EXHIBIT 10.20
ORIGINAL DESIGN MANUFACTURER AGREEMENT
between
TRIGEM COMPUTER, INC.
and
EMACHINES, INC.
January 24, 2000
ORIGINAL DESIGN MANUFACTURER AGREEMENT
This Original Design Manufacture Agreement ("Agreement") is entered into on
this 24th day of January, 2000, between TRIGEM COMPUTER, INC., a Korean
corporation whose principal office is located at TriGem Computer Bldg., 00-0
Xxxxx-xxxx, Xxxxxxxxxxxx-xx, Xxxxx 000-000, Xxxxx ("Original Design
Manufacturer" or "ODM") and EMACHINES, INC., a Delaware corporation whose
principal office is located at 00000 Xxxxxx Xxxx, Xxxx. 000, Xxxxxx, Xxxxxxxxxx
00000-0000, X.X.X. ("EMACHINES"). ODM and EMACHINES shall be referred
collectively as "Parties" or individually as "Party." Unless otherwise noted,
all capitalized terms in this Agreement shall have the meanings set forth in
Article 1.
WITNESSETH:
WHEREAS, ODM and EMACHINES desire to enter into a relationship whereby ODM will
manufacture, assemble and provide Support for the Products whereby the Products
will be ODM's design but may incorporate certain EMACHINES Components and Third
Party Components;
WHEREAS, the Parties desire the Products to be marketed and sold by EMACHINES
under the EMACHINES label on a worldwide basis; and
WHEREAS, the Parties desire to set forth the terms and conditions of their
relationship in this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants contained
hereinbelow, the Parties hereby agree as follows:
ARTICLE 1. DEFINITIONS
"Affiliate" means any EMACHINES Subsidiary, subcontractor or other third party
authorized to purchase Products under this Agreement as listed in a Product
Addendum.
"Annual Plan" shall have the meaning set forth in Section 3.1.
"Applicable Percentage" means LIBOR plus 3%, as adjusted on calendar quarter
basis.
"Class Failure" shall have the meaning set forth in Section 8.5.
"Components" means EMACHINES Components, ODM Components and Third Party
Components.
"Confidential Information" shall have the meaning in Section 13.1.
"Defective Product" means any Product that does not comply with the
Specifications, the requirements of the Purchase Order, Product Addendum, or
other provisions of this Agreement.
"Delivery Date" means the date specified in a Purchase Order for the delivery of
Products by ODM to the Shipping Port.
"Documentation" means any user and technical materials that EMACHINES makes
available for the Products.
"Effective Date" means the date this Agreement is executed by the Parties.
"EMACHINES Components" means all EMACHINES hardware, EMACHINES Software and
other EMACHINES materials and Documentation that ODM will incorporate into the
Products that are either provided or sold to ODM by EMACHINES or EMACHINES'
designee; provided, however, that if the same components from EMACHINES'
designees are being used by ODM in other products that it manufactures for its
other clients, then such components shall be designated as the Third Party
Component for the purposes of this Agreement.
"EMACHINES Custom Parts" means keyboards, speakers, mice, chassis, front bezel,
packing boxes and Documentation which contain EMACHINES Marks purchased by ODM
to fulfill a Purchase Order. For avoidance of any doubt, in the event that
EMACHINES provides, whether directly or indirectly, the EMACHINES Custom Parts
to ODM, then such EMACHINES Custom Parts shall be deemed to be EMACHINES
Components.
"EMACHINES Property" means all property, including without limitation, models,
tools, equipment, copies of designs and documentation and other materials that
may be provided to ODM by EMACHINES or by a third party on EMACHINES' behalf, or
separately paid for by EMACHINES for use by ODM to manufacture (but not
incorporate into) Products under this Agreement. However, EMACHINES Property
shall not include chassis tooling, packaging tooling and plastic molds unless
such items are paid for by EMACHINES.
"Excess Components" means Components that (a) were purchased solely to fulfill a
Requisition and are remaining on the last day covered by the Requisition and (b)
are not scheduled to be used in the immediately following Requisition.
"Intellectual Property Rights" means all rights in patents, copyrights, trade
secrets, mask works, Marks and other similar rights.
"Lead Time" means the time between the date a Purchase Order is acknowledged by
ODM and the Delivery Date.
"Marks" means the trademarks, service marks, trademark and service xxxx
applications, trade dress, trade names, logos, insignia, symbols, designs or
other marks identifying a Party or its products.
"Month" means a calendar month.
"ODM Components" means all ODM hardware, ODM Software, packaging materials,
inserts and other ODM materials that ODM will incorporate into the Products.
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"Parts" means the replacement parts, components, consumables or other products
that may be supplied in conjunction with the Products.
"Price" shall have the meaning set forth in Section 5.1.
"Product Addendum" means the addendum to the description of Products and
Product-specific requirements in the form attached to this Agreement as Exhibit
A, and any subsequent addendum entered into between ODM and EMACHINES,
containing the information required in Section 4.1.
"Products" means the finished and assembled products listed in the Product
Addendum to this Agreement.
"Purchase Order" means a written or electronic purchase order issued by
EMACHINES or its Affiliate to ODM for purchase of the Products.
"Shipping Port" means the shipping port stated in the Product Addendum.
"Software" means any software or firmware included or bundled with the Products.
"Software Build" means the specific operating system and bundled software
packages and drivers loaded on the Products listed in each Product Addendum.
"Specifications" means the technical and functional requirements for the
assembly of the Products as specified or referenced in a Product Addendum.
"Subsidiary" means an entity controlled by or under common control with a Party,
through ownership or control of more than 50% of the voting power of the shares
or other means of ownership or control, provided that such control continues to
exist.
"Support" means ongoing maintenance and technical support by ODM for the
Products as more fully described in Exhibit B.
"Term" shall have the meaning in Section 14.1.
"Third Party Components" means all third party hardware, third party Software
and other third party materials that ODM procures and incorporates into the
Products.
ARTICLE 2. SALE AND PURCHASE OF PRODUCTS
Subject to the terms and conditions in this Agreement, ODM agrees to design,
procure, directly or indirectly, certain Components, manufacture, assemble and
provide Support for the Products, and to sell the same to EMACHINES in
accordance with the terms hereof.
ARTICLE 3. ORDERS FOR PRODUCTS AND SUPPORT
3.1 Annual Plan. The annual plan ("Annual Plan") shall set forth the projected
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monthly breakdown of the Products required by EMACHINES. The Annual Plan
for the first year of this Agreement is set forth in Exhibit F. Thereafter,
the Parties shall mutually agree on
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revised Annual Plans for the year by January 15th of that year. The Annual
Plan shall be subject to quarterly adjustment on the mutual agreement of
the Parties.
