CONFIDENTIAL TREATMENT REQUESTED
Exhibit 10.15
CONFIDENTIAL TREATMENT REQUESTED: Certain portions of this document have been
omitted pursuant to a request for confidential treatment and, where applicable,
has been marked with an asterisk to denote where omissions have been made. The
confidential material has been filed separately with the Commission.
GLOBAL SUPPLY AGREEMENT
APPLIED MATERIALS CONFIDENTIAL
This Global Supply Agreement dated and effective as of June 1, 2002 is by and
between Applied Materials, Inc., a Delaware corporation, having places of
business in Santa Clara, California and Austin, Texas, and Kinetics Fluid
Systems, Inc., a California corporation, having places of business in Santa
Clara, California, and Austin, Texas.
In consideration of the mutual promises and consideration provided for in this
Agreement, the parties agree as follows:
DEFINITIONS
The following capitalized terms will have the meanings given below when used in
this Agreement:
"Agreement" means this Global Supply Agreement, all its Exhibits and
Attachments, and all Specifications for Items, all as amended from time to time,
and all Applied Purchase Orders and other Authorized Demand Signals that may be
issued for the purchase of Items (including Services). When used with reference
to the purchase of a particular Item or Items, "Agreement" means those
provisions of the foregoing that apply to such Item or Items and to the
transaction for such purchase.
"Applied's Standard Terms and Conditions of Purchase" means Exhibit 1 to this
Agreement.
"Applied" means Applied Materials, Inc., and all of its domestic and
international divisions and subsidiaries.
"Applied IP" has the meaning given in the IPA.
"Applied System(s)" means capital equipment sold by Applied that incorporates a
Fluid Delivery System.
"Asset Purchase Agreement" means the Asset Purchase Agreement dated June 25,
1999 between Applied Materials, Inc. and Kinetics Fluid Systems, Inc., as
amended and supplemented from time to time.
"Attachment" means one of the documents, records or instruments identified as an
"Attachment" on the List of Exhibits and Attachments set out in this Agreement.
CONFIDENTIAL TREATMENT REQUESTED
"Authorized Demand Signal" means an order or record issued by Applied to
Supplier pursuant to Section 2.1.5.1.
"Bus Route" or "Blanket Order" means an arrangement, method or agreement for the
order and purchase of goods under which the buyer issues a standing, blanket or
open order (under which quantities may be indeterminate, forecasted, or
otherwise provided for) and then periodically specifies quantities for delivery
through summary orders, issuance of a purchase order document, or by electronic
or other notice.
"Business Day" means a day that is not a Saturday, a Sunday, or a holiday or
operating shut down day under the most current fiscal year operating calendar of
Applied in effect under this Agreement.
"Committed Delivery Date" means the date on which Supplier shall deliver a
completed Item and all required documentation to Applied, as determined under
Sections 2.1.5.2 and 2.1.5.3. As to Services for which a Purchase Order is the
"Authorized Demand Signal," the "Committed Delivery Date" means each date
established by such Purchase Order for completion of Services and delivery of
work product or other deliverables to Applied.
"Confidential Information" means all of the following: (a) "Confidential
Information," as such term is defined by the IPA, a Design SOW, a DSA or a DVA
(each as defined below), (b) Internal Applied Data, as defined below, and new
product plans of Applied that are included as Confidential Information under
Section 2.9.2 below, and (c) "Confidential Information" or "Proprietary
Information" of, or received from, Applied or Supplier, under (and as such
term(s) are defined in) any NDA now in effect or hereafter in effect (but in any
case, only for the period applicable under the IPA, NDA or other agreement, as
applicable).
"Configurable Subassemblies" means those configurable products identified by a
non-repeating part numbering system established by Applied (in which a
Subassembly part numbering follows a particular convention, i.e., XXXX-cont.). A
Configurable Subassembly may contain a number of Piece Parts, Modules or devices
(or a combination thereof) that are electrically and/or mechanically connected
and perform a specific function. An FDS is a Configurable Subassembly.
"Configuration Engineering Services" means the engineering services requested by
Applied and provided by Supplier for Applied (i) in the preparation of the Xxxx
of Materials ("BOM") that conforms to, and is configured to, the requirements of
the standard manufacturing options for an FDS as specified and designed by
Applied (a "Configured BOM"), including system design information identified by
Applied through its Authorized Demand Signal or (ii) in the preparation of a
revised Configured BOM pursuant to a Configuration Change Request.
"CCR Services" means the Configuration Engineering Services or CES Services
provided by Supplier pursuant to Applied's CCR.
"CCR" means Applied's request for CES Services or Configuration Engineering
Services in the revision of a Configured BOM or CES Package, which request is
issued after Supplier's acceptance of the applicable SSR or NSO order.
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CONFIDENTIAL TREATMENT REQUESTED
"Contract Price" means the price for an Item, including a Service, established
by or in accordance with Attachment 1 or, as to Services for which pricing is
not determined under Attachment 1, the price for Services established by or in
accordance with the applicable Applied Purchase Order issued under this
Agreement.
"CES Package" means all documentation, drawings, specifications and information
prepared or provided by Supplier to implement and record a CES.
"CES Services" means the engineering services provided by Supplier pursuant to
Applied's request to Supplier for a Customer Engineering Special.
"CES" or "Customer Engineering Special" means a modification to an existing
standard Fluid Delivery System configuration, wherein the modification involves
either (1) the specification by the customer of alternative Piece Part(s) or
Module(s), or alternative manufacturer of a Piece Part or Module, instead of
Applied's default standard Piece Parts or Modules, or (2) the modification of
the FDS interface to the customer's facility, e.g., power connection(s), gas
connection(s), water connection(s) or physical mounting. CES does not include,
and CES Services do not include engineering or design services required as a
result of, the specification by an Applied customer of a new requirement or
process that requires research and development, or design.
"CPS" means Applied's Installed Customer Productivity Support organization,
formerly known as the Installed Base Service & Support organization, and any
successor organization (such organization being sometimes referred to as "IBSS"
or "CPS").
"Design Services," "Design SOW," "Design Services Agreement," and "DSA" have the
meanings given in the IPA.
"Development Services," "Development Services Agreement," and "DVA" have the
meanings given in the IPA.
"ECO" means an Engineering Change Order issued by Applied to change a
Specification or to make another Engineering Change under (and as defined in)
Section 4.1.1 below or approved by Applied to authorize a change in a
Specification or to make another Engineering Change under Section 4.1.1 below.
"ERS Program" means Applied's "Evaluated Receipts Settlement Program," which is
a system for payment by Applied for Items purchased hereunder, as described in
Section 2.11.1.3 below.
"Exhibit" means one of the documents, records or instruments identified as an
"Exhibit" on the list of Exhibits and Attachments set out in this Agreement.
"FDS" or "Fluid Delivery System" has the meaning given in the IPA. The term FDS
includes (unless otherwise limited by particular provisions of this Agreement)
Volume Manufacturing FDS, Pilot FDS, R&D FDS and NSO FDS.
"First Article" means a new Item, an Item with revised Specifications (including
drawings), or an Item manufactured after a change in Supplier's (or a sub-tier
supplier's) manufacturing location,
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CONFIDENTIAL TREATMENT REQUESTED
manufacturing process or any other change that, pursuant to the QRD (defined
below) or the Quality Framework Document (Attachment 15 to this Agreement),
requires the change or the affected Item to be evaluated and accepted by Applied
prior to delivery to Applied or use in manufacturing of Items under this
Agreement.
"Internal Applied Data" means all non-public, proprietary information from any
source that is recorded, displayed, maintained or accessed on Applied's SPR,
SSR, NSR, CCR or any internal database, subject to the exclusions of Section
4.1, clauses (i) through (v) of the IPA.
"IP Rights" has the meaning given in the IPA.
"Item" or "Items" means FDS(s), Module(s), other Subassembly(ies), Piece Part(s)
and any other good(s) or Service(s) that (a) Supplier is to provide to Applied
under this Agreement pursuant to any Authorized Demand Signal and (b) are
identified in, or have pricing terms determined as set forth in, Attachment 1
and any amendments to Attachment 1 or are identified in and have pricing terms
set forth in an Applied Purchase Order issued as an Authorized Demand Signal
under this Agreement. Items (excluding Services) shall be deemed to constitute
"goods" as that term is defined in, and used in, the Uniform Commercial Code as
adopted in California, including amendments to such statutes. Certain exclusions
affecting "Items" are also set out in Section 1.4 below.
"Manufacturing Process" has the meaning given in the IPA.
"MFC" means mass flow controller.
"Module" means those standard or configurable parts that may be identified by a
single Applied part number, that contain multiple Piece Parts and that are sold
by Supplier to Applied on a recurring basis as separate units or as assemblies
for use in FDSs, NSOs or other fluid delivery products.
"NDA" means any and all agreements between Applied and Supplier for
confidentiality, nondisclosure or limitation on use of Confidential Information.
Such term, unless otherwise indicated in this Agreement, includes the IPA.
"New Product Transition" or "NPT" means the transition, in accordance with
criteria approved by Applied, of an FDS or Applied System from R&D Manufacturing
to Pilot Manufacturing, or from Pilot Manufacturing to Volume Manufacturing.
"New Product Transition Services" or "NPT Services" means the manufacturing,
engineering and documentation preparation services necessary for New Product
Transition. The particular requirements for each NPT Services project will be
defined in Applied's Purchase Order for NPT Services issued pursuant to an
RFP/RFQ process, and will generally include (when appropriate to the particular
project and with compensation to be negotiated) evaluation of product structure
tree(s), identification of open design issues and of product options (released
or not released), appropriate assembly and test fixture specifications,
definition and requirements, engineering of tooling and test fixtures, and
documentation preparation.
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CONFIDENTIAL TREATMENT REQUESTED
"NSO" or "Non-System Order" means a Subassembly or other Item (excluding an FDS)
that (a) is ordered by Applied for Volume Manufacturing, Pilot Manufacturing or
R&D use and (b) either is to be installed or incorporated in a previously
manufactured Configurable Subassembly or is to be used by Applied for R&D
purposes.
"NSR" means a nonstandard request for an Item to be manufactured by Supplier,
which request will include basic process, platform, fab, and chamber information
and other information to describe the Item ordered.
"Piece Parts" means piece parts that are contained in Subassemblies or that are
provided by Supplier to Applied separately from a Subassembly.
"Pilot FDSs" means FDSs manufactured by Supplier for incorporation into Applied
Systems under Applied's Pilot Manufacturing program.
"Pilot Manufacturing" excludes R&D Manufacturing and means (i) manufacturing in
the United States of America of FDSs or Modules that have not been released for
Volume Manufacturing by completion of New Product Transition, and/or (ii)
manufacturing of FDSs or Modules in each other country which is specifically
identified from time to time in an Attachment to this Agreement as a country in
which Supplier may provide FDSs or Modules that have not been released for
Volume Manufacturing by completion of New Product Transition.
"Product Development Process" means Applied's process and management procedures
for its new product development programs employed to control design and delivery
of Applied's products.
"Purchase Order," (i) when used to describe a method of ordering Items, means
that method of ordering (sometimes also referred to as "Spot Buy") under which
Applied issues Authorized Demand Signals in accordance with Section 2.1.5.1,
including SSRs, NSRs and Purchase Orders (as defined in the following clause
(ii)), that identify or describe particular Items to be manufactured or provided
to Applied; and (ii) when used to describe an order issued by Applied for
particular Item(s), means Applied's order for particular Item(s) contained in an
Applied purchase order form, except that the provisions of this Agreement
(including Exhibit 1 to this Agreement) shall be a part of each purchase order
form issued as a Purchase Order under this Agreement and shall supersede and
replace in their entirety the terms and conditions stated on the reverse side of
the purchase order form. The Purchase Order method is distinguished from the Bus
Route method. The Purchase Order method will be utilized for the ordering of
FDSs by Applied from Supplier. When used in Section 2.2.3, "Spot Buy" refers to
Supplier's method, arrangement or agreement for the purchase of Piece Parts
under a Purchase Order method.
"QRD" means the "Quality Requirements Document for Manufactured Assemblies --
Kinetics Gas Systems," attached to this Agreement as Attachment 20, as such
document is modified from time to time.
"R&D" means the development, design and related scientific analysis (a) for new
or modified capital equipment for use or application in any Applied System; and
(b) for the prototype manufacture of such new or modified capital equipment.
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CONFIDENTIAL TREATMENT REQUESTED
"R&D Manufacturing" means the manufacturing of FDSs or Modules on a prototype or
other limited basis for use by Applied for R&D purposes.
"R&D Services" means Design Services and Development Services required for R&D
or R&D Manufacturing. R&D Services may include creation of product definitions
and functional requirements, schematics, product structure trees, electronic
valve assignments, definition of test requirements, determination and resolution
of manufacturing engineering issues, and the manufacture of one or more
prototypes. CES Services are not included in the term R&D Services.
"RFP," "RFQ," or "RFP/RFQ" means, as applicable, Applied's Request for Proposal
or Request for Quotation process, as applicable, or a combination of such
processes.
"SAT" means the Supply Account Team (or successor organization) assigned to
Supplier by Applied.
"Services" means Configuration Engineering Services, CES Services, CCR Services,
NPT Services, Design Services, Development Services, and other services
performed by Supplier for Applied pursuant to this Agreement, the IPA (to the
extent applicable), or (as to Design Services or Development Services) the
relevant DSA or DVA.
"SMT" means Applied's Subsystem Management Team (or successor organization)
assigned to Supplier by Applied.
"Source Inspection" means any inspection at Supplier's facilities required by
the quality provisions of this Agreement, including the QRD or the Quality
Framework, Attachment 15.
"Spares" means Items ordered by Applied's CPS pursuant to Section 2.1.5 below.
"Specifications" means authorized drawings, designs, specifications,
instructions relating to installation, assembly and testing, and manufacturing
and product requirements that are applicable to an Item. Specifications include
any ECOs applicable to an Item and information of the types set out above that
is included in, or referred to in, an SSR, NSR, CCR or Purchase Order issued as
to an Item.
"SPR" or "System Production Report" means, as to Volume Manufacturing FDSs,
Pilot Manufacturing FDSs, and NSO Items, Applied's schedule for anticipated
production of Applied Systems and NSOs, which is posted by Applied from time to
time and updated at least weekly for Supplier's electronic access and review,
identifying the Applied Systems and NSO transactions for which Supplier (subject
to the provisions of this Agreement) is anticipated to provide FDSs or NSOs
under this Agreement.
"Standard Services" means any or all of the following: Configuration Engineering
Services; CCR Services; CES Services; and NPT Services.
"Standard Subassemblies" means those products discretely identified by a single
Applied part number. A Standard Subassembly may contain a number of Piece Parts,
Modules or devices (or
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CONFIDENTIAL TREATMENT REQUESTED
a combination thereof) that are electrically and/or mechanically connected and
performs a specific function.
"Subassemblies" means both Standard Subassemblies and Configurable
Subassemblies.
"Supplier" means Kinetics Fluid Systems, Inc., a California corporation, and (x)
all unincorporated divisions of Kinetics Fluid Systems, Inc. and (y) those
subsidiaries and affiliates of Kinetics Fluid Systems, Inc. that are approved
(through written supplement to this Agreement) by Applied as permitted to
perform supply or service obligations hereunder. Unit Instruments, Inc. shall
not be included in the term "Supplier" unless a written amendment to this
Agreement, executed by all parties, so provides. As set out in Section 1.4
below, this Agreement does not apply to goods, products, parts or services that
are the subject of agreement(s) previously entered into with Applied by Insync
Systems, Inc., even though Supplier has succeeded to such prior agreement(s) by
merger.
"Supplier Performance Plan" means a formal performance plan for Supplier in the
form of Attachment 16, as modified from time to time. Attachment 16 is the
Supplier Performance Plan in effect on the Effective Date.
"System Specification Report" or "SSR" means Applied's internally generated
report of basic process, platform, fab and chamber information and requirements
describing an order for an Applied System requiring FDS or other Item(s), or for
an NSO, from Supplier, as the same is posted by Applied to the Applied website
designated for Supplier access or as otherwise furnished to Supplier.
"UCC" means the Uniform Commercial Code, as adopted, amended and in effect in
the State of California from time to time, which is currently codified in the
California Commercial Code.
"Volume Manufacturing FDSs" means FDSs manufactured by Supplier for
incorporation into Applied Systems in Applied's Volume Manufacturing operations.
"Volume Manufacturing" or "VMO" means (i) manufacturing in the United States of
America of those FDSs or Modules that are released by Applied for Volume
Manufacturing from Pilot Manufacturing following completion of New Product
Transition, and also (ii) manufacturing of FDSs or Modules in each other country
which is specifically identified from time to time in an Attachment to this
Agreement as a country in which Supplier may provide FDSs or Modules that have
been released by Applied for Volume Manufacturing from Pilot Manufacturing
following completion of New Product Transition.
"Will" or "shall" have the same meaning and are used to convey an affirmative
duty or obligation (i.e., a requirement).
Capitalized terms used in this Agreement and defined in other provisions will
have the meanings in this Agreement given in such other provision(s). Unless
otherwise indicated, references to Sections, provisions, paragraphs or like
terms are to such elements of this Agreement and to all subsections or subparts
of the referenced Section, provision or paragraph, and "hereof," "herein" and
like words refer to this Agreement as a whole and not to a particular provision,
also unless otherwise indicated. "Including" or "includes" does not indicate a
limitation. Capitalized terms
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CONFIDENTIAL TREATMENT REQUESTED
defined in the text of this Global Supply Agreement that are also used in its
Attachments or Exhibits are used in the Attachments and Exhibits as defined in
the text of the Global Supply Agreement, unless the context of usage indicates
otherwise.
1. SCOPE.
1.1. Description of Agreement.
This Agreement defines the terms and requirements applicable between Applied and
Supplier with respect to the supply of Items by Supplier to Applied and to
matters related to such supply that are covered by this Agreement; each party
agrees to observe, perform under and comply with this Agreement. Applied may,
from time to time, issue Authorized Demand Signals to Supplier for the purchase
of Items. Upon acceptance (including deemed acceptance) of each Authorized
Demand Signal, and for valuable consideration received, Supplier agrees that it
shall, throughout the term of this Agreement, sell and deliver the Item(s)
covered by each such Authorized Demand Signal under and in compliance with this
Agreement. Decisions regarding future purchases from Supplier will be based in
part upon Supplier's performance under this Agreement, and Supplier's
achievement toward Applied's business objectives.
1.2. Addresses and Contact Persons; Notices.
1.2.1. Contact Persons.
The persons to receive notices generally under this Agreement and the
procedures for notice are set out in Section 1.2.2. The following
individual contact persons are identified for convenience of the
parties and certain of the persons listed below are designated, in
specific sections of this Agreement, as the person(s) to receive or
initiate certain specific notices or actions. Each party may change any
of its contact persons or other information in this Section 1.2.1 from
time to time. Upon any such change, notice of the change shall be given
promptly to the other party through the person(s) specified to receive
notice under Section 1.2.2 below, and until such notice is given the
change shall not be effective as to the other party.
SUPPLIER CONTACT PERSONS: KINETICS FLUID SYSTEMS, INC.
Senior Vice President: Xxx Xxxxxx
Phone: (000) 000-0000
Facsimile: (000) 000-0000
E-mail address: xxxxxxx@xxxxxxxxxxxxx.xxx
Vice President Operations: Xxxx Xxxxxx
Phone: (000) 000-0000
E-mail address: xxxxxxx@xxxxxxxxxxxxx.xxx
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CONFIDENTIAL TREATMENT REQUESTED
Vice President Sales: Xxxx Xxxxxx
Phone: (000) 000-0000
E-mail address: xxxxxxx@xxxxxxxxxxxxx.xxx
Senior Director of Operations - Round Rock Division: Xxxx Xxxxxx
Phone: (000) 000-0000
E-mail address: xxxxxxx@xxxxxxxxxxxxx.xxx
Director of Operations - Milpitas Division: Xxxxxxx Xxxxxxxxx
Phone: (000) 000-0000
E-mail address: xxxxxxxxxx@xxxxxxxxxxxxx.xxx
Customer Service Manager (Austin): Xxxxx Xxxxxxxxxxx
Phone: (000) 000-0000
E-mail address: xxxxxxxxxxxx@xxxxxxxxxxxxx.xxx
Cell phone: (000) 000-0000 Pager: (000) 000-0000
Customer Service Manager (Milpitas): Xxxxxx Xxxxxxxxx
Phone: (000) 000-0000
Email address: xxxxxxxxxx@xxxxxxxxxxxxx.xxx
Cell phone: (000) 000-0000 Pager: (000) 000-0000
Engineering Manager: Xxxx Xxxxxxx
Phone: (000) 000-0000
E-mail address: xxxxxxxx@xxxxxxxxxxxxx.xxx
Quality Manager (Round Rock): Xxxx Xxxxxx
Phone: (000) 000-0000
E-mail address: xxxxxxx@xxxxxxxxxxxxx.xxx
Quality Manager (Milpitas): Xxxx Xxxxxx
Phone: (000) 000-0000
E-mail address: xxxxxxx@xxxxxxxxxxxxx.xxx
Finance Manager (Milpitas): Xxxx Xx
Phone: (000) 000-0000
E-mail address: xxx@xxxxxxxxxxxxx.xxx
Finance Manager (Round Rock): Xxxx Xxxxxxx
Phone: (000) 000-0000
E-mail address: xxxxxxxx@xxxxxxxxxxxxx.xxx
Customer Service Manager-Warranty Claims: Xxxx Kitchen
Phone: (000) 000-0000
E-mail address: xxxxxxxx@xxxxxxxxxxxxx.xxx
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CONFIDENTIAL TREATMENT REQUESTED
Senior Counsel - Austin: Xxxxx Xxxxxx
Phone: (000) 000-0000
E-mail address: xxxxxxx@xxxxxxxxxxxxx.xxx
Milpitas Division Address:
0000 Xxxxxx Xxxxxx Xxxxx, Xxxxxxxx, XX 00000
Austin/Round Rock Division Address:
000 X. Xxxxxx Xxxxx, Xxxxxx, Xxxxx 00000
APPLIED CONTACT PERSON:
Xxxxx Xxxxxx, Supply Account Team Lead, M/S 3300
Applied Materials, Inc., 0000 Xxxxxxx 000X, Xxxxxx Xxxxx 00000
Phone: 000-000-0000
Facsimile: (000) 000-0000 Attn: Xxxxx Xxxxxx
E-mail: Xxxxx_X_Xxxxxx@xxxx.xxx
1.2.2. Notices.
Notices required or permitted under this Agreement shall be given in
writing, which shall include facsimile and e-mail transmission with
receipt confirmed (either electronically or by the recipient or on
behalf of the recipient) to the recipient, at the recipient's current
business address, facsimile number or e-mail address, addressed to
Supplier or Applied, as the case may be, and to the attention of the
persons specified below, except as otherwise provided in this
Agreement. If hand-delivered or transmitted by facsimile or e-mail,
notice is effective at the time of receipt at the designated business
address, facsimile number or e-mail address or on the next Business Day
after receipt if receipt occurs after 5:00 p.m. (local time of
recipient) or on a non-Business Day; if sent by nationally recognized
courier or express service (e.g., Federal Express, Airborne, Express
Mail or equivalent service), or by mail (which shall be certified mail
-- return receipt requested), notice is effective on the Business Day
of receipt, or the next Business Day after receipt, if receipt occurs
on a non-Business Day.
The persons specified to receive notices under the Agreement as
provided in this Section 1.2.2 are:
FOR APPLIED,
Xxxxx Xxxxxx, Supply Account Team Lead, at the address given
above in Section 1.2.1,
with a copy to:
Xxxxx Xxxx, Vice President-Legal Affairs, Applied Materials,
Inc., Legal Department, 0000 Xxxxx Xxxx., Xxxxxxxx 00, Xxxxx
Xxxxx, Xxxxxxxxxx 00000.
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CONFIDENTIAL TREATMENT REQUESTED
Telephone: (000) 000-0000, Facsimile: (000) 000-0000, E-mail:
Xxxxx_Xxxx@xxxx.xxx;
FOR SUPPLIER,
Xxx Xxxxxx, Senior Vice President, 0000 Xxxxxxx Xxxxxxx Xxxx.,
Xxxxx Xxxxx, Xxxxxxxxxx 00000, and whose telephone and
facsimile numbers and e-mail address are given above in
Section 1.2.1,
with a copy to:
(a) Xxxx Xxxxxx, Vice President Operations at the address
given above in Section 1.2.1, and
(b) Xxxx Xxxxxxx, Vice President and General Counsel, 0000
Xxxxxxx Xxxxxxx Xxxx., Xxxxx Xxxxx, Xxxxxxxxxx 00000.
Telephone: (000) 000-0000, Facsimile: (000) 000-0000, E-mail:
xxxxxxxx@xxxxxxxxxxxxx.xxx.
Either party may specify that notices to it, and any required copies of
same, be provided to no more than three persons, and notice shall be
effective as to a party when it has been given as above provided to all
persons so specified. Further, each party may, from time to time,
change the persons(s) specified to receive notice under this Section
1.2.2. Notice of such a change shall be given to the person(s)
specified to receive notice for the other party under this Section
1.2.2, and such change shall be effective when notice thereof is
effective under the procedures of this Section 1.2.2.
In certain instances, notice may also be given to one or more "Guarantors" under
and for purposes of the "Performance Guaranty Agreement" (such terms being
defined below) relating to this Agreement. The persons to receive such notice(s)
are set out in such Performance Guaranty Agreement.
1.3. Entire Agreement; Related Agreements; Modification; Prior Transactions.
1.3.1. Certain Related Agreements.
In addition to this Agreement, the parties and certain affiliates of
Supplier have entered into and delivered concurrently with this
Agreement certain other agreements related to, and constituting part of
the consideration for, this Agreement (the "Related Agreements"). The
Related Agreements are the following:
(i) an Acknowledgement and Supplement agreement of even date
herewith to the Asset Purchase Agreement;
(ii) two Acknowledgement and Supplement agreements of even
date herewith to the two Facilities Use Agreements between the
parties and dated, respectively, June 28, 1999, as to
Applied's facilities in Austin, Texas, and September 20, 1999,
as to
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CONFIDENTIAL TREATMENT REQUESTED
Applied's facilities in Santa Xxxxx County, California, as the
same have been amended (such Facilities Use Agreements, as
amended, being called the "FUAs");
(iii) An Amended and Restated Intellectual Property Agreement
of even date herewith (such agreement, as amended from time to
time, being called the "IPA"); and
(iv) a Performance Guaranty Agreement of even date herewith of
Kinetics Holdings Corporation (sometimes called "KHC") and The
Kinetics Group, Inc. (sometimes called "KGI") (such agreement,
as amended from time to time, being called the "Performance
Guaranty Agreement" and such corporations being collectively
called "Guarantors") with and for the benefit of Applied.
1.3.2. Entire Agreement.
This Agreement and the Related Agreements set forth the entire
understanding and agreement of the parties as to the subject matter of
this Agreement and of the Related Agreements. From and after the
Effective Date (defined below) of this Agreement, this Agreement and
the Related Agreements supersede, in accordance with their respective
terms and subject to the other provisions below in this Section 1.3.2,
all prior agreements, understandings, negotiations and discussions
between the parties as to the subject matter of this Agreement and of
the Related Agreements.
1.3.2.1. In addition to this Agreement and the Related
Agreements, other agreements now in effect between Applied and
Supplier and referred to in Section 1.3.2.2, clause "third"
below, relate to the subject matter of this Agreement and
provide Applied or Supplier with rights in or licenses of
Confidential Information or intellectual property of the other
party, or protect or limit the use by either of Confidential
Information or intellectual property of the other party (the
"Separate Confidential Information Agreements"). The Separate
Confidential Information Agreements shall remain in effect for
the respective terms thereof and each of such agreements shall
control as to the matters covered by such Separate
Confidential Information Agreements, subject to Section
1.3.2.2.
1.3.2.2. In the event (and to the extent) of conflict between
or among any of the documents set out in this Section 1.3.2.2,
precedence shall be given as follows (except as otherwise
expressly agreed in writing, with reference to this Agreement
or to the other affected agreement):
first, to any DVA entered into by Applied and
Supplier, and then to the IPA ;
second, to this Agreement (other than its
incorporated Exhibits or
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CONFIDENTIAL TREATMENT REQUESTED
Attachments, unless and to the extent otherwise
provided expressly by this Agreement);
third, to any DSA, and then to any applicable
Separate Confidential Information Agreement
(including any NDA) other than the IPA, a DVA or DSA;
fourth, to Exhibit 1 to this Agreement, and then to
all Attachments and other Exhibits (if any) to this
Agreement;
fifth, to Specifications, to other technical
documents incorporated in this Agreement (other than
Attachments), and then to Authorized Demand Signals;
and
sixth, to any of the Related Agreements that are not
specifically identified above for precedence.
1.3.2.3. From and after the Effective Date (defined below),
this Agreement supersedes and replaces in its entirety the
Amended and Restated Comprehensive Supplier Agreement dated as
of June 28, 1999, as amended and extended through the
Effective Date (the "CSA"), so that the term of the CSA
expires concurrently with this Agreement becoming effective on
its Effective Date, except as to those obligations, rights and
liabilities arising under such CSA that have accrued at or
prior to the Effective Date, or that hereafter accrue with
respect to transactions between the parties that have occurred
under and pursuant to such CSA at or prior to the Effective
Date (including, by way of example, obligations, rights and
liabilities relating to Items provided prior to the Effective
Date of this Agreement), as to which the CSA shall continue in
effect in accordance with its terms. In this regard, the
parties specifically agree (i) that pricing for Items for
which an SSR or Purchase Order issued under the CSA has been
accepted, under the procedures described in Section 2.1.5.1
below, prior to the Effective Date shall be determined under
the CSA, and (ii) that, except for such pricing of those Items
within clause (i) above, the provisions of this Agreement will
apply to Items that are delivered after the Effective Date but
were ordered under the CSA prior to the Effective Date of this
Agreement.
1.3.3. Provisions Continuing in Effect.
Following any termination, cancellation, or expiration of this
Agreement, the provisions of each of Articles 2, 3, 5, 9,11, 21, 22,
and 27 of Exhibit 1 and Sections 2.9.1.1.D, 2.9.2, 4.8, 7 and 9 of this
Agreement will remain in full force and effect, unless specifically
terminated by mutual written agreement between the parties, until the
respective stated expiration of such provisions. The termination,
cancellation or expiration of this Agreement shall not relieve a party
of its obligations and liabilities that accrue or arise under or in
connection with this Agreement through the time of, or in connection
with, termination, cancellation or expiration of this Agreement (or
thereafter under or in connection with provisions that survive as set
out above), which obligations and
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CONFIDENTIAL TREATMENT REQUESTED
liabilities and related claims, demands and causes of action shall
continue until the expiration of the applicable period for the bringing
of claims under controlling statutes of limitation or repose. The
various Related Agreements and Separate Confidential Information
Agreements (including NDAs) shall terminate or continue in effect as
provided in such agreements.
1.3.4. Modification.
No amendment to or modification of this Agreement will be binding
unless in writing and signed by a duly authorized representative of
each party, except for amendments or modifications which Applied is
permitted to initiate by posting or notice under this Section 1.3.4.
The Attachments to this Agreement that are identified on the List of
Exhibits and Attachments following the signature page of this Agreement
as subject to modification or amendment by Applied upon notice (the
"Implementation Attachments"), will be deemed to be the most current
versions of such Attachments, as updated and revised from time to time
by Applied in accordance with this Section 1.3.4.
Unless prohibited by law or by separate modification of this Agreement,
to initiate a modification or amendment of an Implementation
Attachment, Applied will either (i) post updates or revisions to
current versions of such Attachment on the Applied website which shall
be designated for Supplier's use and made available to Supplier, or
(ii) provide other written or electronic notice to Supplier of the
revision or update, which notice shall be sent or given to Supplier's
Senior Counsel - Austin identified in Section 1.2.1 above.
If Supplier fails to object within thirty (30) calendar days after the
date (i) on which such modification or amendment to an Implementation
Attachment was posted on Applied's website (provided that Supplier had
timely notice of posting of such modification or amendment through
notice on the Applied website designated for Supplier's use) or (ii) on
which such other notice was provided to Supplier, then such Attachment,
as modified or amended, shall be deemed to be accepted by Supplier as
the Attachment to this Agreement and shall be effective as the
applicable Attachment upon the expiration of such thirty (30) day
period.
Any update or revision to an Attachment that is initiated by Applied's
posting of the update or revision on the applicable Applied web site
and that would have the effect of amending this Agreement (other than
the modification or amendment of the affected Attachment) shall be
effective only if Supplier fails to object within thirty (30) days
after written, electronic or other actual notice of such update or
revision is received by Supplier. Notice of such an update or revision
subject to this provision shall be given to Supplier's Senior Counsel -
Austin, as above identified.
1.4. Items Covered.
All Items supplied (including Services other than Development Services) to
Applied by Supplier, even if sold pursuant to a separate Purchase Order, will be
covered by this Agreement; provided that the terms, provisions and conditions of
this Agreement (if any) applicable to Services rendered pursuant to a DVA shall
be determined in accordance with the DVA. This Agreement does not apply to
goods, parts, products or services that Unit Instruments, Inc., or any other
14
CONFIDENTIAL TREATMENT REQUESTED
subsidiary or affiliate of Supplier provides to Applied. This Agreement likewise
does not apply to goods, parts, products or services provided to Applied
pursuant to the currently effective Global Supply Agreement dated as of October
27, 2000 (with execution dates of October 4, 2000 and October 19, 2000), for
weldments and other items provided to Applied by Insync Systems, Inc. (now
merged into, and a division of, Supplier), or pursuant to subsequent agreements
for such goods, parts, products or services, even though Supplier is successor
by merger to Insync Systems, Inc. Such other agreement(s) for goods, parts,
products or services shall continue in effect in accordance with their
respective terms, but shall not affect this Agreement. New Items may be added to
Attachment 1 upon mutual written agreement of Applied and Supplier from time to
time.
1.5. Duration of Agreement.
This Agreement is effective and commences on and as of June 1, 2002 (the
"Effective Date").
This Agreement will remain in effect for a term of thirty-six (36) months, from
the Effective Date through May 31, 2005 (the "Initial Term"), unless and to the
extent earlier terminated or cancelled in accordance with its provisions. At any
time before expiration of the Initial Term, Applied may, at Applied's option,
extend the term of this Agreement (subject to all other provisions of this
Agreement) for an additional period of up to 6 months, by notifying Supplier in
writing of such extension. The Initial Term shall include the period of such an
extension.
2. LOGISTICS, ORDERING AND OPERATIONAL FRAMEWORK.
2.1. Operation and Management of Orders.
2.1.1. Operating Calendar & Holidays.
This Agreement operates on the basis of Applied's current fiscal year
operating calendar, shown in Attachment 2, as modified from time to
time. Recognized holidays and operating shut down days are as shown on
such calendar. Supplier shall, unless commercially impracticable,
adjust its operations, holidays and any shut down days as necessary to
provide all Items (including Services) and meet its other agreements
and obligations in accordance with this Agreement. Applied may, in
accordance with Section 1.3.4, modify its calendar as needed for its
operations, which may result in the requirement for production support
seven days a week, twenty-four hours a day.
2.1.2. Monthly Volume Summaries.
Supplier will prepare periodic summary reports showing quantities of
FDSs and Modules projected by Applied for manufacture by Supplier (the
"Monthly Volume Summaries"), and Supplier will retain a copy or
electronic record of at least one (1) Monthly Volume Summary for each
month during the term of this Agreement. Supplier will retain such
copies and records for audit purposes for a minimum of twelve (12)
months following the end of the month for which the respective Monthly
Volume Summary was prepared. All of Applied's SPRs and other reports
regarding Items or Applied Systems and the information provided by
Applied in such SPRs and reports are Applied Confidential Information,
to be used only by Supplier to meet its obligations to Applied under
this
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CONFIDENTIAL TREATMENT REQUESTED
Agreement and treated by Supplier as Confidential Information of
Applied. The Monthly Volume Summaries are Confidential Information of
each of Applied and Supplier to the extent of their respective
Confidential Information included in, or used in the preparation of,
any Monthly Volume Summary.
