EXHIBIT 10.10
SUPPLY AGREEMENT BETWEEN
MANUFACTURERS' SERVICES SALT LAKE CITY OPERATIONS, INC.
and
PALM COMPUTING, INC.
--------------------
[*] = information redacted pursuant to a confidential treatment request
throughout this exhibit. Such omitted information has been filed separately with
the Securities and Exchange Commission.
TABLE CONTENTS
Page
----
1. DEFINITIONS............................................................ 1
2. PRECEDENCE OF DOCUMENTS................................................ 3
3. PURCHASE AND SUPPLY COMMITMENT......................................... 3
4. PURCHASE ORDERS, FLEXIBILITY, RESCHEDULES, CANCELLATIONS............... 4
5. ROLLING FORECAST....................................................... 6
6. PURCHASES BY BUYER'S AUTHORIZED AGENTS................................. 6
7. EXCESS MATERIALS....................................................... 7
8. OBSOLETE MATERIALS..................................................... 7
9. TERM OF AGREEMENT...................................................... 7
10. PRODUCTION CAPACITY.................................................... 7
11. FLEXIBILITY CAPABILITY................................................. 8
12. MATERIALS TRANSFER..................................................... 8
13. PRICING................................................................ 8
14. DELIVERY............................................................... 9
15. PACK-OUT, PACKING, MARKING, AND SHIPPING INSTRUCTIONS.................. 9
16. QUALITY STANDARDS AND CERTIFICATION.................................... 9
17. INSPECTION, TESTING, AND ACCEPTANCE.................................... 11
18. RETURN OF PRODUCT...................................................... 12
19. SUPPORT................................................................ 13
20. WARRANTY............................................................... 13
21. PAYMENT................................................................ 15
i
TABLE OF CONTENTS
(continued)
Page
----
22. CHANGES................................................................ 15
23. PROTOTYPING AND ENGINEERING SERVICES................................... 16
24. INTELLECTUAL PROPERTY RIGHTS........................................... 17
25. TERMINATION FOR CAUSE.................................................. 18
26. TERMINATION FOR CONVENIENCE............................................ 18
27. LIMITATION OF LIABILITY................................................ 19
28. FORCE MAJEURE.......................................................... 19
29. NONASSIGNABILITY....................................................... 20
30. NOTICES................................................................ 20
31. COMPLIANCE WITH LAWS................................................... 21
32. PATENT, COPYRIGHT AND TRADEMARK INDEMNITY.............................. 21
33. CAPACITY PLANNING...................................................... 23
34. GRATUITIES............................................................. 23
35. INSURANCE AND STATUTORY OBLIGATIONS.................................... 23
36. INSURANCE COVERAGE..................................................... 23
37. CONFIDENTIAL INFORMATION............................................... 24
38. PUBLIC ANNOUNCEMENTS................................................... 25
39. COUNTRY OF ORIGIN...................................................... 26
40. PROPERTY FURNISHED BY BUYER............................................ 26
41. GENERAL................................................................ 26
EXHIBITS:
Exhibit A - Products and Pricing
Exhibit B - Specifications
ii
TABLE OF CONTENTS
(continued)
Page
----
Exhibit C - Buyers' Pack-Out and Packaging Specifications
Exhibit D - Flexibility Parameters
Exhibit E - Buyer's Affiliates and Authorizing Agents
Exhibit F - Performance Standards
Exhibit G - Build Request Process Flow
Exhibit H - Long Leadtime Authorization Form
Exhibit I - Environmental Warranties
Exhibit J - Statement of Work
-iii-
SUPPLY AGREEMENT
THIS SUPPLY AGREEMENT (hereinafter referred to as "the Agreement"), dated
and effective this 27th day of November 1999, ("Effective Date"), and the
schedules attached hereto between
Manufacturers' Services Salt Lake City Operations, Inc., a company
organized and existing under the laws of Delaware and having its principal
place of business at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
("Seller") on the one hand and
Palm Computing, Inc., a company organized and existing under the laws of
California and having its principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Buyer") on the other hand
"Seller and Buyer" are hereinafter also collectively referred to as
"Parties" and individually as a "Party".
WHEREAS, Seller agrees to manufacture and sell to Buyer the Products (as
hereinafter defined) and Buyer agrees to purchase from Seller such Products,
subject to the terms and conditions of this Agreement.
1. DEFINITIONS
A. "Affiliate": with respect to any Party, any other party directly or
indirectly controlling, controlled by, or under common control with such Party.
For purposes of this definition, "control" when used with respect to any
party, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such party, whether
through the ownership of voting securities, by contract or otherwise; the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
Buyer's Affiliates are identified in Exhibit E, which may be changed by written
notice from Buyer to Seller from time to time.
B. "BOM": Buyer's ▇▇▇▇ of Materials.
C. Buyer's "Authorized Agent": any of Buyer's Affiliates, or any third
party suppliers, subcontractors or contract manufacturers who desire to purchase
Products or Materials and whose credit worthiness is reasonably acceptable to
Seller, who purchase on a letter of credit basis, or whose payment obligations
are guaranteed by Buyer. Buyer's Authorized Agents are identified in Exhibit E,
which may be changed from time to time by written agreement between Buyer and
Seller.
D. "Days": calendar days unless otherwise specified.
E. "Excess Materials": Unique Materials on hand and ordered consistent
with Buyer's forecast at agreed-upon leadtimes and for which the forecasted use
is in excess of thirteen (13) weeks resulting from Buyer's cancellations,
reschedules or other delays or changes caused by Buyer.
F. "Finished Goods Stockroom": the section of Seller's facility
designated as the area where the Product is delivered to Buyer.
G. "Materials": component line items on the BOM, which are collectively
assembled to produce the Product.
H. "Manufacturing Lead Time": the total aggregate lead time of that
component of the Product having the longest lead time, plus the time necessary
for receiving and inspecting all components for such Product, manufacturing the
Product, and systems integration, test and distribution, all as mutually agreed
upon by the Seller and Buyer.
I. "MRP": Materials requirements planning.
J. "NRE": non-recurring engineering expenses.
K. "Obsolete Materials": Unique Materials on hand and ordered consistent
with Buyer's forecast at agreed-upon leadtimes which can no longer be used for
their designated Product and/or for which there is no forecast for the following
[*].
L. "Performance Standards": those performance standards set forth in
Exhibit F, as may be modified from time to time by mutual written agreement of
the Parties.
M. "Product(s)": the product(s) identified by Buyer's part number or
assembly identification name as more fully described in Buyer's Specifications.
N. "Pull" means a replenishment driven process triggered by customer
consumption whereby Product is manufactured and delivered by Seller based upon
Buyer's replenishment demand, which is generated by actual use, disposition or
consumption of Product by Buyer; the overall objective being to minimize Seller
and Buyer's inventories while enabling greater flexibility and faster response
in fulfilling Buyer's variable replenishment demand.
O. "Build Request" is a document Buyer provides to Seller on an as-needed
basis and serves as a replenishment request. The Build Request indicates, among
other things, the part number(s), quantity(s), delivery date(s), and
destination(s) of the Product(s) being requested.
P. "Pull Product" shall mean Products, which may be purchased by Buyer
under a Pull Purchase Order pursuant to this Agreement, and for which Seller and
Buyer have jointly agreed are to be designated as pull Products.
Q. "Blanket Purchase Order" is Buyer's blanket Purchase Order for a
Product. Blanket Purchase Orders shall reference this Agreement and include the
mutually agreed Price (as defined in
2
Section 13A), but do not bind Buyer or Seller as to total quantities purchased,
delivery dates, or the total dollar commitment of such Blanket Purchase Order.
R. "Purchase Order": Buyer's written purchase order form or other format
mutually agreed upon by the Parties and any documents incorporated therein by
reference.
S. "RMA": return material authorization.
T. "Specifications": Buyer's specifications as shown on Exhibit B,
attached, which also hereby by reference include IPC-610B Class 2 workmanship
standards as modified from time to time and the then currently accepted
commercial manufacturing practices.
U. "Unique Materials": Custom (i.e. specifically designed for the
Products) Materials or noncancellable and nonreturnable industry standard
Materials (i.e., that are not available from multiple suppliers or from a single
supplier with multiple customers).
2. PRECEDENCE OF DOCUMENTS
The precedence of documents between Buyer and Seller shall be:
A. This Agreement, as it may be amended in writing by mutual agreement
B. A Purchase Order
C. Buyer's non-binding forecast.
3. PURCHASE AND SUPPLY COMMITMENT
A. Buyer agrees that it and its Authorized Agents shall purchase, and
Seller agrees to supply, a minimum commitment of 450,000 units of Palm Viewer
Products per quarter during the Initial Term of this Agreement. Notwithstanding
the foregoing, if Seller fails to meet the Performance Standards set forth in
Exhibit F in all material respects, or otherwise fails to comply with material
obligations hereunder, or Seller fails to make the minimum commitment available
to Buyer in accordance with Buyer's orders in any quarter due to a Materials
shortage or otherwise (not directly caused by Buyer), Buyer will be under no
obligation to reach this minimum in any quarter of such material noncompliance
but will be under this obligation in subsequent periods if such noncompliance is
cured within the Initial Term. Notwithstanding the foregoing, any failure of
Seller to make minimum commitments available to Buyer in accordance with Buyer's
orders in any quarter shall only relieve Buyer of its obligation to reach its
minimum commitment to the extent of such shortfall provided that Seller makes
the remainder of such commitment available in such quarter in accordance with
Buyer's orders.
B. Any overage in purchase of Products of no more than 20% that occurs
during any quarter will be credited towards the subsequent quarterly period and
any deficit in purchase of Products of no more than 20% in any quarter may be
made up in the next quarter to the extent there is not a deficit in such
subsequent quarter. This minimum purchase commitment takes precedence over the
3
Flexibility Parameters of Exhibit D. Failure to meet the commitment is subject
to a ninety (90) day notice and cure period.
4. PURCHASE ORDERS, FLEXIBILITY, RESCHEDULES, CANCELLATIONS
A. Buyer will provide a minimum of [*] continuous, Blanket Purchase Order
coverage. Blanket Purchase Orders may be submitted in the form of hard copy, by
facsimile, or by electronic transfer if there is an electronic data interchange
("EDI") agreement in place between Buyer and Seller. Purchase Orders will
specify part numbers, quantity, prices, product revisions, requested delivery
dates and delivery locations all of which shall be consistent with the terms
hereof. Any terms or conditions contained in the Purchase Order or in Seller's
acknowledgement or other document which are inconsistent with or in conflict
with the terms and conditions contained in this Agreement or which increase or
impose additional obligations, liabilities, or risks upon the other Party are
hereby expressly rejected and shall have no effect. Blanket Purchase Orders will
be for one part number per purchase order and indicate: (1) agreed-upon purchase
Price; (2) method for shipping, receiving and billing of Product shipped per the
"Build Request Process Flow" method set out in Exhibit G or as otherwise
mutually agreed; and (3) payment terms as defined in this Agreement. Blanket
Purchase Orders quantities are not considered for liability purposes or for use
in Materials planning and forecast requirements. Materials liability is set
forth in Exhibit D. Buyer shall communicate demand for long range and weekly
increments consistent with the Build Request Process Flow set forth in Exhibit G
or as otherwise mutually agreed.