3.2 Forecasts. Forty-five (45) days before the commencement of each three (3)
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Month period, EMACHINES shall provide a three (3) Month rolling forecast of
its projected purchases of Products for such quarter ("Forecast"). The
Forecast shall consist of an approximation of such prospective purchases of
the Products, broken down by price band, per Month in the forecasted
period. Any quantities listed in any Forecast or other correspondence
between the Parties are only estimates made as an accommodation for
planning purposes and do not constitute EMACHINES' commitment to purchase
any such quantity.
3.3 Requisitions. Thirty (30) days before the commencement of each Month,
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EMACHINES shall provide to ODM such Month's binding requisition for
projected purchases of the Products ("Requisition"). Immediately after the
Forecast has been issued by EMACHINES in accordance with Section 3.2, the
Parties shall meet and determine the Requisition for the next Month's
projected purchases. ODM shall accept the Requisitions; provided that (a)
Components are available to ODM to build the Products in the Requisition;
and (b) the Requisition is within the capacity levels set forth in the
Annual Plan. The Requisition shall consist of EMACHINES' purchases broken
down by model number, price of each Product model, unit quantity and week
of delivery, and shall be implemented through the issuance of Purchase
Orders in accordance with Section 3.4.
3.4 Purchase Order. At least three (3) weeks prior to a Delivery Date (for
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Products manufactured in Korea), at least four (4) weeks prior to a
Delivery Date (for Products manufactured in China), and at lead times to be
agreed upon by the Parties for other manufacturing locations, EMACHINES
shall place a Purchase Order electronically or through facsimile for
purchase of Products to ODM. Each Purchase Order shall include: (i) a
reference to the Product Addendum; (ii) Product unit quantity; (iii)
Shipping Port; (iv) Delivery Date; (v) price of each Product model, and
(vi) other instructions or requirements pertinent to the Purchase Order.
The Purchase Orders for the relevant Month may exceed the Requisition by
fifteen percent (15%), subject to ODM's Component availability. ODM shall
use commercially reasonable efforts to manage its inventory of Components
to absorb such fifteen percent (15%) flexibility, provided that in the
months of September, October and November, such flexibility shall be
subject to both ODM's Component availability and ODM's production capacity,
provided that capacity shall be allocated on a most favored basis.
3.5 Delivery Destination. Unless otherwise agreed by ODM, all Products ordered
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through Purchase Orders shall be delivered to the Shipping Port. Subject to
Section 6.5, ODM, at EMACHINES cost, may assist EMACHINES with shipping
documentation to have the Products delivered to a location desired by
EMACHINES from the Shipping Port.
3.6 Order Acknowledgment. A Purchase Order shall be deemed to have been placed
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as of the date ODM acknowledges receipt of a Purchase Order electronically
or through facsimile to EMACHINES within three (3) working days of the date
on which a Purchase Order has been received by ODM. Purchase Order(s)
within Lead Time requirements of this Agreement shall be deemed accepted
upon acknowledgement by ODM. If a Purchase Order shortens the
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Lead Time or EMACHINES requests an adjustment to a Purchase Order, ODM will
use commercially reasonable efforts to adjust the Purchase Order or
accommodate such shorter Lead Time. Any reasonable costs incurred by ODM to
adjust the Purchase Order or accommodate a shorter Lead Time shall be borne
by EMACHINES; provided that EMACHINES has approved of such costs in advance
in writing. If EMACHINES does not approve such costs, the Products shall be
delivered at the originally scheduled Delivery Date.
3.7 Change in Components or Specifications. Upon mutual agreement of the
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Parties, EMACHINES may change EMACHINES Components or Specifications at any
time prior to manufacture of corresponding Products. If such change
reasonably and directly affects the Price, number of Product units or
delivery schedule for the Products, an equitable adjustment shall be made
provided ODM makes a written claim for an adjustment.
3.8 Materials Procurement and Liability. At the time a Requisition is made, the
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Parties will meet and discuss whether any Components cannot reasonably be
returned, sold or used for other customers of ODM in the event Components
procured by ODM in reliance on a Requisition are not consumed for the
Products. If ODM identifies such Components to EMACHINES, ODM shall also
identify reasonable substitutes, where possible, which could be sold,
returned or used by ODM for its other customers and the Parties will work
together to maximize the use of such substitutes. In the event EMACHINES's
Purchase Orders for the relevant Month do not match the Requisitions and
Excess Components remain, for the first 30 days after the end of applicable
Requisition ("Initial Period"), ODM will use commercially reasonable
efforts to mitigate damages including, without limitation, canceling
Components orders, using such Components for ODM's support obligations,
rescheduling Components orders, or selling Components, as well as using the
Components for other Products or the products of other customers of ODM
when ODM cannot sell, cancel or reschedule Components that were purchased
solely to support a Requisition. EMACHINES shall either (a) compensate ODM
for any Excess Components at any time after the end of the applicable
Requisition; or (b) request ODM to continue holding such Excess Components
for up to ninety (90) days after the Initial Period, subject to EMACHINES
paying to ODM a carrying charge equal to a 3-year corporate bond yield of
Korean blue-chip companies plus 7.0%, as adjusted on a calendar quarterly
basis; thereafter, EMACHINES shall be required to purchase Excess
Components. EMACHINES shall purchase the Excess Components at a price set
forth in the Requisition. In cases where ODM cannot sell the Components to
any third party for the same price as the price set forth in the
Requisition, the Parties will mutually agree on an amount to be paid to ODM
prior to ODM selling such Components at a lower price. ODM will sell such
Components at the best commercially available price in the marketplace or
according to EMACHINES's written direction and EMACHINES shall be entitled
to set-off the amount received by ODM for such sale against any EMACHINES
expense for which EMACHINES would otherwise be liable.
ARTICLE 4. PRODUCT ADDENDUM
4.1 New Product Addenda. EMACHINES and ODM may, from time to time, add
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products to this Agreement by executing a Product Addendum. Each Product
Addendum shall include the following information: (i) Product description
and model number; (ii) Product number;
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(iii) Price components and configuration and profit percentage; (iv)
Software Build; (v) packaging and packing specifications; (vi) Affiliates
authorized to purchase Products and Support; (vii) Shipping Port; (viii)
Product specifications; (ix) tentative price; and (x) other terms and
conditions as agreed by the Parties.
4.2 Precedence. Unless a Product Addendum specifically refers to and amends a
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term of this Agreement, the terms and conditions of this Agreement will
control and take precedence over any conflicting terms in a Product
Addendum.
