1
EXHIBIT 10.25
PORTIONS OF THIS EXHIBIT MARKED WITH AN "*" HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
MICROSOFT CORPORATION
MANUFACTURING AND SUPPLY AND SERVICES AGREEMENT
--------------------------------------------------------------------------------
CONFIDENTIAL
--------------------------------------------------------------------------------
This Microsoft Manufacturing and Supply and Services Agreement
("Agreement") is made and entered into this 1st day of July, 1999 ("Effective
Date"), by and between Microsoft Corporation ("Microsoft"), a Washington, USA
corporation, and StarTek, Inc. ("StarTek"), a Colorado corporation.
RECITALS
WHEREAS, Microsoft and StarTek intend to create a formal relationship
by which StarTek shall provide certain manufacturing and distribution services
with respect to orders for Microsoft software and hardware products.
WHEREAS, the parties intend in this Agreement to set forth specific
terms and conditions governing the performance of certain manufacturing and
distribution services by StarTek for Microsoft; and
NOW, THEREFORE, in consideration of the covenants and conditions set
forth below, the adequacy of which is agreed to and hereby acknowledged, the
parties agree as follows:
AGREEMENT
1. DEFINITIONS.
The following terms, whenever initially capitalized, shall have the following
meanings for the purposes of this Agreement:
(a) "BOM" shall mean the ▇▇▇▇ of materials document provided by
Microsoft to StarTek, which ▇▇▇▇ of materials identifies all components
comprising a given Product or Product Component. BOMs may be modified in writing
prospectively from time to time by Microsoft at its sole discretion.
(b) "CUSTOMERS" shall mean customers designated by Microsoft, including
Microsoft internal customers and distribution vendors, to whom Microsoft
authorizes StarTek to deliver Product pursuant to the terms and conditions of
this Agreement and the Statements of Work.
(c) "DELIVERABLES" shall mean and include all Hardware, code material,
source material, software masters or replicative material or other such
documented material, of any kind or description and in any form including
compact disk, other disks or diskettes, tape, text or any electronic or other
medium supplied by Microsoft or at its direction. It does not include such
materials if held under an independent contractual relationship with an Original
Equipment Manufacturer ("OEM") which contract contains the requisite license.
Nor does it include Products acquired for office purposes and used by StarTek in
its offices.
(d) "FACILITY" shall mean the manufacturing facility operated, owned,
subcontracted or leased by StarTek, at *.
2
(e) "FINISHED PRODUCT UNIT" shall mean fully packaged Microsoft
Product, which includes all requisite Product Components, Microsoft software
and/or Hardware, ready for delivery to a Customer.
(f) "HARDWARE" shall mean, without limitation, all Microsoft keyboards,
mice, joysticks and other Microsoft Products which could not reasonably be
categorized as software.
(g) "INSOLVENT" shall mean a financial condition such as to make the
sum of a party's debts greater than all of the party's assets, at fair
valuation; or, when a party has incurred debts beyond that party's ability to
pay such debts as they mature; or, when a party is engaged in a business or
transaction for which the party has unreasonably small capital.
(h) "INTELLECTUAL PROPERTY" shall mean any and all trademarks,
copyrights, patents and other proprietary rights comprising or encompassing a
given Product.
(i) "INVENTORY" includes Finished Product Units, Deliverables, work in
process, Product Components, Hardware or Raw Materials pertaining to the
Products that contain Microsoft software, trademarks, copyrighted material,
logos or other proprietary materials.
(j) "MANUFACTURING AND SUPPLY" OR "MANUFACTURING AND SUPPLYING" shall
mean the manufacturing and supply of Product Components and Products as
described in the Statements of Work.
(k) "PRODUCTS LIST" shall mean a list provided to StarTek by Microsoft
from time to time that will list the Products to be Manufactured and Supplied by
StarTek and Services to be provided by StarTek for Products pursuant to the
terms of this Agreement.
(l) "PRODUCT(S)" shall mean the copyrighted and/or patented Microsoft
software products, including Product Components, Microsoft software, and any
associated documentation, packaging and other written materials, including,
where applicable, the specified user documentation, which Microsoft may request
StarTek to Manufacture pursuant to this Agreement, by the issuance of a purchase
order .
(m) "PRODUCT COMPONENTS" shall mean the Product CD-ROMs, Jewel Case
Components, Disk Set Components, Assembled Box Components and Microsoft software
products.
(n) "RAW MATERIALS" shall mean each raw material purchased by StarTek
from third parties and used to compromise a Product or Product Component such
as, for example and without limitation, disks, polyvinyl disk baggies,
documentation, boxes, retail *.
(o) "SERVICES" shall mean packaging and distribution services described
in this Agreement and the Statement of Work.
(p) "STATEMENT(S) OF WORK" shall mean the attached Exhibits A and B,
including any modifications made thereto pursuant to Section 14(b).
(q) "PRODUCT CD-ROMS" shall mean the Product CD-ROM media either
supplied by Microsoft or produced or procured by StarTek, but shall not include
any Microsoft software included on the CD-ROM.
(r) "DISK SET COMPONENT" shall mean the fully assembled disk set,
including polyvinyl disk baggies and duplicated disks either supplied by
Microsoft or produced or procured by StarTek, but shall not include any
Microsoft software included on the disks.
2
3
(s) "JEWEL CASE COMPONENT" shall mean a fully assembled jewel case or
CD sleeve, including all documentation and other printed material, such as the
front and back liners but excluding the Product CD-ROMs, to be included as an
insert in the jewel case.
(t) "ASSEMBLED BOX COMPONENT" shall mean the fully assembled retail
packaging, including without limitation, retail bar code labels and all manuals
and other documentation that is to be included with the Product, but excluding
the Product CD-ROMs, Jewel Case Components, Disk Set Components.
2. MANUFACTURING AND SERVICES.
(a) GENERAL. StarTek hereby agrees to conduct Manufacturing and Supply
and Services for Products on the Products List at the Facility pursuant to the
terms and conditions set forth in this Agreement, including without limitation,
the Statements of Work. StarTek shall not conduct Manufacturing and Supply and
Services at or from any location other than the Facility without Microsoft's
prior written approval. In the event of any conflict between the terms contained
in this Agreement and terms contained in the Statements of Work, the terms
contained in this Agreement shall control.
(b) OTHER MANUFACTURING/SERVICES. In addition to Manufacturing and
Supply and Services, the parties may identify other manufacturing and/or
services to be provided under this Agreement through an addendum signed by the
parties hereto.
(c) REPORTS. StarTek, at the scheduled times shall provide Microsoft
with reports as specified herein or in the Exhibits (each a "Report"), with
respect to all Products or Manufacturing and Supply and Services ordered or sold
hereunder through StarTek to Customers. All Reports shall be in the form shown
in the Exhibits and have the content as set forth in this Agreement or as
otherwise agreed by the parties in writing, and shall be complete as required
under this Agreement and accurate. Each Report, whether in paper or electronic
format, shall meet the Standard Report Requirements identified for the Report in
the Exhibits and shall be delivered as specified in the Exhibits. StarTek shall
use reasonable efforts to correct any errors in a Report within * following
Microsoft's notice specifying the item in respect of which an error has
occurred. StarTek shall deliver each Report and all required supporting
documentation therefor, by the time and on the date specified in the Exhibits.
(d) NO ALTERATION; NO MISREPRESENTATION. Except in accordance with the
terms of this Agreement or as otherwise authorized in writing by Microsoft,
StarTek shall not alter the Product or Product packaging without the specific
prior written consent of Microsoft, and shall have no authority to make copies
of Microsoft diskettes or documentation other than as provided in this
Agreement. StarTek shall distribute Product to Customers as specified in the
Statements of Work. No other product or informational piece, including without
limitation flyers, literature, documentation and advertising may be bundled with
any product without the prior written consent of Microsoft. All materials used
by StarTek in the distribution of Product shall comply with Section 4 hereof and
shall clearly note that such Product is Microsoft Product. Such materials may
include, but are not limited to, Microsoft invoices, packing slips, and
packaging.
(e) INVENTORY. All of the Inventory shall at all times be held
exclusively for assembly and delivery to shipping locations as authorized by
Microsoft and for no other purpose, use or disposition, except as may be
directed in writing by Microsoft. StarTek shall at all times cause the Inventory
to be free and clear of any and all liens, encumbrances and other claims of its
creditors. StarTek grants Microsoft the option, assignable to any affiliated
corporation, to acquire by purchase all of the Inventory and/or Product
Components (less Finished Product Units which have already been purchased by
Microsoft) upon * notice, and payment as would apply for unused Inventory in the
case of termination as stated in Section 10, at the price set forth at in
Exhibit C. At any time, upon Microsoft's request, StarTek shall take all
necessary steps and shall execute such documents as may be necessary or
3
4
advisable under the local law where the Inventory is located, in order to effect
the sale of such Inventory and/or Product Components to Microsoft and to
document Microsoft's title to Inventory and/or Product Components owned by
Microsoft. Use of Intellectual Property in any manner by StarTek after
expiration or termination of this Agreement for any reason, whether or not
incorporated in Inventory, shall be deemed to be in violation of Microsoft's
Intellectual Property rights and shall entitle Microsoft to have all remedies
provided by law or equity (including injunctive relief); provided, however, (i)
this does not preclude StarTek from continuing to use in its offices Microsoft
Products legally acquired for that purpose; and (ii) it does not preclude
StarTek's performance of independent contractual relationships with Microsoft or
an OEM (original equipment manufacturer) or other party, which contract contains
the requisite Microsoft product replication license.
(f) INVENTORY CONSIGNMENT. If, and to the extent that, Microsoft
delivers Deliverables, Product CD-ROMs and/or Disk Set Components (collectively
referred to herein as the "Consigned Inventory") to StarTek or places it under
StarTek's control, this is a true consignment agreement governing such Consigned
Inventory, which StarTek shall hold in trust for the sole benefit of Microsoft
pursuant to Section 6(b)(i). StarTek is not purchasing the Consigned Inventory.
StarTek shall hold the Consigned Inventory either (a) for delivery to
Microsoft's distribution center pursuant to this Agreement or (b) for return to
Microsoft, and StarTek's authority is limited thereto. Microsoft consents only
to sales in the ordinary course of providing the Services pursuant to this
Agreement. The references in this subsection or elsewhere in this Agreement to
"StarTek's control" means its ability to exercise restraining or directing
influence over the item described. All of the Consigned Inventory shall be held
in the Microsoft approved Facilities and exclusively for transfer to Microsoft's
distribution center as authorized by Microsoft and for no other purpose, use or
disposition, except as may be directed by Microsoft. Microsoft shall have title
and ownership of the entire Consigned Inventory. StarTek shall at all times
cause the Consigned Inventory to be free and clear of any and all liens,
encumbrances and other claims of StarTek's creditors. StarTek shall label all
Consigned Inventory as being the "property of Microsoft" and keep all such
Consigned Inventory completely and totally segregated from any materials,
supplies or inventory belonging to StarTek or any of its customers. At any time,
at Microsoft's request, StarTek shall take all reasonable steps and shall
execute a security agreement and financing statements, or their equivalents, all
as may be necessary or advisable under the local law where the Consigned
Inventory is located, in order to place of record Microsoft's ownership of all
Consigned Inventory, and its unavailability to any creditor or creditors of
StarTek. Microsoft shall bear the reasonable cost to StarTek (not to exceed
$500.00) of reviewing, negotiating and executing any such security agreements or
financing statements, except that StarTek shall bear the cost of executing any
such agreements or statements done contemporaneously in connection with the
execution of this Agreement.
(g) DECLARATION OF TRUST.
(1) GENERALLY. StarTek hereby declares, confirms and agrees that
throughout the term of this Agreement, StarTek shall hold in trust for the sole
benefit of Microsoft all Consigned Inventory within StarTek's possession or
within its reasonable control, of any kind, description or character. StarTek
further agrees to account for the Consigned Inventory in its possession or under
its reasonable control as property held in trust for Microsoft and not as assets
belonging to StarTek, and not to present any Consigned Inventory as assets of
StarTek in its balance sheet or in any representations (whether oral or written)
to its creditors.
Wherever this Agreement states StarTek holds property in trust or as
trustee, StarTek agrees to exercise ordinary care that Consigned Inventory
received by StarTek will be handled as specified in this Agreement, but it does
not, because of any trust or otherwise, undertake any greater standard of care.
(2) ACCOUNTING. StarTek agrees to account for the disposition of all
Consigned Inventory received by StarTek, such accounting to be given to
Microsoft at Microsoft's request, at the times and in the manner reasonably
4
5
requested by Microsoft. If this is beyond the reports otherwise required
hereunder, the reasonable expense of it shall be paid by Microsoft.
(3) DIRECTIONS. Microsoft may at any time direct StarTek to return to
Microsoft according to Microsoft's direction and at Microsoft's sole expense
part or all of the Consigned Inventory in StarTek's possession or under its
reasonable control. StarTek shall promptly (within *) comply with any such
direction.
(h) AGREEMENT NOT TO SELL. StarTek acknowledges that, under the terms
of this Agreement, that both during and after the term of this Agreement it has
no rights within the licenses pertaining to software or other Microsoft
proprietary materials or Products which would allow StarTek to be a seller or
distributor of any Products. Whenever requested by Microsoft and from time to
time, it will sign separate mutually acceptable agreements to this effect.
(i) SAFE STORAGE AND *. StarTek agrees not to store any other goods
near or in such relation to the Products or Product Components as to cause
injury to those Products or Product Components through contamination by strong
odors, leakage, or otherwise. *.
(j) NON-EXCLUSIVITY. This Agreement is not an exclusive agreement. At
all times Microsoft shall have the right to appoint other third parties to
perform Manufacturing and Supply and Services and other services for Microsoft
or Customers. Provided that StarTek would not be placed in breach of this
Agreement, StarTek may contract with and conduct manufacturing services for
other software companies.
(k) FINANCIAL INFORMATION. Within * after StarTek learns that it has
become or will become Insolvent, StarTek shall submit financial statements to
Microsoft in sufficient detail to allow Microsoft to determine whether StarTek
shall be capable of continuing to perform its obligations hereunder. The
financial statements shall include, but shall not be limited to, balance sheets
and related statements of income and retained earnings and statements of changes
in financial condition. To the extent those statements are audited, the audit
report of the certified public accountant performing the audit shall also be
made available to Microsoft.
(l) RETURN OF DELIVERABLES. StarTek will have possession of
Deliverables and replicable material for certain Products and other property for
purposes of the replication to be done under this Agreement. Upon termination of
this Agreement and at any early time whenever requested by Microsoft to do so,
StarTek shall immediately deliver, at Microsoft's cost, to Microsoft all of such
Deliverables (provided that in no event shall such a request by Microsoft for
StarTek's return of the Deliverables prejudice StarTek's right to full
performance by Microsoft under this Agreement), replicable materials and all and
any other Microsoft proprietary materials ever received by it and it shall not
retain any copy or original of the same in any way whatsoever.
