Exhibit 10(t)(1)
Conformed Composite Copy
MASTER SUPPLY AGREEMENT
BY AND BETWEEN
XEROX CORPORATION
AND
FLEXTRONICS INTERNATIONAL LTD.
DATED AS OF
NOVEMBER 30, 2001
Confidential portions of this exhibit have been omitted and filed separately
with the Securities and Exchange Commission with a request for confidential
treatment pursuant to Rule 24b-2. The location of an omitted portion is
indicated by an asterisk within brackets ("[*]").
1
STRICTLY CONFIDENTIAL
Master Supply Agreement
Table of Contents
Page
ARTICLE 1 BACKGROUND 1
ARTICLE 2 AGREEMENT 2
ARTICLE 3 DEFINITIONS 4
ARTICLE 4 PURCHASE AND SALE 16
ARTICLE 5 SUB-TIER SUPPLIERS 28
ARTICLE 6 PRICING AND PRODUCTIVITY 31
ARTICLE 7 MANUFACTURING 43
ARTICLE 8 QUALITY ASSURANCE 48
ARTICLE 9 PRODUCT CONFIGURATION MANAGEMENT AND CONTROL 50
ARTICLE 10 GOVERNMENTAL AUTHORITY, APPROVAL AND SAFETY 52
ARTICLE 11 INSURANCE 53
ARTICLE 12 REPRESENTATIONS AND WARRANTIES OF FLEXTRONICS 54
ARTICLE 13 COVENANTS OF THE PARTIES 54
ARTICLE 14 PRODUCT WARRANTIES 57
ARTICLE 15 TERM; EVENTS OF DEFAULT; TERMINATION 59
ARTICLE 16 EFFECTS OF EXPIRATION AND TERMINATION, ETC. 63
ARTICLE 17 INDEMNIFICATION 65
ARTICLE 18 CONFIDENTIAL AND PROPRIETARY INFORMATION 69
ARTICLE 19 XEROX-OWNED ASSETS; XEROX UNIQUE PROPERTY; XEROX INTELLECTUAL
PROPERTY; IMPROVEMENTS TO PRODUCTS 70
ARTICLE 20 GENERAL PROVISIONS 74
MASTER SUPPLY AGREEMENT
This Master Supply Agreement (this "Agreement") is made and entered into
as of November 30, 2001 by and between Flextronics International Ltd., a
limited liability company formed in the Republic of Singapore (hereinafter
"Flextronics"), acting through its Hong Kong branch office with offices at Room
908, Dominion Centre, 43-59 Queen's Road East, Wanchai, Hong Kong, and Xerox
Corporation, a corporation organized under the laws of the State of New York,
with offices in Xxxxxxx, New York (hereinafter "Xerox").
For valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties to this Agreement hereby agree as follows:
ARTICLE 1
BACKGROUND
Section 1.1 Flextronics and Xerox are parties to a Master Purchase
Agreement dated as of October 1, 2001 (the "Master Purchase Agreement"). As set
forth in the Master Purchase Agreement and the Ancillary Agreements (as defined
in the Master Purchase Agreement), as contemplated by the Master Purchase
Agreement, Xerox and certain Xerox Affiliated Companies (as defined herein)
have transferred to certain Flextronics Affiliated Companies (as defined
herein) substantially all of their Product (as defined herein) manufacturing
assets. As contemplated by the Master Purchase Agreement, Flextronics and
Xerox have agreed to enter into this Agreement for, among other things,
Flextronics and the Flextronics Affiliated Companies to provide the services
necessary to supply the Purchasers (as defined below) with Products for the
Term (as defined herein), all upon the terms and subject to the conditions set
forth in this Agreement.
Section 1.2 Xerox is engaged in the document management business and
through a network of affiliated companies designs, manufactures and markets
printing and copying equipment and supplies. Xerox is now interested in
outsourcing certain manufacturing and other services in connection with the
operation of its General Office Business Segment (as defined below) and
electronics production. Xerox's objective for outsourcing these manufacturing
and services needs is to work with a contract manufacturer to reduce costs and
investments and to retain an appropriate level of risk related to the marketing
and sales of such products and services.
Section 1.3 Flextronics and the Flextronics Affiliated Companies comprise
the Flextronics group, which collectively is a global supplier of
pre-manufacturing, manufacturing and post-manufacturing services to global
original equipment manufacturers. The objective of Flextronics when entering
into this Agreement with Xerox is to build a viable and sustainable services
business model, including an appropriate level of risk, and work with Xerox and
the Xerox Affiliated Companies to aid in the achievement of time to customer,
quality and cost objectives through cooperation on services from the beginning
to the end of the Product Life (as defined below) of the Products, throughout
the business units of Xerox.
ARTICLE 2
AGREEMENT
1
Section 2.1 The Agreement. The following documents, exhibits, attachments
and schedules shall be deemed to be and form part of this Agreement:
(a) PSAs (as defined herein), including without limitation, the final
product quality acceptance tests, if any, applicable to each Product, and any
other attachments thereto;
(b) Schedule A hereto, containing, at the applicable Closing Date (as
defined in the Master Purchase Agreement) for the Facility that manufactures
such Product, Product information, including without limitation, the then-
effective Quarterly Purchase Price, the estimated average cost to repair each
Component, Product Lead Time, UMC, Failure Rate Threshold, current Forecast and
designation as PO Product or Kanban Product (each as defined herein) for each
Product;
(c) Schedule B hereto, including without limitation, the lists of
freight carriers, customs agents, Designated Locations and Facilities (each
as defined herein);
(d) Schedule C hereto, including without limitation, the descriptions
of certain of the management processes referred to in this Agreement;
(e) Schedule D hereto, containing the methods to be used to calculate
the UMC and the Quarterly Statements (each as defined herein) for each Product;
(f) Schedule E hereto, containing certain KPIs (as defined herein) to
be used in measuring certain aspects of the performance of Flextronics and
the Flextronics Affiliated Companies under this Agreement;
(g) Schedule F hereto, containing a list and description of reports
that Flextronics shall deliver to Xerox during the Term;
(h) Schedule G hereto, containing an example of the calculation to be
made pursuant to Section 6.2(c) hereof;
(i) Schedule H hereto, containing, at the applicable Closing Date (as
defined in the Master Purchase Agreement) for the Facility that manufactures
such Electronic Component, Product information with respect to each
Electronic Component;
(j) Schedule I hereto, containing a list of each Approved Sub-Tier
Supplier and indicating whether such supplier is a Xerox Sub-Tier Supplier or
a Flextronics Sub-Tier Supplier;
(k) Purchase Orders (as defined below) issued by any Purchaser under
this Agreement;
(l) SSAs (as defined below) pursuant to which certain Affiliates of
Flextronics and Xerox shall conduct the supply and purchase of Products in
their respective locations; and
(m) Any other document, exhibit, attachment or schedule referenced
herein and specifically made a part hereof.
Section 2.2 Conflicting Terms; Changes to Schedules, Etc. All such
documents, exhibits, attachments and schedules shall together be deemed to
contain the terms of this Agreement; provided, however, any printed term or
condition contained in any Purchase Order or on any order confirmation or
similar document received by a Purchaser from Flextronics or any Flextronics
Affiliated Company, which term or condition is otherwise in conflict with the
other terms and conditions set forth in this Agreement, shall be superseded by
the terms and conditions otherwise set forth in this Agreement. The PSAs and
Schedule A and the information contained therein (except for the Quarterly
Purchase Price set forth in Schedule A, which is governed by Article 6 hereof,
and except as provided in the next sentence) may be changed or amended by
Xerox, in its reasonable discretion, upon written notice to Flextronics. Unless
otherwise specifically set forth in this Agreement, (a) the information with
respect to Product Lead Time, UMC, Failure Rate Threshold and the estimated
average cost to repair each Component set forth in Schedule A, (b) Schedules B,
C, D, E, F, G, H and I and the information contained therein, and (c) any other
document, exhibit, attachment or schedule referenced herein, may be changed or
amended only by mutual written consent of Flextronics and Xerox, which consent
may not be unreasonably withheld. The change or amendment of the SSAs shall be
governed by Section 2.3 below. Any references in this Agreement to the PSAs,
the SSAs, Schedules X, X, X, X, X, X, X, X and I and the information contained
therein (or to any other document, exhibit, attachment or schedule referenced
herein) shall be deemed to be references to the then-current PSAs, SSAs,
Schedules and information (or other document, exhibit, attachment or schedule),
unless otherwise indicated in such reference.
Section 2.3 Specific Supply Agreements. Flextronics and Xerox anticipate
that their respective Affiliates will enter into SSAs in order to conduct the
supply and purchase of Products in their respective locations. The terms and
conditions of this Agreement shall be incorporated into all SSAs, except
Independent SSAs, with reference to this Agreement. Independent SSAs shall
include all of the relevant terms and conditions of this Agreement. Different
or additional terms and conditions may be negotiated and included in any SSA.
In the event of any conflict or inconsistency between the terms and conditions
of this Agreement and such SSA, which conflict or inconsistency is contrary to
the intent of the parties hereto, the terms and conditions of this Agreement
shall control. In the event of any conflict or inconsistency between the terms
and conditions of this Agreement and such SSA, which conflict or inconsistency
is consistent with the intent of the parties hereto, the terms and conditions
of such SSA shall control. Xerox and Flextronics agree that the SSAs will
provide that any disputes thereunder will be resolved by Xerox and Flextronics
rather than by the parties to the SSAs. Notwithstanding the foregoing or
anything contained in any SSA to the contrary, no SSA and no amendment to any
SSA shall be valid or enforceable unless and until Xerox shall have been made a
party thereto (evidenced by the execution of such document by Xerox's MSA
Contract Manager) and shall have duly executed and delivered such SSA or such
amendment, as the case may be.
Section 2.4 Inducement Payment by Flextronics. As additional
consideration to Purchasers to enter into this Agreement, Flextronics and the
Flextronics Affiliated Companies are hereby paying to certain Purchasers the
sum of [*], receipt of which is hereby acknowledged by the relevant
Purchasers, allocated as set forth in Schedule 2.4 hereto. The amounts paid
to such Purchasers are exclusive of Certain Taxes, duties or other
governmental
charges. Any Certain Taxes, duties or other governmental charges imposed on
the payments made under this Section 2.4 shall be paid by and allocated solely
for the account of the party which could have used commercially reasonable
actions to avoid or recover any such amounts, or, if specifically addressed in
the applicable SSA, to the party identified in such SSA. Any Certain Taxes,
duties or other governmental charges not specifically allocated to a specific
party under the provisions of the prior sentence shall be paid and borne by the
parties in a manner that splits these Certain Taxes, duties or other
governmental charges (including any Certain Taxes, duties or other governmental
charges imposed on the payment of these additional amounts) equally between the
parties, i.e., 50/50. In consideration of the above payment, during the Term,
Xerox agrees (and shall cause Purchasers to agree) that a majority of the
consolidated annual net sales revenue of Xerox and all companies Controlled by
Xerox will not be derived from a business of electronics contract manufacturing
that is substantially similar to and competitive with the core services
provided by Flextronics and the Flextronics Affiliated Companies as of the date
of this Agreement. For purposes of clarity, net sales revenue that is derived
from goods and services related to the field of Printing and Publishing shall
not be deemed derived from the business of electronics contract manufacturing.
In the event that Xerox together with companies Controlled by Xerox fail to
meet the criteria set forth in this Section 2.4, then, notwithstanding anything
contained herein to the contrary, the sole remedy of Flextronics shall be
termination of this Agreement as if termination occurred at the end of the
Initial Term, Mandatory Extension Term, or a Renewal Term as such termination
is provided pursuant to Section 15.1 hereof.
ARTICLE 3
DEFINITIONS
"Actual Total Quarterly UMC" shall have the meaning set forth in Section
6.2(a)(iii) hereof.
"Actual UMC" shall have the meaning set forth in Section 6.1(a) hereof.
"Affiliate" shall mean any entity that directly or indirectly, through one
or more intermediaries, Controls, is Controlled by, or is under common Control
with a party to this Agreement.
"Agreement" shall mean this Agreement, including the documents, exhibits,
attachments and schedules referred to in Article 2 above.
"Applicable Benchmark Cost" shall mean the lowest cost for which a
specific Product, as designed, can be obtained, given the Facility in which
such Product is manufactured, provided such Facility is specified by Xerox,
with Components sourced at the lowest worldwide Landed Costs to the respective
Facility. The Applicable Benchmark Cost shall be as determined from time to
time by Xerox in its commercially reasonable discretion in the ordinary course
of business in accordance with past practices. Xerox shall provide Flextronics
with written documentation of the Applicable Benchmark Cost, or any changes
thereto, at the Quarterly Pricing Meeting.
"Applicable Laws" shall mean all (a) applicable common law and
principles of equity, and (b) applicable provisions of all constitutions,
treaties, decrees, conventions, laws, statutes, ordinances, rules, regulations,
orders or other enforceable requirements of any Governmental Authority.
"Approved Sub-Tier Supplier" shall mean, with respect to a Component, any
Sub-Tier Supplier that has been qualified to provide such Component for
inclusion into a Product, all in accordance with Section 5.2 hereof.
"Assessment" shall have the meaning set forth in Section 6.7(b) hereof.
"Batch-Produced Products" means any PO Product with delivery to Purchaser
scheduled in batches.
"Business Day" shall mean any day other than a Saturday, Sunday or a
statutory or civic holiday in the United States.
"Buy Back Period" shall have the meaning set forth in Section 7.5 hereof.
"Buy Back Price" shall mean the price that Flextronics or the relevant
Flextronics Affiliated Company shall pay to any Purchaser for any Component
that requires repair and shall be predetermined at meetings between Flextronics
and Xerox by subtracting the estimated average cost to repair such Component
plus the applicable Margin Amount (calculated in accordance with Section 6.1(a)
hereof) from the price that any Purchaser shall pay to repurchase such repaired
Component; provided, however, for purposes of this definition, the applicable
Margin Amount with respect to Electronic Components shall be calculated
pursuant to the formula provided in Section 6.1(a) hereof for Products
manufactured by Flextronics or the relevant Flextronics Affiliated Company in
the Facilities in Mexico, Malaysia and Hungary. The estimated average cost to
repair each Component is set forth on Schedule A hereto.
"Cancelled Electronic Components Purchase Order" shall mean a Purchase
Order for Electronic Components (or portion thereof) that a Purchaser has
notified Flextronics or the relevant Flextronics Company in writing is
cancelled.
"Certain Taxes" shall mean any and all taxes imposed or collected by any
governmental entity worldwide, or any political subdivision thereof, however
designated or levied, on amounts payable to Purchasers by Flextronics or any
Flextronics Affiliated Company, and any taxes or amounts in lieu thereof paid
or payable in respect of the foregoing; exclusive, however, of: (i) withholding
taxes; (ii) taxes imposed upon the net income of Purchasers or taxes in lieu of
such net income taxes including but not limited to franchise taxes; and (iii)
exclusive of any value added taxes ("VAT"), goods and services taxes ("GST")
and other similar types of taxes that are recoverable by Purchasers by invoice
credit or other similar credit in a taxing jurisdiction in which Purchasers may
file for such credit.
"Change Request" shall have the meaning set forth in Section 9.2 hereof.
"Commodities" shall mean market-driven commodities used in manufacturing
Products, including, for example, plastic resins, sheet steel, bar stock,
memory chips, standard electrical circuits and active or passive electrical
components.
"Completed Machine" shall mean any fully assembled Xerox copying or
printing machine or other equipment fully configured for resale and assigned a
serial number, which shall have certain performance characteristics as set
forth in the applicable Specifications. Completed Machines can be New Build
Products, Remanufactured Products or Conversion Products.
"Component" shall mean any components, parts, Commodities or other
materials (including, without limitation, any Module (such as an Electronic
Component) and any label, insert and packaging for the Products) included in or
used in connection with a Product in accordance with the Specifications that is
obtained from a Sub-Tier Supplier.
"Component Lead Time" shall mean the aggregate amount of time necessary
for Flextronics or any of the Flextronics Affiliated Companies to: (i) process
an order for any Component, (ii) receive such order from the supplier thereof,
and (iii) manufacture the Product containing such Component; provided, however,
that the aggregate time necessary with respect to (i) and (iii) above shall not
exceed ten (10) Business Days, unless otherwise agreed by the parties.
"Confidential Information" shall mean any information of a party
concerning its business, finances, products, services, processes, methods and
customers, including without limitation any information contained in this
Agreement, whether in written, electronic or other form and whether or not now
or hereafter existing.
"Configuration Database" shall mean a computerized database of Products,
including every Component thereof and each part number thereof.
"Control" or "Controlled" shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of an entity, whether by voting power, contract or credit arrangement,
or otherwise and, in any event and without limiting the foregoing, any entity
owning more than fifty percent (50%) of the voting securities of another entity
shall be deemed to control that entity.
"Conversion Product" shall mean a Product that is disassembled, cleaned
and reassembled as a different type or model of Product bearing a different
serial number and that contains both new and Used Components.
[*] shall have the meaning set forth in Section [*] hereof.
"Damages" shall have the meaning set forth in Section 17.1 hereof.
"Designated Location" shall mean a location that has been designated by
Xerox for the holding of Products. The locations of all Designated Locations
designated by Xerox as of the date hereof are set forth on Schedule B hereto.
"Direct Material Cost" shall mean the direct material cost component of
the UMC.
"Disputes" shall have the meaning set forth in Section 20.9(a) hereof.
"Electronic Components" shall mean Modules consisting of electronic parts
and assemblies for use in Xerox products including, but not limited to, printed
circuit board assemblies, user interface devices, network controllers and
electronic sub-systems, in each case that are either manufactured or repaired
by Flextronics or a Flextronics Affiliated Company as further provided in this
Agreement.
"End-of-Life/Discontinued Product" shall have the meaning set forth in
Section 4.10(a) hereof.
"Escalation Procedure" shall have the meaning set forth in Section 20.9(h)
hereof.
"Estimated Mid-Point" shall mean the date that, pursuant to the plan
agreed upon by the parties for the process of transferring the manufacturing of
any Electronic Component from the relevant Xerox Affiliated Company to the
relevant Flextronics Affiliated Company, is estimated at the time such plan is
agreed to be the mid-point in such process.
"Ex Works" shall have the meaning set forth in Section 4.7(b) hereof.
"Express Warranties" shall have the meaning set forth in Section 14.1
hereof.
"Extraordinary Mitigation Steps" shall have the meaning set forth in
Section 4.5 hereof.
"Facility" shall mean each of the Flextronics Affiliated Companies'
manufacturing facilities listed on Schedule B hereto from time to time.
"Failure" shall mean, with respect to any Product, an occurrence
requiring unscheduled field technical resources in respect of the repair or
replacement of such Product.
"Failure Rate Threshold" shall mean, with respect to any Product, a
Failure rate, which Failure rate is set forth on Schedule A hereto (or if no
such Failure rate is set forth on Schedule A, a Failure rate that indicates
that the Failure rate for such Product is statistically out of control).
Defects in a Product the Failure rate of which has not then reached the Failure
Rate Threshold shall be governed by Section 7.5 hereof. Defects in a Product
the Failure rate of which is equal to or exceeds the Failure Rate Threshold
shall be governed by the provisions of Article 14 hereof.
"Financing Charge" shall mean a charge fixed at [*] per month.
"Financing Charge Amount" shall have the meaning set forth in Section
4.7(a) hereof.
"Flextronics Affiliated Companies" shall mean any entity that is owned or
otherwise Controlled, directly or indirectly, by Flextronics.
"Flextronics Confidential Information" shall mean Confidential Information
of Flextronics and any Flextronics Affiliated Company.
"Flextronics Event of Default" shall have the meaning set forth in Section
15.2 hereof.
"Flextronics Guaranteed Obligations" shall have the meaning set forth in
Section 20.17 hereof.
"Flextronics Indemnitee" shall have the meaning set forth in Section 17.2
hereof.
"Flextronics Intellectual Property" shall mean any software, equipment,
development, design, method, process, know-how, formula, algorithm, discovery,
invention, technical data, specification, drawing or design tool, that is
developed, invented, conceived or otherwise acquired by Flextronics prior to
the date of this Agreement.
"Flextronics Sub-Tier Suppliers" shall mean the Flextronics Sub-Tier
Suppliers identified on Schedule I hereto.
"Force Majeure Event" shall mean any event caused by circumstances beyond
the reasonable control of a party, including, but not limited to, fire, flood,
earthquake, typhoon or other acts of God, war, embargo, general labor strike or
work stoppage, riot or piracy. For the avoidance of doubt, any failure by
Flextronics or any Flextronics Affiliated Company to comply in any material
respect with the Recovery Plan and any labor strike or work stoppage that is
particular to one or more of the Facilities (instead of general in nature)
shall be deemed not to be a Force Majeure Event.
"Forecast" shall mean, with respect to any Product, (i) when used as a
noun, a good faith estimate of the quantity of such Product that the Purchasers
then believe they will require during a stated period of time and (ii) when
used as a verb, the act of making such estimate.
"General Office Business Segment" shall mean that segment of Xerox's
business that specifically targets general offices of medium-sized businesses
as customers for Xerox's products.
"Governmental Authority" shall mean any federal, state, local or foreign
governmental or quasi-governmental agency or other body, including without
limitation governmental agencies regulating product safety and electromagnetic
emissions.
"Hulks" shall have the meaning set forth in Section 7.4(a) hereof.
"Improved Product" shall mean a variant (including, without limitation,
all upgrades and downgrades) of a Product, which variant (a) is not in
existence as of the date of this Agreement, and (b) has at least fifty percent
(50%) of the total number of its Components in common with the Product upon
which such variant is based; Improved Products shall become Products and shall
be governed as such under the terms and conditions of this Agreement only as
provided in Section 4.9 hereof.
"Improvements" shall mean any enhancement of, modification to,
derivation of, or method for producing, any of the Products (including without
limitation, Improved and New Products), whether or not eligible for patent,
copyright or other form of intellectual property protection, which
modification, derivation or method is developed, invented or conceived after
the date hereof.
"Incoterms" shall have the meaning set forth in Section 4.7(b) hereof.
"Independent SSA" shall have the meaning set forth in the definition of SSA.
"Initial Cost Savings Amount" shall mean the aggregate dollar amount of
reductions in the cost of Products agreed to by the parties in writing.
"Initial Quarterly Purchase Price" shall have the meaning set forth in
Section 6.1(c) hereof.
"Initial Term" shall have the meaning set forth in Section 15.1 hereof.
"Inventory Repurchase Procedure" shall have the meaning set forth in
Section 4.6(b) hereof.
"Kanban Process" shall mean the product replenishment process to be
followed by Flextronics, the Flextronics Affiliated Companies and the
Purchasers with respect to Kanban Products, all as set forth in Section 4.3
hereof.
"Kanban Products" shall mean those Products that have been designated on
Schedule A hereto as Kanban Products, which Products shall be subject to the
Kanban Process set forth in Section 4.3 hereof.
"KPIs" shall have the meaning set forth in Section 13.1(g) hereof.
"Labor and Overhead Reduction Amount" shall have the meaning set forth in
Section 6.1(e)(ii) hereof.
"Landed Cost" shall mean the cost of a Product or Component landed at its
destination including, without limitation, the price of transportation and any
applicable customs duties and related processing fees, insurance, Taxes (other
than Taxes that are recoverable by Purchasers), other governmental charges and
related costs.
"Light Remanufacturing and Conversion Operations" shall mean the
remanufacturing and/or conversion processes that are generally performed by
field service technicians with respect to Products that have experienced
limited customer and/or market use (including without limitation, demonstration
Products or trial install Products), without delivering such Products to a
Facility.
"Long Lead Time Component" shall mean any Component with a Component Lead
Time in excess of eight (8) weeks.
"Major Change" shall mean any change to the Product Configuration of a
Product that (i) impacts the form, fit, function or compatibility of a Product,
(ii) relates to the safety of a Product, (iii) relates to the approval of a
Product by any Governmental Authority, or (iv) Xerox has designated as a Major
Change.
"Mandatory Extension Term" shall have the meaning set forth in Section
15.1 hereof.
"Margin Amount" shall have the meaning set forth in Section 6.1(a) hereof.
"Master Purchase Agreement" shall have the meaning set forth in Section
1.1 hereof.
"Maximum Reschedule Quantity" shall mean, with respect to Kanban
Products, the applicable percentage set forth in the table in Section 4.3(e)
hereof, and, with respect to PO Products, the applicable percentage set forth
in the tables in Sections 4.4(c)(i) and (ii) hereof.
"Minor Change" shall mean any change to the Product Configuration of a
Product that is not a Major Change.
"Minimum Percentage" shall mean, with respect to a product family (i.e.,
"Lakes," "Silverstone," [*] and "Phaser 860"), the minimum percentage of
business to be awarded to Flextronics and the Flextronics Affiliated Companies
for each Product calculated based on volume.
"Module" shall mean two or more parts or components that have been
combined to form a sub-assembly.
"MSA Contract Manager" shall mean (a) with respect to Xerox, the Vice
President of Strategic Contracts, and (b) with respect to Flextronics, the
Director of Strategic Accounts. The initial MSA Contract Manager for Xerox
shall be Xxxxxxxxx Xxxxxx and the initial MSA Contract Manager for Flextronics
shall be Xxxxxxx Xxxxxxx.
"New Build Product" shall mean a Product that may contain both new and
Used Components, the majority of which Components are new.
"New Product" shall mean (a) a fully assembled Xerox copying or printing
machine or other equipment fully configured for resale and assigned a serial
number, (b) any spare part, assembly or component required for the repair and
maintenance of the items listed in (a) above, (c) any consumable or other
customer replaceable component, (d) any accessory, service tool or similar item
for a Completed Machine or for any item listed in (a) above and all
modifications, enhancements and improvements thereto, and (e) any component,
part, Raw Material or other material (including labels, product inserts,
packaging and other labeling) included in an item listed in (a) above, which,
in the case of (a) through (e) above: (i) is not listed on Schedule A hereto as
of the date of this Agreement, (ii) has less than fifty percent (50%) of the
total number of its parts in common with any other then-existing Product, and
(iii) has been designed by Xerox and falls within Xerox's General Office
Business Segment. New Products shall become Products and shall be governed as
such under the terms and conditions of this Agreement only as provided in
Section 4.9 hereof.
"One Day of Supply" shall mean the amount that is obtained by dividing the
then-current projected Actual Total Quarterly UMC for any calendar quarter
divided by the number of calendar days in such quarter. Any reference herein
to a specified number of "Days of Supply" shall mean the product of One Day of
Supply multiplied by such specified number.
"One Day's Worth of Sales" shall mean the amount that is obtained by
dividing the relevant quarterly aggregate amount of the invoice value by the
number of calendar days in such quarter. Any reference herein to a specified
number of "Days' Worth of Sales" shall mean the product of One Day's Worth of
Sales multiplied by such specified number.
"Ongoing Mitigation Steps" shall have the meaning set forth in Section 4.5
hereof.
"Option" shall mean any Module supplied as an accessory or any other
accessory (including without limitation, any finishing, digital front-end and
paper handling apparatus), any service tool and similar item for Completed
Machines, as set forth in the applicable Specifications, and modifications,
enhancements and improvements thereto.
"Packaging Test Plan" shall have the meaning set forth in Section 8.4
hereof.
"Permitted Number of Components" shall mean, with respect to any
Component, the sum of (a) the number of such Component that is necessary to
meet up to the first eight (8) weeks of the demand therefor existing at the
time Flextronics or the relevant Flextronics Affiliated Company ordered any
such Component, as indicated by a combination of the then-current Purchase
Orders and the then-current Forecast, and (b) the number of Long Lead Time
Components that is necessary to meet the Forecasted demand therefor existing at
the time Flextronics or the relevant Flextronics Affiliated Company ordered any
such Component for a period that is equal to such Component's Component Lead
Time.
"Permitted Number of Products" shall mean, with respect to any Product,
the number of such finished Products for which any Purchase Order has been
issued but not yet filled and that are required within the Product Lead Time.
Any Component included in the calculation of the "Permitted Number of Products"
shall also be included in the calculation of the "Permitted Number of
Components."
"PO Process" shall mean the purchase order fulfillment process to be
followed by Flextronics, the Flextronics Affiliated Companies and the
Purchasers with respect to PO Products, all as set forth in Section 4.4 hereof.
"PO Products" shall mean those Products that have been designated on
Schedule A hereto as PO Products, which Products shall be subject to the PO
Process set forth in Section 4.4 hereof.
"Possessing Party" shall mean, in the case of (a) Xerox, Xerox, any Xerox
Affiliated Company and any of their respective directors, officers, employees,
agents and representatives that are in possession of Flextronics Confidential
Information and any other person or entity to whom any Flextronics Confidential
Information has been disclosed on behalf of Xerox, and (b) Flextronics,
Flextronics, any Flextronics Affiliated Company and any of their respective
directors, officers, employees, agents and representatives that are in
possession of Xerox Confidential Information and any other person or entity to
whom any Xerox Confidential Information has been disclosed on behalf of
Flextronics.
"Printing and Publishing" shall have the meaning set forth in Section 19.4
hereof.
"Prior Total Quarterly UMC" shall have the meaning set forth in Section
6.2(a)(iv) hereof.
"Problem Management Process" shall have the meaning set forth in Section
8.5 hereof.
"Product" shall mean any Completed Machine, Option, Spare, Supply or
Module that any Purchaser purchases from Flextronics or any Flextronics
Affiliated Company under this Agreement as set forth in Schedule A hereto.
"Product Configuration" shall mean, with respect to each Product, the
list of Components comprising such Product, including without limitation the
part number in respect of each such Component and a list of all Supplies,
Options and Spares. The Product Configuration for each Product shall be set
forth in the applicable Specifications.
"Product Forecasts" shall mean the Forecasts of Products that Xerox shall
deliver to Flextronics or any Flextronics Affiliated Company on a monthly basis
as provided in Sections 4.3(d) and 4.4(b), respectively, hereof.
"Product Lead Time" shall mean the amount of time agreed for order
fulfillment for each Product as set forth on Schedule A hereto.
"Product Life" shall mean, with respect to a Product, the period of time
during which such Product shall be in new-build or subject to remanufacturing
or conversion, as estimated in good faith by Xerox.
"PSA" shall mean the Product Specific Attachments attached hereto, which
PSAs may be amended and modified from time to time by the parties as provided
herein and which shall include, without limitation, the final product quality
acceptance tests, if any, applicable to each Product based on product
performance specifications for the then-current Product Configurations for such
Product, which may take the form of Product Verification Tests (PVTs) or the
equivalent, and the KPIs, if any, applicable to each Product.
"Pull Signal(s)" shall mean the electronic or paper document(s) pursuant
to which a Purchaser may demand the replacement of a unit or units of Product.
"Purchase Order" shall mean a written order or any associated release
(including, without limitation, a Pull Signal) issued by a Purchaser to
Flextronics or any Flextronics Affiliated Company by mail, facsimile or
electronically for (i) the purchase of PO Products or Kanban Products under
this Agreement or (ii) a cancellation settlement with respect to orders to
purchase PO Products or Kanban Products under this Agreement.