4.3 New Products Configuration Lead Time. EMACHINES may request a change (i)
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in the configuration (memory, processors and mass storage) with a Lead Time
of three (3) weeks; (ii) for motherboards in production with a Lead Time of
six (6) weeks; and (iii) for new motherboards with a Lead Time of eight (8)
weeks. All changes requested by EMACHINES shall be subject to Component
availability.
ARTICLE 5. PRICE; PAYMENT TERMS
5.1 Price. Subject to Section 5.2, ODM's price for the Products shall be as
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agreed upon by the Parties and tentative, non-binding price or pricing
formula shall be stated in the Product Addendum ("Price"). Prices are
inclusive of all freight charges, taxes and fees applicable to ODM. Prices
shall be calculated on a "cost plus" basis, with "cost" to consist of the
elements set forth below with a percentage "profit" for ODM to be set forth
in the Product Addendum on a model by model basis:
5.1.1 Xxxx of Materials ("BOM"), which means actual costs paid, reflective
of credits, refunds, rebates for Components and other costs
associated with the Components including, without limitation,
transportation costs, insurance and taxes and duties.
5.1.2 Manufacturing Cost and Overhead, which means costs associated with
manufacturing the Products and overhead cost therefor.
5.1.3 Scrap and Rework, which means expenses of manufacturing repair,
import cost and any other material loss and scrap work associated
with non-reimbursable costs, which shall be included in "cost" as a
percentage of the BOM subject to quarterly review.
5.1.4 Service Cost, which means a fixed cost per unit to provide for ODM's
warranty coverage subject to quarterly review.
5.1.5 SG&A, which means a percentage of the sum of Sections 5.1.1, 5.1.2,
5.1.3 and 5.14 to cover general administrative expenses, which
percentage shall be subject to quarterly review.
5.1.6 Research and Development, which means a percentage of the sum of
Sections 5.1.1, 5.1.2, 5.1.3 and 5.1.4 to cover ODM's research and
development related to Products sold to EMACHINES subject to
quarterly review.
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5.1.7 Extended and Other Services, including, by way of example and not
limitation, transportation, insurance, financing and other costs
that are mutually agreed by the Parties.
5.1.8. Software and Royalties, which means software for the Products not
covered in BOM or provided by EMACHINES, and royalties paid by ODM
to third parties.
5.2 Price Adjustments. Prices shall be agreed Monthly in the Requisition,
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and shall be based on ODM's then current cost as calculated in accordance
with Section 5.1. Pricing shall take into account any inventory effects for
the BOM agreed by the Parties, and shall also reflect any change in BOM
cost during the previous Month.
5.3 Most Favored Pricing. The Prices shall not exceed those offered to
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other ODM customers purchasing similar products and services in like or
lesser quantities under similar terms and conditions. If ODM offers prices
to other customers for like or lesser quantities during the same time
period which are lower than those offered to EMACHINES, then those prices
shall become available to EMACHINES at the time of availability to that
other customer.
5.4 Payment Terms. After ODM has delivered the Products to the Shipping Port,
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ODM shall transmit to EMACHINES the executed xxxx of lading and other
shipping documents for the Products. Full payment for the Products shall be
due within net thirty (30) calendar days from the estimated arrival date to
the destination port ("Due Date"). Unless otherwise instructed by ODM, all
payments shall be made to ODM's Subsidiary, TriGem America Corporation
("TGA"), in United States currency, by check, money order or wire transfer
(as may be agreed upon by the Parties) to an account designated by ODM or
TGA. ODM shall be responsible for ensuring that TGA complies with the terms
of this Agreement and ODM shall be liable to EMACHINES for any breach by
TGA.
5.5 Early Payment; Late Payment. Payment which is received by TGA or ODM, as
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the case may be, prior to the Due Date shall be discounted by ODM and
credited to the account of EMACHINES at the Applicable Percentage of the
Price based on the following formula:
Price - [[Applicable Percentage x (number of days prior to Due
Date) / 30] x Price]
E.g., If EMACHINES pays the Price on the day it receives the
shipping documents from ODM, EMACHINES shall be entitled to a
discount of Applicable Percentage of the Price; if EMACHINES
pays the Price fifteen (15) days after it receives the shipping
documents from ODM, EMACHINES shall be entitled to a discount
of .415% of the Price [Price - [.83% x (15/30)]], assuming .83%
is the Applicable Percentage.
Similarly, if EMACHINES is late in its payments to ODM or TGA, as the case
may be, a late fee shall be assessed on the Price using the following
formula:
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Price + [[Applicable Percentage x (number of days after Due
Date) / 30] x Price]
E.g., If EMACHINES is 60 calendar days late from the Due Date,
the late fee shall be 1.66% of the Price [Price + [.83% x (60 /
30)]], assuming .83% is the Applicable Percentage.
5.6 Taxes; Duties. Upon delivery of the Products to the Shipping Port,
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EMACHINES shall be wholly responsible for all applicable taxes, duties and
any other fees or costs related to the Products, except for those
expressly included in the Prices. In the event ODM pays for any such taxes
or fees that accrue after delivery to the Shipping Port, EMACHINES shall
repay ODM or its designee within ten (10) days of ODM's demand for
immediate repayment of the same after presentation of documents evidencing
such payment.
5.7 Price Audit. Upon prior written notice, EMACHINES or its
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representative may inspect ODM's relevant records to confirm that
EMACHINES is receiving Prices equal to or better than those offered by ODM
to other customers pursuant to Section 5.3, and the accuracy of the
computation of "cost" pursuant to Section 5.1. The audit shall not be
performed more than once per year ("Initial Audit"), unless an audit
reveals non-compliance of Section 5.1 or 5.3 by ODM to EMACHINES of over
US$500,000. Further, audits shall be conducted at a reasonable time and
during normal hours of operation. If the audit reveals that ODM has not
complied with the terms of Sections 5.1 and 5.3 and there has been an
overcharge to EMACHINES, then ODM shall promptly pay such overcharge,
without interest, to EMACHINES. If, however, the audit reveals that ODM
has not complied with the terms of Sections 5.1 and 5.3 and there has been
an undercharge to EMACHINES, then EMACHINES shall promptly pay such
undercharge, without interest, to ODM. EMACHINES shall bear the cost of
the audits; provided, however, that if the overcharge is in excess of
US$500,000, then ODM shall reimburse EMACHINES for the reasonable cost of
the Initial Audit.
ARTICLE 6. SHIPMENT
6.1 Product Labeling. To the extent EMACHINES timely provides ODM with
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specific instructions on and samples of EMACHINES' current labeling
requirements and Marks, ODM will ensure that the Products and the
packaging contain such information and EMACHINES' Marks.
6.2 Complete Delivery. All Product units specified in a Purchase Order
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are to be shipped complete. In the event ODM knows that only a portion of
the Products will be available for shipment to meet a Delivery Date, ODM
shall immediately notify EMACHINES. In such event, EMACHINES shall have
the option to accept partial shipment or direct ODM to reschedule the
shipment.
