precautions to prevent the occurrence of any injury to
persons or property during the progress of such work and, except to the
extent that such injury is due to the other Party's negligence or willful
misconduct, each Party shall indemnify the other Party against all loss
which may result in any way from any negligence or willful misconduct of
the Party, its employees, servants, agents, or subcontractors, and each
Party shall maintain such insurance as shall protect the other Party from
such risks and from any statutory liabilities arising therefrom and shall
provide evidence of such insurance to the other Party upon request.
Party for the purposes of Section 22 includes Buyer, Buyer's Affiliates,
and Buyer's Authorized Agents.
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<PAGE>
23. PRODUCT LIABILITY INSURANCE
Buyer will provide evidence of product liabiity insurance in the amounts
of [*] per occurrence and [*] aggregrate per year, and will maintain in
effect such insurance which will name Seller as an additional insured.
24. CONFIDENTIAL INFORMATION
A. Confidentiality
Confidential information shall be treated in accordance with Confidential
Disclosure Agreement signed July 21, 1997 by Seller and July 21, 1997 by
Buyer. If additional confidential information not covered by such
Agreement needs to be exchanged by the Parties, the Parties will first
enter additional confidential disclosure agreements as appropriate.
25. COUNTRY OF ORIGIN
A For each Product purchased under this Agreement, Seller shall furnish
Buyer with country of origin (manufacture), by quantity and part number
(Buyer's and Seller's) if requested by Buyer.
26. PROPERTY FURNISHED BY BUYER
A. Any tools, drawings, specifications, or other materials furnished by Buyer
for use by Seller in its performance under this Agreement or any Purchase
Order issued hereunder shall be identified and shall remain the property
of Buyer and shall be used by Seller only in its performance hereunder and
Seller shall, at Buyer's expense, take such action as Buyer may reasonably
request to give full legal effect to Buyer's rights therein. Such property
shall be returned to Buyer at Buyer's cost, upon request, to destination
specified by Buyer in good condition, except for normal wear and tear.
B. Buyer shall maintain, or pay to maintain, any Buyer-owned property in use
by Seller.
27. GENERAL
A. Any obligations and duties which, by their nature, extend beyond the
expiration or earlier termination of this Agreement, including Sections 0,
4.E, 8, 9, 11, 13.C, 14, 15, 16, 19, 24 and 26 shall survive any such
expiration or termination and remain in effect. Termination shall not
relieve any Party from its liability for breach.
B. If any provision or provisions of this Agreement shall be held to be
invalid, illegal or unenforceable, such provision shall be enforced to the
fullest extent permitted by applicable law and the validity, legality and
enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
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<PAGE>
C. No action, except those regarding claims by third parties, or claims with
respect to patents, copyrights, trademarks or trade names or the
unauthorized disclosure of Confidential Information, regardless of form,
arising out of this Agreement may be brought by either party more than [*]
after the cause of action has arisen, or, in the case of non-payment, more
than [*] from the date the payment was due.
D. Any waiver of any kind by a party of a breach of this Agreement must be in
writing, shall be effective only to the extent set forth in such writing
and shall not operate or be construed as a waiver of any subsequent
breach. Any delay or omission in exercising any right, power or remedy
pursuant to a breach or default by a party shall not impair any right,
power or remedy which either party may have with respect to a future
breach or default.
E. To the extent the laws of the United States are applicable, Seller hereby
gives assurance to Buyer that it shall not export, re-export or otherwise
disclose, directly or indirectly, technical data received from Buyer or
the direct product of such technical data to any person or destination
when such export, re-export or disclosure is prohibited by the laws of the
United States or regulations of a Department of the United States.
F. This Agreement is considered to be Buyer and Seller Confidential
Information.
G. The entire Agreement between the parties is incorporated in this Agreement
and Exhibits, and it supersedes all prior discussions and agreements
between the parties relating to the subject matter hereof. This Agreement
can be modified only by a written amendment duly signed by persons
authorized to sign agreements on behalf of both parties, and shall not be
supplemented or modified by any course of dealing or trade usage. Variance
from or addition to the terms and conditions of this Agreement in any
Purchase Order, or other written notification from Seller will be of no
effect.
H. Exhibits specified in this Agreement shall be attached hereto and by this
reference are made a part hereof.
I. The construction, validity, and performance of this agreement and any
Purchase Order issued under it shall be governed by the laws of the State
of Utah. The United Nations Convention on Contracts for the International
Sale of Goods is hereby expressly excluded from application to this
Agreement.
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<PAGE>
IN WITNESS, THE AUTHORIZED REPRESENTATIVES OF THE PARTIES HAVE EXECUTED THIS
AGREEMENT.
For the Buyer: For the Seller:
/s/ Wayne Stewart 7/31/97 /s/ Rod Michael 7/30/97
- -------------------------------- --------------------------------
Signature (date) Signature (date)
WAYNE STEWART ROD MICHAEL
- -------------------------------- --------------------------------
Name Name
Chief Operating Officer VP Business Development
- -------------------------------- --------------------------------
Title Title
Iomega Corporation Manufacturers' Services Limited
- -------------------------------- --------------------------------
Company Company
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<PAGE>
EXHIBIT A
Products & Pricing
Seller agrees that the price is firm for the current [*] and that the price will
be renegotiated prior to the end of the firm pricing period. Seller agrees to
furnish a non-binding price forecast for the following [*]. No less than [*]
prior to the end of the then current pricing period, Seller shall provide Buyer
with [*] pricing. Seller agrees that any Value Added and Material Acquisition
pricing adjustments made shall include both existing Purchase Orders (backlog)
and new Purchase Orders respective to the [*] in which they are scheduled for
delivery by Buyer.
Seller further agrees to provide price in US$. Buyer agrees to pay in US$ for
any given quarter.
Qtrly Run Rate Machine Hand Hand Solder Material
(Annualized) Placement Cost Placement Cost Cost/Comp Acquisition
- ------------ -------------- -------------- --------- -----------
[*]
Component Pricing is delivered by Buyer to the Seller for each pricing period.