"Purchase Price" shall mean, with respect to each unit of Product, the
transfer price for such unit. Purchase Price to be charged by Flextronics or
any Flextronics Affiliated Company to Purchasers for Products (other than
Electronic Components) shall be calculated and paid in accordance with Article
6 herein.
"Purchaser" shall mean Xerox and/or any of the Xerox Affiliated Companies
that has been designated in writing by Xerox as a "Purchaser" in respect of
this Agreement.
"Quality Plan for Products" shall have the meaning set forth in Section
8.3 hereof.
"Quarterly Measurement Amount" shall have the meaning set forth in
Section 6.2(b) hereof.
"Quarterly Price Paid" shall have the meaning set forth in Section 6.2(a)
hereof.
"Quarterly Pricing Meeting" shall have the meaning set forth in Section
6.1(b) hereof.
"Quarterly Purchase Price" shall have the meaning set forth in Section
6.1(b) hereof.
"Quarterly Statement" shall have the meaning set forth in Section 6.2(a)
hereof.
"Recovery Plan" shall have the meaning set forth in Section 7.8 hereof.
"Remanufactured Product" shall mean a Product that (a) is returned to a
Purchaser or its agent after use thereof by the customer, (b) is disassembled,
cleaned and reassembled as the same type and model of Product bearing the same
serial number, and (c) contains both new and Used Components, the majority of
which Components are Used Components.
"Renewal Term" shall have the meaning set forth in Section 15.1 hereof.
"Repurchase Right" shall have the meaning set forth in Section 16.5
hereof.
"Repurchase Right Agreement" shall mean that certain Repurchase Right
Agreement between Xerox and Flextronics, substantially in the form of Exhibit A
attached hereto.
"Shared Incentive Items" shall mean those items of reductions in cost set
forth in Section 6.2(c) hereof.
"Spares" shall mean spare parts, assemblies and other components
required for the repair and maintenance of Products and modifications,
enhancements and improvements thereto.
"Specific Supply Agreement" or "SSA" shall mean an agreement signed by a
Flextronics Affiliated Company, a Xerox Affiliated Company and Xerox pursuant
to which the Affiliates agree to be bound by the terms and provisions of this
Agreement (except where the parties determine that any particular jurisdiction
requires a fully integrated agreement (each, an "Independent SSA") and any
other additional or different terms set forth in such SSA with respect to the
supply of Products, including any applicable currency price adjustment
agreements, which SSA (and any amendment thereto) shall only become valid and
enforceable in accordance with Section 2.3 herein.
"Specifications" shall mean, the models, drawings and specifications
(including without limitation the manufacturing specifications) for a Product,
as the same may be amended or modified by Xerox from time to time pursuant to
the terms and conditions of this Agreement, including without limitation,
engineering standards, technical and test instructions and procedures
(including those set forth in the PSAs), functional information and related
data, Product Configurations, Approved Sub-Tier Suppliers, technical
information and processes, quality control regulations and quality standards, a
list of Governmental Authority approvals, all as replaced, substituted, amended
and in effect from time to time.
"Sub-Tier Suppliers" shall mean all suppliers that provide Components for
inclusion into Products or for use therewith.
"Supplies" shall mean consumables and other customer replaceable
components (including, for example, toner cartridges, developer cartridges,
photoreceptor assemblies and the like), as set forth in the applicable
Specifications, and Improvements thereto.
"Systemic Defect Period" shall have the meaning set forth in Section 14.3
hereof.
"Taxes" shall mean any and all taxes imposed or collected by any
governmental entity worldwide, or any political subdivision thereof, however
designated or levied, on amounts payable to Flextronics or any Flextronics
Affiliated Company by Purchasers for the billing of Products, and any taxes or
amounts in lieu thereof paid or payable in respect of the foregoing; exclusive,
however, of: (i) withholding taxes; (ii) taxes imposed upon the net income of
Flextronics or taxes in lieu of such net income taxes including but not limited
to franchise taxes; and (iii) exclusive of any value added taxes ("VAT"), goods
and services taxes ("GST") and other similar types of taxes that are
recoverable by Flextronics or any Flextronics Affiliated Company by invoice
credit or other similar credit in a taxing jurisdiction in which Flextronics or
such Flextronics Affiliated Company may file for such credit.
"Term" shall have the meaning set forth Section 15.1 hereof.
"TTM" shall have the meaning set forth in Section 4.9(e) hereof.
"UMC" shall mean, with respect to each Product, the per unit cost to
Flextronics or the relevant Flextronics Affiliated Company to manufacture a
Product, as the case may be, which cost shall be calculated as set forth on
Schedule D hereto. Schedule D shall contain the definitive and comprehensive
method for calculating UMC.
"Used Components" shall mean Components that have previously been
included in a Product.
"Workmanship" shall mean, with respect to any Product or Component, the
adherence by Flextronics or any Flextronics Affiliated Company to the
manufacturing processes and test processes mutually agreed by the parties
hereto.
"Xerox Affiliated Company" shall mean any entity that is owned or
otherwise Controlled, directly or indirectly, by Xerox, or that is otherwise
designated in writing by Xerox to Flextronics as a Xerox Affiliated Company.
"Xerox Confidential Information" shall mean Confidential Information of
Xerox, any Xerox Affiliated Company, Fuji Xerox Co., Ltd. and any customer of
any of the foregoing.
"Xerox Event of Default" shall have the meaning set forth in Section 15.3
hereof.
"Xerox Guaranteed Obligations" shall have the meaning set forth in
Section 20.18 hereof.
"Xerox Indemnitee" shall have the meaning set forth in Section 17.1
hereof.
"Xerox Intellectual Property" shall mean rights of Xerox, any of the
Xerox Affiliated Companies and/or Fuji Xerox Co., Ltd. in and to all
intellectual property related to Xerox, such Xerox Affiliated Companies and/or
Fuji Xerox Co., Ltd. and their businesses and operations, including
without limitation, any and all patents, copyrights, trademarks, trade secrets
and any other proprietary rights of Xerox, the Xerox Affiliated Companies
and/or Fuji Xerox Co., Ltd., Xerox Confidential Information, Specifications,
plans, technical information, engineering and assembly drawings, schematics,
diagrams, firmware, software source code and object code, circuit diagrams,
gerber files, masks, testing methods, pricing terms, bills of materials,
routing and cost information, proprietary property (including know-how) and all
proprietary rights with respect thereto, business and technical plans, all
information and documentation pertaining to Xerox's development of Products and
methods and processes related thereto, whether or not existing as of the date
hereof or hereafter existing. For purposes of this Agreement, "Xerox
Intellectual Property" shall include, without limitation, any tangible assets
whenever acquired by Flextronics or any Flextronics Affiliated Company that
incorporate or are designed or based upon Xerox Intellectual Property,
including any modifications to such assets.
"Xerox-Owned Assets" shall mean all tangible and intangible assets of
Xerox or any Xerox Affiliated Company provided or purchased by Xerox or any
Xerox Affiliated Company for the use by Flextronics or any such Flextronics
Affiliated Company in manufacturing and delivering Products to Purchasers
hereunder, but as to which Xerox or a Xerox Affiliated Company retains or
acquires ownership rights.
"Xerox Sub-Tier Suppliers" shall mean the Xerox Sub-Tier Suppliers
identified on Schedule I hereto.
"Xerox Unique Property" shall mean any customized items of (i) tooling,
(ii) software, and (iii) testing and other equipment and tangible personal
property that are not Xerox-Owned Assets and that are used or held for use by
Flextronics or any Flextronics Affiliated Company substantially solely for the
manufacture of Products for Purchasers hereunder (and are subject to any
restrictions set forth herein).
ARTICLE 4
PURCHASE AND SALE
Section 4.1 Purchase and Sale of Products.
(a) Subject to the terms and conditions of this Agreement, during the
Term, Flextronics shall or shall cause the Flextronics Affiliated Companies to
manufacture and sell to any Purchaser who has entered into an SSA, and Xerox
shall or shall cause such Purchasers to purchase from Flextronics or such
Flextronics Affiliated Companies, all such Products as such Purchasers may
order from time to time in accordance with this Agreement.
(b) Purchasers shall not have any obligation to purchase from Flextronics
or any Flextronics Affiliated Company any minimum amount of Products or any
particular mix of Products, or be subject to any limitation on the amount of
any Products ordered pursuant hereto, for any period during the Term; provided,
however, that, unless otherwise specifically set forth in this Agreement,
during each calendar year during the Term (or portion thereof, as the case may
be), Purchasers shall be required to collectively purchase from Flextronics and
the Flextronics Affiliated Companies no less than a certain number of units of
each Product, which number shall be equal to (i) the total number of units of
such Product that Xerox and the Xerox Affiliated Companies collectively require
in such calendar year (or portion
thereof, as the case may be), times (ii) the Minimum Percentage applicable to
such Product. The Minimum Percentage for each Product is as hereinafter set
forth:
(A) Lakes, Muskegon and Aldebaron
As of the date of this Agreement, the Minimum Percentage of
the worldwide demand for the 240V systems in the Lakes, Muskegon and
Aldebaron product family shall be one hundred percent (100%). As of the
date of this Agreement, the Minimum Percentage of the worldwide demand
for the 110V systems currently built in Xxxxxxx and Manaus in such product
family shall be zero percent (0%). Xerox shall not manufacture or have
manufactured the 240V systems in such product family anywhere other than
at a Facility.
(B) Silverstone
As of the date of this Agreement, the Minimum Percentage of
the worldwide demand for the 110V systems in the Silverstone product
family shall be one hundred percent (100%). As of the date of this
Agreement, the Minimum Percentage of the worldwide demand for the 240V
systems in such product family shall be zero percent (0%). Xerox shall not
manufacture or have manufactured the 110V systems in such product family
anywhere other than at a Facility; provided, however, that Xerox may
continue to manufacture such Products in Manaus for the Brazil, Argentina,
Paraguay and Uruguay market.
(C) [*]
As of the date of this Agreement, the Minimum Percentage of
the worldwide demand for the [*] product family shall be one hundred
percent (100%) when [*] production begins (after pilot production). If
Xerox requires Flextronics or any Flextronics Affiliated Company to
manufacture 110V and 240V systems in such product family in their
respective marketplaces, Flextronics hereby agrees to do so or to cause
such Flextronics Affiliated Company to do so. Xerox may continue to
manufacture such Products in Manaus for the Brazil, Argentina, Paraguay
and Uruguay market.
(D) Phaser 860
As of the date of this Agreement, the Minimum Percentage of the
worldwide demand for the Phaser 860 product family manufactured in Penang,
Malaysia as of the date hereof shall be one hundred percent (100%). The
Minimum Percentage of the worldwide demand for the next generation, known
as Bandit [*], shall be one hundred percent (100%).
(c) Notwithstanding any rights any entity may have in and to Xerox
Intellectual Property, Flextronics shall not, and no Flextronics Affiliated
Company shall, manufacture or supply to any entity other than the Purchasers:
(i) any product, including, without limitation, finished goods, supplies,
components, and spares, the manufacture, use, or sale of which is covered by or
manufactured using Xerox Intellectual Property, nor (ii) any spare part or
supply product that (A) is designed based upon or using Xerox Intellectual
Property, Xerox-Owned Assets or Xerox Unique Property or (B) is covered by
Xerox Intellectual Property. Notwithstanding the above, Flextronics may at any
time request a waiver of this Section 4.1(c) with respect to any specific
product proposed for sale to an identified entity other than the Purchasers,
and Xerox may, in its sole discretion, grant such waiver by written approval
signed by authorized personnel of Xerox.
Section 4.2 Order Fulfillment Process. Flextronics and the Flextronics
Affiliated Companies shall employ two processes in fulfilling Product orders
submitted by Purchaser under this Agreement, the Kanban Process and the PO
Process. The Kanban Process shall be used for all Products designated as Kanban
Products on Schedule A hereto and the PO Process shall be used for all Products
designated as PO Products on Schedule A hereto.
Section 4.3 The Kanban Process.
(a) The Kanban Process requires, and Flextronics hereby agrees, that
Kanban Products shall be shipped to Designated Locations at a frequency and in
an amount in accordance with a Pull Signal from any such Designated Location.
Xerox shall issue a blanket Purchase Order, to enable invoicing, indicating the
maximum number or value of each Kanban Product to be ordered by Xerox over a
period of time. (Under no circumstances shall such blanket Purchase Order be
deemed a firm Purchase Order.) When Xerox uses a unit or units of Kanban
Product from its own inventory at a Designated Location, that event shall cause
a Pull Signal to be sent to the appropriate Facility and such Pull Signal shall
constitute an authorization and a demand for shipment of a unit or units of the
same Kanban Product to the same Designated Location. These Pull Signals will be
sent/made available daily, intra-daily or at any other frequency according to
the processes and systems in use at the relevant Designated Location.
(b) Flextronics or the relevant Flextronics Affiliated Company shall
invoice Purchaser for each unit of Kanban Product at such time as it is shipped
from the Facility consistent with the Pull Signal in accordance with Section
4.5 hereof. At such time during the Term as Xerox may request, Flextronics
agrees to cooperate with Xerox to develop the capability, processes and terms
to invoice Kanban Products upon their receipt at Designated Locations with
Flextronics or the relevant Flextronics Affiliated Company retaining inventory
ownership until receipt/invoicing at such Designated Location. At such time,
the parties will mutually agree in writing to the terms and conditions of such
new process.
(c) Flextronics shall, and shall cause the Flextronics Affiliated
Companies to, cooperate with Xerox to develop improvements in the supply chain
for Kanban Products which may result in different combinations of locations and
inventory ownership than those set forth herein.
(d) Kanban Product Forecasts.
(i) Xerox shall submit to Flextronics or the relevant Flextronics
Affiliated Company, at least monthly during the Term, a Forecast covering
Kanban Products for the immediately subsequent six (6) calendar month
period, broken down on a month-by-month basis.
(ii) Flextronics shall respond in writing to each such Forecast
within five (5) Business Days of Flextronics' or such Flextronics
Affiliated Company's receipt thereof. Such response shall set forth
Flextronics' good faith estimate of Flextronics' and the Flextronics
Affiliated Companies' production capacity for Kanban Products for each
calendar month included in Xerox's Forecast and the amount of any
incremental production capacity, over and above Flextronics' and the
Flextronics Affiliated Companies' estimated capacity, that is otherwise
available to Purchasers.
(e) Maximum Allowable Variances. For any accepted Purchase Order for
Kanban Products, Purchasers may (i) increase the quantity of Products or (ii)
reschedule the quantity of Products and their shipment date as provided in the
table below:
No. of days before
Shipment Date on Purchase Allowable Quantity Maximum Reschedule
Order Increases Quantity
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
Section 4.4 The PO Process.
(a) Purchase Orders. Under the PO Process, Purchasers shall issue
PurchaseOrders to Flextronics or the relevant Flextronics Affiliated Company
for such PO Products as Purchasers shall desire to purchase from time to time
during the Term. All Purchase Orders for PO Products shall be submitted to
Flextronics or such Flextronics Affiliated Company by mail, facsimile or
electronically (for instance, by EDI, internet or intranet) by an authorized
representative of any Purchaser. Any such Purchase Order issued by an
authorized representative of any Purchaser, who shall be identified to
Flextronics prior to initial order placements, shall be accepted in writing by
Flextronics or such Flextronics Affiliated Company (which response may be
transmitted electronically) within five (5) Business Days after receipt of each
such confirmation or Purchase Order. From time to time, Purchasers may request
deliveries inside the then-effective Product Lead Times. Flextronics and such
Flextronics Affiliated Company shall use their commercially reasonable efforts
to provide any such PO Products in an expedited manner with Purchasers paying
all costs and expenses directly related to such expedited deliveries. All
Purchase Orders issued for PO Products shall be in writing, shall be deemed to
be made pursuant to this Agreement and shall also include (1) description and
quantity of PO Product ordered, (2) required dates, (3) shipping destination,
and (4) then-effective agreed Quarterly Purchase Price. Purchase Orders issued
by a Purchaser operating outside of the United States shall also specify, when
appropriate, whether Xerox or a particular Xerox Affiliated Company is to be
invoiced for the Products specified therein.
(b) PO Product Forecasts.
(i) Xerox shall submit to Flextronics or the relevant Flextronics
Affiliated Company, at least monthly during the Term, a Forecast covering
PO Products for the immediately subsequent six (6) calendar month period,
broken down, where possible, on a month-by-month basis; provided, however,
that if Xerox does not submit such Forecast on a month-by-month basis,
Flextronics and the relevant Flextronics Affiliated Company shall be
entitled to assume that the Forecast for each month thereof shall be equal
to one-sixth (1/6) of the total amount of the Forecast. It is expected
that Flextronics and the Flextronics Affiliated Companies shall use such
Forecasts to plan production capacity equal to the forecasted usage plus
twenty percent (20%).
Flextronics or the relevant Flextronics Affiliated Company shall also
promptly share with any Sub-Tier Suppliers from whom Flextronics or such
Flextronics Affiliated Company shall be ordering Components (or from whom
Purchasers may order Components directly) what the future requirements for
such Components will be based upon such Forecasts. In no event will any
such Forecast be deemed to be a Purchase Order for PO Products.
(ii) Flextronics shall respond in writing to each such Forecast
within five (5) Business Days of Flextronics' or such Flextronics
Affiliated Company's receipt thereof. Such response shall set forth
Flextronics' good faith estimate of Flextronics' and the Flextronics
Affiliated Companies' production capacity for PO Products for each
calendar month included in Xerox's Forecast and the amount of any
incremental production capacity, over and above Flextronics' and the
Flextronics Affiliated Companies' estimated capacity, that is otherwise
available to Purchasers.
(c) Maximum Allowable Variances
(i) For any accepted Purchase Order for PO Products (other than
Electronic Components and Batch-Produced Products), Purchasers may
(A) increase the quantity of Products or (B) reschedule the quantity of
Products and their shipment date as provided in the table below:
No. of days before
Shipment Date on Purchase Allowable Quantity Maximum Reschedule
Order Increases Quantity
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
(ii) For any accepted Purchase Order for Electronic Components and
Batch-Produced Products, Purchasers may (A) increase the quantity of
Products or (B) reschedule the quantity of Products and their shipment
date as provided in the table below:
No. of days before
Shipment Date on Purchase Allowable Quantity Maximum Reschedule
Order Increases Quantity
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
For each time period set forth in the table in this Section 4.4(c)(ii), the
Allowable Quantity Increases and the Maximum Reschedule Quantities shall not
exceed, in the aggregate, the percentages set forth therein as calculated with
reference to the original accepted Purchase Order. The parties agree to work
together to mitigate surplus inventory that accumulates as a result of
rescheduling by Xerox.
Section 4.5 Mitigation of Surplus Component Inventory. If the inventory
of any Component held by Flextronics or any Flextronics Affiliated
Company exceeds the applicable Permitted Number of Components therefor,
Flextronics shall (and shall cause the Flextronics Affiliated Companies to)
immediately take the following steps (the "Ongoing Mitigation Steps"): (i) use,
if possible, such Components in the manufacture of other Products or products
for third parties (if Xerox gives its prior written consent); and (ii) sell, if
possible, such Components to third parties (if Xerox gives its prior written
consent). In addition, if Xerox notifies Flextronics or any Flextronics
Affiliated Company of a Cancelled Electronic Components Purchase Order, or if
Xerox notifies Flextronics or any Flextronics Affiliated Company that any
Product shall become an End-of-Life/Discontinued Product in accordance with
Section 4.10(a) hereof, or if Xerox notifies Flextronics or any Flextronics
Affiliated Company of its intention to implement a Major Change or Minor Change
which causes a Product or Component to become obsolete, or if this Agreement is
terminated for any reason other than a Flextronics Event of Default,
Flextronics and the Flextronics Affiliated Companies shall immediately take the
Ongoing Mitigation Steps and shall also immediately take the following
additional steps (the "Extraordinary Mitigation Steps"): (A) immediately cancel
all pending orders that have been placed with Sub-Tier Suppliers for Components
to have been used in the affected Products and (B) return to Sub-Tier Suppliers
the unused Components to have been used in the affected Products.
Section 4.6 [*]
(b) If any individual Product or Component is held in any Facility's
inventory for more than one hundred eighty (180) days, and such Component or
Product was within the definition of the Permitted Number of Components or
Permitted Number of Products when purchased and manufactured, respectively,
then, upon Flextronics' request, Xerox shall repurchase: [*]; provided, however,
that Xerox shall be obligated to repurchase such Components only to the extent
that such Facility is operated on a "first-in/first-out" warehousing system.
After the end of such 180 day period, Flextronics shall commence such repurchase
in accordance with the following "Inventory Repurchase Procedure": (A)
Flextronics shall complete, and shall cause the Flextronics Affiliated Companies
to complete, the applicable mitigation steps referred to above within thirty
(30) days thereof and shall deliver to Purchaser a summary statement of
appropriate charges together with reasonably acceptable documentation
substantiating any and all such charges; (B) within ten (10) days of Purchaser's
receipt thereof, Purchaser shall issue a Purchase Order with respect to such
charges in accordance with such documentation; (C) upon receipt of such Purchase
Order, Flextronics shall deliver to Purchaser an invoice for such charges in
compliance with the invoicing procedures in Section 4.7 hereof, which invoice
shall be separate from any invoices for Products sold to Purchasers; and (D)
Purchaser shall pay, separate and apart from any other payment for Products, the
total amount of such invoice within ten (10) days of receipt of such invoice.
Section 4.7 Payment of Invoices; Title and Risk of Loss. (a) Flextronics
or the relevant Flextronics Affiliated Company shall issue an original invoice
to Purchasers for Kanban Products and PO Products, no earlier than the day such
Products are shipped from the Facilities. Such invoices will include the
Quarterly Purchase Price of each Product ordered and delivered, plus applicable
Taxes, separately stated by type and amount of Tax for which Purchasers are
responsible under Section 6.7 below. Each such original invoice shall be
supported by appropriate detail and summary billing information provided to
Purchaser in a timely manner, and both the invoice and the supporting
documentation shall be in the form required by the
appropriate Governmental Authority or as otherwise mutually agreed. The
invoices shall be rendered to the persons or addresses Xerox shall designate,
including a Xerox Affiliated Company, or as specified in the applicable SSA or
Purchase Order or confirmation. Purchasers shall pay such invoices within
forty-five (45) days of receipt of such invoice; provided, however, that no
invoice shall be paid until such invoice and associated documentation comply
with all appropriate Governmental Authority rules and regulations related
thereto. Payment against such invoices shall be made via electronic funds
transfer or, in the event electronic funds transfer is unavailable, by paper
check. All applicable customs duties and fees related to the importation of
Products sold to Purchasers will be the responsibility of Purchasers, and will
be paid by Purchasers directly to the applicable Governmental Authority. Unless
otherwise provided in any SSA, all invoices and payments therefor shall be in
the currency of the United States of America and any payments to be made by
Purchasers to one or more Flextronics Affiliated Companies shall be made to
such entities and in such proportions as Flextronics shall specify in writing
to Purchasers. [*]
(b) Title to and risk of loss of Kanban Products and PO Products shall
pass to Purchaser in accordance with the "Ex Works" ("Ex Works") term of the
Incoterms of the International Chamber of Commerce, 2000 Edition (the
"Incoterms"); provided, however, that Flextronics or the Flextronics Affiliated
Companies shall load the carriers at the Facility. The parties shall agree on
specific modifications to the Ex Works terms with respect to the delivery of
Products, including, without limitation, freight forwarding and the loading and
unloading of Products. At the request of Xerox, Flextronics agrees to discuss
the possibility of using FOB, DAF and DDU terms of delivery in selected
jurisdictions, and Flextronics agrees to allow Purchasers, provided that the
parties mutually agree, to change the place of passage of title of Products.
Notwithstanding the above, Purchasers shall have the right, in Purchasers' sole
discretion, to change the place of passage of title with respect to Products
sold by Flextronics or any Flextronics Affiliated Company from sources within
Malaysia, Hungary and the Czech Republic, provided: (i) that any such change
does not impose a non-incidental incremental cost on, or a material risk that
any significant non-incidental incremental costs may be incurred by,
Flextronics; and (ii) that Purchasers agree in writing to bear such
non-incidental incremental costs, if any.
(c) Any invoice sent by electronic transmission under any provision of
this Agreement shall be deemed to be received as of the date of transmission.
Any invoice delivered by mail under any provision of this Agreement shall be
deemed to be received three (3) Business Days after the date of such invoice.
Any invoice that is hand-delivered under any provision of this Agreement shall
be deemed to be received on the date such invoice is delivered. No invoices may
be transmitted by facsimile transmission.
Section 4.8 Electronic Components.
(a) Purchase and Sale of Electronic Components. Notwithstanding anything
contained in this Agreement to the contrary, Flextronics shall manufacture and
sell (and shall cause the Flextronics Affiliated Companies to manufacture and
sell) to Xerox and all Xerox Affiliated Companies all of the Electronic
Components that Xerox and the Xerox Affiliated Companies shall order from
Flextronics or any Flextronics Affiliated Company during the Term, regardless
of whether such Electronic Components are to be manufactured and sold to Xerox
or a Xerox Affiliated
Company as part of a Product hereunder or if such Electronic Components have
been ordered by Xerox or a Xerox Affiliated Company for use in a Xerox machine
that is not a Product hereunder or as a spare for such machine. Except as set
forth in this Section 4.8, all Electronic Components shall be subject to all of
the terms and conditions of this Agreement that apply to PO Products. Within
ninety (90) days of each initial closing of the transfer of the relevant
Facility contemplated by the Master Purchase Agreement and the Ancillary
Agreements, Flextronics shall establish the Purchase Price for each Electronic
Component listed in the Schedule H hereto relevant to such Facility; provided,
however, that each such Purchase Price shall not be in excess of [*]. The
Purchase Price for all other Electronic Components shall be established
pursuant to the provisions of Section 4.9(c) hereof. Flextronics agrees to use
commercially reasonable efforts to reduce the Purchase Price for all Electronic
Components by at least [*] each calendar year during the Term by passing
through cost savings made available by market cost reduction and where
applicable through re-sourcing components, relocating assembly operations and
redesign. Notwithstanding anything in this Agreement to the contrary, [*] shall
be considered to be [*] unless caused by [*]. Xerox will not re-source any of
the Electronics Components from Flextronics or any of the Flextronics
Affiliated Companies during the Term; provided, however, that in the event
Flextronics: (a) requires an increased Purchase Price for an Electronic
Component or (b) reduces the Purchase Price for an Electronic Component at a
rate that is less than the rate reasonably expected by Xerox, then Flextronics
shall be required to demonstrate to Xerox the actual cost for such Electronic
Component, including disclosure of Component prices to the fullest extent
possible in light of any applicable confidentiality agreements with Flextronics
Sub-Tier Suppliers. If Flextronics is unable to provide an explanation for such
increase in Purchase Price or lower-than-expected reductions in the Purchase
Price which explanation is reasonably acceptable to Xerox, then, at any time
after one (1) year from the relevant Estimated Mid-Point, the parties shall
attempt in good faith to resolve such matter in accordance with the Escalation
Procedure referred to in Section 20.9(h) hereof. The parties shall take any
actions agreed pursuant to such Escalation Procedure; provided, however, that
if the parties do not reach agreement, Xerox may, in its sole discretion,
re-source such Electronic Component. Notwithstanding anything in this Agreement
to the contrary, the provisions of Section 4.6(a) and (b)(i) and (ii) shall not
apply to Electronic Components. Upon the reasonable request of either party,
the parties agree to review the pricing of Electronic Components and make any
mutually agreeable adjustments necessary to reflect market changes at a time
other than at a Quarterly Pricing Meeting. If product-specific tooling or
non-recurring engineering (NRE) is required to manufacture any Electronic
Component, Xerox shall issue a Purchase Order for any agreed charges therefor,
in advance of commencement of such manufacturing. Product-specific tooling for
Electronics Components shall remain the property of Purchaser.
(b) Cancelled Electronic Components Purchase Orders. Once a Purchase
Order for Electronic Components (or portion thereof) becomes a Cancelled
Electronic Components Purchase Order, Purchaser shall be liable for and shall
pay to or reimburse Flextronics or the relevant Flextronics Affiliated Company
as follows: [*]; provided, however, that, notwithstanding the foregoing, [*].
Upon the request of Purchaser, Flextronics and the Flextronics Affiliated
Companies shall (and Flextronics shall use its commercially reasonable efforts
to cause the Sub-Tier Suppliers to) provide reasonably acceptable documentation
substantiating any and all such costs. If requested by Purchaser, Flextronics
and the Flextronics Affiliated
Companies shall (and Flextronics shall use its commercially reasonable efforts
to cause the Sub-Tier Suppliers to) permit Purchaser's representatives to
review the business records of Flextronics and the Flextronics Affiliated
Companies (or the Sub-Tier Supplier, as the case may be) for the sole purpose
of validating the claim for costs (subject to any confidentiality agreements to
which Flextronics is a party), to validate the count of inventory of such
Product and the Components and to supervise the scrappage, if any, of such
Product or Components. After a Purchase Order for Electronic Components has
become a Cancelled Electronic Components Purchase Order, Flextronics shall
commence the Inventory Repurchase Procedure. When the term "Direct Material
Cost" is used in this Section 4.8, it shall mean the cost represented on the
xxxx of materials supporting the most current Electronic Components Purchase
Price at the relevant time.
Section 4.9 New Products and Improved Products.
(a) Xerox may from time to time during the Term design and develop New
Products and Improved Products.
(b) Flextronics and the Flextronics Affiliated Companies shall have the
right to manufacture and sell to the Purchasers all Improved Products;
provided, that Flextronics and Purchaser are able to mutually agree in writing
on the pricing and other terms that shall govern such Improved Product, it
being understood that (i) any such pricing shall take into account the parties'
shared objective of launching Improved Products as close as possible to the
Applicable Benchmark Cost for the Purchaser thereof, and (ii) that the
productivity requirements for any such Improved Product shall be determined by
Xerox in its reasonable discretion, taking into account, among other things,
the Product Life of the Components used in such Improved Product and the
commonality of such Components with existing Products. In addition, if
Flextronics is unable to provide pricing for such Improved Product at a price
to the Purchasers that is less than [*] of the Applicable Benchmark Cost
for such Product (excluding, for purposes of making such comparison, any
Components provided by Xerox or any Xerox Sub-Tier Supplier), then the
Purchasers shall be entitled to procure such Products from a third party. Upon
Xerox and Flextronics having definitively agreed in writing that Flextronics or
a Flextronics Affiliated Company shall be the provider of an Improved Product,
Xerox shall create and attach to this Agreement a PSA (if applicable) in
respect of such Improved Product, and Flextronics and Xerox shall attach a new,
mutually acceptable Schedule A to this Agreement, setting forth all of the
relevant information for such Improved Product, and such Improved Product shall
thereafter be deemed to be a PO Product or a Kanban Product, as the case may
be, under and subject to all of the terms and conditions of this Agreement.