(m) QUALITY REQUIREMENTS. StarTek shall ensure that in performing its
obligations under this Agreement, it shall operate in accordance with the
quality guidelines as posted on Microsoft's Website, which can be found at *
(the "Microsoft Website") and as set forth in the Statements of Work.
(n) PRODUCTION. StarTek covenants and agrees to meet Microsoft's
demands for Product related to designated shipping locations, as such demands
may be adjusted from time to time. Additional measurement procedures may be
implemented as mutually agreed upon by Microsoft and StarTek.
(o) NON-CONFORMING PRODUCT. StarTek shall promptly replace and deliver,
within * from notification, at no charge to Microsoft or its Customers, any
non-conforming Product if any delivery of Product, or any portion of it, to any
Customer fails to meet the quality standards specified in the Statements of
Work. If StarTek is unable to obtain Product Components necessary to replace
non-conforming Product within the specified two (2)
5
6
week period, then replacement of such non-conforming Products shall take place
as soon as possible after necessary Product Components are obtained by StarTek.
StarTek agrees to use its best efforts to obtain Product Components as quickly
as possible. In the event Microsoft determines that a Product recall is
necessary due to a breach of StarTek's warranties hereunder, or due to a
manufacturing defect, StarTek shall cooperate with Microsoft in all respects to
conduct such recall at StarTek's expense; provided that if StarTek has given
prior notice of the possible defect and recommended against delivery and the
Product is nonetheless delivered at Microsoft's direction, or if the recall is
necessary because of a Microsoft error, the recall on account of that defect
shall be at Microsoft `s expense, but StarTek shall still cooperate with it, and
in such a case, Microsoft shall reimburse StarTek for the costs of Manufacturing
and Supply and Services for the replacement Products.
3. DEDICATED REPRESENTATIVES. StarTek shall appoint one qualified staff
member ("StarTek Account Manager") who has or is hereby granted authority to (i)
submit material and information requests to Microsoft; (ii) provide access to
StarTek's staff and independent advisors (including accountants) to provide
information and answer questions; and (iii) provide schedules and plans to
Microsoft for Microsoft' review and/or approval. StarTek shall also appoint a
more senior officer who shall have authority to act for StarTek in making
binding decisions with respect to this Agreement, and amend this Agreement.
Microsoft shall appoint one or more qualified staff members ("Microsoft Vendor
Account Manager") who has or is hereby granted authority to (i) act for
Microsoft and make binding decisions with respect to this Agreement, and amend
this Agreement; (ii) review information supplied by StarTek; (iii) provide any
Microsoft information and answer questions and provide Product training to
StarTek. The StarTek Account Manager is * and the Microsoft Vendor Account
Manager is *. StarTek's senior officer described above is *, its *. Either party
may change account managers and StarTek may change the designated senior officer
upon twenty (20) days' prior notice to the other (as long as or to the extent
that such notice is reasonably possible).
4. PRICE AND PAYMENT.
(a) GENERAL. Microsoft and StarTek agree that StarTek shall be
compensated for the Manufacturing and Supply and Services pursuant to the Price
and Payment terms and conditions set forth in Exhibit C ("Component Pricing
Matrix"). Microsoft shall be liable for payment to StarTek for Raw Materials
that have been purchased in support of the weekly forecasts issued by Microsoft.
Such forecasts shall only cover a two (2) week period and Microsoft shall not be
responsible for Raw Materials purchased in excess of such forecasts. StarTek
will use all reasonable efforts to provide competitive pricing to Microsoft.
Except for Miscellaneous Charges (as defined below), all payments due by
Microsoft to StarTek under this Agreement for Manufacturing Services shall be
made * from Microsoft's receipt of a Purchase Order Receipt from StarTek.
Payment shall be made by Microsoft in accordance with the Microsoft SAP
Autovoucher Procedures. Payment for Miscellaneous Charges due by Microsoft to
StarTek under this Agreement shall be made * from Microsoft's receipt of an
invoice from StarTek. Any undisputed payment that is overdue for more than *,
shall thereafter bear interest at an annual rate of * per annum (or such lower
rate as may then be the highest rate legally available).
(b) MANNER OF PAYMENT; INVOICES. For Manufacturing and Supply and
Services, with the exception of Miscellaneous Charges, StarTek shall provide
daily Purchase Order Receipts in accordance with the Microsoft SAP Autovoucher
Procedures. StarTek shall render accurate monthly invoices for the Miscellaneous
Charges earned by the date of the Microsoft Fiscal Month Close. For purposes of
this Section 4, "Miscellaneous Charges" shall be defined as including, without
limitation, prep/tooling, freight charges, pallet charges and samples. Such
invoices shall consist of a complete, itemized listing of all such Manufacturing
and Supplying and Services performed or Miscellaneous Charges incurred during
the current invoice period. Microsoft shall pay within * of its receipt of an
invoice, the entire amount of the invoice (except for Disputed Amounts), if the
invoice is accurate, complete and accompanied by backup documentation required
in the Statements of Work. All invoices shall be expressed in U.S. dollars. All
payments shall be made by Microsoft in U.S. dollars either by first class mail,
postage paid, at the address specified herein for notices to StarTek or in such
other manner or at such other place as StarTek
6
7
may reasonably designate from time to time by notice to Microsoft or
electronically, at Microsoft's sole option. Payment shall be deemed credited to
the account of Microsoft when received by StarTek if sent by first class mail or
upon receipt by StarTek's financial institution if sent electronically.
(c) DISPUTED AMOUNTS. As used herein, "Disputed Amounts" means invoice
or Purchase Order Receipt amounts that are subject to a bona fide dispute raised
by Microsoft in writing within * of Microsoft's receipt of an invoice, in the
case of Miscellaneous Charges, or within * of an audit of Purchase Order
Receipts, in the case of Manufacturing Services, which claim of dispute may
concern not only the accuracy of the charge itself, but also any claim of
deficient service or performance or any other claim of breach of this Agreement
that relates to the specific charges in the invoice or Purchase Order Receipt.
All Disputed Amounts that Microsoft subsequently agrees in writing to pay
("Agreed Payment") or that are required to be paid pursuant to a proper court
order or award from any mutually submitted arbitration ("Required Payment")
shall be paid within * from the date of such agreement or determination. Payment
of an invoice or Purchase Order Receipt without asserting a dispute is not a
waiver as to any claim or circumstance.
(d) REVISIONS TO STARTEK SERVICES. From time to time, Microsoft may
request that StarTek revise its Manufacturing and Supply and Services. If (i)
Microsoft makes a request or a series of requests that materially changes the
Manufacturing and Supply and Services and (ii) StarTek determines that a change
in compensation is warranted, StarTek may provide Microsoft with a quote of the
change in cost, by unit or other appropriate measure, for which it will
undertake the change of Services ("Interim Rate Quote"). Microsoft may accept or
reject any Interim Rate Quote. If Microsoft accepts an Interim Rate Quote,
StarTek's Manufacturing and Supply and Services and the corresponding costs to
Microsoft shall be revised accordingly, which revision shall be memorialized in
a written amendment signed by both parties. If Microsoft rejects an Interim Rate
Quote, StarTek's Manufacturing and Supply and Services shall not be revised but
Microsoft shall then be free to have the changed Manufacturing and Supply and
Services in question performed by a third party and to terminate the relevant
portion of the Manufacturing and Supply and Services upon thirty (30) calendar
days' prior notice to StarTek. StarTek agrees, at Microsoft's reasonable
expense, to cooperate with such third party to transition and allow it to
perform such Manufacturing and Supply and Services. This Section 4(d) does not
impair either party's rights under Section 11(b) hereof.
(e) COST CONTAINMENT. *
(f) TAXES. In the event income taxes are required to be withheld by
Microsoft on payments to StarTek required hereunder, Microsoft agrees to provide
StarTek with reasonable notice in advance of the first such withholding, and
Microsoft may deduct such income taxes from the amounts owed and timely pay such
taxes, when required, to the appropriate taxing authority. Microsoft shall in
turn promptly secure and deliver to StarTek an official receipt for any income
taxes withheld. Microsoft agrees to pay all applicable goods and services or
other applicable consumption taxes (other than income taxes) levied on it by a
duly constituted and authorized taxing authority on the Manufacturing and Supply
and Services. To the extent required by any such taxing authority, StarTek may
collect such taxes, if any, from Microsoft, and, in such case, shall remit to
Microsoft official tax receipts indicating that such taxes have been collected
by StarTek and remitted to the appropriate tax authorities, to the extent such
receipts are available, and StarTek shall show such taxes as separate line items
on invoices to Microsoft. StarTek agrees to take such steps as are reasonably
requested by Microsoft to minimize such taxes in accordance with all relevant
laws and to cooperate with and assist Microsoft, in challenging the validity of
any taxes applicable to the Manufacturing and Supply and Services and collected
from Microsoft by StarTek or otherwise paid by Microsoft. Except as required by
law or where expressly agreed to, in writing, by Microsoft pursuant to Exhibit
C, Microsoft shall not pay any taxes other than those described above,
including, without limitation (1) taxes on or with respect to or measured by any
net or gross income or receipts of StarTek, (2) any franchise taxes, taxes on
doing business, gross receipts taxes or capital stock taxes (including any
minimum taxes and taxes measured by any
7
8
item of tax preference), (3) any taxes imposed or assessed for work performed
without the written authorization by Microsoft after the date upon which this
Agreement is terminated, (4) taxes based upon or imposed with reference to
StarTek's real and personal property ownership, (5) taxes incurred by StarTek on
all goods and services purchased from other related or unrelated parties, and/or
(6) any taxes similar to or in the nature of those taxes described in (1), (2),
(3), (4) or (5) above. StarTek agrees to make available to Microsoft any and all
records necessary to comply with any and all tax obligations as provided herein,
including but not limited to reports necessary for goods and services tax
compliance and audit purposes. The contents and form of such reports shall be
mutually agreed to between the parties.
5. LICENSE GRANT.
(a) GENERAL. In order to allow StarTek to perform its Manufacturing and
Supply and Services as required hereunder during the term of this Agreement,
Microsoft grants StarTek a non-exclusive, non-transferable, personal, limited
license right to the Intellectual Property for each Product:
(1) to procure materials, reproduce and/or Manufacture and Supply the
Product Components based upon the applicable BOM(s) and purchase orders
delivered by Microsoft pursuant to the Statements of Work;
(2) to assemble the Product Components into Finished Product Unit(s)
solely in accordance with the written instructions and BOM(s) delivered by
Microsoft, including the right to reproduce and manufacture any Microsoft
software and documentation specified in the BOM(s) as necessary to build the
Finished Product Unit(s); and
(3) to deliver the Finished Product Unit(s) to Customers solely in
accordance with the Statements of Work.
(b) LICENSE RESTRICTIONS.
(1) Except as expressly provided in the Statements of Work or in this
Agreement, StarTek shall not in any way modify any BOM, Print Specifications,
Products or Intellectual Property without obtaining, in advance, the express
written permission of Microsoft;
(2) StarTek shall not reproduce, manufacture, or distribute any Product
or Intellectual Property except pursuant to the terms of this Agreement or
pursuant to a separate legal contractual arrangement, which contains a valid
Microsoft license or authorization to do same;
(3) StarTek shall not reverse engineer, decompile, or disassemble any
Products or Intellectual Property. Notwithstanding the foregoing, StarTek may
physically disassemble those Product Components that do not consist of software
or hardware solely for the purpose improving Product assembly and/or quality. No
other product or informational piece, including without limitation flyers,
literature, documentation and advertising, may be bundled with any Products
without the prior written consent of Microsoft.
(4) StarTek shall perform the Manufacturing and Supply and Services
(including, but not limited to replication and assembly of Products) only at the
Facilities. Additional StarTek Facilities may be added to Exhibit H, but the
addition of such locations is subject to Microsoft's prior written approval and,
in the case of a StarTek subsidiary, the full execution by the StarTek
subsidiary of the Microsoft Subsidiary Agreement between Microsoft and such
StarTek subsidiary as shown in Exhibit I. StarTek hereby guarantees its
subsidiary's fulfillment of the applicable obligations imposed on StarTek by
this Agreement. StarTek agrees to indemnify Microsoft for all damages and/or
costs of any kind, without limitation, incurred by Microsoft or any third party
and caused by a
8
9
breach of its subsidiary's fulfillment of the applicable obligations imposed on
StarTek by this Agreement, including, without limitation, StarTek's payment of
any costs, fees and/or monetary judgments awarded in favor of Microsoft, by a
court of competent jurisdiction, resulting from StarTek's subsidiary's
unauthorized replication and/or distribution of Product(s).
(5) StarTek shall perform Manufacturing and Supply and Services solely
in accordance with this Agreement, including without limitation, the Statements
of Work.
(6) All rights not expressly granted herein, without limitation, are
reserved by, and shall exclusively inure to the benefit of, Microsoft.
6. SUBCONTRACTING.
(a) TO THIRD PARTIES. StarTek shall not subcontract any of its rights
or obligations under this Agreement, with respect to Manufacturing and Supply
and Services, except as follows:
(1) Prior to any subcontractor performing any
such services for StarTek under this Agreement, StarTek and its subcontractor
shall enter into a written agreement ("Subcontractor Agreement") that expressly
provides that Microsoft is a third party beneficiary of the Subcontractor
Agreement with rights to enforce such agreement should StarTek fail to timely do
so; that Microsoft, at its sole discretion, reserves the right to evaluate the
Subcontractor, either in person or in written form; and further that requires
Subcontractor to:
(A) comply with the applicable
obligations identical to those imposed on StarTek under Sections 2, 5(b), 7(a),
8(a)(1), 9, 10, 11(c), 12, 13, 16(k), 16(l) and Exhibits A and B of this
Agreement, and
(B) halt reproduction of Product(s) as
required under this Agreement or upon notice from StarTek or Microsoft of the
termination or expiration of this Agreement, and
(C) pay Microsoft's attorneys' fees if
Microsoft employs attorneys to enforce any rights arising out of the
Subcontractor Agreement; and
(2) StarTek guarantees its subcontractor's
fulfillment of the applicable obligations imposed on StarTek by this Agreement;
and
(3) StarTek shall indemnify, defend and hold
Microsoft harmless for all damages and/or costs of any kind, including without
limitation, those incurred by Microsoft and caused by a breach of the
Subcontractor Agreement by a subcontractor and/or subcontractor's failure to
fulfill the applicable obligations imposed on StarTek by this Agreement,
including, but not limited to, StarTek's payment of any monetary judgments
awarded to Microsoft by a court of competent jurisdiction and any costs and fees
relating thereto, not paid by subcontractor, resulting from subcontractor's
unauthorized replication and/or distribution of Product(s) in accordance with
the Subcontractor Agreement; and
(4) Upon execution of this Agreement and
thereafter prior to a subcontractor performing any services under this
Agreement, StarTek shall provide Microsoft with a written certification, signed
by a StarTek officer, representing and warranting that StarTek is in compliance
with the provisions of Section 6 of this Agreement; and
9
10
(5) Microsoft, in its reasonable discretion,
will provide an approved CD and COA supplier list as seen in Exhibit F which may
be updated by Microsoft from time to time. If a supplier used by StarTek as a
subcontractor is removed from such list by Microsoft, Microsoft acknowledges
that StarTek may not be able to immediately discontinue use of subcontractor. In
such case, subject to other rights and obligations of enforcement as set forth
in the Agreement, Microsoft and StarTek will mutually agree to a transition
plan.