B. Alternatively, Buyer will provide a Blanket Purchase Order [*] at the
agreed-upon Price for the forecasted demand for [*]. Buyer will release Build
Requests for Products on a [*] basis for the quantities to be shipped the
following [*] based upon demand patterns and backlog status. On a periodic basis
at Buyer's discretion, Buyer may issue a Build Request document to Seller,
requesting delivery of Product pursuant to the Build Request Process Flow set
forth in Exhibit G. Such Build Requests shall be Buyer's only commitment to
purchase Products (subject to Section 3 above), and Seller's only authorization
to ship Product to Buyer. A Build Request may be in electronic or written
(including facsimile) form. Seller agrees to multiple Build Requests per Day.
C. When Buyer issues a Build Request, Products must be scheduled for
delivery [*] business Days after Seller's receipt of the Build Request. If Buyer
requests Seller to ship Products in fewer than [*] business Days after Seller's
receipt of the Build Request, Seller agrees to make commercially reasonable
efforts to accommodate Buyer's request.
D. Buyer and Seller agree to, on a monthly basis, reconcile their
respective data records with respect to open Purchase Order quantity and the
quantity of Product ordered, shipped and delivered pursuant to Buyer's Build
Requests during the previous one-month period.
E. Seller will use commercially reasonable efforts, and will allocate
excess capacity at the Salt Lake City facility pro-rata based on customer unit
order volume among Buyer and other customers (to the extent Seller does not have
enough capacity to meet Buyer's orders beyond forecast and minimum commitment)
to meet Buyer's requested increases in capacity beyond
4
forecasted quantities within the Manufacturing Lead Time subject to Materials
availability, other scheduled manufacturing, and manufacturing capacity. If any
premium, expediting, or other increased charges over quoted costs are required
in order to meet Buyer's increased requirements, they must be approved in
advance by Buyer. Buyer agrees to pay for all such pre-approved costs that
represent out-of-pocket costs incurred by Seller. In addition, Seller commits at
no additional cost to Buyer to comply with the flexibility terms for Materials
and capacity availability as defined below provided that Seller is not obligated
to procure additional capital equipment to meet this obligation:
Materials and Capacity Availability Upside
[*] % Upside
0-2 25%
2-4 40%
4-8 50%
>8 100%
F. Exhibit D sets forth the allowable outward reschedules, cancellations
and upward flexibility.
G. Changes to Purchase Orders that are permissible under Exhibit D and
changes to its forecasts will be consolidated by Buyer who will take
commercially reasonable efforts to limit its requests to one request per week.
H. Purchase Orders shall not be considered as accepted until confirmed in
writing by an authorized representative of Seller. Seller shall make
commercially reasonable efforts to confirm Purchase Orders (except by written
mutual arrangement) within [*] business Days after receipt. Notwithstanding
the foregoing, if Seller fails to accept or reject within [*] Business
Days, Seller will be deemed to have accepted that Purchase Order. No additional
or different provisions proposed by either Party shall apply unless expressly
agreed to in writing by both Parties. Seller will accept Purchase Orders which
are consistent with the terms and conditions of this Agreement.
I. Seller will meet the delivery dates specified by Buyer if such dates
are consistent with the Performance Standards set forth in Exhibit F.
J. On a [*] basis Seller will provide Buyer with a list of all Materials
with leadtimes exceeding [*] for review and mutual approval. Upon mutual
approval, Seller will update the MRP with the mutually agreed current leadtimes.
Any Unique Materials that are required to be purchased beyond mutually agreed
leadtimes requires completion of the "Long Leadtime Authorization Form" set
forth in Exhibit H.
5
K. Any Unique Materials item whose cost will change, with inventory or
liability still available, but less than a forecasted [*] production, will
result in a Price change, using a [*] method:
[*]
L. or such other method as mutually agreed.
5. ROLLING FORECAST
Buyer will provide Seller with at least a [*] rolling non-binding forecast,
updated [*]. Buyer authorizes Seller to procure long lead-time Materials
consistent with Section 4J above in accordance with Buyer's forecasts and
flexibility requirements. Buyer further authorizes Seller to purchase minimum
buy items and reel quantities to support economic order quantities and Materials
requirement planning which may exceed authorized forecasts or Purchase Orders.
Seller agrees to inform Buyer of such purchases and Buyer shall have the right
to pre-approve all purchases of Unique Materials ordered in excess of forecast.
Some of Seller's orders to vendors and/or some Materials may be designated by
vendors as non-cancelable or non-returnable. All of these actions may result in
Materials procurement in excess of that required by Buyer's Purchase Orders and
forecasts. Buyer hereby authorizes Seller to make such purchases as are
reasonably necessary to meet Buyer's forecasts. Buyer will be liable for, and
Buyer's liability with respect to the procurement of Materials will be limited
to Excess and Obsolete Materials as set forth in Section 7 and Section 8 below.
For the avoidance of doubt, Seller will be responsible for managing the
disposition and liability of all industry standard Materials at no expense or
liability to Buyer (i.e., all non-Unique Materials). In addition, Buyer may
limit its liability hereunder by specifying to Seller in writing a maximum
amount. If Buyer elects to specify a maximum amount Seller will purchase only to
that amount and will notify Buyer of the impact to Buyer's forecast/Purchase
Orders.
6. PURCHASES BY BUYER'S AUTHORIZED AGENTS
Seller agrees that all of the Buyer's Authorized Agents, wherever located,
shall be entitled to make purchases under this Agreement, and all such purchases
shall apply to the purchase commitments in Section 3, subject to their credit
worthiness being reasonably acceptable to Seller, unless they purchase on a
letter of credit basis or their payments are guaranteed by Buyer. Any payment
timing and credit limitations placed on Buyer's Authorized Agents, other than
those presented in this Agreement, will be agreed upon in writing by both
Parties. Seller agrees to notify Buyer of any credit limitations applicable to
Buyer's Authorized Agents.
6
7. EXCESS MATERIALS
With respect to any Excess Materials on hand, Seller will notify Buyer of
the amount and the cost of such Excess Materials in a consolidated, monthly
report. Buyer shall either (i) pay carrying costs for Excess Materials at a rate
of [*] per month as it ages greater than [*] after receipt of such monthly
notice by Buyer; or (ii) buy all Excess Materials at Seller's cost (purchase
price paid by Seller) to be held in bonded stock for consumption based upon a
forecasted demand within the next [*]. Seller will use reasonable commercial
efforts to sell Excess Materials.
8. OBSOLETE MATERIALS
On a monthly basis, Seller will send Buyer a report which states the
Materials that are determined to be Obsolete Materials. Buyer will purchase
Obsolete Materials at cost (purchase price paid by Seller) plus a [*] Materials
acquisition charge. Buyer will provide Seller a Purchase Order within [*] days
of confirmation of obsolescence. Seller will use reasonable commercial efforts
to sell Obsolete Materials.
9. TERM OF AGREEMENT
This Agreement shall become effective upon execution by authorized
representatives of both Parties. This Agreement shall expire twenty-four (24)
months after the date of execution by both Parties ("Initial Term"), unless this
Agreement is terminated earlier pursuant to Section 25 or 26 and shall be
automatically extended for one or more additional successive [*] month
periods (each, a "Renewal Term"), unless one Party notifies the other Party in
writing at least [*] months prior to the beginning of such additional period
that it desires not to extend. Minimum capacity and purchase obligations
pursuant to Section 3 shall terminate upon expiration of the Initial Term and
shall not be renewed in any Renewal Term. The Initial Term, along with any
Renewal Terms, is referenced to herein as the "Term" of this Agreement.
10. PRODUCTION CAPACITY
All manufacturing will be conducted at Seller's Salt Lake City, Utah
facility unless otherwise agreed. Seller shall make available the necessary
capacity at such facility to meet Buyer's production requirements, as provided
by Buyer in Sections 4 and 5. Seller will notify Buyer on a [*] basis to confirm
that capacity is available for the forecasted period for the following [*] Days
and to advise Buyer of any capacity constraints for the remainder of the
forecast period. Buyer agrees to not unreasonably withhold approval of
additional production facilities in the event of extraordinary demand beyond
Buyer's forecasts. However, to the extent Seller does not have sufficient
capacity to meet Buyer's orders beyond forecast and minimum commitments, Seller
will allocate capacity at the Salt Lake City facility pro-rata among Buyer and
other customers, based on customer unit order volumes, and Buyer is under no
obligation to approve the manufacture of Products at any other of Seller's
locations if Buyer determines in its sole discretion that such location does not
meet Buyer's business needs.
7
11. FLEXIBILITY CAPABILITY
Buyer may issue change requests for Product quantities and schedule dates,
and Seller shall maintain the necessary capacity to accommodate such changes, in
accordance with the Flexibility Parameters attached as Exhibit D (the
"Flexibility Parameters"). Changes made in accordance with the Flexibility
Parameters will not incur cost or liability for Buyer.
12. MATERIALS TRANSFER
Seller agrees to buy, from time to time, Buyer's on-hand Materials that are
in excess of Buyer's own production requirements and are needed for Seller's
production within the open Purchase order period. Seller also agrees to sell
Materials in excess of Seller's production requirements to Buyer, to any of
Buyer's Authorized Agents or anyone else designated by Buyer whose credit
worthiness is reasonably acceptable to Seller, who purchases on a letter of
credit basis, or whose payment obligations are guaranteed by Buyer. Transfer
quantities and payment terms will be mutually agreed on a case-by-case basis.
Prices shall be at Buyer's or Seller's, as the case may be, actual purchase
price for the transferred Materials.
13. PRICING
A. The prices for Products sold pursuant to this Agreement are set out in
Exhibit A to this Agreement (hereinafter referred to as "Prices"). Any change to
the Prices set forth in Exhibit A shall be identified by an amendment to Exhibit
A which must be approved by authorized representatives of both Parties. All
Prices shall be in US Dollars, unless otherwise negotiated and documented in
Exhibit A.