2.1.3. Manufacture and Delivery.
Supplier will manufacture, provide, sell and deliver all Items to
Applied for which an Authorized Demand Signal has been issued and
accepted or deemed accepted. Supplier will deliver all such Items to
the locations, in the quantities, and at the times specified in or
determined from the applicable Authorized Demand Signal, as accepted or
deemed accepted, as such Authorized Demand Signal is modified pursuant
to this Agreement and as otherwise required by a controlling provision
of this Agreement.
2.1.3.1. Delivery Mechanics.
The specific mechanics and requirements for delivery of Items
to Applied are set out in Attachment 3, and other delivery and
transportation terms and requirements are set out in Section
2.10.3. Applied and Supplier may provide, by subsequent
written agreement, that Supplier shall manufacture and deliver
Items on a lean manufacturing system; if so, the requirements
and specific mechanics to be followed for lean manufacturing
shall be as shown in Attachment 3, subject to such
modifications as may be mutually agreed at the time.
2.1.3.2. Delivery Dates.
Supplier shall deliver each Item to Applied on its Committed
Delivery Date, as determined under Section 2.1.5.2, as the
same may be modified pursuant to or as provided by Section
2.1.5.3 (or Section 2.1.4) or extended pursuant to Section
4.2.4(b). Supplier may make actual delivery of an Item no more
than three (3) Business Days prior to the Committed Delivery
Date; unless an earlier actual delivery date is permitted
pursuant to Section 2.5.3. Delivery shall not be made after an
Item is cancelled as provided in this Agreement, except as
provided in Section 2.3.3(a). Supplier shall use all
commercially reasonable efforts to make delivery of an Item on
a date requested by Applied pursuant to Section 2.1.4.4. If
Items are purchased under a Blanket Order (Bus Route)
procedure, Items under the Blanket Order procedures shall be
delivered at the date, time and location specified in the
applicable Bus Route delivery requirements.
The provisions of Section 2.1 shall control over provisions of
Attachment 3 with regard to determination of actual and
permitted dates of delivery.
2.1.4. Change in Delivery Date.
2.1.4.1. Applied may request Supplier to accelerate the
manufacture, completion and delivery of any Item to a date
other than the Committed Delivery Date then
16
CONFIDENTIAL TREATMENT REQUESTED
established under Section 2.1.5 below. A request for
accelerated delivery shall be issued by a written or
electronic record transmitted to Supplier to the attention of
the Customer Service Manager or Director of Operations
(including Senior Director of Operations) at the affected
facility. A request for accelerated delivery may propose
modification of the delivery date of one or more scheduled
Items.
2.1.4.2. Supplier will respond to the request for accelerated
delivery within forty-eight (48) hours (measured during
Business Days and under prevailing Pacific Time), after its
receipt of the request. Supplier will include in its response
the following: changes in price for accelerated manufacture,
completion and delivery; impact of requested accelerated
manufacture, completion and delivery on other Items for which
an Authorized Demand Signal has been issued or which are
listed on the most recent SPR; additional NSR or CCR
information required; and limitations or requirements
applicable to the response. Upon request by either party,
Applied and Supplier will consult regarding the request for
accelerated delivery during such forty-eight (48) hour period
to facilitate Supplier's response and to resolve questions as
to the request or response.
2.1.4.3. Promptly upon receipt of Supplier's response to the
request for accelerated delivery, Applied will review such
response and consult with Supplier regarding any additional
information needed by Applied or Supplier. Upon agreement of
the parties pursuant to such request and response, Applied
shall issue a revised Authorized Demand Signal and include in
such revised Authorized Demand Signal the new Committed
Delivery Date and all changes in price or other cost,
established in accordance with the request and response.
2.1.4.4. A request for a change accelerating delivery by three
(3) Business days or less from the applicable Committed
Delivery Date is not an accelerated delivery subject to this
Section, and the Contract Price for the Item will not (due to
the acceleration of delivery) be changed. Likewise, the
Committed Delivery Date shall not be deemed to be altered,
unless otherwise expressly agreed, pursuant to a request for
accelerated delivery of three (3) Business days or less.
2.1.5. Orders for Items.
Orders for Items may be issued by Applied under the following methods
of ordering:
Bus Route or Blanket Order: If Bus Route Orders apply, then
Applied will send via daily EDI transmission an Authorized
Demand Signal to Supplier containing Applied's material
requirements for Items, which will be organized according to
part numbers and will represent Applied's daily purchase from
Supplier. Unless otherwise agreed by Applied and Supplier by
written amendment to this Agreement, the Blanket Order or Bus
Route method shall not be used for the ordering and delivery
of Items.
Purchase Order: As needed by Applied, Applied will issue
Authorized Demand Signals for one or more Items to Supplier
under the procedures set out in Section
17
CONFIDENTIAL TREATMENT REQUESTED
2.1.5.1. Each Authorized Demand Signal shall apply to the
particular Item(s) specified in that signal.
Authorized Demand Signals for orders by Applied under this Agreement
may be issued by Applied using any of the methods provided for in
Section 2.1.5.1.
2.1.5.1. Authorized Demand Signals.
Each Authorized Demand Signal issued by Applied constitutes
Applied's offer to purchase from Supplier, in accordance with
and subject to this Agreement, the Item(s) identified in such
Authorized Demand Signal. Supplier agrees that (subject to the
refusal terms of this Agreement and to Section 4.11 of this
Agreement) it will accept the Authorized Demand Signals issued
by Applied and sell, provide and deliver, in accordance with
and subject to this Agreement (including delivery in
accordance with provisions regarding Committed Delivery Date),
all Items for which an Authorized Demand Signal is accepted or
deemed accepted by Supplier. Issuance of a Purchase Order as
an Authorized Demand Signal may be made by e-mail transmission
or by facsimile transmission, or, if such transmission
services are not available, by mail or hand delivery, and
shall be effective when transmitted or delivered to Supplier's
Customer Service Manager - Austin, or Customer Service Manager
- Milpitas, as appropriate. Issuance of an Authorized Demand
Signal to Supplier through website posting by Applied and
acceptance of such posted Authorized Demand Signals is
effective between the parties as provided in other provisions
below in this Section 2.1.5.1.
A. Issuance of Authorized Demand Signal.
1. VMO or Pilot FDSs, NSOs, and Modules. An
Authorized Demand Signal for Volume Manufacturing
FDSs, Pilot Manufacturing FDSs, NSOs or Modules is
issued by Applied posting, at the Applied website
designated for Supplier's access (or, at such times
that website access is unavailable, by transmission
by e-mail or facsimile to, or other delivery to,
Supplier's Customer Service Manager - Austin or
Milpitas, as appropriate), an SSR, NSR, or equivalent
spreadsheet, report or record of basic FDS or other
Item Specification, which identifies the FDS or other
Item(s) being ordered and includes the Applied
Project Number or Applied "Spec Id" number. If
Applied elects to provide an Applied Configured BOM
pursuant to Section 2.1.5.1.A.4.c below (Coordination
as to Services), Applied shall issue (or make
available by electronic means) the Applied Configured
BOM as part of the Authorized Demand Signal.
The SSR, NSR, or equivalent spreadsheet, report or
record so posted or furnished (and including an
Applied Configured BOM if such is provided) is an
"Authorized Demand Signal."
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CONFIDENTIAL TREATMENT REQUESTED
Applied may also order Modules through an RFP/RFQ
process and issuance of a Purchase Order, as provided
in Section 2.1.5.1.A.3 below.
2. R&D. An Authorized Demand Signal for Items for
Applied's R&D purposes is issued by Applied in either
of the following ways:
(a) for FDSs, Modules and NSOs that do not
require Design Services or Development
Services, by issuing (or furnishing) an SSR,
NSR or equivalent spreadsheet, report or
record of basic Specification to Supplier in
the manner provided in Paragraph A.1 above;
or
(b) for any Item to be manufactured in
connection with or as a deliverable under a
Design Services Agreement or Development
Services Agreement, by issuance to Supplier
of the Purchase Order that is a part of the
relevant Design Services Agreement, or the
Purchase Order for the Development Services
Agreement, in each instance based on
Supplier's proposals or quotations received
by Applied through an RFP/RFQ process and as
agreed by the parties pursuant to the
RFP/RFQ process.
The SSR, NSR or equivalent spreadsheet, report or
record, or Purchase Order, for FDS or other Items
ordered for R&D purposes is an "Authorized Demand
Signal." Authorized Demand Signals for R&D purposes
shall be issued by electronic transmission (including
e-mail or facsimile transmission), or by delivery of
a written Purchase Order to Supplier to the attention
of Supplier's Customer Service Manager -Milpitas. If
an Item is to be manufactured in connection with or
as a deliverable in connection with Design Services
or Development Services, the Authorized Demand Signal
must include the Purchase Order for such Services and
the Authorized Demand Signal is not effective until
that Purchase Order is accepted or deemed accepted.
3. Spares and Certain Modules. An Authorized Demand
Signal for Spares or for Modules not ordered through
the issuance and acceptance of an SSR ("Non SSR
Modules") is issued by Applied when it issues a
Purchase Order to Supplier, to the attention of
Supplier's Customer Service Manager - Warranty based
on Supplier's proposals or quotations received by
Applied through the RFP/RFQ process. A Purchase Order
so issued is an "Authorized Demand Signal." A
Purchase Order issued as an Authorized Demand Signal
for Spares or Non SSR Modules, issued pursuant to an
RFP/RFQ process and in conformity with Supplier's
proposal or quotation (or as agreed by the parties
pursuant to such process), is deemed accepted on
issuance.
4. Services. An Authorized Demand Signal for Services
is issued as follows:
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CONFIDENTIAL TREATMENT REQUESTED
a. Configuration Engineering Services, CES Services
and CCR Services.
(i) For Configuration Engineering
Services, by issuing the SSR for
the Applied System for which
Configuration Engineering is to be
performed, or, as to Configuration
Engineering Services that are CCR
Services incident to a CCR, by
issuing the CCR.
(ii) For CES Services, by issuing an NSR
incident to an SSR, and for CES
Services that are CCR Services
incident to a CCR, by issuing the
CCR.
Issuance of an NSR, SSR, CCR or Purchase Order as to
Services under this Section 2.1.5.1.A.4.a shall be
made as follows:
with respect to VMO or Pilot FDSs, NSOs or
Modules, by posting electronic record of the
NSR or SSR on the Applied website designated
by Supplier's access (or as otherwise
provided by Section 2.1.5.1.A as to Purchase
Orders, and in other circumstances as there
provided for), or,
with respect to NSRs, SSRs or Purchase
Orders for Items for which posting is not
used, by e-mail or facsimile transmission
(or as otherwise provided by Section
2.1.5.1.A as to Purchase Orders, and in
other circumstances as there provided for),
or
with respect to CCR Services, by e-mail or
facsimile transmission, or by hand delivery
(if e-mail or facsimile transmission is not
available), of the CCR to Supplier, to the
attention of the Supplier contact person to
whom the initial order to which the CCR
relates was issued.
b. Other Services.
All other Services (including NPT Services) shall be
ordered through a Request for Proposal/Request for
Quotation process, pursuant to which the Authorized
Demand Signal will be an Applied Purchase Order
issued in accordance with this Section 2.1.5.1.A.4.b.
Design Services or Development Services shall only be
ordered through an RFP/RFQ process and by issuance of
an Applied Purchase Order conforming to Supplier's
response to the RFP/RFQ (or as is otherwise agreed by
the parties pursuant to the RFP/RFQ process). If
Item(s) are to be manufactured in connection with, or
as a deliverable under, a Design Services Agreement
or Development Services Agreement, the Purchase Order
that is a part of the Design Services Agreement, or
that is issued for the Development Services
Agreement, must also include the order for such
Item(s). Further, a Purchase Order for Design
Services or for Development Services shall
20
CONFIDENTIAL TREATMENT REQUESTED
also be issued in accordance with the IPA (including
provisions of the IPA applicable to a DSA or DVA.)
The IPA (and any DVA, as applicable) shall control
and have priority in the event of conflict with this
Agreement in accordance with Section 1.3.2.2 above.
c. Coordination as to Services.
(i) Applied may, at the time it issues the Authorized
Demand Signal for an Item, elect to provide to
Supplier the Configured BOM for the Item that would
otherwise be prepared by Supplier as part of its
Configuration Engineering Services (the "Applied
Configured BOM"). If Applied elects to provide an
Applied Configured BOM for an Item, the Authorized
Demand Signal for the Item will be the SSR, NSR or
equivalent spreadsheet, report or record plus the
Applied Configured BOM issued with and included in
the SSR, NSR or equivalent document.
If Applied does not issue an Applied Configured BOM
as part of its Authorized Demand Signal in accordance
with this Section 2.1.5.1.A.4.c, then Supplier shall
perform those Services that are ordered pursuant to
the Authorized Demand Signal as determined under
other provisions of Section 2.1.5.1.A.4, and Applied
shall pay for Services so performed at the rates
applicable under the cost model (Attachment 1).
(ii) Applied shall be responsible for engineering
services in the preparation of an Applied Configured
BOM. Supplier shall not be required to perform or
provide engineering review of an Applied Configured
BOM prior to commencing the manufacture of the Item.
(iii) Supplier will advise Applied of defects in an
Applied Configured BOM that are identified by
Supplier in the manufacture of the Item. If an
Applied Configured BOM is defective:
(a) Supplier is excused from compliance with
the Committed Delivery Date applicable at
the time the defect in the Applied
Configured BOM was identified;
(b) Applied will re-engineer the Applied
Configured BOM to correct the defect(s), or,
upon mutual written agreement pursuant to an
RFP/RFQ process (which includes e-mail and
facsimile records of the agreement),
Supplier will re-engineer the Applied
Configured BOM to correct the defect(s)
pursuant to the Purchase Order issued
through the RFP/RFQ process;
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CONFIDENTIAL TREATMENT REQUESTED
(c) Changes in Piece Parts for an Item that
result from re-engineering of an Applied
Configured BOM pursuant to this Section
2.1.5.1.A.4.c. (excluding changes involving
digital line-side configurable MFCs) shall
be treated as * in accordance with Section
2.8 of this Agreement if occurring within
the period covered by Section 2.8.3.1;
(d) Applied and Supplier shall negotiate in
good faith to determine an adjusted
Committed Delivery Date; and
(e) Appropriate written modifications of the
Committed Delivery Date shall be made upon
mutual agreement.
(iv) Supplier shall review the documentation and
information provided as part of each Authorized
Demand Signal and shall coordinate its Services so
that Supplier provides or performs those Services
necessary or appropriate under the Authorized Demand
Signal and its related documentation or information.
(v) The parties may, by mutual written agreement,
amend the scope of or charges for Services for repeat
build Items.
d. Quotation of CES Charges.
(i) Applied may require that Supplier provide "Quoted
CES Charges" (as such term is defined below) as to
one or more product line(s), type(s) or model(s) of
Applied Systems. The Applied SAT Team Lead for
Supplier shall notify Supplier's Engineering Manager
that Quoted CES Charges are required, and such notice
shall specify the Applied product line(s), type(s) or
model(s) of Applied Systems for which Quoted CES
Hours are required, the date on which Supplier shall
commence providing such quotes, and the person at
Applied to whom the Quoted CES Charges shall be sent.
Quotations setting out Quoted CES Charges shall be
provided by Supplier by e-mail or facsimile
transmission to the person so identified.
(ii) "Quoted CES Charges" means the charges for CES
Services that Supplier is to perform pursuant to an
Authorized Demand Signal for CES Services under
Section 2.1.5.1.A.4.a that are in excess of 20 hours
as to a Volume Manufacturing FDS or 40 hours as to a
Pilot Manufacturing FDS, or such higher reportable
charges threshold as may be specified in the notice
requiring Supplier to provide quotations. Supplier
may charge, in addition to Quoted CES Charges, for
two (2) hours of engineering services for the release
of a Configured BOM through Applied's ECO procedures
applicable to an Item when Supplier performs
Configuration Engineering
* Material has been omitted and filed separately with the Commission.
22
CONFIDENTIAL TREATMENT REQUESTED
Services or CCR Services as to the Configured BOM,
without having to include such charges for release of
the Configured BOM in its quote.
(iii) If Quoted CES Charges are required with respect
to a Volume Manufacturing FDS or Pilot Manufacturing
FDS for which the Authorized Demand Signal (for the
FDS and related CES Services) is the NSR incident to
the primary SSR (a "Conditional ADS") Supplier shall
accept or refuse the Conditional ADS within the time
period otherwise applicable to that Authorized Demand
Signal. The obligations of Supplier and Applied with
respect to a Conditional ADS upon its acceptance
under other provisions of Section 2.1.5.1 are,
however, subject to subsequent agreement on Quoted
CES Charges, as provided in this Section
2.1.5.1.A.4.d. Within two (2) Business Days after the
date of acceptance of a Conditional ADS, Supplier
shall provide its quotation of hours and amounts to
be charged for Quoted CES Services to Applied. Until
Applied accepts (or is deemed to have accepted) the
time and amount for Quoted CES Services shown on the
quotation of Quoted CES Charges, the affected
Conditional ADS shall be subject to Applied's
acceptance of the quote for Quoted CES Services and
until such acceptance the Conditional ADS shall not
be binding as to Applied; Supplier, however, shall
not revoke its acceptance of the Conditional ADS or
withdraw its quote of Quoted CES Charges.
(iv) Applied may reject or accept a quotation of
Quoted CES Services by e-mail, facsimile or other
record or writing (but not by telephone or
voice-mail) at any time prior to the time acceptance
is deemed to occur by the following sentence. If a
quote for Quoted CES Services is not rejected by
Applied within two (2) Business Days after the quote
is issued to Applied, then the quote for Quoted CES
Services shall be deemed accepted by Applied. Upon
Applied's acceptance of the quotation of Quoted CES
Charges, the related Conditional ADS Demand Signal
becomes binding on and agreed to by both Supplier and
Applied at such time. The Committed Delivery Date
shall be determined based on such date of acceptance
of the quotation of Quoted CES Services. Applied's
notice of rejection of Quoted CES Services shall be
issued to Supplier's Engineering Manager. If Applied
rejects a quote for Quoted CES Services, then
Supplier and Applied shall promptly negotiate as to
the scope, time and costs for Quoted CES Services. If
the parties agree on the scope, time and costs for
Quoted CES Services after a quote is rejected, then
Supplier shall issue a revised quote for Quoted CES
Services and upon Applied's issuance of an acceptance
of such revised quote, the related Authorized Demand
Signal shall be binding on and is agreed to by both
Supplier, and the Committed Delivery Date shall be
determined based on the date of acceptance of the
revised quote by Applied.
(v) Except in those instances in which a quotation of
Quoted CES Charges applies and has been accepted, CCR
Services are not subject to
23
CONFIDENTIAL TREATMENT REQUESTED
the procedures for quotation and acceptance in this
Section 2.1.5.1.A.4.d. If, after a quote of Quoted
CES Charges has been accepted, Applied changes the
relevant SSR or NSR and such change affects CES
Services previously quoted and accepted, then (a)
Supplier shall promptly requote its Quoted CES
Charges to include additional CES Services (or CCR
Services) resulting from the changes in SSR or NSR,
(b) Applied shall promptly accept or reject the
Quoted CES Charges, as so requoted, (c) requoted
Quoted CES Charges accepted by Applied shall become
part of the Contract Price of the Item(s) affected;
and (d) the parties shall negotiate in good faith to
determine an adjusted Committed Delivery Date (if
any) due to changes in the SSR or NSR that adversely
affect Supplier's ability to meet the otherwise
applicable Committed Delivery Date.
(vi) A charge for up to two (2) hours for engineering
services for release of a Configured BOM through
Applied's ECO procedures applicable to the Item may
be made in addition to Quoted CES Services.
B. Acceptance and Refusal. Each Authorized Demand Signal
issued by Applied in compliance with Section 2.1.5.1.A and not
timely refused by Supplier as provided by this Section
2.1.5.1.B is agreed to have been accepted and is effective
between Applied and Supplier upon the expiration of the period
specified for Supplier's refusal.
1. VMO or Pilot FDSs, NSOs and Modules. Supplier may
refuse an Authorized Demand Signal issued by Applied
for purchases within the scope of Paragraph A.1. (a)
for error by Applied in the SSR, CCR, or NSR (or
equivalent document), (b) as exceeding Supplier's
capacity or flexibility requirements determined under
Section 2.5 (except as to CCRs), or (c) for failure
to provide a required NSR or to provide an Applied
Configured BOM that should have been part of the
Authorized Demand Signal under Section 2.1.5.1.A.4.c,
but not for other reasons. Supplier shall effect a
refusal to accept an SSR, CCR, or NSR (or equivalent
document) by posting its refusal on Supplier's Master
Production Schedule document as maintained on an
Applied server, or (if server access is unavailable)
by e-mail or facsimile transmission to the Applied
purchasing representative for the Applied
organization issuing the SSR, CCR, or NSR. Refusal
shall be made within ninety-six (96) hours (measured
during Business Days and under prevailing Pacific
Time) after Applied's issuance of the Authorized
Demand Signal for orders in this category.
2. R&D. Supplier may refuse an Authorized Demand
Signal issued by Applied initiated by the SSR process
for R&D purchases within the scope of Paragraph A.2
for (a) error by Applied in the SSR or NSR (or
equivalent document), (b) incomplete design or
unresolved manufacturing issues, (c) as exceeding
Supplier's capacity or flexibility requirements under
Section 2.5 below, or (d) failure to provide a
required NSR, but not
24
CONFIDENTIAL TREATMENT REQUESTED
otherwise. Supplier shall effect a refusal to accept
an R&D SSR order (or equivalent) by posting its
refusal on Supplier's Master Production Schedule
document as maintained on an Applied server, or (if
server access is unavailable) by e-mail or facsimile
transmission to the purchasing representative for the
Applied organization issuing the Authorized Demand
Signal. Refusal shall be made within five (5)
Business Days after posting of the R&D SSR. A
Purchase Order issued as an Authorized Demand Signal
for an R&D purchase pursuant to an RFQ/RFP process
and in conformity with the proposal or quotation
received from Supplier and the requirements of
Section 2.1.5.1.A.2 where applicable (or as agreed by
the parties pursuant to such RFP/RFQ process) is
deemed accepted upon its issuance.
3. Services. With respect to those Standard Services
that are required for or are incident to the
manufacture of an Item or Items for which the
Authorized Demand Signal is an SSR or NSR (or
equivalent spreadsheet or record), the corresponding
Authorized Demand Signal for Standard Services is
accepted or deemed accepted upon and by the
acceptance or deemed acceptance of the SSR or NSR. An
Authorized Demand Signal for CCR Services is deemed
accepted upon and by acceptance or deemed acceptance
of the CCR under Section 2.1.5.1.B.1. A Purchase
Order constituting an Authorized Demand Signal for
other Services, issued in accordance with Section
2.1.5.1.A.4, is deemed accepted upon issuance,
whether for Services required for or incident to
manufacture of an Item or Items, or otherwise.
4. Assurance to Supplier. In addition to the matters
set out above in this Section 2.1.5.1.B as grounds
for refusal of an Authorized Demand Signal, Supplier
may also refuse an Authorized Demand Signal in the
circumstances allowed by Section 2609 of the UCC.
2.1.5.2. Committed Delivery Dates.
A. Except as provided for in Paragraph B, C or D
below in this Section 2.1.5.2, the Committed Delivery
Date for Volume, Pilot and R&D Items shall be
determined in accordance with applicable cycle times
in effect at the time the Authorized Demand Signal is
accepted or deemed accepted under the following
schedule:
Volume: From the date of acceptance or
deemed acceptance of Authorized Demand
Signal *.
Pilot: From the date of acceptance or deemed
acceptance of Authorized Demand Signal *.
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
R&D: From the date of acceptance or deemed
acceptance of Authorized Demand Signal when
issued by SSR, *; and, for R&D Items for
which a Purchase Order is issued, * from the
date of issuance of the Purchase Order,
unless another date is specified in the
Purchase Order.
B. The Committed Delivery Date for NSO Items shall be
* from the date of acceptance or deemed acceptance of
the Authorized Demand Signal; the Committed Delivery
Date for Modules shall be * from the date of
acceptance or deemed acceptance of the Authorized
Demand Signal.
C. Services for Items ordered through an SSR, NSR,
CCR or equivalent process shall be provided and
completed as required to achieve the applicable
Committed Delivery Date for the Items. Services for
which the Authorized Demand Signal is a Purchase
Order (or DSA or DVA, if applicable) shall be
provided in accordance with the applicable Purchase
Order (or DSA or DVA, if applicable) and its
Committed Delivery Date or other delivery or
completion requirements of such Purchase Order (or
DSA or DVA, if applicable).
D. For any Items not otherwise governed by the
preceding terms for which the initial Authorized
Demand Signal is an Applied Purchase Order, the
Committed Delivery Date shall be the delivery date
set out in such Purchase Order.
E. By mutual written agreement, the parties may amend
the cycle times provided in this Section 2.1.5.2 with
respect to one or more Item(s). The parties will
consult together, identify and, upon mutual written
agreement, implement reductions in cycle time for
repeat build Item(s).
2.1.5.3 Modification of Committed Delivery Dates.
A. For Items for which the Committed Delivery Date is
established pursuant to Section 2.1.5.2.A or B, the
Committed Delivery Date may be changed only with
Supplier's approval; provided that any Committed
Delivery Date may be changed, without Supplier's
approval, as provided in Section 2.3.2. The delivery
date for an Item as modified as provided in Section
2.3.2 shall become the "Committed Delivery Date" for
such Item.
B. For Items for which the Committed Delivery Date is
established by a Purchase Order issued under Sections
2.1.5.1 and 2.1.5.2, the Committed Delivery Date
shall be modified only through issuance of a revised
Purchase Order, or pursuant to Section 2.3.2.
C. The Committed Delivery Date for an Item may also
be modified pursuant to Section 2.1.4 or Section
2.1.5.1.A.4.c. or d.
* Material has been omitted and filed separately with the Commission.
26
CONFIDENTIAL TREATMENT REQUESTED
2.1.6. Electronic Commerce.
For transactions conducted by electronic means (other than facsimile,
internet or e-mail transmission), Supplier is required to communicate
with Applied using the then current EDI ANSI standards and encouraged
to use either XXXX, EDICT or other approved software. Facsimile,
internet and e-mail transmissions shall be made using commercially
available systems compatible with Applied's e-mail, internet and
facsimile applications.
The parties agree that they shall conduct transactions hereunder by
various electronic means and will rely upon electronic means to issue
Authorized Demand Signals, to enter into purchase and sale
transactions, and to exchange delivery and order information under this
Agreement. To the extent electronic means are not accessible or become
otherwise unavailable due to technical difficulties or due to the
effect of any law or regulation governing electronic transactions
(collectively "Unavailability"), the parties agree: (1) that any
transactions entered into, and any delivery or order information
received, by electronic means prior to the Unavailability date will
remain valid, and Supplier and Applied shall honor their respective
obligations; and (2) that they will continue to conduct their
transactions, to the extent of the Unavailability, by other than
electronic means, such as written form or fax as contemplated in
Section 2.1.5 of this Agreement. This Agreement shall not require all
transactions to be conducted by electronic means. If required by
applicable law, a separate agreement concerning electronic transactions
between Applied and Supplier will set out other terms that will control
as to certain aspects of electronic transactions.
2.1.7. Pro Forma.
2.1.7.1. Estimated Pro Forma.
No later than three (3) Business Days prior to Supplier's
shipment of each Item to Applied for which the Contract Price
is determined under Attachment 1, Supplier shall transmit its
preliminary "pro forma invoice" (a "Pro Forma") for such Item.
The preliminary Pro Forma shall identify the Item(s) covered,
shall calculate the Contract Price by applying the appropriate
elements of the cost model set out in Attachment 1, and shall
specify separately any charges (stated separately as to each
applicable category) for *, Reconfigure Items, Relabel Items,
Restock Items (as such terms are defined below), and any other
charges included as applicable to the Item(s) but not provided
for in Attachment 1. The preliminary Pro Forma shall be
delivered by e-mail (or upon request by Applied, by fax or
hand delivery) to the finance representative of the Applied
organization issuing the Authorized Demand Signal, and to such
other persons as Applied may reasonably request. The
preliminary Pro Forma shall identify charges for Standard
Services by category.
* Material has been omitted and filed separately with the Commission.
27
CONFIDENTIAL TREATMENT REQUESTED
2.1.7.2. Final Pro Forma.
At the time of Supplier's shipment of each Item to Applied for
which the Contract Price is determined under Attachment 1,
Supplier shall transmit to Applied its final Pro Forma for
such Item. The final Pro Forma shall contain all information,
costs and charges applicable to the Item, including all
elements described in Section 2.1.7.1, and shall be delivered
in the manner and to the persons specified in Section 2.1.7.1.
The final Pro Forma shall further identify separately for each
category of Standard Services the charges for that category of
Service and the portions of such charges attributable to
Configuration Engineering Services, CES Services, and
engineering for the release of the Xxxx of Materials for the
Item through Applied's ECO procedures, as applicable.
2.2. Definition of Terms for Certain Provisions Affecting Prices or Charges.
2.2.1 The definitions set out in this Section shall apply in
determining charges, credits and payments under Sections 2.8 (*), 2.14
(Provisions for Reconfiguration or Restocking), 3.1.4 (Further
Agreements as to Pricing) through 3.1.6 (Adjustment for *), and 4.11
(Wind Down Provisions).
Each of these sections will provide further definitions or procedures
that will control the particular matters to which it applies.
2.2.2 For the purposes of Section 2.2 and the sections identified in
Section 2.2.1, Piece Parts (including MFCs) installed on or removed
from an Item are classified in one of the following categories:
i) NonReusable Materials
ii) NonConsumable Materials
iii) NonConsumable MFCs
iv) Consumable Materials
v) Consumable MFCs
vi) Floor Stock Scrap.
2.2.3 The following provisions and definitions apply generally for the
purposes of Section 2.2 and the Sections indicated above:
* Material has been omitted and filed separately with the Commission.
28
CONFIDENTIAL TREATMENT REQUESTED
(a) "NonReusable Materials" means those Piece Parts, excluding
Floor Stock Scrap, used in the manufacture of an Item that are
(i) missing or damaged at the time of inspection prior to
disassembly and teardown (as Reconfigure or Restock Items
only), (ii) damaged in the course of disassembly and teardown
when using commercially reasonable practices, or (iii)
obsolete and no longer meet current revision levels of
applicable specifications.
(b) "Floor Stock Scrap" means those Piece Parts removed from
an Item in the course of disassembly and teardown that have a
unit cost of $10.00 or less.
(c) "Consumable Materials" are all recoverable Piece Parts for
an Item other than NonReusable Materials, NonConsumable
Materials, NonConsumable MFCs and Floor Stock Scrap.
(d) "NonConsumable Materials" consists of Bus Route
NonConsumable Materials, and Spot Buy NonConsumable Materials.
(e) "Bus Route NonConsumable Materials" are those * Piece
Parts for an Item that * on a Bus Route basis and have been
used in, or delivered to Supplier for, the manufacture of the
Item at the Relevant Date that are * (x) Supplier's * for such
Piece Parts over the * following the Relevant Date *.
(f) "Spot Buy NonConsumable Materials" are those * Piece Parts
for an Item that * on a Spot Buy basis and have been used in,
or delivered to Supplier for (or for which Supplier has issued
its non-cancelable purchase order), the manufacture of the
Item at the Relevant Date, that are * (x) Supplier's * for
such Piece Parts over the * following the Relevant Date, *.
(g) "NonConsumable MFCs" are those MFCs (excluding all *
configurable MFCs) that have been used in, or delivered to
Supplier for (or for which Supplier has issued its
non-cancelable purchase order), the manufacture of the Item at
the Relevant Date, and that are in excess of Supplier's then
applicable * (calculated separately for Spot Buy and Bus Route
MFCs using the methodology for Spot Buy NonConsumable
Materials and for Bus Route NonConsumable Materials) for such
MFCs current at the Relevant Date. NonConsumable MFCs shall be
handled only under provisions for NonConsumable MFCs, and not
through charges for NonConsumable Materials.
(h) Supplier's "Current Average Cost of Materials" shall be
the average cost to Supplier calculated with respect to
quantities * and taking into account the * of the affected
Piece Part under the method employed by Supplier on the
Effective Date and in accordance with generally accepted
accounting principles in effect in the United States of
America and consistently applied. The "Current Average Cost of
Materials" as so determined is subject to adjustment under
Sections 3.1.5 and 3.1.6 of this Agreement.
* Material has been omitted and filed separately with the Commission.
29
CONFIDENTIAL TREATMENT REQUESTED
(i) Supplier's "Standard Cost of Materials" is the materials
cost charged by Supplier to Applied for Piece Parts
incorporated in Items sold to Applied and conforming to the
schedule or database of materials costs then in effect and
maintained by Supplier on its Oracle (or other enterprise
accounting system) database. The "Standard Cost of Materials"
as so determined is subject to adjustment under Sections 3.1.5
and 3.1.6 of this Agreement.
(j) "MRP Demand" means the demand for an affected Piece Part
under the manufacturing requirements planning standards
employed in the industry.
(k) "Relevant Date" means the following:
1) For * charges (Section 2.8.3), the date on which
the * is requested by Applied.
2) For Restock Items and Reconfigure Items (Section
2.14), the date on which the Item is classified by
Applied as a Restock Item or Reconfigure Item.
(l) Each Piece Part shall be included in only one category of
charge.
(m) Supplier shall return to Applied's Asset Recovery
Management organization, or destroy if so instructed by
Applied, all Piece Parts for which a cancellation charge is
made, except for Floor Stock Scrap and NonConsumable MFCs (to
be retained by Supplier).
2.3. Cancellation of Items.
2.3.1. Items Subject to Cancellation.
Applied may cancel Items in accordance with this Section 2.3 at any
time by written or electronic notice (but not telephone or verbal
notice) to Supplier's Customer Service Manager (Austin or Milpitas, as
applicable) as designated in Section 1.2, between (a) the date on which
Applied's Authorized Demand Signal has been accepted or deemed accepted
and (b) the Committed Delivery Date. Applied may withdraw order(s) for
Item(s) set out in Authorized Demand Signal(s) issued, but not accepted
or deemed accepted, at any time prior to acceptance or deemed
acceptance.
2.3.2. Deferral.
Without cancellation of an Item, Applied may defer the delivery date of
any Item(s) for a period of up to * following the initially applicable
Committed Delivery Date *. To defer delivery, Applied shall give notice
of deferral, to the Supplier contact person and in the manner provided
under Section 2.3.1, no later than * before the Committed Delivery Date
in effect at the time of deferral; provided that the cumulative period
of deferral as to each Item shall not exceed * from the initially
applicable Committed Delivery Date.
* Material has been omitted and filed separately with the Commission.
30
CONFIDENTIAL TREATMENT REQUESTED
In exercising its rights of deferral under this Section 2.3.2, Applied
will consult with Supplier with respect to the date that will become
the new Committed Delivery Date resulting from deferral so that, to the
extent consistent with Applied's requirements for manufacturing and
shipment of Applied Systems, such new Committed Delivery Date is not
unreasonably burdensome to Supplier, taking into account the available
manufacturing capacity and flexibility capabilities of Supplier through
the new Committed Delivery Date. Applied shall, however, be entitled to
set the new Committed Delivery Date as required for its timely
manufacturing and shipment of Applied Systems.