(c) Xerox shall permit Flextronics to participate in any request for
proposal process initiated by Xerox with respect to New Products if and when
Xerox deems it to be commercially reasonable to do so. If, in a competitive
bidding process for New Products, Flextronics submits to the Purchaser a
proposal for such New Products the terms of which are at least as favorable to
Xerox (including, without limitation, price, quality, delivery, warranty,
capabilities and other commercial factors), as determined by Xerox in its sole
and reasonable discretion, as other bona fide quotations received by Xerox,
then Xerox shall award to Flextronics the initial right to manufacture and sell
to the Purchasers such New Product. If, however, Flextronics' proposal is not
at least as favorable to Xerox, as determined by Xerox as set forth above,
Xerox shall be entitled to award to a third party such initial
right to manufacture and sell to Purchasers such New Product. In addition,
Xerox shall permit Flextronics to offer an initial proposal in advance of the
commencement of competitive bidding if Xerox deems it commercially reasonable
to do so and shall, in such event, consult with Flextronics concerning its
proposal in an attempt to bridge any gap between such proposal and Xerox's
expectations with respect to price, quality, delivery, capabilities and other
matters. Following such consultation with respect to Flextronics' advance
proposal, if the parties are unable to reach an agreement, Xerox may commence a
competitive bidding process. Upon Xerox and Flextronics having definitively
agreed in writing that Flextronics or a Flextronics Affiliated Company shall be
the provider of a New Product (including the definitive terms and conditions
thereof), Xerox shall create and attach to this Agreement a PSA (if applicable)
in respect of such New Product, and Flextronics and Xerox shall attach a new,
mutually acceptable Schedule A to this Agreement, setting forth all of the
relevant information for such New Product, and such New Product shall
thereafter be deemed to be a PO Product or a Kanban Product, as the case may
be, under and subject to all of the terms and conditions of this Agreement.
(d) Notwithstanding anything to the contrary contained herein, the
Minimum Percentage in effect for any New Product that becomes a PO Product or a
Kanban Product, as the case may be, under and subject to all of the terms and
conditions of this Agreement shall be zero (0), unless Xerox and Flextronics
otherwise specifically agree in writing.
(e) In implementing any Improved Product or New Product into the
development and manufacturing processes of Flextronics, Flextronics shall use,
and shall cause the Flextronics Affiliated Companies to use, the Xerox Time To
Market ("TTM") process (or the latest Xerox equivalent) for the development and
manufacturing of such Products and shall take the utilization of such TTM
process into account when proposing terms (including pricing) under which
Flextronics or any Flextronics Affiliated Company is able to manufacture and
sell such New Products and Improved Products to Purchasers. The TTM process
currently in effect is attached hereto as part of Schedule C.
Section 4.10 End-of-Life/Discontinued Products.
(a) By Xerox.
Xerox will notify Flextronics in writing at least one hundred twenty
(120) calendar days in advance of Xerox and the Xerox Affiliated Companies
permanently discontinuing and canceling their purchase and sale of any Product
(an "End-of-Life/Discontinued Product"). In such event, Flextronics shall meet
with Xerox within thirty (30) days of such notice to discuss the possible costs
of such action and how best to mitigate any such costs. Purchaser shall be
liable for and shall pay to or reimburse Flextronics or the relevant
Flextronics Affiliated Company for all costs and expenses related to such
End-of-Life/Discontinued Products as follows: [*]; provided, however, that,
notwithstanding the foregoing, [*]. Upon the request of Purchaser, Flextronics
and the Flextronics Affiliated Companies shall (and Flextronics shall use its
commercially reasonable efforts to cause the Sub- Tier Suppliers to) provide
reasonably acceptable documentation substantiating any and all such costs. If
requested by Purchaser, Flextronics and the Flextronics Affiliated Companies
shall (and Flextronics shall use its commercially reasonable efforts to cause
the Sub-Tier Suppliers to) permit Purchaser's representatives to review the
business records of Flextronics and the Flextronics Affiliated Companies (or
the Sub-Tier Supplier, as the case may be) for the sole purpose of validating
the claim for costs (subject to
any confidentiality agreements to which Flextronics is a party), to validate
the count of inventory of such Product and the Components and to supervise the
scrappage, if any, of such Product or Components. After a Product has become an
End-of-Life/Discontinued Product, Flextronics shall commence the Inventory
Repurchase Procedure.
(b) By Sub-Tier Supplier. Flextronics or any Flextronics Affiliated
Company shall notify Xerox in writing within two (2) Business Days of being
notified by any Sub-Tier Supplier that such Sub-Tier Supplier intends to
discontinue its manufacture and sale of any Component. Flextronics shall be
responsible for arranging an alternate source of supply for any such Component
discontinued by a Flextronics Sub-Tier Supplier (and, at the request of Xerox,
any Xerox Sub-Tier Supplier) in a manner and a time frame that results in no
more than minimal disruption to Flextronics' or such Flextronics Affiliated
Company's supply of any Product to any Purchaser, and Flextronics shall use its
commercially reasonable efforts to ensure that such alternate source of supply
does not result in any change in Purchase Price of such Product and Flextronics
shall communicate and cooperate with Xerox in identifying any such new source.
Any such appointment of a new Sub-Tier Supplier shall require the agreement of
Xerox, in accordance with Section 5.2 hereof.
Section 4.11 Xerox's Right to Cover. If Flextronics or any Flextronics
Affiliated Company, for any reason (other than Xerox's breach under this
Agreement), including, but not limited to, a Force Majeure Event, fails to
deliver Products to a Purchaser in accordance with the terms and conditions of
this Agreement (including, without limitation, at the required location and by
the delivery date specified), Flextronics will use its best efforts to
immediately obtain an alternate supply of Products for Purchasers at no
additional cost to Purchasers. If Flextronics cannot obtain such an alternate
supply, Xerox may, in addition to any other rights or remedies available to
Xerox under applicable law, purchase from other sources during the period of
failure or delay in performance the type and quantity of Product that were
scheduled for delivery to a Purchaser pursuant hereto. All such purchases from
third parties shall be counted toward any Minimum Percentage requirements of
Purchasers with respect to such Products. Xerox shall notify Flextronics of any
increased cost (including freight and handling) incurred by Purchasers in
acquiring such Products from other sources and Flextronics or the relevant
Flextronics Affiliated Company shall immediately credit or reimburse Xerox for
any such cost increase incurred, except in the event of a failure by
Flextronics or any Flextronics Affiliated Company to deliver Products by reason
of a Force Majeure Event.
Section 4.12 Early and Late Deliveries; Deliveries in Excess of Amount
Ordered. Flextronics and the Flextronics Affiliated Companies shall, and
Flextronics shall use its commercially reasonable efforts to cause the Sub-
Tier Suppliers to, deliver the exact quantity of Products ordered by Purchasers
and Flextronics and the Flextronics Affiliated Companies shall, and Flextronics
shall use its commercially reasonable efforts to cause the Sub-Tier Suppliers
to, deliver such Products as required by the Purchaser thereof as indicated by
the Purchase Order or associated documents. Any Purchaser may, in its sole
discretion, return any Products, at the expense of Flextronics or the relevant
Flextronics Affiliated Company (or the Sub-Tier Supplier, as the case may be)
if Products in excess of the number ordered have been delivered or if any such
order of Products is delivered more than seven (7) calendar days earlier than
indicated on the Purchase Order or associated documents. In consideration of
increased costs incurred by a
Purchaser when Products are delivered late, Flextronics or the relevant
Flextronics Affiliated Company will automatically arrange for premium freight
to meet the required delivery date, unless otherwise specifically directed not
to do so by the Purchaser. Flextronics or the relevant Flextronics Affiliated
Company shall pay for said premium freight and any other costs, fees, expenses
or other charges (including Certain Taxes and duties), excluding any taxes and
duties that are recoverable by Purchaser, that would not have been payable by
or chargeable to Purchasers pursuant to this Agreement had the delivery been
timely in the event the delay is for reasons within the control or
responsibility of Flextronics or any Flextronics Affiliated Company.
Section 4.13 Flexible Workforce. Flextronics and the Flextronics Affiliated
Companies will maintain at each Facility, and as allowed within existing
constraints, a flexible direct labor workforce that will be able to adjust to
the volume requirements set forth in Sections 4.3(e) and 4.4(c) hereof.
Flextronics will use reasonable commercial efforts to adjust the indirect
workforce and, if possible, the fixed cost infrastructure for volume
fluctuations that are sustained. Flextronics will discuss these actions with
Xerox in advance of implementing them.
ARTICLE 5
SUB-TIER SUPPLIERS
Section 5.1 Management of Sub-Tier Suppliers.
(a) Schedule I hereto sets forth each Approved Sub-Tier Supplier and
indicates whether such supplier is a Xerox Sub-Tier Supplier or Flextronics
Sub-Tier Supplier. Xerox and Flextronics shall subsequently identify any new
Sub-Tier Suppliers as either a Xerox Sub-Tier Supplier or a Flextronics Sub-
Tier Supplier. In addition, Xerox and Flextronics shall take commercially
reasonable steps to transition certain Xerox Sub-Tier Suppliers to Flextronics
Sub-Tier Suppliers as the parties shall mutually agree. Flextronics shall be
responsible for obtaining any and all Components from all Sub-Tier Suppliers to
the extent the same are necessary for Flextronics and the Flextronics
Affiliated Companies to fulfill its obligations under this Agreement and
Flextronics shall be the party responsible for the day-to-day contact with all
Sub-Tier Suppliers that may be necessary for Flextronics and the Flextronics
Affiliated Companies to perform their obligations under this Agreement. No
subcontracting of the manufacture and/or supply of any Component by Flextronics
or any Flextronics Affiliated Company to any Sub- Tier Supplier shall relieve
Flextronics from its responsibility for delivering to Purchasers all Products
required to be delivered by Flextronics to Purchasers under this Agreement.
(b) Flextronics shall take all commercially reasonable steps necessary
to ensure that all Sub-Tier Suppliers provide Flextronics or any Flextronics
Affiliated Company or any Purchaser with Components in accordance with the
applicable Specifications, within the specified delivery times and in
accordance with any other term and condition applicable to a Component supplied
by such Sub-Tier Supplier under this Agreement.
(c) The failure of a Sub-Tier Supplier to provide Flextronics or any
Flextronics Affiliated Company or any Purchaser with Components in accordance
with the applicable Specifications, within the specified delivery times and in
accordance with any other term and condition applicable to a Product
supplied by such Flextronics Sub-Tier Supplier under this Agreement shall not
relieve Flextronics of its obligations under this Agreement.
Section 5.2 Approved Sub-Tier Suppliers. Neither Flextronics nor any
Flextronics Affiliated Company shall obtain any Component for any Facility from
any Sub-Tier Supplier that is not an Approved Sub-Tier Supplier with respect to
such Component for such Facility. All proposed qualifications by Flextronics of
a Sub-Tier Supplier as an Approved Sub-Tier Supplier and all proposed
disqualifications by Flextronics of a Sub-Tier Supplier as an Approved Sub-Tier
Supplier must be approved in advance in writing by Xerox, at the commercially
reasonable discretion of Xerox. Any proposed qualification by Flextronics of an
Approved Sub-Tier Supplier to provide an additional or different Component must
be approved in advance in writing by Xerox, at the discretion of Xerox. Xerox
agrees to promptly consider any such proposals by Flextronics and to promptly
provide its approval or disapproval. Notwithstanding the foregoing, Xerox
reserves the right, exercisable in its sole discretion at any time, to
disqualify any Approved Sub-Tier Supplier in accordance with the following
procedure. In the event any such disqualification would require the payment to
such Sub-Tier Supplier of a cancellation charge, Flextronics will review with
Xerox such cancellation charge in advance of triggering such obligation to pay,
and Xerox shall have the right to negotiate with Flextronics and such Sub-Tier
Supplier the amount of such charge. If such amount is agreed to by Xerox, such
Approved Sub-Tier Supplier shall be disqualified and Xerox shall be responsible
for such agreed-upon cancellation payments to such disqualified Sub-Tier
Supplier. In the event any such disqualification would not require the payment
to such Sub-Tier Supplier of a cancellation charge, then such Approved Sub-Tier
Supplier shall be immediately disqualified.
Section 5.3 Purchase of Components from Sub-Tier Suppliers; Information
Concerning Sub-Tier Suppliers.
(a) Purchasers may, at their discretion, order and purchase Components
that are supplied by any Sub-Tier Suppliers exclusively for the manufacture of
Products either directly from the Sub-Tier Supplier thereof, or by placing an
order with Flextronics or any Flextronics Affiliated Company therefor.
Flextronics shall ensure that all Purchasers shall be listed as "approved
buyers" under Flextronics' or any Flextronics Affiliated Company's agreements
with Sub-Tier Suppliers such that any order and purchase of such Components by
Purchasers directly from Sub-Tier Suppliers shall be made on the same terms and
conditions, including without limitation, price, as Flextronics or any
Flextronics Affiliated Company may order and purchase such Components from such
Sub-Tier Suppliers. Xerox shall ensure that Flextronics and the Flextronics
Affiliated Companies shall be listed as an "approved buyer" under Xerox's
agreements with Sub-Tier Suppliers such that any order and purchase of such
Components for inclusion into Products by Flextronics or any Flextronics
Affiliated Company directly from Sub-Tier Suppliers shall be made on the same
terms and conditions, including without limitation, price, as Xerox may order
and purchase such Components from such Sub-Tier Suppliers. Further, if any
Purchaser orders any Component from Flextronics or any Flextronics Affiliated
Company that is otherwise supplied from a Sub-Tier Supplier, the Purchase Price
paid by Purchaser to Flextronics or such Flextronics Affiliated Company
therefor shall in no event exceed the price Flextronics or such Flextronics
Affiliated Company was charged by the Sub-Tier Supplier therefor, plus [*],
and shall be agreed by Xerox and Flextronics on a case-by-case basis.
Notwithstanding anything to the contrary set forth in this Article 5, Xerox
retains the right,
exercisable in its sole discretion, (i) to negotiate the terms and conditions
governing the supply of Components with such Sub-Tier Suppliers as it deems
necessary or desirable, to contract directly with such Sub-Tier Suppliers and
to procure the rights for Flextronics or any Flextronics Affiliated Company to
purchase Components from such Sub-Tier Suppliers on the same terms and
conditions as a Purchaser, and/or (ii) to itself act as a Sub-Tier Supplier
under this Agreement.
(b) Flextronics shall provide to Xerox upon Xerox's request (but in no
event less than once per calendar quarter on the first day of each such
quarter) a then true, correct and complete list of Flextronics Sub-Tier
Suppliers' prices to Flextronics and the Flextronics Affiliated Companies for
Components (other than Electronic Components materials with respect to which
Flextronics is subject to confidentiality agreements with third parties, for
which materials Flextronics will provide Xerox with market price information
related to a "basket" of materials).
(c) Flextronics shall provide written notice to Xerox within five (5)
Business Days of receiving notification from any Sub-Tier Supplier that such
Sub-Tier Supplier is changing the location of manufacture of any custom
Component.
(d) Flextronics shall provide Purchasers with the benefit of the lowest
prices from Sub-Tier Suppliers that Flextronics or any Flextronics Affiliated
Company is contractually permitted to provide.
Section 5.4 Flextronics as Sub-Tier Supplier. The parties acknowledge
and agree that it may be mutually advantageous to the parties to qualify
Flextronics as an Approved Sub-Tier Supplier with respect to any Components or
services that Flextronics offers. Xerox agrees to qualify any Facility as an
Approved Sub-Tier Supplier, subject to Xerox's normal approval process, as
Flextronics may request. Xerox, in its sole and reasonable discretion, will
evaluate any quotation that Flextronics may offer for the supply of such
Components or services and shall accept such offer provided that the terms of
such offer are more favorable to Xerox than other bona fide quotations received
by Xerox (including, without limitation, price, quality, delivery, warranty,
capabilities and other commercial factors). Upon acceptance of Flextronics'
offer, Xerox shall qualify Flextronics to provide such selected and mutually
agreed Components or services.
ARTICLE 6
PRICING AND PRODUCTIVITY
Sections 6.1 through 6.3 hereof, inclusive, shall not apply to
Electronic Components which are covered by Section 4.8 hereof.
Section 6.1 Pricing.
(a) Except as set forth in Section 4.8 hereof and subject to the terms
and conditions of this Article 6, the Purchase Price for each Product shall be
equal to (i) the actual UMC (the "Actual UMC") for each such Product, divided
by (ii) either (A) [*] for Products manufactured by Flextronics or any
Flextronics Affiliated Company in the Facilities in [*], or (B) [*] for
Products manufactured by Flextronics or any Flextronics Affiliated Company in
the Facilities in [*]. That portion of any Purchase Price of a Product that is
in excess of the Actual UMC shall be referred to herein as the "Margin
Amount." Notwithstanding the foregoing, the number in (ii) above shall be [*]
when calculating that portion of the Margin Amount that is applicable to any
Components provided by [*].
(b) A price (the "Quarterly Purchase Price") for each Product shall be
set at quarterly meetings between Xerox and Flextronics (each, a "Quarterly
Pricing Meeting"), which shall be held no later than the fifteenth (15th)
calendar day of each calendar quarter during the Term. The Quarterly Purchase
Prices shall be the amount that Purchasers will pay Flextronics and the
Flextronics Affiliated Companies for Products during such calendar quarter and
until the Quarterly Purchase Prices for the next calendar quarter have been
agreed. The Quarterly Purchase Price for a Product shall, subject to the terms
and conditions of this Article 6, be equal to the sum of (i) the Actual UMC for
such Product during the calendar quarter immediately preceding the Quarterly
Pricing Meeting, adjusted for (A) expected fluctuations in production volumes
and mix, (B) expected changes in Component or other costs, (C) the expected [*]
and (D) the expected Labor and Overhead Reduction Amount, and (ii) the Margin
Amount. In setting the Quarterly Purchase Prices, the parties shall attempt to
estimate as closely as possible what the actual Purchase Prices for the quarter
will be. Following completion of each calendar quarter and the determination of
the Actual UMCs (and corresponding Purchase Prices) during such quarter, the
parties shall compare the amount that Xerox actually paid for Products (based
on Quarterly Purchase Prices) during such calendar quarter against what Xerox
should have paid (based upon the Actual UMCs for such calendar quarter) as set
forth below in this Article 6. In the event that Xerox and Flextronics cannot
come to mutual agreement on any Quarterly Purchase Price for any Product, such
dispute shall be resolved in accordance with the procedures set forth in
Section 20.9 herein.
(c) The Actual UMC for each Product for the period beginning on the
date of the relevant SSA and continuing through the end of the first full
calendar quarter thereafter shall be the UMC set forth for each such Product on
Schedule A as of the date of such SSA and the Quarterly Purchase Price for each
such Product (calculated in accordance with Section 6.1(a) and (b) above)
during such period shall be hereinafter referred to as the "Initial Quarterly
Purchase Price."
(d) All fees or expenses related to the manufacture and sale of
Products by Flextronics and the Flextronics Affiliated Companies to Purchasers
(including without limitation, service fees, freight and insurance), if any,
shall also be discussed and agreed by Xerox and Flextronics at the Quarterly
Pricing Meetings, except to the extent that any such other fees and expenses
are not subject to change, as set forth in this Agreement. No Purchaser shall
be required to pay any amounts for Products or services other than those listed
in Schedule A or as otherwise agreed in advance and in writing by Xerox.
Notwithstanding anything herein to the contrary, Flextronics and the
Flextronics Affiliated Companies shall not include in the UMC, nor otherwise
charge Purchaser for, any Tax or other governmental charge that is recoverable
by it (e.g., recoverable VAT), refunded or refundable to it or otherwise
subject to similar credit or recovery. Any Tax or other governmental charge
that had previously been included in the UMC of Products, together with
interest thereon imputed at the rate imposed by the refunding or crediting
Taxing jurisdiction, that is recovered by or credited or refunded to
Flextronics or any Flextronics Affiliated Company shall immediately be repaid
to Purchasers (or credited against the UMC of Product orders in the next
Quarterly Measurement Period).
(e) (i) Flextronics, in cooperation with Xerox, shall use its
reasonable best efforts to reduce the Purchase Prices for all Products in
the aggregate by at least [*] each calendar year (and maintain such
reduction during such year) during the Term until the Applicable Benchmark
Cost for all Products has been achieved. The parties agree to implement
and abide by the procedures and processes set forth in Schedule C in
furtherance of attaining such goal of Applicable Benchmark Cost for all
Products. Flextronics, in cooperation with Xerox, shall use its reasonable
best efforts to reduce the Actual UMC for all Products in the aggregate by
at least [*] each calendar quarter during the Term.
(ii) Notwithstanding the foregoing, Flextronics shall cause all
value-added costs (including labor, labor overhead and material overhead)
included in the calculation of UMC to be reduced by at least [*] each
calendar quarter during the Term, as compared to the same period in the
previous year, at each Facility where volume production levels for
Products are equal to or greater than such levels for the same period in
the previous year (the "Labor and Overhead Reduction Amount").
Notwithstanding the immediately preceding sentence, the reductions with
respect to each Facility shall be reflected in UMC commencing at the
beginning of the third calendar quarter following the closing of the
transfer of such Facility pursuant to the Master Purchase Agreement and
the Ancillary Agreements.
Section 6.2 Quarterly Statement; True-Up of Quarterly Purchase Prices
and [*].
(a) Quarterly Statement. Flextronics shall provide to Xerox a detailed
statement (a "Quarterly Statement") no later than five (5) Business Days prior
to the date of the Quarterly Pricing Meeting following the end of the subject
quarter. The Quarterly Statement shall have been prepared in accordance with
Schedule D hereto and otherwise in accordance with United States generally
accepted accounting principles, setting forth:
(i) a calculation of the aggregate total of all Quarterly
Purchase Prices actually invoiced to Purchasers for all Products
purchased by Purchasers during such quarter (the "Quarterly Price Paid");
(ii) a calculation of the Quarterly Measurement Amount (as
defined below) for such quarter;
(iii) a calculation of the aggregate total of all Actual UMCs for
all Products purchased by Purchasers during such quarter (the "Actual
Total Quarterly UMC");
(iv) the Actual Total Quarterly UMC for the calendar quarter
immediately preceding such quarter (the "Prior Total Quarterly UMC"); and
(v) a calculation of any Taxes, customs duties and similar charges
paid or invoiced with respect to the Quarterly Price Paid.
(b) For purposes of this Agreement, the "Quarterly Measurement Amount"
for any quarter shall be equal to the sum of (i) the Actual Total Quarterly UMC
for such quarter, taking into account (A) actual production volumes and
mix, (B) the actual [*] and (C) the actual Labor and Overhead Reduction Amount,
and (ii) the Margin Amount with respect thereto. Notwithstanding anything
contained herein to the contrary:
(i) at no time shall the Actual UMC for any single Product,
plus the Margin Amount with respect thereto (as the same is used to
calculate the Quarterly Measurement Amount) be greater than the Initial
Quarterly Purchase Price for such Product or any other prior quarter's
Purchase Price for such Product, whichever is less, unless specifically
agreed in writing at the Quarterly Pricing Meeting by Xerox and
Flextronics and specifically justified by Major Changes in Product
Configuration or changes in Commodities prices, volume or mix;
(ii) the Actual UMC for each Product reflected in the
Initial Quarterly Purchase Prices will include an allowance for setup,
material and labor efficiencies consistent with historical experience; and
(iii) no cost that is attributable to the negligence or
willful misconduct of Flextronics or any Flextronics Affiliated Company
shall be included in the calculation of the Quarterly Measurement Amount.
(c) [*]
(d) True-Up of Purchase Price.
(i) If, as indicated by the final and binding Quarterly
Statement, the Quarterly Price Paid exceeds the Quarterly Measurement
Amount for the subject quarter, then such excess amount (net of any
unpaid [*] that [*] pursuant to Section [*] above) shall be payable to
the applicable Purchasers, in cash (subject to applicable customs and
duties restrictions) or in the form of a credit to be applied against
future Product purchases, as Xerox shall request in its discretion, and
shall be paid (or credit shall have been issued, as the case may be)
within ten (10) Business Days of the Quarterly Statement becoming final
and binding as provided below. In addition to the payment or crediting of
the excess amount to the applicable Purchasers, Flextronics shall also
pay or credit to such Purchasers: (x) a ratable portion of Taxes paid by
Purchasers on the Actual Total Quarterly UMC attributable to such excess;
and (y) any Taxes, duties, governmental charges or similar costs
(excluding income Taxes or Taxes in lieu thereof) that are imposed by any
Governmental Authority on the payment or crediting of such excess to
Purchasers.
(ii) If, as indicated by the final and binding Quarterly
Statement, the Quarterly Price Paid is less than the Quarterly
Measurement Amount for the subject quarter, then such incremental amount
(including any unpaid [*] that [*] pursuant to Section [*] above) shall
be payable to the applicable Flextronics Affiliated Companies, in cash a
carry-forward amount to be fully recovered in the immediately succeeding
calendar quarter, as Xerox shall request in its discretion, and, if paid
in cash, shall be paid within ten (10) Business Days of the Quarterly
Statement becoming final and binding as provided below and, if carried
forward, shall be fully recovered in the immediately succeeding calendar
quarter. In addition to the payment or carrying forward of the
amount to the applicable Flextronics Affiliated Companies, Purchasers
shall also pay or carry forward: (x) a ratable portion of Taxes payable
by Purchasers on the Actual Total Quarterly UMC attributable to such
incremental amount; and (y) any Taxes, duties, governmental charges or
similar costs (excluding income Taxes or Taxes in lieu thereof) that are
imposed by any Governmental Authority on the payment or carrying forward
of such incremental amount to Purchasers.
Section 6.3 Procedures Regarding Finalization of Quarterly Statement.
(a) Xerox shall have five (5) Business Days to review each Quarterly
Statement and to notify Flextronics in writing of any dispute with respect
thereto. If such dispute cannot be resolved by Xerox and Flextronics within
five (5) Business Days after the receipt by Flextronics of such notice of
dispute, then the dispute shall be resolved in accordance with the procedures
set forth in Section 20.9 hereof. The applicable Quarterly Statement shall
become final and binding upon the earliest to occur of: (i) if no notice is
given by Xerox in accordance with this Section 6.3, the expiration of the
period within which Xerox may notify Flextronics of any objections thereto
pursuant to this Section 6.3; (ii) agreement by Xerox and Flextronics that the
Quarterly Statement, together with any modifications thereto agreed by Xerox
and Flextronics, shall be final and binding; and (iii) the date on which any
dispute shall have been resolved in accordance with Section 20.9 hereof.
(b) For the avoidance of doubt, it is the intention of the parties
hereto to eliminate the effects of currency fluctuations from any cost
comparisons contemplated under this Article 6, including, but not limited to,
by making all comparisons of cost of any Components in the currency in which
such Components were purchased.
Section 6.4 [Reserved].
Section 6.5 [Reserved].
Section 6.6 Currency; Governmental Authority Levy.
(a) (i) For purposes of converting the pricing of foreign-sourced
Components, or other items in UMC which are transacted in a foreign
currency, from the currency in which such Components or other items were
purchased or transacted into United States currency (and for any other
purpose under this Agreement where such conversion of currency may be
required), the parties shall use as an exchange rate the average of the
exchange rate for the applicable currency for the current quarter.
(ii) For countries in which Flextronics or any Flextronics
Affiliated Company cannot xxxx in U.S. dollars and the exchange rate
moves +2% from the rates used in the invoice to rates at the date of
payment, the actual exchange rate on the date of payment will be used to
determine the currency rate adjustment. For clarity, the following
example is provided:
In the Invoice L.C.* Exchange Rate U.S. $ Equivalent
Local Currency Content 5,000 10:1 500
Non-local Currency Content 5,000 10:1 500
------ -----
Total Invoice 10,000 1,000
* Means Local Currency
On Payment Date U.S. $ Exchange Rate L.C. Equivalent
Non-local Currency Content 500 1:20 10,000
Local Currency Consent 5,000
L.C. Due on Settlement 15,000
Previously Invoiced (10,000)
Currency Adjustment 5,000 L.C.
As an acceptable alternative, Flextronics or such Flextronics Affiliated
Company may xxxx at the [*] day forward rate, which would be the basis of the
local currency amount. If paid after [*] days, the method of calculation set
forth in the example would be used except that the forward rate would be the
basis of the invoice amount. If Purchaser were to pay early, the rate on the
payment date would be used.
(b) In the event that any Governmental Authority levies an import or
export Tax, duty, surcharge or other Tax on Products in such a way that the
Landed Cost to Xerox or the UMC of such Products would be greater than the
then-effective Purchase Prices (or Landed Costs, as applicable) for Products,
the parties shall meet upon the request of either party to review the
situation, discuss all possible alternatives, including without limitation a
relocation of the manufacture of the affected Product and a revision of pricing
with respect thereto, and attempt in good faith to reach an agreement regarding
the situation. Flextronics agrees that in the event that any Governmental
Authority levies or announces plans to levy any import or export Tax, duty or
surcharge or other Tax on Products, Flextronics will cooperate with and assist
Purchasers and pursue in its name where appropriate any reasonable effort
identified by Purchasers to reduce, eliminate, xxxxx, suspend or otherwise
ameliorate the cost to Purchasers of any such import or export Tax, duty or
surcharge or any other Tax or governmental charge on Products.
Section 6.7 Tax and Customs Matters.