B. Delivery is at Seller's dock or the Seller's Finished Goods Stockroom,
whatever the case may be. Buyer shall pay all applicable out-bound freight
costs, out-bound export costs, including any pre-shipment inspection charges if
mandated by the authorities of the country of exportation, as well as all out-
bound export brokerage, documentation, processing, customs and any other export
fees and taxes for export out of the United States at Buyer's request. Buyer
also agrees to pay all sales and use taxes on Products or Materials sold to
Buyer to Seller's delivery point or furnish Seller with tax exemptions. Both
Parties agree that Prices shall include all costs of the Product manufacture,
including pack-out of finished goods, as well as charges such as packaging,
palletizing, packing, crating, and storage as needed.
C. All Materials shall be purchased from suppliers on Buyer's approved
vendor list (the "AVL") as revised from time to time. Buyer agrees to use
reasonably commercial efforts to have Buyer's suppliers extend to Seller (as
agreed to by the applicable supplier) any and all Buyer negotiated Materials
pricing solely for purchases for Products manufactured under this Agreement.
Buyer will consider requests by Seller to permit such pricing to be extended to
Seller for purchases for Seller's other customers (as agreed to by the
applicable supplier).
D. Any Materials inspection processes that are in place at the
manufacturing facility as of the Effective Date are included in the negotiated
Price. Materials cost reductions negotiated by
8
Buyer with component suppliers will also be factored into Buyer's Materials
cost. Cost reductions negotiated by Seller for Buyer-controlled Materials from
alternate suppliers that are not on Buyer's approved vendor list, but which have
been approved by Buyer for inclusion on the AVL, will be shared equally for one
quarter following first production shipment of such components by the new
supplier to Seller, after which time the cost reduction will be factored fully
into Buyer's Materials cost.
14. DELIVERY
A. Seller will deliver the Product no more than [*] Days before and [*]
Days after the agreed delivery date, but if deliveries are delayed by causes
beyond Seller's control, Seller will promptly notify Buyer and may make partial
deliveries. If Seller continues to be unable to meet the agreed delivery date
due to supply constraints, it will provide Buyer a report of such supply
constraints and proposed actions to minimize the impact of these constraints. If
delivery is more than [*] Days late due to causes entirely within Seller's
control, Seller will pay the incremental cost of expedited shipment. Delivery
terms are Ex-Works (as defined in the International Chamber of Commerce
"Incoterms" 1990 edition) from Seller's production facility. Title and risk of
loss to the Product passes to the Buyer at the point of delivery, i.e. Seller's
dock or Sellers' Finished Goods Stockroom.
B. Seller shall segregate and clearly designate the Products as belonging
to Buyer. Seller shall maintain insurance coverage in a form reasonably
acceptable to Buyer to cover risk of loss to the Products until delivery to the
common carrier.
15. PACK-OUT, PACKING, MARKING, AND SHIPPING INSTRUCTIONS
A. All Product shall be finished, packed-out, prepared and packed for
shipment in a commercially reasonable manner with the intent to secure the
lowest transportation rates and meet carrier's requirements and those set forth
in Buyer's Pack-Out and Packaging Specifications which are attached hereto as
Exhibit C.
B. Each shipping container shall be marked to show Buyer's Purchase Order
number, part number, revision level, lot number, quantity contained therein, and
destination. A packing list showing the Purchase Order number shall be included
in each container. Marking on all parts shall be per the Buyer's shipping
specification. Marking shall include date of manufacture, place of manufacture,
Seller's part number and revision number.
16. QUALITY STANDARDS AND CERTIFICATION
A. MANAGEMENT REVIEW PROCESS. The Parties intend to maintain active and
open communications at both the program level and at the strategic level, and
agree to engage in periodic reviews of all applicable activities encompassing
the relationship. Executive representatives from both Parties will meet no less
than quarterly to review all major elements of this Agreement and to jointly
agree upon updated performance metrics for this Agreement. Initially, the
Parties intend to rotate these meetings between Seller's locations and Buyer's
corporate facilities in Santa ▇▇▇▇▇,
9
California. Special attention will be paid to Buyer programs specific to the
host site, although the Parties will also follow a standard agenda covering the
total business. This agenda will include reviewing Buyer future Product roadmaps
and schedules, organizational updates, future manufacturing and process
improvements by Seller's business reviews, and performance metrics reflecting
activities during the period since the last review.
B. PERFORMANCE METRICS. Performance Metrics as set forth in Exhibit F
will include, but are not limited to, the following: (i) total Buyer-Seller
business level; (ii) Seller product quality and yields; (iii) Seller on-time
delivery performance; (iv) Buyer forecast accuracy; (v) Seller inventory
summary; (vi) Buyer EC activity; (vii) lead time characterization; (viii) Seller
prototype on-time delivery and quality performance; and (ix) Seller
future/projected manufacturing/process and cost improvements. Seller agrees to
maintain quality standards, measurement practices, quality reports, and
inspection processes as they exist at the Salt Lake City facility as of the
Effective Date subject to any changes as may be mutually agreed. In addition,
Seller will work with Buyer to develop mutually-agreeable closed-loop quality
and corrective action processes on a going forward basis. Seller shall maintain
the quality plan in effect at the Salt Lake City facility as of the Effective
Date. The Parties shall cooperate to develop a mutually acceptable quality plan
incorporating such existing plan at a minimum on a going forward basis. Upon
request of either Party, the Parties will cooperate to document such plan in
writing. The Parties shall engage in quarterly reviews and weekly conference
calls to track performance and update such plan.
C. Seller agrees that all Products will conform in all material respects
to the Specifications for the part number stated on the BOM or Buyer's Purchase
Order, the Specifications for the manufacture and pack-out of the Products, and
to the workmanship specifications of IPC-610B Class 2 as modified from time to
time, which are set forth in Exhibits B and C, and to the then currently
accepted commercial manufacturing practices. For the avoidance of doubt, as
used in this Agreement "material" includes without limitation any non-conformity
that may cause a customer to return a Product.
D. Seller will supply qualification samples to Buyer upon request. Buyer
shall provide written notification to Seller of the results of qualification
testing of each Product. If the sample is approved by Buyer, then Buyer will be
deemed to have accepted the BOM for the qualification samples and the processes
performed by Seller will be deemed to meet the appropriate Specifications.
E. Buyer shall have the right to purchase spare Materials for the
Products in order to perform internal maintenance, support, and repair and for
lab stock and testing purposes. Such purchases shall be governed by the
applicable terms and conditions set forth in this Agreement.
F. Seller will conform to the requirements of ISO 9002 at all times in
manufacturing the Products hereunder. Seller agrees that it currently is or
will, within twelve (12) months of the Effective Date of this Agreement become
certified under ISO 9002, and during the term of this Agreement will remain ISO
9002 certified. If at any time hereafter certification under ISO 9002 is no
longer generally appropriate, Seller will ensure that it is certified under
another comparable or higher standard which is reasonably acceptable to Buyer.
10
G. Seller agrees that it will perform final "out-of-box" testing of a
sample of the Products to verify that the Products conform to the Specifications
in all material respects prior to delivery to Buyer. If any Products in the
sample deviate from the Specifications, Seller shall rework all defective
Products in the lot being sampled to render them compliant with the
Specifications in all material respects. Test methods and test procedures shall
be as currently in place at the Salt Lake City facility or as otherwise agreed
to by both Parties.
H. If Buyer returns defective Products to Seller, Seller agrees to
implement on a prompt basis appropriate actions as necessary to minimize the
possibility that additional defective Products will be delivered to Buyer, and
further agrees as soon as reasonably possible to implement appropriate
corrective actions as necessary to prevent reoccurrence of the defect. Seller
further agrees to conduct a detailed failure analysis and to report the failure
analysis data to Buyer within thirty (30) Days of receipt of the defective
Product at Seller's location. Seller agrees to preserve and maintain all data
associated with Product failure analysis and corrective actions and to make that
data available to Buyer upon request at no charge provided that Seller shall not
be obligated to preserve and maintain such data beyond the period required by
its ISO 9002 certification or the warranty period for the Products, whichever is
greater. Seller agrees to participate in Buyer's closed-loop corrective action
process.
I. Seller agrees to advise Buyer in writing of any material changes to
manufacturing processes and any changes to Materials, sources of supply, or
process chemistries, test procedures, quality reporting or other major
processes, and to ensure that any such changes do not compromise specifications,
quality, or reliability of Products ordered pursuant to this Agreement . In the
case of changes to Materials or sources of supply, such notice shall be provided
no less than the Materials' leadtime plus thirty (30) Days prior to the
effectiveness of such change. Seller may not make any such changes without prior
written approval from Buyer. In the event a Seller-proposed change fails Buyer's
qualification, Seller is obligated to provide the existing qualified Product
until the proposed changed can be qualified.
17. INSPECTION, TESTING, AND ACCEPTANCE
A. Products purchased pursuant to this Agreement shall be subject to
inspection, testing, and acceptance by Buyer, which shall occur within [*] of
delivery of Product.
B. All Products built by Seller for Buyer will have a specific set of
Product testing procedures and acceptance criteria as currently in place at the
Salt Lake City facility or as otherwise agreed to by both Parties. Upon request
of either Party, the Parties will cooperate to document such procedures and
criteria in writing. Should Products or Seller's processes be found to be non-
conforming, Seller will withhold shipping Product until such non-conformance is
resolved to Buyer's reasonable satisfaction. Buyer will not be responsible for
Products that fail to meet agreed upon acceptance criteria.
C. All Products are subject to Buyer's inspection and test at Buyer's
facility before final acceptance. Buyer has a [*] acceptance period after
delivery. In the event of a non-conforming
11
order (i.e. failure to meet Purchase Order or failure to meet warranty), Buyer
has the right to reject the order in whole or in part within such [*] period.
D. Upon two (2) business Days' notice, Buyer shall have the right to
perform vendor qualifications and/or on-site inspections at Seller's
manufacturing facilities during Seller's normal business hours. If an inspection
or test is made on Seller's premises, Seller shall provide Buyer's inspectors
with reasonable facilities and assistance at no additional charge. In the event
that any on-site inspection of the Products indicates that the Products do not
conform to the requirements of this Agreement, Seller shall not ship such
Products to Buyer until such nonconformity has been corrected to Buyer's
reasonable satisfaction and Buyer has approved shipment of such Products in
writing. This does not preclude, prevent or limit Buyer's right to perform
acceptance testing at Buyer's facilities.
18. RETURN OF PRODUCT
A. In the event Buyer detects non-conforming Products prior to acceptance,
a Non-Conforming Materials Report (NCMR) and/or a Corrective Action Request
(CAR) shall be provided to Seller and Seller shall submit an initial response to
such CAR within forty-eight (48) hours after receipt. Seller must provide a
Return Materials Authorization (RMA) within forty-eight (48) hours after receipt
of request for an RMA from Buyer.