6.3 Option to Accept Overshipment. If ODM ships more Product units than
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ordered, EMACHINES may accept the amount of the overshipment with payment
due.
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6.4 Delays. If ODM knows it cannot meet or has missed the Delivery Date,
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ODM shall immediately notify EMACHINES of such event. ODM shall take any
and all necessary actions, and EMACHINES shall inform ODM of the delivery
dates to the Products affected. Such affected Products shall be shipped by
air transportation or other expedient means acceptable to EMACHINES to a
destination port as set forth in the xxxx of lading. If, however, the
delay is to the extent that ODM can not meet the estimated arrival date at
the destination port but reasonably believes that it can meet EMACHINES'
reasonable commitment to deliver to EMACHINES' customer destination
("Commitment Destination"), then ODM shall ship the Products to the
Commitment Destination by EMACHINES' required delivery dates to its
customers. ODM shall pay for any resulting increase in the freight cost
over that which EMACHINES would have been required to pay by the standard
method of transportation. If delay has been notified to EMACHINES or has
occurred, EMACHINES shall have the right to cancel any Purchase Order if
(a) EMACHINES notifies ODM of the Commitment Destination and delivery date
to the Commitment Destination and (b) (i) ODM acknowledges that it can not
meet the delivery date to the Commitment Destination; or (ii) ODM misses
the delivery date to the Commitment Destination. EMACHINES shall undertake
commercially reasonable methods to mitigate ODM's costs associated with
above described expedient delivery for the affected Products.
Notwithstanding the foregoing, this Section 6.4 shall be subject to
Article 12 in the event of a force majeure.
6.5 Title and Risk of Loss. Unless otherwise specified in writing by ODM,
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all Products in Purchase Orders shall be F.O.B. Shipping Port. Title and
risk of loss or damage to Products will pass to EMACHINES immediately
after ODM properly delivers the Products to the Shipping Port and
transmits executed copies of the relevant shipping documents to EMACHINES.
6.6 Packing List. Each delivery of Products must include a packing list
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that contains at least: (i) EMACHINES model number; (ii) quantity of
Products shipped; and (iii) date of shipment.
6.7 Packaging; Damages. ODM shall properly package, handle and pack all
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Products so as to protect the Products from loss or damage, in conformance
with good commercial practice, the Specifications, government regulations,
and other applicable standards. Special static protection must be provided
for Products requiring such packaging.
ARTICLE 7. COMPLIANCE WITH LAWS AND REGULATIONS
7.1 Compliance with Laws and Regulations. ODM shall comply with all
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applicable laws and regulations applicable to the Products and/or Parts in
jurisdictions in which EMACHINES sell the Products and/or the Parts.
EMACHINES shall provide the jurisdictions in which the Products and/or the
Parts will be sold at the time in which the Forecast is issued to ODM and
shall reasonably assist ODM to comply with applicable laws and
regulations. In no event shall ODM be held liable or responsible for any
non-compliance with applicable laws and regulations for the jurisdictions
in which EMACHINES failed to timely inform ODM.
7.2 Compliance. Subject to Section 7.1, ODM shall be responsible for
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providing regulatory agencies and standards organizations with proof of
compliance to the requirements in
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Section 7.1 for each Product and, as applicable, for Parts and Components
associated with such Product. ODM shall xxxx the Products and, as
applicable, the Parts and Components with regulatory, safety and standards
organizations marks which signify compliance with the requirements of
those organizations. Upon request by EMACHINES, ODM shall provide
EMACHINES with a copy of each report issued by the foregoing agencies and
organizations related to compliance testing and approvals for Products,
Components and Parts. ODM will obtain the prior approval of the relevant
agencies or organizations prior to implementing any change that may affect
the compliance status of any Product previously approved by such agency or
organization. EMACHINES shall provide any and all assistance requested by
ODM to obtain such prior approval from the relevant agencies and
organizations. In addition to the foregoing, ODM agrees to notify
EMACHINES in writing of any change it proposes to make to any Product that
affects its performance, quality or reliability.
7.3 Origin Certification; Marking. Upon EMACHINES' request, ODM will
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provide EMACHINES with an appropriate certificate stating the country of
origin for the Products. ODM shall also xxxx each Product, or the
container if there is no room on the Product, with the country of origin
in compliance with customs requirements.
7.4 WHQL Certification. ODM warrants that the Products will meet all
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Microsoft Windows Hardware Qualification Laboratories certifications.
7.5 Indemnification. Each Party shall indemnify and hold the other Party
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harmless from and against any claim, liability, loss, judgment, expense or
cost arising from the breach or claimed breach of any of the provisions in
this Article 7.
ARTICLE 8. PRODUCT QUALITY
8.1 Quality Program. ODM shall maintain a quality program for all
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Products in accordance with its current policies which has been provided to
EMACHINES prior to the Effective Date and, if applicable, any additional or
substitute quality requirements agreed to by the Parties. ODM will conform
to the requirements of ISO 9001 at all times. ODM further represents and
warrants that it currently is or will, within twelve (12) Months of the
Effective Date of this Agreement become certified under ISO 14000, and
during the term of this Agreement will remain ISO 9001 and 14000 certified.
If at any time hereafter certification under ISO 9001 is no longer
generally appropriate, ODM will ensure that it is certified under another
comparable or higher standard which is acceptable to EMACHINES.
8.2 Inspection of ODM Plants; Subcontractors. Upon prior written request
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by EMACHINES, EMACHINES or its representatives may inspect the Products and
associated manufacturing processes at ODM's plants. Inspections shall be
conducted at a reasonable time and during normal hours of operation, unless
such inspection disrupts the operation or business of ODM's plants. Subject
to the approval of ODM's vendor or subcontractor, EMACHINES or its
representatives may also inspect such vendor or subcontractor. ODM shall
use commercially reasonable efforts to obtain the approval of ODM's vendor
or subcontractor.
8.3 Safety Standard Changes. ODM shall promptly notify EMACHINES if any
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upgrade, substitution or other change to any ODM Component or Third Party
Component is required
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to make the Component meet applicable safety standards or other
governmental statutes, rules, orders or regulations. If an ODM Component or
Third Party Component meets applicable safety standards and other
governmental requirements at the time of manufacture, EMACHINES and ODM
will allocate the costs of any subsequent upgrade, substitution or other
required change in an equitable manner based on good faith discussions
between the Parties.