(b) RIGHTS PASS THROUGH. It is the intention of this section that
StarTek be able to subcontract, provided StarTek fully maintains quality
standards and protects Microsoft's property rights in Microsoft's Intellectual
Property and Deliverables such that, in addition to Microsoft's recourse to
StarTek under this Agreement, Microsoft shall also have rights enforceable
directly against the subcontractor. The responsibility and liability of StarTek
under this Agreement is not diminished on account of any subcontract and StarTek
shall be fully responsible for the subcontractor's performance and work.
(c) EXPORT RESTRICTIONS. StarTek hereby agrees that in subcontracting
portions of the Manufacturing and Supply and Services to third parties pursuant
to Section 6(a) or (b) above, StarTek shall not, directly or indirectly, export
or transmit (i) any Product Component, Product and/or technical data or (ii) any
Product (or any part thereof), process, or service that is the direct product of
a Product, to (a) any countries that are subject to U.S. export restrictions
(including as of the Effective Date, but not limited to, the Federal Republic of
Yugoslavia (Serbia and Montenegro), Cuba, Iran, Iraq, Libya, North Korea, Sudan
and Syria); (b) any end-user whom StarTek knows or has reason to know will
utilize such Product Component, Product and/or technical data in the design,
development or production of nuclear, chemical or biological weapons; or (c) any
other country to which such export or transmission is restricted by the export
control laws and regulations of the United States, and any amendments thereof,
without prior written consent, if required, of the Bureau of Export
Administration of the U.S. Department of Commerce, or such other governmental
entity as may have jurisdiction over such export or transactions, unless
Microsoft specifically directs StarTek in writing to do so.
(d) INDEMNIFICATION. If StarTek delivers Product(s) to a Customer
specified by Microsoft or at Microsoft's direction, Microsoft agrees to
indemnify StarTek for any consequent indirect violation of the export
restrictions described in subsection 6(c) above.
(e) ENFORCEMENT. StarTek agrees that it will diligently and timely
enforce all rights against or obligations of any subcontractor(s) in order to
enforce compliance with the applicable terms of this Agreement and/or to
otherwise cure a subcontractor breach.
7. REPRESENTATIONS & WARRANTIES.
(a) BY STARTEK. StarTek represents and warrants to Microsoft as
follows:
(1) StarTek has full right and power to enter into and perform
according to the terms of this Agreement and doing so does not violate any
agreement between it and any third party;
(2) the Manufacturing and Supply and Services, including any portion
done by any subcontractor as contemplated in Section 5, will strictly comply
with all applicable laws, as well as the terms and conditions of this Agreement,
including without limitation the Statements of Work;
(3) the Products (including the Raw Materials, reproduction quality,
Product Components and Finished Product Unit quality) will satisfy the quality
workmanship standards and service levels set forth in the Microsoft Website (*)
and Statements of Work and StarTek shall further protect Microsoft's property
rights in Microsoft's Intellectual Property and Deliverables from unauthorized
use within the scope of this Agreement;
10
11
(4) StarTek shall at all times comply with its commitments and
obligations as stated in this Agreement;
(5) StarTek's performance of Manufacturing and Supply and Services,
pursuant to the rights granted under this Agreement, does not infringe any third
party's patent, copyright, trade secret and/or any other intellectual property
right with respect to StarTek's replication, assembly, and/or distribution
processes;
(6) StarTek will, at all times relevant to this Agreement, keep any and
all license agreement with third parties relevant to Manufacturing and Supply
and Services for the Products in force and in good standing; and
(7) StarTek shall promptly replace, at no charge to Microsoft or the
Customers, any non-conforming Products, and all transportation, customs, and/or
taxes relating thereto, if any delivery of Products to Microsoft or Customers,
or any portion of it, breaches the warranties of Section 7(a). In the event
Microsoft determines that a Product recall is necessary, StarTek shall cooperate
with Microsoft in all respects to conduct such recall at StarTek's expense,
provided that if the recall is necessary because of a Microsoft error, the
recall on the account of that defect shall be at Microsoft's expense, but
StarTek shall still cooperate with it, and in such a case, Microsoft shall
reimburse StarTek for the costs of producing and distributing the replacement
Products.
(8) StarTek agrees that it will not make any warranties, statements or
representations regarding Product(s) beyond the scope of what is authorized by
this Agreement or contained in Microsoft-provided written documentation or other
Microsoft documents or contained in the written Microsoft Software License
Agreement.
(9) StarTek agrees that it will not modify any of the warranties
regarding Product(s) set forth in the written Microsoft Software License
Agreement or in Microsoft-provided written documentation or other Microsoft
documents.
(10) StarTek shall indemnify, defend and hold Microsoft harmless from
all Claims threatened, asserted or filed by any person or entity arising out of
or related to any other warranty of alleged warranty made or modified by
StarTek.
(11) All equipment, products, systems and processes utilized by StarTek
in providing the Manufacturing services including without limitation all
hardware, software and networks will be fully and effectively "Year 2000
Compliant."
(12) YEAR 2000 COMPLIANCE.
(A) In this Section 7(a)(12), the expression
"Year 2000 Compliant" (and like expressions) shall mean that no operational,
financial, data transmission, communication or process is affected or
interrupted by dates prior to, during or after the Year 2000, and in particular,
but without prejudice to the generality of the foregoing that:
(i) *;
(ii) *;
(iii) *;
(iv) *.
11
12
(B) *.
StarTek at its expense shall have completed the
following:
(i) *.
(ii) *.
(iii) *.
(iv) *.
(v) *.
(vi) *.
(C) *.
(D) *.
(E) In this Section 7(a)(12), time shall be of the
essence.
(b) BY MICROSOFT. Microsoft hereby represents and warrants to
StarTek as follows:
(1) Microsoft has the full and exclusive right and power to enter
into and perform according to the terms of this Agreement;
(2) Microsoft has and will have, at all relevant times, sufficient
rights in the Products to grant StarTek the rights granted in this Agreement;
(3) that at all times relevant to this Agreement, Microsoft will keep
any and all license agreements with third parties relevant to the reproduction
and manufacture of the Products in force and in good standing; and
(4) that any and all software and Intellectual Property provided by
Microsoft to StarTek for incorporation into the Products will be EXPORTABLE into
the countries where Microsoft requests it be delivered.
(c) DISCLAIMER OF WARRANTY. THE WARRANTIES SET FORTH IN SECTIONS 7(a)
AND 7(b) ABOVE ARE THE ONLY WARRANTIES MADE BY THE PARTIES AND ARE IN LIEU OF
ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, OR STATUTORY, INCLUDING BUT NOT
LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY AND/OR FITNESS FOR A PARTICULAR
PURPOSE WITH RESPECT TO THE PRODUCTS.
8. INDEMNIFICATION.
(a) INDEMNITY.
(1) BY STARTEK. StarTek agrees to hold harmless and indemnify
Microsoft, its subsidiaries and affiliates, and their respective directors,
officers, and employees, from and against any and all claims, suits, actions,
proceedings, or liabilities of any kind, including reasonable attorneys fees and
expenses associated therewith or with
12
13
successfully establishing the right to indemnification hereunder, which arises
out of or is connected with this Agreement, except to the comparative extent
such claims, suits, actions, proceedings or liabilities result from the fault,
negligence, or willful acts of Microsoft. StarTek shall further hold harmless
and indemnify Microsoft from and against any and all claims, suits, actions,
proceedings, or liabilities of any kind, including reasonable attorneys fees and
expenses incurred in connection therewith or with successfully establishing the
right to indemnification hereunder, which arise out of (i) the breach or alleged
breach of any representation, warranty or agreement made by StarTek in this
Agreement, or (ii) the breach or default by StarTek in the performance of any
obligation to be fulfilled by StarTek under this Agreement.
(2) BY MICROSOFT. Microsoft agrees to hold harmless and indemnify
StarTek, its subsidiaries and affiliates, and their respective directors,
officers, and employees, from and against any and all claims, suits, actions,
proceedings, or liabilities of any kind, including reasonable attorneys fees and
expenses associated therewith or with successfully establishing the right to
indemnification hereunder, which arises out of or is connected with any claim
that, if true, would constitute a breach of Microsoft's representations and
warranties set forth in Section 7(b) above.
(b) SURVIVAL. StarTek and Microsoft agree that the indemnities set
forth in this Section 8 shall survive and shall be enforceable beyond the
termination or completion of this Agreement.
(c) LIMITATION ON LIABILITY. STARTEK'S TOTAL LIABILITY AS TO MATTERS
ARISING UNDER THIS AGREEMENT SHALL BE LIMITED TO THE LESSER OF * OR *, WITH THE
EXCEPTION THAT STARTEK'S LIABILITY SHALL BE UNLIMITED AS TO: (i) ANY
INDEMNIFICATION OBLIGATION FOR PERSONAL INJURY, DEATH OR PROPERTY DAMAGE TO THE
EXTENT SUCH CLAIM IS BASED UPON STRICT LIABILITY, NEGLIGENCE, GROSS NEGLIGENCE,
INTENTIONAL ACT OR OTHER FAULT OF STARTEK OR ITS SUBCONTRACTOR(S); (ii) ANY
MATTER ARISING UNDER SECTIONS 9 OR OF THIS AGREEMENT; (iii) FOR THE COST OF
REPLACING PRODUCTS AND ASSOCIATED TRANSPORTATION COSTS OF ANY PRODUCT RECALL;
(iv) ANY FAILURE TO RETURN ANY DELIVERABLES AS IS OTHERWISE PROVIDED FOR IN THIS
AGREEMENT; OR (v) ANY COPYRIGHT, PATENT, TRADEMARK OR TRADE SECRET
INFRINGEMENT(S) (ALL OF THE FOREGOING BEING COLLECTIVELY REFERRED TO AS THE
"STARTEK EXCLUDED MATTERS"). MICROSOFT'S TOTAL LIABILITY AS TO MATTERS ARISING
UNDER THIS AGREEMENT SHALL ALSO BE LIMITED TO THE LESSER OF * OR *, EXCEPT FOR
ANY MATTERS ARISING UNDER SECTION 9 OF THIS AGREEMENT. EXCEPT WITH REGARD TO
STARTEK EXCLUDED MATTERS (WHICH TERM FOR THE PURPOSES OF THIS SENTENCE SHALL NOT
INCLUDE ANY LIABILITY AS TO RECALL), NO PARTY HERETO SHALL BE LIABLE TO ANOTHER
FOR ANY INDIRECT, CONSEQUENTIAL, PUNITIVE OR INCIDENTAL DAMAGES ARISING OUT OR
RELATED TO THIS AGREEMENT. THE PARTIES ACKNOWLEDGE THAT THE OTHER PROVISIONS OF
THIS AGREEMENT RELY UPON THE INCLUSION OF THIS SECTION 8(c).
9. CONFIDENTIALITY.
(a) GENERAL. Each party expressly undertakes to retain in confidence
the terms of this Agreement and the Agreement itself, along with all information
and know-how transmitted to or otherwise received by each party that the
disclosing party has identified as being proprietary and/or confidential or
that, by the nature of the circumstances surrounding the disclosure, ought in
good faith to be treated as proprietary and/or confidential (collectively,
"Confidential Information"), and will make no use of such Confidential
Information except under the terms and during the existence of this Agreement.
Notwithstanding the foregoing, any party may disclose the terms of this
Agreement to its outside legal and financial advisors with whom such party has a
confidential relationship and who are obligated to retain such information in
confidence, in the ordinary course of business. In addition, no party shall have
an obligation to maintain the confidentiality of information that (i) it
received rightfully from an
13
14
unaffiliated third party prior to its receipt from the disclosing party; (ii)
the disclosing party has disclosed to an unaffiliated third party without any
obligation to maintain such information in confidence; or (iii) is independently
developed by the obligated party. Further, each party may disclose Confidential
Information as required by governmental or judicial order, provided such party
gives the disclosing party prompt written notice prior to such disclosure, and
complies with any protective order (or equivalent) imposed on such disclosure,
and provides the disclosing party the option of either seeking a protective
order or having its Confidential Information be subject to the same protective
orders as may apply to information of the party subject to the governmental or
judicial order. No party shall disclose, disseminate or distribute any other
party's Confidential Information to any third party without the other's prior
written permission. Each party's obligation under this Section 8 shall extend to
the earlier of such time as the information protected hereby is in the public
domain through no fault of the obligated party or five (5) years following
termination or expiration of this Agreement. Each party shall take all
reasonable steps to ensure that their employees (and in the case of StarTek,
also its subcontractors) comply with this Section 9(a).
(b) OWNERSHIP RIGHTS. Both parties agree that each has and shall retain
ownership rights to its own Confidential Information and that upon completion or
termination of this Agreement and request from the other party, each party will
return the other's Confidential Information regardless of the media in which it
is stored. For Microsoft, Confidential Information at least and specifically
includes, but is not limited to: * Notwithstanding the foregoing, if as a result
of StarTek's performance of the Services, StarTek enhances or improves Microsoft
Customer lists, such enhancements or improvements shall be the sole property of
Microsoft. Both parties agree to return all Confidential Information including,
but not limited to, records released to either party for marketing and
distribution services, to either party immediately upon either party's written
request, and upon termination or expiration of this Agreement.
(c) INJUNCTIVE RELIEF. Both parties acknowledge that unauthorized
disclosure or use of Confidential Information could cause irreparable harm and
significant injury which may be difficult to ascertain. Accordingly, both
parties agree that the aggrieved party will have the right to seek and obtain
injunctive relief from breaches of this Agreement, in addition to any other
rights and remedies it may have.
(d) FACILITY TOURS. Microsoft acknowledges that customers and potential
customers of StarTek may tour the Facility. Microsoft agrees that any casual
viewing during such a tour of Products that Microsoft has already commercially
released does not violate Section 9(a) above. *. In the event that Microsoft
reasonably believes that additional security measures are necessary, Microsoft
will notify StarTek, and the parties will implement additional mutually
agreeable security procedures for so long as necessary.
10. RISK OF LOSS.
(a) GENERAL. Risk of loss for all Consigned Inventory, Inventory,
Deliverables, Products, Finished Product Units, and Microsoft property which are
the subject of this Agreement, together with all Product Components (including
the associated Raw Materials), shall remain with StarTek except as otherwise
provided in this Section 10. StarTek shall take all reasonable precautions to
protect Microsoft property against loss, damage, theft or disappearance while in
its care, custody or control.