The total price of the Product is calculated by the following formula, using the
values in the table above:
[*]
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<PAGE>
EXHIBIT B
SPECIFICATION
Buyer's specifications are identified by Buyer part number(s) in Exhibit B
herein. For each part number all reference specifications shall apply as
provided to Seller.
Description Part Number
- ----------- -----------
[*]
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<PAGE>
EXHIBIT C
QUALITY AGREEMENT
Intentionally Left Blank.
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<PAGE>
EXHIBIT D
FLEXIBILITY AGREEMENT
The following changes to volumes on existing Purchase Orders may be made without
cost or liability to Buyer for Products, except as allowed by Paragraph 3.D of
this Agreement.
Number of weeks prior % Increase % Decrease
to scheduled delivery dates
[*]
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<PAGE>
EXHIBIT E
AFFILIATES AND AUTHORIZED AGENTS
Affiliates
Iomega (Malaysia) SDN BHD
Authorized Agents
None
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<PAGE>
Exhibit 10.18
1 June 1999
Manufacturing Services Agreement
(Venice Printed Circuit Assemblies)
Hewlett-Packard Singapore Pte Ltd Manufacturers' Services S'pore Pte Ltd
450 Alexandra Road No 12, Street 65,
12th Floor Ang Mo Kio Industrial Park 3
Singapore 119960 Singapore 569060
This Agreement is effective this 1st day of June 1999 ("Effective Date") by and
between Hewlett-Packard Singapore (Pte) Ltd; (herein referred to as "HP") and
MANUFACTURERS' SERVICES SINGAPORE PTE LTD (herein referred to as "CM").
PREAMBLE
Whereas, CM is in the business of performing assembly services, testing and
other manufacturing related operations for the product(s) defined in Schedule 1
("the Products") and;
Whereas HP is desirous of entering into an manufacturing services agreement with
CM under terms and conditions set forth below:
1. TERM
This Agreement shall be in effect from the Effective Date and shall be
valid for a period of 2 years ("Term"). Thereafter, annual renewals of
this Agreement shall be by mutual written consent of both parties.
2. SCOPE OF SERVICES
During the Term of this Agreement, CM shall manufacture the Products in
accordance with the specifications set out in Schedule 1, 6, 8 and supply
those Products exclusively to HP, and HP shall purchase such volumes of
the Products as to be ordered by HP from time to time.
CM shall perform the following manufacturing services:
(a) Assembly
(b) Testing
(c) Packaging and delivery
(d) Service support
3. DEFINITION OF SERVICES
Assembly:
The process of joining together components in accordance with process
flow, written process, technical requirement and visual inspection
criteria.
- ---------------------
[*] = Information redacted pursuant to a confidential treatment request.
An unredacted version of this exhibit has been filed separately with the
Commission.
<PAGE>
The process of testing electrical performance where required to meet the
product's electrical specifications.
Packaging and Delivery:
The process of packaging the product as defined in the assembly procedure
specified in Schedule 6.
Service Support:
The process of supplying service assemblies specified in Schedule 9
between the product manufacturing release date and the end of the GMS
period, defined as [*] after the product End-Of-Life.
4. FORECAST AND ORDERS
Subject to this clause, the process for forecasting and ordering
(including CM's response to orders) the Products shall be in accordance
with Schedule 2.
4.1 Forecast
Throughout the Term of this Agreement, HP shall provide CM with an
advanced non-cancellable [*] order and a rolling forecast of
projected demand for each model of the Products. Such rolling
forecast shall be for at least [*] although HP may forecast for up
to [*].
4.2 Purchase Order
HP shall provide the purchase order for the following [*].
Purchase orders must contain the following terms:
(a) the name and product number of the Product ordered
(b) the minimum quantities per Product and multiples thereof;
(c) delivery instructions, including requested delivery schedule.
(shipping destination will be provided separately)
(d) purchase order number and contract number, date of order, name
and title of HP's representative, invoice-to address, order
acknowledgement address and any special instructions.
4.3 Response Time
CM shall respond within [*] working days after the receipt of the
Purchase Order.
5. MATERIALS MANAGEMENT
Materials required for the manufacture of the Products shall:
(a) be supplied to CM by HP on consignment; and/or
(b) obtained by CM from vendors approved by HP ("turnkey")
Such consigned/turnkey materials are specified in Schedule 3.
<PAGE>
5.1 Materials on Consignment
Where materials are supplied by HP on consignment:
(a) CM shall be responsible for all forwarding and brokerage costs
and customs duties or user fees. CM shall also assist HP with
all import formalities and obtain customs clearance for such
consigned materials.
(b) As long as CM continues to have possession of the material
supplied by HP, HP shall retain legal title to all such
materials supplied. In the event such materials are used even
with loss of identity, the legal title to the resultant
products shall remain in HP.
(c) CM shall submit to HP on a monthly basis, a report on the
balance of consigned materials in the possession and control
of CM at its premises in an agreed format.
(d) HP reserves the right to perform a periodic statistical audit
of CM's physical inventory.
(e) Upon termination of this Agreement and/or business
relationship for whatever reasons, CM shall return the
remaining quantity of consigned materials to HP in good
condition.
5.2 Materials on Turnkey
Where materials are obtained by CM from vendors approved by HP:
(a) CM shall purchase materials only from HP approved vendors in
the Approved Vendors List ("AVL") set out in Schedule 4.
(b) Any changes in vendors, parts specifications and processes
shall be subject to HP's review and written approval.
(c) CM shall plan for the turnkey materials required according to
HP's forecast and communicate the requirements to the approved
vendors based on the AVL allocation percentage determined by
HP.
(d) CM shall verify the quality and quantity of each receipt of
materials from suppliers. CM shall take a proactive role to
initiate corrective actions for any non-conformance to
material specification.
(e) CM shall have the full ownership and accountability of
delivery, quality and cost
(f) CM shall submit to HP on a monthly basis, a report on the
balance of turnkey materials in the possession and control of
CM on its premises and the quantity and leadtime and value of
open purchase orders of turnkey materials in an agreed format.