8.4 Failure Rate. A "Failure Rate" shall mean the cumulative percentage
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of Defective Products shipped under a Product Addendum in relation to the
total Products shipped under that Product Addendum. ODM and EMACHINES
acknowledge that a Failure Rate set forth in a Product Addendum is expected
by the Parties. If the actual Failure Rate for Products exceeds the
expected rate, ODM shall provide EMACHINES with a root cause analysis and a
corrective action plan within ten (10) working days after the occurrence of
such failure.
8.4.1 EMACHINES shall make available information and assistance required
by ODM to conduct its root cause analysis.
8.4.2 The corrective action plan will describe the additional engineering
and technical support that ODM will provide to bring the actual
Failure Rate within the specified Failure Rate in the Product
Addendum, and other necessary corrective measures as agreed to by
the Parties.
8.5 Class Failures. Unless otherwise stated in the Product Addendum,
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"Class Failure" shall mean a cumulative return rate for a specific Product
of at least five percent (5%); provided however, defects related to
Software shall only be included as a Class Failure if (i) the defect cannot
be fixed by download, (ii) the defect is known as "catastrophic" such that
the Product cannot perform basic functions and is inoperable, and (iii) the
defect is directly attributable to ODM. A "Class Failure" occurring before
the Effective Date shall mean a cumulative return rate of at least eight
percent (8%).
8.6 Class Failure Remedies. Upon the occurrence of a Class Failure,
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EMACHINES shall have the remedies set forth in Exhibit B.
ARTICLE 9. WARRANTIES
9.1 Product Warranties. ODM warrants that all Products will be free from
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defects in design, material and workmanship and will conform to the
Specifications and other criteria referred to in this Agreement or agreed
to by the Parties in writing. The warranty period for each Product shall
continue from the actual Delivery Date and continue until fifteen (15)
Months thereafter. Warranty claims shall be processed in accordance with
Exhibit B. ODM further warrants that all Products will:
9.1.1 Be new, except as otherwise provided by the Parties.
9.1.2 Be free and clear of all liens, encumbrances, restrictions, and
other claims against title or ownership.
-11-
9.2 Component Warranties. ODM warrants that all ODM Components and Third
--------------------
Party Components when assembled into the Product will:
9.2.1 Conform to the Specifications, and other criteria referred to in this
Agreement or agreed to by the Parties in writing.
9.2.2 Be new, except as otherwise provided by the Parties.
9.2.3 Be free from defects in design, material and workmanship.
9.2.4 Be free and clear of all liens, encumbrances, restrictions, and other
claims against title or ownership.
9.3 Support Warranties. ODM will provide EMACHINES with Support for the
------------------
Products as specified in the Support Terms, attached as Exhibit B, during
the Term of this Agreement and notwithstanding the expiration or
termination of this Agreement, for a period of two (2) years after the last
Product is delivered to the Shipping Port by ODM; provided, that separate
fees will be paid by EMACHINES for Support required after the expiration of
the warranty period for the Products. ODM will maintain such number of
qualified personnel and Parts as are necessary to provide timely and
knowledgeable maintenance and Support. ODM warrants that all Support will
be provided in a professional and workmanlike manner. ODM shall not
independently offer and provide support services to Product customers.
However, in no event may ODM disclose EMACHINES Confidential Information or
use EMACHINES Property to provide such support without EMACHINES' prior
consent.
9.4 No Warranty on EMACHINE Components. Notwithstanding any provision to
----------------------------------
the contrary in this Agreement, ODM shall not be liable for any damages or
losses to EMACHINES or any third party resulting from defective EMACHINES
Components, except for those EMACHINES Components which have been qualified
by ODM pursuant to a test program set by ODM which ODM shall implement in
connection with EMACHINES Components.
9.5 Third Party Royalties and Fees. Unless otherwise noted in the Product
------------------------------
Addendum, ODM warrants that the fees set forth in the Product Addendum are
inclusive of all royalties and other fees relating to Third Party
Components.
9.6 Year 2000 Compliance Warranty. ODM warrants that all Products
-----------------------------
delivered under this Agreement shall perform without error, loss of data or
loss of functionality arising from any failure to process, calculate,
compare or sequence date data accurately. In addition, the Products will
not cause any associated products or systems in which they may be used to
fail in any of the ways described above. ODM shall take all reasonable
actions to ensure that all of its suppliers and shipping agents and their
products and services are Year 2000 Compliant.
9.7 Remedies for Breach of Warranty. If a Product is deemed to be a
-------------------------------
Defective Product, the procedures set forth in Exhibit B shall apply.
9.8 Survival of Warranties. Unless otherwise specified in the Product
----------------------
Addendum, all warranties shall be effective for the term stated in Section
9.1.
-12-
9.9 DISCLAIMER; LIMITATION OF LIABILITY FOR DEFECTIVE PRODUCTS. EXCEPT AS
----------------------------------------------------------
EXPRESSLY PROVIDED IN THIS AGREEMENT, AND SUBJECT TO ANY RIGHTS EMACHINES
OR ITS CUSTOMERS MAY HAVE UNDER LAW THAT CANNOT BE EXCLUDED UNDER THIS
AGREEMENT, ODM MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED, REGARDING THE
PRODUCTS AND COMPONENTS, THEIR MERCHANTABILITY OR THEIR FITNESS FOR A
PARTICULAR PURPOSE. EXCEPT AS OTHERWISE PROVIDED HEREIN, ODM'S SOLE AND
EXCLUSIVE LIABILITY AND EMACHINES' SOLE AND EXCLUSIVE REMEDY FOR DEFECTIVE
PRODUCTS DURING THE WARRANTY PERIOD SHALL BE LIMITED TO REPAIR OR
REPLACEMENT OF THE DEFECTIVE PRODUCT.
ARTICLE 10. MARKETING AND LICENSING
10.1 Marketing Authority. EMACHINES shall have the right to use its own
-------------------
business and license terms for all marketing and distribution of the
Products.
10.2 No Rights in Marks. Except as otherwise specified in Section 6.1,
------------------
nothing in this Agreement shall be construed to grant either Party any
rights in the Marks of the other Party. The Products shall be affixed with
copyright notices sufficient to give notice as to the rights of the Parties
in their respective products. As between the Parties, the exterior Product
design, manuals, EMACHINES Marks, manuals and Product model names (the
"EMACHINES Elements") are the property of EMACHINES. Accordingly, ODM shall
not use the EMACHINES Elements except in connection with fulfillment of
ODM's obligations hereunder; provided, however, that EMACHINES Elements
that were used by ODM prior to the Effective Date as set forth in Exhibit D
shall continue to be used by ODM. Further ODM shall reasonably assist
EMACHINES at EMACHINES's expense to provide necessary materials so that
EMACHINES can have the EMACHINES Elements reproduced by itself or other
manufacturers.