(b) TRANSIT RISKS. Risk of loss for Product(s) or Product Components in
transit shall remain at all times with StarTek unless and until acceptance of
Finished Product Units is made by a Microsoft or Customer directed carrier.
(c) ON PREMISES RISK. StarTek shall be responsible for all risk of loss
or damage to all Microsoft property while located at StarTek's or its
subcontractor's facilities. StarTek shall be responsible for the full amount
14
15
of the loss or damage and shall reimburse Microsoft for such loss or damage.
Reimbursable amount for any loss or damage shall be as set forth in Section (d)
below.
(D) REIMBURSABLE AMOUNT. StarTek shall reimburse Microsoft for any
loss or damage to Finished Product Units as follows:
(1) StarTek shall reimburse Microsoft for the * as established by
Microsoft for any loss or damage to Finished Product Units, except loss or
damage resulting from (i) theft; (ii) mysterious disappearance; (iii) StarTek's
negligence or willful acts; or (iv) Shortage (as defined below) in excess of *.
The * variance will be calculated as defined in the Statement of Work Metrics
Reporting attachment;
(2) StarTek shall reimburse Microsoft for * as established by Microsoft
for any loss to Finished Product Units resulting from (i) theft; (ii) mysterious
disappearance; (iii) the negligence or willful acts of StarTek; or (iv) Shortage
(as defined below) in excess of *.
(e) PROTECTION OF MICROSOFT INTELLECTUAL PROPERTY. StarTek shall ensure
that the Intellectual Property provided by Microsoft to StarTek or its
Microsoft-approved subcontractor in accordance with this Agreement is retained
and held by StarTek or its Microsoft-approved subcontractor in such a manner as
to prevent its unauthorized use. Without limiting the generality of the
foregoing, StarTek shall ensure that the Media is *. For purposes of this
Section, (a) "Intellectual Property" shall mean any and all trademarks,
copyrights, patents and other proprietary rights comprising or encompassing a
given Product, (b) "Product" shall mean those Microsoft products, including
without limitation, any associated documentation and packaging that StarTek or
its Microsoft-approved subcontractor manufactures pursuant to the Agreement, and
(c) "Media" shall mean the media upon which the Intellectual Property is stored,
including, but not limited to, electronic and physical artwork files, PID files
and labels, labels and label art, CD serialization files and lables, film, all
software media on disk, CD-R masters, CD-ROM masters, glass masters, stampers
and electronic files.
Obsolete Media shall be destroyed to prevent unauthorized use in the
following manner:
(1) StarTek shall verify that CD stampers *.
(2) CD-R masters shall be *.
(3) Electronic media and artwork files shall be *.
(4) Printed materials shall be *.
(5) Label printing ribbons shall be *.
Product obsolescence and the corresponding Media destruction shall be
coordinated through the Microsoft Vendor Account Manager. Physical destruction
of the Media shall either be witnessed by Microsoft personnel or certified in
writing by StarTek.
(f) SHORTAGE. StarTek shall be liable for and shall reimburse Microsoft
for any Product(s) that is unaccounted for ("Shortage"), when such Shortage
exceeds *, calculated as shown in Exhibit __, as reported in the * build reports
provided to Microsoft, or as determined upon physical inventory/audit conducted
pursuant to Section 12 of this Agreement. "Shortage" shall be include *.
15
16
(g) SALVAGE. At all times, and regardless of whether StarTek or its
insurers are required to compensate Microsoft for property losses as provided
for in this section, Microsoft shall retain sole rights to salvage for damaged
Products. StarTek shall not surrender damaged goods to carriers, insurers, other
parties or for destruction or disposal without first obtaining the written
consent of Microsoft.
(h) *
11. TERM AND TERMINATION.
(a) DURATION. The term of this Agreement shall commence on the
Effective Date and continue until * (the "Initial Term"), unless terminated
earlier as provided below. Upon expiration of the Initial Term, this Agreement
shall automatically renew for successive * terms (each a "Renewal Term") at the
then-current pricing, unless either party notifies the other party of its intent
not to renew by providing the other party with written notice not less than *
prior to the expiration of the Initial Term or any subsequent Renewal Term.
(b) EARLY TERMINATION AND DEFAULT. Microsoft may terminate this
Agreement immediately upon notice if StarTek: (i) fails to strictly comply with
Section(s) 5 or 9 of this Agreement, (ii) makes or attempts to make an
assignment in violation of Section 16(a) of this Agreement, or (iii) experiences
an Insolvency Event of Default, as defined below. In addition to the foregoing,
Microsoft or StarTek may terminate this Agreement without cause with * notice in
writing. The rights and remedies provided herein to the parties shall not be
exclusive and are in addition to any other rights and remedies provided by law.
In the event a non-defaulting party in its discretion elects not to terminate
this Agreement, such election shall not be a waiver of any claims of that party
for a default(s). Further, the non-defaulting party may elect to leave this
Agreement in full force and effect and to institute legal action against the
defaulting party for specific performance and/or damages suffered by such party
as a result of the default(s). For purposes of this Agreement, an "Insolvency
Event of Default" shall be deemed to have occurred in the event the applicable
party fails to formally dismiss the Insolvency Event of Default within * after
commencement of any of the following proceedings: (v) any party admits in
writing its inability to pay its debts generally or makes a general assignment
for the benefit of its creditors; (w) a proceeding is instituted, voluntarily or
otherwise, by or against any party seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement adjustment or composition of
it or its debt, which is not dismissed within *; (x) a proceeding is instituted
against any party seeking to appoint a receiver, trustee or similar official for
it or for any substantial part of its property; (y) a party ceases to pay its
debts as they become due; or (z) any party becomes Insolvent, as defined
elsewhere herein.
Notwithstanding the foregoing, Microsoft may, at its sole discretion,
immediately terminate this Agreement if, due to StarTek's lack of diligence,
StarTek engages in or permits its subcontractor(s) to engage in the unauthorized
replication and/or distribution of Product(s). StarTek will diligently attempt
to prevent any unauthorized replication and/or distribution of Product(s) by
StarTek employees or any subcontractor and will cooperate fully with Microsoft
to that end. Microsoft may, at its sole discretion, immediately terminate
StarTek's right to subcontract the replication and/or assembly of Product(s), in
accordance with Section 6 of this Agreement, if Microsoft determines that
StarTek's subcontractor is or has been involved in the unauthorized replication
and/or distribution of Product(s) or any third party products.
(c) OBLIGATIONS UPON TERMINATION/EXPIRATION OF THIS AGREEMENT. Within
*, or earlier as noted, after termination or expiration of this Agreement,
StarTek shall do all of the following:
(1) deliver to Microsoft any Finished Product Units built against a
Microsoft purchase order, but not yet delivered, at the Prices set forth in
Exhibit C. StarTek shall destroy all other Finished Product Units and shall,
upon request of Microsoft, issue a letter certifying that such destruction has
taken place.
16
17
(2) StarTek shall, at Microsoft's election, either deliver to Microsoft
or destroy any other unused Inventory (excluding Finished Product Units), as
designated by Microsoft. Microsoft's payment obligation for such unused
Inventory shall be in accordance with Exhibit C.
(3) Subject to payment as set forth in Exhibit C, StarTek shall, at
Microsoft's request, provide Microsoft the opportunity to purchase any other
Product Components owned by StarTek (excluding unused Inventory).
(4) StarTek immediately shall deliver to Microsoft any Microsoft
Deliverables and any Confidential Information not covered by the foregoing.
StarTek shall not retain any copy or original of any Microsoft Deliverable or
Confidential Information in any way or form whatsoever.
StarTek shall work with Microsoft to terminate the Manufacturing and Supply and
Services in an orderly manner in the event of the termination of this Agreement.
Use of Intellectual Property in any manner by StarTek after expiration or
termination of this Agreement for any reason, whether or not incorporated in
Inventory, shall be deemed to be in violation of Microsoft's Intellectual
Property rights and shall entitle Microsoft to have all remedies provided by law
or equity (including injunctive relief); provided, however, this does not
preclude StarTek from continuing to use Products properly acquired outside of
this Agreement in accordance with the applicable license.
(d) EFFECT OF DEFAULT. If there is a Default, the parties shall have
all rights and remedies provided in this Agreement or otherwise available under
law as limited by this Agreement.
(e) SURVIVAL. Sections 2(d), 7, 8, 9, 12, 14 and 16(b) shall survive
termination or expiration of this Agreement. With respect to tax matters, the
provisions of Section 4(d) shall survive termination or expiration until the
expiration of any applicable statute of limitations or extension thereof.
12. RECORD KEEPING AND AUDIT REQUIREMENTS.
(a) RECORD KEEPING REQUIREMENTS. During the term of this Agreement,
StarTek agrees to keep all usual and proper production and delivery records and
books of account and all usual and proper entries relating to StarTek's (and any
subcontractor's) performance of this Agreement for a minimum period of * from
the date they are created. StarTek agrees to keep all usual and proper tax
records relating to StarTek's (and any Subcontractor's) performance of this
Agreement for a minimum period of * from the date they are created. Such
records, books of account, and entries shall be kept in accordance with
generally accepted accounting principles.
(b) DOCUMENTATION. During the term of this Agreement, StarTek agrees to
provide Microsoft with any and all information, as mutually agreed upon between
the parties, that Microsoft determines necessary for tax compliance and
statutory reporting purposes. The information required will include, but may not
be limited to, the data shown on Exhibit E. Unless Microsoft indicates
otherwise, StarTek shall provide such information in an electronic format, at an
agreed upon quarterly deadline. Microsoft shall specify the data requirements
and make every reasonable effort to assist StarTek in designing the report
format. All information should be based on the Microsoft fiscal year-to-date
basis. Such report shall also cover StarTek's subcontractor(s). Microsoft
reserves the right to modify the form of such reports by providing StarTek with
written notice of any such modifications.
(c) AUDIT. Notwithstanding the foregoing provisions, upon * written
notice if Microsoft reasonably believes a breach is occurring under this
Agreement (with such notice specifying the alleged breach) and otherwise upon
reasonable notice as agreed upon between the parties (but in no event shall such
reasonable notice exceed * and StarTek shall not unreasonably delay or withhold
its agreement), Microsoft may cause an audit to be made of StarTek's (and any
applicable subcontractor's) books and records, and/or an inspection of
replication, assembly, and
17
18
distribution locations, including the Facility, in order to verify StarTek's
compliance with the terms of this Agreement and to verify financial reports
issued by StarTek. This right of audit extends beyond the termination of this
Agreement for a period of *. Any such audit shall be made by an independent
certified public accountant selected by Microsoft (other than on a contingent
fee basis) and/or a Microsoft internal audit team. Any audit and/or inspection
shall be conducted during regular business hours at StarTek's (or any applicable
subcontractor's) offices. StarTek agrees to provide Microsoft's designated audit
or inspection team access to relevant StarTek records and all replication and/or
assembly locations. Any such audit shall be paid for by Microsoft unless
material discrepancies are disclosed. *. If material discrepancies are
disclosed, StarTek agrees to pay Microsoft for the costs associated with the
audit. No unauthorized duplication or replication of Product will be permitted.
StarTek shall be liable for any Unaccounted Product discrepancies in excess of
the Shortage allowance in an amount equal to *. "Unaccounted Product(s)" shall
be defined as the number of Finished Product(s) Units that the audit and/or
inspection determines have been replicated and assembled by StarTek and/or one
of StarTek's subcontractors, but (i) have not been properly delivered in
accordance with the terms of this Agreement, (ii) are not in StarTek's
inventory, (iii) are not in transit in accordance with the terms of this
Agreement; (iv) have not been properly destroyed at Microsoft's direction; (v)
have not been otherwise accounted for as damaged or destroyed or lost by theft;
or (vi) are not lost or damaged as a result of the negligence or willful acts of
StarTek. StarTek shall also be liable for Unaccounted Products of its
subcontractor(s). StarTek's obligation to pay Microsoft for Unaccounted
Product(s) shall not be Microsoft's exclusive remedy and is in addition to any
other rights and remedies Microsoft may have as provided by law or this
Agreement.
(d) FACILITY INSPECTIONS. Microsoft may cause an inspection to be made,
with at least * prior notice, of the Facility to verify that StarTek and/'or any
subcontractor is providing Manufacturing and Supply and Services in compliance
with the terms of this Agreement. Any inspection conducted pursuant to this
Section 12(d) shall be conducted during regular business hours at the Facility.
StarTek agrees to provide Microsoft's designated inspection team access to
relevant records and the Facility. StarTek may designate a representative to
accompany the inspector or inspectors, and it may reasonably restrict access
from specific areas containing confidential information of StarTek or its other
customers. If material discrepancies from the provisions of this Agreement are
disclosed, StarTek agrees to implement agreed-upon corrective action. Nothing
herein shall preclude Microsoft from exercising any other rights or remedies it
has under law or other provisions of this Agreement.
(e) CONFIDENTIALITY. Notwithstanding the foregoing, StarTek may edit
its books and records to protect confidential information of StarTek that is
unrelated to the subject of a Microsoft record review, or to protect
confidential information of StarTek's customers.
13. EXPORT RESTRICTIONS. StarTek shall comply with U.S. export laws and
regulations. StarTek shall not, directly or indirectly, export, re-export or
transmit any Product (or any part thereof), technical data, process, or service
that is directly associated with a Product, to any country, person, entity,
Customer or end-user subject to U.S. export restrictions, including but not
limited to:
(a) any countries to which the U.S. has embargoed or that are subject
to U.S. export restrictions (including, but not limited to, the Federal Republic
of Yugoslavia (Serbia and Montenegro), Cuba, Iran, Iraq, Libya, North Korea,
Sudan and Syria) or to any national of any such country, wherever located, who
intends to transmit or transport the Product back to such country;
(b) any Customer or end-user whom StarTek knows or has reason to know
will utilize them in the design, development or production of nuclear, chemical
or biological weapons, or to any end-user who has been prohibited from
participating in U.S. export transactions by any federal agency of the U.S.
government;
18
19
(c) any other country to which such export of transmission is
restricted by the export control laws and regulations of the United States, and
any amendments thereof, without prior written consent, if required, of the
Bureau of Export Administration of the U.S. Department of Commerce, or such
other governmental entity as may have jurisdiction over such export or
transactions; and
(d) any exportable product (or portions thereof) regulated under
"Encryption Item (EI)" of the Export Administration Regulation (EAR, 15 CFR
730-744) of the U.S. Commerce Department, Bureau of Export Administration (BXA)
outside the U. S. or Canada.
StarTek warrants and represents that neither the BXA nor any other U.S.
Federal agency has suspended, revoked or denied its export privileges. StarTek
shall comply with the published Microsoft Global Trade Compliance Programs.
StarTek shall be responsible for acquiring program documentation and interacting
with Microsoft to ensure its full and successful implementation. Microsoft will
be responsible for communicating to StarTek any changes or updates to any of the
published Microsoft Global Trade Compliance Programs and StarTek will be allowed
appropriate time to implement the changes or updates. StarTek agrees that
Microsoft may audit StarTek's compliance with the published Microsoft Global
Trade Compliance Programs at any time, pursuant to Section 11 above.