2.3.3. Cancellation.
If Applied cancels an Item (including as a cancellation any Item as to
which Applied does not initiate delivery of an Item within the * period
provided by Section 2.3.2 following a deferral), the costs, expenses
and charges arising from such cancellation (including failure to
initiate delivery) shall be governed by the following terms:
(a) If cancellation occurs less than * calendar days before
the Committed Delivery Date, then Applied shall purchase the
Item at its *, the Item shall be delivered to Applied only if
requested by Applied, and the Item may be classified by
Applied as a * Item under Section 2.14 below. Applied shall
have no obligation to Supplier arising from cancellation
except those under this Section 2.3.3(a).
(b) All costs, expenses and charges for cancellation of Items,
other than cancellations to which Section 2.3.3(a) applies,
are accounted for and included in the * and shall be the sole
responsibility of Supplier. Applied shall have no obligation
to Supplier arising from cancellations to which Section
2.3.3(a) does not apply.
2.3.4. Applicability; Payment.
(a) If an Item that has been deferred under Section 2.3.2 is
subsequently cancelled, Section 2.3.3(a) applies if either (a)
the cancellation occurs * before the Committed Delivery Date
as then applicable following deferral, or (b) the Item was
initially deferred * prior to the original Committed Delivery
Date.
(b) The Pro Forma for an Item purchased pursuant to Section
2.3.3(a) shall be issued by Supplier to Applied within * after
the date on which cancellation becomes effective, and such
purchase amount shall be payable (and subject to prompt
payment discount) under the terms of Section 2.11.
2.3.5. Other Rights.
Applied's rights of cancellation are in addition to, and shall be
independent of its rights under, and the limitations of, Section 2.14
of this Agreement, except as to Items that become classified under
Section 2.14 pursuant to Section 2.3.3(a).
* Material has been omitted and filed separately with the Commission.
31
CONFIDENTIAL TREATMENT REQUESTED
2.3.6. Services.
If Services for which a Purchase Order was issued are cancelled, and
such cancelled Services are not CES Services, Configuration Engineering
Services or CCR Services performed on a cancelled Item, Supplier shall
charge for its Services actually performed through the date of
cancellation, at rates and in accordance with the applicable Purchase
Order.
2.4. Response Time, Turnaround and Implementation Time.
This Section establishes the methods by which Applied will communicate its
Production Issues to Supplier and the time periods for Supplier to respond and
implement solutions.
2.4.1. Production Issues.
A "Production Issue" is an interruption or stoppage of any of Applied's
manufacturing operations in the United States of America (as, or
equivalent to, a "line down" situation) that results from a failure of
an Item to conform to warranty, from other defect in or damage to an
Item delivered by Supplier, a failure or interruption in the timely
delivery of Items by Supplier on Committed Delivery Dates, or from
other failure in Supplier's performance under this Agreement. Applied
shall notify Supplier of a Production Issue by telephone, cell-phone or
pager to the following persons:
Supplier's Customer Service Manager at Austin or Milpitas, as
appropriate, using the contact information set out in Section
1.2.1.
Supplier shall contact the Applied originator of a notice of Production
Issue within * of the issuance by Applied of the notice of a Production
Issue. This notice and response procedure is not subject to Section
1.2.2.
2.4.2. Turnaround and Implementation Time.
Supplier will, in the case of a Production Issue, repair, replace and
correct Item(s), deliver (or restore delivery of) Items, and otherwise
resolve and correct such Production Issue in accordance with the
following requirements:
(a) Supplier shall commence its repair, replacement,
correction or solution of a Production Issue within one (1)
hour after its response to Applied and shall complete the
repair, replacement, correction or solution within the time
period necessary to meet Applied's production requirements,
not to exceed * after its response to Applied, unless a longer
time is required for completion in accordance with best
practices in the industry.
(b) Supplier shall provide timely status reports to Applied
regarding the repair, replacement, correction or solution to
assist Applied in managing its manufacturing operations
affected by the Production Issue.
* Material has been omitted and filed separately with the Commission.
32
CONFIDENTIAL TREATMENT REQUESTED
2.5. Capacity Planning and Flexibility Requirements.
2.5.1 Capacity Planning.
(a) Supplier will use commercially reasonable efforts to plan
its manufacturing capacity, including materials, staff, engineering
support, facilities, and other production factors in order to:
have capacity adequate for projected quantities and projected
delivery dates shown in Applied's SPR, as released to Supplier
and as revised from time to time (and at least weekly);
have additional capacity available to supply Items ordered
through Purchase Orders as Authorized Demand Signals but not
previously shown on the SPR provided to Supplier; and
to implement adjustments in operations and manufacturing to
comply with the flexibility requirements applicable under
Section 2.5.2.
(b) As part of its capacity planning, Supplier shall review
with Applied's Supplier Performance Management organization and any
Applied organization subsequently performing its functions (the "SPM")
on a monthly basis (as part of its monthly performance review)
Supplier's manufacturing capacity and Supplier's capability to increase
such capacity when and as changes occur in Applied's manufacturing
volumes and requirements. Supplier shall advise Applied at such monthly
meetings of Supplier's manufacturing capacity as planned by Supplier
under Section 2.5.1 (a) and, in consultation with the Applied SPM,
determine appropriate changes in manufacturing capacity for periods
covered in the monthly performance review (collectively, the "Capacity
Projections") The Capacity Projections shall be made a part of the
Supplier Performance Plan (Attachment 16) and shall provide capacity at
least equal to the rolling * forecast of the then-current SPR for Items
anticipated to be provided by Supplier.
2.5.2 Flexibility.
In addition to manufacturing capacity planning under Section
2.5.1, Supplier shall also use commercially reasonable efforts to plan
for and to implement manufacturing flexibility capabilities in addition
to Supplier's manufacturing capacity. Supplier shall review such plans
and capabilities with Applied's SPM at least monthly (as part of the
monthly performance review activity) and, in consultation with the
Applied SPM, establish manufacturing flexibility levels applicable to
Supplier as part of the Supplier Performance Plan (Attachment 16)
consistent with known or anticipated changes in Applied's manufacturing
volumes, delivery dates and product requirements. Supplier's
manufacturing flexibility levels shall at least allow for manufacturing
volumes and output to * over Supplier's basic manufacturing capacity
established and reported to Applied, from time to time, in accordance
with Section 2.5.1 within a given * period.
* Material has been omitted and filed separately with the Commission.
33
CONFIDENTIAL TREATMENT REQUESTED
2.5.3. Acceptance; Delivery.
(a) Supplier shall not refuse to accept, on the basis of the
quantity of Items involved, Authorized Demand Signals under Section
2.1.5.1 that are within current manufacturing capacities, production
volumes, and operating levels or are within Capacity Projections or
flexibility levels included in the Supplier Performance Plan. Supplier
shall also advise Applied (upon request) regarding additional volumes
of Items that are within increases in such capacities, volumes and
levels, beyond the Capacity Projections and flexibility levels under
the Supplier Performance Plan, that Supplier can achieve through use of
commercially reasonable efforts.
(b) If week to week variations in the quantities of Items
deliverable under Authorized Demand Signals, together with changes in
Committed Delivery Dates through deferral of Items pursuant to Section
2.3.3 cause the volumes of Items that are to be delivered in a weekly
period to exceed Supplier's delivery volumes provided for by the
Supplier Performance Plan and if Supplier is not able to complete and
make delivery of the quantities solely due to such variations (and
exclusive of any delivery volume limitations or other problems
resulting from Supplier's failure or inability to achieve capacity and
flexibility levels established for the affected periods under the
Supplier Performance Plan), then Applied will allow Supplier to
deliver Items that are affected by the excessive increase for that
period up to a maximum of two (2) weeks in advance of the applicable
Committed Delivery Dates. Such early delivery allowance shall be in
effect only to the extent and for the period commercially necessary to
enable Supplier to comply with the Committed Delivery Date(s) of Items
exceeding its capacity and flexibility levels, and in no event later
than the time revised capacity or flexibility requirements can be
established on a commercially reasonable basis.
This Section 2.5 does not alter the provisions of this Agreement in
Section 2.3 (Cancellation of Items), Section 2.14 (Provisions for
Reconfiguration or Restocking), or Section 2.8 (*).
2.6. On-Site Support Requirements.
Supplier may be asked by Applied to provide appropriate or necessary personnel
required to support on-site operations at Applied's facilities. On-site
representatives will comply with all Applied facilities requirements. Applied,
at its sole discretion, may require Supplier to execute an On-site
Representative Agreement, in the form set forth in Attachment 18, and may
require the On-site Representative to execute an NDA joinder in the form
required by the On-Site Representative Agreement, prior to issuing a building
badge to Supplier's representative(s) or permitting access to Confidential
Information. Supplier agrees to notify Applied immediately of any changes in its
staffing assignments involving those individuals with access to Applied's
facilities or IS&T systems, applications or databases.
* Material has been omitted and filed separately with the Commission.
34
CONFIDENTIAL TREATMENT REQUESTED
In the event that Supplier's personnel will provide such support at the premises
of a customer of Applied, Supplier agrees to comply with the requirements and
restrictions imposed by such customer for access to its premises (in addition to
the terms of any On-site Representative Agreement executed by Supplier).
2.7. [Omitted]
2.8. *.
2.8.1. Modifications and *.
In addition to its rights of cancellation under Section 2.3 and of
relabeling, reconfiguration and restocking under Section 2.14, Applied
shall have the right to modify the SSR or Specifications for Items
after the issuance and acceptance of any Authorized Demand Signal and
prior to the actual delivery of the Item. Changes initiated by Applied
as to an Item through changes to an SSR or Specifications (including
those initiated by Applied as ECOs) * covered by this Section 2.8 are *
or "*."
2.8.2. Scope of *.
An * includes only changes initiated by Applied * the * of an
Authorized Demand Signal and excludes changes resulting from other
requests for CES Services, CCR Services or Configuration Engineering
Services, and design or engineering changes attributable to Supplier.
Changes that involve * are not *.
2.8.3. Charges for *.
Applied shall * for * ("*") determined under the following terms:
1. If the * is requested * prior to the then applicable
Committed Delivery Date, the * Charges shall be the
*: Supplier's Standard Cost of Materials for Bus
Route NonConsumable Materials, Supplier's Standard
Cost of Materials for Spot Buy NonConsumable
Materials, 70% of Supplier's Standard Cost of
Materials for NonConsumable MFCs, and Supplier's
Standard Cost of Materials for NonReusable Materials,
applied to Piece Parts removed from the affected Item
as a result of the *. * for materials resulting from
an * shall be shown as a separate line item materials
charge in Supplier's Pro Forma for the affected Item
and become a part of the Contract Price for an Item.
2. If the * is requested * or more prior to the then
applicable Committed Delivery Date, no * Charges
shall apply.
* Material has been omitted and filed separately with the Commission.
35
CONFIDENTIAL TREATMENT REQUESTED
3. Supplier shall also charge for, as a rate per hour
charge in accordance with the terms of Attachment 1,
but subject to the terms of Section 2.1.5.1.A.4.d as
to "Quoted CES Charges" and Section 2.1.5.1.A.4.c as
to "Coordination of Services," the actual CES, CCR
and Configuration Engineering Services resulting from
an *, as part of the Contract Price for the affected
Item.
Supplier shall maintain a record of the Piece Parts removed from an
Item or classified as NonConsumable or NonReusable as a result of *,
and Supplier shall identify all NonConsumable and NonReusable Materials
(excluding Floor Stock Scrap) by preparation of a Xxxx of Materials for
NonConsumable and NonReusable Materials (the "NRM BOM"), classified by
the affected Applied System or affected Purchase Order, which NRM BOM
will be invoiced on the Pro Forma for the Item and will be retained by
Supplier for a period of one (1) year from the invoice date for the *.
All removed Piece Parts, excluding NonConsumable MFCs, for which an *
is made to Applied shall be delivered to Applied's Asset Recovery
Management Unit.
2.9. Information.
2.9.1. Applied Internal Databases.
Supplier may be given electronic access to Internal Applied Data, and
such access may, at Applied's sole discretion, be subject to certain
further limitations and requirements on Supplier, including
Supplier-provided employee control lists, audit rights and the
requirement that Supplier's employees execute a joinder in the IPA as
to confidentiality with Applied. This access, if granted, and all
Internal Applied Data accessed shall be used solely by Supplier and
only to directly facilitate Supplier's production and delivery of Items
to support Applied's requirements. Supplier's access to, and
utilization of, all Internal Applied Data is subject to the
confidentiality provisions and obligations of the IPA with respect to
Confidential Information and the terms of this Agreement and any
applicable NDA between the parties. Applied may terminate Supplier's
access to Internal Applied Data at any time at the discretion of
Applied.
If Applied terminates Supplier's access to Internal Applied Data under
this Section, whether with or without cause, then Applied and Supplier
shall promptly consult to develop alternative ways of providing
Supplier with access to Internal Applied Data for the purpose of
Supplier's performance under this Agreement.
2.9.1.1. Applied IS&T Services.
A. Applied and Supplier have agreed on the services
and scope of services * for voice and data
telecommunication and * to Applied *, all for
Supplier's use in the performance of its obligations
under this Agreement and the Related Agreements, as
more fully set out in the "EPSP Global Help Desk
Service Level Agreement" attached to this Agreement
as Attachment 21 (the "IS&T Services" and the "IS&T
Agreement"), as such
* Material has been omitted and filed separately with the Commission.
36
CONFIDENTIAL TREATMENT REQUESTED
is modified by the provisions of this Section 2.9.1.1
regarding costs and rates of charge. The IPA and the
Tooling Loan Agreement (Attachment 19) also set out
rights and obligations of Applied and Supplier with
respect to the services, * and telecommunications and
access services provided under the IS&T Agreement.
Applied and Supplier each shall perform, provide, pay
for and observe such IS&T Agreement, as herein
modified, as part of this Agreement from and after
the Effective Date hereof for the term of this
Agreement, as the same may be amended from time to
time.
B. All charges and costs payable by Supplier pursuant
to the "Custom IS Services Service Level Agreement"
as in effect between Applied and Supplier pursuant to
the FUAs prior to the Effective Date through the
Effective Date have been resolved by the parties
through, and are payable by Supplier to the extent
provided for by, separate agreements. From and after
the Effective Date, Applied will * not be * charges
and costs for IS&T Services * of the IS&T Agreement
for initial set-up activities or for additional
services requested by Supplier.
C. Except as provided below, failure by Applied to
furnish the IS&T Services to any extent, or any
cessation thereof, shall not render Applied liable in
any respect for damages to either person or property,
and such failure or cessation shall not relieve
Supplier from performing as provided in this
Agreement, except to the extent that such failure to
perform on the part of Supplier is excused under
Article 23(b) of Exhibit 1. If IS&T Services are not
restored by the fifteenth (15th) Business Day after
cessation or failure by Applied to furnish such
Services, Supplier may terminate the IS&T Agreement
with respect to the particular IS&T Services
affected. To the extent so terminated, neither
Supplier nor Applied shall have any further rights or
obligations under the IS&T Agreement from and after
the date of termination except for any rights or
obligations that expressly survive termination of the
IS&T Agreement. Termination by Supplier under this
paragraph shall not relieve Supplier of its
obligations for performance under this Agreement, but
such performance shall be excused to the extent
provided by Article 23(b) of Exhibit 1, or the time
for performance shall be equitably adjusted.
D. Access to IS&T Services. The IS&T Services are
those services to be provided by Applied, as
specified in the IS&T Agreement.
D.1. Access Restriction. Access to Applied's
network and the Confidential Information
contained thereon is granted to Supplier
solely to facilitate the performance of
Supplier's obligations under this Agreement
and the IPA, is limited to the specific
information, applications, systems, time
periods and personnel approved by Supplier
and Applied and is subject to the
obligations regarding
* Material has been omitted and filed separately with the Commission.
37
CONFIDENTIAL TREATMENT REQUESTED
confidentiality of Article 4 of the IPA.
Access is subject to and Supplier agrees to
be governed by business control and
information protection policies, standards,
and guidelines of Applied. Use of any other
Applied information, applications, systems
or in other time periods or by other
personnel is expressly prohibited. This
prohibition applies even when information or
an application or system that Supplier is
authorized to access serves as a gateway to
other information, application(s) or system
outside the scope of Supplier's
authorization. Without limiting the
foregoing, Supplier shall be responsible for
the implementation and execution of security
measures as to its operations and personnel
designed to comply with the above
obligations and to insure that access
granted hereunder will not impair the
integrity and availability of Applied's
information, applications and systems.
D.2. Provision of Information. Supplier
agrees to take commercially reasonable
actions to provide to Applied all employee
and other information that is reasonably
necessary for Applied to approve or
disapprove, as the case may be, access and
use by any Supplier employees, consultants,
agents or representatives to the Applied
network. Furthermore, Supplier agrees to
advise Applied, as soon as reasonably
possible, of any changes in the status or
identities of those employees, consultants,
agents, or representatives to whom Applied
has granted access and use.
D.3. Audit Rights. Supplier acknowledges
that Applied has a vested interest in
assuring that Supplier complies with its
obligations of confidentiality. Accordingly,
Supplier agrees that Applied may take all
steps that Applied, in its sole discretion,
believes are useful in limiting and
controlling Supplier's access to the Applied
network and the Applied Confidential
Information presented or accessed thereby,
including the provision of passwords, the
utilization of security checks, and the
issuance of user identifications that
restrict Supplier's access, provided that
such discretion shall be reasonably
exercised. Supplier also agrees that
Applied, upon prior notice to Supplier's
Senior Director of Operations - Round Rock,
or Director of Operations - Milpitas, as
appropriate, and at reasonable times, may
audit Supplier's access to the Applied
network and use of Applied Confidential
Information, including inspection or audit
of Supplier's facilities, inventory,
records, documentation and personnel, with
respect to compliance with the requirements
of this Section 2.9.1. Applied, in its sole
discretion, will decide the frequency and
extent of such audits, provided that such
discretion shall be reasonably exercised.
Applied agrees to cooperate with Supplier to
limit the burden to
38
CONFIDENTIAL TREATMENT REQUESTED
Supplier of any such audits and to implement
steps to protect the Applied Confidential
Information.
D.4. Segregation of Applied Confidential
Information. Supplier agrees: to segregate
the Applied Confidential Information that it
receives; to take all other reasonable steps
to keep Applied Confidential Information
separate from Supplier information or
information of others to which Supplier has
access; and to assure that the Applied
Confidential Information is readily
locatable and identifiable.
D.5. Effect of Failure to Comply. Supplier
agrees that its failure to comply in any
material respect with any duty or obligation
pursuant to this Section 2.9.1.1.D
constitutes a breach of its confidentiality
obligations under the IPA and that Applied
may initiate termination pursuant to Section
5.2.3 of the IPA.
D.6. Need to Know. The parties will
cooperate to limit the number of Supplier's
employees accessing and utilizing the
Applications and Databases (as such are
defined in the IPA) to only those employees
reasonably necessary for Supplier to perform
its duties and obligations under this
Agreement and the Related Agreements. The
parties agree, however, that Applied retains
final approval concerning access to and
utilization of any such Applications and
Databases. Supplier agrees to have all
current employees with access to Applied
Confidential Information execute an Employee
Joinder (in the form attached to the IPA)
within two (2) weeks after the execution and
delivery of this Agreement, and to forward a
copy of each signed Joinder to Applied, by
transmission to Applied Materials, Inc.,
Attn: Law Department, 0000 Xxxxxxx 000X, X/X
0000, Xxxxxx, Xxxxx 00000. Thereafter,
Supplier agrees to provide to Applied, as
soon as reasonably possible and to its Law
Department at the above address, a copy of
an executed Joinder for each employee
receiving Applied Confidential Information.
In this regard, for those Supplier employees
requiring access to the Applied computer
network, Supplier will forward the original
executed Joinders concurrently with the
respective request for access to the Applied
Law Department at the above address. For
those Supplier employees receiving Applied
Confidential Information, but for whom
access to the Applied computer network is
not required, Supplier will forward copies
of executed Joinders to the Applied Law
Department, at the above address. The
liability of Supplier and any of its
employees involved for any violation of the
provisions of this Agreement or of the IPA
regarding Applied's Confidential
Information, shall be joint and several. If
an employee violates any of the provisions
of this Agreement or the
39
CONFIDENTIAL TREATMENT REQUESTED
IPA regarding Applied's Confidential
Information after the time his or her
employment with Supplier has terminated and
if Supplier, as part of its exit interviews
and procedures, specifically advised such
former employee of the continuing nature of
his or her obligation regarding such
Confidential Information, then Supplier
shall not have such joint and several
liability to Applied for such subsequent
violation by such former employee by reason
of the previous employment relationship.
2.9.2. Applied New Product Plans.
Supplier will, on occasion and at Applied's discretion, be invited to
forums in which Applied's new product plans are shared. Any Applied new
product plans provided to Supplier are Confidential Information of
Applied and are subject to the confidentiality provisions of Article 4
of the IPA and of this Agreement, and any applicable NDA executed in
connection with the forum(s) at which such plans are shared.
2.9.3. Compliance with Securities Laws.
Supplier agrees that the Internal Applied Data and Applied new product
plans contain Confidential Information of or disclosed by Applied to
Supplier and to those of its employees, contractors, representatives,
and agents receiving such Confidential Information or new product plans
solely for performance of Supplier's obligations to Applied, and that
possession of Confidential Information which is material, non-public
information concerning companies with publicly-traded securities
prohibits Supplier and its employees, contractors, representatives and
agents with direct or indirect access to such Confidential Information
from (1) buying or selling such companies' publicly traded securities
(stock, options, etc.) ("xxxxxxx xxxxxxx") until after such
Confidential Information has been disclosed to the public and absorbed
by the market (at least two business days), and (2) passing the
Confidential Information on to anyone who may buy or sell such
companies' securities ("tipping"). Supplier shall comply with (and
shall direct its employees, contractors, representatives and agents to
comply with) all federal and state securities laws prohibiting xxxxxxx
xxxxxxx and tipping, and shall immediately notify Applied if Supplier
violates any such laws or if Supplier becomes aware of any such
violation by any of its employees, contractors, agents or
representatives. Supplier also agrees to execute additional NDAs or
other agreements as may be required to comply with applicable
securities laws. Applied has established a corporate policy prohibiting
xxxxxxx xxxxxxx and tipping by all members of its workforce as to its
securities and as to securities of companies other than Applied.
Applied will maintain a policy against such xxxxxxx xxxxxxx and tipping
in effect throughout the term of this Agreement.
2.10. Packaging and Transportation.
2.10.1. Packaging and Shipment.
Supplier will have all Items packaged "ready for use" in accordance
with Applied's packaging Specification (Attachment 6a). Supplier will
xxxx and identify every Item in
40
CONFIDENTIAL TREATMENT REQUESTED
compliance with Applied's part marking identification Specifications
and requirements (Attachment 6b). In addition, Applied may require
specific fit-for-use packaging for certain Items and/or deliveries.
2.10.2. Bar Coding.
All shipments of Items shall be bar coded to Applied's Specifications
in Attachment 5.
2.10.3. Transportation Requirements.
2.10.3.1. F.O.B Destination.
Supplier shall ship all Items "F.O.B. Destination," provided
that allocation of risk of loss and terms for passage of title
otherwise applicable as to Items shipped by Supplier may be
varied by the provisions of this Agreement. Applied will
specify the applicable destination point, which may be an
Applied Facility or another location. Supplier shall ship all
Items in accordance with Applied's Corporate Routing Guide
(Attachment 7), including use of approved carriers. Supplier
shall ship all Items to accomplish delivery of all Items at
the applicable destination point, on time.
2.10.3.2. Freight and Delivery Costs.
Except for Items shipped by Supplier on Supplier owned trucks
pursuant to prior written approval by Applied and except as
provided below for Items shipped with freight prepaid with
prior approval, all freight and delivery costs for Items shall
be specified as "Freight Collect" on bills of lading or
shipping receipts, to be paid directly by Applied. With prior
written approval by Applied, Supplier may prepay freight and
delivery costs (to be shown as "Freight Paid and Charged Back"
on the bills of lading or shipping receipts) and invoice
Applied for the actual amounts of such costs. Applied will not
pay freight and delivery costs in excess of the costs
determined under the Corporate Routing Guide for applicable
delivery methods. Applied will not pay any freight and
delivery costs if Supplier uses a carrier that is not approved
under Applied's Corporate Routing Guide. Any variance in these
requirements must be approved by Applied in advance, in
writing.
2.10.3.3. Risk of Loss; Title.
For all Items shipped Freight Collect or "Freight Prepaid and
Charged Back" in accordance with 2.10.3.2 and by a carrier
approved by Applied, Applied shall bear all risk of loss as to
such Items while in transit. For those Items that, with
Applied's prior written approval, are shipped using Supplier
owned trucks, Supplier shall bear all risk of loss as to all
such Items while in transit and continuing until Applied or
its designee has acknowledged receipt of the Items at the
specified destination point. Acknowledgment of receipt occurs
when Applied enters the receipt of the Items in Applied's data
and accounting system. Applied shall be responsible, however,
for any loss as to an Item occasioned by the gross
41
CONFIDENTIAL TREATMENT REQUESTED
negligence of its employees, acting within the scope of their
employment, regardless of whether there has been
acknowledgement of receipt or passing of title as to such
Item.
2.11. Payment.
2.11.1. Invoices; Certain Acceptance Terms.
(a) Invoices (other than for Services invoiced under Section 2.11.1(c)
below) shall contain the following information: Purchase Order number,
Item number, description, sizes, quantities, unit prices, and extended
totals in addition to tax amounts and any other information requested.
Pro Formas shall comply with Section 2.1.7. Applied's payment of an
invoice or other account, or payment made under an ERS Program, does
not in itself represent unconditional acceptance of Items or preclude
revocation of acceptance.
(b) If Services are included in an invoice described in Section
2.11.1(a), Supplier shall provide on the invoice the charges for each
category of Service, and the portions of such charges attributable to
Configuration Engineering Services, CES Services, engineering for
Design Services or Development Services, and engineering for the
release of the Xxxx of Materials for the Item through Applied's ECO
procedures, as applicable.
(c) When Supplier has completed Services which are not related to an
Item for which Supplier is to issue a Pro Forma or an invoice and has
delivered any work product or other deliverables related to the
Services, Supplier shall issue an invoice or other notice of completion
of Services and delivery (a "Completion Notice") to Applied, to the
attention of the purchasing representative of the Applied organization
issuing the relevant Authorized Demand Signal, which may have been a
Purchase Order that is part of a DSA or that was issued for a DVA. A
Completion Notice shall include: the Applied Purchase Order number, the
date(s) of completion and delivery, a description of the Services
performed and work product or other deliverables delivered, and the
Applied representative to whom delivery was made. A Completion Notice
may be issued by Supplier in invoice form or as an e-mail or letter,
and may be delivered by mail, facsimile, or e-mail transmission.
(d) (i) Applied may reject any Item (including Services handled under
Section 2.11.1(d)(ii)) until receipt of that Item has been acknowledged
by entry of the receipt in Applied's data and accounting system (a
"Receipt Entry"). Applied's Receipt Entry is deemed to be acceptance of
the Item(s) identified in the Receipt Entry, in accordance with and
subject to the terms of this Agreement. Supplier agrees that Applied
may revoke its acceptance as to any Item or Items deemed accepted
through Receipt Entry that do not conform to the warranty terms
applicable to the Item(s) and are not timely corrected, repaired or
replaced by Supplier in compliance with Section 7.2.2, as the value of
such Item(s) to Applied is substantially impaired. Revocation of
acceptance as to such Item(s) shall be made within a reasonable time
after Applied discovers the defect or nonconformity and is not
effective until Applied notifies Supplier of revocation.
42
CONFIDENTIAL TREATMENT REQUESTED
(ii) Services performed or provided by Supplier pursuant to a
Purchase Order, DSA or DVA will be handled under the preceding Receipt
Entry procedures by issuance of an Applied "in-house packing slip."
Acceptance of such Services by Applied for purposes of payment shall
not occur until all of the following have occurred: (i) an Applied
Purchase Order, DSA or DVA, as applicable, has been issued for such
Services; (ii) the Services have been completed and all work product
deliverables have been delivered to Applied in accordance with the
Purchase Order, DSA or DVA; (iii) Supplier has delivered its Completion
Notice for the Services to Applied in accordance with the applicable
Purchase Order, DSA or DVA; and (iv) Applied has issued its "in-house
packing slip" to initiate payment of the amounts charged under the
Completion Notice, whether by check, electronic funds transfer or
otherwise.
(iii) Acceptance of Items or of Services, as described above,
is acceptance for purposes of payment and shall not impair any remedy
or right of Applied, or warranty or other obligation of Supplier, under
this Agreement or applicable law other than that of rejection of
Item(s) deemed accepted that are governed by the UCC and rights
equivalent to rejection as to Services governed by laws other than the
UCC. All payments made by Applied will be subject to adjustment for
errors, shortages or nonconformity with warranty provisions, and to
revocation of acceptance where applicable.
2.11.1.1. Delivery of Invoices.
All invoices must be sent directly to Applied's Accounts
Payable Department in Austin:
Accounts Payable
Applied Materials
0000 XX Xxxxxxx 000 Xxxx X/X 0000
Xxxxxx, XX 00000-0000
2.11.1.2. Method of Payment.
Applied is authorized by Supplier to make payments under this
Agreement by either check or electronic funds transfer.
Supplier will provide Applied with the required bank routing
coordinates and other information that may be required by
Applied to establish electronic funds transfer capability.
2.11.1.3. ERS Program.
If Supplier participates in Applied's ERS Program, Supplier
will provide Pro Formas pursuant to Section 2.1.7, but
otherwise will not provide invoices to Applied for sales of
Items to which that program applies. Supplier will be
responsible for the verification of all prices and quantities
prior to shipment and will enter that information on the Pro
Forma for each Item. All applicable sales and use tax will be
remitted to Supplier with payment by Applied. ERS payments
will be subject to adjustment for errors, shortages,
non-conformities or defects, as well as prompt payment
discounts.
43
2.11.1.4. Packing Slips.
Supplier must include a valid packing slip number or package
ID on each package or shipment.
2.11.2. *.
Payment terms will be *
a. if payment is made from Supplier's invoice, then from the
later of (i) Applied's receipt of Supplier's invoice, in form
and substance acceptable to Applied, for the Item(s), or (ii)
delivery of, and Applied's entry of receipt for, the Item(s)
in Applied's data and accounting system.
b. if payment is made under the ERS Program, then from the
date of Applied's entry of its receipt of the Item(s) in
Applied's data and accounting system.
If payment is made within * after the applicable date under clause (a)
or (b) *.
2.11.3. Offsets, Debits.
Applied may at any time set off any amount owed by Applied to Supplier
against any amount owed by Supplier (whether in Supplier's name or in
the name of Insync Systems, Incorporated) to Applied.
Applied anticipates implementing, in the Third Quarter of its 2002
fiscal year, a procedure under which Applied will issue to Supplier
notices of scheduled debits or offsets approximately * in advance of
the execution of such debit or offset. Applied will advise Supplier if
Applied will not be able to implement such procedure in the anticipated
period with use of commercially reasonable efforts, and the parties
will negotiate in good faith to determine if alternative notice
procedures can be established by the parties. Notices of debits or
offsets under such a procedure, if implemented, shall be given to
Supplier's Finance Manager.
2.11.4. Effect of Payment.
Time and method of payment shall not alter the time at which title to
Items passes to Applied, nor shall payment, in itself, preclude Applied
from the exercise of remedies under this Agreement or as permitted by
law, in each instance in accordance with this Agreement.
* Material has been omitted and filed separately with the Commission.
44
CONFIDENTIAL TREATMENT REQUESTED
2.11.5. Reconciliation of Payment Discrepancies.
Attachment 22 to this Agreement sets out agreements of Applied and
Supplier as to any claims of Supplier with respect to "Payment
Discrepancies," as such term is defined in Attachment 22.
To the extent permitted by Attachment 22, Applied may initiate
amendment(s) of such Attachment 22 by posting of an amendment on the
Applied website to which Supplier has access in accordance with Section
1.3.4, and each amendment so initiated becomes effective if Supplier
does not object to the amendment within thirty (30) days of such
posting. Amendments that the terms of Attachment 22 exclude from such
website modification procedure shall be made in accordance with the
provisions of such attachment.
2.12. Disaster Recovery Plan.
Supplier shall develop and provide to Applied, upon request, reasonable
information describing or evidence of a disaster recovery plan that includes
emergency back up capacity, and appropriate record protection and recovery.
Applied shall have the right to verify Supplier's internal processes for
compliance with this provision.
2.13. Performance Constraints.
2.13.1. Constraints.
Supplier shall use commercially reasonable efforts to anticipate
material constraints affecting its ability to perform its obligations
under this Agreement. If Supplier believes that any such constraints
are reasonably likely to materially and adversely affect its
performance under this Agreement, Supplier will inform Applied's
Subsystems Management Team and Supply Chain Management organizations
(through the contact persons designated for Supplier by those
organizations) thereof and of action plans to resolve them. Typical
constraints might include, but are not limited to:
a. Consumption over forecast
b. Consumption under forecast
c. Quality problems
d. Capacity/production problems
e. Sub-tier supplier supply-chain management problems
2.14. Provisions for Reconfiguration or Restocking.
2.14.1. "Affected Items."
This Section 2.14 applies to those FDS, NSO, Module and Spares Items
which have been delivered to Applied by Supplier pursuant to an
Authorized Demand Signal issued under Section 2.1.5, which conform to
applicable requirements (including Specifications) of this Agreement,
and which, subsequent to delivery to Applied (and prior to shipment by
Applied to its customer), Applied identifies for relabeling,
reconfiguration, or return and
45
CONFIDENTIAL TREATMENT REQUESTED
restock based on Applied's current manufacturing requirements
("Affected Items"). As to Items that Applied identifies as Affected
Items, Applied shall use its commercially reasonable efforts to locate
Applied customers that will purchase Affected Items, so that such will
be treated as Relabel or Reconfigure Items, rather than as Restock
Items.
2.14.2. Categories.
Applied shall notify Supplier of those Items that are identified as
Affected Items by Applied from time to time. Applied's notice to
Supplier of the Affected Items so classified shall be given by fax or
e-mail notice to Supplier's Customer Service Manager in Austin or
Milpitas, as appropriate. Applied will classify Affected Items in the
following categories:
a. Relabel Items
b. Reconfigure Items
c. Restock Items
2.14.3. "Relabel Items."
An Affected Item which Applied determines is appropriate for relabeling
and/or minor reworking (for which no re-testing is required) at
Applied's facility, to meet the requirements of an Applied customer, is
a "Relabel Item."
2.14.3.A. Applied shall issue new or revised configuration,
labeling and related Specifications and completion
requirements (the "Revised SSR") to Supplier for each Relabel
Item at the time when Applied has determined the particular
manufacturing requirements of Applied and its customer. Within
ninety-six (96) hours (measured during Business Days and under
prevailing Pacific Time) following receipt of the Revised SSR,
Supplier will determine if the Revised SSR requires any CES
Services or Configuration Engineering Services, beyond
Configuration Engineering Services required solely to relabel,
and if the completion requirements are feasible. Unless (i)
Supplier specifically refuses (under the standards applicable
to refusal of an initial SSR) the new or Revised SSR for the
Relabel Item within forty-eight (48) hours (measured during
Business Days and under prevailing Pacific Time) following the
time Supplier has made the determinations under the preceding
sentence, or (ii) Supplier determines, with Applied's
concurrence, that CES Services or Configuration Engineering
Services, beyond Configuration Engineering Services solely to
relabel, are required by the Revised SSR, Supplier shall
rework and relabel each Relabel Item at the Applied
manufacturing facility where that Item is held. Such reworking
and relabeling shall be performed by Supplier in compliance
with all requirements of the Agreement applicable to such
Item, including Applied's new or Revised SSR issued under this
Section 2.14.3; as reworked and relabeled, the Relabel Item
shall be deemed a new Item for warranty, performance and other
provisions of this Agreement.