(a) Each Purchaser is liable for 100% of all Taxes imposed on such
Purchaser with respect to the billing for Products by Flextronics or any
Flextronics Affiliated Company to Purchaser. Each Purchaser shall pay any and
all such Taxes to Flextronics or such Flextronics Affiliated Company at the
same time and in the same manner that it pays such other amounts to Flextronics
or such Flextronics Affiliated Company to which such Taxes relate and
Flextronics or such Flextronics Affiliated Company shall promptly remit
payments of Taxes to the appropriate taxing jurisdiction. Flextronics shall,
and shall cause the Flextronics Affiliated Companies to, pay and indemnify each
Purchaser on an after-tax basis for any claims for Taxes and any interest,
penalties, fines or other similar amounts imposed thereon made by a taxing
jurisdiction relating to Taxes paid by such Purchaser to Flextronics or such
Flextronics Affiliated Company imposed as a result of Flextronics' or any
Flextronics Affiliated Company's failure to remit such Taxes paid by such
Purchaser to Flextronics or such Flextronics Affiliated Company to the
appropriate taxing jurisdiction in a timely fashion after their
receipt. Flextronics shall, and shall cause the Flextronics Affiliated
Companies to, pay and indemnify each Purchaser on an after-tax basis for any
claims for interest (but only for interest exceeding the amount of interest
that would have been imposed had the rate of interest equaled LIBOR),
penalties, fines or other similar amounts (but not Taxes) imposed by a taxing
jurisdiction relating to (i) Flextronics' or any Flextronics Affiliated
Company's negligence in filing such Tax returns; or (ii) Flextronics' or any
Flextronics Affiliated Company's failure to invoice such Purchaser for the
correct amount of Taxes at the time of the invoice. Flextronics agrees and
understands that any payments for Taxes and any interest, penalties, fines or
other similar amounts imposed thereon that it or any Flextronics Affiliated
Company is required to make under the terms of the prior clauses of this
paragraph are not to be billed directly or indirectly to or otherwise recovered
from Purchasers. Flextronics, each Flextronics Affiliated Company and each
Purchaser agree to cooperate to minimize and properly calculate any applicable
Taxes and, in connection therewith, each such Purchaser shall provide
Flextronics or the relevant Flextronics Affiliated Company any valid resale
certificates, information regarding out-of-state use or foreign receipt of
materials, services or sales or other exemption or tax reduction certificates
or other certificate or document of exemption or information that is reasonably
available and may be required in order to exempt such Purchaser's payment for
Product from any such Taxes, and Flextronics shall, and shall cause the
Flextronics Affiliated Companies to, accept and support any claims, which such
Purchaser in good xxxxx xxxxx to be valid, of resale, direct pay, identifiable
segment, bulk sale, occasional sale, casual sale, export sale or other
exemption. If a Purchaser provides certification of an exemption from any Tax
or of a reduced rate of Tax imposed by an applicable taxing authority, then
Flextronics and the Flextronics Affiliated Companies shall not invoice for nor
pay over any such Tax unless and until the applicable taxing authority assesses
such Tax, at which time Flextronics or the relevant Flextronics Affiliated
Company shall invoice and such Purchaser shall pay any such Tax, together with
any interest, penalties, fines or other similar amounts imposed thereon, unless
Purchaser elects to contest such assessment pursuant to Section 6.7(b) hereof
(in which event the provisions of that subsection shall control any invoicing
and payment). Flextronics or the relevant Flextronics Affiliated Company shall
issue or caused to be issued to Purchaser on the applicable invoice date a
valid original VAT invoice or similar invoice for VAT or other Taxes as
required by the applicable Governmental Authority or as requested by Purchaser
to enable recovery of Taxes where appropriate; and Purchaser shall pay only
against such valid invoices. Each Purchaser shall be entitled to, and
Flextronics or the relevant Flextronics Affiliated Company shall promptly repay
to such Purchaser, any refunds, rebates or credits of Taxes Flextronics or such
Flextronics Affiliated Company receives that were paid by such Purchaser
pursuant to this Agreement, together with interest thereon measured by the
applicable statutory rate in the jurisdiction providing such refund, rebate or
credit. Interest at the applicable statutory rate in the jurisdiction providing
such refund, rebate or credit will not be payable by Flextronics or such
Flextronics Affiliated Company to Purchaser in cases where the overpayment
subject to refund, rebate or credit was not as a result of the failure of
Flextronics or such Flextronics Affiliated Company to use commercially
reasonable actions or judgment and the applicable taxing jurisdiction would not
pay interest on an actual refund of such overpayment amount. In the case of any
refund, rebate or credit of Tax that can only be recovered by Purchaser (such
as certain recoveries of VAT on Product sales
that are cancelled), Flextronics agrees to provide and to cause the Flextronics
Affiliated Companies to provide to Purchaser as soon as is reasonably practical
after the payment of a Tax the requisite documentation and other information
(such as a VAT credit note) that will enable Purchaser to obtain the effective
refund, rebate or credit of the Tax.
(b) If Flextronics or any Flextronics Affiliated Company receives any
assessment or other notice (collectively, "Assessment") from any governmental
taxing authority providing that Taxes are due from Flextronics or such
Flextronics Affiliated Company which are subject to payment by a Purchaser
pursuant to this Agreement, Flextronics or such Flextronics Affiliated Company
shall, within fifteen (15) calendar days of receipt of the Assessment, give
such Purchaser written notice of the Assessment and Purchaser shall pay to
Flextronics or such Flextronics Affiliated Company or directly to the taxing
authority upon receipt of the Assessment or, if required by the applicable
Governmental Authority, a valid original VAT invoice or similar invoice for VAT
or other Taxes, the amount of Taxes set forth as due in the Assessment within
thirty (30) calendar days of receipt of such notice; exclusive, however, of any
amounts for which Flextronics or such Flextronics Affiliated Company has agreed
to pay and indemnify such Purchaser for in accordance with this Agreement.
Notwithstanding the above, if a Purchaser, in its reasonable discretion,
determines that it will contest an Assessment of Taxes, then (i) such Purchaser
shall control any such contest, (ii) Flextronics and the Flextronics Affiliated
Companies shall not pay the Tax in controversy to the applicable governmental
taxing authority before the completion of such contest (and such Purchaser
shall not be required to make payment of such Tax to Flextronics, or any such
Flextronics Affiliated Company) unless such Purchaser requests that such Tax be
paid earlier, or if the applicable Tax rules and regulations require the
payment thereof (or if payment of the Tax is a pre-condition to contest as is
the case, for example, with the VAT imposed by the United Kingdom), and (iii)
Flextronics and the Flextronics Affiliated Companies shall cooperate with such
Purchaser in such contest and shall provide such support, information,
documents and other items as such Purchaser shall reasonably request in
connection therewith. In any case where a Purchaser determines to contest an
Assessment, such Purchaser will indemnify Flextronics on an after-tax basis for
Taxes and where Purchaser has directed Flextronics or any Flextronics
Affiliated Company not to pay or collect a specific Tax, any interest,
penalties, fines or other similar amounts imposed thereon, and other reasonable
defense costs related thereto incurred by Flextronics or such Flextronics
Affiliated Company as a result of the contest. If Purchaser determines to
contest an Assessment and the determination of such controversy can reasonably
be expected to adversely affect Flextronics' or any Flextronics Affiliated
Company's liability for such Tax for any Post-Closing Period, Flextronics may
attend, itself or through separate counsel reasonably satisfactory to
Purchasers, any appearances (with reasonable notice thereof) before the Tax
authority and any administrative or judicial body determining such controversy
and shall have the right to review and comment in advance on any pleadings,
briefs or documents to be disclosed or submitted by Purchasers in defense of
the matter. If Flextronics determines that it would prefer that such Purchaser
not contest an Assessment, Flextronics may notify such Purchaser at any time
not to pursue such contest, provided that Flextronics or any Flextronics
Affiliated Company fully satisfies any such Assessment and pays the reasonable
defense costs (including attorneys' fees) related thereto incurred by Purchaser
as a result of the contest. In such a case, such Purchaser will have no
obligation to indemnify Flextronics or any Flextronics Affiliated Company for
any amounts paid or payable by Flextronics or such
Flextronics Affiliated Company with respect to such Assessment.
(c) If any Taxes payable by Flextronics or any Flextronics Affiliated
Company that are otherwise properly chargeable to Purchaser under this
Agreement are recoverable by or payable to Flextronics or such Flextronics
Affiliated Company, such Taxes shall be considered to be based upon
Flextronics' or such Flextronics Affiliated Company's net income and no
Purchaser shall have any obligation to pay to or indemnify Flextronics or any
Flextronics Affiliated Company for any such recoverable or refundable Taxes.
(d) Flextronics, the Flextronics Affiliated Companies and each
Purchaser shall comply with all laws and regulations respecting the export,
directly or indirectly, of any technical data acquired from the other under
this Agreement or any Product utilizing any such data to any country the laws
or regulations of which at the time of export, require an export license or
other government approval including, but not limited to, first obtaining such
license or approval.
(e) Flextronics, the Flextronics Affiliated Companies and Purchaser
shall also cooperate with each other and with Governmental Authorities with
respect to customs matters. Such cooperation shall include, but not be limited
to, the sharing of information, including bills of materials, necessary to
determine the proper tariff classification (HS) and customs value of imported
goods, compliance with country of origin marking and product labeling
requirements, and the certification or qualification of products for duty-free
treatment or preferential tariff status under the North American Free Trade
Agreement (NAFTA), the Generalized System of Preferences (GSP), or any other
duty reduction or preference arrangement in effect in any country of
importation. Flextronics' and the Flextronics Affiliated Companies' duties of
customs cooperation shall include, but not be limited to: (i) providing NAFTA
Certificates of Origin for eligible merchandise, together with information
needed to verify such certificates; (ii) cooperating in NAFTA verifications
conducted by authorized government officials; (iii) providing information
needed to establish the GSP eligibility of merchandise; (iv) cooperating in any
lawful customs inquiry regarding the verification of any claim for duty-free or
reduced-duty treatment; (v) answering government questionnaires and otherwise
cooperating or participating in antidumping or countervailing duty
investigations with respect to goods sold to Purchaser; (vi) sharing
information necessary to the above duties with Purchaser, including
confidential information under such terms of confidentiality as the parties may
mutually agree; and (vii) securing on a commercially reasonable basis Binding
Tariff Information rulings or other customs rulings establishing the tariff
status of such goods. Flextronics and the Flextronics Affiliated Companies will
also cooperate with, and provide support to, Purchaser to certify Products
conform with government procurement requirements, including but not limited to
the Federal Acquisition Regulations regarding the so-called "Buy American Act"
import procurement restrictions under the Trade Agreements Act of 1979.
Flextronics and the Flextronics Affiliated Companies will also take any
commercially reasonable actions that would reduce Landed Cost or dutiable value
to the full extent allowable under the law as well as affording Purchaser
maximum access to Federal government sales for Purchaser's products.
(f) Flextronics and Purchaser will establish a committee (the "Customs
Committee") (on such terms and with those members to be agreed initially by the
parties hereto within forty-five (45) days from the date of execution
hereof) that will cooperate and work together to review all aspects of the
production and material sourcing plans of Flextronics and the Flextronics
Affiliated Companies to ensure that appropriate reductions in customs duties,
levies and other import and export taxes are obtained, that no incremental
duties, levies or taxes are incurred, and that no action taken by Flextronics
or any Flextronics Affiliated Company results in restrictions to market access
by Purchaser. If Flextronics or any Flextronics Affiliated Company fails to act
in a commercially reasonable manner and the result of such failure is an
increase in customs duties or levies or import or export taxes to Purchaser,
then Flextronics or such Flextronics Affiliated Company shall pay and be
responsible for any customs duties, levies or taxes, together with any
interest, penalties, fines or similar amounts, that exceed what Purchasers
would otherwise have been obligated to pay, had Flextronics or such Flextronics
Affiliated Company acted in a commercially reasonable manner. For purposes of
this Section 6.7(f), failing to act in a commercially reasonable manner
includes, but is not limited to, (i) failing to provide the requisite documents
and information set forth in subparagraph (e) above, (ii) changing the source
of component products or subassemblies in a manner that increases customs
duties or levies as a result of, but not limited to, a loss of NAFTA status, a
loss of GSP certification or Purchaser's inability to sell end product to the
U.S. federal government under provisions in the Federal Acquisition
Regulations, "Buy American" procurement restrictions, and procurement under the
Trade Agreements Act of 1979, etc., without the consent of Purchasers, (iii)
failing to comply with any law or rule or regulation promulgated thereunder,
(iv) failing to comply with any reasonable direction of Purchasers to optimize
customs duties, levies and other import and export taxes where such direction
can be complied with at no significant cost to Flextronics or any Flextronics
Affiliated Company, (v) failing to keep in place any licenses or other
favorable customs and duty tax regimes that are obtained by Flextronics or any
Flextronics Affiliated Company as of or after the applicable Closing Time
provided that such favorable customs and duty tax regimes can be reasonably
maintained without expense on the part of Flextronics or any Flextronics
Affiliated Company that is disproportionate to benefit received, (vi) failing
to provide Purchasers with necessary support and cooperation that would enable
Purchasers to receive or maintain reduced rates of customs duties, levies and
other import and export taxes, or the ability to recover overpayments thereof,
where such support and cooperation can be reasonably provided without
significant expense on the part of Flextronics or any Flextronics Affiliated
Company, and (vii) failing to reasonably maintain or otherwise properly execute
shared systems or other data management functions.
(g) Notwithstanding anything herein that might be read to suggest a
contrary position, each party hereto shall carry out its responsibilities and
obligations with respect to VAT accounting, reporting payment and recovery of
VAT in accordance with the applicable local VAT laws and regulations
promulgated thereunder.
(h) Flextronics and the Flextronics Affiliated Companies will support
all commercially reasonable efforts by Purchaser and will reasonably cooperate
to enable Purchaser to secure duty drawbacks or refunds relating to the
Products which Flextronics or any Flextronics Affiliated Company manufactures
for Purchaser.
(i) Flextronics, the Flextronics Affiliated Companies and Purchaser
shall enter into all necessary contracts or agreements to permit Flextronics
and the Flextronics Affiliated Companies to use, or have access to,
Purchaser's "duty management system" for goods manufactured and/or stored in
the Venray CRU Operation, to the extent such Operation is or has been
transferred to Flextronics or any Flextronics Affiliated Company. For purposes
of this provision, the "duty management system" shall be defined to include any
EDI database and system which nets inventory outputs against inventory inputs
for customs control and duty payment systems, together with any inventory or
production data contained therein. It is understood and agreed by the parties
that all such duty management systems shall remain the sole and exclusive
property of Purchaser and (A) Purchaser may decide in its sole discretion that,
or (B) if Flextronics so requests, Purchaser's employees shall operate such
systems for the use and benefit of Flextronics and such Flextronics Affiliated
Company. This agreement enabling Flextronics and the Flextronics Affiliated
Companies to use or have access to Purchaser's "duty management system" shall
extend for a period of twelve (12) months after Flextronics or any Flextronics
Affiliated Company first has access to Purchaser's "duty management system",
and will only be extended upon the express written agreement of the parties.
(j) Purchasers enjoy suspension, exemption or reduced rates of tax
(including VAT) and duty on the Products and in the taxing jurisdictions listed
on Schedule 6.7(j) hereof. Flextronics agrees that it will, and that it will
cause the Flextronics Affiliated Companies to, attempt to obtain and, if
necessary, seek rulings obtaining (and Purchasers agree that they will
cooperate with Flextronics in the obtaining of) the same or similar suspension,
exemption or reduced rates of Tax (including VAT) and duty on the Products that
will be sold to Purchasers, unless Flextronics obtains the written consent of
Xerox, which consent will not unreasonably be withheld provided that Xerox
determines that any such failure to obtain the same or similar suspension,
exemption or reduced rates of Tax (including VAT) and duty on the Products
would not materially and adversely affect the amount of taxes (other than Taxes
recoverable by Purchasers) and/or customs duties that would otherwise be
payable or reimbursable by Purchasers.
(k) Xerox and Flextronics each agree to cooperate in good faith and to
take such actions as are reasonably necessary to minimize or eliminate the
amount of any tax required to be withheld or paid by any Purchaser or any
Flextronics Affiliated Company with respect to the transactions contemplated by
this Agreement.
Section 6.8 Intellectual Property Royalty. Xerox and Flextronics may
agree in writing in the future to a royalty to be paid by Flextronics and the
Flextronics Affiliated Companies for the use by Flextronics and the Flextronics
Affiliated Companies of the Xerox Intellectual Property. Any such royalty shall
be treated as a cost for purposes of calculating UMC. However, in no event
shall (i) Flextronics or any Flextronics Affiliated Company be entitled to any
Margin Amount (or the recovery of any Taxes, duties, levies or other similar
charges imposed thereon) with respect to the amount of any such royalty, or
(ii) Flextronics or any Flextronics Affiliated Company be entitled to [*].
Section 6.9 Compliance with Laws. Subject to Section 6.7(e) and (f)
hereof, Flextronics shall use its commercially reasonable efforts to secure any
permits, approvals, licenses, or authorizations required to be obtained by
Flextronics or any Flextronics Affiliated Company under this Agreement to
ensure that the Products conform in all material respects to the requirements
of Governmental Authorities, and may be imported into, and sold in, the country
of destination. Such Governmental Authorities include, but are not
limited to, the United States Federal Communications Commission, Food and Drug
Administration, Consumer Product Safety Commission and Federal Trade
Commission. Flextronics shall also use commercially reasonable efforts to
ensure that all Products delivered to Purchaser are in compliance with all
mandatory standards imposed by the country of importation, including but not
limited to United States mandatory standards, European Union standards, and
Mexican Normas Oficiales Mexicanas (NOMs).
ARTICLE 7
MANUFACTURING
Section 7.1 Manufacture in Accordance with Specifications and Applicable
Laws. Flextronics shall, and shall cause all Sub-Tier Suppliers who will
provide Products hereunder, to manufacture all Products in accordance with the
Specifications therefor and in accordance with all Applicable Laws.
Section 7.2 Purchase of Components. Flextronics is required to, and
shall cause the Flextronics Affiliated Companies to, purchase a sufficient
number of Components to support the manufacture and sale of Products hereunder;
provided, however, that Xerox shall be responsible therefor solely to the
extent and as set forth in Sections 4.10(a), 9.5 and 16.1(b) hereof. In the
event any Purchaser has any Components that meet the Specifications,
Flextronics and the Flextronics Affiliated Companies are required to buy back
such Components at the then-effective UMC therefor to the extent needed to fill
Forecasted demand during the next ninety (90) calendar days.
Section 7.3 Manufacturing Capacity.
(a) Flextronics shall maintain, and shall cause the Flextronics
Affiliated Companies to maintain, sufficient manufacturing capacity in the
Facilities during the Term in order to provide Purchasers with all Products
ordered by Purchasers hereunder and all Products that are forecasted to be
ordered by Purchasers hereunder in accordance with the Product Forecasts.
Flextronics and the Flextronics Affiliated Companies shall accept all complete
Purchase Orders issued by any Purchaser and received by Flextronics or any
Flextronics Affiliated Company in accordance with terms of this Agreement. In
the event that Flextronics in good faith believes that Flextronics' and the
Flextronics Affiliated Companies' manufacturing capacity will be insufficient
to meet Xerox's Product Forecasts, then Flextronics shall notify Xerox in
writing thereof immediately and the parties shall promptly meet to develop a
solution to this problem.
(b) Neither Flextronics nor any of the Flextronics Affiliated Companies
shall commence production of any product for any third party customer until
Flextronics' and the Flextronics Affiliated Companies' available manufacturing
capacity in the Facilities (running at maximum employee and asset utilization
during all shifts) to satisfy any Purchaser's orders of Products under this
Agreement is equal to one hundred twenty percent (120%) of Xerox's Forecasts,
as indicated by the first sixty (60) calendar days of the then applicable Xerox
six-month rolling Forecast.
Section 7.4 Use of Used Components Yielded From Remanufacture and
Conversion of Products.
(a) Flextronics acknowledges and agrees that Flextronics and the
Flextronics Affiliated Companies shall be required to remanufacture and use
Used Components in connection with the manufacture of Products hereunder,
including without limitation, the manufacture of New Build Products,
Remanufactured Products and Conversion Products so long as such Used Components
can be remanufactured to meet the Specifications therefor and to the extent
available. The source of Used Components shall be any Products provided by a
Purchaser or its agent (which may, in certain circumstances agreed by the
parties, be Flextronics or a Flextronics Affiliated Company) to Flextronics or
any Flextronics Affiliated Company (including, without limitation, Completed
Machines and certain Modules) (such Products being referred to herein as
"Hulks"). Under no circumstances, however, shall Flextronics or any
Flextronics Affiliated Company be required to purchase any amount of Hulks (or
otherwise hold any such Hulks or Used Components in its inventory of
Components) that when added to its current inventory of Components will result
in an amount of inventory which is in excess of that inventory needed to meet
the then Forecasted demand for Products containing such Components for ninety
(90) calendar days, and in no event shall Flextronics or any Flextronics
Affiliated Company sell or otherwise transfer any Used Components to any entity
that is not a Xerox Affiliated Company.
(b) Purchaser shall issue an original invoice to Flextronics or the
relevant Flextronics Affiliated Company for Hulks promptly after shipment of
such Hulks, as determined by Xerox. Such invoice will include the price of
each Hulk, as determined by Xerox, invoiced and delivered, plus any applicable
taxes (other than income taxes or taxes in lieu thereof), separately stated by
type and amount of tax imposed on Flextronics or such Flextronics Affiliated
Company and to be collected by Purchaser in connection with the sale and
delivery of such Hulk. Such original invoice shall be supported by appropriate
detail and summary billing information provided to Flextronics or such
Flextronics Affiliated Company in a timely manner, and both the invoice and the
supporting documentation shall be in the form required by the appropriate
Governmental Authority or as otherwise mutually agreed. Flextronics or such
Flextronics Affiliated Company shall pay such invoices within forty-five (45)
calendar days of the date of such invoices, provided that if the payment date
falls on a day that is not a Business Day, then the due date shall be on the
next succeeding Business Day, and further provided that no payment will be made
by Flextronics or such Flextronics Affiliated Company unless and until the
invoice and associated documentation comply with all governmental rules and
regulations related thereto. All applicable customs duties and fees related to
the importation of Hulks sold to Flextronics or such Flextronics Affiliated
Company will be the responsibility of Flextronics and such Flextronics
Affiliated Company, and will be paid by Flextronics or such Flextronics
Affiliated Company directly to the applicable Governmental Authority. Payment
against Purchaser's invoices shall be made via electronic funds transfer or by
paper check, as determined by Flextronics. The parties may agree in writing
from time to time during the Term that Flextronics or any Flextronics
Affiliated Company may act as agent for Purchasers in accepting receipt of
returned Products or that Purchasers shall retain title to Hulks during the
remanufacturing and/or conversion processes conducted by Flextronics or any
other mutually satisfactory method for the acquisition and use of Hulks.
(c) Subject to the Minimum Percentage requirements set forth in this
Agreement, nothing in this Agreement shall prevent or limit the right of Xerox
or any Xerox Affiliated Company to continue to conduct remanufacturing and
conversion operations at its own facilities (including without limitation, the
Mitcheldean, Manaus, Rampur and Cairo manufacturing
facilities of Xerox). Further, notwithstanding anything contained in this
Agreement to the contrary, Purchasers shall be permitted to conduct Light
Remanufacturing and Conversion Operations, in the Purchasers' discretion.
Flextronics and the Flextronics Affiliated Companies shall cooperate with all
Purchasers who so request in connection with such Purchaser's conduct of light
remanufacturing and light conversion by providing necessary Components (at
prices to be agreed at the time) and Specifications and other data necessary
therefor.
(d) All Products containing Used Components shall be subject to all
quality assurance and inspection requirements in accordance with the provisions
of Article 8. The representations, warranties or covenants of Flextronics set
forth in Article 14 of this Agreement shall apply to any Products containing
Used Components, commencing on the receipt of such Products by Purchaser.
(e) Flextronics acknowledges and agrees that Used Components shall be
used by Flextronics and the Flextronics Affiliated Companies wherever
practicable prior to using new Components.
Section 7.5 Repair Obligations of Flextronics. In the event that any
Purchaser determines that a Component requires repair for any reason, such
Purchaser shall deliver such Component to Flextronics or the relevant
Flextronics Affiliated Company. Purchaser shall issue an original invoice to
Flextronics or such Flextronics Affiliated Company for such Components promptly
after shipment of such Components by Purchaser. Such invoice will include the
Buy Back Price of each such Component invoiced and delivered, as agreed, plus
any applicable taxes (other than income taxes or taxes in lieu thereof),
separately stated by type and amount of Tax imposed on Flextronics or such
Flextronics Affiliated Company and to be collected by Purchaser in connection
with the sale and delivery of such Component. Such original invoice shall be
supported by appropriate detail and summary billing information provided to
Flextronics or such Flextronics Affiliated Company in a timely manner, and both
the invoice and the supporting documentation shall be in the form required by
the appropriate Governmental Authority or as otherwise mutually agreed.
Flextronics or such Flextronics Affiliated Company shall pay such Purchaser the
Buy Back Price for such Component within forty-five (45) days from receipt of
such Component (the "Buy Back Period"); provided, however, that no payment will
be made by Flextronics or such Flextronics Affiliated Company unless and until
the invoice and associated documentation comply with all governmental rules and
regulations related thereto. All applicable customs duties and fees related to
the importation of such Components sold to Flextronics or any Flextronics
Affiliated Company will be the responsibility of Flextronics, and will be paid
by Flextronics or such Flextronics Affiliated Company directly to the
applicable Governmental Authority. Payment against Purchaser's invoices shall
be made via electronic funds transfer or by paper check, as determined by
Flextronics. Xerox and Flextronics shall meet at least every three (3) months
to negotiate the Buy Back Price and Buy Back Period for such Components. Xerox
and Flextronics shall negotiate in good faith to: (i) adjust the Buy Back Price
for Components to reflect costs for labor, material, and any other expenses
associated with repair, and (ii) adjust the Buy Back Period where they
determine that the average period within which Flextronics or any Flextronics
Affiliated Company repairs and resells any type of such Component to any
Purchaser is longer or shorter than forty-five (45) days. All Products
repaired or replaced pursuant to this Section 7.5 shall be subject to all
quality assurance and inspection requirements in accordance with the
provisions of Article 8. To the extent any representation, warranty or covenant
of Flextronics set forth in Article 14 of this Agreement applied to the Product
prior to its rejection, such representation, warranty or covenant shall
continue to apply to the repaired or replaced Product, commencing on the
receipt of such replaced or repaired Products by Purchaser.
Section 7.6 Initial Location and Change in Location of Manufacture.
Flextronics shall, and shall cause the Flextronics Affiliated Companies to,
except as otherwise provided on Schedule 7.6 hereto, manufacture Products in
the same facility at which such Products were manufactured by Xerox immediately
prior to execution of this Agreement. If Flextronics provides on Schedule 7.6
to manufacture initially at a facility other than that used by Xerox,
Flextronics shall not, and shall cause the Flextronics Affiliated Companies not
to, undertake any such alternate manufacturing without the prior written
consent of Xerox, which consent shall not be unreasonably withheld; provided,
however, that Xerox's withholding of consent shall automatically be deemed to
be reasonable if such event would materially and adversely affect the quality,
capabilities, Product Lead Times or UMCs of Products or the associated cost of
freight, Taxes (other than taxes recoverable by Purchasers) and/or customs
duties that would otherwise be payable or reimbursable by Purchasers or would
operate to deny Purchasers market access for Products. Flextronics shall not,
and shall cause the Flextronics Affiliated Companies not to, change the
location of or cease operations at any Facility, or change the location of the
manufacture of any Product from its then-current Facility to another location
without the prior written consent of Xerox, which consent shall not be
unreasonably withheld; provided, however, that Xerox's withholding of consent
shall automatically be deemed to be reasonable if such event would materially
and adversely affect the quality, capabilities, Product Lead Times or UMCs of
Products or the associated cost of freight, Taxes (other than taxes recoverable
by Purchasers) and/or customs duties that would otherwise be payable or
reimbursable by Purchasers or would operate to deny Purchasers market access
for Products. If Xerox grants Flextronics the written consent referred to in
this subsection (to initially manufacture in a different facility or to change
any such location, etc.), then Xerox may, in its sole discretion, make any such
consent conditional on Flextronics and the Flextronics Affiliated Companies
obtaining and/or maintaining certain waivers, licenses, reduced tax rate
certificates, and other similar items that could affect the total cost of a
Product to Xerox.
Section 7.7 Data Protection. Flextronics shall, and shall cause the
Flextronics Affiliated Companies to, establish and maintain reasonable means of
protection against violation, destruction, loss or alteration of data and data
files in respect of the manufacture of the Products and implement a process
sufficient to isolate and return rejected and defective Components, including,
but not limited to, daily software system backups to be stored off-site and a
backup site to run Flextronics' and the Flextronics Affiliated Companies'
systems; provided, that such means of protection shall be automatically deemed
to be reasonable if such means are equal to or exceed the means that Xerox
employs in respect of data protection as of the date hereof. In addition,
Flextronics shall, and shall cause the Flextronics Affiliated Companies to,
institute security procedures no less restrictive than Xerox's exportation
procedures as of the date hereof to prevent the exportation of technical data
in violation of United States export control laws. Flextronics shall present to
Xerox such plan of data protection and security procedures within ninety (90)
calendar days of the execution hereof. Upon reasonable notice and at reasonable
times, Flextronics shall, and shall
cause each of the Flextronics Affiliated Companies to, grant reasonable
access to its data and data file related to the manufacture of Products under
this Agreement as Xerox may reasonably require. The parties agree that third
party visitors who Xerox then deems are direct or potential competitors of
Xerox (including without limitation Canon, Heidelberg, Hewlett-Packard,
Lexmark, Minolta, Oce, Ricoh, Sharp and Toshiba) shall not be allowed in the
manufacturing areas where any Products (other than Electronic Components) are
being manufactured in the Facilities for Purchasers without Xerox's prior
written consent.
Section 7.8 Recovery Plan. Effective as of the date hereof, Flextronics
shall, and shall cause the Flextronics Affiliated Companies to, adopt and use
at the Facilities and at any other manufacturing locations where Products for
Purchasers are manufactured, the Xerox protection and disaster recovery plan
(the "Recovery Plan") attached to this Agreement as part of Schedule C hereto.
After the date hereof, Flextronics may revise the Recovery Plan or substitute
its own protection and disaster recovery plan therefor; provided, that, in the
discretion of Xerox as indicated by Xerox in writing, such revised Recovery
Plan or substitute plan (i) shall be designed to avoid shutdown or
interruptions in the manufacturing capability and if such a shut down or
interruption nevertheless occurs, to reduce the effects of such occurrences,
(ii) shall identify minimum protection standards, including standards for
responding to Force Majeure Events, and (iii) shall conform to or exceed the
requirements of the Recovery Plan of Xerox, as the same may have been amended
or replaced and is then in effect.
Section 7.9 Contract Manufacturing.
(a) If Flextronics' current structural arrangements either: (i) include
a principal/agent formed in Labuan, Mauritius, or Hungary to perform contract
manufacturing at any Facility; or (ii) separate the ownership of the Facility
and its operations and employees from the ownership of the underlying
manufacturing assets, Products, Components, or work-in-progress inventory, then
Flextronics shall not include in the applicable UMCs, or otherwise invoice
Purchasers for, and will indemnify Purchasers for, any non-incidental
incremental cost (including all Tax and duty costs) that would not have been
incurred but for the use by Flextronics of such arrangement.
(b) Xerox agrees to discuss the possibility of implementing:
(i) a principal/agent or other similar arrangement to perform
contract manufacturing at any Facility; or
(ii) separation of the ownership of the Facility and its operations
and employees from the ownership of the underlying manufacturing assets,
Products, Components, or work-in-progress inventory
in selected jurisdictions, and Xerox agrees to allow Flextronics, provided
that the parties mutually agree, to implement said (b)(i) or (b)(ii).
Notwithstanding the above, Flextronics shall have the right, in Flextronics'
sole discretion, to implement the structures in (b)(i) or (b)(ii), provided:
(A) that any such implementation does not impose a non-incidental incremental
cost (including all Tax and duty costs) on, or a material risk that any
significant non-incidental incremental costs (including all Tax and duty
costs) may be incurred by, Purchasers; and (B) that Flextronics agrees in
writing to bear such non-incidental incremental costs (including all Tax and
duty costs), if any.
ARTICLE 8
QUALITY ASSURANCE
Section 8.1 Quality Requirements.Products produced and delivered to
Purchaser shall fully comply with the Specifications therefor, including
without limitation, the requirements of the Xerox-approved Quality Plan for
Products referred to in Section 8.3 below and the reliability standards set
forth in the Specifications.