14. NOTICES AND PRINCIPAL CONTACTS.
All notices, authorizations, and requests in connection with this
Agreement shall be deemed given on the day they are sent by air express courier,
charges prepaid; and addressed as follows:
STARTEK: StarTek Inc.
Attn: ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to: StarTek General Counsel
Telephone:
Fax:
MICROSOFT: Microsoft Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: *
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
19
20
With a copy to: Law & Corporate Affairs
Microsoft Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or such other person or address as each party, respectively, so designates by
written notice to the other parties.
15. ENTIRE AGREEMENT AND MODIFICATIONS.
(a) ENTIRE AGREEMENT. This Agreement, including all exhibits hereto,
constitutes the entire agreement between StarTek and Microsoft with regard to
the subject matter hereof and merge all prior and contemporaneous
communications. The Statements of Work, as may be modified pursuant to Section
14(b) below, is a part of this Agreement for all purposes.
(b) STATEMENTS OF WORK. The Statements of Work may be modified as
follows: each modification must be approved by Microsoft and StarTek, and such
approval must be documented with a confirming e-mail or other written
communication between authorized representatives of the two parties. In
addition, if Microsoft deems it necessary and appropriate, it shall prepare on a
* basis an updated version of the Statements of Work incorporating all
modifications made since the prior update and clearly setting forth the "Date of
Revision" on the front page. Microsoft shall circulate each such update to
StarTek. The most current revised version of the Statements of Work that has
been circulated in this manner to the parties, together with subsequent
modifications documented pursuant to this Section 15(b) shall constitute the
Statements of Work for the purposes of this Agreement. StarTek shall maintain
and make available to Microsoft upon request copies of all of its documentation
regarding modifications to the Statements of Work. For purposes of this
Agreement, references to Statements of Work includes any agreed modification
even if prior to the quarterly incorporation of such changes.
(c) AMENDMENT. This Agreement may be amended only in writing signed by
authorized representatives of both parties. Notwithstanding the foregoing,
Microsoft reserves the right to change, by * prior notice to StarTek, any
policies of Microsoft.
(d) OTHER. Except as provided in this Section 15, the provisions of
this Agreement may be modified only by written instrument signed by duly
authorized representatives of Microsoft and StarTek.
16. GENERAL.
(a) PROHIBITION AGAINST ASSIGNMENT. Except as expressly provided in
this Section 16(a), no party may assign its rights or obligations under this
Agreement (by actual assignment or by operation of law, including without
limitation through a merger, consolidation, exchange of shares, or sale or other
disposition of assets, including disposition on dissolution), without the prior
written consent of the other party, which consent shall not be unreasonably
withheld. Microsoft may, however, assign this Agreement to a Microsoft
subsidiary without the consent of StarTek. Notwithstanding the foregoing, this
is a contract for personal services and Microsoft relies upon the
qualifications, reputation and expertise of StarTek to perform all obligations
hereunder. In particular, Microsoft relies upon StarTek's history of performance
over more than * of operation,
20
21
(b) CONTROLLING LAW. This Agreement shall be construed and controlled
by the laws of the State of Washington, and StarTek consents to jurisdiction and
venue in the state and federal courts sitting in the State of Washington.
Process may be served on any party in the manner set forth in Section 13 for the
delivery of notices or by such other method as is authorized by Washington law
or court rule.
(c) NO PARTNERSHIP/JOINT VENTURE/AGENCY/FRANCHISE. This Agreement shall
not be construed as creating a partnership, joint venture, employer-employee or
agency relationship or as granting a franchise.
(d) SEVERABILITY. If any provision of this Agreement shall be held by a
court of competent jurisdiction to be illegal, invalid or unenforceable, the
remaining provisions shall remain in full force and effect.
(e) ATTORNEYS' FEES. If any party employs attorneys to enforce any
rights arising out of or relating to Agreement, the prevailing party shall be
entitled to recover its reasonable attorneys' fees, costs and other expenses.
(f) WAIVER. No waiver of any breach of any provision of this Agreement
shall constitute a waiver of any prior, concurrent or subsequent breach of the
same or any other provisions hereof, and no waiver shall be effective unless
made in writing and signed by an authorized representative of the waiving party.
(g) SECTION HEADINGS. The Section headings used in this Agreement are
intended for convenience only and shall not be deemed to supersede or modify any
provisions.
(h) GOVERNMENTAL APPROVALS. Each party shall, at its own expense,
obtain and arrange for the maintenance in full force and effect of any and all
governmental approvals, consents, licenses, authorizations, declarations,
filings, and registrations as may be necessary or advisable for the performance
of all of the terms and conditions of this Agreement.
(i) FORCE MAJEURE.
(1) Except as otherwise provided in this Section 16(i), neither party
shall be in default by reason of any failure in performance of this Agreement,
if such failure arises out of causes beyond the control and without the fault or
negligence of the involving party including, but not restricted to, acts of God,
acts of the Government, fires, floods, epidemics, quarantine restrictions,
strikes, lock-outs, freight embargoes and unusually severe weather. This Section
shall also apply to StarTek's contractors where a contractor's failure arises
out of the same causes, except insofar as StarTek could have reasonably been
expected to obtain contractor supply from alternate sources.
(2) StarTek shall give a written notice to Microsoft within * after
StarTek becomes aware of any circumstances or event which may reasonably be
anticipated to cause or constitute, or which constitute a force majeure as
described in Section 16(i)(1), above. Such notice shall contain a detailed
description of the delay and of the affected portion of the Agreement. Within a
further * after such notice, StarTek shall deliver a detailed written
description of the work-around plan, alternative sources, and any other
reasonable means that StarTek shall, at its own cost, use to prevent such
further delay.
(3) If the delivery of any Products shall be delayed by reason of force
majeure for more than * beyond when delivery was scheduled, Microsoft may upon
written notice to StarTek with respect to the undelivered Products, either
terminate any or all this Agreement hereunder. In the event of such termination,
the parties shall comply with their obligations as specified in Section 11.
(j) EXHIBIT(S). The following exhibits, as amended from time to time,
are incorporated into this Agreement by this reference ("Exhibit(s)"):
21
22
EXHIBIT DESCRIPTION
A Statement of Work - Manufacturing
B Statement of Work - Distribution
C Component Pricing Matrix
D Insurance
E Required Tax Information
F Approved Subcontractor List
G Certificate of Material Destruction
H StarTek Facilities
I Subsidiary Agreement
All references to the "Agreement" are references to this Agreement and all
Exhibits, all as amended from time to time. To the extent that any provision
contained in any Exhibit is inconsistent or conflicts with this Agreement
exclusive of the Exhibits, the provisions of this Agreement (exclusive of the
Exhibits) shall control.
(k) PRESS RELEASES/PUBLICITY. StarTek shall not issue any new press
releases or publicity that may relate or refer to this Agreement. Any press
statements shall only be released by joint agreement of the parties, except as
legally required by the SEC or NYSE. StarTek shall not use the name "Microsoft"
or "Microsoft Corporation" in any advertisements. StarTek may, however, with the
prior written consent of Microsoft, use the name "Microsoft Corporation" in
brochures, written response to requests for client lists as part of Requests for
Proposals, Requests for Information, etc. StarTek may also use the name
"Microsoft" or "Microsoft Corporation" in verbal client presentations.
(l) INSURANCE. Prior to the commencement of the Manufacturing and
Supply and Services to be performed hereunder and throughout the entire period
of performance by StarTek, StarTek shall procure and maintain the insurance
coverage set forth in Exhibit D. Such insurance shall be in a form and with
insurers acceptable to Microsoft, and shall comply with the minimum requirements
set forth in Exhibit D.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set
forth above. All signed copies of this Agreement shall be deemed originals.
MICROSOFT CORPORATION STARTEK INC.
/s/ ▇▇▇▇ ▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------- ----------------------------------
By By
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------- ----------------------------------
Name (Print) Name (Print)
President and Chief Executive
Vice President Officer
----------------------------- ----------------------------------
Title Title
August 4, 1999 July 20, 1999
----------------------------- ----------------------------------
Date Date
22
23
State of Washington )
) ss:
County of King )
I certify that I know or have satisfactory evidence that
____________________________ is the person who appeared before me, and said
person acknowledged that (he/she) signed this instrument, on oath stated that
(he/she) was authorized to execute the instrument and acknowledged it as the
_______________________ of MICROSOFT CORPORATION to be the free and voluntary
act of such party for the uses and purposes mentioned in the instrument.
Dated: ______________
---------------------------------
Notary Public
[Seal or Stamp] ---------------------------------
[Printed Name]
My appointment expires
23
24
Colorado )
) ss:
County of Weld )
I certify that I know or have satisfactory evidence that ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ is the person who appeared before me, and said person acknowledged that
he signed this instrument, on oath stated that he was authorized to execute the
instrument and acknowledged it as the Chief Executive Officer of StarTek Inc. to
be the free and voluntary act of such party for the uses and purposes mentioned
in the instrument.
Dated: July 20, 1999
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
Notary Public
▇▇▇▇ ▇▇▇▇▇▇▇
[Seal or Stamp] -----------------------------------
[Printed Name]
My appointment expires May 17, 2001
------------
24
25
EXHIBIT A
26
26
EXHIBIT A
*
STARTEK, INC. * STATEMENT OF WORK
For purposes of this exhibit, "Company" shall mean StarTek USA. All other
capitalized terms not otherwise defined in this Exhibit shall have the same
meaning as set forth in the Agreement to which this is an Exhibit.
1. GENERAL:
1.1 PURPOSE AND REQUIREMENT SCOPE
This document describes the requirements that the Company must
meet as a manufacturer and service provider to Microsoft. The
general requirements under this agreement are:
1.1.1 Source and procure raw materials in accordance with
Microsoft specifications.
1.1.2 Build finished package product in accordance with
Microsoft specifications in the quantities ordered by
Microsoft pursuant to a Finished Goods Purchase
Order.
1.1.3 Make Finished Product units available to a Microsoft
designated distribution center or ship direct to
designated Microsoft customers as requested.
1.1.4 Make Less Than Finished Goods components available to
Microsoft at the locations specified in a Less Than
Finished Goods Purchase Order.
1.1.5 Provide information regarding production and delivery
as required.
2. SCOPE OF BUSINESS
Microsoft may elect to split the book of business between two or more
companies.
3. FORECASTS
3.1 * ROLLING FORECAST:
Microsoft will provide a * rolling forecast for * for all
Products anticipated to be built by the Company (reference
attachment 1). This forecast may be used by the Company at the
Company's discretion for planning and procuring raw materials.
Microsoft may change the forecast up to the issuance of a
frozen build signal, followed by a Microsoft Purchase Order,
with no penalty or responsibility for any raw materials,
Product Components, or Product acquired/built to such
forecast, with the exception that certain long lead-time
components may be procured in advance of the frozen build
signal with agreement by the VAM.
3.2 MANUFACTURING SYSTEMS
The company shall perform procurement, scheduling and
manufacturing activities on their own manufacturing system(s).
Microsoft will not be responsible for providing the Company
with any manufacturing system.
Exhibit A-Page 1
27
4. PURCHASE ORDER PROCEDURES
4.1 PURCHASE ORDERS (PO)
During the term of the Agreement, Microsoft will issue a *
frozen build signal, in the form of an Excel spreadsheet, to
the Company by * for Finished Product Units for * (reference
attachment 2). * a PO will be issued that requires Finished
Product Units to be prepared and delivered to a distribution
center the * following the build * or direct to designated
customers on a scheduled agreed to by Microsoft and the
Company in advance of shipment. The purchase order will
include but not be limited to the SKU, quantity, price and
required delivery date. Microsoft may prioritize Products on
the PO so Company will be able to build more urgent
requirements first. The purchase order will officially
authorize the Company to manufacture Microsoft Products.
Microsoft accepts ownership and liability for only those
quantities of raw materials purchased, and finished goods
built, that meet the weekly frozen build signal, unless prior
arrangements have been made in writing and agreed to by both
parties.
4.2 Once Microsoft has issued a PO, Microsoft may change the build
requirements or issue engineering change notices (ECN)
corresponding to that PO, but raw materials procured by the
Company to fulfill such PO, in accordance with section 4.1,
that are left unused will be the responsibility of Microsoft.
Company may charge Microsoft for the storage of any such
unused raw materials remaining in Company's warehouse * days
after fulfillment of the PO at the rate of *. Microsoft will
reimburse Company for the cost of such raw materials if they
remain unused. In order to be reimbursed by Microsoft, the
Company must provide a raw material inventory age report for
which Microsoft owns liability upon expiration of the *
holding period. In case of an ECN that stops and/or starts a
component, the Company must notify Microsoft of the related
charges within * of the change order. Related charges will be
tracked and reviewed at * management meetings. This
notification must include the Microsoft ECN#, the component
part number and the quantity that Microsoft is liable for.
Microsoft will determine and communicate in writing whether or
not to scrap any raw material or finished goods and reimburse
the Company accordingly.
4.3 Microsoft intends to remit payment to the Company, * or via
the auto voucher process, for all Finished Product Units upon
receipt of the po quantity by the applicable distribution
turnkey vendor ("DTV") or from another Microsoft-authorized
entity in the event the shipment does not deliver to a DTV.
All error-free invoices submitted by the Company will be paid
within the payment terms of the Agreement. When invoice
discrepancies are found, invoices will be immediately returned
to the company for correction and re-submittal. Corrected
invoices submitted to Microsoft must reflect a revised invoice
date (not the original invoice date). It is in the Company's
best interest to submit error-free invoices to Microsoft for
prompt payment, as invoice errors will delay Microsoft payment
to the Company. Microsoft will make payments for services in
US dollars.
5. FINISHED GOODS TRANSACTION REPORT AND RECEIPTS
5.1 When production has been completed per the Microsoft Purchase
Order, the Company must notify DTV of the completed Finished
Product Units by sending an advance ship notice (ASN).
5.1.1 Company must notify Microsoft * of any inventory
movements that may required inventory adjustments.
Adjustments include but are not limited to quality
issues, cycle count adjustments, rework, and site to
site stock transfers.
Exhibit A-Page 2
28
6. PROCUREMENT
6.1 Company will be responsible for procuring all raw materials
for assembly. Raw materials procured must meet Microsoft
Global Quality specifications for Full Packaged Product (FPP).
Microsoft may at times designate `Approved Subcontractors' for
certain raw material components such as security components,
third party pieces and hardware. Microsoft may at times supply
raw material to the Company. The Company will be notified o
the approved subcontractors. All raw materials that the
Company procures are subject to audit at the Company's
Facility for adherence to Microsoft Global Quality Standards
for Full Packaged Product located on *.