46
CONFIDENTIAL TREATMENT REQUESTED
2.14.3.B. The total charge from Supplier to Applied for each
Relabel Item shall be *.
2.14.3.C. Upon notice to Supplier, to be sent to the attention
of Supplier's Customer Service Manager - Austin or - Milpitas,
as appropriate, Applied may change the classification of a
Relabel Item to another category, whether or not work under
the applicable SSR has been initiated or completed. Pricing
for a Relabel Item that is changed to a Restock Item after the
work has been performed by Supplier for the relabeling shall
be calculated as if such had originally been a *.
2.14.4. "Reconfigure Items."
An Affected Item (i) which Applied determines (after consultation with
Supplier as to the scope of work involved) is appropriate for
reworking, reconfiguration (including related CES or Configuration
Engineering Services) and testing at Supplier's facilities to meet the
requirements of Applied or its customer(s), and (ii) for which Applied
has issued a new or Revised SSR from which a new Committed Delivery
Date is determined, is a "Reconfigure Item." Unless Supplier
specifically refuses the applicable new or Revised SSR within
ninety-six (96) hours (measured during Business Days and under
prevailing Pacific Time) after its issuance by Applied (under the
standards applicable to refusal of an initial SSR) the SSR shall be
deemed accepted by Supplier and the Committed Delivery Date shall
(unless otherwise mutually agreed) be determined by the standard cycle
time for the Item based on the date of acceptance or deemed acceptance.
2.14.4.A. Upon Supplier's acceptance or deemed acceptance of a
Revised SSR, Applied will ship Reconfigure Items to Supplier,
at Applied's cost and risk of loss until delivery to
Supplier's receiving dock. Supplier shall have risk of loss
and shall hold all Reconfigure Items as bailee for Applied
from the time the Item is delivered to Supplier's receiving
dock. Supplier shall maintain in force insurance covering
Reconfigure Items against risks and in amounts that are
appropriate to protect the interests of Applied in such goods.
Applied shall include, as part of its shipment to Supplier,
any safety notice required for the Affected Item, to include a
notice that the Affected Item has not been exposed to toxic or
corrosive gases or chemicals and that no decontamination is
required.
2.14.4.B. Applied shall issue a new SSR or a Revised SSR for
each Reconfigure Item when Applied has determined the
particular manufacturing requirements of Applied and its
customer and prior to shipment of the Reconfigure Item to
Supplier. Supplier will perform applicable CES Services,
Configuration Engineering Services and CCR Services and
reconfigure, rework, test, and relabel each Reconfigure Item
at Supplier's facility. Such CES Services, Configuration
Engineering Services and CCR Services, reconfiguration,
reworking, testing, and relabeling shall be performed by
Supplier in compliance with all requirements and
Specifications of the Agreement applicable to such
* Material has been omitted and filed separately with the Commission.
47
CONFIDENTIAL TREATMENT REQUESTED
Item, including Applied's new SSR or Revised SSR issued under
this Section 2.14.4, and as reconfigured, reworked, tested and
relabeled, the Reconfigure Item shall be deemed a new Item for
warranty, performance and other provisions of this Agreement.
2.14.4.C. The total charge from Supplier to Applied for each
Reconfigure Item shall be equal to the sum of:
(i) The cost of *, as determined in accordance with,
and priced in compliance with, * excluding * but to
include *
*
2.14.4.D. Upon notice to Supplier, whether or not the
reconfiguration has been initiated or completed, which notice
shall be given by e-mail or fax transmission to the attention
of Supplier's Customer Service Manager - Austin or - Milpitas,
as appropriate, Applied may direct that Supplier cease work on
a Reconfigure Item or may change the classification of a
Reconfigure Item. Applied shall specify in its notice under
this Section 2.14.4.D whether the Item as to which work is to
cease shall then become a new Reconfigure Item, a Relabel
Item, or a Restock Item; alternatively, Applied may direct
that it be delivered as an incomplete Reconfigure Item. The
date of the notice of conversion shall be deemed the date of
receipt by Supplier of the Item as a Restock, Relabel, or new
Reconfigure Item. If the Item is changed from a Reconfigure
Item to a Restock Item, Section 2.14.5 shall apply after that
date.
2.14.4.E. Each completed Reconfigure Item shall be shipped to
Applied by Supplier in accordance with the terms of the
Agreement and on the Committed Delivery Date. Supplier shall
provide its Pro Forma for the Reconfigure Item in accordance
with Section 2.1.7 and payment shall be handled under the
applicable payment procedures for new Items. Applied shall
review the Pro Forma under the applicable pricing model, shall
advise Supplier of any dispute as to the Pro Forma amount, and
then issue its Purchase Order in accordance with the pricing
model, the above terms as to Reconfigure Items, and the Pro
Forma (as revised, if necessary).
2.14.4.F. All NonReusable and NonConsumable Materials removed
by Supplier from a Reconfigure Item (other than NonConsumable
MFCs, missing parts and Floor Stock Scrap) shall be returned
to Applied in accordance with Applied's Asset Recovery
Management process.
2.14.4.G. If Applied directs Supplier to cease work on a
Reconfigure Item under Section 2.14.4.D above without delivery
of same to Applied, such Item shall be treated as a Restock
Item under Section 2.14.5 as of the date of the
* Material has been omitted and filed separately with the Commission.
48
CONFIDENTIAL TREATMENT REQUESTED
direction to cease work. Supplier shall, however, charge
Applied for the following amounts, which shall be determined
in addition to the amounts payable with respect to the Restock
Item:
*
2.14.5. "Restock Items."
Affected Items returned by Applied for disassembly and restocking by
Supplier as set out in Sections 2.14.5 and 2.14.6 are "Restock Items."
Applied will ship Restock Items to Supplier, at Applied's cost and risk
of loss until delivery to Supplier's receiving dock. Supplier shall
have risk of loss from the time the Restock Item is delivered to its
receiving dock. Supplier shall acquire all Restock Items (including all
materials and Piece Parts other than NonConsumable Materials or
NonReusable Materials and Floor Stock Scrap) from Applied. Supplier
shall deliver to Applied any applicable tax exemption certificates and
shall pay any applicable tax. Supplier shall return all NonReusable
Materials and NonConsumable Materials to Applied in accordance with
Applied's Asset Recovery Management process (or destroy, as instructed
by Applied). Applied shall include, as part of its shipment to
Supplier, any safety notice required for the Affected Item, to include
a notice that the Affected Item has not been exposed to toxic or
corrosive gases or chemicals and that no decontamination is required.
2.14.6. Restocking Process and Charges.
2.14.6.A. Within ten (10) days after completion of disassembly
of each Restock Item by Supplier, Supplier shall (i)
immediately record and notify Applied under Section 2.14.6.C
below of, all NonConsumable and NonReusable Materials (as
defined in Section 2.2.3) and deliver a detailed listing of
all Piece Parts; (ii) restock, or (as to NonConsumable and
NonReusable Materials) return, all Piece Parts, and (iii)
deliver to Applied the Reconfiguration/Tear-Down
Reconciliation Form ("Reconciliation Form") for each Restock
Item. The Reconciliation Form shall specify the amount for
which Supplier shall acquire the Consumable Materials and
NonConsumable MFCs from the Restock Item, which amount payable
by Supplier is equal to the total of: (a) Consumable Materials
at * plus (b) NonConsumable MFCs at * of * and less (c)
Teardown Labor Costs of * per FDS.
Supplier must identify on the Reconciliation Form prices for
all NonReusable Materials and NonConsumable Materials
(excluding Floor Stock Scrap) for each Restock Item being
handled under this Section, which prices shall be *
NonReusable Materials or NonConsumable Materials. Any
NonReusable Materials and NonConsumable Materials prices
exceeding *, as to the particular material or Piece Part, and
the disposition of each MFC, shall be set out on a NRM BOM
that will be delivered with the Reconciliation Form and
calculated at * MFC or other Piece Part.
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
2.14.6.B. Supplier shall deliver the Reconciliation Form to
Applied as required by Section 2.14.6.A. Applied shall audit
such form for compliance with the terms of this Section 2.14
and for any NonReusable Materials or NonConsumable Materials
with costs in excess of $250.00. The Reconciliation Form shall
not be released for processing and payment until Applied has
approved same under Sections 2.14.6.B and C.
2.14.6.C. Supplier shall return all NonConsumable and
NonReusable Materials to Applied (other than missing parts or
materials and NonConsumable MFCs) at Applied's Asset Recovery
Management location, or destroy such NonConsumable and
NonReusable Materials if so directed by Applied, in writing.
2.14.7. Provisions as to Restocked or Removed Parts.
A. Supplier shall identify and return to Applied (for Asset Recovery
Management by Applied) all NonReusable Materials removed from any
Affected Item and shall scrap or destroy all Floor Stock Scrap.
Supplier accepts all Restock Items and all Piece Parts and materials
removed or obtained from any other Affected Item (not identified by it,
and returned, as NonReusable Materials or scrapped as Floor Stock
Scrap) (collectively, "Goods") "AS IS."
B. EXCEPT FOR THE WARRANTY IN PARAGRAPH D BELOW, APPLIED MAKES NO
WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE GOODS
OR ANY PART THEREOF. APPLIED HEREBY DISCLAIMS WITH RESPECT TO THE GOODS
ALL IMPLIED WARRANTIES, INCLUDING ANY IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND WARRANTIES OF
TITLE AND OF NONINFRINGEMENT.
C. WITH RESPECT TO SUCH GOODS AND EXCEPT AS TO MATTERS COVERED BY THE
WARRANTY OF PARAGRAPH D BELOW, IN NO EVENT SHALL APPLIED BE LIABLE FOR
ANY DAMAGES THAT ARE EXCLUDED DAMAGES UNDER ARTICLE 17 OF EXHIBIT 1 TO
THIS AGREEMENT FOR ANY REASON, WHETHER OR NOT APPLIED OR SUPPLIER HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND APPLIED EXCLUDES
AND SUPPLIER WAIVES ANY LIABILITY OF APPLIED FOR ANY SUCH DAMAGES.
D. Applied WARRANTS to Supplier: (a) that none of the Goods returned as
Reconfigure Items or Restock Items shall have been exposed to toxic or
corrosive gases or chemicals; (b) that as to any Items returned to
Supplier as a result of a warranty claim of Applied under this
Agreement or pursuant to Section 5.2.1, Applied will have
decontaminated and prepared for safe handling under all applicable
safety and environmental laws and regulations any such Items delivered
to Supplier that have been exposed to toxic or corrosive gases or
chemicals while in Applied's possession; (c) that all applicable safety
and environmental notices and labels shall be affixed to or provided
with the delivery of any such Goods or Items; and (d) that none of such
Goods have been delivered to any person other than Applied or Supplier
following Applied's receipt of
50
CONFIDENTIAL TREATMENT REQUESTED
same. The limitations of Paragraph C above do not apply to the
warranties set out in this Section 2.14.7.D.
2.14.8. Processing and Payments.
Supplier shall calculate the amount payable by it for Restock Items in
accordance with the provisions of this Section 2.14, and shall
authorize Applied to charge Supplier for the Restock Item by issuing
the Reconciliation Form and related NRM BOM. Applied shall review the
Reconciliation Form and NRM BOM and shall charge and collect from
Supplier the calculated amount payable to Applied for the Restock Item
by debit memo or other offset against amounts otherwise payable by
Applied to Supplier. If Applied believes that additional amounts are
properly payable by Supplier in excess of the calculated amount, it
shall promptly advise Supplier of such claim and the parties shall
review the determination of the amount payable by Supplier for the
affected Restock Item. If the parties do not agree on the proper charge
to be made within 30 days after the dispute arises, the parties shall
proceed under the Business Review Process as defined in Section 7 below
to attempt resolution of the dispute. Applied shall not effect a debit
or other offset (in excess of the amount initially calculated by
Supplier) until the parties have failed to reach agreement and have
failed to reach a resolution within the time allowed for the Business
Review Process.
3. PRICING FRAMEWORK
3.1. Contract Prices.
3.1.1. Pricing and Cost Model of Attachment 1.
Attachment 1 contains the contract terms agreed upon with respect to
the following: (i) the pricing and cost model, which set out the
elements and calculations by which Contract Prices are determined on an
ongoing basis; * indicated periods during the term of the Agreement.
Any modifications to Attachment 1 must be made in accordance with
Section 1.3.4 of this Agreement. Supplier shall price and sell, and
Applied shall purchase, all Items in accordance with this Agreement,
including Attachment 1. Supplier will provide R&D Items at
non-discriminatory prices that take into consideration the total value
of Applied's business with Supplier.
Applied and Supplier have established pricing for certain Services on a
rate-per-hour basis as part of Attachment 1 or in other provisions of
this Agreement. Unless otherwise agreed at the time, pricing for
Services provided by Supplier pursuant to Purchase Order(s) will be
determined at applicable rates set out in Attachment 1.
The Contract Prices of additional and/or revised Items will be based
upon applicable elements of the pricing or cost model set forth in
Attachment 1.
Attachment 1 is sometimes referred to as the "cost model" or "pricing
model" for the Agreement.
* Material has been omitted and filed separately with the Commission.
51
CONFIDENTIAL TREATMENT REQUESTED
3.1.2. Application of Prices.
On the Effective Date and in accordance with Section 1.3.2.3, the
pricing for Items shall be determined pursuant to this Agreement,
including Attachment 1; provided that pricing under this Agreement
shall not apply to FDSs or other Items for which an SSR or Purchase
Order has been accepted (based on the procedures of Section 2.1.5.1
hereof) prior to the Effective Date.
Specific circumstances may result in a review of Agreement terms,
including Contract Prices. These circumstances include, but are not
limited to:
a. Volume increases or decreases resulting in an
increase or decrease in the value of the Agreement of
over 20%;
b. Addition or deletion of Items to the Agreement
increasing or decreasing the value of the Agreement
over 20%;
c. Cost increases or reductions exceeding those
committed in Supplier's Performance Plan; and
d. Reductions or increases in market prices for
equivalent materials and services.
Any amendment or change in terms shall be made in accordance with
Section 1.3.4 of this Agreement. Nothing contained in this Section 3.1
shall require either party to amend or change any term of this
Agreement.
3.1.3. Pricing Model.
The parties have anticipated that changes will occur in the design,
Specifications, Piece Parts, and other elements of Items to be provided
pursuant to this Agreement and have negotiated the pricing model shown
in Attachment 1 to accommodate such changes and to apply to Items that
are affected by such change. The pricing model is agreed to apply
appropriately to Items as changed in the future. However, if
unanticipated changes not within the contemplation of the parties have
a material and adverse impact on the operation of the pricing model,
and alternative pricing is not agreed to by the parties at the time,
then the Item(s) affected shall be removed from this Agreement. Such
removal shall not be classified as a partial termination.
3.1.4. Further Agreements as to Pricing.
(a) Upon request made by Applied through the SAT Team Lead for Supplier
and delivered to Supplier's Vice President - Sales, Applied and
Supplier will review pricing models proposed by Applied from time to
time, including by way of example, option based pricing models. The
parties may, by mutual written amendment to this Agreement, implement
one or more alternative pricing models with respect to those Item(s)
identified in or made subject to such alternative pricing model(s) by
such amendment. The Items or Piece Parts subject to an alternative
pricing model shall not be subject to Section 3.1.5 or Section 3.1.6
unless the parties expressly so provide in the amendment implementing
the relevant alternative pricing model.
52
CONFIDENTIAL TREATMENT REQUESTED
(b) (i) The prices of Piece Parts sold to Applied, whether incorporated
in FDSs or otherwise sold to Applied, shall be as follows:
A. Non-Unit MFCs (defined below in Section 3.1.4(b)(ii)
shall be *;
B. All other Piece Parts *; and
C. Adjustments to the foregoing prices shall be made in
accordance with Section 3.1.5 and 3.1.6.
(ii) MFCs sold pursuant to this Agreement that are not Unit MFCs (the
"Non-Unit MFCs") * MFCs manufactured or sold by Supplier's affiliate Unit
Instruments, Inc. ("Unit MFCs") shall be sold to Applied at *
(c) Upon request of Applied or Supplier, the parties shall confer and
establish milestones and criteria applicable for the transition of
Item(s) from R&D Manufacturing to Pilot Manufacturing, and from Pilot
Manufacturing to Volume Manufacturing and further shall develop, based
on milestones and criteria established, checklists and procedures
appropriate to the transition of the affected Item(s). An illustrative
form of NPT checklist is attached to this Agreement as Attachment 23.
3.1.5. * Terms.
(a) The "Commodity Classifications" are * "Weldments," and "Unit MFC."
Guidelines for determining the Commodity Classification applicable to a
particular Commodity for each periodic reclassification are set out in
Section 3.1.5.1(d). The * are the periods, denominated periods 1
through 5 and stated as monthly periods from June 1, 2002 and ending on
the last date of the indicated month, in the table set out in Section
3.1.5 (d).
(b) Prior to each * and in accordance with Sections 3.1.5 and 3.1.6,
Supplier will prepare a preliminary table of Commodity Classifications
for all Commodities. Supplier and Applied shall review and consult on,
and agree to, the actual classification of Commodities for * for
purposes of the * for the *. Each actual classification of Commodities
agreed upon by the parties shall be attached to this Agreement as part
of Attachment 24.
(c) Two weeks prior to each * and in accordance with the table
classifying Commodities as agreed upon by the parties and with Sections
3.1.5 and 3.1.6 , Supplier shall prepare a * under Section 3.1.5.1 (e)
that specifies * for each Piece Part that is to be incorporated in any
FDS forecasted to be built during that * and is included in the
Commodity Classification to which * in the next * ("Forecasted Piece
Part"). The Applied Forecast to be used in preparing a * shall be the
most recent Applied Forecast reflected in Supplier's MRP system as of
the date which is * prior to the beginning of the applicable * (the "*
Forecast"). Supplier shall then implement such pricing for each
* Material has been omitted and filed separately with the Commission.
53
CONFIDENTIAL TREATMENT REQUESTED
Forecasted Piece Part used in an Item ordered during the * or that is
sold to Applied under this Agreement as a separately purchased Item
(excluding in this latter case Unit MFCs). In addition, Supplier shall
also * in accordance with Section 3.1.6 for all Piece Parts for which *
apply as a result of *.
(d) The * and * for each Commodity Classification are as follows:
* * FOR * * FOR * * % FOR * *
COMMODITIES COMMODITIES % FOR *
-------------------------------------------------------------------------------
#1/* * * * *
#2/* * * * *
#3/* * * * *
#4/* * * * *
#5/* * * * *
3.1.5.1 Calculation of New *.
(a) Initial Classifications. Attachment 24 to this Agreement is the
initial table of Commodity Classifications and *, agreed upon by the
parties as of the Effective Date and applicable for * No. 1,
classifying all Piece Parts into *: *.
(b) Periodic Reclassifications. Not later than * prior to the beginning
of each * after the first period, Supplier shall deliver to Applied (to
the attention of the Supplier's SAT Team Lead at Applied) Supplier's
proposed classification table of all * for the next *. Applied and
Supplier shall promptly review and negotiate in good faith to establish
the classification table for *, utilizing the classification guidelines
set out in Section 3.1.5.1(d) below. If the parties fail to agree upon
the classification table to be used within ten (10) Business Days after
Supplier's delivery of the proposed classification table, either party
may initiate the Business Review Process of Section 7.2.5 with respect
to such failure as a "Dispute."
(c) Special Provisions. Special provisions related to prices applicable
to Piece Parts affected by * (as such term is defined in Section 3.1.6)
will be governed by Section 3.1.6, and those provisions shall control
over the * provisions of Section 3.1.5 to the extent of any conflict.
(d) Commodity Classification Guidelines. In preparing the Commodity
Classification table for each *, Supplier and Applied shall utilize the
guidelines of this Section 3.1.5(d), subject to the exclusions
applicable under Section 3.1.5.2.
* Material has been omitted and filed separately with the Commission.
54
CONFIDENTIAL TREATMENT REQUESTED
A. Guidelines for * Commodities Classification.
* Commodities will include all Commodities that are identified
by the parties under any of the following descriptions:
(i) Sheet metal, cables, harnesses, and hardware and
such other Commodities as are set out as * on the
initial table of Commodity Classifications in
Attachment 24.
(ii) All Commodities for which Supplier has had
authority to select the supplier or source of such
Commodity, whether as a no-preference choice or
because neither Applied nor its customers have
required a specific source or supplier provided that
the Piece Parts meet Applied design requirements and,
if applicable, the provider is a qualified supplier,
in at least * of the FDSs which Applied has ordered
from Supplier in the 9 month period preceding the
start of the applicable *. Examples of Commodities
that will be evaluated under this guideline are
valves, transducers, filters and similar Commodities.
B. Guidelines for * Commodity Classification.
* Commodities are Commodities that are not now or hereafter
classified as *, and include, by way of example, *.
C. Status Change.
Once a Commodity is classified as *, that Commodity (to
include, as to a commodity group, all Piece Parts in such
group) remains classified as * during the remainder of the
Agreement and shall not be reclassified in a periodic
reclassification process.
D. MFCs.
MFCs are not treated as *. Unit MFCs shall have pricing
adjustments made in accordance with the table set out in
Section 3.1.5(d).
E. Weldments.
Weldment Commodities will include all weldments that are
incorporated in an FDS ordered by Applied under this
Agreement. After the first *, Supplier may treat the Weldment
Commodities and the * Commodities as one Commodity
Classification for purposes of calculation of the Total Gross
Dollars, the * and new Piece Part pricing applicable pursuant
to Sections 3.1.5.1(e) (4), (5) and (6) of this Agreement.
*Material has been omitted and filed separately with the Commission.
55
CONFIDENTIAL TREATMENT REQUESTED
(e) *. Each * Matrix for a * shall reflect:
-
(1) The Commodity Classification of each Forecasted Piece
Part.
(2) The pricing then in effect for each Forecasted Piece Part
within the Commodity Classification to which the * will apply.
After the initial * is made with respect to a particular
Forecasted Piece Part, whether as a result of the * or
application of a * under Section 3.1.6. below, references in
this Agreement (including these * terms) to applicable Piece
Part prices will mean such prices as then adjusted under
Sections 3.1.5 and 3.1.6.
(3) The forecasted demand for each Forecasted Piece Part
during the applicable * based on the * Forecast.
(4) The total gross dollars forecasted for the entire list of
Forecasted Piece Parts in the Commodity Classification based
on the * Forecast, to which a percentage * applies during the
applicable * ("Total Gross Dollars"). Total Gross Dollars
equals the sum of the then current Forecasted Piece Part
pricing (i.e., the prices actually charged to Applied by
Supplier immediately prior to the start of the applicable *)
multiplied by the respective forecasted demand in the *
Forecast.
(5) The * dollar amount * which is the product of the *
multiplied by the Total Gross Dollars.
(6) The new Piece Part pricing which represents Kinetics'
allocation of the * across the list of Forecasted Piece Parts.
Supplier shall use commercially reasonable methods in its
allocation of the * and its selection of new Piece Part
pricing. However, the difference between the Total Gross
Dollars and the sum of the new Piece Part pricing multiplied
by the respective forecasted demand in the applicable *
Forecast must equal the * Percentage for the applicable *.
3.1.5.2 Exclusion; Particular Terms.
(a) A particular Piece Part shall not be classified or included in the
* (either as a Forecasted Part utilized in calculating the * or as a
Piece Part to which a * shall apply pursuant to a * Matrix) until the
first * that occurs six (6) months after the time when the Piece Part
is first assigned a part number.
(b) A particular Piece Part that is a non-recurring purchase resulting
from a CES requirement shall not be included as a Forecasted Piece Part
and Supplier shall provide a list of such excluded Piece Parts with the
affected *.
(c) Prices of Unit MFCs under a * apply only to purchases of Unit MFC's
that are incorporated in an FDS ordered by Applied under this
Agreement.
(d) Prices of * are not subject to the * terms of this Section 3.1.5.
* Material has been omitted and filed separately with the Commission.
56
CONFIDENTIAL TREATMENT REQUESTED
3.1.6. Adjustment for *.
(a) Applied may *
(b) The parties shall meet at least once per quarter to coordinate
their respective efforts related to existing commitments from, or
ongoing negotiations with, *. This notice will be given to Supplier's
Vice President Sales.
(c) The *:
(1) If the * for that Piece Part, the price charged to
Applied *.
(2) If the * for a Piece Part is below Supplier's Current
Average Cost for such part, * under this Section
3.1.6.
(3) *.
3.2. Volume.
Applied does not commit to buy a specific volume, quantity, or percentage of any
Piece Part or Item from Supplier, and Applied may buy the same or similar Piece
Part or Item from multiple sources.
3.3. Export.
Applied may require, from time to time, Supplier to ship Items to locations
outside of the United States of America. Supplier will prepare the export
paperwork and be the exporter of record. Supplier must utilize Applied's
preferred carriers for the export of the Items. Applied will pay the freight
charges based on Applied's rates with its preferred carriers. Applied will be
responsible for importing the goods into the destination country.
3.4. Currency.
All prices shall be quoted by Supplier in U. S. dollars; prices for foreign
manufactured Items will not be adjusted to reflect changes in the exchange rate.
Supplier is encouraged to obtain any necessary currency exchange protection
which it deems appropriate.
4. TECHNICAL FRAMEWORK.
4.1. Engineering Change Orders.
4.1.1. ECO Procedures.
(a) Applied may change its Specifications at any time and generate a
proposed ECO with respect to such change. An Applied Supplier Engineer
may review with Supplier the Applied proposed ECOs that affect any
Item(s).
* Material has been omitted and filed separately with the Commission.
57
(b) Supplier shall utilize one of the following procedures to initiate
or request any engineering change to an Item or a change affecting
Specifications (an "Engineering Change"):
i) Supplier may prepare and submit for approval a proposed ECO
for an Engineering Change if such action is authorized under
Supplier's Manufacturing Engineering Authority ("MEA"), as
defined in Applied's documentation of its ECO procedures and
standards in effect from time to time and provided to Supplier
(a "Supplier ECO"); or
ii) Supplier may request an ECO to authorize an Engineering
Change through a Request for Engineering Action ("REA") if
such request is authorized under Supplier's MEA (a "Supplier
Request"); or
iii) Supplier may initiate the development of an Engineering
Change by submitting a Supplier Problem Sheet (Attachment 13)
(an "SPS") to the SPS Administrator designated for Supplier.
(c) Changes to which an SPS or the ECO process applies shall not be
implemented by Supplier (and Supplier shall not ship any Items with any
Engineering Change) until written permission to proceed is given by
Applied as required by its applicable SPS and ECO procedures. Applied
will provide, in writing (to the attention of Supplier's Engineering
Manager) or by release on Applied's current ECO database, notice of
approved ECOs (Attachment 12), indicating the effective dates of all
changes. Unless otherwise notified, Applied's receiving inspection will
inspect to the latest revision in effect at the time of receipt of
Items.
(d) If Applied has not responded to an SPS, REA or proposed ECO within
the time period indicated in this Paragraph (d), Supplier may request
review of the SPS, REA or proposed ECO by the SMT Supplier Engineer for
Supplier. Applied is not obligated to approve any SPS, REA or proposed
ECO. The response time for purposes of this Paragraph (d) is eighteen
(18) days after initial submission of a proposed ECO or REA or after
initial submission of an SPS.
(e) Each Supplier ECO and Supplier Request shall be handled in
accordance with applicable MEA procedures and shall not modify or
eliminate any requirement of the Quality Framework Document (Attachment
15) or the QRD (Attachment 20) for review and approval by Applied prior
to implementation. Each Engineering Change initiated as a Supplier
Request or Supplier ECO shall, prior to implementation by Supplier:
(i) have been released by Supplier to Applied's assigned organizations
for REA or ECO review and approval under the REA and ECO workflow and
approval routing requirements of Applied in effect at the time;
(ii) have been properly completed and documented under Applied's REA
and ECO workflow and preparation requirements, including
(a) the document control process,
58
(b) applicable safety checklists, and
(c) other safety engineering or information requirements,
as in effect at the time; and
(iii) have been approved, in writing (to include electronic
authorization) as required by Applied's ECO, REA or other applicable approval
procedures.
4.2. Tooling.
4.2.1. General Tooling Provisions.
(a) Except as otherwise set forth in Section 4.2 or as otherwise agreed
by the parties in a separate writing, special dies, tools, patterns,
test fixtures, and like equipment (collectively, "Tooling") used in the
manufacture of Items shall be furnished by and at the expense of
Supplier and shall be owned by Supplier. As to those items of Tooling
covered in Sections 4.2.2 and 4.2.3 (the "Test Fixture Hardware" and
"Test Fixture Software," such latter term being defined in Section
4.2.3(c)), the terms of Sections 4.2.2 and 4.2.3 shall apply and not
the terms of this Section 4.2.1.
(b) Supplier agrees that Applied may, at Applied's option, purchase
from Supplier Tooling to which this Section 4.2.1 applies that is
unique to the Items or is unique to the manufacture of Items, *.
Pursuant to such option, Applied may purchase from time to time (but
subject to the limitations and requirements of Section 4.2.4(c)) items
of such Tooling at the fair market value of such Tooling, as determined
at the time of the exercise by Applied of this option. As part of such
purchase and without additional consideration, Supplier shall assign to
Applied, or if such assignment is not possible, license on a
royalty-free, non-terminable basis, all IP Rights associated with such
Tooling, including software (if any) associated with such Tooling *. In
this regard, Supplier will obtain from its employees, consultants,
agents and representatives, as necessary, all assignments necessary for
assignment of IP Rights to Applied.
(c) Prior to acquisition of an item of Tooling that is unique to the
Items or is unique to the manufacture of Items, Supplier will provide a
separate line item quote for any such item of Tooling (excluding,
however, Tooling subject to provisions of Sections 4.2.2 or 4.2.3) that
Supplier will acquire for use in the manufacture of Items after the
Effective Date. If Applied accepts such quote under such procedures,
Applied will pay the cost of such Tooling separately, title to the
Tooling shall be held by Applied, and the parties shall execute and
deliver a Tooling Loan Agreement (or a supplement or schedule to an
existing Tooling Loan Agreement) as to such Tooling. Supplier will
establish appropriate accountability and tracking of any Tooling owned
by Applied.
(d) Supplier shall not at any time use Tooling owned by Applied
("Applied Tooling") for the production of goods for persons other than
Applied or in any manner other than in performance of Supplier's
obligations under this Agreement, without Applied's written
* Material has been omitted and filed separately with the Commission.
59
approval. Applied and Supplier shall execute a tooling loan agreement
of even date with this Agreement in the form of Attachment 19 (the
"Tooling Loan Agreement") for any Applied Tooling in Supplier's
possession, or a supplement or schedule to include such Applied Tooling
under an existing Tooling Loan Agreement.
4.2.2. Current FDS Test Fixtures.
(a) The FDS test fixtures (including, for purposes of this Section 4.2,
*) identified on Schedule 4.2.2(a) to this Agreement (the "Purchased
FDS Test Fixtures") were purchased by Supplier from Applied. Each
Purchased FDS Test Fixture (i) shall be located only at premises
approved, in writing and in advance, by Applied (subject to the
provision below as to changes of location among facilities of
Supplier), and (ii) shall be used by Supplier solely to perform its
obligations under this Agreement for manufacturing Applied FDSs to be
sold to Applied pursuant to this Agreement. Further, Supplier grants
and extends to all Purchased FDS Test Fixtures a security interest in
favor of Applied to secure performance by Supplier of its obligations
in respect of repurchase of the Purchased FDS Test Fixtures by Applied
pursuant to Section 4.2.2(b) below.
Supplier may, upon at least ten (10) calendar days prior notice to
Applied given to Applied's Supply Account Team Lead as specified under
Section 1.2.2 above, relocate any of the Purchased FDS Test Fixtures
from their current locations to any manufacturing facility of Supplier
in Milpitas, California, Austin, Texas or Round Rock, Texas.
(b) Supplier grants to Applied the right, exercisable from time to time
by Applied, at its option, whether or not default has occurred under
this Agreement but subject to the requirements of Section 4.2.4(c)
below, to purchase from Supplier any or all of the Purchased FDS Test
Fixtures(s) and all then existing hardware modifications and
improvements to such fixture(s). The purchase price for such Purchased
FDS Test Fixture(s) shall be equal to the following percentages of the
purchase price initially paid by Supplier to Applied for such Purchased
FDS Test Fixtures and modifications and improvements: *. Upon payment
of such purchase price Supplier shall convey to Applied, and Applied
shall be the owner of, such test fixture(s) and all IP rights in or to
such test fixture(s) (*). Supplier agrees to assign to Applied as part
of such purchase and without additional consideration, and to obtain
from its employees, consultants, agents and representatives, as
necessary, all assignments of, all IP Rights it or they may have
relating to the Purchased FDS Test Fixture(s) (*).
(c) The FDS test fixtures identified on * to this Agreement are owned
by Applied (the "Applied Test Fixtures") *.
(d) The FDS test fixtures identified on * are owned by Supplier (the
"Supplier Test Fixtures"). *. Improvements, additions and alterations
to the Supplier Test Fixtures (excluding Improved Software, as defined
below) shall be procured, purchased, funded and owned by Supplier.
* Material has been omitted and filed separately with the Commission.
60
4.2.3. Future FDS Test Fixtures.
(a) Capacity FDS Hardware.
Supplier shall regularly consult with Applied's SPM regarding such new
FDS test fixture hardware and any modifications to existing FDS test
fixture hardware (excluding modifications to the *) that Supplier will
need within the following six (6) month period either (i) to meet
manufacturing capacity and flexibility requirements under the Supplier
Performance Plan then in effect, (ii) to achieve production levels
established pursuant to its capacity planning under Section 2.5.1, or
(iii) to achieve increases in manufacturing capacity and flexibility,
production volumes or operating levels to accommodate changes in
quantities of Items under Section 2.5.2 (the "Capacity FDS Hardware"),
and to develop operational requirements for the Capacity FDS Hardware
and a schedule for the acquisition and installation of such hardware,
together with any related software. Applied shall provide or purchase
all items of Capacity FDS Hardware that are, in its commercially
reasonable judgment, necessary and appropriate for the purposes set out
above in this Section 4.2.3(a). All Capacity FDS Hardware purchased or
provided by Applied shall be owned by Applied and shall be subject to
the Tooling Loan Agreement and this Agreement and upon request by
Applied shall be identified by a supplement to * as Applied Test
Fixtures. Whether or not default has occurred under this Agreement but
subject to the requirements and limitations of Section 4.2.4(c) below,
Applied shall have the right to remove or otherwise take possession of
such Capacity FDS Hardware.
(b) Product Change Hardware and Improved Software.
Supplier shall regularly consult with the Applied SAT Lead regarding
(i) any new or modified hardware for test fixtures that will be used to
manufacture or test any FDS, Module, or other Item for Applied, which
new or modified hardware will be needed as a result of new Applied
products, modifications of existing Applied products, or new or
modified testing requirements or Specifications for Applied products
that Supplier may be selected to manufacture or supply Items for (the
"Product Change Hardware") and (ii) any new or modified software for
test fixtures that will be used to manufacture or test any FDS, Module
or other Item for Applied, which new or modified software will be
needed as a result of new Applied products, modifications of existing
Applied products, or new or modified testing requirements or
Specifications for Applied products that Supplier may be selected to
manufacture or supply Items for, or changes in Supplier's manufacturing
capacities, equipment or volumes (the "Improved Software"). Applied
(including its SAT Lead and the Tooling and Test Organization) shall
regularly consult with Supplier as to new Applied FDS products and
modifications of existing Applied FDS products that Supplier may be
selected to manufacture and as to changes in Applied's FDS test
requirements. Supplier will use commercially reasonable efforts to
identify and advise the SAT Lead of Product Change Hardware and
Improved Software, the need for which is known to Supplier, that will
result from such new or modified products, testing, manufacturing
requirements, or Specifications.