(g) CM shall obtain authorisation from HP for the purchase of very
long component lead times or industry parts allocations, in
excess of the stated cumulative lead-
<PAGE>
time. All exception buy agreements shall be dated and written
and shall specify the part numbers and description of
materials to be purchased, the assembly that the materials are
to be used in, and the maximum liability.
6. MATERIALS LIABILITY
6.1 Planned End-Of-Life
HP shall provide [*] notice before any planned Product End-Of-Life.
HP and CM shall each endeavour to avoid or to minimise any materials
liability for both HP (consignment) and CM (turnkey) controlled
materials.
6.2 Unplanned EOL
In the event of an unplanned End-Of-Life, CM shall take all
reasonable steps to reduce outstanding excess materials exposure and
liability. All eventual materials liability must be clearly
documented and justified.
HP shall be liable for the materials purchased for purchase orders
that have been issued to CM, as well as those that have been
purchased/ordered outside the period of HP's orders due to long lead
time. HP shall not be liable for any excess material purchased by
CM.
6.3 Build Plan Reduction outside Materials Lead-times
HP shall not be liable for any material exposure in the event of a
build plan reduction that is beyond the lead-times of components.
6.4 Build Plan Changes within Materials Lead-times
In the event of a change in build plan within lead-time, CM shall
take all reasonable steps to reduce outstanding excess materials
exposure and liability. HP shall be liable only for inventory that
is purchased/ordered within the material lead-time.
6.5. HP shall be liable for any material exposure in the event of a PCO
implementation that is beyond the leadtime of the components
6.6 Exposure Reduction
CM shall strive to continuously reduce the lead-time of the
components and the logistic flow between the assemblies so as to
reduce the material exposure and improve response time for material
assembly.
7. OPERATING SUPPLIES
7.1 CM shall provide operating supplies as required in the manufacturing
process. HP shall provide on consignment all indirect materials
unique to HP.
7.2 Any changes to the use of operating supply materials and/or the
supplier shall require written approval from HP. Operating supplies
which require approval include but shall not be limited to oils,
paper for printer testing and label printing ink ribbons.
<PAGE>
7.3 Upon termination of this Agreement and/or business relationship for
whatever reasons, CM shall return the remaining consigned indirect
materials to HP in good condition.
8. EQUIPMENT AND TOOLING
8.1 CM shall supply all standard production tooling and fixture
requirements defined in Schedule 5A.
8.2 HP shall provide unique process equipment and spare/replacement
parts associated with the manufacturing process as defined in
Schedule 5B. HP shall have full ownership of all equipment and tools
exclusively paid for by HP but under CM possession. Schedule 5B
shall be updated whenever there is any change in the list of
equipment and tooling consigned to CM.
8.3 CM and its suppliers shall maintain and repair the unique process
equipment.
8.4 In the event that CM considers it necessary to renew any HP unique
tools or to add alterations to the existing tools to meet HP's
specifications or request, CM shall notify HP for approval at least
two (2) months prior to the actual implementation. HP shall not
withhold the approval unreasonably.
8.5 CM shall qualify all new tools/fixture and obtain HP's written
approval before they are used in CM's production line. CM shall send
HP a copy of its qualification report to HP. In the event that HP
does not concur with CM's qualification result, HP has the right to
reject the use of new tools until corrective actions are taken.
8.6 CM shall calibrate all equipment and tools according to the
procedures specified by manufacturers or as per HP requirements. A
calibration report must be filed and made available to HP upon
request.
8.7 CM shall not sell, assign, sublet, pledge, hypothecate or otherwise
encumber or suffer a lien upon or against any interest in this
Agreement any unique equipment or tools mentioned herein, or alter,
or remove the equipment or tools, from the place of installation
without HP's prior written consent, which consent shall not be
unreasonably withheld.
8.8 In the event that this Agreement is terminated for whatever cause,
CM shall pack the applicable equipment and tools for shipment in
accordance with manufacturers' specifications and shall return in
the same condition as when delivered to CM, fair wear and tear
excepted, to a location to be specified by HP at HP cost.
HP is responsible for PCA ICT test and Top level test software
upgrades.
9. PROPERTY
9.1 HP shall at all times retain all right, title and interest in HP
property, including but not limited to materials, operating supplies
and equipment and tooling, consigned to CM.
9.2 HP shall conduct physical inventory audits of all HP property such
as consigned equipment / tooling and components located at CM
Premises at no cost to HP.
<PAGE>
9.3 Upon HP's request, or the expiration or sooner determination of this
agreement, CM shall return all HP property to HP in good condition;
normal wear and tear excluded. All return costs shall be borne by
HP.
10. STAFFING
10.1 CM shall maintain sufficient personnel to support the business and
ensure that its assembled products conform to HP's specifications
and quality standards.
10.2 To be deleted.
10.2 HP shall provide the necessary training required at start-up, free
of charge to CM employees. CM shall carry out any subsequent
training and maintain verifiable training records.
10.3 In the event training of CM employees is conducted in HP's premises
in Singapore, CM shall pay for all expenses incurred by CM
employees, in attending the training in Singapore.
10.4 In the event HP sends personnel to CM to assist in the start-up, HP
shall pay for all expenses incurred by HP employees.
11. ENGINEERING AND ASSEMBLY
11.1 The process and specifications for the assembly and engineering of
the Products shall be as described in Schedule 6 and shall be
governed by the terms and conditions therein. (Schedule 6 will be
revised quarterly if there is changes)
12. CHANGE ORDERS
12.1 HP shall be entitled to change its specifications subject to
issuance of a Production Change Order (PCO). Such change shall be
effective from the date of the PCO, subject to an agreed
implementation schedule and there is no consequent increase the
costs of services.
12.2 In the event the PCO increases the cost of services, the parties are
entitled to renegotiate for higher service charges payable. if the
parties are unable to agree to an adjustment in service charges, HP
may withdraw its PCO or alternatively exercise its right of
termination under the Agreement provided HP pays all attendant costs
involved in terminating the Agreement including unused materials and
spare parts.