6.2 PRE-PRESS WORK, ENGINEERING, AND DIE CHARGES
These are costs associated with the output of electronic files
to plate ready film, color separations, proofs, prototypess,
and die charges and are not to be calculated in the unit or
component cost of the part. These are to be billed on a
separate invoice to Microsoft noting the Microsoft part number
to which the costs are related. Costs associated with
frequently performed services such as outputting postscript
files for manual text, preparing provided film for plate
imposition etc. shall be charged *. Charges for other
non-standard goods and services shall be billed * provided the
Company can demonstrate that these charges are competitive for
similar goods and services within the region.
7. SUBCONTRACTING
Any references to subcontractors in this Exhibit shall be subject to
the requirements for subcontractors set for in the Agreement.
8. PRINTING
8.1 PROCURE
Company must be capable of procuring printed materials per
Microsoft provided specifications and in quantities to meet
Microsoft's finished goods production requirements and Less
Than Finished Goods component order requirements.
8.2 PRINT SPECIFICATIONS
Printed materials must meet the quality standards and
specifications identified in Microsoft Print Specification
documentation and in the Microsoft Global Quality Standards.
For ongoing business, the Company will access all required
quality specifications using the Internet on *. From time to
time printed samples may be requested. The Company must supply
samples to Microsoft upon request.
8.3 MONITOR AND ORDER ARTWORK FOR PRINTING
It is the Company's responsibility to *.
8.3.1 IDENTIFY COMPONENTS
Company will pull a BOM from EDT based on demand seen
in *of the *. Company will review the Microsoft BOM
and determine whether or not artwork is needed.
Exhibit A-Page 3
29
8.3.2 TRACK COMPONENTS
Company must have an internal mechanism to track
outstanding artwork and receipt dates for film. The
purpose of the tracking mechanism is to proactively
monitor whether outstanding artwork will impact
Product builds. Company will provide a * report of
all Microsoft film ordered and/or received in the
previous *.
8.3.3 MONITOR MICROSOFT ARTWORK RELEASE
Company will receive * reports via email from
Microsoft Product Information Release Services
(PIRS). It is the Company's responsibility to monitor
the * print release reports. These reports notify the
Company that the *.
8.3.4 PULLING AND PREPPING ELECTRONIC FILES
Electronic files include but are not limited to 1-2
color print components, print specifications, film
order forms and software images. It is the Company's
responsibility to pull electronic files posted to EDT
for parts required as soon as parts are released to
EDT, or SKU demand is seen in * of the *, whichever
is later. Electronic art files are to be sent to
Company's supplier to be converted to bluelines as
soon as they are pulled. Bluelines are to be sent to
Microsoft or its designated art agency as defined on
the Print Specifications documentation within * of
pulling the electronic files from EDT. Blueline
approval from Microsoft or its designated art agency
is required before the component can be used in
building Product.
8.3.5 ORDERING FILM
For film-based components (over 2 colors) it is the
Company's responsibility to pull film order forms
from EDT, complete all required information (film
requirements, ship-to address, required delivery
date, etc.) and send the order form via email
directly to the designated film house.
Company must report all printed material
discrepancies immediately to Microsoft through the *.
8.4 REGISTRATION/LICENSE CARD PRINTING
Company shall have the capability to have printed product part
numbers, product ID numbers or other Microsoft identified
information on Microsoft registration cards and Microsoft
license agreements.
8.5 CD COMPONENT PRINTING
Company shall procure printed components included in
replicated CD-ROMs. These components shall consistently meet
the quality requirements of Microsoft CD ROM Quality
Specifications found in the Microsoft Global Quality
Standards. For ongoing business with Microsoft, the Company
will access all required quality specifications in the *.
Exhibit A-Page 4
30
9. DISK DUPLICATION
Duplicated disks may be produced or procured by the Company, as set
forth in the * PO.
9.1 DISK DUPLICATION CAPABILITIES
Company or Company's duplication subcontractor must be capable
of duplicating diskettes in accordance with the requirements
identified in Microsoft Global Quality Standards. Company or
Company's duplication subcontractor duplication equipment must
have the ability to control all aspects of the quality of the
duplication process including image integrity, bit placement,
window margin, and revolutions per minute (RPM) of the drive
spindle.
9.2 DISK DUPLICATION QUALITY CONTROL
Company or Company's duplication subcontractor must have *.
The * shall be used to ensure that the proper image is being
duplicated.
9.3 DISK DUPLICATION PROCESS
Company or Company's duplication subcontractor must have:
9.3.1 A preventive maintenance program or backup
subcontracting program in place capable of preventing
disk duplicating delays for finished goods
production.
9.3.2 A format training program in place for all
duplication operators and support personnel.
9.3.3 A staff technically capable of supporting all of
Microsoft's duplication requirements within the
weekly production variability range.
9.3.4 A write and verify process for all duplicated
Product.
9.3.5 The capability to utilize Microsoft * and other tools
when necessary.
9.4 VIRUS PROTECTION
To ensure that every possible avenue to preventing Microsoft
deliverable Product from being infected with a computer virus
is pursued, Company shall implement the following:
9.4.1 *.
*:
9.4.1.1. *.
9.4.1.2. *.
9.4.1.3. *.
9.4.1.4. *.
9.4.1.5. *.
*.
Exhibit A-Page 5
31
9.5 DISKETTE QUALITY
Company or Company's duplication subcontractor must perform
quality checks on duplicated disks. Diskettes shall be
duplicated and verified in accordance with the Microsoft
Floppy Diskette workmanship specification (S000257). Company
must be capable of tracking and reporting duplication
performance data.
9.6 CUSTOMER MASTER DISK HANDLING
Company or Company's duplication subcontractor must have the
capability of receiving software master images *. Company or
Company's duplication subcontractor shall ensure proper
handling, storage, retrieval and control of the master disk(s)
provided or created to ensure the integrity of the software
images.
9.7 DISK COPY PROTECTION AND *
Company or Company's duplication subcontractor's disk
duplication process must be capable of supporting disk copy
protection and *.
9.8 DISK LABELING AND COLLATION
9.8.1 LABEL IMAGES
Microsoft will provide all label images *.
9.8.2 LABEL PRINTERS
Company or Company's duplication subcontractor shall
print *.
9.8.3 LABELERS
Company or Company's duplication subcontractor's
labeling equipment and/or procedures shall be capable
of consistently meeting or exceeding Microsoft's
label placement specification as described in the
Microsoft Quality Specifications (*). For ongoing
business with Microsoft the Company will access all
required quality specifications using the Internet *.
9.8.4 COLLATION
Company or Company's duplication subcontractor shall
have sufficient and appropriate process equipment to
seal collated disk sets into polyvinyl bags. Company
is responsible for ensuring that collation process
for diskettes meets Microsoft Floppy Diskette
workmanship specification (S000257).
10. CD AND DVD REPLICATION
CD's and DVD shall be procured by Company, as set forth in the
* PO's for Product and for Less Than Finished Goods. Company or Company's CD
subcontractor shall have documented processes and appropriate equipment to
effectively produce CD-ROM's, DVD and associated CD components which
consistently meet or exceed the requirements of the Microsoft Global Quality
Specifications for CD ROM. Company's CD subcontractor agrees to perform all
required maintenance on the equipment at its own cost. Company's CD
subcontractor shall have a * to hold CD-ROMs and DVD and material until they can
be rendered unusable or recycled. When Company procures CDs and DVD, the
following apply:
Exhibit A-Page 6
32
10.1 CD ROM AND DVD PRODUCTION PROCESS
Company or Company's CD subcontractor shall have documented
processes for the following:
10.1.1 Company's CD subcontractor shall have a preventative
maintenance program in place capable of preventing
delays for finished goods production.
10.1.2 Company's CD subcontractor shall have a formal
training program in place for all CD and DVD
operations (Premastering, Mastering, and Replication)
and support personnel.
10.1.3 Company and Company's CD subcontractor shall have
staffs technically capable of supporting all of
Microsoft's CD and DVD requirements within the *
production variability range.
10.2 HANDLING OF CD ROM AND DVD MASTERS
Company or Company's CD subcontractor shall have documented
procedures in place, which ensure proper handling, storage,
and retrieval of Microsoft supplied CD master files.
10.3 CD AND DVD ANTI-PIRACY *
Company or Company's CD subcontractor shall be capable of
supporting Anti-Piracy initiatives and * applicable to CD-ROMs
and DVD upon Microsoft request.
10.4 CD ROM AND DVD QUALITY CONTROL
Company or Company's CD subcontractor shall have a documented
verification process in place to ensure the integrity of the
replicated CD-ROM matches the original supplied by Microsoft.
In addition, Company or Company's CD subcontractor of supply
shall have documented and implemented processes to verify *
parameters which ensure compliance to Microsoft Global
Specifications. The Company will access all required quality
specifications using the Internet on *. Company or Company's
CD subcontractor must be capable of tracking and reporting CD
quality data to Microsoft.
10.5 CD LABEL SCREEN PRINTING AND DVD PIT ART
Company or Company's CD subcontractor, should have a process
to receive CD or DVD label images *. Process must be
established to ensure the correct label image is applied to
the correct CD or DVD title. Processes must prevent any CD's
of DVD's used in the setup of the print processes *.
10.6 *
11. PRODUCTION
11.1 ASSEMBLY CAPABILITY
Company will establish and maintain an assembly process
capable of producing sufficient quantities of Product that
meet Microsoft's Purchase Order requirements, or minimum
capacity, whichever is lower. If Microsoft demand exceeds the
Company's capacity and subcontracting is necessary to meet
this demand, Microsoft must be notified prior to proceeding
with off-site builds. The Microsoft Global Quality
Specifications for full packaged Products as stated in the *
must be met.
Exhibit A-Page 7
33
11.2 *.
Company shall have the proper equipment to make *.
11.3 SHRINKWRAPPING
Company shall be capable of shrink-wrapping all sizes of
Products, in accordance with *.
11.4 ASSEMBLY QUALITY
Company shall perform in-process and final verifications of
assembled Products to ensure compliance to the Microsoft
requirements and quality standards.
11.5 BUNDLING
Microsoft may notify the Company that a bundling operation is
required and will provide Company with SKU number, quantity
and specific bundling instructions. The Company shall provide
the Microsoft Vendor Account Manager (VAM) with a * for the
bundling effort within * in sufficient detail to allow
Microsoft to perform an analysis of the major cost elements.
The VAM will provide the Company with written authorization to
proceed at the agreed upon price. The Company shall be
responsible for bundling the Products in accordance with the
Microsoft provided bundling instructions and submitting an
invoice to the VAM at the agreed upon price. The Company may
be required to purchase finished goods and/or raw materials
from other Companies to fulfill the bundling requirement(s).
11.6 REWORK
Microsoft may notify the Company that rework is required and
will provide Company with SKU number, quantity and requested
completion date. The Company shall provide the Microsoft VAM
with a * for the rework effort within *, in sufficient detail
to allow Microsoft perform an analysis of the major cost
elements. The VAM will provide the Company with written
authorization to proceed at the *. The Company shall be
responsible for reworking the Products in accordance with the
Microsoft BOM and submitting an invoice to the VAM at the *. A
touch is defined as one activity per component for pricing
purposes.
11.7 ORDERS REQUESTED PRIOR TO NORMAL LEAD-TIME
There will be situations where Microsoft will request orders
to be built in less than the normal * lead-time. (Please
reference section 4.1 hereof). When Microsoft requests such an
order, the Company will reply with at least but not limited to
*. This will give Microsoft the opportunity to decide which
option best suits the situation. These orders will be
communicated to the Company by the Microsoft VAM in situations
where faster Product deliveries are required due to urgent
customer requests. The Microsoft VAM and Company shall
mutually agree that the option taken is acceptable and the
Microsoft VAM will provide authorization to proceed.
11.8 SCRAP PROCESS
Subcontractor must have written authorization from Microsoft
VAM prior to scrapping and/or disposing of Microsoft finished
goods or components (please reference attachment 3).
Exhibit A-Page 8
34
12. DELIVERY REQUIREMENTS
12.1 PREPARATION
The Company is responsible for delivering the Finished Product
Units to the Distribution Center. This preparation includes
ensuring that finished goods are correctly palletized,
shrink-wrapped and ready for transit to the Distribution
Center.
12.2 PALLET LOADING
The Company shall adhere to the Microsoft Global
specifications for pallet configuration specifications when
stacking Product.
12.3 FINISHED GOODS HANDLING
The Company shall have proper handling procedures for finished
goods to prevent loss of damage between assembly and pick-up
by the Distribution Center.
12.4 ADVANCE SHIPMENT NOTIFICATION
The Company is responsible for providing * to the Distribution
Center.
12.5 SHIP DIRECTLY TO CUSTOMER
On regular basis, the manufacturing supplier will be requested
to prepare Product for direct shipment to the distributor. The
Company will invoice upon shipment. Upon doing any direct
shipment, company will provide Microsoft with electronic
notification containing all relevant shipment information.
13. REPORTING / COMMUNICATION REQUIREMENTS
13.1 MANUFACTURING DELAY
*
13.2 REPORTING
13.2.1 THE COMPANY SHALL PROVIDE:
o *
o *
o *
o *
o *
o *
o *
o *
o *
o *
o *
o *
o *
Exhibit A-Page 9
35
13.2.2 MICROSOFT SHALL PROVIDE
o *
o *
o *
o *
o *
o *
o *
o *
o *
o *
o *
o *
o *
o *
o *
o *
o *
14. QUALITY
14.1 ISO CERTIFICATION
Company shall remain ISO certified during the period of the
Agreement.
QUALITY RECORDS
Company shall maintain records of inspection, repairs, reworks
and tests for the term of the Agreement. Records shall be made
available to Microsoft upon request.
14.3 *
14.4 *
14.5 *
15. CONFIGURATION MANAGEMENT
15.1 BOM'S AND CAD'S
Company will use Microsoft supplied Bills of Material (BOM's)
and CAD's as a reference to ensure proper assembly of Product
as specified in *. Company must inspect and approve all new
releases and first time builds per first article process.
15.2 CHANGES TO BOM'S AND CAD'S
All changes to the configuration of Products will be managed
through the Microsoft Configuration group. The Company must
manage all resulting changes to Bills of Material accordingly.
Company may make no changes to Product configuration or
content without written authorization from Microsoft, however,
Company is encouraged to suggest changes that *or the Product.
Any discrepancies between Microsoft's BOM, CAD or Kit and
Company's BOM shall be resolved prior to each build.
Exhibit A-Page 10
36
15.3 * RECORD RETENTION
Company shall maintain records of * used to assemble Product
for the term of the Agreement. All records will be made
available to Microsoft upon request.
16. INFORMATION TECHNOLOGY
16.1 INFRASTRUCTURE REQUIREMENTS
The Company Facility shall have an infrastructure capable of
supporting a variety of data communications required to
Manufacture Product. This includes the ability to connect to
Microsoft's external network. External network connections
will be used to transfer information about Product builds.