* Material has been omitted and filed separately with the Commission.
61
Applied shall have the option to provide or purchase all items of
Product Change Hardware and Improved Software that, in its commercially
reasonable judgment, are necessary and appropriate for the manufacture
and testing of FDSs, Modules or other Items for Applied, but shall not
be required to provide or purchase Product Change Hardware or Improved
Software. Supplier will not acquire or install Improved Software not
purchased or provided by Applied. All Product Change Hardware and
Improved Software purchased or provided by Applied shall be owned by
Applied and, in the case of Product Change Hardware and Improved
Software, be subject to the Tooling Loan Agreement and this Agreement
and upon request by Applied shall be identified by a supplement to * as
Applied Test Fixtures. Whether or not default has occurred under this
Agreement, but subject to the requirements of Section 4.2.4(c) below,
Applied shall have the right to remove or otherwise take possession of
such Product Change Hardware.
(c) Right to Remove or Copy Software.
Applied owns, has provided to Supplier and has paid the cost of the
software currently used in the testing operation of all test fixtures
listed on Schedules 4.2.2(a)-(d) (the "Current TF Software"). (The
Current TF Software, the software for Capacity FDS Hardware and the
Improved Software are the "Test Fixture Software.") Any Test Fixture
Software in Supplier's possession may be copied by Applied at any time
or times, upon reasonable notice to Supplier, to the attention of
Supplier's Engineering Manager. Test Fixture Software in Supplier's
possession may also be removed by Applied at any time or times;
provided that as to removal of Test Fixture Software, Applied shall
give the notice and comply with the other requirements of Section
4.2.4(c) below. Applied shall have the right to hold all source code
and original documentation of Test Fixture Software. Applied shall have
the obligation to maintain the Test Fixture Software, and Supplier
shall cooperate with Applied in such maintenance.
4.2.4. General Application.
(a) Supplier shall not at any time use Test Fixture Hardware or the
Test Fixture Software (other than the Supplier Test Fixtures and
hardware or software that, in each instance (i) are not provided or
purchased by Applied under Sections 4.2.3(a)-(c) or (ii) do not
constitute Applied IP) for the production of goods for persons other
than Applied or in any manner other than in performance of Supplier's
obligations under this Agreements without Applied's written approval.
Any such Test Fixture Hardware in Supplier's possession shall be
subject to this Agreement, the IPA, and also the Tooling Loan
Agreement; the Test Fixture Software shall be subject to this
Agreement, the Tooling Loan Agreement, and also the IPA.
(b) If Applied fails to provide or delays providing (after notice by
Supplier, given to Applied's SMT Operations Manager, that the failure
or delay will affect Committed Delivery Dates), items of Capacity FDS
Hardware, Product Change Hardware or Improved Software that are
required for the manufacture and testing of new FDSs, Modules or other
Items for Applied Systems, modifications of existing Applied Systems,
* Material has been omitted and filed separately with the Commission.
62
or new or modified testing requirements or Specifications for Applied
Systems that Supplier is selected to manufacture or to supply Items
for, or changes in Supplier's manufacturing capacities, equipment or
volumes, after the Effective Date, then, to the extent of delays in
testing and delivery that result directly from such failure of Applied
after notice under this Section 4.2.4(b), the Committed Delivery Date
of the Items(s) so delayed shall be extended for a period equal to the
period of Applied's failure or delay in providing such hardware or
software.
(c) Applied may exercise any of its options or rights to purchase,
repossess, or remove any Tooling or Test Fixture Hardware and Test
Fixture Software, to the extent provided for in this Section 4.2, at
any time, without the occurrence or continuance of a default by
Supplier, but only in connection with a termination or cancellation of
this Agreement, in whole or in part. If exercised in connection with a
partial termination or cancellation, the right of Applied shall extend
only to such items of Tooling, Test Fixtures and Test Fixture Software
that are reasonably required for or in connection with the manufacture
and testing of those Items (including Applied System product lines) as
to which the termination or cancellation relates. Applied shall give
Supplier prior notice under Section 1.2.2 of Applied's intent to
purchase, repossess or remove any Tooling, Test Fixtures or Test
Fixture Software or other items which it owns or may acquire hereunder,
which shall be given at a time reasonably in advance of acquisition or
relocation to allow Supplier to complete production of Items affected
by the cancellation or termination and for which an Authorized Demand
Signal has been issued, provided that notice given at least eight (8)
weeks (or a period equal to such lesser product cycle time as may be
applicable to the affected Items at the time) prior to the
repossession, removal or purchase shall be deemed reasonable.
4.3. Design Changes and Resolution.
(a) Supplier will not make changes to the Specifications, form, fit, function or
manufacturing process of Item(s), without having first complied with the
applicable requirements of Sections 4.1, 4.3, 4.4, and 4.5 of this Agreement.
(b) Supplier shall not subcontract any Design Service or Development Service
except as permitted by and in compliance with the IPA and shall not utilize in
any Services any consultant, contractor, or employee for whom an executed
joinder in the confidentiality provisions of the IPA has not been delivered to
Applied. Supplier shall implement changes affecting Items and resulting from
Design Services or Development Services only upon obtaining prior written
approval required under applicable ECO, Applied Product Definition Form, and
other procedures from Applied's Supplier Engineer designated for Supplier and,
as applicable, as required by the DSA or DVA.
4.4. Process Changes and Resolution.
Supplier shall be responsible for its compliance and compliance by its sub-tier
suppliers, subcontractors, providers and special process suppliers with
manufacturing requirements, Specifications and provisions of the QRD and Quality
Framework and shall inform Applied of any special process or other sub-tier
supplier, provider or subcontractor changes to Items, including any changes in
the manufacturing process of Supplier or of a sub-tier supplier, special
63
process supplier, subcontractor or provider, even when Specifications are being
met (excluding changes in physical layout of Supplier's manufacturing plant or
in Supplier's manufacturing line design). Supplier must receive approval in
writing from Applied with respect to the implementation of each such change. As
required by the QRD, Supplier must use special process suppliers from the list
set forth in Attachment 14.
4.5. QRD and Special Process Requirements.
4.5.1 Critical and Source Specific Materials.
The manufacture, processes, Specifications, manufacturing processes and
requirements of and for, and the providers of, Piece Parts, Modules,
assemblies or Subassemblies designated as "Critical" or "Source
Specific" pursuant to the QRD, and any Subassemblies transitioned to a
sub-tier supplier or subcontractor (the "Critical and Source Specific
Materials") shall comply with Applied's QRD, Quality Framework, and
Special Process Supplier requirements in or pursuant to Attachments 14,
15 and 20 to this Agreement and documents or procedures referred to
therein, all as revised from time to time. Supplier shall not make or
authorize any change in any of the foregoing without prior written
approval by Applied pursuant to the Quality Framework, QRD and Special
Process Supplier requirements and related documents and procedures.
4.5.2 Supplier's Subcontractors.
Supplier will ensure that all sub-tier suppliers, providers and
subcontractors of Supplier who have access (directly or indirectly) to
Applied's Specifications or Internal Applied Data or other Confidential
Information sign and are governed by a confidentiality agreement with
Supplier that is similar in form and substance to the confidentiality
provisions of the IPA applicable to Supplier, and Sections 2.9.1 and
2.9.2 of this Agreement. Approval by Applied of a sub-tier supplier,
provider, or subcontractor selected by Supplier shall not alter
Supplier's obligations to Applied.
4.5.3. Costs of Supplier Change.
The party initiating a change in a subcontractor, provider or sub-tier
supplier to Supplier for Source Specific Parts shall bear the costs of
qualifying the new sub-tier supplier, provider or subcontractor for the
affected Piece Part, material or other element.
4.5.4. Waivers.
In addition to the provisions of Section 9.4 of this Agreement, if
Applied waives any drawing, Specification or other requirement for one
or more of the Items, it will not constitute a waiver as to remaining
Items to be delivered, unless stated by Applied in writing.
4.6. First Articles and Source Inspections.
First Article and Source Inspections shall be conducted in compliance with the
QRD and Quality Framework and the documents and procedures referred to therein.
64
4.7. Applied's Right to Subcontract.
Applied may at its discretion elect to contract with a manufacturer, integrator
or outsource provider of Subassemblies (a "Subassembler"), which Subassemblies
will incorporate or include Item(s) Applied may purchase under this Agreement.
Applied will advise Supplier of the new Subassembler and of the Items affected.
Supplier understands that the selection and sourcing of any Items to be
incorporated or included in Subassemblies to be provided by the Subassembler
will be made by the Subassembler, and that, pursuant to Article 17 of Exhibit 1,
Applied may assign this Agreement, in whole or in part, in connection with its
contract with the Subassembler.
4.8. Product Support
4.8.1. Global Technical Support and Product Support.
(a) Technical Support. Supplier shall provide a telephone support
system for global technical assistance to Applied, seven days a week,
24 hours a day, at no additional charge. Supplier shall include as part
of its technical support hot pager contact for access at times outside
Supplier's normal operating periods. Supplier is expected to use
commercially reasonable efforts to provide a resolution to Applied's
requests for technical assistance.
(b) Product Support. In addition to support, repair and replacement
services covered by other provisions of this Agreement and in addition
to the above technical support, Supplier will, upon request by Applied,
provide support globally to Applied (and at the direction of Applied,
to Applied's customers) for all Items that Supplier provides to
Applied, to include repair, replacement or correction of Items.
Supplier agrees to have an established and, at Applied's request,
deployable global product support service capability. Supplier may
utilize one or more affiliates of Supplier, Supplier distributor(s) or
other qualified entities designated by Supplier and acceptable to
Applied to meet this requirement. If support services provided by
Supplier are not covered as warranty obligations to be provided
pursuant to Section 7 of this Agreement, Supplier will be compensated
for the services so provided as agreed by the parties on a case by case
basis or under standard pricing as agreed. Except as required for those
requests, if any, for global support covered by Section 2.4, when
Applied has not been able to resolve a defect, failure or problem
affecting an Item through the above technical support process, Kinetics
shall respond to each request for global support from Applied and
propose a plan for the correction, solution, repair or replacement
within forty-eight (48) hours (as to requests initiated by Applied's
Customer Engineer), and as to all other requests from Applied, within a
period that is prompt under commercially reasonable standards
considering the nature and urgency of the request.
4.8.2. Product Support Period.
Supplier agrees to maintain the capability to provide Items and to
provide the same types and level of global product service and
technical support to Applied described in Section 4.8.1 above, for all
of the Items, for a minimum of ten years from the date of the last
shipment of an Item to Applied under this Agreement to Applied for its
manufacturing operations (the "Post Term Support"), in addition to
meeting Supplier's warranty
65
obligations. Upon Applied's request, Supplier shall provide Post Term
Support on a time and materials basis, at rates and cost determined as
set out in Section 4.8.1 above.
4.8.3. Product Post Term Support Options.
(a) If Supplier desires to modify or reduce its Post Term Support
obligation, Supplier agrees, as a condition of such a reduction or
modification, that Supplier shall have prepared a transition and
support plan for Post Term Support and shall have obtained Applied's
approval, not to be unreasonably withheld, of such plan. As part of
such plan, Supplier shall have negotiated (and obtained such approval
from Applied of) a contract for Post Term Support (including capability
to provide Items and the provision of global product support and
technical support) to be provided by a financially responsible entity
with established capability and expertise and a license to such third
party of IP Rights to meet the requirements for Post Term Support, to
the extent Supplier desires to reduce or modify its obligations for
Post Term Support.
(b) If, after the use of commercially reasonable efforts, Supplier has
not located a third party to provide Items as required for modification
or reduction of Post Term Support obligations of Supplier or to
negotiate a contract for the provision of Items under Post Term Support
as described in Section 4.8.3(a), then Supplier shall provide in good
faith all assistance reasonably required by Applied for Applied to
provide or obtain the Items for which Supplier has Post Term Support
obligations and, for such purpose, Applied shall have and may exercise
the license in respect of cover pursuant to Section 3.13 of the IPA. If
Supplier fails in any respect (other than as to arrangements for the
provision of Items) to provide Post Term Support, or to have obtained
approval of a transition and support plan under Section 4.8.3(a), then
Supplier shall provide in good faith all assistance reasonably required
by Applied for Applied to provide or obtain the affected Post Term
Support and, for such purpose, Applied shall have and may exercise the
license in respect of cover pursuant to Section 3.13 of the IPA.
4.9. Periodic Business Review.
Applied and Supplier shall periodically review their activities and agreements
through a formal business review process. As part of such business review
process during any Wind Down Period, the parties shall determine if Supplier
holds any documentation of a Future Modification (as defined in the IPA) in
which Applied holds any rights as owner or licensee pursuant to the IPA or any
DSA or DVA, which documentation Supplier is required to deliver to Applied
pursuant to the IPA, but which documentation has not been delivered to Applied
(the "Deliverable Documentation"). Supplier shall promptly deliver to Applied,
upon identification of same, upon subsequent request by Applied, any Deliverable
Documentation.
4.10. [Omitted].
4.11. Wind Down Provisions.
(a) The "Wind Down Period" is the period preceding expiration or termination of
this Agreement that is applicable under the following provisions:
66
(i) With respect to the expiration of this Agreement, a period of up to
* that is designated by Applied as the Wind Down Period, which period
shall commence on the date specified in a notice by Applied (given
under Section 1.2.2) that a Wind Down Period shall apply in connection
with the expiration of this Agreement. If the otherwise applicable term
of this Agreement would expire prior to the end of such designated Wind
Down Period, Applied shall extend the term of this Agreement to the
last day of the Wind Down Period by an extension pursuant to Section
1.5, so that the term of the Agreement shall automatically be extended
to and expire upon the last day of the designated Wind Down Period.
(ii) If Applied terminates this Agreement pursuant to Article 25 of
Exhibit 1 to this Agreement or Article 26 of Exhibit 1 to this
Agreement, the Wind Down Period shall be a period of up to * that is
designated by Applied in its notice (given under Section 1.2.2)
exercising such right of termination, which period commences on the
date the notice of termination is issued and ends on the date
termination is effective, which effective date of termination shall be
set out in the notice of termination and shall comply with the
requirements of this Section 4.11 and of Article 25 or 26 (as
applicable) of Exhibit 1. If Supplier * the Wind Down Period shall be a
period of at least * that is designated by Supplier in its notice *
which period commences on the date the notice * is issued and ends on
the date * is effective, which effective date * shall be set out in the
notice of * and shall comply with the requirements of this Section 4.11
and of *.
If termination is in part and not in whole, the Wind Down Period shall apply
with respect to that portion of the Agreement affected by the termination.
During the Wind Down Period, Supplier shall continue to supply all Items for
which an Authorized Demand Signal is issued and accepted or deemed accepted
under this Agreement. The parties shall use commercially reasonable efforts and
cooperate so that Items for which Authorized Demand Signals are issued and
accepted during or prior to commencement of the Wind Down Period will have
Committed Delivery Dates on or before the end of the Wind Down Period. Supplier
and Applied each shall perform its agreements and obligations regarding the Wind
Down Period under the IPA and this Agreement. The Wind Down Period continues
from the date it commences until the date termination or expiration is
effective.
(b) The provisions of Section 4.8 shall apply during, and continue in effect
after, the Wind Down Period, without limitation of other survival provisions of
this Agreement.
(c) No later than the conclusion of the Wind Down Period (and, when applicable
for a partial termination, then as to the portion affected):
(i) Supplier shall convey its title, if any, to, and shall deliver to
Applied, * In the event of Termination for Default or an expiration of
the term of this Agreement, Applied shall have the option, but not an
obligation, to purchase from Supplier the Remaining Consumable
Materials. * Prices for partially completed Items shall be determined
by applying the cost model (Attachment 1) to actual materials consumed
or installed in the
* Material has been omitted and filed separately with the Commission.
67
partially completed Item, and by a charge for actual Services performed
and actual manufacturing labor (at the rate for work in Supplier's
facility). The price payable by Applied for Remaining Consumable
Materials shall be determined under Section 4.11(d) below. Supplier
shall not charge for documentation of or relating to, Applied IP.
(ii) Supplier and Applied shall have performed and discharged their
respective obligations under the IPA and this Agreement.
(iii) Supplier will return all Tooling, capital or other equipment
(including any Tooling and capital equipment that Applied has acquired
ownership rights in as a result of exercising its rights under this
Agreement) and material owned by Applied. Supplier will be responsible
for the packaging and transportation costs associated with the return
of these items if the termination is for default; Applied shall be
responsible for such packaging and transportation costs in all other
events.
(iv) Applied and Supplier shall each have paid the other all amounts
then due and payable under this Agreement and any Related Agreement,
except for amounts in bona fide dispute.
(d) "Remaining Consumable Materials" shall be determined as follows: Supplier
shall record and report to Applied, within 10 days after the date notice of
termination is given, * following the date on which notification is given, *
affected by the notification over the following *. The "Remaining Consumable
Materials" is the quantity of * that were actually on hand, or for which
Supplier had issued noncancellable purchaser orders, that were not used or
consumed in the course of operations under the Agreement. The charge or price
for Remaining Consumable Materials is determined * for the * at the date of
notification.
(e) During the period after notification and prior to termination, Applied and
Supplier shall negotiate the terms of and charges for Restock or Reconfigure
Items, and the formula provisions of Sections 2.14.4 and 2.14.6 shall not apply.
Supplier shall not be required, during a Wind Down Period relating to
termination, to accept Restock Items or Reconfigure Items that are first
designated as such during such a Wind Down Period. The provisions of this
Agreement as to cancellation of Items and as to *, however, are not modified
during a Wind Down Period.
5. NONCONFORMANCE.
5.1. Nonconformance and Corrective Action.
5.1.1. [Omitted.]
5.1.2. Supplier Corrective Action Request.
Applied will complete a "Supplier Corrective Action Request"
(Attachment 10) pursuant to ISO 9000 processes to record and request
corrective action for recurring nonconformities. Upon receipt of a
Supplier Corrective Action Request, Supplier will promptly respond as
appropriate and use best industry practices to cure the
* Material has been omitted and filed separately with the Commission.
68
nonconformities and the cause of nonconformity. A corrective action
process to resolve nonconformance will be documented and used by the
parties. In addition, Supplier will participate in continuous
improvement plans and programs as defined by Applied and Supplier.
5.2. Applied Nonconformance and Corrective Action.
5.2.1. Items Affected.
Applied will, at its option, return Items at Applied's expense that do
not conform to Applied's requirements due to Applied's errors or damage
caused by Applied. These Items will be returned to Supplier for repair
or potential rework. Applied may, at its option, require Supplier to
repair a Subassembly at Applied's facility. If Applied returns an Item
to Supplier under this Section 5.2.1, Applied shall deliver to Supplier
with such Item, when returned, certification of decontamination and
preparation for safe handling if the Item has been exposed to toxic or
corrosive gases or chemicals, in compliance with Section 2.14.7.D.
5.2.2. Standard Repair Costs.
Except for instances for which the parties have established "standard"
repair costs (labor, Items and freight) for Items not covered under
warranty, Supplier shall charge, and Applied shall pay, for
non-warranty repair or correction of Items on a time and materials
basis. Materials shall be charged at the *; Supplier's labor charges
for repairs performed at Supplier's facilities shall not exceed *. If
Supplier is required to provide labor at Applied facilities to meet
repair times for Production Issue Items, the labor cost will not exceed
*.
Supplier will assess repair and rework costs and timing and quote same
to Applied before work is performed. Upon approval of Supplier's quote,
Applied will issue its Purchase Order for such costs. Applied may at
its option elect (a) to have the Item repaired or reworked, or (b) to
purchase a new Item at pricing determined under Attachment 1. Supplier
shall prepare its quotation based on the completion terms of Section
5.2.3 and shall advise Applied as part of its quotation if more than
five (5) Business Days will be required.
5.2.3. Time for Repair.
Supplier shall repair, replace, or correct defects or defective Items
resulting from Applied's error or damage within * after Applied
notifies Supplier of the defect or damage (unless a longer period is
required in the use of best professional practices), or at such other
time as is agreed by the parties as part of the issuance of Applied's
Purchase Order, except for Items Applied identifies as a Production
Issue in its initial notice under Section 2.4, as to which Supplier
shall respond and act in accordance with Section 2.4.2. Costs and
pricing for repair of damages or defects caused by Applied error will
be established under Section 5.2.2 above.
* Material has been omitted and filed separately with the Commission.
69
5.2.4. Return of Items.
Items repaired or reworked by Supplier will be shipped in accordance
with generally applicable transportation and packaging requirements.
Supplier will deliver such Items to Applied at the times determined
under Section 5.2.3 above. Prior to Supplier's return of a repaired or
reworked Item to Applied, Supplier will xxxx such Item with Applied's
part number, serial number, range and gas (if applicable). Applied
shall pay costs of transportation and bear the risk of loss or damage
during transit of repaired or reworked Items, whether or not such Items
meet warranty or other requirements.
6. SUPPLIER PERFORMANCE PLAN.
As part of this Agreement, Applied and Supplier have prepared a Supplier
Performance Plan, which is Attachment 16 to this Agreement. Supplier's
performance and compliance with the applicable Supplier Performance Plan shall
be reviewed in periodic business review meetings conducted by Applied's SPM. A
recurring failure of Supplier to perform at (or to achieve) the standards set,
or to comply with terms of, the Supplier Performance Plan will be deemed a
Dispute for purposes of Section 7.2.5, as to which either party may initiate the
Business Review Process and, if such recurring failure is material, may be the
basis of an action by Applied under Article 25(a)(iii) of Exhibit 1. A recurring
failure for purposes of this Section 6 and of the Supplier Performance Plan is a
failure that occurs in at least *.
7. WARRANTIES AND REMEDIES.
7.1. Supplier Warranty.
7.1.1. Basic Warranty.
Subject to the limitations set out in Section 7.1.4 below, Supplier
warrants to Applied, for the warranty period set out in Section 7.1.3
below, that each Item delivered to Applied (excluding Services
separately warranted under Section 7.1.2 below):
(a) will be free from defects in materials, workmanship and
manufacture, and will be of good title;
(b) will conform to (i) all Specifications, and (ii) those
requirements of (or made applicable through) the following
documents and Sections of this Agreement applicable to such
Item: the Quality Requirements Document (Attachment 20); the
Process Qualification Program in effect at the time of
manufacture under the QRD and applicable to the Item; the
Quality Framework (Attachment 15); Special Process Suppliers
(Attachment 14); and Sections 4.4 and 4.5 of this Agreement;
(c) will have been manufactured in compliance with those
provisions of the Quality Requirements Document (Attachment
20), Process Qualification Program in effect at the time of
manufacture under the QRD and applicable to the Item,
* Material has been omitted and filed separately with the Commission.
70
Quality Framework (Attachment 15), the Supplier Performance
Plan (Attachment 16), and Sections 4.4 and 4.5 of this
Agreement, applicable to the manufacture of such Item and with
manufacturing standards suitable for the manufacture of high
quality, process sensitive components of Applied Systems
("Suitable Manufacturing Standards"); and will consist of new
materials and Piece Parts;
(d) will be of merchantable quality and fit for the intended
purpose of use with or incorporation in Applied Systems for
semiconductor wafer fabrication, flat panel display
fabrication, thin film application processes or manufacturing,
toxics abatement or recycling, or wafer inspection and
metrology, as applicable; and
(e) will, to the extent of Configuration Engineering Services,
CES Services, CCR Services, NPT Services and Design Services
or Development Services, provided by Supplier, be free from
defect in such Services excluding, however, any defects caused
by error in the applicable product design that was not itself
caused by Supplier or its Services.
7.1.2. Services.
As to Services, for the warranty period set out in Section 7.1.3 below
and subject to the limitations set out in Section 7.1.4 below, Supplier
warrants to Applied that its Services have been performed in a
competent, professional and workmanlike manner, and are free from
defect and in accordance with the best professional practices of the
industry.
7.1.3. Warranty Period.
The warranty period applicable under this Agreement commences on the
date of delivery to Applied of the Item (and, as to Services, commences
upon completion of the Service and delivery of the completed work
product and any other deliverables to Applied) and extends for a period
of * after such date * subject, however, to applicable limitations
under Section 7.1.4(iii), and provided that Supplier's warranty period
as to a Third Party OEM Component (as defined in Section 7.1.5. below)
extends * If Applied's warranty to the Applied customer by whom the
Item is used or purchased expires during Supplier's stated * warranty
period, * If Applied's warranty to the Applied customer by whom the
Item is used or purchased does not have a stated period or term, *.
7.1.4. Limitations on Warranty.
Supplier's warranties under this Agreement are subject to the following
limitations:
(i) Supplier makes NO WARRANTIES under this Agreement, whether
express, implied, statutory or otherwise, except those
warranties provided in this Agreement. The remedies provided
for in or through this Agreement (and as to Services, where
applicable, provided for in or through the IPA, DSAs, or DVAs)
constitute the sole and exclusive remedies of Applied with
respect to Items that
* Material has been omitted and filed separately with the Commission.
71
fail to conform to such warranties. EXCEPT FOR THE WARRANTIES
EXPRESSLY SET FORTH IN THIS SECTION 7.1 AND THOSE EXPRESSLY
PROVIDED IN THE IPA AND ANY DSAS OR DVAS, (A) SUPPLIER
DISCLAIMS ALL OTHER WARRANTIES, EXPRESS, IMPLIED, STATUTORY,
OR OTHERWISE WITH RESPECT TO ITEMS (INCLUDING SERVICES)
INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF TITLE,
NON-INFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, AND (B) THE ITEMS ARE PROVIDED "AS IS."
(ii) In determining whether an Item is of a quality that is
merchantable (Section 7.1.1(d) above), an Item must be of a
quality at least equal to the standards of minimum
acceptability for the same or like Items that are employed by
Applied at the time of its manufacture; however, such
standards shall not limit application of, or excuse compliance
with, specific warranty requirements of Section 7.1.1 above
applicable to the specific Item. In determining whether an
Item is of a quality that is merchantable, the standards for
merchantable quality of the Item shall be those that are
currently applied at the time of its manufacture. In
determining whether an Item is fit for its intended purpose,
such warranty shall extend to use or incorporation in
semiconductor wafer fabrication, flat panel display
fabrication, thin film application processes or manufacturing,
toxics abatement or recycling, or wafer inspection and
metrology systems, as applicable, employed in processes (a)
that are customary or generally contemplated within the
industries using such systems, or (b) that are specifically
identified by Applied to Supplier, in writing (including
e-mail, facsimile and posting of information on the Applied
website designated for Supplier's access) as an intended use.
(iii) Supplier's warranties do not extend to defects, failure
or malfunction of an Item to the extent such failure, defect
or malfunction (a) results from conformance by Supplier with
Specifications prepared by Applied, provided that this
exclusion shall not alter or limit Supplier's warranties of
its Services; (b) is caused by accident, negligence, misuse,
alteration, modification or tampering of or caused by any
person other than Supplier, or (c) is caused by use or
operation in environments or for processes that are not
customary or generally contemplated in those industries using
semiconductor wafer fabrication, flat panel display
fabrication, thin film application processes or manufacturing,
toxics abatement or recycling, or wafer inspection and
metrology systems, as applicable, or not specifically
identified by Applied to Supplier as intended uses or
environments.
7.1.5. Third Party OEM Components.
(a) A "Third Party OEM Component" is any product (i) that is
identified by an Applied Commodity Code (under Applied's
Commodity Code Document 0250-10856) with an initial designator
equal to or greater than "0500" and (ii) for which the
original manufacturer's warranty is for a period of at least
thirteen (13) months from the date of Supplier's purchase and
expressly runs to Applied or has been validly assigned to
Applied by Supplier. The foregoing provision as to products
with an initial Commodity Code designator equal to or greater
than "0500" includes products: (i) that are identified by
Applied Commodity Codes with initial designators between
"0220" and "0229" but that would otherwise be
72
assigned Applied Commodity Codes with an initial designator
greater than "0500"; and also, (ii) that are new products to
which a Commodity Code initial designator greater than "0500"
would be assigned under the terms of Applied Document
Commodity Code Document 0250-10856 as in effect on the
Effective Date.
(b) *
(c) Effective on the shipment by Applied to its customer of
the Item or Applied System containing a Third Party OEM
Component, Supplier assigns to Applied, to the fullest extent
permitted by applicable law and agreements, all of Supplier's
warranties, warranty rights and recoveries from or against
each manufacturer and supplier of each Third Party OEM
Component installed or incorporated in the Item or Applied
System that may not be enforced by Applied, unless so
assigned. Supplier will cooperate with Applied in Applied's
enforcement of and recovery under such assigned or available
warranties of Third Party OEM Components, including the
execution and delivery of such further instruments as Applied
may reasonably request to perfect and protect the foregoing
assignment or rights of Applied, provided that Supplier shall
not be required to bear costs and expenses of such cooperation
that are not reasonable under the circumstances. If, following
the date of assignment to Applied of the warranty and warranty
rights and recoveries, Supplier is sued and such warranty and
warranty rights or recoveries are reasonably required for
Supplier's defense of, or for the assertion of counterclaim
against, the claims against Supplier, Applied will cooperate
with Supplier with respect to such warranty and warranty
rights and recoveries and, upon reasonable terms and
indemnification, assign back to Supplier, to the extent so
required, the warranty and warranty rights or recoveries.
7.1.6. Debit Recoveries.
(a) Prior to Applied's initiation of a debit or other offset
under Section 2.11.3 to effect a recovery for a warranty claim
of Applied against Supplier, Applied shall advise Supplier, to
the attention of Supplier's Customer Service Manager -
Warranty Claims (in addition to the notice to Supplier's
Finance Manager as provided by Section 2.11.3) of the expected
debit or offset amount and shall ship to Supplier for
inspection the Item for which Applied proposes to effect a
debit or offset based on its warranty claim (the "Warranted
Part"). Supplier shall cooperate in arranging for delivery and
shall provide, promptly upon request by Applied and without
prejudice to Supplier as to warranty coverage, Supplier's
Return Materials Authorization ("RMA") for the return of the
Warranted Part under this Section 7.1.6. Applied shall not use
debits or offsets to recover amounts for warranty claims as to
Services only.
* Material has been omitted and filed separately with the Commission.
73
(b) If a Warranted Part has been destroyed or is not available
to Applied for delivery for purposes of the debit process
under this Section, Applied will not initiate a debit process
for the warranty claim. If Applied fails to effect delivery of
the Warranted Part to Supplier under Section 7.1.6 (a), the
debit or offset shall be recredited in full. If Applied does
not proceed under this Section, Applied retains and may pursue
all its other remedies. Applied is not required to proceed
under this Section to assert or recover for its warranty
claims against Supplier; this Section only applies to debits
or offsets relating to warranty claims.
(c) If, after Supplier's examination of a Warranted Part,
Supplier disputes the debit, offset or warranty coverage,
Supplier shall notify its assigned Supplier Quality Engineer
("SQE") at Applied and shall specify the amount Supplier
requests to be re-credited ("Disputed Amount"). This
notification and specification of the Disputed Amount must in
any event be given to Applied within thirty (30) days after
the RMA delivery of the Warranted Part to Supplier. If the SQE
approves the Supplier's request, the Disputed Amount shall be
recredited.
(d) If the SQE and Supplier do not agree on the amount to be
re-credited, or on the disposition of the claim, Supplier may
(i) accept the determination of the SQE or (ii) initiate the
Business Review Process for resolution of the dispute as
described in Section 7.2.5.
7.1.7. Survival of Warranties.
Supplier's warranties shall survive any delivery, acceptance,
inspection, or payment by Applied, except as expressly provided
otherwise in this Section 7.1. Applied's approval of Supplier's
material or design will not relieve Supplier of the warranties
established in this Agreement.
7.2. Applied's Remedies.
This Section 7.2 sets out obligations of Supplier and provides remedies of
Applied for Supplier's failure to make timely delivery of Item(s) and for breach
of Supplier's warranties as to Items. In addition to the remedies for such
failure of delivery and for breach of warranty provided for in this Section 7.2,
Applied has the remedies and rights provided under Articles 22 and 25 of Exhibit
1 (subject to the limitations and requirements of such Articles and of Article
21 of Exhibit 1). Provisions for recovery of damages by Applied in this Section
7.2 or in Article 25 are subject to applicable limitations under Article 21 of
Exhibit 1.
7.2.1. Failure to Deliver.
If Supplier fails to deliver one or more Items (or to provide Services
with completed work product and deliverables) on the Committed Delivery
Date or otherwise at the times provided by the applicable Authorized
Demand Signal or as agreed by the parties:
(a) Supplier shall initiate all actions necessary to complete
and deliver the Items (or provide Services, work product and
deliverables) promptly, without
74
notice or demand by Applied. All increased costs and expenses
for completion and delivery that result from Supplier's
failure to timely deliver Items (or provide Services, work
product and deliverables) shall be paid by Supplier. Supplier
shall use the most expeditious manner commercially available
to effect completion and delivery of Item(s), Services, work
product and deliverables.
(b) If the failure constitutes or results in a Production
Issue under Section 2.4, Supplier shall comply with that
Section of this Agreement.
(c) If Supplier fails to comply with Section 2.4, where
applicable, or if Supplier otherwise fails to cure the late
delivery promptly after the applicable Committed Delivery Date
or repudiates, Applied may recover its damages resulting from
the failure to comply or deliver, from late delivery or from
repudiation and may exercise all remedies available pursuant
to the UCC and, as to Services and related deliverables, may
recover its damages and exercise all remedies provided by law
or equity. Where applicable, the procedures and limitations of
(or, provided for through) Section 7.1.6, 7.2.1(d), or
7.2.1(e) and of Article 21 of Exhibit 1 will apply to
exercise, enforcement and recovery by Applied.
(d) Prior to effecting cover under the preceding paragraph
(c), Applied shall give notice of its intent to cover, which
notice shall be given to Supplier's Customer Service Manager
in Austin or Milpitas, as applicable by e-mail or facsimile
transmission and by voice message (telephone, pager, or voice
mail). The notice of intent to cover shall identify the
Item(s) for which cover is intended, and shall specify the
Cover Period (defined below). Within 24 hours (measured during
Business Days and under prevailing Pacific Time) from the time
notice is so given, Supplier shall notify Applied (in the same
manner as provided for the notice to Supplier) by e-mail or
facsimile notice to the Supply Account Team Lead specified in
Section 1.2.1 if Supplier will provide to Applied the Item(s)
within the Cover Period or if Supplier declines to proceed. If
Supplier elects to provide such Item(s), Supplier shall
provide such Item(s) on or before the expiration of the Cover
Period at the original Contract Price. The "Cover Period" is
that period which is reasonable under the circumstances for
the Item(s), or equivalent(s), to be completed and delivered
(but not to exceed the period within which the Item(s), or
equivalent(s), can be obtained from a source other than
Supplier).
(e) (i) Prior to effecting cancellation through termination
for default, in part, with respect to the particular affected
Item(s), as a remedy pursuant to clause (c) above, Applied
shall give notice of intent to cancel to Supplier's Customer
Service Manager in Austin or Milpitas, as appropriate, and may
(but shall not be required to) initiate the Business Review
Process under Section 7.2.5. This cancellation through
termination for default as to particular Item(s) shall not be
limited by or conducted under Article 25 of Exhibit 1, but
Applied may proceed to exercise such right by notice to
Supplier. If Applied does elect to utilize the Business Review
Process and the failure is not resolved by the Business Review
75
Process, when applicable, or if Supplier fails to perform in a
material respect under a resolution developed by the Business
Review Process, Applied may give notice of default and cancel
this Agreement as to the particular Item(s) without compliance
with Article 25 of Exhibit 1.
(ii) If Applied intends to effect cancellation as to
more than the particular affected Item(s) through termination
for default (which may be in part or in whole), Applied shall
proceed in accordance with Article 25 of Exhibit 1 and the
Business Review Process.