B. Buyer may reject and return any defective Product to Seller at Seller's
expense. Seller agrees to reimburse Buyer all reasonable and actual freight and
handling costs associated with return of any defective Product. Seller will
return conforming Products freight prepaid as per the following schedule to
Buyer or issue appropriate credit no later than [*] Days, or as mutually
agreed by both Parties, from the date Seller receives the defective Product:
RMA Quantity Days
------------ ----
[*] [*]
[*] [*]
[*] [*]
Any Product returned to Seller, which, after inspection and testing by Seller,
is found to be free of defects shall be subject to a "No Defect Found Charge" as
specified in Exhibit A. However, Seller will waive any NDF Charges on Products
returned for repair, if returned Products result in an NDF rate not exceeding
[*] of the monthly unit volume. For an NDF rate greater than [*] but not more
than [*] the Parties will mutually agree upon allocation of the NDF Charge.
C. If pending the analysis of returned Products by Seller Buyer is in
urgent need of Product, Buyer may issue a Purchase Order to replace the Products
to which the CAR pertains. Seller will expedite such Purchase Order at Buyer's
request and, if requested by Buyer, will ship the order by
12
premium transport as specified by Buyer. All costs of expedited handling of such
Purchase Order and any premium transport specified by Buyer shall be borne by
Buyer, unless there is a defect that is the fault of the Seller, in which case
it will be borne by Seller.
19. SUPPORT
Buyer may request reasonable on-site support from Seller, which Seller
shall provide, to solve problems with rejected shipment batches of Product as
well as to validate Buyer's inspection methodology. All costs will be borne by
the Party incurring them.
20. WARRANTY
A. WARRANTY. Subject to Section 20E below, Seller makes the following
warranties to Buyer:
(i) The Product will conform in all material respects to the
Specifications and the Materials will conform in all material respects to the
supplier's specifications for such Materials for a period of [*] from the date
of delivery to Buyer;
(ii) The Products will be free from defects in Seller's
workmanship and in Materials and meet the mutually-agreed testing criteria for a
period of [*] from the date of delivery to Buyer;
(iii) All Products and Materials delivered under this Agreement
shall comply with the environmental warranties set forth in Exhibit I;
(iv) All Products and Materials delivered under this Agreement
shall be free and clear of any liens or encumbrances, and at the time of
delivery Seller shall have all rights necessary to transfer title to such
Products and Materials to Buyer;
(v) The Materials are Year 2000 ready such that they are
capable of correctly processing, providing, receiving and displaying date data,
as well as capable of exchanging accurate date data with all Products with which
the Materials are used within and between the twentieth and twenty-first
centuries; and
(vi) The Products and all Materials provided to Buyer under
this Agreement (other than those purchased from Buyer) are new products and do
not contain anything used, refurbished or reconditioned.
B. REPAIR OR REPLACEMENT. In the event that any Product fails to comply
with the warranties set forth in Section 20A above, Seller shall, at its
expense, correct any such defect by repairing or replacing such defective
Product in Seller's discretion subject to Buyer's reasonable approval. Buyer
shall return to Seller such defective Products and Materials to Seller's
designated facility pursuant to the RMA procedure set forth in Section 18 above.
The repaired or replaced item will be shipped to Buyer no later than ten (10)
business Days from receipt of the defective Product at
13
Seller's facility subject to Materials availability. If repair or replacement is
not possible due to unavailability of needed Materials within the time required
by Buyer, at Buyer's option Seller will issue a refund in the form of a credit
to Buyer in an amount equal to the purchase Price of the defective Products that
Seller is unable to repair or replace. Replacement and/or repaired Products
shall be warranted for the [*].
C. EPIDEMIC DEFECT RATE. In addition to Section 20A above, Seller agrees
to repair or replace, at no charge to Buyer, any Epidemic Defects found to exist
in any of the Products at any time prior to [*] after the date of delivery to
Buyer of the affected Products. As used herein, "Epidemic Defects" shall mean a
product field failure or defect for which Seller is responsible pursuant to the
warranty in Section 20A at a rate of [*] or more occurring with the same or
related Products with the same cause as measured during the warranty period. In
the case of any Epidemic Defects, Seller and Buyer shall jointly agree regarding
which of the following options to pursue, at Seller's expense; (i) [*] that no
such corrective action is sufficient.
D. INDEMNIFICATION. If Seller discovers a material breach of any of the
representations and warranties in Section 20A, Seller shall promptly notify
Buyer of such breach in writing. In addition to repairing or replacing such
Products or Materials pursuant to Section 20B above, Seller shall defend,
indemnify and hold harmless Buyer and its officers, directors, employees,
agents, representatives, successors and assigns from any third-party claims,
liabilities, losses, demands or judgments arising from the breach of any of
Seller's representations and warranties set forth in Section 20A(iii) or (iv).
E. WARRANTY EXCLUSIONS.
Buyer will have no claim against Seller under the Product warranties set
forth in Section 20A, and Seller shall have no liability under Section 20A to
the extent that such claims are made for a Product defect:
(a) resulting from defective Buyer-supplied Materials;
(b) resulting from specific instructions provided by
Buyer in writing or electronically, covering design or test data,
Specifications, quality requirements, diagnostics, manufacturing processes or
other processes or Product descriptions; or
(c) that is caused by Buyer or anyone other than
Seller or its agents through misuse, excessive shock, accident, fire, or
improper maintenance procedures, improper storage, or modification by Buyer or
anyone other than Seller.
14
Notwithstanding Section 20A above, Seller's sole liability under this
Section 20 with respect to Materials shall be to use reasonable commercial
efforts to obtain such warranties for Materials from its suppliers of Materials.
All warranties obtained by Seller on the Materials shall, if possible, be
assigned to Buyer at no additional cost. To the extent such warranties are not
assignable to Buyer at no additional cost to Seller, Seller shall at Buyer's
written request use reasonable commercial efforts to enforce such warranty
against the supplier, and Seller shall provide the benefits of such enforcement
to Buyer (subject to reimbursement of attorney's fees as provided below). In
the event that after using reasonable commercial efforts, Seller's initial
efforts to enforce such warranty against the Materials vendor are unsuccessful,
Buyer will reimburse Seller for the reasonable costs of pre-approved (by Buyer)
outside legal counsel to enforce such warranties. If Seller is successful in
such enforcement, Seller will repair the affected Products with the non-
defective, replacement Materials, if applicable, at no cost to Buyer to the
extent that such labor costs are included in the warranty. To the extent that
labor costs are not included in such warranty, upon request from Buyer, Seller
will repair the affected Products with the non-defective replacement Materials
at Seller's standard costs.
F. WARRANTY DISCLAIMER. THE FOREGOING EXPRESS WARRANTIES AND REMEDIES ARE
EXCLUSIVE AND ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, EITHER IN
FACT OR BY OPERATION OF LAW, STATUTORY OR OTHERWISE, INCLUDING WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ALL OF WHICH ARE HEREBY
DISCLAIMED.
21. PAYMENT
A. Payment shall be made by Buyer [*] Days from the receipt of invoice or
the date of delivery of Product, whichever is later. All payments shall be made
without any discount whatsoever. Seller shall submit the invoices to the address
indicated by Buyer.
B. Unless otherwise specified in Exhibit A or agreed to in writing by the
Seller and the Buyer, payment shall be in U. S. Dollars.
22. CHANGES
A. The Parties recognize that from time to ▇▇▇▇ ▇▇▇▇▇▇ will request or
will be requested by Buyer to implement Engineering Change Orders (hereinafter
referred to as "ECOs"). The following outlines the proper procedure for such:
(i) Seller Requested Changes. Seller is to notify Buyer in
------------------------
writing of proposed ECOs no less than lead time of the Materials plus [*] and
will, if so requested, provide Buyer with samples. The notification shall
include the proposed Product changes, anticipated price changes and
implementation date. Notification shall also include the appropriate
documentation to support Buyer's investigation of the impact of this proposal.
Buyer will review the feasibility of the implementation of the proposed ECO. If
lead-time or new costs are required for the ECO, lead time and new Prices will
be reviewed. Buyer is to advise Seller of its decision with respect to the
proposed ECO within [*] after receipt of Seller's written notifica-
15
tion, Buyer will not be liable for any Excess or Obsolete Materials arising as a
direct result of such Seller ECO.
(ii) Buyer Requested Changes. Buyer agrees to notify Seller
-----------------------
in writing of all proposed ECOs. This notification will include the appropriate
documentation to support Seller's investigation of the impact of this proposal.
Seller is to report to Buyer within five (5) business Days of Buyer's request
the feasibility of the implementation of the ECO and if reasonably feasible, the
estimated charges that would be incurred for obsolete work-in-process Materials,
raw Materials, and on-order Materials. Buyer will review the labor and Materials
costs and impact for the implementation of the ECO. If new Materials are
required for the ECO, lead-time and new Product Price will be reviewed and
mutually agreed upon.
(iii) Buyer is to notify Seller in writing within ten (10)
business Days after receipt of Seller's cost report of its decision as to the
proposed ECO, associated costs, and the implementation dates. Seller will
execute an agreed ECO per a mutually agreed upon phase-in plan, and will use
reasonable commercial efforts to meet Buyer's requested dates.
B. No ECO's shall be made by Seller without Buyer's prior written
approval, which may be withheld in Buyer's sole discretion.
23. PROTOTYPING AND ENGINEERING SERVICES
A. PROTOTYPE SERVICES. Buyer may engage Seller to render prototyping
services in connection with Products to be manufactured hereunder. In the event
that Buyer desires to engage Seller to render such services, the Parties shall
execute a Statement of Work which shall be in the form attached hereto as
Exhibit J or as otherwise mutually agreed, which shall include a description of
the services to be rendered, any milestones or delivery dates or other terms
relevant to such engagement.
B. OTHER ENGINEERING SERVICES. The Parties acknowledge that Buyer may
desire to engage Seller for other engineering services relating to the Products.
If Seller agrees to such engagement, the Parties shall execute a Statement of
Work in the form attached hereto as Exhibit J or as otherwise mutually agreed
and which shall include a description of the services to be rendered and any
milestones or delivery dates or other terms relevant to such engagement.
C. PERFORMANCE METRICS FOR SERVICES. Specific performance metrics for
Seller for a specific service may be set forth in the corresponding Exhibit J or
as otherwise mutually agreed. Where none is set forth, Seller shall use
reasonable efforts to provide services in accordance with the policies,
procedures and practices in effect before the date hereof and shall exercise the
same care and skill as it exercises in performing similar services for itself.