ARTICLE 11. MUTUAL INFRINGEMENT INDEMNIFICATION
11.1 ODM Intellectual Property Warranty. ODM warrants that the
----------------------------------
manufacturing processes used to manufacture the Products do not and will
not violate or infringe any third party Intellectual Property Rights. ODM
further warrants that the ODM Components and Third Party Components do not
violate or infringe any third party Intellectual Property Rights.
11.2 EMACHINES Intellectual Property Warranty. EMACHINES warrants to ODM
----------------------------------------
that EMACHINES Components do not and will not violate or infringe any third
party Intellectual Property Rights.
11.3 Duty to Indemnify. The Parties warrant to each other that neither is
-----------------
aware of any such facts upon which such Intellectual Property Rights
infringement claims could be made (except as set forth in Exhibit E). In
the event an infringement claim is filed, the Parties agree to indemnify
and hold the other Party harmless, as the case may be, from and against any
such claims, losses, liabilities, costs and expenses (including the actual
fees of attorneys and other professionals and all related costs and
expenses) the indemnified Party may incur as a result
-13-
of the other Party's breach or claimed breach of its warranties in Sections
11.1, 11.2 and 11.3.
11.4 Notification of Claim. If either Party learns of any claim or any facts
---------------------
upon which a claim could be made, such Party shall immediately notify the
other Party. If after such notice, the indemnifying Party does not
diligently pursue resolution of the claim nor provide the indemnified Party
with reasonable assurances that it will diligently pursue resolution, then
the indemnified Party may, without in any way limiting its other rights and
remedies, defend the claim.
11.5 Remedies For Infringing Products. If the use or combination of any Product
--------------------------------
provided hereunder is enjoined and is not subject to indemnification by
EMACHINES under Section 11.3 ("Infringing Product"), ODM may, in its sole
discretion:
(i) Procure for EMACHINES and its customers the right to continue using
or combining the Infringing Product;
(ii) Replace the Infringing Product with a non-infringing product of
equivalent function and performance; or
(iii) Modify the Infringing Product to be non-infringing, without
detracting from function or performance.
11.6 Limitations. ODM shall be relieved of its indemnification obligations under
-----------
this Article 11 to the extent Section 11.2 applies or the claim arises from
ODM's compliance with EMACHINES's Specifications.
ARTICLE 12. FORCE MAJEURE
12.1 Notification. If the performance of either Party is affected by any event
------------
of force majeure, including act of God, actions or directive of a court or
public authority or government, war or civil disturbance, fire, explosion,
flood, shortage of fuel, power, materials, disruption of transportation or
communications, strikes or other labor disruption, destruction of machinery
or equipment, or any other natural or man-made event beyond the reasonable
control of such Party, such Party shall immediately notify the other Party,
in writing, giving details of the event. For clarification purposes, an
industry wide inability to obtain a Component is a force majeure event;
however, other supplier shortages shall not be force majeure events.
12.2 Suspension of Performance. The performance of the Party affected by such
-------------------------
force majeure shall be suspended only for as long as the event of force
majeure continues, but the Parties shall consult and will use their best
efforts to find alternative means of accomplishing such performance.
12.3 Commencement of Performance. Immediately upon cessation of the event of
---------------------------
force majeure, the Party affected by force majeure will notify the other
Party in writing and will take steps to recommence or continue the
performance that was suspended.
-14-
12.4 Disaster Recovery Plan. As of the Effective Date of this Agreement, ODM
----------------------
shall have a disaster recovery plan in place and approved by EMACHINES for
each Product to ensure the supply of such Products to EMACHINES is not
interrupted. Such plans may include multiple sources of supply for each
Component and multiple manufacturing facilities. Any changes to the
disaster recovery plan shall be subject to EMACHINES's prior written
concurrence.
ARTICLE 13. CONFIDENTIALITY
13.1 Definition of Confidentiality. As used in this Article 13, Confidential
-----------------------------
Information shall mean any and all information exchanged by the Parties
expressly marked as confidential or proprietary (or similar variations
thereof), including such information which would normally be deemed
confidential if not expressly marked including, but not limited to, any
information concerning either Party's business operations, strategies,
customers, suppliers, technology, know-how, and financial information.
Confidential Information shall also include the terms and conditions as
well as the existence of this Agreement.
13.2 Obligation of Confidentiality. All Confidential Information shall be kept
-----------------------------
in strict confidence by the Parties and shall not be used otherwise than in
connection with the implementation of the terms and conditions of this
Agreement, except as follows:
(i) to the extent it was known when received by the receiving Party;
(ii) it is obtained by the receiving Party from other sources without
such duty as to confidentiality and non-use;
(iii) to the extent such information is generally available to the public;
(iv) the extent such duty as to confidentiality and non-use is waived by
the disclosing Party; or
(v) as may be required by court order or any governmental agency.
13.3 Survival. The foregoing obligation as to confidentiality and non-use shall
--------
survive any expiration or termination of this Agreement. Upon expiration or
termination of this Agreement, each Party shall promptly return to the
other Party all Confidential Information (including any reproductions
thereof or notes therefrom) received from such Party not within the above
exceptions.
ARTICLE 14. TERM; TERMINATION
14.1 Term. This Agreement shall commence as of the Effective Date and continue
----
for two (2) years ("Term"), unless terminated earlier. After the initial
Term, this Agreement will renew automatically for additional one-year
periods, unless either Party provides the other Party at least one hundred
and eighty (180) days written notice of its intent to terminate prior to
the expiration of the initial Term or any subsequent Term.
-15-
14.2 Outstanding Orders. All Purchase Order(s) accepted by ODM prior to the
------------------
expiration of this Agreement shall be fulfilled pursuant to and subject to
the terms of the Purchase Order.
14.3 Termination
-----------
14.3.1 Notice of Breach. If either Party is in material breach of any
----------------
provision of this Agreement, the non-breaching Party may, by notice
to the breaching Party, terminate the whole or any part of this
Agreement or any Purchase Order, unless the breaching Party cures
the breach within thirty (30) days after receipt of notice.
14.3.2 Causes of Breach. For purposes of Section 14.3.1 above, "breach"
----------------
includes, without limitation, any:
(1) Proceeding, whether voluntary or involuntary, in bankruptcy or
insolvency by or against a Party; or the inability to pay debts
as they become due (except those contested in good faith);
(2) Appointment, with or without the other Party's consent, of a
receiver or an assignee for the benefit of creditors;
(3) Failure by ODM to deliver the Products in accordance with the
requirements of this Agreement or any Purchase Order, not as a
result of force majeure;
(4) Failure by ODM to replace or repair Defective Products in a
timely manner as required by Article 9;
(5) Failure by EMACHINES to make its payments in accordance with
Article 5; or
(6) Any other failure by a Party to comply with any material
provision of this Agreement with additional failure to provide
the non-breaching party, upon request, with reasonable
assurances of future performance.