7.2.2 Defective Items.
If Supplier delivers Items (or provides Services) that do not conform
to the warranty terms applicable to the Item(s) or Service(s) (a
"Defective Item"), Applied shall give written notice (including notice
by e-mail, facsimile or other electronic record) to Supplier's Customer
Service Manager in Austin or Milpitas, as appropriate, of the Defective
Item, and thereafter:
(a) Supplier shall promptly correct, repair or replace, at
Supplier's cost and expense, the Defective Item(s) without
further notice from or demand by Applied. As to Services,
Supplier's obligations include the prompt correction or
re-performance of the Services and any work product or other
deliverables. Supplier shall use the most expeditious
commercially available means to effect repair, replacement or
correction, including the provision of a new Item in lieu of
repair. Applied may require repair, replacement or correction
at Applied's facility.
(b) If the failure constitutes or results in a Production
Issue under Section 2.4, Supplier shall comply with that
Section. If the failure is subject to Section 5.1.2, as
applicable under this Agreement, Supplier shall comply with
that Section of this Agreement.
(c) If Supplier fails to comply with Section 2.4, where
applicable, or if Supplier otherwise fails to promptly repair,
replace or correct any Defective Item(s) or if Supplier
repudiates, Applied may recover its damages resulting from
such failure and may exercise all remedies available pursuant
to the UCC (to include revocation of acceptance) and, as to
Services and related deliverables, may recover its damages and
exercise all remedies provided by law or equity. Applied may,
as part of its recovery, include premium costs for expedited
delivery. Where applicable, the procedures and limitations of
(or, provided for through) Section 7.1.6, 7.2.2(e) and (f),
and Article 21 of Exhibit 1 will apply to exercise,
enforcement and recovery by Applied.
(d) (i) Applied will utilize the procedures of this Section
7.2.2(d) to make repair, replacement or correction of a
Defective Item in those instances in which (a) Supplier fails
to comply with Section 2.4, if applicable, (b) Supplier fails
to correct, repair or replace the Defective Item within the
period requested by
76
Applied or otherwise established by the parties or this
Agreement, or (c) the Defective Item has been shipped to or is
installed at an Applied customer location.
(ii) When Applied effects repair, replacement or
correction of a Defective Item under this Section 7.2.2(d),
Applied shall be entitled to recover, and Supplier shall pay
to Applied each of the following that applies:
1. The cost of goods obtained or used by Applied to
make the repair, replacement or correction of the
Defective Item, and of any necessary engineering or
similar services relating to such goods.
2. The cost of freight or shipping and of taxes for
the goods obtained for the repair, replacement or
correction, and for the return of any Defective
Item(s).
3. The cost of labor required to remove, repair,
replace and reinstall a Defective Item (if repaired)
and remove and reinstall other Piece Parts necessary
to the repair, correction or replacement.
Costs of labor shall be determined at Applied's then standard
labor rates; if labor is provided at facilities of Applied's
customers or through the Applied CPS organization, the labor
charge by Applied to Supplier shall be equal to the field
service labor charge calculated at Applied's CPS rates (not to
exceed *). Costs of engineering services shall be determined
by Applied at its customary rates, then in effect, not to
exceed *. This Section 7.2.2(d) shall not limit Applied's
other remedies or recoveries provided for in (but subject to
the limitations of) other provisions of this Agreement.
(e) Prior to effecting replacement under paragraph (d) above
of a Defective Item that is an FDS, Applied shall give notice
of its intent to make such a replacement, which notice shall
be given to Supplier's Customer Service Manager in Austin or
Milpitas, as appropriate, by e-mail or facsimile transmission
and by voice message (telephone, pager, or voice mail). The
notice of intent to replace shall identify the Item(s) for
which such replacement is intended, and shall specify the
Replacement Period (defined below). Within 24 hours (measured
during Business Days and under prevailing Pacific Time) from
the time notice is so given, Supplier shall notify Applied (in
the same manner as provided for the notice to Supplier) by
e-mail or facsimile notice to the Supply Account Team Lead
specified in Section 1.2.1 if Supplier will replace the
Item(s) within the Replacement Period or if Supplier declines
to proceed. If Supplier elects to replace such Item(s),
Supplier shall replace such Item(s) on or before the
expiration of the Replacement Period. The "Replacement Period"
is that period which is reasonable under the circumstances for
the Item(s), or equivalent(s), to be replaced (but not to
exceed the period within which the Item(s), or equivalent(s),
can be obtained from a source other than Supplier).
* Material has been omitted and filed separately with the Commission.
77
(f) If Applied intends to cancel the Agreement as to more than
the particular affected Item(s) through termination for
default (which may be in part or in whole) as a result of
Supplier's breach or default under this Section, Applied shall
proceed in accordance with Article 25 of Exhibit 1 and the
Business Review Process.
(g) If Applied makes a warranty claim with respect to an Item
that has been modified or repaired, Applied shall include as
part of the documentation of such claim the maintenance and
service record relating to the modification or repair.
7.2.3. Cumulative Remedies.
The remedies of Applied and Supplier shall be cumulative, and no
election of remedies shall occur.
7.2.4. Remedies for Other Breach or Default.
7.2.4.1. Subject to the exclusions provided in this Section
7.2.4 or provided in Article 25 of Exhibit 1 to this
Agreement, if Supplier or Applied fails to comply with,
observe or perform any term, provision or condition of this
Agreement, or otherwise defaults under or breaches any term,
provision or condition of this Agreement, the other party
shall initiate the Business Review Process prior to proceeding
to enforce or exercise its rights, remedies and actions
available to it under this Agreement or under applicable law.
7.2.4.2. The requirement in Section 7.2.4.1 of initiation of
the Business Review Process shall not apply: (a) to the
enforcement or exercise of equitable rights or remedies, and
actions seeking equitable relief; or (b) to claims, matters,
remedies, and actions that are provided for in Section 7.2.1
or Section 7.2.2 with respect to particular Item(s).
7.2.4.3. If Supplier or Applied has failed to comply with,
observe or perform, or otherwise has defaulted under or
breached, any term, provision or condition of this Agreement,
then (after any applicable period of notice or consultation
applicable under this Agreement and after conclusion of the
Business Review Process, where applicable) the other party may
proceed to enforce or exercise its rights and remedies as
provided under this Agreement or as provided by law or equity
(subject to procedural requirements of this Agreement and,
where applicable, to the limitations of Article 21 of Exhibit
1 to this Agreement), all as it may elect, concurrently and in
the alternative, without waiver or election by the pursuit of
any one or more right, remedy or action.
7.2.4.4. In this Agreement, the phrase "term, provision or
condition" shall include any term, provision, condition,
covenant, agreement, representation, warranty, obligation,
indemnity, undertaking, requirement, or other part of this
Agreement or of another indicated agreement, and such phrase
shall be so construed unless the context clearly requires
otherwise.
78
7.2.5 Business Review Process.
7.2.5.1. With respect to any dispute, issue, controversy or
claim of breach arising under this Agreement (a "Dispute"),
either party may initiate the process described in this
Section 7.2.5 (the "Business Review Process") to seek
resolution of the Dispute. Except as specifically provided to
the contrary in this Agreement, compliance with the Business
Review Process is not a condition or requirement to the
exercise of any legal remedies or proceedings, to the exercise
of rights or remedies provided by or under this Agreement, or
to other action by a person.
7.2.5.2. The Business Review Process is initiated by a Notice
from Applied or Kinetics to the other of a Dispute, which
notice shall be given under Section 1.2.2, and a request for
review of the Dispute under the Business Review Process. Upon
such Notice and request, Applied shall designate a
representative at its director level or higher, and Kinetics
shall designate a representative at its director level or
higher, to constitute their representatives for this Business
Review Process. These representatives shall promptly confer
and use commercially reasonable efforts in good faith to
resolve the Dispute. The Business Review Process shall
continue for twenty (20) Business Days after the date on which
the party initiating the process designates its
representative, unless otherwise agreed by the two
representatives. If the Dispute is not resolved through the
Business Review Process or a party fails to comply with,
perform or observe the terms for cure, correction or waiver of
the breach, default or Dispute established through the
Business Review Process, then all parties shall be free to
pursue all rights, remedies and relief as may be available,
without further application of the Business Review Process or
other provision for cure or correction.
8. AMENDMENTS AND MODIFICATIONS; CAPTIONS AND CONSTRUCTION;
INTERPRETATION.
8.1 Amendments and Modifications.
Subject to Section 1.3 above, amendments or modifications to this Agreement must
be in writing, signed by a duly authorized representative for each of Supplier
and Applied, traced by revision or amendment numbers and attached to this
original Agreement. The master copy of this Agreement and any revisions are to
be maintained by Applied.
8.2 Captions and Construction.
Headings and captions in this Agreement are for the convenience of the parties
only and shall not affect the interpretation or construction of this Agreement.
The provisions of this Agreement (including Exhibits and Attachments) shall be
construed as a whole, each supplementing the other, except for instances of
conflict which shall be governed by Section 1.3.2.2 as to precedence. This
Agreement, including also any Purchase Order issued for Items, shall control
over any invoice, delivery ticket, or other document issued by Supplier.
References to a party's internal business organization shall refer to such
organization and successor organizations performing similar functions.
79
8.3 Interpretation.
Supplier and Applied have each participated fully in the negotiation and
preparation of this Agreement. Each party has engaged its own legal counsel and
has relied upon its own representatives, employees and counsel, and not the
other party or its counsel, in the negotiation and preparation of this
Agreement. The rule that a contract shall be construed against the party
drafting the agreement and statutes of like effect, including California Civil
Code Section 1654, shall not apply to the construction or interpretation of this
Agreement.
9. PROVISIONS OF GENERAL APPLICATION.
9.1. Independent Contractor.
Throughout the term of this Agreement, the relationship between Applied and
Supplier shall be that of independent contractors. Nothing set forth herein or
in any Related Agreement shall be deemed or construed to render the parties
joint venturers, partners, or employer and employee, and under no circumstances
may either party hold itself out to be a partner, employee, franchisee,
representative, servant or agent of the other party. Neither party is authorized
to make any commitment or representation on the other's behalf. Neither party
may create any obligations or responsibilities on behalf of or in the name of
the other party. Throughout the term of this Agreement, if the term
"partnership," "partner," or "development partner" or the like is used to
describe the parties' relationship, Applied and Supplier agree to make it clear
to third parties that these terms refer only to the spirit of cooperation
between them and neither describe, nor expressly or implicitly create, the legal
status of partners or joint venturers. Each party also agrees not to make false
or misleading statements, claims or representations about the other party, its
products or the relationship of the parties.
9.2. No Third Party Beneficiary.
Each and all of the agreements, covenants, obligations, duties, conditions,
terms, warranties, representations and benefits in or arising under this
Agreement, whether express or implied by law, are and shall be solely for the
benefit of the parties to this Agreement and the respective permitted
successors, assigns, and legal representatives of each party hereto. It is the
express intention and agreement of Applied and Supplier that no entity not a
party to this Agreement (including any customer of Applied) shall be or shall be
deemed a third-party beneficiary of this Agreement, or of any of its agreements,
covenants, obligations, duties, conditions, terms, warranties, representations
and benefits.
9.3. Severability.
Any provision or provisions of this Agreement or of any Related Agreement that
are determined by a final judgment or order of a court of competent jurisdiction
to be invalid or unenforceable in any jurisdiction or as to any person or
circumstance shall be reformed, as permitted by law, so as to be valid and
enforceable, and, if (or to the extent) not so reformed, shall be severed, and
the remainder of the affected agreement or agreements shall continue in effect
and be enforced, construed and applied without such severed provision(s).
80
9.4 Waiver.
Any provision, right, remedy or requirement of this Agreement may be waived by
the party entitled to the benefit thereof by written waiver, signed by such
party. A waiver so made or given shall extend only to the specific matter or
event, and shall be effective only to the extent, specifically provided for in
such waiver. A waiver of any breach or default under this Agreement shall not be
construed as a continued waiver of other breaches of the same, or of any other,
provision of this Agreement, nor as a bar to, or waiver of, any right or remedy
as to any subsequent event, occurrence, default or breach. Except as provided
above as to written waivers, no act, omission, or course of conduct or of
performance shall be deemed to constitute a waiver hereunder. In furtherance of
the preceding provision, if Applied or Supplier delays or fails to insist on
strict performance of any of the terms, conditions, provisions, requirements,
covenants or obligations set forth in this Agreement, such delay or failure
shall not constitute a waiver.
9.5. Successors and Assigns.
This Agreement shall be binding upon, and shall inure to the benefit of, each
party and its respective permitted successors and assigns.
9.6. Execution.
This Agreement may be executed in any number of counterparts, each of which when
so executed and delivered shall be deemed an original, and such counterparts
shall constitute one and the same instrument. Each Party shall receive a
duplicate original of the counterpart copy or copies executed by it. For
purposes hereof, a facsimile copy of this Agreement, including the signature
pages hereto, shall be deemed to be an original. Notwithstanding the foregoing,
the Parties shall deliver original execution copies of this Agreement to one
another as soon as practicable following execution thereof.
10. REPRESENTATIONS AND WARRANTIES OF THE PARTIES.
Each party (the "Warranting Party") warrants and represents to the other party
that:
(a) the Warranting Party is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction in
which it is organized, with full corporate power and authority to carry
on its business as it is now being conducted;
(b) the Warranting Party has full power and corporate authority to
enter into this Agreement;
(c) the execution, delivery and performance of this Agreement has been
duly authorized by the Warranting Party, and does not and will not
violate any other agreement, any provision of the charter or
organizational documents of the Warranting Party or any applicable law,
regulation, decree, judgment or order of any regulatory government
agency or any court of competent jurisdiction, which violation would
have a material adverse effect on the Warranting Party;
81
(d) except as provided herein, the Warranting Party will not enter into
any agreement, the execution and/or performance of which violates any
term of this Agreement;
(e) the Warranting Party is not a party to any agreement calling for
the payment to, or receipt from, any third party by the Warranting
Party of any commission, gratuity, or other similar thing or amount in
consideration of the other party's entry into this Agreement;
(f) this Agreement has been duly executed and delivered by the
Warranting Party and constitutes a valid and binding obligation of the
Warranting Party, enforceable against the Warranting Party in
accordance with its terms, except that such enforceability may be
subject to bankruptcy, insolvency, reorganization, moratorium, or
similar laws now or hereafter in effect relating to creditors' rights
and to general equitable principles (whether enforcement is sought
through legal or equitable proceedings).
11. ACCEPTANCE AND EXECUTION.
This Agreement is executed and delivered by each of the undersigned parties,
acting through its officer or other representatives, duly authorized to act for
and on behalf of the indicated party, and is effective on and as of the
Effective Date.
Accepted:
Applied Materials, Inc. Kinetics Fluid Systems, Inc.
BY: /s/ Xxxx Xxxxxxxxx BY: /s/ Xxx Xxxxx
------------------------------- -------------------------------
Name: Xxxx Xxxxxxxxx Name: Xxx Xxxxx
-------------------- --------------------
Title: Vice President Title: President
-------------------- --------------------
Date: 5/21/02 Date: 5/21/02
-------------------- --------------------
82
CONFIDENTIAL TREATMENT REQUESTED
LIST OF EXHIBITS AND ATTACHMENTS
EXHIBITS
Exhibit 1: Applied's Standard Terms & Conditions
* INDICATES
ATTACHMENTS ATTACHMENTS THAT
HAVE NOTIFICATION
REVISION PROCESS ON
WEB SITE
1. List of Items and Pricing Mechanism
2. Corporate Fiscal Calendar *
3. Delivery Mechanics and Lean Product Delivery System *
4. Forecast Mechanism *
5. Bar Code Specifications *
6. a. Packaging (0250-00098) b. Marking (0250-01033) Specifications *
7. Transportation Routing Guide *
8. Electronic Funds Transfer Process and Evaluated Receipts Settlement *
9. NDA [N/A]
10. Supplier Corrective Action Form *
11. Supplier Quality Data Form *
12. Engineering Change Notice Form *
13. Supplier Problem Sheet *
14. List of Approved Special Process Suppliers *
15. Quality Framework *
CONFIDENTIAL TREATMENT REQUESTED
16. Supplier Performance Plan (Including Metrics and Targets) (not a website
document)
17. Certificate of Conformance *
18. On-site Representative Agreement *
19. Tooling Loan Agreement
20. Quality Requirements Document
21. *
22. Agreement for Accounting Reconciliation Procedures
(Accounts Payable Payment Discrepancy Letter)
23. NPT Checklist (Section 3.1.4)
24. Classification of Piece Parts * (Section 3.1.5)
25. Schedules 4.2.2(a), 4.2.2(c) and 4.2.2(d)
* Updates and current versions of these Attachments are posted on
Applied's website which is available to Supplier for purposes of
Section 1.3.
* Material has been omitted and filed separately with the Commission.
CONFIDENTIAL TREATMENT REQUESTED
TABLE OF CONTENTS
DEFINITIONS..................................................................................................... 1
1. SCOPE.................................................................................................. 8
1.1. Description of Agreement...................................................................... 8
1.2. Addresses and Contact Persons; Notices........................................................ 8
1.2.1. Contact Persons...................................................................... 8
1.2.2. Notices.............................................................................. 10
1.3. Entire Agreement; Related Agreements; Modification; Prior Transactions........................ 11
1.3.1. Certain Related Agreements........................................................... 11
1.3.2. Entire Agreement..................................................................... 12
1.3.3. Provisions Continuing in Effect...................................................... 13
1.3.4. Modification......................................................................... 14
1.4. Items Covered................................................................................. 14
1.5. Duration of Agreement......................................................................... 15
2. LOGISTICS, ORDERING AND OPERATIONAL FRAMEWORK.......................................................... 15
2.1. Operation and Management of Orders............................................................ 15
2.1.1. Operating Calendar & Holidays........................................................ 15
2.1.2. Monthly Volume Summaries............................................................. 15
2.1.3. Manufacture and Delivery............................................................. 16
2.1.4. Change in Delivery Date.............................................................. 16
2.1.5. Orders for Items..................................................................... 17
2.1.6. Electronic Commerce.................................................................. 26
2.1.7. Pro Forma............................................................................ 27
2.2. Definition of Terms for Certain Provisions Affecting Prices or Charges........................ 28
2.3. Cancellation of Items......................................................................... 30
2.3.1. Items Subject to Cancellation........................................................ 30
2.3.2. Deferral............................................................................. 30
2.3.3. Cancellation......................................................................... 30
2.3.4. Applicability; Payment............................................................... 31
2.3.5. Other Rights......................................................................... 31
2.3.6. Services............................................................................. 31
2.4. Response Time, Turnaround and Implementation Time............................................. 31
2.4.1. Production Issues.................................................................... 31
2.4.2. Turnaround and Implementation Time................................................... 32
2.5. Capacity Planning and Flexibility Requirements................................................ 32
2.5.1 Capacity Planning.................................................................... 32
2.5.2 Flexibility.......................................................................... 33
CONFIDENTIAL TREATMENT REQUESTED
2.5.3. Acceptance; Delivery................................................................. 33
2.6. On-Site Support Requirements.................................................................. 34
2.7. [Omitted]..................................................................................... 34
2.8. *............................................................................................. 34
2.8.1. Modifications and *.................................................................. 34
2.8.2. Scope of *........................................................................... 34
2.8.3. Charges for *....................................................................... 35
2.9. Information................................................................................... 35
2.9.1. Applied Internal Databases........................................................... 35
2.9.2. Applied New Product Plans............................................................ 39
2.9.3. Compliance with Securities Laws...................................................... 39
2.10. Packaging and Transportation.................................................................. 40
2.10.1. Packaging and Shipment............................................................... 40
2.10.2. Bar Coding........................................................................... 40
2.10.3. Transportation Requirements.......................................................... 40
2.11. Payment....................................................................................... 41
2.11.1. Invoices; Certain Acceptance Terms................................................... 41
2.11.2. *.................................................................................... 43
2.11.3. Offsets, Debits...................................................................... 44
2.11.4. Effect of Payment.................................................................... 44
2.11.5. Reconciliation of Payment Discrepancies.............................................. 44
2.12. Disaster Recovery Plan...................................................................... 44
2.13. Performance Constraints....................................................................... 45
2.13.1. Constraints.......................................................................... 45
2.14. Provisions for Reconfiguration or Restocking.................................................. 45
2.14.1. "Affected Items.".................................................................... 45
2.14.2. Categories........................................................................... 45
2.14.3. "Relabel Items."..................................................................... 46
2.14.4. "Reconfigure Items."................................................................. 46
2.14.5. "Restock Items."..................................................................... 49
2.14.6. Restocking Process and Charges....................................................... 49
2.14.7. Provisions as to Restocked or Removed Parts.......................................... 50
2.14.8. Processing and Payments.............................................................. 51
3. PRICING FRAMEWORK...................................................................................... 51
3.1. Contract Prices............................................................................... 51
3.1.1. Pricing and Cost Model of Attachment 1............................................... 51
3.1.2. Application of Prices................................................................ 52
3.1.3. Pricing Model........................................................................ 52
* Material has been omitted and filed separately with the Commission.
CONFIDENTIAL TREATMENT REQUESTED
3.1.4. Further Agreements as to Pricing..................................................... 53
3.1.5. * Terms.............................................................................. 53
3.1.6. Adjustment for *..................................................................... 57
3.2. Volume........................................................................................ 58
3.3. Export........................................................................................ 58
3.4. Currency...................................................................................... 58
4. TECHNICAL FRAMEWORK.................................................................................... 59
4.1. Engineering Change Orders..................................................................... 59
4.1.1. ECO Procedures....................................................................... 59
4.2. Tooling....................................................................................... 60
4.2.1. General Tooling Provisions........................................................... 60
4.2.2. Current FDS Test Fixtures............................................................ 61
4.2.3. Future FDS Test Fixtures............................................................. 62
4.2.4. General Application................................................................... 64
4.3. Design Changes and Resolution................................................................. 65
4.4. Process Changes and Resolution................................................................ 65
4.5. QRD and Special Process Requirements.......................................................... 65
4.5.1 Critical and Source Specific Materials............................................... 65
4.5.2 Supplier's Subcontractors............................................................ 65
4.5.3. Costs of Supplier Change............................................................. 66
4.5.4. Waivers.............................................................................. 66
4.6. First Articles and Source Inspections......................................................... 66
4.7. Applied's Right to Subcontract................................................................ 66
4.8. Product Support............................................................................... 66
4.8.1. Global Technical Support and Product Support......................................... 66
4.8.2. Product Support Period............................................................... 67
4.8.3. Product Post Term Support Options.................................................... 67
4.9. Periodic Business Review...................................................................... 68
4.10. [Omitted]..................................................................................... 68
4.11. Wind Down Provisions.......................................................................... 68
5. NONCONFORMANCE......................................................................................... 70
5.1. Nonconformance and Corrective Action.......................................................... 70
5.1.1. [Omitted.]........................................................................... 70
5.1.2. Supplier Corrective Action Request................................................... 70
5.2. Applied Nonconformance and Corrective Action.................................................. 70
5.2.1. Items Affected....................................................................... 70
5.2.2. Standard Repair Costs................................................................ 71
5.2.3. Time for Repair...................................................................... 71
* Material has been omitted and filed separately with the Commission.
CONFIDENTIAL TREATMENT REQUESTED
5.2.4. Return of Items...................................................................... 71
6. SUPPLIER PERFORMANCE PLAN.............................................................................. 71
7. WARRANTIES AND REMEDIES................................................................................ 72
7.1. Supplier Warranty............................................................................. 72
7.1.1. Basic Warranty....................................................................... 72
7.1.2. Services............................................................................. 73
7.1.3. Warranty Period...................................................................... 73
7.1.4. Limitations on Warranty.............................................................. 73
7.1.5. Third Party OEM Components........................................................... 74
7.1.6. Debit Recoveries..................................................................... 75
7.1.7. Survival of Warranties............................................................... 76
7.2. Applied's Remedies............................................................................ 76
7.2.1. Failure to Deliver................................................................... 76
7.2.2 Defective Items...................................................................... 77
7.2.3. Cumulative Remedies.................................................................. 79
7.2.4. Remedies for Other Breach or Default................................................. 80
7.2.5 Business Review Process.............................................................. 80
8. AMENDMENTS AND MODIFICATIONS; CAPTIONS AND CONSTRUCTION; INTERPRETATION................................ 81
8.1 Amendments and Modifications.................................................................. 81
8.2 Captions and Construction..................................................................... 81
8.3 Interpretation................................................................................ 81
9. PROVISIONS OF GENERAL APPLICATION...................................................................... 81
9.1. Independent Contractor........................................................................ 81
9.2. No Third Party Beneficiary.................................................................... 82
9.3. Severability.................................................................................. 82
9.4 Waiver........................................................................................ 82
9.5. Successors and Assigns........................................................................ 83
9.6. Execution..................................................................................... 83
10. REPRESENTATIONS AND WARRANTIES OF THE PARTIES.......................................................... 83
11. ACCEPTANCE AND EXECUTION.............................................................................. 84
CONFIDENTIAL TREATMENT REQUESTED
APPLIED MATERIALS CONFIDENTIAL
EXHIBIT 1
APPLIED MATERIALS STANDARD TERMS AND CONDITIONS OF PURCHASE
Table of Contents
1. ACCEPTANCE............................................................................................. 1
2. CONFIDENTIAL INFORMATION............................................................................... 1
3. INTELLECTUAL PROPERTY RIGHTS AND OWNERSHIP THEREOF..................................................... 1
4. [OMITTED].............................................................................................. 1
5. PRESS RELEASES/PUBLIC DISCLOSURE NOT AUTHORIZED........................................................ 1
6. PRICING................................................................................................ 2
7. DUTY DRAWBACK AND COUNTRY OF MANUFACTURE............................................................... 3
8. OZONE DEPLETING CHEMICAL ("ODC")....................................................................... 3
9. COMPLIANCE WITH LAWS................................................................................... 4
10. EQUAL EMPLOYMENT OPPORTUNITY........................................................................... 4
11. APPLICABLE LAW, CONSENT TO JURISDICTION AND VENUE...................................................... 4
12. NOTICE OF LABOR DISPUTES............................................................................... 5
13. TAXES.................................................................................................. 5
14. [OMITTED].............................................................................................. 5
15. INSURANCE.............................................................................................. 5
16. CERTAIN EVENTS AND NOTICES; FINANCIAL INFORMATION...................................................... 6
17. ASSIGNMENT AND SUCCESSION.............................................................................. 11
18. GRATUITIES............................................................................................. 14
19. [OMITTED].............................................................................................. 14
20. [OMITTED].............................................................................................. 14
21. DISCLAIMERS AND LIMITATIONS OF LIABILITY AS TO EXCLUDED DAMAGES........................................ 14
22. INDEMNITY.............................................................................................. 15
23. FORCE MAJEURE.......................................................................................... 18
24. CHANGES................................................................................................ 18
25. TERMINATION FOR DEFAULT; OTHER REMEDIES................................................................ 19
26. TERMINATION FOR CONVENIENCE............................................................................ 22
27. POST-TERMINATION OBLIGATIONS........................................................................... 24
CONFIDENTIAL TREATMENT REQUESTED
Exhibit 1
APPLIED MATERIALS STANDARD TERMS AND CONDITIONS OF PURCHASE
1. Acceptance.
The terms and conditions stated in these Applied Materials Standard
Terms and Conditions of Purchase are an integral part of the Global Supply
Agreement between the parties to which this Exhibit 1 is attached ("Agreement")
and which covers the purchase of Items, as defined in such Agreement. Defined
terms used herein shall have the meanings ascribed to them in other provisions
of the Agreement unless otherwise defined in this Exhibit 1. Additional or
different terms or conditions of purchase will not be applicable unless accepted
in writing by a duly authorized representative of each of Supplier and Applied.
2. Confidential Information.
(a) Supplier and Applied, respectively, will comply with each NDA
executed by Supplier or Applied, as applicable, with or for the benefit of the
other, whether now or hereafter in effect; subject, however, to the provisions
of the Agreement as to priority among conflicting agreements.
(b) The obligations of the parties with respect to Confidential
Information under and for purposes of the Agreement are governed by the IPA.
Such obligations include those arising pursuant to Sections 2.9.1.1.D and 2.9.2
of the Agreement and Article 5(a) of this Exhibit 1.
3. Intellectual Property Rights and Ownership Thereof.
Rights of the parties in, ownership of, and other matters relating to
intellectual property under and for purposes of the Agreement shall be governed
by the IPA.
4. [Omitted]
5. Press Releases/Public Disclosure Not Authorized.
(a) The Agreement and Related Agreements contain Confidential
Information of Applied and Supplier, and such Confidential Information is
protected as set out in the IPA. As part of their respective obligations under
the IPA as to Confidential Information, neither Supplier nor Applied shall
disclose to any third party, including any governmental authority, or publicly
release the terms of the Agreement or of any Related Agreement without the prior
written approval of the other party; provided, however, that subject to its
compliance with this Article 5(a), either party may make any public disclosure
(which shall include disclosure in the course of litigation, as well as under
other applicable law, rule or regulation) it believes in good faith that it is
required to make by applicable law, rule or regulation. The disclosing party:
shall notify the other party in advance of such a disclosure or release; shall
take commercially reasonable efforts (at least equal to the efforts such party
takes to protect the confidentiality of its own information) to protect the
confidentiality of the Confidential Information of the other party in the
Agreement, which shall include deleting the financial terms and other
Confidential Information of the other
CONFIDENTIAL TREATMENT REQUESTED
party in the Agreement from (or requesting such deletion or equivalent
protection or confidential treatment where approval by a court or governmental
authority is required) disclosure or public release when permitted by applicable
law, rule or regulation. Section 4.1(v) of the IPA may also apply in regard to
disclosures.
(b) Further, and without limiting the foregoing provision, Supplier and
Applied, respectively, will not, without the prior written approval of the
other, issue any press release, advertising, publicity or public statement or in
any way engage in any other form of public disclosure that indicates the
relationship of the parties (except for disclosures as may be made under, and in
compliance with, requirements applicable under Article 5(a) and disclosure of
the existence of the Agreement), or implies any endorsement by Applied of
Supplier or Supplier's products or services.
(c) Any requests or notices under this Article 5 must be made in
writing and submitted to the person(s) designated to receive notices under
Section 1.2.2 of the Agreement.
6. Pricing.
(a) *
(b) In no event shall Supplier quote, or shall Applied receive, prices
that would be unlawfully discriminatory under any applicable law. *
(c) A "Covered Product" is a good sold by Supplier (i) that is not an *
form, fit and function to an Item under this Agreement.
7. Duty Drawback and Country of Manufacture.
(a) Duty Drawback
Supplier will provide Applied, or any agent designated by Applied for
this purpose, with all U.S. Customs entry and shipment data concerning
applicable Items that Applied determines is necessary for Applied to qualify for
duty drawback ("Duty Drawback Information"). Such data shall include information
and receipts for duties paid, directly or indirectly, on all Items that are
either imported or contain imported Piece Parts. Such data shall further include
serial numbers, unique part numbers, lot numbers and any other data that will
assist Applied in identifying imported Items sold to Applied. This data will be
provided to Applied within thirty (30) days after the end of each calendar
quarter and shall be accompanied by a completed Certificate of Delivery of
Imported Merchandise or Certificate of Manufacture and Delivery of Imported
Merchandise (Customs Form 331) as promulgated pursuant to U. S. 19 CFR 191.
(b) Country of Manufacture
Supplier shall provide Applied with country of manufacture data for
each Item Supplier provides to Applied. This data shall identify each Item by
Applied part number and shall list the corresponding country of manufacture for
the Item. This data shall be provided to Applied
* Material has been omitted and filed separately with the Commission.
CONFIDENTIAL TREATMENT REQUESTED
within fifteen (15) days after the end of each month and as requested by
Applied. If Supplier is a United States manufacturer of any Item supplied to
Applied, as defined by United States Customs regulations, Supplier shall, on an
annual basis and in accordance with Applied's written instructions, provide
Applied with a signed manufacturer's affidavit.
(c) All information to be provided to Applied under this Article 7
shall be sent to the attention of:
Manager, Customs Compliance
Applied Materials
0000 Xxxxx Xxxx.
X/X 0000
Xxxxx Xxxxx, XX 00000
or any agent designated by Applied in writing to Supplier.
8. Ozone Depleting Chemical ("ODC").
In the event that the Items are manufactured with or contain Class I
ODCs, as defined under Section 602 of the Federal Clean Air Act (42 USC Section
7671a) and implementing regulations, or if Supplier believes that such a
condition exists with respect to any one or more Items, Supplier shall notify
Applied prior to performing any further work with respect to such Items pursuant
to the Agreement. Applied shall have the right to: (a) terminate the Agreement
as to such Items, upon notice and without penalty, and without application of
the termination procedures of Articles 25 and 26; and, in addition, (b) return
any and all Items delivered that are found to contain or have been manufactured
with Class I ODCs. Supplier shall pay (or if already paid by Applied, then
reimburse Applied for) all costs of shipping, special handling, and returning,
for labor to remove and replace, and for the purchase price paid by Applied as
to such Items.
9. Compliance With Laws.
Supplier represents and warrants that no law, rule or ordinance of the
United States, any state, any other governmental agency, or any country has been
or will be violated in manufacturing or supplying the Items purchased, or to be
purchased, under the Agreement.
10. Equal Employment Opportunity.
Supplier represents and warrants that it is in compliance with
Executive Order 11246, any amending or supplementing Executive Orders and
implementing regulations, unless exempted.
11. Applicable Law, Consent to Jurisdiction and Venue.
(a) THE AGREEMENT SHALL BE GOVERNED BY, SUBJECT TO, AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, EXCLUDING
CONFLICTS OF LAW RULES. THE PARTIES AGREE THAT ANY SUIT ARISING OUT OF THE
AGREEMENT FOR ANY CLAIM OR CAUSE OF ACTION, WHETHER IN CONTRACT, IN TORT,
STATUTORY, AT LAW OR IN EQUITY, SHALL EXCLUSIVELY BE BROUGHT IN THE UNITED
STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA, THE
CONFIDENTIAL TREATMENT REQUESTED
SUPERIOR COURTS OF SANTA XXXXX COUNTY, CALIFORNIA, THE UNITED STATES DISTRICT
COURT FOR THE WESTERN DISTRICT OF TEXAS, AUSTIN DIVISION, OR THE TEXAS STATE
DISTRICT COURTS OF XXXXXX COUNTY, TEXAS, PROVIDED THAT SUCH COURT HAS
JURISDICTION OVER THE SUBJECT MATTER OF THE ACTION. EACH PARTY AGREES THAT EACH
OF THE NAMED COURTS SHALL HAVE PERSONAL JURISDICTION OVER IT AND CONSENTS TO
SUCH JURISDICTION. EACH PARTY FURTHER AGREES THAT VENUE OF ANY SUIT ARISING OUT
OF THE AGREEMENT IS PROPER AND APPROPRIATE IN ANY OF THE COURTS IDENTIFIED
ABOVE.
(b) WITH RESPECT TO TRANSACTIONS TO WHICH THE 1980 UNITED NATIONS
CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS WOULD OTHERWISE
APPLY, THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THE AGREEMENT, INCLUDING
THESE TERMS AND CONDITIONS, SHALL NOT BE GOVERNED BY THE PROVISIONS OF THE 1980
UNITED NATIONS CONVENTION OF CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS.
APPLICABLE LAWS OF THE STATE OF CALIFORNIA, INCLUDING THE UNIFORM COMMERCIAL
CODE AS ADOPTED THEREIN (BUT EXCLUSIVE OF SUCH 1980 UNITED NATIONS CONVENTION),
SHALL GOVERN THE AGREEMENT AND ALL TRANSACTIONS RELATED TO THE AGREEMENT (EXCEPT
TO THE EXTENT THE PROVISIONS OF SUCH APPLICABLE LAWS HAVE BEEN MODIFIED OR
SUPERSEDED BY EXPRESS PROVISIONS OF THIS AGREEMENT).