13. PRODUCTION VOLUME
13.1 Both parties shall comply with the production ramp profile for new
top level assemblies and yield expectations for Printed Circuit
Assemblies(PCA) as determined by HP and CM as set out in Schedule 7.
(a) Production volume shall mean the projected quantity ordered by
customers.
(b) Due to changes in production volume, the production capacity
flexibility shall be as follows:
<PAGE>
o [*]
o [*]
o [*]
CM shall respond to [*] of installed capacity with a lead-time of
[*].
13.2 In the event changes are beyond the above limits, HP and CM shall
review and discuss on the necessary actions to be taken.
13.3 In the case of volume ramp down or discontinuance, HP shall provide
[*] notice.
14. COST REDUCTION
14.1 CM shall actively pursue cost reduction from the onset of initial
production.
14.2 Cost reduction shall be achieved in areas including but not limited
to process improvements, material cost reductions, redesigning,
improved manufacturing efficiency, packaging recycling,
transportation, yields, localisation and automation.
14.3 In the event that changes in the assembly processes result in
significant productivity, HP and CM shall [*]. HP and CM shall agree
on all process adjustments.
14.4 CM shall fulfil all the cost goals and roll-in timelines as set out
in Schedule 7.
15. QUALITY
Subject to this clause, quality specifications, requirements and standards
for the Products shall be as defined in Schedules 6 and 8.
15.1 CM shall ensure that the finished Products satisfy HP
specifications, quality and reliability standards by appropriate
agreed-upon test methods. HP shall ensure that current revision of
specifications and test methods are made available to CM.
15.2 HP shall ensure that any changes in specifications are updated with
current revisions and CM informed of the changes.
15.3 CM shall maintain a quality system that meets 1S09002 standards.
15.4 CM shall ensure compliance in all areas to the current version of HP
Workmanship Specification for ESD Control (HP Document
#A-5951-1589-1, the relevant sections of which are attached in
Schedule 8).
15.5 CM shall ensure that the finished products comply with the
product-specific technical product regulations (E.g. UL, CSA, CCIB,
VCCI, FCC).
15.6 CM shall ensure that their factory certifications are maintained for
manufacture in accordance with the specified technical product
regulations.
15.7 CM shall conduct any necessary testing in accordance with HP
specifications and manage, execute HP specified qualifications &
processes and submit data, failure analysis and corrective actions
to HP.
<PAGE>
15.8 Any units rejected by HP may be returned to CM for possible rework
or rescreen at no charge to HP, if the cause or failure of is due to
CM's non-conformance to HP's specifications or defective
workmanship. If HP opts to make a claim against CM under Clause 24,
HP shall provide sufficient documentation as needed to support its
claim.
15.9 CM warrants that all Material Safety Data Sheets for the Product
shall be provided to HP upon request and shall be complete and
accurate.
16. YIELD
16.1 In the event that assembly yield is low due to assembly quality or
equipment problems, CM shall conduct the necessary investigation to
resolve the problem(s) encountered.
16.2 In the event that the accepted process yields do not match HP's
targeted yields [*] from start-up, CM shall aim to achieve the
targeted yields or HP's sustainable yields (whichever is lower)
within [*] of start-up, upon which HP may claim for excess
scrappage.
17. QUALITY AUDITS
17.1 General
(a) HP shall be entitled to undertake a quality audit of CM
facilities at any time. CM shall permit HP's authorised
representatives to enter into its premises for the purposes of
quality audits. CM shall be responsible for follow-up
corrective actions and shall report the results back to HP.
(b) CM shall establish and maintain a Quality Assurance System of
product inspections and reporting system to ensure the
assembled products conform to HP's specifications, quality and
reliability standards.
17.2 ESD
(a) CM shall conduct monthly ESD compliance audit and audit
reports (results and corrective action and plan, if any) shall
be submitted to HP on the first week of each month.
(b) In the event that corrective action is required a re-audit
shall be conducted upon completion of the implementation of
the plan. Reports on implementation of corrective action,
action items and plan must be attached to the ESD monthly
report.
17.3 Failure to meet standards
If CM fails to achieve and maintain the standards required by HP, HP
shall be entitled to re-evaluate and modify appropriately the status
of CM as a recommended service provider in the long term.
<PAGE>
18. PACKAGING AND DELIVERY
18.1 CM shall ship finished Products in full pallets, unless otherwise
instructed.
18.2 All finished Products must be serialised, scanned, packaged and
visually inspected according to HP specified shipment and packaging
standards.
18.3 Any Product that does not conform to the standards shall be returned
to CM for repackaging/replacement at CM's expense unless HP, in its
sole discretion, adopts an alternative solution.
18.4 All Products shall be packaged, handled and packed according to
agreed packaging requirement so as to protect the Products from loss
or damage.
18.5 Delivery of finished Product and/or HP materials to carrier at point
of shipment shall constitute delivery to HP.
18.6 Upon stability, (not greater than [*] from start-up), CM shall
commit to a normal turnaround time of [*] to ship the finished
Products in accordance with HP agreed loading schedule.
18.7 CM shall provide urgent turnaround of [*] working days to ship
finished Products as and when the need arises, for example when the
end-customer faces a product shortage subject to availability of
unique parts.
18.8 CM shall meet all delivery requirements, including delivery on time.
CM shall not he entitled to deliver the Products late and may
deliver within [*] days before the scheduled time.
19. DELAYS
19.1 Likely Delay
CM shall inform HP immediately upon the likelihood of a delayed
delivery. CM shall take all necessary action to minimise delay or
shortfall and provide HP with proper recovery plans.
19.2 Delaying Cause
CM shall not be liable for delays or failure in order performance or
delivery of finished Products caused in whole or in part, by
inability to obtain transportation, equipment or material due to
insurrection, fires, floods, storms, embargoes, action of military
or civil authorities, lockouts, acts of God, or other similar or
different circumstances beyond the control (collectively called
"Delaying Cause") of CM.