14.4 LIMITATION OF LIABILITY. UNLESS OTHERWISE STATED IN THIS AGREEMENT,
-----------------------
NEITHER PARTY SHALL BE LIABLE FOR ANY SPECIAL OR CONSEQUENTIAL DAMAGES OF
THE OTHER ARISING OUT OF ANY PERFORMANCE OF THIS AGREEMENT OR IN
FURTHERANCE OF THE PROVISIONS OR OBJECTIVES OF THIS AGREEMENT, REGARDLESS
OF WHETHER SUCH DAMAGES ARE BASED ON TORT, WARRANTY, CONTRACT OR ANY OTHER
LEGAL THEORY, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
ARTICLE 15. DISPUTE RESOLUTION
15.1 Amicable Resolution. The Parties agree to carry out this Agreement in
-------------------
a spirit of mutual cooperation and good faith, and shall attempt to resolve
any differences, disputes or controversies which may arise between them
amicably.
-16-
15.2 Escalation. If such negotiations and meetings do not resolve the
----------
dispute within ten (10) days of written communications of the dispute, then
each Party shall nominate one senior officer of the rank of Vice President,
or higher, as their respective representative. The senior representatives
shall meet within ten (10) days of their nomination to resolve such
dispute. If the dispute is not resolved to the satisfaction of the
representatives within thirty (30) days from the date of the original
communication, then either Party may terminate this Agreement in whole or
in part and seek arbitration under Section 15.3.
15.3 Arbitration. Any disagreement, dispute, controversy or claim arising
-----------
out of or relating to this Agreement or the interpretation hereof or any
arrangements relating hereto or contemplated herein or the breach,
termination or invalidity hereof shall be finally settled by arbitration.
15.4 Arbitration Venue. The arbitration shall be conducted in London, United
-----------------
Kingdom, and shall be conducted in accordance with the Rules of Arbitration
of the International Chamber of Commerce ("ICC Rules").
15.5 Arbitrators. The arbitral tribunal shall consist of three arbitrators. One
-----------
arbitrator shall be appointed by ODM, one arbitrator shall be appointed by
EMACHINES, and the third arbitrator shall be appointed by mutual consent of
the two appointed arbitrators.
15.6 Language. The language used in the arbitration shall be the English
--------
language.
15.7 Binding Decision. Any decision or award of the arbitral tribunal
----------------
shall be final and binding upon the Parties. To the extent permitted by
law, the Parties waive any rights to appeal or to review of such award by
any court or tribunal. The Parties further agree that the arbitral award
may be enforced against the Parties to the arbitration proceeding or their
assets wherever they may be found and that a judgement upon the arbitral
award may be entered in any court having jurisdiction thereof.
ARTICLE 16. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York, without reference to its conflicts of laws provisions.
ARTICLE 17. NOTICE
17.1 Notice Address. Any notices given hereunder shall be in writing and
--------------
shall be served by hand at, or by being sent by facsimile transmission or
prepaid post to, the following addresses and numbers:
To ODM:
TRIGEM COMPUTER, INC.
00-0 Xxxxx-xxxx, Xxxxxxxxxxx-xx
Xxxxx 000-000, Xxxxx
Attention: J.R. Xxx, Vice President
Facsimile: 00-000-000-0000
-17-
To EMACHINES:
EMACHINES, INC.
00000 Xxxxxx Xxxx, Xxxx. 000
Xxxxxx, Xxxxxxxxxx 00000-0000
X.X.X.
Attention: General Counsel
Facsimile: 0-000-000-0000
17.2 Method of Notice. Any such notice shall be deemed to be served at the
----------------
time of delivery (if delivered by hand), at the time of transmission (if
served by facsimile) or on the fifth (5th) working day immediately after
the date of posting with an internationally recognized courier (if served
by courier). Evidence that the notice was properly addressed and placed
with an internationally recognized courier shall be conclusive evidence of
posting. Without prejudice to the effectiveness thereof, a notice served by
facsimile shall be confirmed promptly in writing delivered by hand or sent
by courier.
17.3 Change of Address. Any Party may, by seven (7) days' written notice
-----------------
served to the aforesaid addresses of the other Parties, change the address
or facsimile number for service referred to above.
ARTICLE 18. MISCELLANEOUS
18.1 Non-Recurring Expenses. EMACHINES shall pay ODM certain non-recurring
----------------------
expenses as contained in Exhibit C. Upon payment of the non-recurring
expenses, EMACHINES shall own all rights in any work product resulting from
such expenses as well as all intellectual property rights therein, and ODM
agrees to provide all reasonable cooperation and assistance and execute all
documents necessary to evidence or perfect EMACHINES's ownership of such
rights.
18.2 Surviving Provisions. The following provisions shall survive expiration or
--------------------
termination of this Agreement: Warranties in Article 9, Indemnification in
Article 11, Confidential Information in Article 13, Limitation of Liability
in Section 14.4, Dispute Resolution in Article 15, Governing Law in Article
16 and the miscellaneous provisions in this Article 18 (except for the
proviso in Section 18.7).
18.3 Entire Agreement. This Agreement and any attachments and exhibits attached
----------------
hereto shall, as of the date of execution hereof, supersede all previous
representations, understandings or agreements, oral or written, among the
Parties with respect to the subject matter hereof.
18.4 Application to Prior Sales. The provisions in Articles 1, 7, 9, 11, 13,
--------------------------
Section 10.2 and Section 18.3 shall apply to the relationship of the
Parties prior to the Effective Date.
18.5 Waivers. No waiver by any Party of any breach or failure to comply with any
-------
provision of this Agreement shall be construed as, or constitute, a
continuing waiver of such provision or a waiver of any other breach of, or
failure to comply with, any other provision of this Agreement.
-18-
18.6 Further Assurances. Each of the Parties hereto agrees to execute and
------------------
deliver such other documents and take such other action as may be
necessary to more effectively consummate the purposes and subject matter
of this Agreement.
18.7 Successors and Assigns. This Agreement and each and every covenant, term
----------------------
and condition hereof shall be binding upon and inure to the benefit of the
Parties hereto and their respective successors and assigns; provided,
however, that neither Party may assign any of its rights or delegate any
of its duties under this Agreement without obtaining the prior consent of
the other Party, except that EMACHINES, in the event of a transfer or sale
of all or substantially all of its (a) assets related to this Agreement,
or (b) its equity, shall have the right to assign this Agreement the
acquiring entity without ODM's consent, provided the assignee is not a
direct competitor of ODM and the assignee agrees in writing to assume
EMACHINES's obligations hereunder.