16.2 *
16.3 TECHNICAL PERSONNEL
The information technology requirements outlined above are
deemed mission critical. The Company shall have in-house or
readily available technical support at the Company's primary
facility. These Company personnel will work with Microsoft
personnel to ensure that the site is properly set up to
communicate with Microsoft. Microsoft will work with the
Company to establish competency with any non-commercially
available Microsoft-specific software that may be used in the
operation. Company will be responsible for on-going training
of replacement or additional personnel used to support the
operation.
16.4 DATA EXCHANGES
Data exchanges will be required throughout the term of the
Agreement. Exchanges will occur primarily through *, and may
include, but are not be limited to, * and routine information
required to Manufacture Product.
16.5 SYSTEM ALTERNATIVES
Microsoft may wish to employ any or all of the following
system alternatives:
o *
o *
o *
o *
16.6 *
17. MANAGEMENT
17.1 MEETINGS AND REVIEWS
Company will meet with designated Microsoft team members at
least * for * business reviews. These meetings will include a
Company performance review, pricing reviews, continuous
improvement projects, management status reviews, cost
reduction initiatives and other operational areas and issues.
* business reviews (*) may be held at Company's facility,
Microsoft's facility or by video teleconference (VTC).
Exhibit A-Page 11
37
17.2 RISK MANAGEMENT
Comprehensive Outsource Risk Evaluation (C.O.R.E) is a
Microsoft tool which is used to assess the Company's
performance and ability to meet or exceed Microsoft customers
expectations. Company will agree to participate in a risk
management program to ensure Product availability. StarTek
North America will on occasion be requested to provide
information that will be used as input to the C.O.R.E. tool.
Microsoft will share the results of the C.O.R.E *.
17.3 METRICS
Microsoft may request that certain metrics be captured and
reported on a * basis.
18. MICROSOFT GLOBAL SPECIFICATIONS
Microsoft Global Specifications for Retail Full Packaged Products
include Workmanship and Engineering Specifications. For ongoing
business with Microsoft, the selected Company(s) will access all
required quality specifications using the Internet on *. Workmanship
and Engineering Specifications are available online at *. Changes to *
will be communicated to the Company as revisions occur.
19. ATTACHMENTS
The following Microsoft documents, which may be modified by Microsoft
from time to time, are hereby incorporated as part of this SOW in
Exhibit J:
------------------- -----------------------------------------
ATTACHMENT NUMBER ATTACHMENT
NAME
------------------- -----------------------------------------
1 * Forecast
------------------- -----------------------------------------
2 Frozen Build Signal *
------------------- -----------------------------------------
3 Procedure for Destruction/Scrap
------------------- -----------------------------------------
4 Approved Suppliers for COA and CD-Rom/DVD
------------------- -----------------------------------------
5 Metrics Reporting for Inventory Shrinkage
------------------- -----------------------------------------
Exhibit A-Page 12
38
20. COMMON MICROSOFT ACRONYMS:
o ASN Advance Ship Notice
o ASAP As soon as possible
o BOM ▇▇▇▇ of Materials
o CAD Computer Aided Drawing
o COGS Cost of Goods Sold
o CSP Customer Service Pack's
o DC Distribution Center
o DMF Distributed Media Format
o * *
o * *
o ECD Engineering Change Date
o ECN Engineering Change Notice
o ECR Engineering Change Request
o EDI Electronic Data Interchange
o EDT Electronic Delivery Tool
o FINOPS Financial Operations
o ISO International Organization of Standards
o ITG Microsoft Information Technology Group
o LTFG Less Than Finished Goods
o MLP Microsoft License Pack's
o * *
o * *
o NDA Non-Disclosure Agreement
o PDM Product Data Manager
o PID Product Identifier
o PO Purchase Order
o PST Pacific Standard Time
o * *
o RMA Returned Merchandise Authorization
o SOW Statements of Work
o UPC Universal Product Code
o VAM Vendor Account Manager
Exhibit A-Page 13
39
EXHIBIT B
STATEMENT OF WORK - DISTRIBUTION
27
40
EXHIBIT B
*
STARTEK, INC. * STATEMENT OF WORK
1.0 GENERAL
1.1 PURPOSE AND REQUIREMENT SCOPE
This document describes the requirements that the Company must
meet as a logistics provider to Microsoft. The general
requirements under this agreement are:
1.1.1 Store varying quantities of finished goods until
needed for shipment, including providing variable
amounts of storage to meet the requirements of
inventory build-ups during certain times of the year.
1.1.2 Meet the information systems needs of Microsoft.
1.1.3 Build and distribute mixed pallets and retail display
units for merchandising and promotion purposes and
provide other value-added services as requirements
emerge.
1.1.4 Provide appropriate systems competency and agree to
work with Microsoft to modify warehousing and
transportation systems to adapt to changing or
emerging business requirements.
2.0 MICROSOFT CONTACTS
For further information regarding this Statement of Work (SOW), please
contact the Sr. Turnkey VAM.
3.0 NON-DISCLOSURE AGREEMENT
The information contained within this Statement of Work, the actual
contract, and any other information relating to this project provided
to you by Microsoft is considered private and confidential and subject
to the "MICROSOFT CORPORATION STANDARD NON-DISCLOSURE AGREEMENT". This
information may only be discussed between principals of your company
and Microsoft, and those transportation and warehouse companies
necessary to successfully complete this project. In addition, any
information you provide to Microsoft pursuant to this agreement shall
be considered private and confidential and subject to the attached
"MICROSOFT CORPORATION STANDARD NON-DISCLOSURE AGREEMENT".
4.0 DEFINITIONS
4.1 COMPANY OPERATIONS INFORMATION
Product will be built and shipped to the Company from several
contract manufacturers. The Company will potentially ship to *
locations in the United States and Canada *. Average
Exhibit B - Page 1
41
shipment size to Microsoft's channel customers will be
approximately *. The majority of the shipments will be *. In
general, the Company must have the following capabilities:
4.1.1 CAPACITY AND EQUIPMENT
Company must provide facility capacity, equipment,
and staff to receive and ship finished goods within
the established timelines. The Company must process
orders, pick and ship to meet established shipping
schedules for major customers and provide a forty
eight (48) hour turnaround on all other shipments.
Equipment needed includes, (but is not limited to)
fork lifts, pallet wrappers, pallet jacks, storage
racks, etc.
4.1.2 STORAGE CAPACITY
Storage capacity to store up to * of finished goods
on an on-going basis with a * of up to *. New product
launches may occur at any time during the year and
may require additional storage space on a temporary
basis. Seasonal buildup of inventory for consumer
products will typically occur in *. It is expected
that the provider maintain relationships to provide
additional space when required. *
4.1.3 INVENTORY ACCURACY
Maintain 100% inventory accuracy. Differences greater
than * between book and physical inventories found
during cycle counting must be * reported, explained
and adjusted.
4.1.4 PICK OPERATIONS
Capability of picking between *, preparing shipments
for outbound transportation including stretch
wrapping, labeling pallets and printing pallet level
packing slips.
4.1.5 ORDER PROCESSING TURN-AROUND
Company must be able to ship orders within * of
receipt, if required. Typical turn-around
requirements will be *, however, in order to meet
customer shipping schedules with cost effective
transportation.
4.1.6 TRANSIT TIMES TO CUSTOMERS
The location of the facility is to be *.
4.1.7 SYSTEMS SUPPORT
A fully competent transportation and distribution
system which can *. Agreeing to work with Microsoft
to implement system modifications to adapt to
changing business requirements is essential.
Exhibit B - Page 2
42
4.1.8 RE-PACKING CAPABILITIES
Re-packing operations must be available in the event
that orders are placed in less than master pack
quantities. Company must have suitable boxes, packing
material, and taping devices to handle less than
masterpack shipments, and the labor on hand to
perform the packing in all phases of this project.
4.1.9 * AND * SHIPPING
Volumes may dictate * shipping and receiving
availability at the Company facility, although it is
anticipated these requirements may be very
infrequent..
5.0 TRAFFIC SERVICES
The Company will dispatch shipments in accordance with Microsoft
routing guidelines, *. The provider's Traffic staff should consult
Microsoft's Transportation staff for determination on routings when the
mode or service level requires clarification. The following details
apply:
5.1 LAUNCH MODE
During product launches, Microsoft may require * shipments to
meet customer needs. Spreadsheets with shipment details and
routing instructions will be forwarded to the provider's
Traffic staff for dispatch.
5.2 FREIGHT TERMS
Freight terms are transmitted via * for each order. Care must
be taken to ensure proper routing of all shipments, whether
prepaid or collect.
o For all LTL shipments, Driver Load and Count (DL &C)
terms apply.
o For truckload shipments there are 2 options, the load
terms must be noted on the ▇▇▇▇ of lading.
o Shipper Load and Count (SL&C)
o Shipper Load and Driver Count (SL & DC)
5.3 CARTON COUNT
Using DL&C and SL&DC terms, the Carrier representative must
count and sign for the number of cartons picked up. The number
of pallets may be noted on the ▇▇▇▇ of lading, but the driver
must sign for the number of cartons (except under SL&C terms).
5.4 BLOCKING, BRACING AND SEALING
Carrier must supply proper blocking and bracing, and utilize
airbags when feasible, to ensure loads stay intact and do not
fall over or become damaged in transit. The provider is
responsible for ensuring that product is properly blocked and
braced before carriers leave the dock. All truckload
Exhibit B - Page 3
43
shipments must be sealed with heavy-duty seals before leaving
the premises. For multi-stop truckload shipments, provider
must supply additional seals to secure the load after each
stop.
5.5 TRUCKLOAD CARRIER FREE TIME FOR LOADING
Truckload carriers free-time for live-loading is * from the
time of scheduled appointment.
5.6 CONSOLIDATED SHIP SCHEDULE
Allocations for major customers may be dispatched based on the
consolidated ship schedule issued by Microsoft's
Transportation staff. Regional consolidations of multiple LTL
shipments into multi-stop truckload shipments should be made
when possible to speed transit and minimize freight cost.
Microsoft's Traffic staff is available for consultation
regarding routings and appropriate combinations.
5.7 ▇▇▇▇ OF LADING PREPARATION
Proper bills of lading must be filled out and supplied to
carriers, including all information to ensure billing and
shipment rating. All bills of lading must show "Microsoft c/o
Startek" as the shipper. The provider must be capable of
providing information about a particular ▇▇▇▇ of lading *.
Requests for copies of bills of lading must be addressed
within *.
o Bills of lading for truckload shipments must be
notated to show the loading terms - *
o All bills of lading must show *. For air freight
shipments using a manual airway ▇▇▇▇, *.
o All bills of lading must detail *.
5.8 DAILY SHIPMENT CONSOLIDATIONS
The Company is responsible for consolidating all replenishment
packslips * into a single customer shipment and generating one
▇▇▇▇ of lading per customer *. The exceptions to this rule
will occur *. In these situations, separate bills of lading
must be provided.
5.9 RATING SHIPMENTS
The *. A rate matrix will be supplied for truckload rates. A *
will be provided by Microsoft for rating all shipments not
rated by the vendor's host computer. Provider should use the
gross weight of the shipment to rate the ▇▇▇▇ of lading and
should pro-rate per packing slip using the gross charges.
Microsoft may also choose to employ the provider to *.
5.10 SHIPMENT CONFIRMATION
The provider must provide * confirmation and transmission of
all completed shipments via *. Standard expectation is that
shipments will be confirmed within *. A manual backup plan
must be available in the event that the transmission system
goes down, or trained personnel are not available. Care must
be taken to ensure confirmation accuracy, including changes in
SCAC codes. Key metrics will be reviewed each * for accuracy
of ▇▇▇▇ of lading number, freight rating, carrier coding,
carton count accuracy, and * confirmations.
Exhibit B - Page 4
44
5.11 TRANSPORTATION COSTS
Freight expenses for all prepaid shipments are billed directly
to Microsoft by the carrier. To ensure proper application of
rates, all bills of lading for prepaid shipments must show the
shipper as "*". Microsoft may also choose to employ the
provider to secure the carriers and provide Microsoft with
line item freight invoicing
5.12 CANADA DOCUMENTATION
Copies of each ▇▇▇▇ of lading, airway ▇▇▇▇ and consolidated
▇▇▇▇ of lading must be faxed to Microsoft for completion of
Customs Documentation by *.
5.13 WEEKEND AND AFTER HOURS TRANSPORTATION
Carriers will be selected that have weekend pick-up and
delivery capabilities to support rare occasions when pick-ups
and deliveries are required on weekends.
5.14 SMALL PACKAGE TRANSPORTATION EXPENSES
A copy of the daily UPS (small package) manifest and manifest
summary must be forwarded to Microsoft no less than *.
5.15 CLAIMS LIABILITY
On all outbound LTL and TL prepaid shipments to customers,
released value of * (unless otherwise stated). Freight claims
are filed by Microsoft.
5.16 DOCUMENTATION REQUESTS
Requests for copies of packing slips and bills of lading for
tracing and claims preparation must be faxed to Microsoft
within *.
6.0 FINISHED GOODS RECEIVING
6.1 FINISHED GOODS RECEIVING PROCEDURE
Mutually agreed upon finished goods receiving and quality
verification procedures must be followed. These procedures may
vary depending on the source of the inventory being received.
Microsoft personnel will work with the provider to clearly
outline requirements.
6.2 PICK-UP TIMING
Finished goods must be system received real-time at the
Company distribution site making inventory immediately
available for shipment to Microsoft's customers. During * or
when shipping *, Microsoft may request * on receipts. As a
rule, finished goods should be put away into allocable
locations within * of receipt.
Exhibit B - Page 5
45
6.3 HANDLING BILLING AND CHARGES
The preferred method for handling charges is a one-time
receiving/shipping handling fee per case accumulated and
charged at the end of the month.
6.4 LOT CONTROL
Provider must be capable of receiving, storing and shipping
inventory using a lot controlled system. The ability to
receive and consolidate partial receipts (i.e. lots of 1,000
units coming in off of purchase orders of 10,000 units) is
desired. The ability to provide Microsoft with specific lots
of inventory shipped to customers is essential.
7.0 STORAGE
Finished goods inventory will be shipped from Microsoft manufacturing
facilities to the Company distribution site *. This inventory will be
stored by the Company for an unspecified amount of time before being
shipped to customer sites, although Microsoft will attempt to turn
inventory on all SKUs as quickly as possible. The following are the
storage requirements:
7.1 DOUBLE STACKING
In the absence of pallet racking, pallets may be double
stacked during storage. The exception to this rule would be
short-term overstock situations where express consent is
provided by the Microsoft Vendor Account Manager. Pallets will
be placed in * to allow systematic allocation of specific
inventory.
7.2 PALLET DIMENSIONS
Standard GMA four-way 40" wide x 48" long pallets, not
exceeding 52" in height including pallet height will be used.
Maximum weight will not exceed 2,400 pounds.
7.3 LIABILITY AND INSURANCE
The Company will assume contractual liability against all loss
and damage during storage and will pay Microsoft for *.
Overages remain the property of Microsoft. Company will
maintain insurance coverage as specified in the contract.