In the event of a Delaying Cause, HP may elect in its sole
discretion to:
(a) Terminate the agreement or any part thereof as to the finished
products not shipped, provided that the delaying cause endures
longer than [*]; or
(b) Suspend this Agreement in whole or in part for the duration of
the delaying cause, purchase said finished products from
alternate source and deducts from any quantities specified in
HP's forecasted requirements.
<PAGE>
If HP selects (b) above, HP may resume performance under this
Agreement once the delaying cause ceases and extend the Term up to
the length of time the delaying cause endured.
Unless HP gives notice of termination pursuant to (a) above, within
[*] days after notice from CM of delaying cause, HP shall be deemed
to have selected (b).
20. SERVICE SUPPORT
CM shall provide maintenance and manufacturing support services to deliver
service assemblies specified in Schedule 9 during the Guaranteed minimum
Support(GMS) period defined as [*] after the product End-Of-Life(EOL). The
EOL shall be made known to CM [*] in advance.
21. QUOTATION
21.1 CM shall send an updated quotation to HP monthly and as and when
required with full cost details of bill of material, lead time,
approved vendor list (AVL) and assembly cost.
21.2 All quotations shall be quoted in US dollars. The quotations will be
reviewed if the exchange rate fluctuation is outside the [*]%
window.
21.3 All quotations by CM are considered the confidential property of CM
and will be treated as confidential information by HP.
21.4 HP shall not reveal CM's proprietary costing information to any
others without seeking permission from CM in writing.
22. PAYMENT AND TAXES
22.1 HP shall make all payments to CM in US dollars by telegraphic or
electronic transfer to a CM specified bank account within [*] days
from the invoice date.
22.2 Any invoices with discrepancies shall be returned to CM for full
equivalent credit and correction.
22.3 All payments made under this Agreement shall be net of all taxes and
official fees, including but not limited to withholding, income,
sales, excise, value added and other taxes.
23. DISCREPANCIES AND REMEDIES
23.1 CM shall verify the quantity of all HP materials consigned. CM shall
inform HP within two (2) working days of receipt of consigned
materials for any discrepancies. Such notice shall state all
material facts concerning the claims then known to CM.
23.2 HP shall inform CM of any claims for quantity discrepancies and/or
defects or nonconformance of finished Products, Such notice shall
state all materials facts concerning the claims then known to HP.
For rejected finished Products, HP may make a claim under Clause 25.
<PAGE>
24. SET OFF
Whenever under this Agreement any sum of money shall be recoverable from
or payable by CM, the same may be deducted from any sum then due or which
at any time thereafter may become due to CM under this or any other
contract with HP. Exercise by HP of its rights under this clause shall be
without prejudice to any other rights or remedies available to HP under
this Agreement, or otherwise howsoever, at law or in equity.
25. RISK OF LOSS
25.1 Loss of damage to property
CM shall be liable for any loss or damage to HP property, consigned
equipment and the Products before delivery to HP as specified above
in Clause 18.5.
25.2 Title and Risk
Title to the Products and risk of loss and damage shall pass to HP
upon delivery. All claims for damage incurred in transit must be
filed against the carrier and presented by HP. CM shall assist in
the best effort to provide all information and documentation to
ensure HP secures its claims.
25.3 Loss control
CM shall be responsible for maintaining the facility and operations
in accordance with applicable and prudent safety, security and fire
protection and loss control standards. CM shall allow HP and their
designated representatives to visit and perform loss control audits
of the facility and operations.
26. INDEMNITY
26.1 In general, CM shall defend, indemnify and hold harmless HP, its
officers, directors and employees from any claims, losses,
attorney's fees, damages, liabilities, costs, expenses, or suits for
injury to any person (including CM or its employees), damages to or
loss of property, or any other claims arising out of or resulting
from any act or omission of CM, its employees, agents, or
subcontractors; the performance of this Agreement; the presence of
CM or its personnel on HP'S premises. In no event shall CM be
responsible for the negligence of HP, its officers, Directors and
employees.
26.2 CM shall indemnify HP for any loss of or damage to HP equipment and
inventory in the care, custody and control of CM, due to theft by CM
agents, employees and subcontractors or from any event due to CM's
negligence. The perils shall include fire, lightning, earthquake,
typhoon and floods.
27. INSURANCE
During the Term and at all times that CM performs services for HP, CM
shall maintain in full force and effect, at CM's expense, the following
minimum insurance coverages. The insurance policies evidencing the
required coverages and limits shall be furnished to HP before any work is
commenced hereunder, name HP as additional insured, and provide
<PAGE>
that there will be no cancellation or reduction of coverage without thirty
(30) days prior written notice to HP.
27.1 Cross Liability
Any insurance required to be effected by CM naming HP as an
additional insured in accordance with the contract shall include a
cross liability clause in which the insurer agrees to waive all
rights of subrogation or action against any of the persons
comprising the insured and for the purpose of which the insurer
accepts the term "insured" as applying to each of the persons
comprising the insured as if a separate policy of insurance had been
issued to each of them.
27.2 Worker's Compensation
Worker's Compensation Insurance shall be provided by Sub-Contractor
as required by law or regulation and shall include Employer's
liability at common law for not less than [*] (or equivalent in
local currency) per accident or occurrence involving bodily injury
or disease which terms shall include death resulting).
27.3 Fidelity / Crime Bond
CM will be covered by Fidelity Insurance or Commercial Crime Bond as
respects CM's agents, employees, and sub-contractors performing
under this Agreement with blanket limits of at least [*] (or
equivalent in local currency) per occurrence, with automatic
reinstatement provision.
27.4 General Liability
Comprehensive General Liability Insurance (or equivalent Public and
Products Liability policies) inclusive of Premises and Operations,
products and Completed Operations, in respect of Property Damage)
which term shall include loss of Property) and Bodily Injury (which
term shall include death) with a limit not less than [*] (or
equivalent in local currency) in respect of any one accident or
occurrence and, as regards Products and Completed Operations
[*] (or equivalent in local currency) in the aggregate.
27.5 "All Risks Insurance"
CM shall effect All Risks Insurance to the effect of [*] (or
equivalent in local currency).