D. PAYMENT TERMS. Prices for services shall be set forth in the
applicable Exhibit J. Seller shall invoice Buyer on a monthly basis for all
charges for services rendered pursuant to this Agreement. Such invoices shall be
accompanied by reasonable documentation or other reasonable
16
explanation supporting such charges. Buyer shall pay Seller for all services
provided hereunder within thirty (30) Days after receipt of an invoice therefor.
24. INTELLECTUAL PROPERTY RIGHTS
A. BUYER OWNERSHIP. Except as set forth in Section 24B below, Buyer shall
exclusively own all right, title and interest in all results and proceeds of the
services rendered by Seller hereunder (the "Services"), including without
limitation, in any work of authorship, mask work, idea, design, concept,
technique, invention or discovery, whether or not patentable or registerable
("Assigned Inventions"), and Seller hereby irrevocably transfers and assigns to
Buyer all right, title and interest, including without limitation all IP Rights,
in the Assigned Inventions. As used herein, "IP Rights" shall mean all
copyrights, maskwork rights, patents and other intellectual property or
proprietary rights. In addition, the Parties expressly agree to consider as
works made for hire those works ordered or commissioned by Buyer which qualify
as such in accordance with the copyright laws. For all of the Assigned
Inventions, Seller agrees to provide documentation satisfactory to Buyer to
assure the conveyance of the Assigned Inventions to Buyer. The Assigned
Inventions shall be kept in confidence by Seller and shall be used only in
performing this Agreement and may not be used for other purposes except upon
such terms as may be agreed upon between the Parties in writing. Seller also
agrees to acquire from its employees, agents and contractors, rights and
covenants as to assure that Buyer shall receive the rights provided for in this
Section 24A.
B. SELLER OWNERSHIP. Seller shall exclusively own all IP Rights in all
know-how, technology, processes, procedures, ideas and concepts developed by
Seller or its employees, agents, affiliates or contractors in the course of
manufacturing the Products, any modifications, enhancements, improvements to the
manufacturing processes for the Products, and any other idea, design, concept,
technique, invention or discovery related to the manufacture of the Products
during the Term of this Agreement ("Manufacturing Standards"). For the avoidance
of doubt, (i) Buyer shall retain all IP Rights to all manufacturing processes,
know-how and other information and materials provided by Buyer to Seller after
the Effective Date of this Agreement to manufacture the Products or perform the
Services ("Buyer IP"), and (ii) Seller shall retain all IP Rights to all
manufacturing processes, know-how, and other information owned by Seller or
developed by Seller other than in connection with the performance of this
Agreement.
C. LICENSE GRANTS. In consideration of Seller's obligations under this
Agreement, Buyer hereby grants Seller a non-exclusive, non-transferable,
royalty-free fully-paid license for the Term of this Agreement to use the Buyer
IP, but solely for the purpose of manufacturing and servicing the Products for
Buyer and any of Buyer's Authorized Agents who purchase under this Agreement,
unless otherwise notified in writing by Buyer. Seller hereby grants to Buyer a
nonexclusive, royalty-free, fully-paid license to use the Manufacturing
Standards in connection with the manufacture of Products by or for Buyer and to
make, have made and distribute the Products manufactured using the Manufacturing
Standards. Upon request from Buyer, Seller shall provide Buyer with such
documents reasonably necessary for Buyer to document and duplicate the
Manufacturing Standards for the Products.
17
D. BUYER TRADEMARKS. Buyer authorizes Seller to affix and apply the Buyer
Trademarks to the Products as directed by Buyer for the sole purpose of
manufacturing the Products pursuant to this Agreement. Seller shall not use
Buyer Trademarks for any other purpose and only in such manner as to preserve
all rights of Buyer. Seller acquires no right to Buyer Trademarks by its use and
all uses by Seller of the Buyer Trademarks will inure to Buyer's sole benefit.
As used herein, "Buyer Trademarks" means those trademarks, trade names, service
marks, slogans, designs, distinctive advertising, labels, logos, and other
trade-identifying symbols as are or have been developed and used by Buyer or any
of its subsidiaries or affiliate companies and which Buyer owns or has the right
to use.
E. Nothing herein shall be deemed to modify the ownership, license or
other terms of the Intellectual Property License Agreement of even date herewith
between 3Com Corporation and Manufacturers' Services Limited ("MSL") or the
Asset Purchase Agreement dated as of November 19, 1999, between 3Com
Corporation, on the one hand, and Seller and MSL, on the other hand (the "Asset
Purchase Agreement").
25. TERMINATION FOR CAUSE
This Agreement or any Purchase Order may be terminated immediately for
cause by either Party upon notice to the other Party for the following:
(i) the other Party makes a general assignment for the benefit
of creditors, or a receiver or similar officer is appointed to take charge of
any of the other Party's assets;
(ii) the other Party enters into any composition with creditors
or is subject to an order made or resolution passed for it to be wound up or for
the appointment of a judicial manager;
(iii) the other Party ceases to carry on its business or
operations;
(iv) a bankruptcy or similar petition is filed by or against the
other Party, and in the case of an involuntary petition, the proceeding is not
dismissed within sixty (60) Days; or
(v) the other Party fails to meet the Performance Standards set
forth in Exhibit F; or
(vi) the other Party fails to perform any material obligation
under this Agreement, and such failure is not cured within thirty (30) Days of
notice thereof.
26. TERMINATION FOR CONVENIENCE
Either Party may terminate this Agreement or any Purchase Order after
expiration of the Initial Term without cause by giving at least [*] written
notice to the other Party. Upon expiration or termination of this Agreement
for any reason, Seller will take commercially reasonable steps to reduce its
liability to vendors. Seller and Buyer may propose specific actions to be
taken in
18
this regard, and if they are unable to reach agreement after a reasonable time,
Buyer will pay Seller an amount equal to the liability for cancelled orders as
set forth in Exhibit D. If the Parties agree to have Seller seek to re-stock or
re-market any Unique Materials, Buyer will compensate Seller for its reasonable
costs, which shall include but not be limited to, cancellation or restocking
charges, costs of preparation and packaging of assemblies or Materials for
shipment to Buyer or any third party authorized by Buyer, and costs of
terminating any open Purchase Orders or contracts which had been authorized by
Buyer. Buyer will have no liability with respect to the payment for non-Unique
Materials.
27. LIMITATION OF LIABILITY
EXCEPT WITH RESPECT TO DAMAGES TO THIRD PARTIES UNDER INDEMNIFICATION
OBLIGATIONS OR WITH RESPECT TO BREACH OF CONFIDENTIALITY OBLIGATIONS, NEITHER
PARTY SHALL BE LIABLE TO THE OTHER UNDER ANY CONTRACT, STRICT LIABILITY,
NEGLIGENCE OR OTHER THEORY FOR ANY INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES
INCLUDING WITHOUT LIMITATION LOST PROFITS IN CONNECTION WITH THE SUBJECT MATTER
OF THIS AGREEMENT OR ANY PURCHASE ORDER IRRESPECTIVE OF WHETHER SUCH PARTY HAD
ADVANCE NOTICE OR KNOWLEDGE OF THE POSSIBILITY OF SUCH DAMAGES.
NOTWITHSTANDING THE FOREGOING, THIS SECTION SHALL NOT LIMIT EITHER PARTY'S
LIABILITY FOR INJURY TO A PERSON OR RELIEVE BUYER'S LIABILITY TO PAY SELLER WHEN
DUE THE PRICE FOR PRODUCTS DELIVERED.
28. FORCE MAJEURE
Neither Party shall be liable hereunder by reason of any failure or delay
in the performance of its obligations hereunder (except for the payment of
money) on account of strikes, shortages, riots, insurrection, fires, flood,
storm, explosions, earthquakes, telecommunications outages, acts of God, war,
governmental action, or any other cause which is beyond the reasonable control
of such Party and could not have been avoided by the exercise of reasonable
prudence. In the event of the occurrence of any force majeure event, the
affected Party shall notify the other Party immediately in writing of its
invocation of this Section 28, and each Party's obligations hereunder (except
for the payment of money) to the other shall be suspended for the duration of
such force majeure event; provided, however, that the affected Party shall be
obligated to use its commercially reasonable efforts to restore performance
hereunder as soon as reasonably practicable, and provided, further, that if such
event continues for more than thirty (30) Days in the aggregate in any six (6)
month period, the non-affected Party shall have the right to terminate this
Agreement at any time upon written notice to the other Party. Seller's
performance under this Agreement in meeting delivery commitments shall be
excused until such time as Seller commences building and delivering Products or
initial SAP implementation is accepted by Seller, such acceptance not to be
unreasonably withheld, provided that, for the avoidance of doubt, such excuse
does not constitute a force majeure event.
19
29. NONASSIGNABILITY
Neither Party may, directly or indirectly, in whole or in part, whether by
operation of law or otherwise, assign or transfer this Agreement, or any rights
or obligations hereunder, without the other Party's prior written consent, and
any attempted assignment, transfer or delegation without such prior written
consent shall be voidable at the sole option of such other Party.
Notwithstanding the foregoing, each Party (or its permitted successive assignees
or transferees hereunder) may assign or transfer this Agreement as a whole
without consent to an entity that succeeds to all or substantially all of the
business or assets of such Party. Without limiting the foregoing, this Agreement
will be binding upon and inure to the benefit of the Parties and their permitted
successors and assigns.
Notwithstanding the foregoing, Seller shall have the right upon written
notice to Buyer to assign this Agreement to a wholly-owned (direct or indirect)
subsidiary of Seller's ultimate parent, such arrangement not to affect the
guarantee by Manufacturers' Services Limited of this Agreement.
Nothing herein shall prohibit Seller from granting in favor of its lenders
a security interest in any accounts receivable by Seller from Buyer under this
Agreement.
30. NOTICES
A. All notices, reports, requests, acceptances, and other communications
required or permitted under this Agreement shall be in writing and shall
reference this Agreement. They will be deemed delivered:
(i) When delivered in person, or
(ii) When sent by confirmed telex or acknowledged facsimile or
acknowledged e-mail except that the communications referred to in Sections 20E,
25, 26, 28, 29, or 32 may not be sent by e-mail, or
(iii) One Day after having been sent by commercial overnight
courier with written verification of receipt or,
(iv) Five Days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or upon actual
receipt thereof, whichever occurs first. An acknowledged e-mail communication
or fax shall be deemed to be a communication in writing. All communication will
be sent to the receiving Party as follows or to such address that the receiving
Party may designate pursuant to this Section.