12. Notice of Labor Disputes.
Whenever an actual or potential labor dispute, or any government
embargo or regulatory or tribunal proceedings relating thereto, is delaying or
threatens to delay the timely performance of the Agreement, Supplier will
immediately notify Applied of such dispute and furnish all relevant details,
regardless of whether said dispute arose directly or indirectly as a result of
an actual or potential dispute within the Supplier's sub-tier supply base or
Supplier's own operations.
13. Taxes.
(a) Supplier shall not charge or collect sales or use tax for Items for
which an applicable sales and use tax exemption or resale certificate is
provided by Applied. For all other Items, Supplier will include all applicable
federal, state, and local taxes, where applicable, on Supplier's invoices, or
(when payment is made under Applied's ERS Program) in Pro Formas, stated as a
separate item.
(b) Supplier may request from Applied information or documentation of
facts relating to Supplier's periodic application for property tax abatement or
tax reduction under rules regarding a "Texas Freeport Exemption"; Applied will
provide reasonable cooperation and assistance to Supplier in responding to
requests by Supplier for this purpose through provision of information or
completion of documentation to support Supplier's application(s) for such tax
benefits.
14. [Omitted]
15. Insurance.
(a) Supplier shall maintain (i) comprehensive general liability
insurance covering bodily injury, property damage, contractual liability,
products liability and completed operations,
CONFIDENTIAL TREATMENT REQUESTED
(ii) Worker's Compensation and employer's liability insurance, and (iii) auto
insurance, all in such amounts as are necessary to insure against the risks to
Supplier's operations.
(b) Minimally, Supplier will obtain and keep in force, insurance of the
types and in the amounts set forth below:
Insurance Minimum Amounts of Liability
--------- ----------------------------
Worker's Compensation *
Employer's Liability *
Automobile Liability * per occurrence
Comprehensive General Liability
(including Products Liability) * per occurrence
Umbrella/Excess Liability * per occurrence
All policies must be primary and non-contributing and shall include
Applied as an additional insured. Supplier will require, and will use
commercially reasonable efforts to verify, that each of its subcontractors
carries at least the same insurance coverage and minimum limits of insurance as
Supplier is required to carry pursuant to the Agreement. Supplier shall notify
Applied at least thirty (30) days prior to the cancellation or implementation of
any material change in the foregoing policy coverage that would affect Applied's
interests. Upon request, Supplier shall furnish to Applied as evidence of
insurance a certificate of insurance stating that the coverage would not be
canceled or materially altered without thirty (30) days prior notice to Applied
or, as to cancellation for failure to pay premiums, without ten (10) days prior
notice to Applied.
16. Certain Events and Notices; Financial Information.
16.1 Certain Events and Notices.
(a) As used in this Exhibit 1, a "Notice Event" means any of the
following: (i) a change in the person or persons with power to direct, or to
cause the direction of, management or policies of Supplier or of any Guarantor;
(ii) a change, however such occurs (including, by way of example, sale,
purchase, merger, or business combination), in the ownership of capital stock of
Supplier or of any Guarantor for which notice is to be given under Article
16.1(b) below; (iii) a sale or disposition of all or substantially all of the
assets of Supplier, or sale or disposition of a line of business of Supplier or
of all or substantially all of the assets of Supplier relating to or used in a
line of business, whether or not the Agreement is assigned; or (iv) a sale or
disposition of all or substantially all of the assets of a Guarantor, or a sale
or disposition of a line of business of a Guarantor or of all or substantially
all the assets of a Guarantor relating to or used in a line of business, which
sale or disposition results in (or will result in) a material change in the
nature of the business of such Guarantor or in a material adverse change in the
financial condition of the Guarantors as a whole.
* Material has been omitted and filed separately with the Commission.
CONFIDENTIAL TREATMENT REQUESTED
(1) A Notice Event may result from a single transaction or from a
series of related transactions. Transactions with a single
person, with a group of persons covered by Section 13(d)(3) of
the Securities Exchange Act of 1934 (the "Exchange Act"), or
with persons under common control shall be considered a single
transaction.
(2) A "Public Offering Event" is the issuance by Supplier or any
Guarantor of capital stock to the public in an underwritten
public offering of capital stock registered pursuant to a
registration statement on Form S-1 with the federal Securities
and Exchange Commission.
(b) Supplier shall provide (and shall cause an affected Guarantor to
provide) notice to Applied in accordance with Section 1.2.2 of the Agreement as
to matters provided for by this Section 16.1(b).
(1) If a Notice Event will result from a transaction to which
Supplier or any Guarantor is a party, Supplier shall give (and
shall cause the affected Guarantor to give) notice to Applied,
in accordance with Section 1.2.2 of the Agreement, (i) except
when such notice would violate applicable securities laws or
regulations or another obligation of confidentiality, (x) at
least five (5) Business Days prior to the date of actual
public disclosure of the transaction or, if earlier, the date
such public disclosure should have been made if Supplier or
the affected Guarantor, as applicable, were a company with
publicly traded securities, but (y) in any event no later than
twenty-one (21) calendar days prior to the closing or
consummation of such transaction, and (ii) of the consummation
or closing of such transaction, at the time of such closing or
consummation. The Notice Event shall not occur, however, until
the closing or consummation of the transaction(s) or event(s)
that cause or will result in the Notice Event. If the giving
of notice to Applied under this Article 16.1(b)(1) is
restricted by an obligation of confidentiality, Supplier (or
such Guarantor) shall make a good faith effort to obtain
approval or consent to give the notice provided for in this
Article 16.1(b)(1).
(2) If securities of Supplier or any Guarantor are or are to be
the subject of a Public Offering Event, Supplier shall give
(and shall cause an affected Guarantor to give) Applied notice
of (and concurrently with) each of the following: the filing
of a registration statement with respect to any such
securities; and a registration statement becoming effective as
to any securities of Supplier or any Guarantor.
(3) Supplier shall, in addition to notices provided for in Article
16.1(b)(1) and (2), give (and shall cause an affected
Guarantor to give) notice to Applied in accordance with
Section 1.2.2 of the Agreement of each of the following
events, occurrences or transactions, each of which is a Notice
Event:
(i) Notice shall be given promptly upon the
occurrence of any Notice Event of a type covered by Article
16.1(a)(i), (iii) or (iv) above.
CONFIDENTIAL TREATMENT REQUESTED
(ii) If Supplier or a Guarantor does not have capital
stock registered with the federal Securities and Exchange
Commission, a Notice Event occurs upon, and the affected
company shall give Applied notice promptly upon (a) the
acquisition of ownership of ten percent (10%) or more of the
outstanding capital stock of such company by any person that
is a Competitor (as defined below) of Applied, and also
promptly upon (b) the acquisition of ownership of twenty-five
percent (25%) or more of the outstanding capital stock of such
company by any person, whether or not a Competitor of Applied.
(iii) If any class of capital stock of Supplier or
any Guarantor is registered with the federal Securities and
Exchange Commission, a Notice Event occurs (with respect to
the company having registered stock) upon, and the affected
company shall give Applied notice promptly upon, (a) the
acquisition of ownership of five percent (5%) or more of the
outstanding capital stock of each such a class by a person
that is a Competitor of Applied in a transaction to which
Supplier, any Guarantor, or any Affiliate of Supplier or a
Guarantor is a party, and (b) (x) receipt of a Schedule 13D
pursuant to the Exchange Act, or (y) Supplier or any Guarantor
having actual knowledge of, any acquisition of ownership of
five percent (5%) or more of the outstanding capital stock of
such a registered class. Notice under this clause (b) shall be
given (where notice is received by Supplier or the affected
Guarantor through the receipt of a Schedule 13D) by forwarding
a copy of such schedule to Applied.
(iv) If any capital stock of any class of Supplier or
any Guarantor is registered with the federal Securities and
Exchange Commission, the affected company shall give Applied
notice of the occurrence of any event reportable pursuant to
Item 1 of Form 8-K as in effect pursuant to the Exchange Act
by notice given concurrently with filing of the report or
announcement of such event.
(c) The following provisions and definitions are part of this
Article 16.1:
(1) In addition to notices provided for above, Supplier shall give
(and shall cause each Guarantor to give) to Applied, on the
15th day of each January and July during the term of this
Agreement, a schedule showing the name of each owner of five
percent (5%) or more of the ownership of capital stock of
Supplier or any Guarantor as of January 1 and July 1 of such
year. This requirement shall apply only to those companies
that do not have publicly traded securities.
(2) In compliance with the confidentiality obligations of the IPA,
Supplier shall not provide Confidential Information of, or
received from, Applied to any third party in connection with a
Notice Event or the negotiation or evaluation of same, without
Applied's prior written consent (and upon such conditions as
Applied may require). Information received by Applied from
Supplier or a Guarantor pursuant to Article 16.1(b) and
Article 16.1(c)(1) shall be deemed Confidential Information of
Supplier under Article 4 of the IPA, subject to the exclusions
of Section 4.1 of the IPA.
CONFIDENTIAL TREATMENT REQUESTED
(3) References to "capital stock" shall include any equity
interest, ownership interest or like right or interest, such
as interests of members in a limited liability company.
References to "ownership" shall include legal or beneficial
ownership or the right to vote.
(4) A "Competitor" of Applied means (I) any person identified to
Supplier by Applied as a competitor in any of the Fields of
Use (as specified below) through written notice given in
accordance with Section 1.2.2 of the Agreement, if Applied
elects to provide such a notice or (II) any person that an
executive officer of Supplier knows is a competitor of Applied
in any Field of Use. The information in a notice from Applied
under this Article 16.1(c)(4)(I) is Confidential Information
of Applied, subject to the exclusions of Section 4.1 of the
IPA. The "Fields of Use" applicable to this definition of
Competitor are the design, manufacturing and marketing of: (a)
semiconductor wafer fabrication equipment, (b) wafer
inspection and metrology equipment, (c) flat panel display
fabrication equipment, (d) wafer fabrication factory control
software, (e) toxics abatement or recycling equipment, or (f)
thin film application processes.
(5) "Affiliate" means any person that directly or indirectly
controls, is under common control with, or is controlled by,
Supplier or any Guarantor.
(6) "Promptly" means, for purposes of this Article 16.1 only, not
later than the third Business Day after the occurrence of the
event or transaction for which notice is to be given.
(7) The following are excluded from "Notice Event":
a) The acquisition of ownership of capital stock by a person
that, on the Effective Date, owns 5% or more of the
outstanding capital stock of any class of Supplier or of the
affected Guarantor, unless such acquisition constitutes or
results in another Notice Event.
b) A change in corporate form of Supplier or a Guarantor that
does not alter the ownership, management or control of the
Supplier or Guarantor, such as conversion from a corporation
to a limited liability company through a transaction in which
ownership and control are maintained as such existed in a
corporate form prior to the conversion.
c) A distribution of all outstanding capital stock of Supplier or
KGI to the shareholders of KHC in proportion to their
ownership in KHC.
d) A merger, consolidation or business combination of Supplier
with or into, or a sale of all outstanding stock of Supplier
to, another entity that is wholly owned (directly or
indirectly) by KHC that does not cause or result in a material
change in the nature of the business conducted by Supplier
prior to such event or in a material adverse change in the
management or operations of Supplier.
CONFIDENTIAL TREATMENT REQUESTED
e) A merger, consolidation or business combination of KGI with or
into, or a sale of all outstanding stock of KGI to, another
entity that is wholly owned (directly or indirectly) by KHC
that does not cause or result in a material change in the
nature of the business conducted by KGI prior to such event or
in a material adverse change in the financial condition of the
Guarantors as a whole.
16.2 Financial Information of Supplier and Guarantors.
(a) Supplier will provide Applied with financial information, and shall
cause KHC to provide to Applied financial information, as follows: (i) within 90
days after the end of each fiscal year, and within 45 days after the end of each
fiscal quarter, financial statements for such year or period as to KHC, to
include the balance sheet, statement of income, and statement of cash flow (on a
consolidated basis with its subsidiaries) of KHC, such annual (but not
quarterly) financial statements to have been audited by independent certified
public accountants of recognized national standing; and (ii) from time to time
such additional financial information as Applied may reasonably request. All
financial statements of KHC shall be prepared on the basis of generally accepted
accounting principles in effect in the United States of America ("GAAP"),
consistently applied. Applied's request for financial information from Supplier
or from KHC to be provided through Applied's Form F-15 shall be deemed a
reasonable request under clause (ii) of this Article 16.2(a) when Applied has
determined that it requires information in addition to that contained in the KHC
financial statements referred to in Article 16.2(a)(i). Information on Form F-15
is not required to be presented in compliance with GAAP.
(b) Supplier agrees to keep true, complete and accurate books and
records, of Supplier's costs and other information relevant to price and cost
reduction provisions of the Agreement and xxxxxxxx by Supplier to Applied under
the Agreement. Supplier will provide:
(1) upon request by Applied's Supply Chain Management organization
or successor organization of Applied performing the functions
of such organization ("SCM"), made on a case by case basis, a
complete costed xxxx of materials for those FDS(s) delivered
to Applied that are specified in the applicable request(s), to
include detailed Piece Part costs at Supplier's Standard Cost
of Materials, Current Average Cost of Materials, or other
Piece Part price, in each case as applicable to the Piece
Parts in such xxxx of materials, to be provided to Applied's
SCM organization or to such other recipient at Applied as
specifically identified in instructions given to Supplier by
Applied's SCM through the Supply Account Team Lead;
(2) upon request by Applied's SCM, access to Supplier's books and
records (at Supplier's facilities and during regular business
hours) to determine the accuracy of Supplier's Piece Part
prices charged to Applied and, as applicable, Supplier's
adjustments thereto under cost reduction provisions of the
Agreement (including Sections 3.1.5 and 3.1.6); and
(3) copies of its books and records (or access to its books and
records), upon request and upon reasonable notice, for review
or audit during regular business hours (to
CONFIDENTIAL TREATMENT REQUESTED
include access to original records or data) to reconcile
differences between the parties as to xxxxxxxx and payments.
At the conclusion of a review or audit as to billing and
payment differences, Applied shall provide to Supplier a
report with reasonably detailed supporting information from
Applied's books and records to support the conclusions reached
with respect to such differences.
(c) Upon mutual agreement of the parties after request by Applied,
Applied (or independent nationally recognized accountants designated by Applied
and reasonably acceptable to Supplier) shall have the right, at Applied's
expense and upon reasonable notice, to conduct audits of all of Supplier's books
and records and of any financial statements or other information provided by
Supplier. This Article 16.2(c) does not limit Applied's rights under Article
16.2(b).
17. Assignment and Succession.
(a) The Agreement shall be binding upon, and inure to the benefit of,
each of the parties and its respective successors and permitted assigns. Neither
Supplier nor Applied shall assign, transfer to or permit to vest in another
person the Agreement, or its rights, interests and obligations under the
Agreement, in whole or in part, whether voluntarily or by operation of law, (i)
without the express, prior written consent of the other party, or (ii) except as
permitted by the following provisions of this Article 17, as applicable.
(b) Applied may assign the Agreement in whole or in part to any other
person(s), as follows:
(i) Assignment in whole or in part is permitted if Applied remains
obligated, either primarily or equally with the assignee, for
performance of the obligations assigned by Applied;
(ii) Assignment in whole or in part is permitted in connection
with, or to effect, a change in manufacturing operations
resulting from an agreement between Applied and a Subassembler
under Section 4.7 of the Agreement, or to accomplish a change
in manufacturing of any Applied Systems relating to such an
agreement;
(iii) Assignment in whole or in part is permitted in connection
with, or to effect, a sale or transfer of assets used in
manufacturing operations of Applied Systems, where such occurs
to facilitate or as part of any bona fide change in the
organization or structure of the manufacturing or integration
of Applied Systems, which may include manufacture or
integration by a third party, and which may be related to
changes as to any product line(s), type(s) or model(s) of
Applied System(s), line(s) of business of Applied, or
geographic or other reorganization; or
(iv) Assignment in whole or in part is permitted in connection
with, or to effect, arrangements or agreements for
outsourcing, contract, turnkey or similar manufacturing, or
for modular build, of Applied Systems or assemblies or
subassemblies, where such occurs to facilitate (or as part of)
any bona fide change in the organization or structure of the
manufacturing or integration of Applied
CONFIDENTIAL TREATMENT REQUESTED
Systems, which may include manufacture or integration by a
third party, and which may be related to changes as to any
product line(s), type(s) or model(s) of Applied System(s),
line(s) of business of Applied, or geographic or other
reorganization.
An assignee from Applied under an assignment made by Applied pursuant to this
Article 17(b) may not further assign, either in whole or in part, the Agreement
(or the portion of the Agreement assigned to the assignee) without the prior
written consent of Supplier to such subsequent assignment.
(c) A transfer or vesting of the Agreement, and rights and obligations
hereunder, in whole but not in part, in another person in the event of or
incident to a merger, consolidation or business combination to which Applied is
a party shall be permitted.
(d) Supplier may assign the Agreement, in whole or in part, to any
other person, and the Agreement may be transferred to, or vest in, another
person, in whole but not in part, by reason of a merger, consolidation or
business combination to which Supplier is a party, as follows:
(i) Assignment, in whole or in part, is permitted if, after notice
from Supplier under Article 17(f), Applied (x) has determined,
in the reasonable discretion of Applied, that: (A) such person
is reasonably likely to qualify, or is then qualified, as a
"preferred" supplier under the then-current standards of
Applied, without prejudice to subsequent assessments during
the term of the Agreement; (B) such person and the terms of
the assignment do not present an adverse risk to Applied with
respect to: manufacturing process, delivery cycle time,
product pricing, quality, or financial responsibility or
condition; (C) such person and the terms of the assignment do
not present an adverse risk to Applied with respect to
protection, confidentiality, misuse or misappropriation of,
access to, or control over confidential or proprietary
information, trade secrets and like property of Applied (or in
which it has an interest); (D) such person and the terms of
the Assignment do not present an adverse risk to Applied that
a Competitor of Applied (or an Affiliate of such a Competitor
(as the terms Competitor and Affiliate are defined in Article
16.1(c)) would be or become a party to, or in control of a
party to, the Agreement or the Related Agreements; and (y) has
issued its written consent based on such determination. In its
assessment as to financial responsibility and condition under
Clause B above, Applied may consider whether the Performance
Guaranty Agreement will continue in effect as to the Agreement
(or portion assigned).
(ii) Transfer or vesting, in whole but not in part, is permitted in
the event of a merger, consolidation or business combination
of Supplier with or into, or a sale of all outstanding stock
of Supplier to, another entity that is wholly owned (directly
or indirectly) by KHC, or as part of a transfer of a
substantial part of the assets of Supplier to a third party
that is wholly owned (directly or indirectly) by KHC, provided
that a transaction under this Article 17(d)(ii) does not cause
or result in a material change in the nature of the business
conducted by
CONFIDENTIAL TREATMENT REQUESTED
Supplier prior to such transaction or a material adverse
change in the management or operations of Supplier.
(e) Any assignee or successor of Applied or Supplier shall also assume,
be bound by and be (or become) a party to and obligated under this Agreement,
the IPA and other Related Agreements (as such agreements are then in effect),
either in whole (if the permitted assignment or other transaction is as to the
Agreement in whole), or in part (if in part).
(f) Each party shall endeavor to provide the other with prior written
notice and, if applicable, a request for consent with respect to a transaction
to which this Article 17 applies, and a brief description of the transaction and
of the assignee or transferee at least seventy-five (75) days before the closing
of such transaction. Further, each party shall give the other party, at least
fifteen (15) days prior to the closing of such a transaction, written notice of,
and, if applicable, a request for consent as to, any proposed or permitted
transaction to which this Article 17 applies and a brief description of the
transaction and of the assignee or transferee of such transaction, if not
previously provided. Failure to give such notice shall not, by itself, affect
the validity of such assignment or transfer as between the parties thereto.
(g) In the event of, and to the extent of, an assignment, merger or
other transaction to which Supplier is a party with respect to the Agreement of
a type described in Article 17(d), Supplier shall maintain during the period
prior to the assignment, merger or such other transaction becoming effective the
supply of Item(s) without interruption or delay and without breach of other
provision of the Agreement. An assignment or transfer of this Agreement, or of
obligations hereunder, shall not apply to, or relieve an assigning or
transferring party of, the obligations, liabilities and debts accrued, incurred
or existing at the date of assignment or transfer or subsequently accruing,
arising, or existing under or in connection with transactions between the
parties prior to such date, but the assigning or transferring party shall remain
primarily and directly obligated and liable for such obligations, liabilities
and debts.
(h) Any assignment, merger or other transaction subject to this Article
17 that is not made in compliance with this Article 17, shall, at the option of
the party (Applied or Supplier, as the case may be) that is not a party to such
assignment, merger or other transaction, be deemed a breach of and a default
under the Agreement and not be binding upon that party. The party, Applied or
Supplier, exercising such option to declare breach and default shall give
written notice of such exercise to the other party, and shall not be required to
proceed with any period of review or cure under Article 25, however, the party
so in breach shall continue to be bound by, and shall perform and observe all
its obligations applicable under this Agreement through the conclusion of a Wind
Down Period, if applicable, and thereafter under provisions that survive.
(i) Assignment of this Agreement in part shall mean that all rights,
interests and obligations of the party assigning and all terms, provisions and
conditions of the Agreement shall be assigned to and assumed by (or apply to)
the assignee with respect to the Item(s), product line(s), type(s) or model(s)
of Applied System(s) or FDSs, or line(s) of business to which the assignment
applies (the "Assigned Products"). Notwithstanding the foregoing, (i) only those
pricing provisions (whether set forth in Attachment 1 or elsewhere in the
Agreement) applicable to Assigned Products affected by the assignment shall be
assigned to the assignee and (ii) the
CONFIDENTIAL TREATMENT REQUESTED
liability of Supplier to Applied and any assignee(s) of Applied * below shall be
apportioned pursuant to the assignment among Applied and each assignee *
liability of Supplier to Applied and such assignee(s) *. In the event of an
assignment, the parties shall cooperate in the implementation of operational
processes and procedures to effect the assignment.
18. Gratuities.
Supplier represents and warrants that it has not offered or given and
will not offer or give any gratuity to induce any person or entity to enter
into, execute or perform the Agreement or any other agreement between Supplier
and Applied. Upon Applied's written request, an officer of Supplier shall
certify in writing that Supplier has complied with and continues to comply with
this Article. Any breach of this representation and warranty shall be a material
breach of the Agreement and any other agreement between Applied and Supplier.
19. [Omitted]
20. [Omitted]
21. Disclaimers and Limitations of Liability as to Excluded Damages.
(a) As used in this Article 21, "Excluded Damages" means all special,
indirect, punitive, consequential or contingent damages that arise from or
relate to the Agreement.
(b) The exclusions and limitations of this Article 21 as to the
liabilities of Applied * for Excluded Damages are expressly made a part of the
Agreement and are accepted by each party.
(c) Subject to the exceptions provided in Article 21(e), Applied
EXCLUDES all liability to Supplier for Excluded Damages, whether or not Applied
has been advised of the possibility of such Excluded Damages.
(d) *:
(e) An exclusion or limitation, as applicable, that is provided by this
Article 21 shall only apply to Excluded Damages and further shall not apply to
damages of any type, obligations of a party, or claims or liabilities against a
party that:
(i) arise from or relate to matters covered by an indemnity under
Article 22 of this Exhibit 1;
(ii) arise from or relate to the IPA, or matters covered by an
indemnity under the IPA; or
(iii) arise from or relate to, or are for, personal injury, death, or
damage to or loss of tangible property.
* Material has been omitted and filed separately with the Commission.
CONFIDENTIAL TREATMENT REQUESTED
22. Indemnity.
(a) Supplier's Indemnity Obligation. In the event a third party brings
a claim or asserts liability against Applied alleging that Items or the work
product of Services ("Work Product"), as provided by Supplier under this
Agreement, or the manufacture, use, sale or offer for sale of such Items or Work
Product by Applied or the use of same by Applied's customers infringes,
misappropriates or otherwise violates third party IP Rights (an "Applied Third
Party Claim"), SUPPLIER SHALL DEFEND, INDEMNIFY AND OTHERWISE HOLD HARMLESS
APPLIED against such Applied Third Party Claim, including the payment of
reasonable fees and expenses of any attorneys and other professionals employed
by Applied in accordance with Article 22(f) in defending the Applied Third Party
Claim and the payment of any judgment finally awarded against Applied or the
payment of any settlement amount agreed to by Supplier to settle such Applied
Third Party Claim. Supplier will not be liable for any settlement of an Applied
Third Party Claim made by Applied without Supplier's consent, except as provided
in Article 22(h) below.
(b) Exceptions to Supplier's Indemnity Obligation. Supplier's
obligations pursuant to Article 22(a) will not apply to any claims or assertions
of liabilities if: (x) Supplier would not otherwise be liable for inducing or
contributing to infringement, misappropriation or other violation; and (y) the
infringement, misappropriation or other violation: (1) was unavoidably caused by
Supplier's compliance with specifications or designs furnished and required by
Applied or by Applied's non-compliance with Supplier's prior written advice or
warning of a possible and likely infringement, misappropriation or other
violation relating to such compliance, or (2) arises from a combination not
performed by Supplier of Items and/or Work Product with other equipment,
hardware, software, materials or components not provided by Supplier and any
such claim or assertion of infringement, misappropriation or other violation
would not arise but for such combination, or (3) is a direct result of
Supplier's combination of components mandated by Applied.
(c) *
(d) Reduction of Indemnification Amounts. The amount that any party is
or may be required to pay to or on behalf of any other person pursuant to an
indemnity under this Article 22 shall be reduced (including retroactive
reduction or reimbursement) by (i) any amounts received by an indemnified party
from an insurance carrier or paid and resolved by an insurance carrier on behalf
of the insured indemnified party (in a manner that results in no further
liability to the indemnified person), in either case net of any applicable
premium adjustment, retrospectively rated premium, deductible, retention, cost
or reserve paid or held by or for the benefit of the insured, or (ii) any other
amounts or tax benefits actually recovered by or on behalf of such indemnified
person in reduction of such payment. If an indemnified person shall have
received the payment required by this Article 22 from an indemnifying party and
shall subsequently actually receive insurance proceeds or other amounts or tax
benefits in respect of such payment
* Material has been omitted and filed separately with the Commission.
CONFIDENTIAL TREATMENT REQUESTED
as specified above, then such indemnified person shall pay to such indemnifying
party a sum equal to the amount of any such double recovery actually received.
This provision shall not, however, operate to relieve a party of liability to an
insurer subrogated to the rights of the insured.
(e) Indemnified Party's Obligations. A party seeking indemnification
(i) shall give the other party prompt written notice of any Applied Third Party
Claim or Supplier Third Party Claim, as applicable (each a "Third Party Claim"),
that may give rise to any indemnification obligation under this Article 22,
together with the estimated amount (if reasonably available) of such Third Party
Claim, and (ii) shall provide reasonable cooperation and assistance to the
indemnifying party in the defense and/or settlement of such claim, including, to
the extent reasonably requested, the retention, and the provision to the
indemnifying party (which shall pay the reasonable costs incurred in providing
or collecting such records) of records and information reasonably relevant to
such Third Party Claim. Failure to give such notice or to provide the
cooperation provided for herein shall not affect the indemnification obligations
hereunder in the absence of material prejudice to the indemnifying party. Except
for the foregoing obligation to pay the reasonable costs incurred in providing
or collecting records, the indemnifying party shall not be liable under this
Article 22 for any internal personnel costs or expenses (including opportunity
costs) suffered or incurred by the indemnified party in connection with a Third
Party Claim.
(f) Selection of Counsel. The indemnifying party shall have the right
to conduct and control the defense and, as herein provided, settlement (at its
own expense) of any such Third Party Claim through counsel of its own choosing
by so notifying the party seeking indemnification within thirty (30) calendar
days of the indemnifying party's first receipt of notice of the Third Party
Claim; provided, however, that any such counsel shall be reasonably satisfactory
to the party seeking indemnification. If the indemnifying party assumes such
defense, the party seeking indemnification shall have the right to participate
in the defense thereof and to employ counsel, at its own expense, separate from
the counsel employed by the indemnifying party. If, under applicable standards
of professional conduct, a conflict with respect to any significant issue
between any indemnified party and the indemnifying party exists in respect of
such Third Party Claim, the indemnifying party shall also pay the reasonable
fees and expense of such additional counsel as may be required to be retained by
reason of such conflict.
(g) Indemnified Party's Consent to Settlement. The indemnifying party
shall not, without the prior written consent of the indemnified party: (i) agree
to the settlement, compromise or discharge of such Third Party Claim unless, by
its terms, such settlement, compromise or discharge actually, fully and finally
discharges the indemnified party from the full amount of liability in connection
with such Third Party Claim; nor (ii) agree to the entry of any judgment or
enter into any settlement that: (1) provides for injunctive or other
non-monetary relief adversely affecting the indemnified party, or (2) does not
include as an unconditional term thereof the giving of a release for all
liability with respect to such claim by each claimant or plaintiff to each
indemnified party that is the subject of such Third Party Claim.
(h) Consequences of Breach by Indemnifying Party. In the event that the
indemnifying party does not assume and conduct the defense of a Third Party
Claim in
CONFIDENTIAL TREATMENT REQUESTED
accordance with this Article 22, or fails to perform any of its other
obligations under Article 22(a), (c), (f) or (g), and therefore is in breach of
its obligations under this Article 22: (i) the indemnified party may defend such
Third Party Claim in any manner it reasonably may deem appropriate (and the
indemnified party need not consult with, or obtain any consent from, the
indemnifying party in connection therewith); (ii) the indemnified party may
consent to the entry of any judgment or enter into any settlement with respect
to such Third Party Claim, provided that, before so consenting to entry of
judgment or entering into a settlement : (1) the indemnified party gives the
indemnifying party written notice of the terms of the proposed consent judgment
or settlement, and (2) the indemnifying party does not thereafter comply with
its obligations under this Article 22 in respect of the Third Party Claim and,
within three Business Days after receipt of such notice, give to the indemnified
party a signed written statement acknowledging that the indemnifying party is
liable under this Article 22 in respect of the Third Party Claim and undertakes
to comply promptly with its obligations under this Article 22; and (iii) subject
to compliance by the indemnified party with the foregoing obligations, as
applicable, the indemnifying party will remain liable to the fullest extent
provided in this Article 22.
(i) IPA Indemnity Obligations. The indemnities and related obligations
under this Article 22 are in addition to the indemnities and related obligations
provided in the IPA; however, this Article 22 shall not apply to any Third Party
Claim that is also subject to an indemnity provided in the IPA. Accordingly, the
indemnity provisions in the IPA shall supersede the provisions of this Article
22 in respect of any Third Party Claim to which the IPA indemnity applies, to
avoid any double indemnity liability or conflicting indemnity liability. The
parties' indemnity obligations as to matters covered by the IPA shall be as
provided in the IPA, except as to Excluded Damages that are limited by Article
21(d).
(j) Relation to Warranty Terms. Limitations or disclaimers of
warranties shall not be construed or applied to alter or affect the obligations
and liabilities of Applied or Supplier, as the case may be, that arise under or
are provided for by the indemnity provisions of this Article 22 or of the IPA.
23. Force Majeure.
(a) A failure by either party to perform its obligations under the
Agreement due to causes, events or conditions beyond its control and without the
fault or negligence of the party shall be deemed excusable during the period in
which the cause of the failure persists. Such causes may include, but not be
limited to, acts of God or the public enemy, acts of the government in either
sovereign or contractual capacity, fires, floods, epidemics, strikes, freight
embargoes and unusually severe weather. If the failure to perform by Supplier is
caused by the default of a sub-tier supplier of Supplier, and such default
arises out of causes beyond the control of both Supplier and sub-tier supplier,
and without the fault or negligence of either of them, Supplier will not be
liable for any excess cost for failure to perform, unless the supplies or
services to be furnished by the sub-tier supplier were obtainable from other
sources in sufficient time to permit Supplier to meet the required delivery
releases of Items. When Supplier or Applied becomes aware of any potential force
majeure condition as described above, that party shall immediately notify the
other of the condition and provide relevant details.
CONFIDENTIAL TREATMENT REQUESTED
(b) A failure by Supplier to perform its obligations under this
Agreement will be deemed excused to the extent caused by Applied's failure to
timely perform its obligations under the FUAs or under the IS&T Agreement (as
such is modified by the Agreement), each as in effect from time to time,
including but not limited to, an interruption in services or failure to provide
or maintain services that Applied is obligated to provide under an FUA or such
IS&T Agreement, which interruption or failure is not timely cured by Applied,
adversely affects Supplier's ability to perform under the Agreement, and
Supplier is unable to perform through use of available alternative services.
24. Changes.
Applied may at any time, by a written order and without notice to
Guarantors, make changes within the general scope of the Agreement to any one or
more of the following:
(a) Specifications;
(b) method of shipment or packing;
(c) place and date of delivery; or
(d) place and date of inspection or acceptance.
Changes in costs, pricing or other terms resulting from changes made
pursuant to this Article shall be determined pursuant to the Agreement. If any
such change not otherwise provided for under the Agreement causes an increase or
decrease in the cost of or time required for performance of the Agreement, an
equitable adjustment shall be made in the Contract Price or delivery schedule,
or both, and the Agreement shall be modified in writing accordingly. No claim by
Supplier for adjustment under this Article 24 shall be valid unless in writing
and received by Applied within sixty (60) days from the date of receipt by
Supplier of the notification of change, provided, however, such period may be
extended upon the written approval of Applied. However, nothing in this Article
shall excuse Supplier from proceeding with the Agreement as changed or amended.
25. Termination for Default; Other Remedies.
(a) Any of the following events, failures, occurrences or breaches and,
when applicable with respect to an event, failure, occurrence or breach to which
Article 25(a)(i) or (a)(iii) applies, the failure of Supplier, after notice by
Applied under Article 25(b), to cure or correct same, if curable, during the
Business Review Process under Section 7.2.5 of the Agreement (or such period as
is established by the Business Review Process) shall constitute a "Default"
under the Agreement:
(i) the recurring material failure by Supplier to deliver Items on time
and in compliance with the warranty provisions of the Agreement;
(ii) Supplier's becoming insolvent; the filing by Supplier of a
voluntary petition under any bankruptcy, insolvency or like law; the filing
against Supplier of an involuntary petition under any bankruptcy, insolvency or
like law
CONFIDENTIAL TREATMENT REQUESTED
(which is not dismissed within 45 days after its filing); the
making of an assignment by Supplier for the benefit of
creditors; and/or any material adverse change in the business,
properties, operation or condition (financial or otherwise) of
Supplier;
(iii) other than those failures to which Article 25(a)(i) applies,
the material failure by Supplier to perform, observe, or
comply with any term, provision, or condition of the
Agreement, including recurring failures that together
constitute a material failure, or the occurrence of any event
or condition constituting a default or breach in a material
respect under any term, provision or condition of the
Agreement; or
(iv) (a) the occurrence of any event or condition constituting a
material default under or breach of any provision of (i) the
Performance Guaranty Agreement, as in effect from time to
time, or (ii) the APA or an FUA, as in effect from time to
time, without cure or correction after notice pursuant to the
APA or an FUA, as applicable, or (b) the exercise by Applied
of a right of termination of the IPA in accordance with its
terms pursuant to Section 5.2 of the IPA.
Upon the occurrence of a Default, Applied shall have the right, at its option,
to terminate the Agreement, either in whole or in part. A termination in part
for Default shall apply to the Items, product line(s), type(s) or model(s) of
Applied Systems or FDSs, or line(s) of business affected by the Default and as
to which Applied exercises its right to terminate for Default (the "Terminated
Products").