27.6 Transit Liability
CM shall provide a Transit All Risks Insurance Policy covering loss
or damage to HP property which is transported from CM's premises to
HP's premises including loading and unloading. The coverage shall be
[*] per transit or carriage.
28. INTELLECTUAL PROPERTY
28.1 Patents and Designs
HP shall be the sole owner or authorised licensee of all designs for
the Product.
<PAGE>
28.2 HP Marks
HP grants to CM the right to apply those certain HP trade marks,
trade names and trade dress (collectively the "HP Marks"), as
expressly written and agreed upon between CM and HP, solely in
strict compliance with HP's then current trademark specifications
and guidelines provided by HP, unless and to the extent that HP has
given prior written consent to a modification thereto. When HP
provides to CM artwork to be applied to the Products, such trademark
compliance shall be HP's responsibility. HP represents and warrants
that it is the sole and exclusive owner of the HP Marks and that the
contemplated use of the HP Marks on the Products will not infringe
upon the rights of any third party. HP's trademarks shall be affixed
to each unit of the Product.
Nothing contained in this Agreement shall be construed as conferring
any right on CM to use in advertising, publicity or other marketing
activities any name, trade name, trade mark or other designation of
HP, including any contraction, abbreviation or simulation of any of
the foregoing.
28.3 Copyright
Unless otherwise agreed to in writing, copyrighted materials may not
be copied, except for archival purposes, to replace a defective copy
and for program error verification.
28.4 Indemnity
CM shall not be liable in any way with respect to claims of
infringement of US or foreign patents, copyrights, trademarks or
other proprietary rights arising out of or any relating to HP's
contract for CM's services, importation, use, possession, sale or
delivery of any product or services rendered to HP by CM and HP
shall indemnify, defend and hold CM harmless from any and all such
claims and liabilities, damages and expenses, including attorney
fees.
29. CONFIDENTIALITY
Both parties shall adhere to the Confidential Information Disclosure
Agreement, attached hereto and labeled Exhibit A.
29.1 Each party shall protect the other's confidential information from
unauthorised dissemination and use with the same degree of care that
each party uses to protects its own like information, but at a
minimum, with a reasonable degree of care.
29.2 Neither party will use the other's confidential information for
purposes other than those set forth in the applicable Confidential
Information Disclosure Agreement.
29.3 CM shall hold secret and confidential, and not use or disclose any
confidential information or materials (including but not limited to
prices, part numbers, volume forecasts, assembly processes,
specification documents) of HP except when these are used for the
performance of its obligations herein.
30. TERMINATION
30.1 Termination
<PAGE>
This agreement may be terminated:
(a) At any time without notice by either party upon breach of the
terms of this Agreement;
The term "breach" shall include without limitation any:
i. Proceedings whether voluntary or involuntary, in
bankruptcy or insolvency by or against a party;
ii. Appointment, with or without a party's consent, of a
receiver or assignee or the benefit of creditors;
iii. Act by CM that endangers performance of this Agreement
in accordance with its terms.
iv. Failure by CM to make a delivery of finished products in
accordance with the requirements of this Agreement;
v. Persistent or recurring failure on the part of CM to
replace or rework finished products in a timely manner
as required under the terms of this Agreement;
vi. Other failure to comply with any material provision of
this Agreement with additional failure to provide the
non-breaching party, upon request, with reasonable
assurances of future performance.
(b) At any time by mutual written consent of both parties.
(c) By HP upon giving CM [*] written notice without assigning any
cause through registered mail to the above address.
(d) By CM upon giving HP [*] written notice through registered
mail to the above address to enable HP to find and qualify
another services source in the event that the need arises.
(e) By HP, [*] in the event that there is a change in CM's total
corporate holding that prejudices HP's commercial and business
interest in continuing the performance of this Agreement.
30.2 Rights and Obligations upon Termination
(a) All Purchase Orders issued prior to the expiration or
termination of this Agreement for any reason shall be
fulfilled pursuant to and subject to the terms of this
Agreement, even if the delivery dates occur after expiration
or termination of this Agreement.
(b) Upon termination of this Agreement for any reason, all
Products which have been manufactured by CM but not delivered
to HP at the date of termination shall be delivered subject to
the terms of this Agreement, and all usable but unused stocks
of labelling and packaging for the Products bearing any of the
HP Marks shall be sold to HP at a price [*].
(c) Upon termination of this Agreement CM shall:
i. cease to manufacture and sell the Products, subject to
the above clause;
ii. cease to use, either directly or indirectly, any of the
designs, HP Marks or other intellectual property owned
by HP and / or licensed to CM and forthwith return to HP
any documents in its possession or control which
<PAGE>
contain or record any part of those designs, HP Marks or
other intellectual property owned by HP;
iii. consent to the cancellation of any formal license
granted to it, or of any record of it in any register,
in respect of any designs, HP Marks or other
intellectual property of HP; and
iv. at its own cost forthwith return any consigned
materials, equipment, tools or other HP property to HP
at HP cost.
and subject as provided in this clause and except in respect
of accrued rights, neither party shall have any further
obligation to the other.
(d) Notwithstanding the expiration or early termination of this
Agreement for any reason, the provisions relating to
confidentiality and the confidential information disclosure
agreement attached in Exhibit A shall continue in force in
accordance with the terms therein.
31. GOVERNMENT COMPLIANCE
CM warrants and undertakes that in the performance of this Agreement it
will comply with all laws, rules, regulations and decrees and other
ordinances issued by any supra-governmental, governmental, state or other
authority relating to the subject matter of this Agreement and to the
performance by CM of its obligations hereunder.
CM shall obtain Safety and Regulatory Certifications for the manufacturing
facility at its own expense.
CM shall furnish to HP any information required during the term of this
Agreement to enable HP to comply with the requirements of any governmental
agency in its use of the finished products.