If to Seller: Manufacturers' Services Salt Lake City Operations, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: Vice President
20
with a copy to: Manufacturers' Services Limited
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
and to Rod Michael, VP of Corporate Accounts
▇▇▇.▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
If to Buyer: PALM COMPUTING, INC.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Senior Director, Supply
Chain Operations
▇▇▇▇▇▇▇_▇▇▇▇▇▇▇▇@▇▇▇▇.▇▇▇
With a copy to: PALM COMPUTING, INC.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Fax. No. (▇▇▇) ▇▇▇-▇▇▇▇
31. COMPLIANCE WITH LAWS
Seller agrees that its performance under this Agreement shall comply with
all applicable laws including without limitation laws governing its relationship
with its employees, agents or subcontractors. Buyer agrees that its performance
under this Agreement shall comply with all applicable laws including without
limitation laws governing its relationship with its employees, agents or
subcontractors.
32. PATENT, COPYRIGHT AND TRADEMARK INDEMNITY
A. Indemnity by Seller. Seller will, at its expense, defend, indemnify
-------------------
and hold Buyer, its Affiliates, officers and directors harmless from any costs,
expenses (including reasonable attorney's fees), losses, damages, court
judgments or awards or liabilities (collectively, "Damages") incurred as a
result of any claim that any Service or Product provided by Seller to Buyer
pursuant to this Agreement infringes or is alleged to infringe any patent,
copyright, trade secret, trademark, mask work right or other proprietary
right(s) of a third party, but solely to the extent such infringement or alleged
infringement arises out of or relates to a Seller Responsibility; provided that
Seller is promptly notified by Buyer, rendered reasonable assistance by Buyer
(at Seller's expense) and permitted to control the defense or settlement of such
claim. As used herein, "Seller Responsibility" means any respect of the
manufacture of the Products or performance of the Services that is not
specifically required in writing by Buyer in its specified designs, Materials,
processes or other instructions and with respect to which there is a
non-infringing alternative available to implement such requirements, or any
deviations from such requirements by Seller or its agents. For the avoidance of
doubt, a Seller Responsibility occurs with respect to any discretionary action
by Seller in the manner of implementing Buyer's requirements if a non-infringing
alternative exists. Without
21
limiting the foregoing, such indemnification shall not apply to infringing
combinations to the extent arising from the combination of the Product with
other items in which the combination was not performed by Seller or its agents
or from claims for infringement to the extent arising from changes to the
Products not made by Seller or its agents.
B. Indemnity by Buyer. Buyer will, at its expense, defend, indemnify and
------------------
hold Seller and its Affiliates, officers and directors harmless from Damages
incurred as a result of any claim that any Product or Service provided by Seller
to Buyer hereunder infringes or is alleged to infringe any patent, copyright,
trade secret, trademark, mask work right or other proprietary right(s) of a
third party, except to the extent that such infringement or alleged infringement
arises out of or relates to a Seller Responsibility, and except to the extent
Seller has indemnification coverage from the applicable supplier with respect to
any Buyer-Specified Materials Infringement Claim; provided that Buyer is
promptly notified by Seller, rendered reasonable assistance by Seller (at
Buyer's expense) and permitted to control the defense or settlement of such
claim. Such indemnification shall not apply to infringing combinations arising
from the combination of Buyer's requirements with other items that are not
Buyer's requirements.
C. Buyer-Specified Materials Infringement Claim. Seller will use
--------------------------------------------
reasonable commercial efforts to obtain indemnification protection covering
Seller (and Buyer if possible) from its suppliers of Buyer-Specified Materials
for any claim that the Buyer-Specified Materials provided by suppliers infringes
or is alleged to infringe any patent, copyright, trade secret, trademark, mask
work, or other proprietary right(s) of a third party (a "Buyer-Specified
Materials Infringement Claim"), and Seller will use reasonable commercial
efforts to pass through to Buyer any indemnification protection that is so
obtained. As used herein, "Buyer-Specified Materials" means any Materials that
are specifically required in writing by Buyer and with respect to which there is
no non-infringing alternative available to implement such requirement. Where
Seller has obtained indemnification protection from a supplier of Buyer-
Specified Materials and is unable to pass through such indemnification
protection to the Buyer and a Buyer-Specified Materials Infringement Claim is
made against Buyer, Seller agrees that it will indemnify Buyer for Buyer's
Damages incurred as a result of such Buyer-Specified Materials Infringement
Claim, but such indemnification by Seller shall be provided only to the extent
Seller is able to obtain indemnification from such supplier using reasonable
commercial efforts and after application of such indemnification amount against
Damages incurred by Seller in connection with such Buyer-Specified Materials
Infringement Claim. All reasonable costs of outside counsel pre-approved by
Buyer to enforce such indemnification protection from such supplier of
Materials, to the extent incurred in respect of Seller's indemnification of
Buyer under this Section 32C, shall be reimbursed by Buyer.
D. Additional Obligations. Should the use of any Product by Buyer or
----------------------
its customers be enjoined because of a Seller Responsibility, Seller shall (or
in the event Seller wishes to minimize its potential liability hereunder arising
from an infringement claim based on a Seller Responsibility, Seller may) either
(i) substitute a fully equivalent non-infringing unit of the Product for each
affected unit of the Product sold to Buyer; (ii) modify the infringing Product
so that it no longer infringes but remains functionally equivalent; (iii) obtain
for Buyer, at Seller's expense, the right to
22
continue to make, use and sell the Product; or if none of the foregoing is
feasible (iv) refund to Buyer the purchase price paid therefor and accept return
of the infringing Products.
33. CAPACITY PLANNING
A. Seller agrees to review forecasts provided by Buyer and advise Buyer
if Seller anticipates that it will be unable to achieve the requested volumes.
Buyer's volume forecasts will be provided to Seller according to Section 5.
Seller may from time to time request Buyer to review Buyer's forecast and advise
of any changes and Buyer will do so. Seller agrees to provide Buyer with either
1) confirmation of feasibility of the forecast received, or 2) notice of
specific feasibility issues with the forecast received within five (5) Days of
receiving said forecast.
B. If Buyer's rolling forecast exceeds Seller's available maximum
capacity for Buyer, Seller shall advise Buyer of the limitations in the capacity
and provide a response in writing as described in the Purchase Order and rolling
forecast articles.
34. GRATUITIES
Each Party represents and warrants that it has not offered or given and
will not offer or give any employee, agent, or representative of the other Party
any gratuity with a view toward securing any business from the other Party or
influencing such person with respect to the business between the Parties.
35. INSURANCE AND STATUTORY OBLIGATIONS
If either Party's work under this Agreement requires access to any of the
other Party's premises or the premises of the other Party's buyers, suppliers,
or locations where the other Party conducts business, or with material or
equipment furnished by the other Party, both Parties shall take all necessary
precautions to prevent the occurrence of any injury to persons or property
during the progress of such work and, except to the extent that such injury is
due to the other Party's negligence or willful misconduct, each Party shall
indemnify the other Party against all loss which may result in any way from any
negligence or willful misconduct of the Party, its employees, servants, agents,
or subcontractors, and each Party shall maintain such insurance as shall protect
the other Party from such risks and from any statutory liabilities arising
therefrom and shall provide evidence of such insurance to the other Party upon
request.
36. INSURANCE COVERAGE
A. Seller will provide evidence of product liability insurance in a form
reasonably acceptable to Buyer in the amounts of [*] per occurrence and [*]
aggregate per year, will maintain in effect such insurance for a period of [*]
after termination of such Agreement, and will provide Buyer with a certificate
of insurance.
B. Buyer will provide evidence of product liability insurance in a form
reasonably acceptable to Seller in the amounts of [*] per occurrence and [*]
aggregate per year,
23
and will maintain in effect such insurance for a period of [*] after
termination of such Agreement and will provide Seller with a certificate of
insurance.
37. CONFIDENTIAL INFORMATION
A. "Confidential Information" means any information: (i) disclosed by one
------------------------
Party (the "Disclosing Party") to the other (the "Receiving Party"), which, if
in written, graphic, machine-readable or other tangible form is marked as
"Confidential" or "Proprietary," or which, if disclosed orally or by
demonstration, is identified at the time of initial disclosure as confidential
and is summarized in writing and similarly marked and delivered to the Receiving
Party within thirty (30) Days of initial disclosure; (ii) which at the time it
is disclosed is or should reasonably be known by the Receiving Party to be
proprietary or confidential information of the Disclosing Party, or (iii) which
is otherwise deemed to be "Confidential Information" by the terms of this
Agreement. Notwithstanding the foregoing, Buyer's Confidential Information
shall include without limitation all Specifications of the Product. As used in
this Section 37A, the terms "Receiving Party" and "Disclosing Party" may be
understood to include, as appropriate under the circumstances, 3Com or its
subsidiaries or Palm or its subsidiaries, as applicable, and MSL or the MSL
Affiliates.
B. Confidential Information Exclusions. Confidential Information will
-----------------------------------
exclude information that the Receiving Party can demonstrate is: (i) now or
hereafter, through no unauthorized act or failure to act on Receiving Party's
part, in the public domain; (ii) known to the Receiving Party from a source
other than the Disclosing Party (including former employees of the Disclosing
Party) without an obligation of confidentiality at the time Receiving Party
receives the same from the Disclosing Party, as evidenced by written records;
(iii) hereafter furnished to the Receiving Party by a third party as a matter of
right and without restriction on disclosure; (iv) furnished to others by the
Disclosing Party without restriction on disclosure; or (v) independently
developed by the Receiving Party without use of the Disclosing Party's
Confidential Information. Nothing in this Agreement shall prevent the Receiving
Party from disclosing Confidential Information to the extent the Receiving Party
is legally compelled to do so by any governmental investigative or judicial
agency pursuant to proceedings over which such agency has jurisdiction;
provided, however, that prior to any such disclosure, the Receiving Party shall
(a) assert the confidential nature of the Confidential Information to the
agency; (b) immediately notify the Disclosing Party in writing of the agency's
order or request to disclose; and (c) cooperate fully with the Disclosing Party
in protecting against any such disclosure and/or obtaining a protective order
narrowing the scope of the compelled disclosure and protecting its
confidentiality.