Section 8.2 Quality Systems Certification Requirements. Flextronics
will have or will actively be pursuing at each Facility a Quality System
certified under ISO 9002 (or TC1706 Approved equivalent) and ISO 14001 (or
any future or modified ISO certification standards), and the manufacturing
operations of Flextronics and the Flextronics Affiliated Companies and the
Facilities shall conform to applicable national and international quality
standards, guidelines and practices during the Term. Flextronics shall
notify Xerox of any change in ISO certification status of Flextronics or any
Flextronics Affiliated Company, shall furnish Xerox with copies of
certification certificates upon request and shall maintain its certifications
in good standing.
Section 8.3 Quality Plan for Products. Effective as of the date hereof,
Flextronics shall adopt and use at the Facilities and at any other
manufacturing locations where Products for Purchasers are manufactured, the
XW1001 Supplier Quality Requirements, and detailed descriptions contained in
the "Multinational Quality Guideline for the Certification of Purchased
Products" (Xerox document TQM3120) (the "Quality Plan for Products") attached
to this Agreement as part of Schedule C hereto. After the date hereof,
Flextronics may revise the Quality Plan for Products or substitute its own
quality plan therefor; provided, that, in the discretion of Xerox as indicated
by Xerox in writing, such revised Quality Plan for Products or substitute plan
shall (i) encompass Spares and consumables, as well as equipment, (ii) define
the controls and operating systems required to assure that only defect-free
Products will be delivered to the Purchasers and on- going compliance with
superior quality standards, (iii) set forth the procedure to be followed for
Product verification tests and auditing of the tests conducted at the
Facilities, including the procedure for handling non- conforming Products, and
(iv) conform to or exceed the requirements of the quality plan for Products of
Xerox then in effect. Flextronics shall, and shall cause the Flextronics
Affiliated Companies to, permit Xerox's Material Quality Assurance Department
or its authorized representatives to perform or oversee the performance of a
verification test program for the Products as part of a bonded lot release
process until Flextronics achieves certification of the Products, satisfactory
to Xerox.
Section 8.4 Product Packaging. Effective as of the date hereof,
Flextronics shall adopt and use at the Facilities and at any other
manufacturing locations where Products for Purchasers are manufactured, the
Xerox packaging test plan (the "Packaging Test Plan") attached to this
Agreement as part of Schedule C hereto. After the date hereof, Flextronics
may revise the Packaging Test Plan or substitute its own packaging test plan
therefor; provided, that, in the discretion of Xerox as indicated by Xerox in
writing, such revised Packaging Test Plan or substitute plan shall (i)
demonstrate that internal and external packaging materials used with respect
to Products sold to Purchasers by Flextronics or any Flextronics Affiliated
Company hereunder meet the packaging requirements set forth in the
Specifications, including without limitation, that there be no substantial
damage to any packaging materials under normal shipping conditions, and (ii)
conform to or exceed the requirements of the packaging test plan of Xerox
then in effect.
Section 8.5 Problem Management Process. Xerox and Flextronics shall meet
and review any data that indicates a measurable variance from any quantitative
specification in any Product's manufacturing specifications contained in the
Specifications. The means used to jointly review data for variance from
Specification and to implement corrective action will be a process (the
"Problem Management Process") set forth below, which both Flextronics and Xerox
shall implement to ensure continuous improvement in Product performance and
timely reaction to shortfalls in Product performance as specified in the
applicable Specification.
(a) Top Problem List. Flextronics and Xerox shall jointly develop a top
problem list with respect to each Product and determine possible solutions. If
it is determined that a problem does not violate the Specifications then, upon
joint agreement, Flextronics will implement tests and approved solutions to the
subsequent manufacture of such Products. The top problem list of Xerox
existing as of the date hereof shall be the initial top problem list with
respect to the Products.
(b) Product Compliance Test Plan. If a Product problem initially appears
to the parties to result in the Product not being in compliance with the
applicable Specifications, the parties shall mutually agree on a test plan to
provide statistically significant validation of such non-compliance and
Flextronics shall conduct such tests and report the results thereof to Xerox as
soon as possible.
(c) Configuration or Sub-Tier Supplier Change. In the event of a Major
Change or a change in the Sub-Tier Supplier of a Component (including without
limitation any addition of a new Sub-Tier Supplier, any qualification of an
Approved Sub-Tier Supplier to supply a different Component and any switch in
the manufacture of a Component from one Approved Sub-Tier Supplier to another
Approved Sub-Tier Supplier), the parties shall discuss and agree on a plan of
testing to ensure that the Product continues to function to Specifications
after such Major Change or change in Sub-Tier Supplier has been implemented.
Section 8.6 On Site Engineer. Upon Xerox's reasonable request in
response to urgent customer issues with respect to any Products, Flextronics
shall dispatch one or more qualified engineer(s) to any Purchaser's facility or
Purchaser's customer's facility no later than three (3) Business Days after a
request by Xerox therefor. Such engineer(s) shall stay at such facilities for
as long as necessary to provide technical assistance, quality assurance and
training support as required. Flextronics shall bear the costs and expenses
related to the provision of the services of such engineer(s) for up to 180
equivalent work days of such engineers' aggregate time per Flextronics facility
that manufactures Product for Xerox in any rolling twelve-month period.
Notwithstanding the foregoing, Xerox agrees that it will make requests pursuant
to this Section 8.6 as necessary in connection with the resolution of customer
issues for which Xerox reasonably believes Flextronics may be of assistance.
ARTICLE 9
PRODUCT CONFIGURATION MANAGEMENT AND CONTROL
Section 9.1 Responsibility for Product Configuration. Xerox shall retain
sole responsibility for developing and maintaining the Product Configuration
for each Product and the related Configuration Database; provided, however,
upon the request of Xerox, Flextronics and the Flextronics Affiliated Companies
shall cooperate with Xerox in any manner as Xerox may reasonably request in the
maintenance of the Configuration Database, including without limitation,
assuming responsibility therefor.
Section 9.2 Major Changes and Minor Changes Proposed by Flextronics.
Flextronics shall notify Xerox's MSA Contract Manager in order to propose a
Major Change or a Minor Change. Such person shall have the right to approve or
deny such proposed Major Change or Minor Change, in his or her reasonable
discretion. In addition, prior to approving or denying any such Major or Minor
Change proposal, such person shall be entitled to require Flextronics to submit
a formal written change request (each, a "Change Request") with respect
thereto. Such Change Request shall include, without limitation, an evaluation
of the feasibility of the proposed change, the cost of the modification, any
change in UMC, Purchase Price or manufacturing or delivery times for the
subject Product as a result of the proposed change, the amount of time required
for implementation, the likelihood of obsolescence of any Components and such
Change's anticipated effect on the safety, function, performance, reliability,
serviceability, appearance, dimensions and tolerances of the subject Product
and a Components list for the revised Product. Xerox shall approve or reject
any such Change Request in writing within thirty (30) calendar days of receipt
thereof. If Xerox has not responded to such informal proposal or formal Change
Request by the expiration of such thirty (30) calendar day period, Flextronics
shall have the right to notify the person to whom Xerox's MSA Contract Manager
reports of such rejection or nonresponse and such person shall meet with
Flextronics within five (5) Business Days thereof to discuss the same.
Notwithstanding anything contained herein to the contrary, no approval of a
proposal for a Major or Minor Change or formal Change Request shall be
effective unless it is in writing signed by Xerox's MSA Contract Manager. With
respect to any Major Change relating to a safety issue, Flextronics shall
immediately notify Xerox of any identified safety issue that is contemplated to
require a Major Change.
Section 9.3 Major Changes Proposed by Xerox. Xerox shall submit a
written proposal to Flextronics in order to propose a Major Change. Flextronics
shall respond to such written proposal within ten (10) Business Days after
receipt of such proposal, indicating, to the extent such information is then
available, an evaluation of the feasibility of the proposed change, the cost of
the modification, any change in UMC, Purchase Price or manufacturing or
delivery times for the subject Product as a result of the proposed change, the
amount of time required for implementation, the likelihood of obsolescence of
any Components and such Change's anticipated effect on the safety, function,
performance, reliability, serviceability, appearance, dimensions and tolerances
of the subject Product and a Components list for the revised Product.
Flextronics' response shall also indicate, if some of such information was not
then available, when a complete response can be delivered. In no event shall a
complete response from Flextronics be made more than thirty (30) calendar days
following receipt by Flextronics of Xerox's Major Change proposal. Xerox shall
determine, in its sole discretion, within a reasonable amount of time after
Xerox's receipt of Flextronics'
complete response to Xerox's Major Change proposal whether to implement such
Major Change, based on Flextronics' response. Notwithstanding the foregoing,
in the event Xerox wishes to make a Major Change because of a safety or
environmental issue, such Major Change shall be implemented as soon as
reasonably possible.
Section 9.4 Minor Changes Proposed By Xerox. Xerox shall notify
Flextronics' MSA Contract Manager in writing in order to propose a Minor
Change. Xerox and Flextronics shall, within five (5) Business Days thereof
meet and in good faith discuss the feasibility of such Minor Change (including,
as applicable, the cost of the modification, any change in UMC, Purchase Price
or manufacturing or delivery times for the subject Product as a result of the
proposed change, the amount of time required for implementation, the likelihood
of obsolescence of any Components and such Change's anticipated effect on the
safety, function, performance, reliability, serviceability, appearance,
dimensions and tolerances of the subject Product and a Components list for the
revised Product). Following such discussions, Xerox shall notify Flextronics in
writing whether or not to implement such Minor Change, based on such
discussions. Notwithstanding the foregoing, in the event Xerox wishes to make a
Minor Change because of a safety or environmental issue, such Minor Change
shall be implemented as soon as reasonably possible.
Section 9.5 Costs of Implementation; Obsolete Products. In the event
that a Major or Minor Change is implemented (other than as a result of the
breach by Flextronics of any of its representations, warranties or covenants
set forth in Article 14 hereof), then Xerox shall bear all costs and expenses
related to such Major or Minor Change, including without limitation, any costs
and expenses incurred as a result of the obsolescence of Purchaser's or
Flextronics' or the relevant Flextronics Affiliated Company's inventory as
follows: [*]; provided, however, that, notwithstanding the foregoing, [*].
Upon the request of Purchaser, Flextronics and the Flextronics Affiliated
Companies shall (and Flextronics shall use its commercially reasonable efforts
to cause the Sub-Tier Suppliers to) provide reasonably acceptable documentation
substantiating any and all such costs. If requested by Purchaser, Flextronics
and the Flextronics Affiliated Companies shall (and Flextronics shall use its
commercially reasonable efforts to cause the Sub- Tier Suppliers to) permit
Purchaser's representatives to review the business records of Flextronics and
the Flextronics Affiliated Companies (or the Sub- Tier Supplier, as the case
may be) for the sole purpose of validating the claim for costs (subject to any
confidentiality agreements to which Flextronics is a party), to validate the
count of inventory of such Product and the Components and to supervise the
scrappage, if any, of such Product or Components. After such Major Change or
Minor Change is approved, Flextronics shall commence the Inventory Repurchase
Procedure.
Section 9.6 Serial Number Notification. Any changes to any Product
Configuration pursuant to this Article 9 shall be implemented in accordance
with the applicable timing for such implementation as indicated above. For
each changed Product, the serial number for the first of such changed Product
shall be identified to Xerox, and Flextronics agrees that all such Products
with serial numbers greater than such first identified changed Product shall
incorporate such changes. Processes standard in the industry to designate
changes of configuration shall be employed with respect to any changed
Products, including without limitation, tag designation, specific serial number
or other method as agreed between Flextronics and Xerox for each specific
Product.
ARTICLE 10
GOVERNMENTAL AUTHORITY, APPROVAL AND SAFETY
Section 10.1 Compliance. Flextronics shall, and shall cause the
Flextronics Affiliated Companies to, comply, in the manufacture and supply of
Products to Purchasers hereunder, with all Xerox requirements set forth in the
Specifications (including without limitation the safety requirements and other
Governmental Authority requirements described in the Specifications) and all
Applicable Laws, in each case as are in effect at the time of shipment of such
Products.
Section 10.2 Monitoring of Compliance.
(a) Flextronics shall provide Xerox with all information necessary to
evaluate compliance with Section 10.1 above, as reasonably requested by Xerox.
Such information shall include, but not be limited to (i) the identity of
substances and quantity thereof in any formulation, (ii) toxicity data (Xxxx
Assay and/or other tests for mutagenicity, human patch tests or acute studies),
(iii) chemical emissions test data, and (iv) waste disposal status of Products.
(b) Flextronics shall, and shall cause the Flextronics Affiliated
Companies to, also cooperate with and provide to Xerox, as requested by Xerox,
information necessary to manage potential hazards posed by Products and respond
to information requests from Governmental Authorities, customers or other stake
holders and to establish written procedures to ensure that the appropriate
party will have reasonable access to the necessary information. Any such
procedures established by Flextronics and the Flextronics Affiliated Companies
shall be in compliance with all requirements of the "Xerox Environmental Health
and Safety Requirements" (and any successor document).
Section 10.3 Governmental Authority Approvals. The parties agree to
cooperate in the activities necessary to obtain all approvals and
certifications from Governmental Authorities that are or shall become necessary
in order for the parties to fulfill their obligations under this Agreement.
Governmental Authority approvals that are required prior to the delivery of a
Product in a country in which the product is to be sold are listed in the
applicable Specifications. The responsibility of each party for performing
specific tasks and obtaining such Governmental Authority approval and which
party will pay for the associated expenses shall be as agreed by Xerox and
Flextronics.
ARTICLE 11
INSURANCE
Section 11.1 Insurance Coverage. (a) Flextronics shall obtain and
maintain insurance covering each Facility, all equipment used in manufacturing
the Products (including without limitation the Xerox-Owned Assets and the Xerox
Unique Property) and the inventory of Products against customary casualty
risks, as well as general liability coverage for personal injury and property
damage, with contractual liability endorsements applicable to indemnity
obligations of Flextronics hereunder. Such insurance will be maintained with
insurance companies with a Best's rating of no less than A minus (or a
comparable rating level), shall be endorsed to provide
that coverage will not be canceled, except after thirty (30) calendar days
prior written notice to Xerox. Flextronics shall maintain the types of
insurance with limits of no less than as follows, provided that such limits may
be set forth in Flextronics' umbrella policy:
(i) Comprehensive general liability insurance, [*] combined single
limit per occurrence and [*] (on an occurrence basis and not on a claims
made basis), including contractual coverage, product and completed
operations coverage, and broad form vendors coverage.
(ii) Automotive liability insurance, [*] combined single limit per
occurrence (on an occurrence basis and not on a claims made basis).
(iii) Workers' compensation insurance with statutory limits and
employers' liability insurance, [*].
(iv) All risk property insurance and business interruption coverage,
with values insured to replacement cost.
(b) Flextronics shall cause the insurer to name Xerox as loss payee on
the insurance listed in Section 11.1(a)(iv), and as an additional insured on
all such policies of insurance listed in Section 11.1(a)(i).
Section 11.2 No Limitation of Liability. The amount of insurance
purchased by Flextronics will not limit the liability of Flextronics to
Xerox.
Section 11.3 Certificate; Copies of Policies. A certificate of insurance
evidencing such coverage and the limits of liability (amounts of coverage)
carried by Flextronics as well as copies of all such insurance policies shall
be provided to Xerox upon Xerox's request.
Section 11.4 Loss Control. For each Facility, Flextronics will maintain
loss control standards consistent with the National Fire Protection Association
guidelines.
ARTICLE 12
REPRESENTATIONS AND WARRANTIES OF FLEXTRONICS
Flextronics hereby represents and warrants that Flextronics and the
Flextronics Affiliated Companies are financially solvent. Flextronics, the
Flextronics Affiliated Companies and each of their respective employees,
agents, subcontractors, and contractors are authorized and competent to perform
the services and manufacture and sell the Products required under this
Agreement.
ARTICLE 13
COVENANTS OF THE PARTIES
Section 13.1 Covenants of Flextronics. Flextronics hereby covenants as
follows:
(a) Maintenance of Licenses. Flextronics and each of the Flextronics
Affiliated Companies shall, and Flextronics shall use its commercially
reasonable efforts to cause each Sub-Tier Supplier to, preserve and maintain
all of its franchises, licenses, rights and privileges under contract or
Applicable Laws that are material to the proper conduct of its business.
(b) Compliance with Applicable Laws. Flextronics and each of the
Flextronics Affiliated Companies shall, and Flextronics shall use its
commercially reasonable efforts to cause each Sub-Tier Supplier to, comply,
and shall ensure that its manufacturing operations and the conduct of its
business are, and the manufacturing operations and the conduct of the
business of each Sub-Tier Supplier is, and remain and are operated, managed
and maintained in compliance in all material respects with all Applicable
Laws.
(d) Cooperation. In connection with the performance of its duties
hereunder, Flextronics and the Flextronics Affiliated Companies shall at all
times act in good faith and cooperate in any reasonable manner with Xerox,
the other Purchasers and their agents, employees, contractors and
subcontractors.
(e) Access. Upon reasonable notice and at reasonable times,
Flextronics shall allow Xerox or its authorized representatives (i) access to
all of the Facilities, (ii) access to any property or premises on which any
books or records relating to the manufacture or sale of Products (other than
Electronic Components materials with respect to which Flextronics is subject to
confidentiality agreements with third parties) or the performance of
Flextronics or any Flextronics Affiliated Company of Flextronics' obligations
under this Agreement may be located, (iii) to review and make extracts from
such books and records (other than with respect to Electronic Components
materials with respect to which Flextronics is subject to confidentiality
agreements with third parties), (iv) to discuss with any person (including its
officers, employees, accountants, suppliers, customers and contractors) any
matters with respect to the manufacture or sale of Products or the performance
by Flextronics or any Flextronics Affiliated Company of Flextronics'
obligations under this Agreement. Flextronics further agrees that if any
Purchaser maintains any action, claim or suit for the recovery of Taxes,
levies, duties, or other similar governmental charges, Flextronics or the
relevant Flextronics Affiliated Company will supply Purchasers with original
records in its possession and the cooperation of any persons within its employ
to enable Purchasers to prosecute said action, claim or suit.
(f) Books and Records. Flextronics shall make and keep at the
Facilities accurate and complete books, records and accounts, which shall, in
reasonable detail, fairly reflect the transactions of Flextronics and the
Flextronics Affiliated Companies with respect to the manufacture and sale of
the Products, Flextronics' and the Flextronics Affiliated Companies'
performance of Flextronics' duties under this Agreement and each element in
the preparation of the Quarterly Statements; such books, records and accounts
shall be kept and maintained in all respects in accordance with Applicable
Laws and otherwise in accordance with standards at least equal to best
industry practices. Flextronics shall keep all such records and accounts for
a period of at least ten (10) years (or such longer period as may be required
by any applicable statute of limitations) from the date on which such records
and accounts, as the case may be, relate. At the expiration of the time
period set forth in the preceding sentence with respect to the retention of
such records and accounts, Flextronics shall consult with Xerox and shall, at
the request of Xerox, forward any or all such records and accounts to Xerox
(except for such records related to Electronic Components materials with
respect to which Flextronics is subject to confidentiality agreements with
third parties).
(g) Audits and Inspections. Xerox shall be permitted upon reasonable
notice and at reasonable times to conduct audits and inspections with respect
to, and to otherwise monitor, the manufacture and sale of Products pursuant
to this Agreement and the performance of Flextronics and the Flextronics
Affiliated Companies of Flextronics' obligations hereunder, including,
without limitation, legal, financial (other than with respect to Electronic
Components materials with respect to which Flextronics is subject to
confidentiality agreements with third parties) and performance audits and the
employment of any key performance indicator tests (including without
limitation those set forth on Schedule E hereto) ("KPIs"), as Xerox may deem
necessary or desirable. Flextronics shall, and shall cause the Flextronics
Affiliated Companies and shall use its commercially reasonable efforts to
cause the Sub-Tier Suppliers, to cooperate fully in any such audit,
inspection or monitoring. If any such audit reveals that any Purchaser shall
have overpaid any amount, Flextronics shall promptly pay to such Purchaser
such overpaid amount with interest thereon at a rate equal to the Financing
Charge.
(h) Delivery of Reports. Flextronics shall deliver to Xerox the
reports listed on Schedule F hereto, as and when such reports are due,
together with additional reports and information reasonably requested by Xerox
and agreed to by Flextronics and any other reports specifically required
pursuant to any other Sections of this Agreement. In addition, Flextronics
shall cooperate in any reasonable manner and assist Xerox in gathering the
information and documentation necessary to complete reports, forms, statements,
and other documentation required by any Governmental Authority with respect to
the business and operations of Xerox.
(i) Tooling and Equipment at Sub-Tier Supplier Facilities.
Flextronics and the Flextronics Affiliated Companies shall cooperate with
Xerox in servicing any items of tooling or other equipment owned by Xerox or
any of the Xerox Affiliated Companies that is located at the facilities of
Sub-Tier Suppliers and is used or held for use by such Sub-Tier Suppliers for
the purpose of manufacturing Products. Flextronics and the Flextronics
Affiliated Companies shall also cooperate with Xerox in the design and
manufacture of any new equipment and tooling to be used or held for use by
such Sub-Tier Suppliers for the purpose of manufacturing Products (including
without limitation manufacturing such tooling and equipment at the
Facilities), as Xerox shall request. Appropriate compensation for the
rendering of such services by Flextronics and the Flextronics Affiliated
Companies shall be mutually agreed by Flextronics and Xerox at the time of
Xerox's request therefor.
(j) Special Access/Audit Rights. In the case where Flextronics is a
party to written confidentiality agreements with respect to Electronic
Components materials, Flextronics will provide Xerox with market price
information related to a "basket" of materials. In addition, an independent
auditor designated by Xerox from a nationally-recognized auditing firm (other
than KPMG LLP, PricewaterhouseCoopers LLP and Xxxxxx Xxxxxxxx LLP) may
exercise the access rights referred to in Section 13.1(e) hereof and the
audit rights referred to in Section 13.1(g) hereof with respect to such
confidential information. Xerox shall bear the expense of retaining such
auditor.
Section 13.2 Covenants of Xerox. Xerox hereby covenants as follows:
(a) Cooperation. In connection with the performance of its duties
hereunder, Xerox shall at all times act in good faith and cooperate in any
reasonable manner with Flextronics and the Flextronics Affiliated Companies.
(b) Compliance with Applicable Laws. Xerox shall, and shall cause
each Purchaser to, comply, and shall ensure that its business and operations
are, and the business and operations of each Purchaser are, and remain and are
operated, managed and maintained in compliance in all material respects with
all Applicable Laws.
ARTICLE 14
PRODUCT WARRANTIES
Section 14.1 Express Warranties. With respect to each Product sold
by Flextronics or any Flextronics Affiliated Company to a Purchaser under this
Agreement, Flextronics represents, warrants and covenants as follows
(collectively, the "Express Warranties"):
(a) Each such Product shall conform to the Specifications;
(b) Flextronics or such Flextronics Affiliated Company shall have
good title to each such Product at the time it is transferred to Purchasers,
free and clear of all liens, encumbrances and security interests of any nature
whatsoever;
(c) Each such Product shall be free from defects in Workmanship; and
(d) Each Component in each such Product, which Component was obtained
from Flextronics or any Flextronics Affiliated Company as Sub-Tier Supplier,
shall be free from defects in material and Workmanship.
(e) Each Component in each such Product, which Component is provided
by a Flextronics Sub-Tier Supplier, shall be free from defects in material and
Workmanship, but, in each case where Flextronics or any Flextronics Affiliated
Company is not the Sub-Tier Supplier, only to the extent otherwise warranted
by the manufacturer of such Component.
Section 14.2 Xerox Sub-Tier Supplier Warranties. With respect to each
Component obtained from a Xerox Sub-Tier Supplier under this Agreement, which
Component is the subject of any express or implied warranty, Flextronics
shall take all commercially reasonable steps necessary and shall in good
faith cooperate with Xerox to obtain for Purchasers the benefit of such
warranty, including, without limitation, by producing evidence to support
Xerox's warranty claim.
Section 14.3 Warranty Obligations. The Buy Back and repair process
set forth in Section 7.5 hereof shall govern the repair of defective Products,
regardless of the reason for such defect, up until such time as the number of
Failures of such Product reaches the Failure Rate Threshold for such Product.
If, at any time during the period commencing on the date of receipt by
Purchaser of any Product and ending [*] months thereafter, the
Failure Rate Threshold for such Product has been reached (the "Systemic
Defect Period"), the following procedures shall apply:
(a) The parties shall meet as necessary to discuss, investigate and
determine the nature and cause of such Failure and to develop and implement
appropriate responses to such Failure; provided, however, that Flextronics
shall not be required to provide engineering time at no charge other than as
set forth in Section 8.6 hereof. Flextronics shall cooperate with Xerox in
any manner reasonably requested by Xerox in respect of such actions.
(b) (i) In the event any such Failure is the result of the
Product failing to conform to the Express Warranties set forth in Section
14.1 hereof, Flextronics and the Flextronics Affiliated Companies shall
bear all costs and expenses related to such agreed-upon actions and to
the repair or replacement in respect of such Products.
(ii) In the event any such Failure is not the result of the
Product failing to conform to the Express Warranties set forth in
Section 14.1 hereof, Purchaser shall bear all costs and expenses related
to such agreed-upon actions and to the repair or replacement in respect
of such Products; provided, however, that Flextronics shall not be
required to provide engineering time at no charge other than as set
forth in Section 8.6 hereof.
(c) Flextronics and the Flextronics Affiliated Companies shall pay
any and all Taxes, duties, levies and similar governmental charges (other than
income Taxes or Taxes in lieu thereof imposed on Purchasers) imposed on
Flextronics, the Flextronics Affiliated Companies and Purchasers arising with
respect to any replacements of Products by Flextronics pursuant to Section
14.3(b)(i) hereof.
(d) Purchaser shall pay any and all taxes, duties, levies and similar
governmental charges (other than income taxes or taxes in lieu thereof imposed
on Flextronics or any Flextronics Affiliated Company) imposed on Flextronics,
the Flextronics Affiliated Companies and Purchasers arising with respect to
any replacements of Products by Purchasers pursuant to Section 14.3(b)(ii)
hereof.
(e) Flextronics and the Flextronics Affiliated Companies shall
support Xerox in the establishment of a joint diagnostic improvement process
to insure "no defect found" levels do not exceed acceptable limits.
Section 14.4 Hazardous Products. In the event that any Product
contains a hazard or is found by any agency having authority to make such
determination to contain or pose a hazard (a "Hazardous Product"), as that term
is understood under the United States Consumer Product Safety Commission Act or
any comparable or successor Applicable Laws, Flextronics shall cooperate with
Xerox in order to make all required reports to all applicable Governmental
Authorities. Xerox shall have control over all actions that it deems necessary
or desirable to comply with Applicable Laws. If it becomes necessary or, in
Xerox's opinion, desirable, that any Products should be recalled in order to
comply with such Applicable Laws, Flextronics shall cooperate with Xerox to
effectuate such recall as expeditiously as practicable. If a Product has been
deemed to be a Hazardous Product under this Section 14.4 by reason of the
breach of the Express Warranties contained in Section 14.1 hereof, all costs
and expenses related to any action taken by the parties with respect to such
Hazardous Product shall be borne by Flextronics and the Flextronics Affiliated
Companies. If a Product has been deemed to be a Hazardous Product under this
Section 14.4 not by reason of the
breach of the Express Warranties contained in Section 14.1 hereof, all costs
and expenses related to any action taken by the parties with respect to such
Hazardous Product shall be borne by Xerox. The requirement of cooperation in
this Section 14.4 shall not be deemed to require any party to delay making in
a timely manner any reports which may be required of it under Applicable Law.
Section 14.5 No Other Warranties. EXCEPT AS SET FORTH IN THIS
ARTICLE 14 AND IN ARTICLE 12, FLEXTRONICS MAKES NO OTHER WARRANTIES WITH
RESPECT TO THE PRODUCTS, EXPRESS, IMPLIED, STATUTORY, OR IN ANY OTHER
PROVISION OF THIS AGREEMENT OR IN ANY COMMUNICATION WITH XEROX OR ANY CUSTOMER
OR PURCHASER, AND FLEXTRONICS SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OR
CONDITION OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
ARTICLE 15
TERM; EVENTS OF DEFAULT; TERMINATION
Section 15.1 Term. Subject to earlier termination as provided
herein, this Agreement shall be in full force and effect force for a term of
five (5) years, commencing on the date hereof and terminating on the fifth
anniversary of such date (the "Initial Term"). Xerox shall have the right, but
not the obligation, to extend the Initial Term for up to two (2) additional one
year periods (the "Mandatory Extension Term"). In the event Xerox decides not
to exercise such right to the Mandatory Extension Term, it shall provide
written notice to Flextronics thereof not less than one hundred eighty (180)
calendar days prior to the end of the Initial Term. After the Initial Term or
the Mandatory Extension Term, as applicable, this Agreement shall
automatically be renewed for successive periods of twelve (12) months each
(each a "Renewal Term") unless either party elects to terminate this Agreement
by delivering to the other party a termination notice not less than one
hundred eighty (180) calendar days prior to the end of the Initial Term, the
Mandatory Extension Term or any such Renewal Term, as the case may be. The
entire duration of the effectiveness of this Agreement, from the first day of
the Initial Term, through the last day of the effectiveness of this Agreement
prior to its expiration or termination as provided herein, is hereinafter
referred to as the "Term."
Section 15.2 Flextronics Events of Default. The occurrence of any of
the following shall constitute a "Flextronics Event of Default" for purposes
of this Agreement:
(a) (i) a petition for relief under applicable bankruptcy laws or
regulations is filed by or against Flextronics or any Flextronics Affiliated
Company that is party to an SSA; (ii) Flextronics or any Flextronics
Affiliated Company that is party to an SSA makes an assignment for the
benefit of creditors or a receiver is appointed; (iii) the nationalization,
expropriation or other taking by any government, or any agency or
instrumentality of any government, of a substantial part of Flextronics' or
of any Flextronics Affiliated Company's assets or business or of any
ownership interest in Flextronics or any Flextronics Affiliated Company; or
(iv) Flextronics or any Flextronics Affiliated Company that is party to an
SSA is unable to pay, or is generally not paying, its debts (other than those
that are the subject of bona fide disputes) as they become due, and such
petition, assignment, agreement or inability to pay or non-payment is not
dismissed, vacated, terminated or cured within thirty (30) calendar days;
provided, that, to the extent Applicable Law may prevent Xerox from
terminating this Agreement in the event of (a)(i) through (a)(iv) above, then
Xerox shall have only those rights and remedies permitted by applicable law,
including without limitation the United States Bankruptcy Code.
(b) (i) any sale, transfer or assignment by Flextronics or any
Flextronics Affiliated Company that is party to an SSA of all or a
substantial part of its assets or of this Agreement, or of any of its rights
or privileges granted or obligations assumed under this Agreement or under an
SSA; or (ii) any sale or transfer, voluntary or involuntary, by operation of
law or otherwise, of any ownership interest in Flextronics or any Flextronics
Affiliated Company that is party to an SSA; provided however, that,
notwithstanding the foregoing, (A) the events set forth in (b)(i) above shall
not constitute a Flextronics Event of Default if such sale, transfer or
assignment is to another entity that is at such time a Flextronics Affiliated
Company, and (B) the events set forth in (b)(ii) above shall not constitute a
Flextronics Event of Default if such sale or transfer of ownership interests,
in the case of Flextronics, does not result in a change in the identity of
Flextronics' then current Controlling entity, or, in the case of a
Flextronics Affiliated Company, does not result in such Flextronics
Affiliated Company being Controlled by an entity that is not Flextronics or
another Flextronics Affiliated Company.