A termination of the Agreement in part for a default or the exercise of other
rights and remedies pursuant to Section 7.2.1 or Section 7.2.2 with respect to
the particular Item(s) affected shall not be subject to the procedural
requirements of this Article 25. A default as to which Section 7.2.1 or Section
7.2.2 applies may, however, also become an element of a Default under this
Article 25. In addition to its rights of termination for Default as to the
Agreement under this Article 25, Applied shall have the rights provided by the
UCC as to transactions governed by such statute (and by other law of the State
of California where the UCC does not apply) to terminate for default (or cancel)
or revoke acceptance with respect to any particular Item(s) and to recover its
damages in connection with such Item(s), without the application of the
procedures of this Article 25 or the Business Review Process.
(b) Following the occurrence of an event, failure, occurrence or breach
that constitutes or may constitute a Default under Article 25(a), Applied may,
at its sole option, initiate and proceed with termination of the Agreement, as
follows:
(i) Applied shall give initial notice to Supplier, in
accordance with Section 1.2.2 of the Agreement, which shall
include the following: notice of the Default or potential
Default and of Applied's intent to terminate the Agreement;
notice that the parties shall proceed with the Business Review
Process as referred to in Article 25(a) with respect to an
event, failure, occurrence or breach to which Article 25(a)(i)
or 25(a)(iii) applies, (except that a breach as to the 15 day
notice under Article 17(f) shall not be subject to the
Business Review Process); notice of
CONFIDENTIAL TREATMENT REQUESTED
any event, occurrence, failure or breach which is determined
by Applied to be an incurable or uncorrectable Default; and
notice of the period of cure or correction for any event,
occurrence, failure or breach (that is curable or correctable
but not otherwise subject to the Business Review Process)
established by Applied in such notice (such a period to be not
less than ten (10) days).
(ii) If (x) the event, occurrence, failure, or breach has not
been cured to Applied's reasonable satisfaction at or before
the expiration of the Business Review Process (where
applicable) or of such period for cure or correction as is
established by such process, or at the expiration of such
other period (of not less than ten (10) days) established by
Applied for matters not otherwise subject to the Business
Review Process, or (y) the event, occurrence, failure or
breach is incurable, Applied may at such time or at any time
thereafter issue a written or electronic notice of termination
(a "Notice of Termination for Default"), and the Agreement
shall terminate on and as of the date for termination
specified in the Notice of Termination for Default.
(c) *
(d) *
(e) (i) The rights and remedies of each party pursuant to this Article
25 or any other provision of the Agreement for any purpose are in addition to
and shall not limit or preclude resort to any other rights and remedies provided
by agreement, by law (subject to procedural requirements of the Agreement) or in
equity. With respect to equitable relief, a party may proceed to seek and obtain
such relief, where authorized under applicable law, without the declaration of a
Default * or compliance with other procedural requirements of the Agreement.
(ii) In the event of a Default *, the non-defaulting party shall
retain, and may exercise, all rights and remedies provided for by this Agreement
or other applicable law for the recovery of damages and/or other relief or
remedies with respect to the failure, breach, default or other event (subject,
however, to applicable limitations of the Agreement as to damages and to
procedural requirements of the Agreement). Termination of the Agreement for
Default * shall constitute "cancellation" under the UCC.
(f) Damages shall not be recoverable with respect to Items for which no
Authorized Demand Signal has been accepted by Supplier prior to the effective
date of termination.
26. Termination for Convenience.
(a) Applied may terminate the Agreement with respect to some or all of the
Items at any time for Applied's convenience (to "terminate for convenience" or a
"Termination for Convenience"), by giving Supplier written or electronic notice
of such Termination for Convenience in accordance with Section 1.2.2 of the
Agreement, which notice shall state the extent of the termination and the
conduct requested of Supplier in connection therewith as to
* Material has been omitted and filed separately with the Commission.
CONFIDENTIAL TREATMENT REQUESTED
matters described in Article 27 below, but excluding Article 27(v) (a "Notice of
Termination for Convenience"). Upon the effective date of the Notice of
Termination for Convenience, the Agreement shall terminate to the extent
indicated in the Notice of Termination for Convenience, and Applied shall pay to
Supplier the Termination Charges as determined in accordance with paragraphs (c)
and (d) below.
(b) Each Notice of Termination for Convenience shall:
(i) Specify the Item(s), product lines, types of Applied
Systems, or other method by which the Item(s) or scope of
the Termination for Convenience will be determined, if
less than all.
(ii) Specify the effective date of the Termination for
Convenience, which shall be at least three (3) months
after the date of issuance of the Notice of Termination
for Convenience.
(iii) Provide such instructions or procedures as shall in
Applied's commercially reasonable judgment be appropriate
to implement Section 4.11 of the Agreement as to the
Termination for Convenience.
Upon a Termination for Convenience of the Agreement in whole or in part by
Applied, Supplier shall promptly follow Applied's directions as set forth on the
Notice of Termination for Convenience, and the parties shall implement the Wind
Down Procedures of Section 4.11, as applicable.
(c) Within ninety (90) days from the effective date of termination
pursuant to a Notice of Termination for Convenience, Supplier shall deliver to
Applied a written statement setting forth all of Supplier's claims in connection
with the Termination of Convenience (the "Termination Charges"), in the form and
containing such documentation as required by Applied. Failure by Supplier to
deliver such claim for Termination Charges within said ninety (90) day period
shall constitute a waiver by Supplier of all claims against Applied for such
Termination for Convenience and a release of all Applied's liability arising out
of such Termination for Convenience.
(d) If Applied does not agree with the amount specified in Supplier's
claim for Termination Charges, Applied and Supplier will attempt to agree upon a
reasonable amount for Termination Charges. If Applied and Supplier fail to agree
upon such an amount within * after receipt by Applied of the claim for
Termination Charges from Supplier, then the Termination Charges will be
conclusively presumed to be the sum of the following (provided that no costs
shall be duplicated):
*
* Material has been omitted and filed separately with the Commission.
CONFIDENTIAL TREATMENT REQUESTED
(c) The provisions of this Article 26 apply solely to a Termination for
Convenience by Applied and shall not affect or impair any right of Applied to
terminate the Agreement due to the default or breach of Supplier as provided in
Article 25 or to seek any remedies in the event of such breach or default of
Supplier as otherwise permitted.
(d) Applied shall have the right to initiate Termination for
Convenience, in whole or in part, based on the occurrence of a Notice Event.
Such right to terminate for convenience shall not limit Applied's right to
terminate for convenience, in whole or in part, at any other time.
27. Post-termination Obligations.
On the date termination of the Agreement becomes effective as specified
in the applicable Notice of Termination for Default or for Convenience, Supplier
shall (i) stop work being performed by Supplier pursuant to the Agreement, (ii)
cancel orders for parts and/or materials with Supplier's sub-tier suppliers and
cease ordering any such parts and/or materials, (iii) cancel work being
performed by Supplier's sub-tier suppliers for Supplier for the Agreement, (iv)
assign to Applied Supplier's interests in contracts with Supplier's sub-tier
suppliers (to the extent such contracts are assignable, are for goods used in
the manufacture of Items, and any required consents to assignment are obtained),
(v) (except in the case of Termination for Convenience) make commercially
reasonable efforts to furnish Applied with releases of claims from Supplier's
sub-tier suppliers resulting from orders and/or work canceled by Supplier, (vi)
protect all property in which Applied has or may acquire an interest, and (vii)
comply with the provisions of this Agreement, and of the TLA as to Tooling, Test
Fixtures and Wind Down.
CONFIDENTIAL TREATMENT REQUESTED
ATTACHMENT 18
FORM OF
ON-SITE REPRESENTATIVE AGREEMENT
This On-Site Representative Agreement ("Agreement") is made this day of ____, by
and between Applied Materials, Inc. ("Applied") and Kinetics Fluid Systems, Inc.
("Supplier") (collectively referred to as the "Parties").
Whereas, Supplier provides parts or services to Applied or desires to sell parts
or services to Applied under the terms of, and pursuant to, a Global Supply
Agreement effective as of June 1, 2002 ("GSA"); and
Whereas, the Parties agree that if certain duties and functions were to be
performed by an employee of Supplier on Applied's premises or at an Applied
facility it would facilitate Supplier's performance and benefit both Supplier
and Applied;
Now, therefore the Parties agree as follows:
1. Statement of Work
Supplier will assign, at no cost to Applied, an individual on-site
representative ("OSR") to perform, on Applied's premises, functions
("OSR Functions") described in the Statement of Work attached hereto as
Exhibit No. 1 (the "SOW").
Supplier agrees to notify Applied immediately of any changes in its
staffing assignments involving the OSR, or in the OSR Functions,
whereby access to Applied's facilities or IS&T systems may no longer be
essential to performing the OSR Functions.
2. Status of OSR
The OSR is an employee of Supplier, subject to its right of direction,
control and discipline. The OSR is not an employee of Applied, nor
shall he or she be entitled to any rights, benefits, or privileges of
an Applied employee. Prior to the commencement by the OSR of an
assignment at Applied, Supplier represents that it will review this
Agreement with the OSR, inform the OSR of the obligations under this
Agreement and the "Joinder" required under this Agreement, and have the
OSR enter into a "Kinetics Employee Joinder" in the form set out in
Schedule 4.4 ("Joinder") to the Restated and Amended Intellectual
Property Agreement between Applied and Supplier of even date with the
GSA (the "IPA").
CONFIDENTIAL TREATMENT REQUESTED
3. Confidentiality and Performance
Applied shall inform the OSR of hours of access to Applied's premises,
pertinent safety regulations, and all other requirements which Applied
deems necessary. The OSR shall comply with any applicable policies and
regulations of Applied. Compliance with all policies and regulations of
Applied is mandatory and is the responsibility of both the OSR and
Supplier; failure to comply with these policies and regulations will be
cause for immediate removal of the OSR from the premises.
Supplier agrees that the OSR Functions to be performed by the OSR will
comply with this Agreement, including Attachments 1 and 2 to this OSR
Agreement, and will also comply with any purchase, confidentiality,
supplier-planner access, nondisclosure, intellectual property, joint
design, joint development or other agreements that may be in effect
between Supplier and Applied and including the Amended and Restated
Intellectual Property Agreement with an Effective Date of June 1, 2002
(the "Related Agreements") at the time this Agreement is executed by
the Parties or that is subsequently in effect.
4. OSR Associated Expenses
All salary, benefits, and travel and business expenses for OSR will be
the sole responsibility of Supplier.
5. Access
Subject to Applied's approval and the completion of the security
background check, the OSR may be granted access to the following:
- Only those specific Applied facilities to which the
OSR requires access in order to perform the tasks
stated in the SOW
- Telephone and fax lines (for matters related to
Applied only)
- Computer/modem and/or database or system information
access as deemed necessary by Applied in order for
the OSR to perform the tasks stated in the SOW.
If a Joinder is attached to this Agreement and executed by the OSR,
then such Joinder shall apply to all "Confidential Information" (as
therein defined), and all Applied databases, applications and servers,
that the OSR obtains, accesses or is exposed to as a result of the OSR
Functions under this Agreement. If a Joinder is not attached and
executed by the OSR, the OSR shall not have access to any information
that is confidential, proprietary, or sensitive or to any Applied
databases, applications or servers.
CONFIDENTIAL TREATMENT REQUESTED
6. Termination of Agreement
This Agreement may be terminated immediately by either Party at any
time without penalty; if not earlier terminated, this Agreement shall
terminate upon completion of the tasks identified in the SOW.
7. Entire Agreement
This Agreement, including its Attachments, and together with all
Related Agreements constitutes the entire agreement between Supplier
and Applied Materials with respect to OSR Functions, and with respect
to OSR Functions it supersedes all preexisting agreements or
arrangements, except for (a) the GSA and any Facilities Use Agreement
as in effect for Applied facilities which the OSR may access, (b) any
Supplier-Planner Access Agreement now or hereafter in effect, (c) any
claims or causes of action of Applied relating to breach of a
pre-existing OSR agreement or arrangement, and (d) any ongoing duty or
obligation(s) of Supplier under a pre-existing OSR agreement or
arrangement. In the event of any conflict between the terms of this
Agreement and the terms of a Related Agreement, the GSA or any
Facilities Use Agreement as in effect for Applied facilities which the
OSR may access, precedence shall be given in accordance with Section
1.3.2.2 of the GSA.
Kinetics Fluid Systems, Inc. Applied Materials, Inc.
("Supplier") ("Applied")
By: By:
------------------------ -----------------------
Its: Its:
------------------------ -----------------------
Date: Date:
------------------------ -----------------------
CONFIDENTIAL TREATMENT REQUESTED
Exhibit 1 - Statement of Work
(On-site Representative Agreement)
This Attachment describes the activities and services included in the OSR
Functions of the Supplier's OSR. Changes in the OSR Functions may be made by
agreement of Applied and Supplier. The OSR Functions include
- Daily consultation with Applied's representatives concerning
Supplier performance, production or project scheduling, and
resolution of problems or errors.
- Evaluation and reporting of problems or errors, and of
anticipated problems, and constraints or delays.
- Consultation with Applied's engineering and production
representatives concerning product quality, product delivery,
and product technical problems and revisions.
- [To be added and revised by Applied's representatives.]
- [To be added and revised by Applied's representatives.]
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 2
On-Site Representative Agreement
The "Joinder" required by this On-Site Representative
Agreement is the "Kinetics Employee Joinder" set out in
Schedule 4.4 to the Amended and Restated Intellectual Property
Agreement of the Parties identified in this On-Site
Representative Agreement.
CONFIDENTIAL TREATMENT REQUESTED
ATTACHMENT 19
TOOLING LOAN AGREEMENT
This Tooling Loan Agreement, is dated as of June 1, 2002 (the
"Effective Date"), and made by and between Applied Materials, Inc., a Delaware
corporation ("Applied"), and Kinetics Fluid Systems, Inc., a California
corporation ("Supplier"). This Tooling Loan Agreement, together with all
Attachments hereto, is referred to herein as the "Agreement." This Agreement is
entered into in connection with the Global Supplier Agreement between Applied
and Supplier, which itself has an effective date of June 1, 2002 ("GSA"), and is
the Tooling Loan Agreement referred to in Sections 4.2.1 through 4.2.4 of the
GSA.
Solely for Supplier's use in fulfilling its obligations to Applied
under the GSA, under Design Services Agreements and Development Services
Agreements entered into from time to time as contemplated by the GSA (the terms
"Design Services Agreement" and "Development Services Agreement" being used
herein as defined in the GSA), and under the Amended and Restated Intellectual
Property Agreement of even date ("IPA"), Applied has agreed to loan to Supplier,
on the terms and conditions contained herein, the property identified in the
Attachments to this Agreement (collectively, the "Tooling"), which Attachments
will be updated from time to time. The Tooling includes * identified in Schedule
4.2.2.(c) to the GSA, the * provided under the "IS&T Agreement" identified in
Section 2.9.1.1 of the GSA, and * in or used in the operation of *. The GSA,
Design Services Agreements, Development Services Agreements, and the IPA, all as
amended from time to time, are collectively called the "Operational Agreements."
In consideration of the premises, the agreements of the parties set
forth herein and in the Operational Agreements, and Applied's lending the
Tooling to Supplier, Applied and Supplier agree as follows:
1. 0 Ownership.
(a) Title to and ownership of the Tooling (other than * "Third Party
Applications", as such term is defined in the IPA) shall remain exclusively in
Applied at all times, and Supplier shall have no ownership or beneficial
interest therein, except as provided in Section 1.3 (b) as to Supplier Provided
Improvements. Title to and ownership of * Third Party Applications shall remain
exclusively in the owner of same, and Supplier shall have no ownership or
beneficial interest therein. Supplier shall affix and maintain prominently on
each item of Tooling a label indicating that the Tooling is owned by Applied or
the other owner thereof. All additions, attachments, alterations, and
modifications to the Tooling (except for *) shall become part of the Tooling and
the exclusive property of Applied or the other owner thereof.
(b) Supplier authorizes Applied to file this Agreement or any copy
hereof, as well as to make any other filings, in any jurisdiction as Applied may
deem appropriate to protect its
* Material has been omitted and filed separately with the Commission.
CONFIDENTIAL TREATMENT REQUESTED
interests or those of any other owner of Tooling. Upon Applied's request,
Supplier shall execute or obtain from third parties and deliver to Applied such
statements or other instruments as Applied deems necessary or advisable to
confirm or perfect the interests of Applied or other owner in the Tooling,
including filings under the Uniform Commercial Code and landlord or mortgagee
waivers, and Supplier hereby grants to Applied the right to execute Supplier's
name thereon where permitted by law.
(c) Supplier shall, at its expense, protect and defend title to the
Tooling of Applied or other owner against all persons claiming against or
through Supplier, at all times keeping the Tooling free from any legal process
or encumbrance whatsoever including but not limited to liens, attachments,
levies, executions and other claims by third parties, and shall give Applied
immediate written notice of any such third party claim and shall indemnify
Applied against any cost, liability or loss caused thereby.
(d) The Tooling is, and shall at all times be and remain, personal
property notwithstanding that the Tooling or any part thereof may now be, or
hereafter become, in any manner affixed or attached to real property or any
improvements thereon.
1.1 Delivery.
Applied shall package the Tooling for shipment to Supplier to provide
for handling and protection of the Tooling sufficient to comply with the
carrier's requirements and consistent with the manner in which Applied packages
shipments of a like nature for its own use. Absent Applied's agreeing otherwise
in writing, Applied shall arrange shipping as it deems appropriate to the
applicable destination specified in the Attachment applicable to the item of
Tooling. Upon delivery of the Tooling to Supplier, Supplier shall inspect the
Tooling. If Supplier believes the Tooling is not in good working order and
repair, it shall notify Applied promptly in writing. If such notice is not
received by Applied within five business days after installation of the Tooling
by Supplier, then Supplier shall be deemed to have accepted the Tooling, and the
Tooling shall be deemed in good working order and repair.
1.2 Risk of Loss.
Supplier shall bear all risks of loss, damage or destruction to the
Tooling from and after the date the Tooling is delivered to Supplier until
Applied accepts return of the Tooling. During such period, Supplier shall
maintain, in addition to any other insurance required under its other contracts
with Applied, all risk insurance with respect to the Tooling, comprehensive
general liability insurance covering bodily injury, property damage, contractual
liability, products liability and completed operations and workers compensation
and employer's liability insurance with financially sound and reputable insurers
in amounts and on terms customarily insured against in similar circumstances (or
in such greater amounts or on such different terms as may be requested by
Applied). Supplier shall furnish evidence of such insurance to Applied prior to
execution of this Agreement, and such insurance shall require the insurer to
give at least 30 days' advance notice to Applied of any material alteration or
cancellation thereof (at least 10 days' prior notice as to cancellation for
nonpayment of premiums). In the event of any loss or damage to the Tooling,
Supplier shall pay Applied within 45 days following the event of loss or damage
the amount of loss or damage to the Tooling, which, in the event of a total loss
shall be the value
CONFIDENTIAL TREATMENT REQUESTED
of the item of Tooling. Applied shall have the discretion to determine whether
to replace any item of Tooling that is lost, damaged or destroyed.
1.3 Use, Maintenance and Alteration.
(a) Supplier shall cause each item of Tooling to be installed and used
at the applicable location set forth in the Attachment applicable to the item,
and shall not copy, remove, reinstall or modify any software, and shall not
relocate any Tooling to any other location (except as provided in Section 4.2.2
(a) of the GSA) without Applied's prior written permission. Except as otherwise
agreed in writing by Applied, Supplier shall use the Tooling solely to fulfill
its obligations to Applied under one or more of the Operational Agreements, all
in compliance with this Agreement and the Operational Agreements. Supplier shall
operate, protect, maintain and calibrate the Tooling in compliance with all
applicable laws, rules and regulations (including those relating to safety), the
conditions of all applicable insurance policies and best industry practices
(including any maintenance schedules delivered by Applied or furnished by the
Tooling manufacturer or distributor). Supplier shall obtain training for the
Supplier personnel who will operate the Tooling, and Supplier shall operate the
Tooling in compliance with such training. Under no circumstances shall Supplier
operate the Tooling in a manner which could cause injury or death to any person
or damage or injury to any property, including the Tooling. If Applied or the
Tooling manufacturer or distributor specifies certain parties who are authorized
to service the Tooling or special equipment required to maintain or calibrate
the Tooling, Supplier shall use such authorized parties and/or special
equipment. Supplier shall maintain logs and reports of the maintenance and
operation of the Tooling and permit Applied, on reasonable prior notice, to
inspect the Tooling to determine whether the Tooling is being used, protected,
maintained and calibrated in accordance with this Agreement and to make copies
of such logs and reports. Supplier shall correct immediately any deficiencies
disclosed by such inspection upon notice from Applied. No such inspection or
lack of inspection by Applied shall in any way diminish the sole responsibility
of Supplier for the proper use, protection, maintenance and calibration of all
Tooling. If an item of Tooling becomes inoperable, Supplier shall (subject to
the limitations of Section 1.3(b) below) make immediate reasonable attempts to
restore it to operating condition before requesting assistance from Applied's *
Department.
(b) Without the prior written consent of Applied, Supplier shall not
make any alterations, modifications or additions to the Tooling except as
provided in this Section 1.3(b). Further, Supplier shall comply with the IPA, as
such applies to all Tooling or to the use of or rights in Tooling. Modifications
or improvements to Tooling that constitute Capacity FDS Hardware or Product
Change Hardware provided or purchased by Applied pursuant to Section 4.2.3 of
the GSA shall be owned by Applied as part of the Tooling. Supplier may acquire
and install on the Tooling, * those alternations, modifications, improvements or
additions to Tooling that are items of Capacity FDS Hardware or Product Change
Hardware that have been proposed by Supplier and Applied does not provide or
procure under the procedures of Section 4.2.3 of the GSA and * (the "Supplier
Provided Improvements").
(c) Costs associated with Applied approved or directed alterations,
modifications, improvements or additions, as well as any third-party calibration
services required to keep the
* Material has been omitted and filed separately with the Commission.
CONFIDENTIAL TREATMENT REQUESTED
Tooling within specified dimensional or sampling tolerances, shall be borne by
Applied. Supplier shall not undertake, or incur any costs associated with, such
activity until an authorizing purchase order has been received from the Applied
organization ordering the Items that require usage of the Tooling.
(d) Routine care, maintenance, and calibration performed by Supplier as
part of normal operations shall be done at no cost to Applied.
(e) Supplier shall comply with the requirements of the * Support Work
Instruction (Form *) which can be found at http://*
1.4 Reserved Rights; Return of Tooling.
(a) Applied may at its discretion, which discretion is to be reasonably
exercised, access, inspect, modify, upgrade, replace, or remove from use any
Tooling. Applied may also direct Supplier to allow Applied or its
representatives to use Tooling at Supplier's location on a temporary basis as
part of Applied's efforts to review and develop its products and processes.
Supplier agrees to accept, subject to the terms of this Agreement, and
incorporate into its manufacturing, testing and other processes any item of
Tooling designated and furnished by Applied.
(b) To the extent practicable, Applied will give Supplier reasonable
advance notice of any action by Applied under the preceding Section 1.4 (a) or
that would otherwise make the Tooling unavailable for use by Supplier on a
temporary or permanent basis. If Applied requires a temporary or permanent
cessation of use of any Tooling and such results in delays in Supplier's testing
or delivery of Items under the GSA, then the extension period provided to
Supplier under Section 4.2.4(b) of the GSA shall apply until Tooling required
for testing or completion of Items is returned to use or replaced by Applied,
unless otherwise agreed at the time.
(c) At the time of termination or expiration of the GSA, in whole or in
part, and also as provided in Section 4.2.4 of the GSA, Applied may exercise
rights to purchase, repossess or remove Tooling in accordance with the GSA and
this Agreement and the procedures of Section 4.2.4 of the GSA. In the event of
Termination for Default pursuant to the GSA, Applied may require that Supplier
return any or all items of Tooling to Applied, and in that event Supplier shall
return such item(s) of Tooling, labeled and shipped in accordance with Applied's
then current policies and specifications, which Supplier shall obtain from
Applied. Supplier shall deliver each such item of Tooling at the appropriate
location (which may be Supplier's facility in those instances in which Applied
is proceeding under Section 4.2.4 of the GSA) in proper operating order, free
from any legal process or encumbrance whatsoever. As to items of Tooling to
which the IPA applies, Supplier shall also comply with Section 5.3 of the IPA
upon termination or expiration of the IPA. If Supplier shall fail to deliver, as
required, any item of Tooling in good working order and condition (reasonable
wear and tear excepted), Supplier shall be responsible for all costs and
expenses incurred by Applied in replacing the Tooling or in returning the
Tooling to such required condition or any reduction in the value as a result
thereof.
* Material has been omitted and filed separately with the Commission.
CONFIDENTIAL TREATMENT REQUESTED
(d) Upon receipt of notice from Applied that Applied will purchase,
repossess or remove Tooling, Supplier shall remove from the affected Tooling all
Supplier Provided Improvements. If Supplier has not removed such Supplier
Provided Improvements at the time Applied takes possession of the Tooling
pursuant to the notice, Applied shall be entitled to remove such improvements,
using commercially reasonable procedures, and shall tender possession of such
removed Supplier Provided Improvements to Supplier.
2.0 Exclusions of Warranties.
SUPPLIER ACCEPTS EACH ITEM OF TOOLING "AS IS" AND "WITH ALL FAULTS."
SUPPLIER ACKNOWLEDGES THAT IT HAS HAD AN OPPORTUNITY TO INSPECT THE TOOLING, AND
THAT SUPPLIER IS EXPERIENCED IN THE OPERATION AND MAINTENANCE OF SUCH TOOLING.
APPLIED MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF
THE TOOLING OR ANY PART THEREOF. APPLIED HEREBY DISCLAIMS ALL IMPLIED
WARRANTIES, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF TITLE,
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND WARRANTIES OF
NONINFRINGEMENT; PROVIDED, THAT THE EXCLUSION AND DISCLAIMERS OF THIS AGREEMENT
ARE, HOWEVER, SUBJECT TO, AND SHALL NOT ALTER, IMPAIR OR MODIFY, ANY WARRANTIES
MADE BY APPLIED IN THE IPA OR GSA THAT ARE APPLICABLE TO TOOLING.
2.1 Exclusion of Certain Damages.
IN NO EVENT SHALL APPLIED BE LIABLE FOR ANY SPECIAL, INDIRECT,
PUNITIVE, CONSEQUENTIAL OR CONTINGENT DAMAGES ("EXCLUDED DAMAGES") THAT ARISE
FROM OR RELATE TO THIS AGREEMENT FOR ANY REASON, WHETHER OR NOT APPLIED HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND APPLIED EXCLUDES AND SUPPLIER
WAIVES ANY LIABILITY OF APPLIED FOR ANY SUCH EXCLUDED DAMAGES; PROVIDED, THAT
THIS EXCLUSION AS TO EXCLUDED DAMAGES IS, HOWEVER, SUBJECT TO AND SHALL NOT
ALTER, IMPAIR OR MODIFY ANY INDEMNITY OBLIGATION OF APPLIED PURSUANT TO THE IPA
OR GSA THAT IS APPLICABLE TO TOOLING OR THIS AGREEMENT.
3.0 [Omitted.]
3.1 Intellectual Property.
(a) Nothing in this Agreement shall be deemed to grant to Supplier any
license or other right under any of Applied's intellectual property (including,
without limitation, Applied's patents, copyrights, trade and service marks,
trade secrets and Confidential Information, such latter term being used as
defined in the IPA) for Supplier's own benefit or to provide or offer Items or
other products or services to any party other than Applied.
(b) The IPA shall apply to and govern the rights and obligations of
Applied and of Supplier with respect to "IP Rights" and "Confidential
Information" (as such terms are defined in the IPA) in or relating to Tooling,
including *, *, and * in or used in the operation of * or *.
* Material has been omitted and filed separately with the Commission.
CONFIDENTIAL TREATMENT REQUESTED
3.2 Injunctive Relief; Reports.
Supplier acknowledges and agrees that Applied would suffer immediate
and irreparable harm for which monetary damages would be an inadequate remedy if
Supplier were to breach its obligations under Sections 1.4 or 3.1. Supplier
further acknowledges and agrees that equitable relief would be appropriate to
protect Applied's rights and interests if such a breach were to arise, or were
threatened, or were asserted.
4.0 Entire Agreement; Amendments.
(a) This Agreement (including the Attachments hereto and provisions
incorporated herein by reference), provisions of the GSA applicable to Tooling
(including Section 4.2 of the GSA), those provisions of the IPA applicable to
Tooling (including related software) and the IS&T Agreement (such term being
used as defined in the GSA), all as amended, set forth the entire understanding
and agreement of the parties as to the loan of the Tooling and supersede all
prior agreements, understandings, negotiations and discussions between the
parties as to such subject matter. The parties may be, or may become, parties to
other agreements relating to the manufacture or sale of products to Applied or
the provision of services to Applied, which other agreements shall govern their
respective subject matters.
(b) No amendment to, modification of or waiver of any provision of this
Agreement will be binding unless in writing and signed by a duly authorized
representative of the party sought to be bound.
4.1 Notices.
Revisions, updates or other amendments or modifications to this
Agreement (including Attachments) shall be effective only if in set out in a
writing (or other record) executed (or authenticated) by each of Applied and
Supplier, and communications hereunder may be given by mail, fax or e-mail to
the individuals listed below.
Supplier:
(Name) Xxx Xxxxxx, Senior Vice President
(Address 1) 0000 Xxxxxxx Xxxxxxx Xxxx.
(Address 2) Xxxxx Xxxxx, Xxxxxxxxxx 00000
(Phone) (000) 000-0000
(FAX) (000) 000-0000
(E-mail) xxxxxxx@xxxxxxxxxxxxx.xxx
* Material has been omitted and filed separately with the Commission.
CONFIDENTIAL TREATMENT REQUESTED
Applied:
Applied Materials, Inc.
0000 X.X. Xxx 290 East M/S 3300
Xxxxxx, Xxxxx 00000
Phone: 000-000-0000
Fax: 000-000-0000
Attn: Xx. Xxxxx Xxxxxx (email address is: Xxxxx_X_Xxxxxx@XXXX.xxx)
Each party shall advise the other in writing of any change to such party's
contact persons.
4.2 Applicable Law; Consent to Jurisdiction; Venue.
This Agreement shall be governed by, subject to and construed in
accordance with the internal laws of the State of California, excluding
conflicts of law rules. The parties incorporate by reference Article 11 of
Exhibit 1 of the GSA and agree that the provisions of such Article apply to this
Agreement.
4.3 Assignments.
The parties incorporate by reference Article 17 of Exhibit 1 of the GSA
and agree that the provisions of such Article apply to this Agreement.
4.4 Waiver.
In the event Applied delays or fails to insist on performance of any of
the terms and conditions set forth herein or delays or fails to exercise any of
its rights or privileges under this Agreement, such delay or failure shall not
constitute a waiver of such terms, conditions, rights or privileges.
4.5 Indemnity by Supplier.
SUPPLIER SHALL DEFEND, INDEMNIFY AND HOLD HARMLESS APPLIED FROM AND
AGAINST, AND SHALL SOLELY AND EXCLUSIVELY BEAR AND PAY, ANY AND ALL CLAIMS,
SUITS, LOSSES, PENALTIES, DAMAGES (WHETHER ACTUAL, PUNITIVE, CONSEQUENTIAL OR
OTHERWISE) AND ALL LIABILITIES AND THE ASSOCIATED COSTS AND EXPENSES, INCLUDING
ATTORNEY'S FEES, EXPERT'S FEES, AND COSTS OF INVESTIGATION (ALL OF THE FOREGOING
BEING COLLECTIVELY CALLED "INDEMNIFIED LIABILITIES"), WHICH ARISE FROM OR RELATE
TO, OR ARE FOR, PERSONAL INJURY, DEATH, OR DAMAGE TO OR LOSS OF TANGIBLE
PROPERTY RESULTING (IN WHOLE OR IN PART) FROM THE USE OR OPERATION OF THE
TOOLING BY SUPPLIER, OTHER THAN (a) AS A RESULT OF DEFECTS IN THE TOOLING
EXISTING AT THE TIME OF DELIVERY TO SUPPLIER OR (b) FOR INFRINGEMENT OR OTHER
MATTERS AS TO WHICH APPLIED HAS WARRANTY OR INDEMNITY OBLIGATIONS TO SUPPLIER.
THIS INDEMNITY IS SUBJECT TO, AND SHALL NOT ALTER, IMPAIR
CONFIDENTIAL TREATMENT REQUESTED
OR MODIFY, ANY WARRANTY OR INDEMNITY BY APPLIED OR SUPPLIER TO OR FOR THE
BENEFIT OF THE OTHER UNDER THE IPA OR GSA.
4.6 Supplier's Expense and Risk; Taxes.
Supplier shall perform all of its obligations hereunder at its own
expense and risk, including without limitation those specified herein as being
at Supplier's expense. Supplier shall be responsible for paying any use tax
assessed in connection with the loan of Tooling contemplated by this Agreement.
4.7 Captions and Severability.
Captions in this Agreement are for the convenience of the parties only
and shall not affect the interpretation or construction of this Agreement. In
the event any provision of this Agreement is held to be invalid or
unenforceable, such provision shall be severed from the remainder of this
Agreement, and such remainder will remain in force and effect.
4.8 Counterparts and Attachments.
This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument.
Particular items of Tooling subject to this Agreement may be added or deleted by
the parties from time to time; as items are added or deleted, a new Attachment
(or an amendment to a current Attachment) to this Agreement shall be executed by
the parties to identify changes in Tooling.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
CONFIDENTIAL TREATMENT REQUESTED
IN WITNESS WHEREOF, the parties hereto have caused their names to be signed
hereto by their respective duly authorized officers, all as of the Effective
Date.
APPLIED: SUPPLIER:
APPLIED MATERIALS, INC KINETICS FLUID SYSTEMS, INC.
By: /s/ Xxxx Xxxxxxxxx By: /s/ Xxx Xxxxx
-------------------------------- ---------------------------------
Name: Xxxx Xxxxxxxxx Name: Xxx Xxxxx
------------------------------ -------------------------------
Title: Vice President Title: President
----------------------------- ------------------------------
CONFIDENTIAL TREATMENT REQUESTED
ATTACHMENT 1
The * Attachment 1 consists of:
(a) Schedule 4.2.2(c) to the GSA as of the Effective Date;
(b) The Test Fixture Software (as defined in Section 4.2.3(c) of the
GSA, and which is not required to be scheduled);
(c) The * identified on Addendum * to the * Agreement and all * the
Third Party Applications set out on Schedule 2.3.8 to the IPA and the *
identified under * in Schedule 2.8 to the IPA; and
(d) The * identified under * in Schedule 2.8 to the IPA.
* Material has been omitted and filed separately with the Commission.
CONFIDENTIAL TREATMENT REQUESTED
As to Tooling delivered *, the following form shall be used:
Supplement to Attachment 1
Applied Materials, Inc. ("Applied") and the below named Supplier ("Supplier")
agree that the property described below to Supplier has been delivered to
Supplier as "Tooling" under, and is subject to, that certain Tooling Loan
Agreement dated as of _________ __, _____ between Applied and the Supplier:
Place of Delivery for Tooling and any Packaging or Shipping Instructions:
[ Enter "Deliver To" Address]
Detailed Description of Each Item of Tooling Identification Number Agreed Value
-------------------------------------------- --------------------- ------------
-------------------------------------------- --------------------- ------------
-------------------------------------------- --------------------- ------------
-------------------------------------------- --------------------- ------------
TOTAL VALUE OF TOOLING
$ TBD
Dated:
--------------------------------------
* Material has been omitted and filed separately with the Commission.
CONFIDENTIAL TREATMENT REQUESTED
APPLIED MATERIALS, INC KINETICS FLUID SYSTEMS, INC.
By: By:
---------------------------------- ----------------------------------
Name: Name:
---------------------------------- ----------------------------------
Title: Title:
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