32. ENVIRONMENTAL COMPLIANCE
32.1 Montreal Protocol
CM warrants, certifies, represents, and agrees that in performing
its obligations under this Agreement, in particular its
manufacturing processes, nothing shall be contrary to the written
provisions of Montreal Protocol on substances that Deplete the Ozone
Layer as adjusted and amended by the second meeting of the parties
in London 27-29 June 1990.
32.2 Toxic Substance Control Act
CM warrants that in performing its obligations under this Agreement,
in particular its manufacturing processes, each chemical substance
used in the finished products is on the inventory of chemical
substances compiled and published by the Environmental Protection
Agency pursuant to the Toxic Substances Control act.
33. COUNTRY OF MANUFACTURE AND DUTY DRAWBACK RIGHTS
Upon HP's request, CM shall provide HP with an appropriate certification
stating the country of origin for the finished products, sufficient to
satisfy the requirements of:
<PAGE>
(a) The customs authorities of the country of import of said finished
products; and
(b) Any applicable export licensing regulations.
34. US EXPORT ADMINISTRATION ACT
The materials consigned may contain technology and items that come from
USA. Regardless of any disclosure by CM to HP of the contemplated ultimate
destination of the materials, CM shall not export or re-export, directly
or indirectly, any material (or the direct product of any materials),
where applicable; without first obtaining an export license from the
department of Commerce or other agency of the US government, as required.
35. GENERAL
35.1 Severability and Heading
Any provision of this Agreement which is held invalid or
unenforceable in any jurisdiction shall be ineffective to the extent
of such invalidity or unenforceability without invalidating or
rendering unenforceable the remaining provisions hereof. And any
such invalidity or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provisions in any other
jurisdiction. All paragraph headings are purely for convenience and
do not form any part of this Agreement.
35.2 Entire Agreement and Amendment
This Agreement (including the documents and instruments referred to
herein) supersedes all prior commitments, representations and
warranties relating to the subject matter hereof which may have been
made by the parties either orally or in writing prior to the date
hereof, and which shall become null and void from the date this
Agreement is signed.
This Agreement (including the documents and instruments referred to
herein) incorporates the entire understanding reached between the
parties hereto with regard to the relationship of parties as
independent contractors. Any amendment or supplement to this
Agreement must be made in writing with the approval by both parties'
authorized representatives in order to be effective
35.3 Schedules and Exhibits
The following Schedules and Exhibits attached to this Agreement
shall be deemed as part of this Agreement and incorporated herein by
reference:
Schedules
---------
Schedule 1 Products and specifications
Schedule 2 Forecast, ordering and response process
Schedule 3 Materials a) on consignment b) on turnkey
Schedule 4 Approved vendor list
Schedule 5A Equipment to be provided by CM
Schedule 5B Equipment to be provided by HP
Schedule 6 The Assembly process, specifications and other terms and
conditions
<PAGE>
Schedule 7 Cost goals
Schedule 8 Quality specifications
Schedule 9 Terms and conditions for service and maintenance support
Schedule 10 Field Quality Warranty Cost Co-sharing Scheme
Exhibit
-------
Exhibit A Confidential Information Disclosure Agreement.
35.4 Assignment
Neither party may assign or transfer any of the rights, duties or
obligations herein, without the prior written consent of the other and any
purported attempt to do so shall be null and void.
35.5 No Partnership or Agency
The parties hereby agree that the parties' relationship shall be that of
independent contractors and that nothing contained in this Agreement shall
be construed as constituting the parties as partners or parties to a joint
venture or either party as an agent of the other.
35.6 Waiver
No exercise or failure to exercise or delay in exercising any right power
or remedy vested in either party under or pursuant to this agreement shall
constitute a waiver by that party of that or any other right power or
remedy.
35.7 Legal fees/stamp duty
Each party shall bear its own legal costs in preparing and executing this
Agreement. CM shall bear any applicable cost of stamp duty in respect of
this Agreement. CM shall be solely responsible to determine whether stamp
duty is payable under this Agreement and shall indemnify HP against any
failure to comply with such legal requirement.
35.8 Non-Exclusive
The appointment of CM to perform the services under this Agreement shall
not restrict HP's ability to appoint one or more independent third parties
to perform similar services on such terms and conditions as mutually
agreed by both parties.
35.9 Time
Time shall be of the essence of this Agreement, both as regards the dates
and periods mentioned in this Agreement and in any of the documents or
instruments referred to herein, and as regards any dates and periods which
may be substituted for them in accordance with this Agreement or by
agreement in writing between the parties.
35.10 Definition of days
<PAGE>
All references in this Agreement to "days" shall, unless otherwise
specified herein, mean calendar days.
35.11 Definition of years
All references in this Agreement to "FY" shall mean fiscal year, which for
HP shall start from November of a calendar year to October of the
following calendar year.
Each fiscal year (FY) shall be divided into 4 quarters (Qtr) and 2 halves:
1st Qtr : Nov - Jan } lst half
2nd Qtr : Feb - Apr }
3rd Qtr : May - Jul ] 2nd half
4th Qtr : Aug - Oct ]
35.l2 Errors
Stenographic, typographical, or clerical errors are subject to correction
by HP.
36. NOTICE
Any notice to be given by either party to this agreement shall be in
writing and shall be deemed duly served if delivered personally or sent by
facsimile transmission or by prepaid registered post (airmail in the case
of an address outside the country of origin) to the addressee at the
address or (as the ease may be) the facsimile number of that party set
opposite its name below:
HP Address: CM Address:
20 Gulway Manufacturers' Services S'pore Pte Ltd
Singapore 629196 No 12, Street 65,
Ang Mo Kio Industrial Park 3
#04-00 Lek Sun Building
Singapore 569060
Telephone no: Telephone no:
(65) 869-8345 (65) 484-4050
Fax no: Fax no:
(65) 861-8965 (65) 484-7121
Marked for the attention of: Marked for the attention of:
Martin Cheng Ng Poh Seng
Or at such other address (fax no.) as the party to be served may have
notified (in accordance with the provisions of this clause) for the
purposes of this agreement.