(c) The breach in any material respect of any material
representation, covenant, warranty or obligation of Flextronics under this
Agreement or any Flextronics Affiliated Company under the SSA to which it is a
party (for the avoidance of doubt, the breach by Flextronics of any of the
provisions of Sections 20.4(a) and 20.17 hereof, whether or not material,
shall be deemed to be Flextronics Events of Default);
(d) The material failure by Flextronics or any Flextronics Affiliated
Company to attain the KPI levels indicated in Schedule E hereto when and as
indicated; or
(e) Any conviction or plea of nolo contendere by Flextronics or any
Flextronics Affiliated Company that is party to an SSA of a felony under
Applicable Laws which relates to the manufacture of Products and/or the
performance by Flextronics or such Flextronics Affiliated Company that is
party to an SSA of its obligations under this Agreement or such SSA.
Section 15.3 Xerox Events of Default. The occurrence of the following
shall constitute a "Xerox Event of Default" for purposes of this Agreement:
(a) (i) a petition for relief under applicable bankruptcy laws or
regulations is filed by or against any Purchaser; or (ii) any Purchaser makes
an assignment for the benefit of creditors or a receiver is appointed;
provided, that, to the extent Applicable Law may prevent Flextronics from
terminating this Agreement in the event of (a)(i) or (a)(ii) above, then
Flextronics shall have only those rights and remedies permitted by applicable
law, including without limitation the United States Bankruptcy Code
(b) The breach in any material respect of any material
representation, covenant, warranty or obligation of Xerox under this Agreement
or any Purchaser under the SSA to which it is party (for the avoidance of
doubt, the breach by Xerox of any of the provisions of Sections 20.4(b) and
20.18 hereof, whether or not material, shall be deemed to be Xerox Events of
Default). Notwithstanding anything herein to the contrary, Xerox's failure to
pay any amount due shall not constitute a Xerox Event of Default to the extent
that Flextronics or the relevant Flextronics Affiliated Company failed.
to submit an invoice for that amount in accordance with Section 4.7 hereof.
(c) Any conviction or plea of nolo contendere by any Purchaser that
is party to an SSA of a felony under Applicable Laws which relates to the sale
or distribution of Products and/or the performance by such Purchaser of its
obligations under this Agreement or such SSA.
Section 15.4 Notice, Cure and Remedies.
(a) Flextronics Events of Default.
(i) Upon occurrence and continuance of a Flextronics Event of
Default, Xerox shall give prompt written notice to Flextronics of the
Flextronics Event of Default.
(ii) For a Flextronics Event of Default under Section 15.2(a)
hereof, Flextronics shall have sixty (60) calendar days from the date of
receipt of such notice to cure such Flextronics Event of Default. If such
Flextronics Event of Default has not been cured at the expiration of such
period, Xerox may then terminate this Agreement upon thirty (30) calendar
days prior written notice to Flextronics.
(iii) For Flextronics Events of Default under Sections 15.2 (b)
and (e) hereof, there shall be no cure period and Xerox shall have the
right to terminate this Agreement upon thirty (30) calendar days prior
written notice to Flextronics.
(iv) For Flextronics Events of Default under Sections 15.2 (c)
and (d) hereof, Flextronics shall have thirty (30) calendar days from the
date of receipt of such notice to cure such Flextronics Event of Default.
If such Flextronics Event of Default has not been cured at the expiration
of such period, Xerox may then terminate this Agreement upon thirty (30)
calendar days prior written notice to Flextronics.
(v) During the continuance of any Flextronics Event of Default,
Purchasers may withhold payment of any amounts that are otherwise due and
payable to Flextronics or any Flextronics Affiliated Company hereunder,
without such non-payment constituting a Xerox Event of Default, until
such time as the default is cured or settled.
(vi) Flextronics shall reimburse Xerox or any other Xerox
Indemnitee and be responsible for any actual Damages suffered by Xerox or
any other Xerox Indemnitee as a result of any Flextronics Event of
Default.
(b) Xerox Events of Default.
(i) Upon the occurrence and continuance of a Xerox Event of
Default, Flextronics shall give prompt written notice to Xerox of the
Xerox Event of Default.
(ii) For a Xerox Event of Default under Section 15.3(a) hereof,
Xerox shall have sixty (60) calendar days from the date of receipt of
such notice to cure such Xerox Event of Default. If such Xerox Event of
Default has not been cured at the expiration of such period, Flextronics
may then terminate this Agreement upon thirty (30) calendar days prior
written notice to Xerox.
(iii) For a Xerox Event of Default under Section 15.3(b) hereof,
Xerox shall have thirty (30) calendar days from the date of receipt of
such notice to cure such Xerox Event of Default. If such Xerox Event of
Default has not been cured at the expiration of such period, Flextronics
may then terminate this Agreement upon ninety (90) calendar days prior
written notice to Xerox.
(iv) For a Xerox Event of Default under Section 15.3(c) hereof,
there shall be no cure period and Flextronics shall have the right to
terminate this Agreement upon thirty (30) calendar days prior written
notice to Xerox.
(v) During the continuance of any Xerox Event of Default,
Flextronics and any Flextronics Affiliated Company may withhold payment
of any amounts that are otherwise due and payable to Xerox hereunder,
without such non-payment constituting a Flextronics Event of Default,
until such time as the default is cured or settled.
(vi) Xerox shall reimburse Flextronics or any other Flextronics
Indemnitee and be responsible for any actual Damages suffered by
Flextronics or any other Flextronics Indemnitee as a result of any Xerox
Event of Default.
Section 15.5 Resolution of Disputes with respect to Certain Events of
Default. Notwithstanding anything contained in this Article 15 to the
contrary, in the event of any Flextronics Event of Default under Sections
15.2(c) or (d) hereof, or any Xerox Event of Default under Section 15.3(b)
hereof, prior to providing notice of termination of this Agreement in
accordance with this Agreement, Xerox and Flextronics shall attempt in good
faith to resolve any and all controversies or claims relating to such Event
of Default promptly by negotiation commencing within ten (10) calendar days
of the written notice of default given by the non-defaulting party, including
referring such matter to Xxxxxx Xxxxx or Xerox's then-current Senior Vice
President of Worldwide Business Services and Xxxxxxx XxXxxxxx or Flextronics'
then current President-Americas. The representatives of the parties shall
meet at a mutually acceptable time and place and thereafter as often as they
reasonably deem necessary to exchange relevant information and to attempt to
resolve the dispute until such time as all cure periods applicable to the
Event of Default have expired. In the event that the parties are unable to
resolve such dispute pursuant to this Section 15.5, the provisions of Section
20.9 hereof shall apply.
Section 15.6 Effect of a Force Majeure Event. Neither party shall be
liable for its failure or delay in performance of its obligations under this
Agreement if such failure or delay is caused by a Force Majeure Event. If a
Force Majeure Event occurs and is continuing, then the non-affected party may
terminate this Agreement without liability if the affected party is not able
to resume its performance within sixty (60) days.
ARTICLE 16
EFFECTS OF EXPIRATION AND TERMINATION, ETC.
Section 16.1 Product Orders; Product.
(a) Upon the expiration of the Term or termination of this Agreement
for any reason, except in the event of nonpayment by Xerox constituting a
Xerox Event of Default under Section 15.3(b) hereof, Flextronics and the
Flextronics Affiliated Companies shall continue to fill any Purchase Orders
it has received from any Purchaser through the effective date of such
expiration or termination, with the terms and provisions of this Agreement
continuing to govern the purchase and sale of such Products. Nothing in this
Article 16 shall affect Flextronics' warranty obligations or Buy Back or
repair obligations in respect of any Products.
(b) Upon the termination of this Agreement for any reason other than
a Flextronics Event of Default, Purchaser shall purchase from Flextronics and
the Flextronics Affiliated Companies all of Flextronics' and the Flextronics
Affiliated Companies' then-existing inventory of Products as follows: [*];
provided, however, that, notwithstanding the foregoing, [*]. Upon the
request of Purchaser, Flextronics and the Flextronics Affiliated Companies
shall (and Flextronics shall use its commercially reasonable efforts to cause
the Sub-Tier Suppliers to) provide reasonably acceptable documentation
substantiating any and all such costs. If requested by Purchaser,
Flextronics and the Flextronics Affiliated Companies shall (and Flextronics
shall use its commercially reasonable efforts to cause the Sub-Tier Suppliers
to) permit Purchaser's representatives to review the business records of
Flextronics and the Flextronics Affiliated Companies (or the Sub-Tier
Supplier, as the case may be) for the sole purpose of validating the claim
for costs (subject to any confidentiality agreements to which Flextronics is
a party), to validate the count of inventory of such Product and the
Components and to supervise the scrappage, if any, of such Product or
Components. Immediately after the termination of this Agreement for any
reason other than a Flextronics Event of Default, Flextronics shall commence
the Inventory Repurchase Procedure. Upon the expiration of this Agreement or
the termination of this Agreement due to a Flextronics Event of Default,
Xerox shall have the right, but not the obligation, to purchase all or any
part of such Products from Flextronics or such Flextronics Affiliated Company
at the then-effective Quarterly Purchases Prices therefor.
Section 16.2 Return of Assets.
(a) Upon the expiration of the Term or termination of this Agreement
for any reason, each party hereto shall (and shall cause its Affiliates to)
immediately return to the other all Confidential Information of the other
party and the other party's Affiliates. Notwithstanding the foregoing, Xerox
shall have the right to retain and use any of Flextronics' Confidential
Information to the extent necessary to continue servicing Products and each
party shall have the right to retain one copy of the other party's (and its
Affiliates') Confidential Information for archival purposes.
(b) Upon the expiration of the Term or termination of this Agreement
for any reason, Flextronics and the Flextronics Affiliated Companies shall
promptly return to Xerox all Xerox Intellectual Property and any of the
Xerox-Owned Assets in the possession, under the control or located on the
premises, of Flextronics or any Flextronics Affiliated Company.
Alternatively, at the request of Xerox, Flextronics shall make disposition in
accordance with Xerox's written instructions which shall be issued within
thirty (30) calendar days after the expiration or termination of this
Agreement. However, Flextronics shall be entitled to retain any such Xerox
Intellectual Property and Xerox-Owned Assets to the extent the same is
required in order for Flextronics and the Flextronics Affiliated Companies to
fulfill (and only until such time as Flextronics and the Flextronics
Affiliated Companies have fulfilled) any continuing obligations under this
Agreement.
Section 16.3 Cooperation upon Termination. Upon the expiration of the
Term or termination of this Agreement for any reason, Flextronics shall use
commercially reasonable efforts to assist Xerox for up to three (3) months
following such expiration or termination with the reasonable requests and
requirements of Xerox in connection with such termination or expiration
including but not limited to: (i) an orderly transition to any supplier of
the Products required by Purchasers, (ii) an orderly demobilization of its
own operations in connection with such Products, (iii) the provision of
Products during any transition period, and (iv) the actions set forth on
Schedule 16.3 hereto. In the event that such expiration or termination is as
a result of either party declining to renew this Agreement or a Xerox Event
of Default, then Xerox shall pay to Flextronics Flextronics' reasonable costs
and expenses incurred in providing such services and cooperation, and in the
event that such expiration or termination is as a result of a Flextronics
Event of Default, then Flextronics shall provide such services and
cooperation to Xerox free of charge.
Section 16.4 Survival. The provisions of Sections 13.1(b), (d), (e),
(f), (g) and (j), Section 13.2(a) and Articles 14, 16, 17, 18, 19 and 20, as
well as the definitions contained in Article 3 that are applicable thereto,
shall survive the expiration or termination of this Agreement for any reason.
Section 16.5 Right of Purchasers to Repurchase. The parties
understand and agree that Purchasers shall, at any time and for any reason
other than a Xerox Event of Default, have the right and option (the
"Repurchase Right") to purchase from Flextronics and/or a Flextronics
Affiliated Company, as the case may be, all or part of the Xerox Unique
Property at such time, at a purchase price equal to the net book value thereof
at such time of purchase. The Repurchase Right shall be exercised in
accordance with the Repurchase Right Agreement dated as of the date hereof by
and between Xerox and Flextronics which Repurchase Right Agreement shall
provide, without limitation, that Purchasers shall have the right to immediate
possession of such Xerox Unique Property upon exercise of the Repurchase
Right, and any issues shall be resolved thereafter. Xerox shall bear the
responsibility for all taxes arising on account of such repurchase.
Flextronics shall, within thirty (30) days after the end of each calendar
quarter, provide to Xerox a certificate setting forth the net book value of
such Xerox Unique Property at the end of such calendar quarter. Xerox will
not remove from any Facility any Xerox Unique Property that is necessary for
Flextronics and the Flextronics Affiliated Companies to perform its
obligations under this Agreement.
Section 16.6 Taxes on Return of Assets and Asset Repurchase. Any
transfer or similar taxes (other than taxes recoverable by Flextronics, the
Flextronics Affiliated Companies or Purchasers which shall be borne by the
recovering party) imposed on the return of assets or the repurchase of assets
shall be borne equally by Purchasers and Flextronics. Flextronics and
Purchaser agree to cooperate to minimize and properly calculate any
applicable transfer or similar taxes and, in connection therewith, Purchaser
shall provide Flextronics any resale certificates, information regarding out-
of-state use or foreign receipt of materials, services or sales or other
exemption or tax reduction certificates or other certificate or document of
exemption or information that is reasonably available and may be required in
order to exempt Purchaser's payment for returned or repurchased assets from
any such transfer or similar taxes, and Flextronics and the Flextronics
Affiliated Companies shall accept and support any claims, which Purchaser in
good xxxxx xxxxx to be valid, of resale, direct pay, identifiable segment,
bulk sale, occasional sale, casual sale, export sale or other exemption. If
Purchaser provides a valid certification of an exemption from any transfer or
similar tax or of a reduced rate of transfer or similar tax imposed by an
applicable taxing authority, Flextronics and the Flextronics Affiliated
Companies shall not invoice for nor pay over any such tax unless and until
the applicable taxing authority assesses such tax, at which time Flextronics
or the relevant Flextronics Affiliated Company shall invoice and Purchaser
shall pay any such tax (including any penalties, interest or other charges
assessed by such taxing authority) unless Purchaser elects to contest such
assessment in which case the rules of Section 6.7(b) hereof will control.
Flextronics or the relevant Flextronics Affiliated Company shall issue or
cause to be issued to Purchaser on the applicable invoice date a valid
original VAT invoice or similar invoice for VAT or other taxes as required by
the applicable Governmental Authority or as requested by Purchaser to enable
recovery of taxes where appropriate, and Purchaser will only pay against such
valid invoices.
ARTICLE 17
INDEMNIFICATION
Section 17.1 Indemnification by Flextronics.
(a) Subject to the provisions of Section 6.7 hereof, Flextronics
agrees to defend, indemnify and hold harmless, on an after-tax basis and after
consideration of any insurance proceeds received, Xerox, each Xerox
Affiliated Company and all directors, officers, employees, agents and
representatives of the foregoing (each, a "Xerox Indemnitee") from and
against all claims, actions, losses, expenses, damages or other liabilities,
including attorneys' fees (collectively, "Damages") incurred by or assessed
against any of the foregoing to the extent the same arise out of, are in
connection with, are caused by or are related to third-party claims relating
to:
(i) any failure of any Product sold by Flextronics or any
Flextronics Affiliated Company (or any Sub-Tier Supplier) hereunder to
comply with any safety or regulatory standard set forth in the
applicable Specifications and any allegation of such a failure
(including, without limitation, any investigations by the United States
Consumer Product Safety Commission or any other Governmental Authority,
and lawsuits arising under laws of product liability, including actions
alleging Workmanship defects, breach of warranty, negligence, strict
liability and unreasonable risk of injury) to the extent caused by a
breach of the Express Warranties set forth in Section 14.1 hereof or
actions alleging design defects relating to designs designed by
Flextronics or any Flextronics Affiliated Company or relating to design
defects in Components made by Flextronics or any Flextronics Affiliated
Company where such designs were acquired by Flextronics or any
Flextronics Affiliated Company from parties other than Xerox or any
Xerox Affiliated Company;
(ii) any injury or damage to any person or property caused by a
Product sold by Flextronics or any Flextronics Affiliated Company (or
any Sub-Tier Supplier) hereunder, and the allegation that any Product
sold by Flextronics or any Flextronics Affiliated Company (or any Sub-
Tier Supplier) hereunder has caused or threatened to cause injury or
damage to any person or property, but only to the extent such injury or
damage has been caused by the breach of the Express Warranties set forth
in Section 14.1 hereof or by the design defects relating to designs
designed by Flextronics or any Flextronics Affiliated Company or
relating to design defects in Components made by Flextronics or any
Flextronics Affiliated Company where such designs were acquired by
Flextronics from parties other than Xerox or any Xerox Affiliated
Company;
(iii) (A) any infringement of the intellectual property rights of
any third party by Flextronics' or any Flextronics Affiliated Company's
manufacturing process for any Product; (B) any infringement of the
intellectual property rights of any third party by any Product
manufactured by Flextronics or any Flextronics Affiliated Company not in
accordance with the Specifications, to the extent such claim would not
have arisen if such Product had been manufactured in accordance with the
Specifications; (C) any infringement of the intellectual property rights
of any third party by any Product to the extent that Flextronics or any
Flextronics Affiliated Company was primarily responsible for creating
the portion of the Specifications covering the infringing portion of
such Product; or (D) any infringement of the intellectual property
rights of any third party by any design designed by Flextronics or any
Flextronics Affiliated Company or acquired by Flextronics or any
Flextronics Affiliated Company from parties other than Xerox or any
Xerox Affiliated Company.
(b) Subject to the provisions of Section 6.7 hereof, Flextronics
agrees to indemnify and hold harmless from any Damages awarded in dispute
resolution or otherwise agreed, on an after-tax basis and after consideration
of any insurance proceeds received, each Xerox Indemnitee from and against all
Damages incurred by or assessed against any of the foregoing to the extent
the same arise out of, are in connection with, are caused by or are related
to any breach by Flextronics of any of its representations, warranties,
covenants or obligations contained in this Agreement or any breach by
Flextronics or any Flextronics Affiliated Company of any of its
representations, warranties, covenants or obligations contained in any SSA.
Section 17.2 Indemnification by Xerox.
(a) Subject to the provisions of Section 6.7 hereof, Xerox agrees to
defend, indemnify and hold harmless, on an after-tax basis and after
consideration of any insurance proceeds received, Flextronics, each
Flextronics Affiliated Company and all directors, officers, employees, agents
and representatives of the foregoing (each, a "Flextronics Indemnitee") from
and against all Damages incurred by or assessed against any of the foregoing
to the extent the same arise out of, are in connection with, are caused by or
are related to third-party claims relating to:
(i) any failure of any Product to comply with any safety or
regulatory standard set forth in the applicable Specifications and any
allegation of such a failure (including, without limitation, any
investigations by the United States Consumer Product Safety Commission
or any other Governmental Authority, and lawsuits arising under laws of
product liability, including actions alleging design defects, failure to
warn, breach of warranty, negligence, strict liability and unreasonable
risk of injury) but only to the extent that such failure has not been
caused by a breach of the Express Warranties set forth in Section 14.1
hereof or has not been caused by an event described in Section 17.1(a)(i)
hereof;
(ii) any injury or damage to any person or property caused by a
Product, and the allegation that any such Product has caused or threatened
to cause injury or damage to any person or property, but only to the
extent such injury or damage has not been caused by the breach of the
Express Warranties set forth in Section 14.1 hereof or has not been caused
by an event described in Section 17.1(a)(ii) hereof; or
(iii) any infringement of the intellectual property rights of
any third party by any Product manufactured in accordance with the
Specifications (except for any portion of the Specifications which
Flextronics or any Flextronics Affiliated Company was primarily
responsible for creating) or by such Product's design (unless such design
was designed by Flextronics or any Flextronics Affiliated Company or was
acquired by Flextronics or any Flextronics Affiliated Company from parties
other than Xerox or any Xerox Affiliated Company).
(b) Subject to the provisions of Section 6.7 hereof, Xerox agrees to
indemnify and hold harmless from any Damages awarded in dispute resolution or
otherwise agreed, on an after-tax basis and after consideration of any
insurance proceeds received, each Flextronics Indemnitee from and against all
Damages incurred by or assessed against any of the foregoing to the extent the
same arise out of, are in connection with, are caused by or are related to any
breach by Xerox of any of its representations, warranties, covenants or
obligations contained in this Agreement or any breach by Xerox or any Xerox
Affiliated Company of any of its representations, warranties, covenants or
obligations contained in any SSA.
Section 17.3 Limitations on Liability. This Agreement sets forth the
entire liability of Xerox and Flextronics to the Flextronics Indemnitees and
the Xerox Indemnitees, respectively, arising out of, in connection with or
related to this Agreement and the consummation of the transactions contemplated
hereby by the parties and any patents, copyrights, trade secrets or other
intellectual property of the parties. EXCEPT AS SET FORTH IN SECTIONS 17.1(a)
AND 17.2(a) AND ARTICLE 18 HEREOF, IN NO EVENT SHALL EITHER PARTY OR ANY OF
THEIR AFFILIATES BE LIABLE TO ANY INDEMNITEE FOR ANY LOSS OF PROFIT OR OTHER
INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND WHATSOEVER THAT ANY
INDEMNITEE CLAIMS IT HAS SUFFERED. THESE LIMITATIONS TO LIABILITY APPLY TO ALL
CAUSES OF ACTION IN THE AGGREGATE, INCLUDING WITHOUT LIMITATION BREACH OF
CONTRACT, BREACH OF WARRANTY, NEGLIGENCE, STRICT LIABILITY, FRAUD,
MISREPRESENTATION AND OTHER TORTS.
Section 17.4 Procedures for Indemnification.
(a) In the event of a dispute between the parties, the parties shall
refer all indemnification matters with regard to Sections 17.1(b) and 17.2(b)
hereof for dispute resolution pursuant to Section 20.9 below.
(b) With respect to any third-party claims, either party shall give the
other party prompt notice of any third-party claim, that may give rise to any
indemnification obligation under this Article 17, together with the estimated
amount of such claim. Failure to give such notice shall not affect the
indemnification obligations hereunder in the absence of actual and material
prejudice. The indemnifying party shall have the right to assume the defense
(at its own expense) of any such claim through counsel of its own choosing by
so notifying the party seeking indemnification within thirty (30) calendar days
of the first receipt of such notice; provided, however, that any such counsel
shall be reasonably satisfactory to the party seeking indemnification. If,
under applicable standards of professional conduct, a conflict with respect to
any significant issue between any indemnitee 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 in order to eliminate such conflict. 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 the
indemnifying party chooses to defend or prosecute a third-party claim, the
other party shall cooperate in the defense or prosecution thereof, which
cooperation shall include, to the extent reasonably requested, the retention,
and the provision to the indemnifying party, of records and information
reasonably relevant to such third-party claim. The indemnifying party shall
not, without the prior written consent of the indemnified party, agree to the
settlement, compromise or discharge of such third-party claim unless, by its
terms, such settlement, compromise or discharge actually discharges the
indemnified party from the full amount of liability in connection with such
third-party claim. In addition, the indemnifying party shall not consent to,
and the indemnified party in no event be required to agree to, the entry of any
judgment or enter into any settlement that (i) provides for injunctive or other
non-monetary relief affecting the indemnified party or (ii) 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. Notwithstanding the foregoing,
the provisions of Section 6.7(b) hereof and not the provisions of this Section
17.4 shall apply to any Assessment by any governmental authority to which said
Section 6.7(b) applies.
Section 17.5 Sale of Products Enjoined. Should the use of any Products
by Xerox, a Xerox Affiliated Company, or a customer of any of them, be enjoined
for a cause stated in Section 17.1(a) above, or in the event Flextronics
desires to minimize its liabilities under this Article 17, Flextronics will, at
its option and expense, either substitute fully equivalent Products not subject
to such injunction, modify such Product so that it no longer is subject to such
injunction, or obtain for Xerox, Xerox Affiliated Companies and their customers
the right to continue using the enjoined Products. If none of the foregoing is
feasible, and said injunction is in effect for more than three (3) months,
Flextronics will take back the enjoined Products from Xerox and refund to Xerox
the Purchase Price paid therefor, plus return transportation costs, applicable
taxes, if any, imposed on Flextronics or any Flextronics Affiliated Company and
any other applicable fees and expenses that arise out of the return of the
enjoined Products and Components from Flextronics and any Flextronics
Affiliated Company and refund to Flextronics the Purchase Price paid therefor.
Should the manufacture or sale of any Products or Components by Flextronics or
any Flextronics Affiliated Company be enjoined for a cause stated in Section
17.2(a) above, such Product will automatically be considered a
End-of-Life/Discontinued Product and Xerox shall repurchase from Flextronics
and any Flextronics Affiliated Company such companies' inventory of Product and
related Components as provided in Section 4.10 hereof.
ARTICLE 18
CONFIDENTIAL AND PROPRIETARY INFORMATION
Section 18.1 Confidential and Proprietary Information. To further the
business relationship between Xerox and Flextronics, Xerox may, from time to
time during the Term, disclose to Flextronics and the Flextronics Affiliated
Companies certain Xerox Confidential Information and Flextronics may, from time
to time during the Term, disclose to Xerox certain Flextronics Confidential
Information. Each party shall protect the confidentiality of any other party's
Confidential Information, using at least the same degree of care as such party
uses in protecting the confidential nature of its own Confidential Information.
Section 18.2 Use and Treatment of Confidential Information. (a) All
Xerox Confidential Information in the possession of Flextronics or any
Flextronics Affiliated Company and all Flextronics Confidential Information in
the possession of Xerox or any Xerox Affiliated Company shall not be disclosed
to any third party or circulated within the Possessing Party's own organization
other than on a need-to-know basis or used by the Possessing Party for any
reason other than such party's fulfillment of its obligations under this
Agreement; provided, that, any party to whom the other party's Confidential
Information is so disclosed or circulated shall be informed of its confidential
nature and any copies of such Confidential Information shall be appropriately
marked as "Confidential" and as the property of the owning party. The
Possessing Party shall be liable for the unauthorized use or disclosure of the
other party's Confidential Information by any third party to whom the
Possessing Party discloses or circulates such Confidential Information,
including without limitation, Sub-Tier Suppliers and customers. Each party
shall cause any such third parties to whom it discloses the Confidential
Information of the other party to execute a written agreement restricting the
use and disclosure of such Confidential Information by such third parties and
otherwise conduct itself in respect of such Confidential Information on terms
not less restrictive than those set forth in this Article 18.
(b) The obligations of the parties with respect to the use and disclosure
of the other party's Confidential Information set forth in this Article 18
shall not apply to any Confidential Information that (i) is or becomes
generally known to the public through no act of the Possessing Party, or (ii)
was in the Possessing Party's possession, free of any obligation of
confidentiality, at the time of receipt and was not received from any party
with an obligation of confidentiality.
(c) In the event that any Possessing Party becomes legally compelled to
disclose the other party's Confidential Information, the Possessing Party shall
provide the other party with prompt notice thereof, specifying in reasonable
detail the nature of such disclosure, so that such other party may seek a
protective order or other appropriate remedy and/or waive compliance with the
provisions of this Agreement. Each party shall cooperate with the other party
in seeking a protective order or other appropriate remedy in respect thereof.
In the event that such protective order or other remedy is not obtained, or the
applicable party waives compliance with the provisions of this Agreement, the
Possessing Party will furnish only that part of the Confidential Information
which such Possessing Party is advised by written opinion of counsel is legally
required and will exercise its reasonable best efforts to ensure that
confidential treatment will be accorded such
Confidential Information. In addition, each party will provide the other party
with written notice of any Confidential Information of the other party to be so
disclosed as far in advance of its disclosure as is practicable.
(d) The obligations of the parties with respect to the use and disclosure
of the other party's Confidential Information set forth in this Article 18
shall survive the expiration or any termination of this Agreement for the five
(5) year period commencing on the effective date of such expiration or
termination; provided, however, that, notwithstanding the foregoing, within
thirty (30) Business Days following the effective date of any such expiration
or termination, Xerox shall have the right, exercisable in its sole discretion,
to designate such portions of the Xerox Confidential Information that it
believes to be of a highly proprietary nature or constitute a trade secret, and
the obligations of Flextronics and the Flextronics Affiliated Companies with
respect to the use and disclosure of such designated portions of Xerox
Confidential Information set forth in this Article 18 shall survive the
expiration or any termination of this Agreement indefinitely.
ARTICLE 19
XEROX-OWNED ASSETS; XEROX UNIQUE PROPERTY; XEROX
INTELLECTUAL PROPERTY; IMPROVEMENTS TO PRODUCTS
Section 19.1 Xerox-Owned Assets. (a) In the event that, during the Term,
any Purchaser shall provide any Xerox-Owned Assets to Flextronics or any
Flextronics Affiliated Company under this Agreement for use by Flextronics or
such Flextronics Affiliated Company in manufacturing Products for sale to
Purchasers, then, unless otherwise agreed to by Xerox in writing: (i) title to
the Xerox-Owned Assets shall remain in such Purchaser; (ii) Flextronics or such
Flextronics Affiliated Company shall hold such Xerox- Owned Assets solely as
bailee; and (iii) Purchaser shall have the absolute right to immediate
possession of the Xerox-Owned Assets upon demand (with the Xerox-Owned Assets
being prepared for shipment and delivered in good condition, normal wear and
tear excepted, to the location specified by Purchaser immediately upon such
demand, at Purchaser's expense). Neither Flextronics nor such Flextronics
Affiliated Company shall substitute any property for the Xerox-Owned Assets,
use such Xerox-Owned Assets except for filling Purchasers' orders, or reproduce
the Xerox-Owned Assets. Flextronics and the Flextronics Affiliated Companies
shall document that the Xerox-Owned Assets are held for the account of
Purchaser and shall furnish Purchaser on demand a true and complete inventory
of the Xerox-Owned Assets held by Flextronics or any of the Flextronics
Affiliated Companies for any period of time requested by Purchaser.
(b) While in Flextronics' or any Flextronics Affiliated Company's custody
or control, the Xerox-Owned Assets: (i) shall be plainly marked or otherwise
identified as "Property of" the appropriate Purchaser, (ii) shall be held at
Flextronics' or such Flextronics Affiliated Company's sole risk, and (iii)
shall be kept insured by Flextronics at Flextronics' expense in an amount equal
to the then-current replacement cost with loss payable to Purchaser.
Flextronics shall provide to Purchaser evidence of such insurance coverage
satisfactory to Purchaser.