C. Confidentiality Obligation. The Receiving Party shall treat as
--------------------------
confidential all of the Disclosing Party's Confidential Information and shall
not use such Confidential Information except as expressly permitted under this
Agreement. Without limiting the foregoing, the Receiving Party shall use the
same degree of care and means that it utilizes to protect its own information of
a similar nature, but in any event not less than reasonable care and means, to
prevent the unauthorized use or the disclosure of such Confidential Information
to third parties. The Confidential Information may be disclosed only to
employees or contractors of the Receiving Party with a "need to know" who are
instructed and agree not to disclose the Confidential Information and not to use
the Confidential
24
Information for any purpose, except as set forth herein; provided, however, in
the case of Buyer, the term "employees or contractors of a Receiving Party"
shall include employees and contractors of Buyer and its Authorized Agents (but
with respect to Authorized Agents who are not Affiliates disclosure shall be
limited to the extent necessary to enable such Authorized Agents to purchase
under this Agreement). The Receiving Party shall have appropriate written
agreements with any such employees or contractors sufficient to comply with the
provisions of this Agreement. A Receiving Party may not alter, decompile,
disassemble, reverse engineer, or otherwise modify any Confidential Information
received hereunder and the mingling of the Confidential Information with
information of the Receiving Party shall not affect the confidential nature or
ownership of the same as stated hereunder.
D. Confidentiality of Agreement. Each Party agrees that the terms and
----------------------------
conditions, but not the existence, of this Agreement will be treated as the
other Party's Confidential Information and that no reference to the terms and
conditions of this Agreement or to activities pertaining thereto may be made in
any form of press release or public statement without first consulting with the
other Party; provided, however, that each Party may disclose the terms and
-------- -------
conditions of this Agreement: (i) as may be required by law; (ii) to legal
counsel of the Parties; (iii) in connection with the requirements of an initial
public offering or securities filing; (iv) in confidence, to accountants, banks,
and financing sources and their advisors; (v) in confidence, in connection with
the enforcement of this Agreement or rights under this Agreement; or (vii) in
confidence, in connection with a merger or acquisition or proposed merger or
acquisition, or the like.
E. No Confidential Information of Other Parties. Each Party represents
--------------------------------------------
and warrants to the other that it has not used and shall not use in the course
of its performance hereunder, and shall not disclose to the other, any
confidential information of any third party, unless it is expressly authorized
in writing by such third party to do so.
F. Required Disclosure. In the event the Receiving Party is required to
-------------------
disclose the Disclosing Party's Confidential Information pursuant to the order
or requirement of a court, administrative agency, or other governmental body,
the Receiving Party shall provide prompt notice thereof to the Disclosing Party
and shall use its reasonable efforts to obtain a protective order or otherwise
prevent public disclosure of such information.
38. PUBLIC ANNOUNCEMENTS.
Seller and Buyer agree to consult with each other before issuing any press
release or making any public statement with respect to this Agreement prior to
the Closing Date (as such term is defined in the Asset Purchase Agreement) and,
except as may be required by applicable law will not issue any such press
release or make any such public statement prior to such consultation. Seller
and Buyer agree that the initial press release to be jointly issued by the
Parties with respect to the transactions contemplated by this Agreement shall be
in the form heretofore agreed.
25
39. COUNTRY OF ORIGIN
For each Product purchased under this Agreement, Seller shall furnish Buyer
with country of origin (manufacture), by quantity and part number (Buyer's and
Seller's).
40. PROPERTY FURNISHED BY BUYER
Any tools, drawings, specifications, or other Materials furnished by Buyer
for use by Seller in its performance under this Agreement or any Purchase Order
issued hereunder shall be identified and shall remain the property of Buyer and
shall be used by Seller only in its performance hereunder and Seller shall, at
Buyer's expense, take such action as Buyer may reasonably request to give full
legal effect to Buyer's rights therein. Such property shall be returned to
Buyer at Buyer's cost, upon request, to destination specified by Buyer in good
condition, except for normal wear and tear. Buyer shall maintain, or pay to
maintain, any Buyer-owned property in use by Seller.
41. GENERAL
A. Any obligations and duties which, by their nature, extend beyond the
expiration or earlier termination of this Agreement, including Sections 18, 20,
24, 26, 27, 30, 32, 36, 37, 40, and 41 (collectively, the "Surviving
Obligations") shall survive any such expiration or termination and remain in
effect. Termination shall not relieve any Party from its liability for breach.
B. If any provision or provisions of this Agreement shall be held to be
invalid, illegal or unenforceable, such provision shall be enforced to the
fullest extent permitted by applicable law and the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby. Any waiver of any kind by a Party of a breach of this
Agreement must be in writing, shall be effective only to the extent set forth in
such writing and shall not operate or be construed as a waiver of any subsequent
breach. Any delay or omission in exercising any right, power or remedy pursuant
to a breach or default by a Party shall not impair any right, power or remedy
which either Party may have with respect to a future breach or default.
C. To the extent the laws of the United States are applicable, Seller
hereby gives assurance to Buyer that it shall not export, re-export or otherwise
disclose, directly or indirectly, technical data received from Buyer or the
direct product of such technical data to any person or destination when such
export, re-export or disclosure is prohibited by the laws of the United States
or regulations of a Department of the United States . This Agreement is
considered to be Buyer and Seller Confidential Information.
D. The entire agreement between the Parties is incorporated in this
Agreement and Exhibits, and it supersedes all prior discussions and agreements,
both oral and written, between the Parties relating to the subject matter
hereof. This Agreement can be modified only by a written amendment duly signed
by persons authorized to sign agreements on behalf of both Parties, and shall
not be supplemented or modified by any course of dealing or trade usage.
Variance from or addition to the terms and conditions of this Agreement in any
Purchase Order, or other written notification from Seller will be of no effect.
This Agreement may be signed in any number of counterparts, each of
26
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Agreement shall become effective
when each party hereto shall have received a counterpart hereof signed by the
other party hereto.
E. Exhibits specified in this Agreement shall be attached hereto and by
this reference are made a part hereof. The following is a list of exhibits so
incorporated:
Exhibit A: Products and Pricing and No Defect Found Charge
Exhibit B: Specifications and IPC 610B Class 2
Exhibit C: Buyer's Pack-Out and Packaging Specifications
Exhibit D: Flexibility Parameters
Exhibit E: Buyer's Affiliates and Authorized Agents
Exhibit F: Performance Standards
Exhibit G: Build Request Process Flow
Exhibit H: Long Leadtime Authorization Form
Exhibit I: Environmental Warranties
Exhibit J: Statement of Work
F. The construction, validity, and performance of this Agreement and any
Purchase Order issued under it shall be governed by the laws of the State of New
York. The United Nations Convention on Contracts for the International Sale of
Goods is hereby expressly excluded from application to this Agreement.
G. Each of the Parties agrees that all actions, suits or proceedings
arising out of or based upon this Agreement or the subject matter hereof shall
be brought and maintained exclusively in the state or federal courts located in
the State of New York . Each of the parties by execution hereof (i) hereby
irrevocably submits to the jurisdiction of the state and federal courts located
in the Borough of Manhattan, City of New York, State of New York for the purpose
of any action, suit or proceeding arising out of or based upon this Agreement or
the subject matter hereof and (ii) hereby waives to the extent not prohibited by
applicable law, and agrees not to assert, by way of motion, as a defense or
otherwise, in any such action, suit or proceeding, any claim that it is not
subject personally to the jurisdiction of the above-named court, that it is
immune from extraterritorial injunctive relief, that his or its property is
exempt or immune from attachment or execution, that any such action, suit or
proceeding may not be brought or maintained in the above-named court should be
dismissed on the grounds of forum non conveniens, should be transferred to any
court other than the above-named court, should be stayed by virtue of the
pendency of any other action, suit or proceeding in any court other than the
above-named court, or that this Agreement or the subject matter hereof may not
be enforced in or by the above-named court. Each of the parties hereto hereby
consents to service of process in any such suit, action or proceeding in any
manner permitted by the laws of the State of New York, agrees that service of
process by registered or certified mail, return receipt requested, at the
address specified in or pursuant to Section 30 hereof is reasonably calculated
to give actual notice and waives and agrees not to assert by way of motion, as a
defense or otherwise, in any such action, suit or proceeding any claim that
service of process made in accordance with Section 30 hereof does not constitute
good and sufficient service of process. The
27
provisions of this Section 41G shall not restrict the ability of any party to
enforce in any court any judgment obtained in the state or federal courts
located in the State of New York. [*]
H. Buyer and Seller agree to conduct joint quarterly business reviews with
Senior Management of both Parties for the purpose of reviewing the ongoing
operational performance of Buyer and Seller as it relates to this Agreement,
discuss anticipated business conditions, corrective and preventive action plans
as necessary and appropriate respective strategic business decisions.
28
IN WITNESS, the authorized representatives of the Parties have executed this
Agreement.
For the Buyer: For the Seller:
/s/ Manufacturers' Services
/s/ Palm Computing, Inc. Salt Lake City Operations, Inc.
--------------------------------- --------------------------------------
Signature Signature
Name:____________________________ Name:________________________________
Title:___________________________ Title:_______________________________
11/27/99 11/27/99
--------------------------------- --------------------------------------
Date Date:
MSL hereby joins this Agreement for the purposes set forth in this
paragraph. MSL hereby guarantees to Buyer the performance by Seller of the
obligations of Seller under this Agreement, and, in the event of default by the
Seller of any such obligations, MSL agrees to perform all such obligations as if
MSL were Seller under this Agreement (subject to any limitations which would
apply if MSL were Seller under this Agreement), and to indemnify and hold
harmless Buyer from any loss, costs or damages arising out of any failure of the
Seller to perform any such obligations (subject to any limitations which would
apply if MSL were Seller under this Agreement).
MSL hereby expressly waives (a) diligence, presentment, demand for payment,
acceptance or protest under this Agreement; (b) discharge due to the disability
of Seller with respect to its obligations under this Agreement; (c) any
requirement that Buyer exhaust any right, power or remedy or proceed against
Seller or any other person that may be liable for any obligations of Seller
hereunder and (d) notice of acceptance of its obligations under this Agreement
and notice of non-performance by Seller. MSL specifically agrees that it shall
not be necessary or required, and MSL shall not be entitled to require, that
Buyer (i) file suit or proceed to assert any claim for personal judgement
against Seller in respect of any obligations hereunder; (ii) make any effort at
collection, enforcement or recovery of all or any part of any obligations
hereunder from Seller; or (iii) exercise or assert any other right or remedy to
which Buyer is or may be entitled in connection with any such obligations
hereunder. Following the Effective Date, Seller and Buyer may amend or modify
this Agreement, or settle or comprise any claim hereunder or thereunder, without
consent of or notice to MSL. MSL assumes all responsibility for keeping
apprised of the financial condition of Seller and its performance under this
Agreement. To the extent any of the following are deemed applicable, MSL
expressly waives, to the extent permitted by law, the benefit of California
Civil Code Sections 2809, 2810, 2819, 2839, 2845, 2848, 2849, 2850, 2899 and
1432. MSL further agrees to be bound by Section 41G in connection with disputes
arising under this Agreement. MSL hereby represents and warrants to Buyer that
it has all requisite power and authority to join this Agreement for the limited
purposes stated in this paragraph and perform its obligations pursuant to this
Agreement. MSL's
29
obligations hereunder shall survive any termination of this Agreement with
respect to the Surviving Obligations and any liability of Seller arising out of
the terminated Agreement.