Any notice sent by telex or fax shall be deemed served when despatched and
any notice served by prepaid registered post shall be deemed served 48
hours after posting to an address in the country of origin or five (5)
days after posting to an address outside that country. In proving the
service of any notice it will be sufficient to prove in the case of a
letter that such letter was properly stamped addressed and placed in the
post or delivered or left at the current address if delivered personally
and in the case of a facsimile that
<PAGE>
such facsimile transmission was duly despatched to the fax no. of the
addressee given above or subsequently notified for the purposes of this
agreement.
37. APPLICABLE LAW
This Agreement shall be construed in accordance with Singapore Law and
shall be subject to the non-exclusive jurisdiction of the Courts of
Singapore.
38. ARBITRATION
Any dispute arising out of or in connection with this Agreement, including
any question regarding its existence, validity or termination, shall be
referred to and finally resolved by arbitration in Singapore in accordance
with the Arbitration Rules of the Singapore International Arbitration
Centre ("SIAC Rules") for the time being in force which rules are deemed
to be incorporated by reference into this clause.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement together with
its attachments to be executed in duplicate originals by their duly authorized
representatives.
Signed for and on behalf of: Signed for and on behalf of:
Hewlett-Packard Singapore (Pte) Ltd. Manufacturers' Services S'pore Pte Ltd
Inkjet Products Group - Asia Operations
- ---------------------------------------
(Division Name)
Home Business Unit - PL 83
- --------------------------
(Department Name)
/s/ Martin Cheng /s/ Johnny Chan
- -------------------------- --------------------------
Name : MARTIN CHENG Name : JOHNNY CHAN
Title : MATERIALS MGR Title : PRESIDENT
Date : Jun 22 '99 Date : JUNE 8th, 1999
<PAGE>
Exhibit A
[HEWLETT-PACKARD LOGO]
CONFIDENTIAL DISCLOSURE AGREEMENT
Effective Date:
--------------------------
In order to protect certain confidential information which may be disclosed
between them, Hewlett-Packard Singapore Pte Ltd ("HPSG"), a division of
Hewlett-Packard Company ("HP") and the "Participant" identified below agree
that:
1. The Discloser(s) of confidential information is (are):
HEWLETT-PACKARD SINGAPORE PTE LTD
- ------------------------------------------------------------------------------
(fill in "HPSG", Participant" or "Both Parties")
2. The parties' representatives for disclosing or receiving confidential
information are:
HPSG:
-------------------------------------------------------------------------
PARTICIPANT: -----------------------------------------------------------------
- ------------------------------------------------------------------------------
3. The confidential information disclosed under this Agreement by HPSG, HP,
its subsidiaries and affiliates, is described as:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
and the confidential information disclosed under this Agreement by the
Participant is described as:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
4. This Agreement controls only confidential information which is disclosed
between the effective date and
-----------------------------
5. A party receiving confidential information under this Agreement
("Recipient") recognizes the proprietary rights of the other's (its ultimate
holding company, subsidiaries and affiliates inclusive) in and to the
information and the confidential nature of the information and agrees to use
the confidential information only for the purpose of:
THE ASSEMBLY OF [*] PRINTER ASSEMBLIES AND PRINTED CIRCUIT BOARD ASSEMBLIES.
6. A Recipient's duty to protect confidential information disclosed under
this Agreement expires on .
-----------------
7. A Recipient shall protect the disclosed confidential information by using
the same degree of care, but no less than a reasonable degree of care, to
<PAGE>
prevent the unauthorized use, dissemination or publication of the
confidential information as the Recipient uses to protect its own
confidential information of a like nature.
8. A Recipient shall have a duty to protect only that confidential
information which is (a) disclosed by the Discloser in writing and is marked
as confidential at the time of disclosure, or which is (b) disclosed by the
Discloser in any other manner and is identified as confidential at the time
of disclosure and is also summarized and designated as confidential in a
written memorandum delivered to the Recipient's representative named in
paragraph 2 above within thirty days of the disclosure.
9. This Agreement imposes no obligation upon a Recipient with respect to
confidential information which (a) was in the Recipient's possession before
receipt from the Discloser, (b) is or becomes a matter of public knowledge
through no fault of the Recipient; (c) is rightfully received by the
Recipient from a third party without a duty of confidentiality; (d) is
disclosed by the Discloser to a third party without a duty of
confidentiality on the third party; (e) is independently developed by the
Recipient; (f) is disclosed under operation of law; or (g) is disclosed by
the Recipient with the Discloser's prior written approval.
10. Each Discloser warrants that it has the right to make the disclosures
under this Agreement.
11. Neither party acquires any intellectual property rights under this
Agreement except the limited right to use set out in paragraph 5 above.
12. Neither party has an obligation under this Agreement to purchase any
service or item from the other party.
13. Neither party has an obligation under this Agreement to offer for sale
products using or incorporating the confidential information. The Discloser
may, at its sole discretion, offer such products for sale and may modify them
or discontinue sale at any time.
14. A Recipient shall adhere to the U.S. Export Administration Laws and
Regulations and shall not export or re-export any technical data or products
received from the Discloser or the direct product of such technical data to
any proscribed country listed in the U.S. Export Administration Regulations
unless properly authorized by the U.S. Government.
15. The parties do not intend that any agency or partnership relationship be
created between them by this Agreement.
16. All additions or modifications to this Agreement must be made in writing
and must be signed by both parties.
17. This Agreement is made under, and shall be construed according to the
laws of the Republic of Singapore.
HEWLETT-PACKARD SINGAPORE (PRIVATE) LTD
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(Division Name)
20, GUL WAY,
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SINGAPORE 629196, SINGAPORE,
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(Address)
By ---------------------------------------------------------------------------
(Functional Manager's Signature)
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(Printed Manager's Name)
SUPPLY MANUFACTURING MANAGER
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(Printed Manager's Title)
PARTICIPANT
- ------------------------------------------------------------------------------
(Company Name)
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- ------------------------------------------------------------------------------
(Address)
By
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(Authorized Signature)
- ------------------------------------------------------------------------------
(Printed Signatory's Name)
- ------------------------------------------------------------------------------
(Printed Signatory's Title)