(c) During the Term, Flextronics and the Flextronics Affiliated Companies
shall preserve and maintain at Flextronics' expense the Xerox-Owned Assets in
good repair, working order and condition, ordinary wear and tear
excepted, in accordance with industry standards; provided, however, that Xerox
shall pay for any major overhauls or upgrades of the Xerox-Owned Assets. Upon
the loss, destruction or other total failure of any item of the Xerox-Owned
Assets, Flextronics shall immediately notify Purchaser and Purchaser shall
replace such failed item at Purchaser's expense as soon as is reasonably
possible; provided, however, in the event such loss, destruction or other total
failure is due to the negligence of Flextronics or any Flextronics Affiliated
Company, Flextronics shall replace such failed item at Flextronics' expense as
soon as is reasonably possible.
Section 19.2 Xerox Unique Property. Unless otherwise agreed to by Xerox
in writing, Flextronics and the Flextronics Affiliated Companies shall not use
any Xerox Unique Property except for filling Purchasers' orders, or reproduce
the Xerox Unique Property. Flextronics shall furnish Xerox promptly at the
request of Xerox a true and complete inventory of the Xerox Unique Property
held by Flextronics and the Flextronics Affiliated Companies. During the Term
and to the extent applicable, Flextronics and the Flextronics Affiliated
Companies shall preserve and maintain at Flextronics' expense the Xerox Unique
Property in good repair, working order and condition (including, without
limitation any major overhauls of the same), ordinary wear and tear excepted,
in accordance with industry standards and shall replace at Flextronics' expense
as soon as is reasonably possible any item of the Xerox Unique Property that is
lost or destroyed or otherwise has failed. Any such replacements shall be
deemed to be Xerox Unique Property which the relevant Purchaser has the right
to purchase under the terms of the Repurchase Right Agreement. Flextronics and
the Flextronics Affiliated Companies shall not transfer, sell, assign, pledge,
dispose of or otherwise encumber or make subject to any Lien (as defined in the
Master Purchase Agreement) any Xerox Unique Property without Xerox's prior
written consent.
Section 19.3 Xerox Intellectual Property.
(a) Any use under this Agreement by Flextronics or any Flextronics
Affiliated Company of any name, trademark, logo or corporate design of Xerox or
a Xerox Affiliated Company or any name, trademark, logo or corporate design
substantially similar to those of Xerox or a Xerox Affiliated Company, and the
good will of any business associating with any said names, trademarks or logos,
shall inure to the benefit of Xerox or such Xerox Affiliated Company.
(b) Flextronics and the Flextronics Affiliated Companies shall apply
Xerox's name, trademarks, and logos to the Products as specified by Xerox in
the applicable Specifications for each such Product. Flextronics and the
Flextronics Affiliated Companies shall not apply, during or after the Term,
Flextronics' or any Flextronics Affiliated Company's or any third-party's name,
trademark or logo to any Product manufactured and sold to any Purchaser
hereunder, except to the extent to which Flextronics or any Flextronics
Affiliated Company may by Applicable Laws be required to identify itself as the
manufacturer or supplier thereof.
(c) Flextronics and the Flextronics Affiliated Companies shall not use
any name, trademark or logo of Xerox on any Product or any product sold by
Flextronics or any Flextronics Affiliated Company or on any sales, advertising,
or service literature or package, label, tag or nameplate, either during or
after the term of this Agreement, except as is expressly directed by the
applicable Specifications.
(d) In the event that Flextronics or any Flextronics Affiliated Company
learns of any infringement or threatened infringement of any name, trademark,
logo or corporate design substantially similar to those of Xerox or a Xerox
Affiliated Company or any passing-off or that any third party alleges or claims
that such names, trademarks, logos, or corporate designs are liable to cause
deception or confusion to the public, or are liable to dilute or infringe any
right of a third party, Flextronics shall use its commercially reasonable
efforts to notify Xerox giving particulars thereof and Flextronics shall
provide necessary information and assistance, at Xerox's expense for
Flextronics' out-of-pocket expenses, to Xerox or its authorized representatives
in the event that Xerox decides that proceedings should be commenced or
defended. Any such proceedings shall be at the sole expense of Xerox and any
recoveries shall be solely for the benefit of Xerox. Nothing in this
Agreement, however, shall be deemed to require Xerox to enforce its
intellectual property rights against others.
(e) Flextronics and the Flextronics Affiliated Companies shall ensure the
Products meet or exceed the quality standards as set forth in Articles 8 and 14
hereof. Purchaser shall have the full right to test and inspect the Products
and any sales, advertising, or service literature or package, label, tag or
nameplate on which any of Xerox's name, trademarks or logos appear in order to
ensure that the provisions of this Agreement are being observed.
(f) The parties hereby agree that, simultaneously with the execution
hereof, the parties shall execute the Manufacturing IP Non-Assertion Agreement
attached hereto as Exhibit B hereto.
Section 19.4 Improvements to Products. (a) Except as provided herein, no
rights are granted to Xerox or any Xerox Affiliated Company under any
Flextronics Intellectual Property nor are any rights granted to Flextronics or
any Flextronics Affiliated Company under any Xerox Intellectual Property that
is developed, invented, conceived or otherwise acquired prior to the date of
this Agreement. Xerox and Flextronics agree that all Improvements, whether
made by Flextronics or Xerox or any other person or entity, during the Term
shall be and remain the sole and exclusive property of Xerox and Xerox shall
own all rights in and to any such Improvements. Accordingly, Flextronics
hereby grants, assigns, and agrees to grant and assign to Xerox (or to the
entity or entities directed by Xerox) all right, title and interest in all
Improvements, together with all patents, copyrights, trade secrets, and other
intellectual property therein. Whenever applicable, copyrightable Improvements
shall be considered work made for hire for Xerox. Additionally, Flextronics
hereby grants and agrees to grant to Xerox and to any party designated by Xerox
a paid-up, worldwide, unrestricted right and license under any intellectual
property rights obtained by Flextronics or any Flextronics Affiliated Company
based upon or derived from Xerox Confidential Information and any intellectual
property rights obtained by Flextronics or any Flextronics Affiliated Company
derived from Xerox Intellectual Property. Such license shall be exclusive to
Xerox within the field of Printing and Publishing and non-exclusive outside
such field. Flextronics shall (and shall cause all Flextronics Affiliated
Companies to), at Xerox's expense, execute all documents and do all things
necessary to enable Xerox to obtain full legal title in and to such
Improvements and intellectual property therein. In return for Flextronics'
obligations pursuant to this Section 19.4(a), Xerox shall not license, assign,
or transfer (or enter into an agreement not to assert) intellectual property
transferred pursuant to this Section 19.4(a) (including but not limited any
intellectual property rights in the Improvements) to any entity or individual
(except Xerox Affiliated
Companies or other entities Controlled by Xerox) for the purpose of
manufacturing (i) printed circuit board assemblies, (ii) keyboards, mouses, and
similar computer user interface devices, (iii) computers and network
controllers, and (iv) consumer electronics products, and (v) electronic sub-
systems related to any of items (i)-(iv); provided, however, that no Purchaser
shall be restricted from using or licensing such intellectual property rights
for any use within the field of Printing and Publishing and provided, further,
that any Purchaser may request a waiver of the license restrictions contained
in this Section 19.4, and Flextronics or the applicable Flextronics Affiliated
Company shall not unreasonably withhold such waiver. Flextronics shall own all
rights, title and interest in and to any manufacturing and testing (i)
software, equipment, development, design, know-how, formula, algorithm,
discovery, invention, technical data, specification, drawing or design or (ii)
methods and processes, that is developed, invented, conceived or otherwise
acquired by Flextronics after the date of this Agreement (including all
intellectual property rights therein) and that is (i) based upon Flextronics
Intellectual Property and (ii) is not based upon or derived from Xerox
Confidential Information nor derived from Xerox Intellectual Property. For
purposes of this Agreement, "Printing and Publishing" means the business and
technology of scanning, manipulating (in conjunction with printing or other
hard copy output), printing, displaying (in conjunction with printing or other
hard copy output), assembling, finishing or otherwise managing (in conjunction
with printing or other hard copy output) images and/or documents in tangible or
intangible form, including, without limitation, the business and technology of
printers, copiers, other hard copy output devices, finishers, assemblers,
scanners, as well as inks, supplies, components, spare parts and services for
repair, maintenance, and remanufacturing of the same.
(b) If, during the Term or at any time thereafter, Flextronics or any
Flextronics Affiliated Company owns, controls, or has the right to license
patents, copyrights or other proprietary rights in information or technology,
material or items, which patents, copyrights or other proprietary rights would
restrict Purchaser's right to use work product or services provided by
Flextronics or any Flextronics Affiliated Company, then Flextronics shall (and
shall cause each Flextronics Affiliated Company to) promptly communicate to
Purchaser such patents, copyrights or other proprietary rights, and Flextronics
hereby irrevocably agrees not to (and shall cause each Flextronics Affiliated
Company not to) assert such patents, copyrights or other proprietary rights
against Xerox, any Xerox Affiliated Company or any customer of any of them.
Flextronics shall not (and shall cause each Flextronics Affiliated Company not
to) assign or encumber any of its patents, or the legal applications therefor,
which would restrict Purchaser's right to use work product or services provided
by Flextronics or any Flextronics Affiliated Company hereunder.
ARTICLE 20
GENERAL PROVISIONS
Section 20.1 Notices. Except as otherwise provided, all notices that are
permitted or required under this Agreement shall be in writing and shall be
deemed given (a) when delivered personally, (b) if by facsimile upon
transmission with confirmation of receipt by the receiving party's facsimile
terminal, or (c) if sent by documented overnight delivery service on the date
delivered, addressed as follows, or to such other person or address as may be
designated by notice to the other party:
If to Xerox, to:
Xerox Corporation
000 Xxxxxxxx Xxxx
Xxxxxxx, Xxx Xxxx 00000
X.X.X.
Attention: Vice President of Strategic Contracts
Facsimile Number: (000) 000-0000
With a copy to:
Xerox Corporation
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: General Counsel
Facsimile Number: (000) 000-0000
and
Xxxxx X. Xxxxx, Esq.
Pillsbury Winthrop LLP
Xxx Xxxxxxx Xxxx Xxxxx
Xxx Xxxx, XX 00000
Facsimile Number: (000) 000-0000
If to Flextronics, to:
Flextronics International Ltd.
Room 000
Xxxxxxxx Xxxxxx
00-00 Xxxxx'x Xxxx Xxxx
Xxxxxxx, Xxxx Xxxx
Attention: Chairman
Facsimile Number: (000) 0000-0000
With a copy to:
Flextronics International USA Inc.
0000 Xxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: President
Facsimile Number: (000) 000-0000
Section 20.2 Headings. The headings and titles of the Sections of this
Agreement are inserted for convenience only and shall not affect the
construction or interpretation of any provision.
Section 20.3 Modification. Except as provided in Sections 2.2 and 2.3
hereof, this Agreement may not be modified and no provision of this Agreement
may be waived unless the modification or waiver is in writing and is signed
by an authorized representative of each party hereto.
Section 20.4 Assignment. (a) This Agreement (and each of the SSAs)
shall inure to the benefit of and shall be binding on and enforceable by the
parties hereto and thereto and their respective successors and permitted
assigns. No party to this Agreement (or any SSA) may assign this Agreement
(or any SSA) or any part hereof or thereof without the prior written consent
of the other parties hereto (or to such SSA), which consent shall not be
unreasonably withheld or delayed, provided that it is understood by the parties
that Flextronics will assign and delegate its rights and duties to manufacture
and sell under this Agreement to the Flextronics Affiliated Companies provided
herein because it is not in the trade or business of providing such services
contemplated under this Agreement, it being understood that Flextronics shall
not assign its obligations under Section 20.17 hereof, and subject to the
material adverse effect standard of the succeeding sentence. For purposes of
this Section 20.4, the withholding of consent of Purchasers shall be deemed
reasonable if the assignment would materially and adversely affect the quality,
capabilities, Product Lead Times or UMCs of Products or the associated cost of
freight, Taxes (other than taxes recoverable by Purchasers) and/or customs
duties that would otherwise be payable or reimbursable by Purchasers or would
operate to deny Purchasers market access for Products). Notwithstanding the
foregoing or anything else contained in this Agreement (or any SSA) to the
contrary, under no circumstances shall this Agreement (or any SSA) or any part
hereof or thereof be assigned, including, without limitation, by operation of
law or otherwise, by Flextronics or any Flextronics Affiliated Company to any
Xerox Competitor. For the purposes of this Agreement, a "Xerox Competitor"
means a party in the printing and copying or document management business
(including, without limitation, Canon, Heidelberg, Hewlett-Packard, Lexmark,
Minolta, Oce, Ricoh, Sharp, and Toshiba).
(b) Xerox shall not sell or in any way transfer substantially all of its
General Office Business Segment to a third party unless this Agreement (i) is
assigned by Xerox to said third party and (ii) is accepted and assumed by said
third party.
Section 20.5 Severability. If any provision of this Agreement is held
invalid by any Applicable Laws or by the final determination of a court of last
resort, such invalidity shall not affect (a) the other provisions of this
Agreement, (b) the application of such provision to any other circumstance
other than that with respect to which this Agreement was found to be
unenforceable; or (c) the validity or enforceability of this Agreement as a
whole.
Section 20.6 Nonwaiver. No course of conduct or delay on the part of
either party in exercising any rights under this Agreement shall waive any
rights of that party or modify this Agreement. All of the rights of either
party under this Agreement shall be cumulative and may be exercised separately
or concurrently.
Section 20.7 Export Control. Neither party shall export, directly or
indirectly, any technical data acquired from the other under this Agreement or
any Products using any such data to any country for which the United States
government or any agency thereof at the time of export requires an export
license or other government approval without first obtaining such license or
approval.
Section 20.8 Independent Contractors. It is the intent of the parties
that during the term of this Agreement, the relationship between Flextronics,
the Flextronics Affiliated Companies and Purchaser shall be that of independent
contractors, and nothing set forth herein shall be deemed or construed to
render the parties joint venturers, partners or employer and employee. Neither
party is authorized to make any commitment or representation on the other's
behalf. During the term of this Agreement, if
the term "partnership", "partner" or "development partner" or the like is used
to describe the parties' relationship, Flextronics, the Flextronics Affiliated
Companies and Purchaser 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.
Section 20.9 Disputes Resolution. (a) Except as otherwise provided in
this Agreement, the following dispute resolution procedures shall be used by
the parties to resolve all disputes, differences, controversies and claims
under this Agreement (or any SSA) (i) the resolution of which expressly
requires the application of the procedures set forth in this Section 20.9, (ii)
that arise out of the inability of the parties to reach agreement on any matter
as to which the parties have expressly agreed to agree in the future, (iii)
that arise out of the refusal by one party to give its approval or consent
prior to the commencement of any action or in order to finalize any action,
plan or document, and (iv) that arise out of or relate to this Agreement (or
the SSAs) or the interpretation or breach thereof (other than those set forth
in Section 20.9(g) hereof) (collectively, "Disputes"). Either party may, by
written notice to the other party, refer for resolution any Disputes.
(b) Any such Dispute shall be referred to arbitration under the rules of
the American Arbitration Association, to the extent such rules are not
inconsistent with this Section 20.9 The arbitration panel shall consist of
three arbitrators, one of whom shall be appointed by each party hereto. The
two arbitrators thus appointed shall choose the third arbitrator; provided,
however, that if the two arbitrators are unable to agree on the appointment of
the third arbitrator, either arbitrator may petition the American Arbitration
Association to make the appointment.
(c) Unless otherwise mutually agreed to by the parties, for any Dispute
procedure initiated by Flextronics or any Flextronics Affiliated Company, the
place of arbitration shall be Rochester, New York, and for any Dispute
procedure initiated by Xerox or any Xerox Affiliated Company, the place of
arbitration shall be San Jose, California.
(d) The decision of the arbitration panel shall be final and binding on
all of the parties hereto and non-appealable, and the parties hereby waive any
right of appeal to any court on the merits of any Dispute resolved pursuant to
this Section 20.9. However, the provisions of this Section 20.9 may be
enforced in any court having jurisdiction over the award or any of the parties
pursuant to Section 20.9(f) hereof, and judgment on the award (including,
without limitation, equitable remedies) granted in any Disputes resolution
hereunder may be entered in any such court.
(e) Each party shall pay their own expenses in connection with the
resolution of Disputes pursuant to this Section 20.9, including attorneys'
fees. The fees and expenses of the arbitration panel shall be (A) borne equally
by Xerox and Flextronics if and to the extent that the arbitration panel
determines that such result would be fair and equitable under the
circumstances, or (B) borne by Xerox and/or Flextronics in inverse proportion
to the amount that the arbitration panel's award in favor of Xerox and/or
Flextronics bears to the total amount of the items in dispute (for illustration
purposes for this Section 20.9(e) only, (X) if the total amount of items in
dispute by Xerox is $1,000,000.00, and Xerox is awarded $500,000.00 by the
arbitration panel, Flextronics and Xerox shall bear the
arbitration panel's fees and expenses equally, or (Y) if the total amount of
items in dispute by Xerox is $1,000,000.00, and Xerox is awarded $250,000.00 by
the arbitration panel, Xerox shall bear 75% and Flextronics shall bear 25% of
the arbitration panel's fees and expenses).
(f) Any judicial proceeding brought pursuant to Section 20.9(d) hereof
must be brought in any court of competent jurisdiction in the State of New
York, and, by execution and delivery of this Agreement, each party (i) accepts,
generally and unconditionally, the exclusive jurisdiction of such courts and
any related appellate court, and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement, (ii) irrevocably waives any
objection it may now or hereafter have as to the venue of any such suit, action
or proceeding brought in such a court or that such court is an inconvenient
forum and (iii) waives personal service of process and consents to service of
process upon it by certified or registered mail, return receipt requested, at
its address specified or determined in accordance with Section 20.1 hereof, and
service so made shall be deemed completed on the third Business Day after such
service is deposited in the mail. Nothing in this Section 20.9 shall affect
the right of any party hereto to serve process in any other manner permitted by
applicable law. THE PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING TO WHICH THEY ARE BOTH PARTIES INVOLVING, DIRECTLY OR INDIRECTLY,
ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS
AGREEMENT.
(g) The foregoing provisions shall not apply to Disputes as to: (a) a
breach of confidentiality obligations under this Agreement; (b) any claim for
indemnification pursuant to Section 17.1(a) or 17.2(a) hereof, which shall be
governed solely by Article 17 hereof; (c) the misappropriation, validity or
infringement of intellectual property rights; or (d) any Flextronics Event of
Default or Xerox Event of Default.
(h) Notwithstanding anything contained in this Section 20.9 to the
contrary, in the event of any Dispute, prior to referring such Dispute to
arbitration pursuant to Section 20.9(b) hereof, Xerox and Flextronics shall
attempt in good faith to resolve any and all controversies or claims relating
to such Dispute promptly by negotiation commencing within ten (10) calendar
days of the written notice of such Dispute by either party, including referring
such matter to Xxxxxx Xxxxx or Xerox's then-current Senior Vice President of
Worldwide Business Services and Xxxxxxx XxXxxxxx or Flextronics' then current
President-Americas (such negotiation process contemplated by this subsection
(h) being herein referred to as the "Escalation Procedure"). The
representatives of the parties shall meet at a mutually acceptable time and
place and thereafter as often as they reasonably deem necessary to exchange
relevant information and to attempt to resolve the Dispute for a period of four
(4) weeks. In the event that the parties are unable to resolve such Dispute
pursuant to this Section 20.9(h), the provisions of Section 20.9(b) through (f)
hereof, inclusive, shall apply.
Section 20.10 Even-Handed Construction. The terms and conditions as set
forth in this Agreement have been arrived at after mutual negotiation, and it
is the intention of the parties that its terms and conditions not be construed
against any party merely because it was prepared by one of the parties.
Section 20.11 Controlling Language. This Agreement is in English only,
which language shall be controlling in all respects. All documents exchanged
under this Agreement shall be in English.
Section 20.12 Controlling Law. This Agreement (and the SSAs) shall be
governed and construed in all respects in accordance with the domestic laws and
regulations of the State of New York, without regard to its conflicts of laws
provisions. The definitions set forth in the Incoterms of the International
Chamber of Commerce, 2000 edition, shall be controlling. To the extent there
may be any conflict between the law of the State of New York and the Incoterms,
the Incoterms shall be controlling. The parties specifically agree that the
1980 United Nations Convention on Contracts for the International Sale of
Goods, as may be amended from time to time, shall not apply to this Agreement.
Section 20.13 Remedies Cumulative. Except as otherwise set forth herein,
any rights of cancellation or termination or remedies prescribed in this
Agreement are cumulative and are not intended to be exclusive of any other
remedy of which the injured party may be entitled to herein or at law or in
equity, including but not limited to the remedy of specific performance.
Section 20.14 Further Documentation. Each of the parties agrees to
furnish to the other such additional documents and instruments as shall be
reasonably requested to effectuate the purposes of this Agreement.
Section 20.15 Ethical Standards. The parties agree that neither party
shall:
(a) give or offer to give any gift or benefit to any employee of the
other party which goes beyond common courtesies usually associated with
accepted business practice in their respective countries;
(b) solicit or accept any confidential or proprietary information or
data, services, equipment or commitment from said employee unless same is:
(i) required under a contract between Flextronics or any Flextronics
Affiliated Company and Xerox; or
(ii) made pursuant to a written disclosure agreement between Xerox
and Flextronics or any Flextronics Affiliated Company including that
contained in Article 18 herein; or
(iii) specifically authorized in writing by an authorized
representative of the other party;
(c) solicit or accept favoritism from any employees of the other party;
or
(d) enter into any business relationship with any employee of the other
party without full disclosure to, and approval of an authorized representative
of, the other party.
As used herein: "employee" includes members of the employee's immediate
family and household, plus any other person who is attempting to benefit from
his or her relationship to the employee; "gift or benefit" includes money,
goods, service, discounts, favors and the like in any form but excluding low
value advertising items such as pens, pencils and calendars; "favoritism" means
partiality in promoting the interest of one company over that of other
companies; and "party" includes any Affiliate of such party.
Section 20.16 Integration. This Agreement and the Letter Agreement
relating to Collateral Matters dated the date hereof between the parties hereto
constitute the entire agreement of the parties hereto as to the subject matter
hereof and supersede any and all prior oral or written understandings and
agreements as to such subject matter.
Section 20.17 Guarantee by Flextronics. (a) Flextronics hereby
unconditionally and fully guarantees: (i) the full and complete compliance by
all Flextronics Affiliated Companies with the terms and conditions of this
Agreement and all SSAs, (ii) that if any of the obligations under this
Agreement shall be undertaken by any Flextronics Affiliated Company,
Flextronics shall cause such Flextronics Affiliated Company to fully and
completely perform such obligations and Flextronics shall be responsible for
any non-performance by any such Flextronics Affiliated Company, and (iii) the
performance by each Flextronics Affiliated Company that is party to an SSA of
any and all obligations of such Flextronics Affiliated Company pursuant to such
SSA (the obligations of Flextronics set forth in (i) through (iii) above shall
be hereinafter referred to as the "Flextronics Guaranteed Obligations").
(b) Flextronics hereby waives notice of acceptance of the guaranty set
forth in this Section 20.17, presentment, demand, protest, or any notice of any
kind whatsoever, with respect to any or all of the Flextronics Guaranteed
Obligations, and promptness in making any claim or demand hereunder; and no act
or omission of any kind shall in any way affect or impair the guaranty set
forth in this Section 20.17. Flextronics also waives any requirement, and any
right to require, that any right or power be exercised or any action be taken
against any Flextronics Affiliated Companies or any other person or entity or
any assets for any of the Flextronics Guaranteed Obligations.
(c) The obligations of Flextronics under the guaranty set forth in this
Section 20.17 shall be absolute and unconditional, present and continuing,
irrespective of any bankruptcy proceeding involving any Flextronics Affiliated
Company or any voluntary or involuntary liquidation, dissolution or winding up
of the affairs of or termination of the existence of any Flextronics Affiliated
Company, or any circumstance which might constitute a legal or equitable
discharge of Flextronics.
Section 20.18 Guarantee by Xerox. (a) Xerox hereby unconditionally and
fully guarantees: (i) the full and complete compliance by all Xerox Affiliated
Companies with the terms and conditions of this Agreement and all SSAs, (ii)
that if any of the obligations under this Agreement shall be undertaken by any
Xerox Affiliated Company, Xerox shall cause such Xerox Affiliated Company to
fully and completely perform such obligations and Xerox shall be responsible
for any non-performance by any such Xerox Affiliated Company, and (iii) the
performance by each Xerox Affiliated Company that is party to an SSA of any and
all obligations of such Xerox Affiliated Company pursuant to such SSA (the
obligations of Xerox set forth in (i) through (iii) above shall be hereinafter
referred to as the "Xerox Guaranteed Obligations").
(b) Xerox hereby waives notice of acceptance of the guaranty set forth in
this Section 20.18, presentment, demand, protest, or any notice of any kind
whatsoever, with respect to any or all of the Xerox Guaranteed Obligations, and
promptness in making any claim or demand hereunder; and no act or omission of
any kind shall in any way affect or impair the guaranty
set forth in this Section 20.18. Xerox also waives any requirement, and any
right to require, that any right or power be exercised or any action be taken
against any Xerox Affiliated Companies or any other person or entity or any
assets for any of the Xerox Guaranteed Obligations.
(c) The obligations of Xerox under the guaranty set forth in this Section
20.18 shall be absolute and unconditional, present and continuing, irrespective
of any bankruptcy proceeding involving any Xerox Affiliated Company or any
voluntary or involuntary liquidation, dissolution or winding up of the affairs
of or termination of the existence of any Xerox Affiliated Company, or any
circumstance which might constitute a legal or equitable discharge of Xerox.
Section 20.19 Interpretation. In any provision hereof in which an
obligation is imposed on a Flextronics Affiliated Company, Flextronics shall
have an accompanying obligation to cause such Flextronics Affiliated Company to
fulfill such obligation. In any provision hereof in which an obligation is
imposed on a Xerox Affiliated Company, Xerox shall have an accompanying
obligation to cause such Xerox Affiliated Company to fulfill such obligation.
In any provision hereof in which Flextronics has an obligation to cooperate
with Xerox or Purchasers or to use commercially reasonable efforts or best
efforts, such cooperation or efforts shall include, without limitation, causing
the Flextronics Affiliated Companies to cooperate with Xerox or Purchasers and
to use commercially reasonable efforts or best efforts, respectively.
[Signature Page for Master Supply Agreement]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
XEROX CORPORATION
By: /s/ Xxxxx X. Xxxxxxxx
Name: Xxxxx X. Xxxxxxxx
Title: Director, Corporate Business
Development
[Signature Page for Master Supply Agreement]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
FLEXTRONICS INTERNATIONAL LTD
By: /s/ C.F. Alain Ahkong
Name: C.F. Alain Ahkong
Title: Director
EXHIBIT A
REPURCHASE RIGHT AGREEMENT
This REPURCHASE RIGHT AGREEMENT (this "Agreement") dated as of,
2001, is made and entered into by and between FLEXTRONICS INTERNATIONAL LTD.,
a limited liability company formed in the Republic of Singapore
("Flextronics"), and XEROX CORPORATION, a New York corporation ("Xerox").
Reference is hereby made to (i) the Master Purchase Agreement dated as
of October 1, 2001 by and between Flextronics and Xerox (the "Master Purchase
Agreement") and (ii) the Master Supply Agreement dated as of,
2001 by and between Flextronics and Xerox (the "Master Supply Agreement").
Pursuant to Section 16.5 of the Master Supply Agreement, the parties
have agreed that Flextronics or the relevant Flextronics Affiliated Company
will sell and transfer to the relevant Purchasers (as defined in the Master
Supply Agreement) at any time and for any reason other than a Xerox Event of
Default (as defined in the Master Supply Agreement) all or any part of the
Xerox Unique Property (as defined in the Master Supply Agreement) as set
forth in a Notice of Exercise (as defined below) provided to Flextronics by
Xerox.
For valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties to this Agreement hereby agree as follows:
1. Right of Repurchase. The parties hereto agree that each Purchaser shall
have the right and option at any time and for any reason other than a
Xerox Event of Default to repurchase all or any part of the Xerox Unique
Property on the terms and subject to the conditions herein provided.
2. Notice of Exercise. Xerox may exercise each Purchaser's right to
repurchase by delivering to Flextronics one or more written notices
substantially in the form of Exhibit A hereto (each, a "Notice of
Exercise").
3. Transfer of Title. Upon receipt of a Notice of Exercise by Flextronics,
title to and rights of possession of the Xerox Unique Property identified
therein shall be deemed sold and transferred to the Purchaser specified
therein, free and clear of all Liens (as defined in the Master Purchase
Agreement). On the respective date on which the Xerox Unique Property
specified in a Notice of Exercise has been delivered to the relevant
Purchasers pursuant to paragraph 5 below (or, if Xerox requests that such
Xerox Unique Property remain at the relevant Facility (as defined in the
Master Supply Agreement), on the date ten (10) Business Days (as defined
in the Master Supply Agreement) after receipt of such Notice of Exercise
by Flextronics), Flextronics shall cause the relevant Flextronics
Affiliated Company to deliver a General Assignment and Xxxx of Sale in
form and substance reasonably acceptable to Xerox (the "General
Assignment") duly executed by such Flextronics Affiliated Company and
such other good and sufficient instruments of conveyance, assignment and
transfer, in form and substance reasonably acceptable to Xerox, as shall
be effective to vest in the relevant Purchasers good title to such Xerox
Unique Property as of the date of receipt of such Notice of Exercise by
Flextronics. For the avoidance of doubt, the parties understand and
agree that immediate transfer of Xerox Unique Property is essential for
continued operation of Purchasers' business. Accordingly, transfer of
title and rights of possession shall be immediate upon receipt by
Flextronics of such respective Notice of Exercise notwithstanding any
issue raised by any party, including Xerox, any Xerox Affiliated Company
(as defined in the Master Supply Agreement), Flextronics or any
Flextronics Affiliated Company. Any such issue shall be resolved by the
parties independently of and subsequent to transfer of title and
possession.
4. No Assumption of Liabilities. None of the Purchasers assumes or shall be
responsible for, and Flextronics and the Flextronics Affiliated Companies
shall retain and remain responsible for, (i) any and all Assumed
Liabilities (as defined in the Master Purchase Agreement) relating to the
Xerox Unique Property, (ii) any Liabilities (as defined in the Master
Purchase Agreement) and obligations of Flextronics or any of the
Flextronics Affiliated Companies under the Master Supply Agreement
relating to the Xerox Unique Property, and (iii) any Liabilities and
obligations of Flextronics or any of the Flextronics Affiliated Companies
under this Agreement relating to the Xerox Unique Property. Nothing
herein is intended to vary the parties' obligations under Article X of
the Master Purchase Agreement.
5. Delivery Instructions. Flextronics shall, and shall cause the relevant
Flextronics Affiliated Company to, follow the instructions of Xerox set
forth in each Notice of Exercise regarding delivery of the Xerox Unique
Property to the relevant Purchasers.