7.4 SEPARATE INVENTORY
*. During temporary storage situations, the Microsoft Vendor
Account Manager may approve *. These situations are expected
to be extremely rare.
7.5 INVENTORY CYCLE COUNTING
Cycle counts must be performed on a daily basis, with all SKUs
and storage locations counted at least monthly. Discrepancies
must be resolved * period to maintain * inventory accuracy by
Exhibit B - Page 6
46
location. Discrepancies in excess of * must be * reported to
Microsoft and reconciled. A * cycle count report should be
available to Microsoft on request.
8.0 DISTRIBUTION SERVICES
Bulk distribution order drops from Microsoft will occur *. The
provider's system will receive transactions and will be required to
location assign picks and handle all subsequent functions required in
order to send Microsoft a completed transaction via * after order
shipment. There may be times when immediate order drops will be made to
meet customer shipping requirements. These may or may not be made via
*. The following are requirements for distribution services:
8.1 ORDER CYCLE
Orders must be shipped to meet required shipping schedules or
delivery appointments. This may require * for some portion of
the total daily order transmission.
8.2 * AND * SHIPPING
* shipping hours may be required due to volumes or special
customer requirements. Microsoft will work with the provider
to keep these situations to a minimum.
8.3 FINISHED GOODS SHIPPING PROCEDURES
Mutually agreed upon finished goods shipping and quality
verification procedures will be followed. Shipping of split
case quantities will be required, particularly in the prepaid
order business.
8.4 STORE LEVEL DISTRIBUTION
It is very possible that *. This will mean *. Store level pick
and pack operations that will include split case picking,
special labeling * and associated *, and package
transportation capabilities may be required.
8.5 PALLET AND DISPLAY BUILDS
The Company must be able to build mixed SKU pallets as well as
multi-product displays from standing inventory. Other value
added services such as bundling products and light re-work
will also be performed at the provider's site.
8.6 PALLET STRETCH-WRAPPING
Finished goods must be securely stretch-wrapped to the
pallets, with a minimum of 3 wraps around the bottom
(including to the pallet) and wrapped continuously around the
pallet, finished by three around the top. Mechanical wrapping
devices are preferred as they provide a more secure wrap.
Exhibit B - Page 7
47
8.7 PALLET LABELING AND PACK SLIP
Proper labeling of pallets will include *. Each pallet must
have a computer generated packing list detailing those
products and quantities contained on that pallet.
8.8 VOLUMES
The Company may be responsible for volumes up to *. On
average, this location is expected to ship * which would
equate to approximately * with an average case value of *.
Month to month volumes could range from a low of * to a high
of *, both with an average case value of *. Product launches
will drive the bulk of the variability and Microsoft and the
provider must ensure solid communication regarding upcoming
requirements.
8.9 SHIPMENT ATTRIBUTES
Based on historical data, the average channel shipment size is
* built onto * with an average weight of *. The average number
of lines, which represents individual SKUs per packing slip,
has been *. It should be noted that shipment sizes vary across
a wide range and the numbers above represent *. Up to *
packing slips will be printed daily. Due to inventory
situations and customer ordering patterns, it is not unusual
to see large numbers of shipments in less than pallet
quantities. If store level distribution is required in the
future, all of the averages presented here will change and a
new Statement of Work will be issued outlining the detailed
business requirements.
9.0 SYSTEMS
Microsoft's long term interests will be best served with standard *
possibly supplemented by *, throughout the day. As previously
mentioned, Microsoft and the provider must be willing to co-participate
in modifications to the provider's system to adapt to changing business
requirements.
Microsoft may wish to employ any or all of the following system
alternatives:
o *
o *
o *
o *
Exhibit B - Page 8
48
The following sections describe Microsoft's current systems environment
and the required information exchanges.
9.1 *
9.2 *
9.3 *
9.4 *
9.5 *
9.6 INVENTORY SYSTEM REQUIREMENTS
Key items include lot control, the ability to track inventory
lots by date received/moved and work order number, and the
ability to designate individual pallet locations as being on
hold.
Exhibit B - Page 9
49
RATES AND FEES
*
Invoices will be submitted to Microsoft for volume based on Microsoft's *
Exhibit B - Page 10
50
EXHIBIT C
PRICE AND PAYMENT TERMS
28
51
EXHIBIT C
COMPONENT PRICING MATRIX
PRICING AND PAYMENT TERMS FOR MANUFACTURING STATEMENT OF WORK
PRICE AND PAYMENT TERMS OF PRODUCT COMPONENTS
1.0 During the term of this Agreement, Microsoft will issue * Purchase
Orders (P.O.'s) for Finished Product Units to StarTek. All receipts to
the P.O. entered by the Shipping Location will be paid via *, which
will result in the issuance of payment.
2.0 For each P.O. issued under this Agreement for Product Components,
Microsoft agrees to pay StarTek a per Product Component price (e.g.,
per each Jewel Case Component ordered) to be calculated as follows:
*
*
*
*
3.0 *
Definitions:
*
*
*
Exhibit C - Page 1
52
PRICE AND PAYMENT TERMS FOR PRODUCT COMPONENTS
*
*
4.0 StarTek may be required to produce Product Components for new Microsoft
Product SKUs at any time during the term of this Agreement. Pricing for
any such Product Components will be determined by using the formula set
forth in Section 2 above. StarTek agrees to make all reasonable effort
to provide Microsoft with Product Component pricing for new Microsoft
Product SKUs within * of receiving the Microsoft Product SKU
specification and BOM information from Microsoft.
5.0 From time to time BOM changes occur that may add or delete components
from the Microsoft Product SKU. These additions or deletions to the
Microsoft Product * shall be reflected accordingly in the material and
labor *.
Exhibit C - Page 2
53
PRICE AND PAYMENT TERMS FOR ASSEMBLY SERVICES
1.0 If assembly services are ordered as part of the P.O., each P.O. so
issued shall require delivery of the finished Products within * of the
Frozen Build Signal. StarTek will build and ship according to the
Shipping Location identified on the P.O.
2.0 For the assembly of the Product CD ROMs, Disk Set Component, Jewel Case
Component, and the Assembled Box Component into a finished Product
including shrink-wrap, Microsoft agrees to pay StarTek for materials
and labor on a * for each Unit Delivered to be calculated as follows
*
*
Exhibit C - Page 3
54
EXHIBIT D
INSURANCE
This Exhibit "D" is a continuation of that certain Microsoft Manufacturing and
Supply and Services Agreement dated _______________ between Microsoft
Corporation ("Microsoft") and StarTek Inc. ("StarTek"). Capitalized terms not
otherwise defined in this Exhibit shall have the same meaning as set forth in
the Agreement to which this document is an Exhibit.
1. INSURANCE
Prior to the commencement of the work to be performed hereunder and throughout
the entire period of performance by StarTek, StarTek shall procure and maintain
insurance coverage as will reasonably respond to claims and liabilities that
StarTek may encounter in the course of its business. Such insurance shall be in
a form and with insurers acceptable to Microsoft, and shall comply with the
following minimum requirements:
1.1 INSURANCE FOR LOSS OR DAMAGE TO PROPERTY. StarTek shall maintain
policies of insurance covering loss or damage to Products and any Microsoft
property in its possession or control, including but not limited to loss or
damage that results from the fraudulent, dishonest, or criminal acts of StarTek,
its subcontractors, or employees of StarTek and its subcontractors. Such
policies shall be written with insurers and on policy forms reasonably
acceptable to Microsoft and shall provide limits adequate to cover the Full
Value of Product(s) at risk, and proceeds of such policies shall be payable in
*. For purposes of this Exhibit, "Full Value" shall be defined as *. StarTek
shall cause its insurers to endorse the policies as follows:
a) Microsoft shall be named as loss payee to the extent of Microsoft's
interest in Product(s),
b) coverage provided by the policy shall be primary to and not
contributory with coverage maintained by Microsoft,
c) rights of subrogation against Microsoft are to be waived, and
d) such policy may not be canceled or materially altered to the
detriment of Microsoft without * advance notice to Microsoft.
Coverage under this policy shall provide the broadest protection available at
reasonable cost.
Upon request StarTek shall provide Microsoft with a current certificate of
insurance and certified copies of policy endorsements evidencing compliance with
the requirements set forth in this section.
1.2 COMPREHENSIVE GENERAL LIABILITY. StarTek shall obtain and maintain
a policy of "general", "public", or "commercial" liability insurance written on
an "occurrence form" with limits of not less than * each occurrence for bodily
injury and property damage. The policy shall provide coverage for worldwide
defense, premises and operations, contractual liability (including specifically
the insurable contractual liability assumed in this Agreement), and products and
completed operations.
StarTek shall also obtain and maintain a policy of "general", "public",
or "commercial" liability insurance written on an "occurrence form" with limits
of not less than * each occurrence for bodily injury and property damage. Such
policy shall provide coverage for defense, premises and operations, contractual
liability (including specifically the insurable contractual liability assumed in
this Agreement), and products and completed operations.
1.3 WORKERS' COMPENSATION. StarTek shall at all times comply to the
full extent with the Worker's Compensation Act of 1985, reenactments thereof,
and any regulations made thereunder.
1.4 EMPLOYERS LIABILITY. StarTek, in addition to complying with the
provisions of section 1.3 above, shall maintain coverage for employers liability
with a policy limit of not less than *.
1.5 CERTIFICATES OF INSURANCE. Upon request by Microsoft, StarTek shall
provide to Microsoft certificates of insurance evidencing full compliance with
the insurance requirements contained herein. Such
29
55
certificates shall be kept current throughout the entire period of performance,
and shall provide for at least * advance notice to Microsoft if the coverage is
to be canceled or materially altered so as not to comply with the foregoing
requirements.
Failure by StarTek, to furnish certificates of insurance or failure by
Microsoft to request same shall not constitute a waiver by Microsoft of the
insurance requirements set forth herein. In the event of such failure on the
part of StarTek or its subcontractors to provide the certificates as required
herein, Microsoft expressly reserves the right to enforce these requirements,
and in the event of liability or expense incurred by Microsoft as a result of
such failure by StarTek or any subcontractor, StarTek hereby agrees to indemnify
Microsoft for all liability and expense (including reasonable attorney's fees
and expenses associated with establishing the right to indemnity), incurred by
Microsoft as a result of such failure by StarTek or its subcontractors.
30
56
EXHIBIT E
REQUIRED TAX INFORMATION
During the term of this Agreement, StarTek agrees to provide Microsoft with such
information, as mutually agreed upon between the parties, that Microsoft
determines necessary for tax compliance and statutory reporting purposes. Such
information shall include, but may not be limited to the following:
A listing of all transactions, showing for each invoice:
- Invoice Number
- Date of Invoice
- Purchase Order Number(s)
- Total Charges Before *
- *
- Total Amount Due
The data provided in electronic format should agree with the information shown
on actual invoices issued to Microsoft.
If there are any transactions that are exempt from *, such transactions should
be reported separately (but the information required will still be listed as set
forth above, except that * will be *).
31
57
EXHIBIT F
APPROVED SUBCONTRACTOR LIST
32
58
EXHIBIT F
APPROVED SUBCONTRACTOR LIST
There are no approved subcontractors as of July 1, 1999.
Exhibit F - Page 1
59
EXHIBIT G
CERTIFICATE OF MS MATERIAL DESTRUCTION
By signatory exercise of this Exhibit G, StarTek asserts that it has fulfilled
its obligations under Section 2(h) of the Agreement (Safe Storage and Security)
by destroying, or having destroyed by a Microsoft authorized StarTek
Sub-contractor, all Microsoft material in its possession or under its control.
COMPANY asserts that the MS Material was destroyed in its entirety at the
location cited below:
Site
----------------------------------------
Address
----------------------------------------
----------------------------------------
Destruction Date
----------------------------------------
If COAs, list part number and number range.
IF MS Material, list specifics, including all quantities.
If MS Product, list Product Category, Language, Dialect, and Item/Number,
including all quantities.
COMPANY Officer's authorized signature:
-----------------------------------------------------------
By (Sign)
-----------------------------------------------------------
Name (Print)
-----------------------------------------------------------
Title
-----------------------------------------------------------
Date
Exhibit to __________________________ Agreement dated ________________, between
MS and COMPANY.
33
60
EXHIBIT H
STARTEK FACILITIES
34
61
EXHIBIT H
STARTEK MANUFACTURING AND DISTRIBUTION FACILITIES
*
*
Exhibit H - Page 1
62
EXHIBIT I
SUBSIDIARY AGREEMENT
For good and valuable consideration, ______________________________, a
corporation of ("StarTek Subsidiary") hereby covenants and agrees with
Microsoft Corporation, a Washington, U.S.A. corporation that StarTek Subsidiary
will comply with all obligations of StarTek, Inc., a corporation of Colorado
("StarTek") pursuant to that certain Manufacturing and Distribution Agreement
between Microsoft and StarTek dated _________________________ (the "Agreement").
StarTek Subsidiary acknowledges that its agreement herein is a
condition for StarTek Subsidiary to exercise any of the rights sub-licensed by
StarTek to StarTek Subsidiary pursuant to the terms of the Agreement.
Capitalized terms used herein and not otherwise defined shall have the
same meaning as in the Agreement.
IN WITNESS WHEREOF, StarTek Subsidiary has executed this agreement as of the
date set forth below. All signed copies of this Agreement shall be deemed
originals.
--------------------------------------------------------------------------------
(StarTek Subsidiary)
--------------------------------------------------------------------------------
Signature
--------------------------------------------------------------------------------
Name (Print)
--------------------------------------------------------------------------------
Title
--------------------------------------------------------------------------------
Date
35
63
EXHIBIT J
ATTACHMENTS
1
64
ATTACHMENT 1
SAMPLE OF * FROZEN FORECAST
*
2
65
ATTACHMENT 2
SAMPLE OF FROZEN BUILD SIGNAL *
*
3
66
ATTACHMENT 3
PROCEDURE FOR DESTRUCTION/SCRAP
Circumstances may arise which require the destruction of Raw Material or
Finished Product. These include but are not limited to:
1. Microsoft requesting destruction for a specific need.
2. StarTek requesting destruction for a raw material (excluding consigned
hardware) which has exceeded * storage.
3. Either party requesting destruction for a material that has damage or
quality defects making it unusable.
Once the request for destruction has been approved by Microsoft, destruction
shall take place in accordance approved procedures and Exhibit G shall be
completed by StarTek and sent to the Microsoft Vendor Account Manager.
The cycle time from approval to completion of destruction will normally be one
week, unless alternate arrangements have been made in email.
4
67
ATTACHMENT 4
APPROVED SUPPLIERS FOR COA AND CD-ROM/DVD
AS OF JULY 1, 1999
*
*
*
*
5
68
ATTACHMENT 5
METRICS REPORTING FOR INVENTORY SHRINKAGE
The calculation that is used to determine inventory accuracy is included below.
Calculation 1- *
Inventory adjustments are defined as *.
6