For MSL:
/s/ MSL
----------------------------------
Signature
Name:_____________________________
Title:____________________________
11/27/99
----------------------------------
Date
30
EXHIBIT A
---------
PRODUCTS AND PRICING AND NO DEFECT FOUND CHARGE
PRICING
Prior to the end of each [*], or as mutually agreed by both parties, the Parties
will conduct a review of the unit price of the ▇▇▇▇ of Material (BOM) for each
Product manufactured hereunder. Any price reductions in the unit price of the
Product's BOM that Buyer controls that is in excess of what Buyer would have
otherwise attained that results from Seller's negotiations of Materials cost or
design or other improvements originated by Seller shall be shared [*] with Buyer
[*] and then pass fully to Buyer. [*] associated with [*] will be [*] prior to
the calculation of the percentage savings split [*] between the Parties. Any
price reductions in the Product's BOM that Buyer controls that are a result of
normal takedown rates in the market or are initiated by Buyer shall pass fully
to Buyer. During such meetings the Parties will, in addition to reviewing the
previous [*] takedowns, also review projections for the next [*].
Pricing will be done at a SKU or Product level.
Prices for Products will be set at the end of each [*] for the subsequent
[*] and will be established based on the following approach:
Buyer Controlled Materials - Prices for Buyer Controlled Materials will be
provided by Buyer, and should be based on [*] over the [*]. If it is expected
that [*] will [*] then a [*] will be used. In any event, any [*] on Buyer
Controlled Materials [*] will be [*] subject to [*] at a Materials level.
Seller Controlled Materials - Prices for Seller Controlled Materials will
be established by applying the [*] in Table A-2 to the [*] for these Materials.
The [*] for these Materials are the [*] for such Materials.
Value Add - Prices for the [*] following the Closing ("[*]") are shown in
Table A-1. Prices for the [*] through the [*] will be established by applying
the [*] in Table A-1 to the [*] prices.
[*] in Table A-1 are [*].
Pack-Out - Pack-out prices for those Products manufactured elsewhere (i.e.,
not by Seller) and packed-out by Seller under this Agreement are shown
separately in Table A-3.
A-1
SKU Price = [*].
For Products not produced in [*] but produced in a [*], the
pricing on Seller Controlled Materials and Value Add will be computed as
though the Product were produced and priced in each [*] schedule in Table A-1.
[*] on the Seller Controlled Materials may be [*] prior to the start of the
[*].
Pricing on new Products:
Prices on new Products will be established as follows:
Buyer Controlled Materials - provided by [*].
Seller Controlled Materials - to be priced [*]. [*] to be negotiated.
Value Add - [*].
The required [*] shown in Table A-1 will then [*].
From time to time, [*] may be put in to [*]. The Value Add price per unit
[*].
If the Product is deemed by both Parties to be unlike any other in the SLC
factory then the pricing will be determined on [*] compared to the [*] in the
factory (such times to be mutually agreed), unless otherwise mutually agreed
by both parties.
Example,
Product A produced in SLC facility
-- [*]
-- Value Add per unit [*]
New Product
-- [*]
-- Value Add per unit = [*]
A-2
This approach applies if the Product is [*].
SKU Price = [*].
[*]
Required [*] for the Initial Term of the Agreement are set forth in Table
A-1 (provided that such required [*] shall be subject to [*]. For the
avoidance of doubt, it shall not be [*].
A-3
[*]
A-4
[*]
A-5
Definitions: . "Buyer Controlled" Materials under this Exhibit A shall mean
those Materials in the BOM [*].
. "Seller Controlled" Materials under this Exhibit A shall mean
those Materials in the BOM [*].
. Value Add - Encompasses [*].
. Packout Price - [*] in accordance with this Agreement.
. Materials Prices are driven off [*].
[*] Threshold Level
-------------------
Within any given [*] if Buyer's [*] set forth below, then [*]. The
exception to this [*] is if the [*] were due to [*].
[*]
PALM VIEWER PRODUCTS MANUFACTURING AND PACK-OUT
-----------------------------------------------
Product
-------
Palm V [*]
A-6
---------------------------------------------------------------------------
Palm Vx [*]
---------------------------------------------------------------------------
Palm IIIx [*]
---------------------------------------------------------------------------
Palm IIIc [*]
---------------------------------------------------------------------------
Co-Pilot Modem
______________________
PALM PRODUCTS - PACK-OUT ONLY
-----------------------------
Product
-------
---------------------------------------------------------------------------
Palm IIIe [*]
__________
Blade Modem
-----------
A-7
EXHIBIT B
---------
SPECIFICATION AND IPC610B CLASS 2
Specifications shall be the existing specifications for the Products in use
at the Salt Lake City facility, or as otherwise mutually agreed. Upon request
from either Party, the Parties will mutually agree on additional documentation
of such Specification.
B-1
EXHIBIT C
---------
BUYER'S PACK-OUT AND PACKAGING SPECIFICATIONS
Specifications shall be the existing specifications for the Products in use
at the Salt Lake City facility, or as otherwise mutually agreed. Upon request
from either Party, the Parties will mutually agree on additional documentation
of such Specification.
C-1
EXHIBIT D
---------
FLEXIBILITY PARAMETERS
Cancellation and Change Schedule:
---------------------------------
A. Cancellations:
Buyer may cancel Purchase orders at any time with the following liability:
[*].
Excess and Obsolete Materials are subject to the charges as described in
Sections 7 and 8.
B. Outward Reschedules:
Days before scheduled Delivery Date Allowable percentage of Reschedules
-------------------------------------- ---------------------------------------
[*] [*]
Flexibility Reschedules: Buyer and Seller will mutually determine the
amount of Materials to be held in inventory to provide flexibility. Seller will
drive initiatives to create Product and component flexibility through innovative
Demand Pull signals that trigger demand to build product based upon Seller sales
order activity. This demand signal will be used as a pull signal throughout the
Seller's manufacturing process. The SMT line should be triggered to build upon
demand and trigger pulling raw components into the factory from a VMI model.
Days before
scheduled delivery
date Committed flexibility
---------------------- -----------------------------------------------------------------------
Zero (0) to seven (7) [*], Seller will [*].
Greater than seven (7) [*] of the available Materials stock.
Buyer and Seller will review all options available and any premiums
required to provide Buyer both expedited replenishment and maximum upward
flexibility.
D-1
EXHIBIT E
---------
BUYER'S AFFILIATES AND AUTHORIZED AGENTS
Affiliates: None
----------
Authorized Agents: None
------------------
E-1
EXHIBIT F
PERFORMANCE STANDARDS
Performance Standards for the [*] following the Effective Date shall be the
existing performance standards for the Products in use at the Salt Lake City
facility, or as otherwise mutually agreed. Upon request from either Party, the
Parties will mutually agree on additional documentation of such Performance
Standards. Performance Standards for [*] shall be mutually agreed by the Parties
prior to the commencement of the [*] following the Effective Date and shall
include such existing performance standards at a minimum, which standards shall
be developed to phase-in the performance expectations of Buyer's internal or
external manufacturing facilities, if applicable to the manufacturing of the
Products.
F-1
EXHIBIT G
---------
BUILD REQUEST PROCESS FLOWCHART
Build Request Process Flow
[*]
G-1
EXHIBIT H
---------
LONG LEADTIME AUTHORIZATION FORM
The following is a sample of the long leadtime authorization form to be
completed by Seller and submitted to Buyer for approval in accordance with
Section 4J. The parties may amend this form upon mutual agreement.
In accordance with Section 4J of the Supply Agreement dated as of November
27, 1999, between Seller and Buyer, Seller requests authorization from Buyer to
order Materials beyond the quoted leadtime plus 10 day period based on unique
circumstances for the following devices.
Affected Buyer division:
Buyer Part Number:
Description of material:
Affected assemblies:
Name of supplier(s) of material:
Reason/justification for requested authorization:
New order leadtime period requested:
Duration of this long leadtime authorization:
Seller
By:_____________________________
Print Name:_____________________
Title:__________________________
Date:___________________________
Approved:
________________________________
Buyer
By:_____________________________
Print Name:_____________________
Title:__________________________
Date:___________________________
H-1
EXHIBIT I
---------
ENVIRONMENTAL WARRANTIES
To the extent the Products manufactured at the Salt Lake City facility
are compliant with the following as of the Effective Date and with respect to
any changes made by Seller after the Effective Date, Seller represents and
warrants to Buyer that upon and after the Effective Date of this Agreement:
(i) Seller will not provide any Product to Buyer which has come into
physical contact with: (i) a Class I substance, as defined in Article 611 of the
Federal Clean Air Act (the "Act"), during any portion of the manufacturing
process; or (ii) a Class II substance, as defined in the Act and Title 40, Code
of Federal Regulations, Article 82 (the "Code"), during any portion of the
manufacturing process, where there has been a determination by the U.S.
Environmental Protection Agency that there is a substitute product or
manufacturing process for such product which does not rely on the use of such
Class II substance, that reduces overall risk to human health and the
environment, and that is currently or potentially available, in accordance with
the Code.
(ii) Buyer shall not be subjected to any warning or labeling
requirements regarding a Class I substance or a Class II substance pursuant to
the Act or any regulation promulgated under the Act, as a result of any Product
provided by Seller to Buyer under this Agreement. Seller shall comply with
applicable environmental regulations involving recyclable packaging to the
extent such packaging is not specified by Buyer.
(iii) The Products will not contain or be manufactured using ozone
depleting substances including without limitation chloroflourocarbons, halons,
methylchloroforms and carbon tetrachlorides.
In the event that the Salt Lake City facility is not compliant with
any of the foregoing as of the Effective Date, the Parties will work to develop
and implement a plan to achieve compliance on a going-forward basis.
I-1
EXHIBIT J
---------
STATEMENT OF WORK
PROTOTYPING SERVICES:
Qty: [*] notice, [*]
Qty: [*] notice, [*]
Qty: [*] notice, [*]
Qty: [*] notice, [*]
Qty: [*] notice, [*]
Pricing is exclusive of Materials and tooling.
Buyer expects some ongoing small runs of builds (typically [*] units) for
component qualification purposes (using production boards). Buyer expects to
give [*] notice, have turnaround time of [*] and pay [*] premium on top of
normal information cost. [*] turn requests for the same purposes will be paid at
[*] premium on top of normal information cost.
J-1