6. Purchase Price. The purchase price for any Xerox Unique Property subject
to a Notice of Exercise shall be an amount equal to the net book value of
such Xerox Unique Property (the "Net Book Value") calculated as
hereinafter set forth. The Net Book Value of any Xerox Unique Property
shall be an amount equal to no more than the amount set forth on the most
recently delivered Net Book Value Certificate (as defined in paragraph 9
below) for such Xerox Unique Property, and shall be calculated in
accordance with the Accounting Principles (as defined in the Master
Purchase Agreement) as if such Xerox Unique Property continued to be
owned by any of Purchasers.
7. Invoice. Promptly after receipt of a Notice of Exercise by Flextronics,
Flextronics will determine the purchase price for the Xerox Unique
Property specified therein subject to paragraph 6 above and no later than
ten (10) Business Days after the receipt thereof deliver to Xerox an
invoice setting forth the purchase price.
8. Payment. The relevant Purchaser shall pay Flextronics the invoiced
amount on the following payment dates: (a) in the case where Xerox
requests that the Xerox Unique Property be delivered to the relevant
Purchaser, within forty-five (45) days of the later to occur of (i)
receipt of the invoice by Xerox or (ii) the date on which Flextronics or
the relevant Flextronics Affiliated Company actually delivers to the
relevant Purchaser the Xerox Unique Property subject to the Notice of
Exercise, and (b) in the case where Xerox requests that the Xerox Unique
Property remain at the relevant Facility, within forty-five days of the
receipt of the invoice by Xerox. In the event that an invoice is
delivered by mail, the date of receipt of such invoice shall be deemed to
be three (3) Business Days after the date of the invoice. All taxes,
exclusive of taxes on the net income of Flextronics (or taxes in lieu
thereof) or withholding taxes, if any, payable by reason of the sale,
transfer or delivery of any Xerox Unique Property shall be paid and borne
by Purchaser, and any recovery, refund or credit by Flextronics or any
Flextronics Affiliated Company of any such taxes paid by Purchaser shall
be repayable to Purchaser immediately upon receipt or credit thereof.
9. Covenants.
From and after the date hereof until the date of receipt of a Notice of
Exercise by Flextronics with respect to Xerox Unique Property (the "Title
Transfer Date"), Flextronics shall and shall cause each of the
Flextronics Affiliated Companies to provide to Xerox, pursuant to Section
16.5 of the Master Supply Agreement, within thirty (30) days after the
end of each calendar quarter from the date hereof until the relevant
Title Transfer Date, a certificate setting forth the Net Book Value of
the Xerox Unique Property at the end of such calendar quarter (each, a
"Net Book Value Certificate"), calculated and prepared in accordance with
the Accounting Principles (as if such Xerox Unique Property continued to
be owned by any of Purchasers).
10. Certain Related Provisions. This Agreement is subject to Article 20 of
the Master Supply Agreement, the provisions of which are hereby
incorporated by reference herein.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first above written.
FLEXTRONICS INTERNATIONAL LTD.
By:
Name:
Title:
XEROX CORPORATION
By:
Name:
Title:
Exhibit A
NOTICE OF EXERCISE
1. Reference is hereby made to Repurchase Right Agreement, dated as of
, 2001 between Flextronics International Ltd. and Xerox
Corporation (the "Repurchase Right Agreement"). Unless otherwise
specified herein, capitalized terms used and not otherwise defined herein
shall have the meanings set forth in the Repurchase Right Agreement.
2. Xerox hereby, on its own behalf and on behalf of the following
Purchaser(s): , exercises the Purchaser(s)' right and
option pursuant to paragraph 1 of the Repurchase Right Agreement to
repurchase the Xerox Unique Property identified on Schedule 1 hereto.
3. Flextronics shall, and shall cause each of the Flextronics Affiliated
Companies (as defined in the Repurchase Right Agreement) to, deliver the
Xerox Unique Property identified on Schedule 1 hereto in its possession
to the Purchaser(s) specified above within days of the date
hereof.
4. [Delivery instructions, if any.]
XEROX CORPORATION
By:
Name:
Title:
Date:
Schedule 1
Items of Xerox Unique Property
EXHIBIT B
MANUFACTURING IP NON-ASSERTION AGREEMENT
This Manufacturing IP Non-Assertion Agreement (this "Agreement") is made
and entered into as of November 30, 2001 by and between Flextronics
International Ltd., a limited liability company formed in the Republic of
Singapore, with offices at Xxxx 000, Xxxxxxxx Xxxxxx 00-00, Xxxxx'x Xxxx
Xxxx, Xxxxxxx, Xxxx Xxxx, (hereinafter "Flextronics"), and Xerox Corporation,
a corporation organized under the laws of the State of New York, with offices
in Xxxxxxx, New York (hereinafter "Xerox").
For valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties to this Agreement hereby agree as follows:
1.0 Relationship to Master Purchase and Supply Agreements; Definitions
1.1. Background. Flextronics and Xerox are parties to a Master
Purchase Agreement (the "Master Purchase Agreement") dated as of
October 1, 2001, and a Master Supply Agreement (the "Master Supply
Agreement"), dated as of the date hereof. As set forth in the
Master Purchase Agreement and the Ancillary Agreements (as defined
Purchase Agreement, Xerox and certain Xerox Affiliated Companies
(as defined in the Master Supply Agreement) have transferred to
certain Flextronics Affiliated Companies (as defined in the Master
Supply Agreement) substantially all of their Product (as defined
in the Master Supply Agreement) manufacturing assets. As
contemplated in the Master Purchase Agreement, Flextronics and
Xerox agree to enter into this Agreement in order that Flextronics
may more efficiently use such assets and to expand its business
during the term of this Agreement.
1.2. Definitions. Unless otherwise provided, all definitions of the
Master Purchase Agreement and the Master Supply Agreement are
hereby incorporated herein. In the event of conflict between such
terms, the terms of the Master Purchase Agreement shall control.
The following definitions shall also apply:
"Licensed Manufacturing IP" means (i) patents, patent rights and
invention registrations of any type, inventions, processes,
formulae, copyrights and copyright rights, processes, know-how,
trade secrets, formulae, methodologies, computer programs, and
related documentation and manufacturing drawings covering
manufacturing processes and manufacturing equipment that are
Purchased Assets used within Operations at the Facilities as of
the Closing Date, and (ii) rights transferred to Xerox or Xerox
Affiliated Companies pursuant to Section 19.4 of the Master
Purchase Agreement to the extent such rights cover manufacturing
processes and manufacturing equipment . Excluded from "Licensed
Manufacturing IP" are patents, patent rights and invention
registrations of any type, inventions, processes, formulae,
copyrights and copyright rights, processes, know-how, trade
secrets, formulae, methodologies, computer programs, and related
documentation covering manufactured articles and/or products or
covering the use or sale of manufactured articles and/or products.
Also excluded, without limitation, are any and all trademarks,
trademark rights, trade names and trade name rights, service marks,
and service xxxx rights, service names and service name rights,
brand names, logos, slogans, Internet domain names, and web sites,
meta-tags, trade dress, business and product names whether or not
subject to statutory registration or protection now or hereafter.
"Printing and Publishing" means the business and technology of
scanning, manipulating (in conjunction with printing or other hard
copy output), printing, displaying (in conjunction with printing or
other hard copy output), assembling, finishing or otherwise
managing (in conjunction with printing or other hard copy
output)images and/or documents in tangible or intangible form.
Included, without limitation, within the "Printing and Publishing"
business and technology are printers, copiers, other hard copy
output devices, finishers, assemblers, scanners, as well as inks,
supplies, components, spare parts and services for repair,
maintenance, and remanufacturing of the same.
2.0 Non-Assertion Provisions
Subject to Flextronics' and Flextronics Affiliated Companies' obligations
of confidentiality to Xerox and to Xerox Affiliated Companies, including,
without limitation, obligations pursuant to Section 5.2 of the Master
Purchase Agreement and Article 18 of the Master Supply Agreement, neither
Xerox nor Xerox Affiliated Companies shall assert against (i) Flextronics
or Flextronics Affiliated Companies, (ii) against customers in respect to
products made by Flextronics or Flextronics Affiliated Companies, or (iii)
suppliers in respect to items supplied for manufacturing operations of
Flextronics and Flextronics Affiliated Companies, their rights in Licensed
Manufacturing IP when used by Flextronics or Flextronics Affiliated
Companies to manufacture products or to provide services that are outside
of the field of Printing and Publishing.
3.0 General Terms; Termination
3.1. General Terms. Unless otherwise provided, the terms and conditions of
Article 20, General Provisions, of the Master Supply Agreement are
hereby incorporated by reference. The following exceptions and
modifications shall apply:
20.1 Notice In addition to the parties designated to receive
notice, add:
Xerox Corporation
000 Xxxx Xxxxx Xxxx
Xxxxxxxx Xxxxxxxxxxx 00000
Attention: Chief Patent Counsel
Facsimile Number: (000) 000-0000
20.4 Delete references to "SSA"
3.2. Termination. This Agreement shall remain in effect unless and
until the Master Supply Agreement is terminated pursuant to a
Flextronics Event of Default. Notwithstanding the above, the
provisions of Section 2.0 of this Agreement shall immediately
terminate in respect to processes and equipment that become
repurchased by Xerox pursuant to the Repurchase Right Agreement
described in Section 16.5 of the Master Supply Agreement, unless
otherwise specifically agreed by the parties in writing.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
this 30th day of November, 2001.
XEROX CORPORATION FLEXTRONICS INTERNATIONAL LTD
By: By:
Name: Name:
Schedule 2.4
ALLOCATION OF INDUCEMENT PAYMENT
[*]
Schedule 6.7(j)
DUTY SUSPENSION, EXEMPTION OR REDUCED RATES OF TAX
TRADE AGREEMENTS
----------------
-------------------------------------------------------------------------------
TO:
-------------------------------------------------------------------------------
FROM: US MEXICO EU BRAZIL CANADA EE FAR EAST/1/ OTHER
(INCL MERCOSUR
JAPAN) COUNTRIES
-------------------------------------------------------------------------------
US X NAFTA ITA - NAFTA - ITA / -
-------------------------------------------------------------------------------
MEXICO NAFTA X MEUFTA ALADI NAFTA - ITA / -
-------------------------------------------------------------------------------
VARIOU
EU ITA MEUFTA X - ITA S ITA / -
-------------------------------------------------------------------------------
BRAZIL GSP ALADI - X ITA - ITA / - FREE
-------------------------------------------------------------------------------
CANADA NAFTA NAFTA ITA - X - ITA / -
-------------------------------------------------------------------------------
EASTERN GSP - GSP - GSP - ITA / -
EUROPE
-------------------------------------------------------------------------------
MALAYSIA ITA - ITA - ITA - ITA / -
-------------------------------------------------------------------------------
/(1)/ITA not applicable to all countries; China -- No ITA, no specific
advantages
ITA Information Technology Agreement
NAFTA North American Free Trade Agreement; U.S., Canada, Mexico
MEUFTA Mexico-EU Free Trade Agreement; Mexico, EU
Mercosur Common Market of the South; Brazil, Argentina, Uruguay,
Paraguay
ALADI Assoc. for the Integration of Latin America; Sectoral
Agreements:
Argentina, Bolivia, Brazil, Chile, Colombia, Cuba,
Ecuador, Mexico, Paraguay, Peru, Uruguay, Venezuela
GSP Generalized System of Preferences
EU European Union
EE Eastern Europe
-------------------------------------------------------------------------------
PLANT SUSPENSION ENVIRONMENT
----- ----------------------
-------------------------------------------------------------------------------
.. AGUASCALIENTES . PITEX / Maquiladora
. Photographic Sectoral
Program
. Electronics Sectoral Program
. Approval by the Economy
Secretariat
-------------------------------------------------------------------------------
.. PENANG . Licensed manufacturing
warehouse (LMW)
-------------------------------------------------------------------------------
.. RESENDE . DECEX License
-------------------------------------------------------------------------------
.. VENRAY . Type "E" Bonded Warehouse
. Authorized Consignor/Consignee
. Inward Processing Relief (IPR)
license plus simplified
procedure
. Processing Under Customs
Control (PCC) license plus
simplified procedure
. PCC (separately or integrated
with IPR license under
suspension)
. Simplified Procedure Import
. Simplified Procedure Export
. Authorized Exporter
-------------------------------------------------------------------------------
Schedule 7.6
------------
INITIAL LOCATION AND CHANGE IN LOCATION OF MANUFACTURE
------------------------------------------------------
Flextronics currently intends to relocate the following manufacturing
---------------------------------------------------------------------
activities:
-----------
===============================================================================
Current Facility New Location
---------------- ------------
-------------------------------------------------------------------------------
El Segundo Guadalajara
---------- -----------
-------------------------------------------------------------------------------
Mitcheldean Czech Republic
----------- --------------
-------------------------------------------------------------------------------
Utica Aguascalientes
----- --------------
===============================================================================
Schedule 16.3
-------------
TRANSITION COOPERATION
----------------------
A. RELATIONSHIP TO THE MASTER SUPPLY AGREEMENT
-------------------------------------------
This Schedule describes several specific services and actions required of
Flextronics and the Flextronics Affiliated Companies (hereinafter, individually
and collectively, as the case may be, "Flextronics") pursuant to Section 16.3
of the Master Supply Agreement. The descriptions herein are for clarification
purposes and shall not be construed to limit Flextronics' obligations of
Section 16.3.
B. EXAMPLES OF TRANSITION SERVICES
-------------------------------
1. Flextronics will provide the following information to support Section 16.3
transitions:
. List of all equipment and tools ( Assembly and Test) and part number
combinations associated therewith, including without limitation,
Xerox-Owned Assets
. Documentation of current manufacturing processes associated with
Products
. Part certification data and historical data, including process
measures and output measures.
. Examples of process measures include, without limitation,
parameters such as time, temperature, pressure, humidity,
production rates, etc., as applicable
. One example of an output measure is the critical dimensions of
components and parts at the conclusion of each manufacturing
process.
. Where applicable, a sample part from the tooling and fixtures
(preferably the last piece or assembly from tooling to be used as
reference)
2. Flextronics will fully participate in the following transition planning
activities:
. Planning discussions with Xerox move team (typically comprised of
Supplier Quality Assurance, Commodity team buyer, Design personnel as
required). Xerox processes such as Continuous Supplier Involvement
(a copy of which can be obtained at
xxxx://xxx.xxxxx.xxxxx.xxxxx.xxx/xxxxxxxxx/xxxxx/) shall form the
basis for these discussions.
. Transfer discussions with a new supplier, if any.
. Support tooling and process transfers and transition, including
supply of the information contained in Exhibit I attached
hereto.
. Planning for and agreement upon level of appropriate finished
goods hedge and associated build schedule
. Participation in process to identify, qualify, and transition
Sub-Tier Suppliers
C. TRANSITION ASSETS AND TRANSITION RIGHTS DELIVERED BY FLEXTRONICS
----------------------------------------------------------------
. Access to and planned delivery of Xerox-Owned Assets and items
repurchased pursuant to Section 16.5 hereof.
. Consistent with the applicable provisions of the Master Supply
Agreement, creation of a disposition process for raw materials used
in the manufacture of products moved together with procedures for
purchasing or build-out to finished goods of Work-In-Process
. Creation of a reasonable finished goods final buy
. Identification of any Software and programs used in the manufacture
/ test / inspection of Components and Products that are transferred
D. SCHEDULE
--------
. Total time required to move production of a Product to a different
manufacturer is 3 to 6 months. As much as possible, Xerox wishes to
arrange transition planning and activities to accord with the
reasonably anticipated time required to complete transfer of
production to and qualification at a different manufacturing site.
At a minimum, this requires:
. Transition planning and transition activities as early as
possible in advance of the anticipated Stop Production date at
Flextronics
. Frequent on-site visits by Xerox transition personnel,
including access to process documentation and processes while
still in production
. Access to tooling and assistance in preparing tooling and
transferred assets for shipment and re-start operations
. Scheduled production of finished good Products and Component
hedge quantities
EXHIBIT I
PROCESS AND PART/ASSEMBLY INFORMATION NEEDED FOR TOOL TRANSFER
TOOLING
.. Describe operation of the tool. (e.g., compound die, 60T, mold, assembly
fixture, etc.)
.. Obtain the process sheet for the Product that uses the tool, including any
non standard operations required to correct or " tweak" the Product.
.. Record the markings on the tool.
.. Obtain the utilization level of the tool to date, e.g., 100,000 strokes.
.. Obtain the estimated tool life, e.g., 250,000 strokes.
.. Collect tool history information, e.g., major repair work done,
modifications, etc.
.. Find out the machine information (type and brand) in which the tool is used.
PRODUCT
.. Provide the Process Certification package, process or quality plan detailing
process steps required to manufacture Product.
.. Review part history records for quality information.
.. Details of any specification that is not within the drawing callout.
.. Based on past experience, provide a written description of any process
critical dimensions that require special attention.
.. Ensure that the last part from each operation / tool is available with the
applicable tool / fixture for later correlation.
.. Ensure that Sub-Tier Supplier special requirements and lead times are known
and taken into account.
Schedule A
[*]
[139 pages omitted]
SCHEDULE B
----------
XEROX NORTH AMERICAN SHIPPING ADDRESSES/DESIGNATED LOCATIONS
------------------------------------------------------------
Parts:
Xerox Corporation:
000 Xxxxxxxx Xxxx, Xxxx. 000 Xxxx 0, Xxxxxxx, XX 00000
000 Xxxxxxxx Xxxx, Xxxx. 000 Xxxx 0, Xxxxxxx, XX 00000
000 Xxxxxxxx Xxxx, Xxxx. 000 Xxxx 0, Xxxxxxx, XX 00000
000 Xxxxxxxx Xxxx, Xxxx. 000 Xxxx 0, Xxxxxxx, XX 00000
000 Xxxxxxxx Xxxx, Xxxx. 000 Xxxx 0, Xxxxxxx, XX 00000
000 Xxxxxxxx Xxxx, Xxxx. 000 Xxxx 0, Xxxxxxx, XX 00000
000 Xxxxxxxx Xxxx, Xxxx. 000, Xxxx 0,Xxxxxxx, XX 00000
H.P. Neun 0000 Xxxxx Xxxx Xxxxx 00, Xxxxxx, XX 00000
Equipment/Supplies:
Xerox Corporation:
Sharonville Logistic Center 0000 Xxxx Xxxxxxxxxxxxx Xx.
Xxxxxxxxxxx Xxxx 00000
Xerox Canada LTD. NLC 0000 Xxxxxxxx Xxxx, Xxxxxxxxxxx, Xxxxxxx
X0X 0X0
Xxxxx Xxxxxx LTD/LTEE 0000 Xxxxxxx Xxxxx, Xxxxxxxxxxx, Xxxxxxx
X0X0X0
Chicago RDC 0000 Xxx Xxxxxxx Xxx X.X. Xxx Xxxxxxx, XX 00000
Compton RDC 000 Xxxx Xxxxxxx Xxxx XXXX Xxxx 00 Xxxxxxx, XX 00000
Xerox RDC 000 Xxxx Xxxxxxx Xxxx XXX Xxxx 00 Xxxxxxx, XX 00000
Xerox Corporation 0000 X. Xxxxxx Xxxx. Xxxxxxxx, XX 00000
Xerox Corporation Supply DC 0000 Xxxxxxxx Xxxxxxx Xxxxxx, XX 00000
Equipment:
Xerox Corporation 000 X. Xxxxx Xxx Xxx Xxxxxxxxx, XX 00000
Xerox Corporation WPDC 00000 Xxxxx Xxxxxx, Xxxxxxxx, XX 00000
Xerox Corporation Central PDC 0000 Xxxx Xxxx, Xxxxxxxxx, Xxxx
00000
Xerox Corporation RDC 0000 Xxxx Xxxxxxx Xx. Xxxxxx XX 00000
Webster PDC 000 Xxxxxxxx Xxxx, Xxxx. 000, Xxxxxxx, XX 00000
OPB:
Xxxxx Xxxxxxxxxxx, Xxxx 0000 Xxxx Xxxx, 00000 XX Xxxxxxx Xxx.,
Xxxxxxxxxxx, XX 00000
Xerox Europe Shipping Addresses/Designated Locations
----------------------------------------------------
XEROX EUROPE LTD
OFFICE PRINTING BUSINESS
X/X XXXXX XXXX XX
XXXXX XXXXXXXXX 0
XXXXXXX/XXXXXX, 0000 XX
Xxxxxxxxxxx
XEROX LTD.
EUROPEAN LOGISTICS CENTRE
SSA-BLDG. C
X/X XXX XXXXXX XXXXXXXXXXXX 0
0000 XX XXXXXX
OPB:
Xerox MFG(NED) BV, Office Printing Business, Xxxxx Vennemmegi,
Oostrum Venray Netherlands
FLEXTRONICS' FACILITIES
===============================================================================
Site Address
-------------------------------------------------------------------------------
Aguascalientes Boulevard a Zacatecas Km. 9.5
Municipio de Xxxxx Xxxxx, Aguascalientes,
Mexico ZP 20900
-------------------------------------------------------------------------------
Guadalajara Xxxxxxxxx Xxxx Xxxxx 0000, Xxxxxx 0
Xxxxxxx, Xxxxxxx, Xxxxxx ZP 45100
-------------------------------------------------------------------------------
Hungary Zrinyi ut 38
H-8900 Zalaegerszeg, Hungary
-------------------------------------------------------------------------------
Penang 1088 MK 6 Tingkat Perusahaan 6
Kawasan Xxxxxxxxxx Xxxx XX
00000 Xxxx, Xxxxxx, Xxxxxxxx
-------------------------------------------------------------------------------
Resende Rodovia Presidente Xxxxx Xx 316-lado impar
Rua: Gunnar B. V. Vikberg s/n
Itatiaia -- RJ -- Brasil
CEP: 27580-000
-------------------------------------------------------------------------------
Toronto 0000 Xxxxxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxx X0X 0X0 Xxxxxx
===============================================================================
FREIGHT FORWARDERS
TO: OUTPUT DESTINATION
-----------------------------------------------------------------------------------------------------------------------------------
Manufacturing Europe US Canada DMO/Other FX Brazil
Site
-----------------------------------------------------------------------------------------------------------------------------------
Venray N/A Egle/Circle (Prim) Eagle/Circle N/A N/A Xxxxx (Prim)
Xxxxx (Bkup) (Prim) Danzas (Bkup)
Xxxxx (Bkup)
-----------------------------------------------------------------------------------------------------------------------------------
Aguascalientes Xxxxx (Prim) N/A N/A Expeditors Expeditors ?
(Prim) (Prim)
Egl/Circle (Bkup) Nippon (Bkup) Nippon (Bkup)
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx Xxxxx (Prim) Danzas (Prim), Danzas (Prim), Xxxxx (Prim) Xxxxx (Prim) N/A
Danzas (Bkup) Xxxxx (Prim), Xxxxx (Prim), EI Danzas (Bkup) Danzas (Bkup)
EI (Prim) (Prim)
-----------------------------------------------------------------------------------------------------------------------------------
Toronto-IODU Xxxxx (Prim) N/A N/A Expeditors Expeditors Xxxxx
Egl/Circle (Bkup) (Prim), (Prim)
Nippon (Bkup), Nippon (Bkup)
Exel
-----------------------------------------------------------------------------------------------------------------------------------
Utica Xxxxx (Prim) N/A N/A Expeditors Expeditors Xxxxx
(Prim) (Prim)
Egl/Circle (Bkup)
Nippon (Bkup) Nippon (Bkup)
-----------------------------------------------------------------------------------------------------------------------------------
Penang Exel (Prim) Expeditors (Prim), Expeditors (Prim), Expeditors N/A Expeditors
(Prim), Xxxxx (Prim), Xxxxx
Xxxxx (Sec), Xxxxx (Sec), (Bkup) (Bkup)
Danzas (Alt) Danzas (Alt)
-----------------------------------------------------------------------------------------------------------------------------------
Mitcheldean N/A Egle/Circle (Prim) Egle/Circle (Prim) Xxxxx (Prim), N/A Xxxxx (Prim)
Xxxxx (Bkup) Xxxxx (Bkup) Danzas (Bkup) Danzas (Bkup)
-----------------------------------------------------------------------------------------------------------------------------------
El Xxxxxxx Xxxxx (Prim) N/A N/A Exel Expeditors Exel
Egl/Circle (Bkup) (Prim) Nippon
(Bkup)
-----------------------------------------------------------------------------------------------------------------------------------
CUSTOMS AGENTS
TO: OUTPUT DESTINATION
-----------------------------------------------------------------------------------------------------------------------------------
Manufacturing Europe US Canada FX Brazil-Manaus Brazil-Resende Mexico Penang
Site
-----------------------------------------------------------------------------------------------------------------------------------
Venray n\a Circle Intl Xxxxxxxxxx Intl FXDC Dmarcos In-House Xxxxx Xxxxxx Expeditors Intl
Despachus
Aduaneiros
-----------------------------------------------------------------------------------------------------------------------------------
Aguascalientes In House Circle Intl Xxxxxxxxxx Intl FXDC Dmarcos In-House n\a Expeditors Intl
Despachus
Aduaneiros
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx Xxxxx
-----------------------------------------------------------------------------------------------------------------------------------
Expeditors Intl
-----------------------------------------------------------------------------------------------------------------------------------
Resende In House Circle Intl Xxxxxxxxxx Intl FXDC n\a n\a Xxxxx Xxxxxx Expeditors Intl
-----------------------------------------------------------------------------------------------------------------------------------
Toronto-IODU In House Circle Intl n\a FXDC Dmarcos In-House Xxxxx Xxxxxx Expeditors Intl
Despachus
Aduaneiros
-----------------------------------------------------------------------------------------------------------------------------------
Utica In House n\a Xxxxxxxxxx Intl FXDC Dmarcos In-House Xxxxx Xxxxxx Expeditors Intl
Despachus
Aduaneiros
-----------------------------------------------------------------------------------------------------------------------------------
Penang In House Eagle/Circle Intl X/X X/X X/X X/X X/X X/X
-----------------------------------------------------------------------------------------------------------------------------------
Mitcheldean In House Circle Intl Xxxxxxxxxx Intl FXDC Dmarcos In-House Xxxxx Xxxxxx Expeditors Intl
Despachus
Aduaneiros
-----------------------------------------------------------------------------------------------------------------------------------
El Segundo In House n\a Xxxxxxxxxx Intl FXDC Dmarcos In-House Xxxxx Xxxxxx Expeditors Intl
Despachus
Aduaneiros
-----------------------------------------------------------------------------------------------------------------------------------
CARRIERS
TO: OUTPUT DESTINATION
----------------------------------------------------------------------------------------------------------
Manufacturing Site Europe US Canada DMO/Other FX Brazil
----------------------------------------------------------------------------------------------------------
Venray N/A Hapag, Hapag, N/A N/A Mitsui,
NYK, NYK Alianca,
Mitsui, MSC
Hyundai
----------------------------------------------------------------------------------------------------------
Aguascalientes Hapag Ryder Ryder via Charleston SC N/A Mitsui,
then Yellow or Alianca
BAX Global
----------------------------------------------------------------------------------------------------------
Resende NYK, Alianca, Alianca, X/X X/X X/X
Xxxxx, Xxxxx, Xxxxx
XXX Xxxxx
----------------------------------------------------------------------------------------------------------
Toronto-IODU Hapag First-Team N/A N/A N/A Mitsui,
Alianca,
Libra
----------------------------------------------------------------------------------------------------------
Utica Hapag, N/A First Team Alianca, N/A Mitsui,
NYK, Libra, Alianca,
Mitsui, CCNI, Libra
Hyundai, Xxxxxxx,
MSC = Mitsui
Webster
----------------------------------------------------------------------------------------------------------
Penang X/X X/X X/X X/X X/X X/X
(Exel) (Expeditors)
----------------------------------------------------------------------------------------------------------
Mitcheldean N/A NYK, Hapag, N/A N/A MSC,
Hapag, NYK Alianca
Hyundai,
Mitsui
----------------------------------------------------------------------------------------------------------
El Segundo Hapag, N/A Ryder, N/A N/A N/A
MSC First team
----------------------------------------------------------------------------------------------------------
Schedule C
[*]
[829 pages omitted]
Schedule D
UNIT MANUFACTURING COST DEFINITION
Purpose:
To provide definition of Unit Manufacturing Cost (UMC) used as the basis for
establishing transfer prices from CEM to Xerox.
Scope:
Applies only to [*]. This definition does not apply to [*].
Definition:
UMC includes [*].
Direct Material Costs:
Includes
[*]
Excludes
[*]
Direct Labor Costs:
Includes
[*]
Excludes
[*]
Manufacturing Overhead Costs:
Includes
[*]
Excludes
[*]
Material and Labor Overhead Cost Content
The overhead costs consists of the following elements:
[*]
Other notes and definitions:
[*]
Schedule E
KEY PERFORMANCE INDICATORS
Xerox and Flextronics agree that achievement of certain key performance
indicators ("KPIs") must be managed actively to assure that the initiation of
delivery of Products meets Xerox market requirements. The program management
team may identify additional KPIs which shall be included in the Product
Specific Agreements. When such KPIs are included in a Product Specific
Agreement, the parties agree to apply diligent efforts to assure that the
progress of the program is kept on schedule.
Xerox and Flextronics agree to conduct quarterly reviews to assess the status
of the KPIs. Further, if it is determined by either party that the progress
of KPIs is insufficient to assure that market launch and ongoing performance
is maintained, managers designated by the parties may schedule more frequent
KPI reviews upon written notification to the other party. KPI reviews will
be held at a mutually agreed locations within ten (10) working days of such
written notification and will be attended by:
Xerox - Vice President of Strategic Contracts
Flextronics - Sr. Supplier Xerox Mgr., Facility(s) Plant Mgr. and additional
program team members as selected by Flextronics
[*]
[2 pages omitted]
Schedule F
REPORTS TO BE PROVIDED BY FLEXTRONICS TO XEROX CORPORATION
Report Frequency By Facility
- Service Level by Facility Monthly/Product Family
- % Kanban Product Shipped within
24 hours of Pull Signal; 48 hours
of Pull Signal
- % PO Products shipped complete per
weekly schedule
- Quality Monthly
- Outgoing Quality/Product per facility
PVT Results (Defects per 100 units)
- Xerox sub tier supplier management
- US$ Spend with Xerox sub- tier Quarterly pending MDSS system
suppliers implementation
- Purchased goods from Flextronics
- Purchased volumes Quarterly
- Cost
- See UMC report requirements in Monthly
Schedule D
- Inventory -
Component/WIP/Finished Goods Monthly
Inventory level in $ and DOS
- Fees charged to Xerox incremental
to Product cost (e.g. - special Monthly
projects, freight, other).
Causals should be listed. Monthly
- Fees as a % of COP Monthly
- Component UMC's ($/each & Supplier)
- Aged Inventory greater than 60 days
by quantity and value
- Top 10 Products (80-90% of COP) UMC Quarterly
detail including Costed BOM, Direct
Labor, MOH, LOH & any other charges
Schedule G
[*]
[2 pages omitted]
Schedule H
[*]
[5 pages omitted]
Schedule I
[*]
[37 pages omitted]
Product Specific Attachments
[*]
[3,375 pages omitted]