18.8 Relationship. This Agreement shall not be construed to create a
------------
partnership, joint venture, agency or employment relationship between the
Parties.
18.9 Amendments. This Agreement may be amended or modified only by an
----------
instrument in writing duly executed by the Parties.
18.10 Severability of Provisions. If any term of provision of this Agreement
--------------------------
is for any reason found invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect the
validity of any remaining portion, which shall remain in full force and
effect as if the invalid portion was never a part of this Agreement when
it was executed.
18.11 Headings. Headings of Articles and Sections in this Agreement are for
--------
convenience only and shall not substantively affect the terms of this
Agreement.
-19-
IN WITNESS WHEREOF, the Parties have executed this Agreement on this 24th day
of January, 2000.
TRIGEM COMPUTER, INC. EMACHINES, INC.
By: /s/ Doo Xxx Xxx By: /s/ Xxxxxxx Xxxxxx
------------------------- ------------------------------
Name: Doo Xxx Xxx Name: Xxxxxxx Xxxxxx
Title: President Title: Chief Executive Officer
-20-
EXHIBIT A
PRODUCT ADDENDUM
[TO BE AGREED BY THE PARTIES]
Model Number
----------------------
Product Specification
----------------------
Tentative Price
----------------------
Price:
-----
Price Components, Configurations and Profit Percentages: See attachment
------------------------------------------------------------------------
Software Build and Royalties: EMACHINES will be responsible for paying the
----------------------------
Microsoft Operating System and Bundled Software Royalties.
Shipping Port:
--------------
Product Specifications: See attachment
---------------------------------------
Packaging and Packing Specifications: See attachment
-----------------------------------------------------
Affiliates Authorized to Purchase the Products and Support:
-----------------------------------------------------------
Expected Product Failure Rate and Class Failure Rate: __________
----------------------------------------------------
Individuals Designated for Receipt of Notices:
---------------------------------------------
EMACHINES, INC. TRIGEM COMPUTER, INC.
Xxxxxxx Xxxxxx X.X. Xxx
00000 Xxxxxx Xxxx, Xxxx. 000 Xxxxxx Industrial Complex 603-4
Xxxxxx, Xxxxxxxxxx 00000-0000 0000 Xxxxxxx-Xxxx
Xxxxxx Xxxxxx xx Xxxxxxx Xxxxx, Xxxxxxx-Xx, Xxxxx
Facsimile: 0-000-000-0000 Facsimile: 00-000-000-0000
A-1
APPROVED AND AGREED:
EMACHINES, INC. TRIGEM COMPUTER, INC.
By: By:
------------------------- --------------------------------
Name: Name:
----------------------- ------------------------------
Title: Title:
---------------------- -----------------------------
Date: Date:
----------------------- ------------------------------
A-2
EXHIBIT B
SUPPORT TERMS
ODM and EMACHINES agree to the following terms and processes for Product
Support which shall be updated and amended every six month period starting from
the Effective Date:
I. Definitions. As used in this Exhibit B, the following terms shall be defined
-----------
as follows:
A. "DF" shall mean defects found.
B. "NDF" shall mean no defects found.
C. "RA" shall mean the return to EMACHINES of a specific Product by
EMACHINES' resellers.
C. "RMA" shall mean the return to EMACHINES of a specific Product by an end
user during the warranty period ("User").
II. New Programs.
------------
A. RA: Effective April 1, 2000:
(1) If the Product is DF, then EMACHINES shall be entitled to a full
credit for the returned Product from ODM.
(2) If the Product is NDF such that the cumulative rate of the NDF is
less than 1.5%, then EMACHINES shall be entitled to a full credit
for the returned Products from ODM.
(3) If the Product is NDF such that the cumulative rate of the NDF is
1.5%, or more, then EMACHINES shall pay ODM US$130 per returned
Product unit.
B. RMA: Effective May 1, 2000
(1) If the Product is DF, ODM shall repair or replace with a Product
of equal or better specifications (at ODM's discretion) the
returned Product within a target date of seven (7) days but no
later than fourteen (14) days after ODM receives the Product from
EMACHINES or User (at EMACHINES' instructions). Shipping cost to
EMACHINES or User shall be borne by ODM.
(2) If the Product is NDF, then EMACHINES shall pay ODM an aggregate
amount of US$22.50 and shipping cost to EMACHINES or User. ODM
shall return the Product to the User within a target date of seven
(7) days but no later than fourteen (14) days after ODM receives
the Product from EMACHINES or User (at EMACHINES' instructions).
B-1
(3) Per EMACHINES' request, Users may directly provide the Products to
ODM and ODM may directly return such Products to Users.
III. Old Programs. For Products returned prior to April 1, 2000 (for RA) and
May 1, 2000 (for RMA), the following shall apply for both RA and RMA:
A. If the Product is DF:
1. and the age of the Product is less than 120 days from the Delivery
Date, EMACHINES shall be entitled to a credit equal to fifteen
percent (15%) of the relevant invoice Price and EMACHINES shall
receive a refurbished Product; or
2. and the age of the Product is 120 days or more from the Delivery
Date, EMACHINES shall be entitled to a refurbished Product only.
B. If the Product is NDF, then EMACHINES shall pay TGA the amount of
US$15 per Product and ODM shall provide EMACHINES with a refurbished
Product.
C. Weekly Status Reports. EMACHINES shall provide ODM and TGA with
accurate records of RA on a weekly basis.
IV. Class Failures
A. Recall. From the Effective Date, in the event EMACHINES deems a
specific Product model or certain Product batch (those Products that
can be identified by a sequence of serial numbers or other reasonable
method) to be a Class Failure, EMACHINES, after consultation with ODM,
may (i) initiate a recall for the relevant Product model or Product
batch; or (ii) recall particular units of the relevant Product model
or Product batch and, in either case, shall be entitled to a full
credit from ODM for all recalled and returned Products. ODM shall
reimburse EMACHINES for all reasonable costs related to a recall.
B. Old Class Failures. In the event of a Class Failure prior to the
Effective Date, regardless whether DF or NDF, then EMACHINES shall be
entitled to (i) US$135 per returned Product for those Products over
the eight percent (8%) threshold and (ii) shall receive a refurbished
Product.
V. Additional Terms
1. ODM and TGA shall only accept Defective Products from EMACHINES or Users at
EMACHINES' directions.
2. Unless otherwise stated in Article 9 (Warranties), the Support Terms and the
relevant Product Addendum, ODM shall be responsible for all costs to repair or
replace Defective Products and Parts.
3. EMACHINES shall properly pack and return the Defective Product to ODM or its
designee in the same or similar shipping material and carton that contained the
original Product. ODM or its
B-2
designee shall not be liable for any damages as a result of improper packing and
delivery by EMACHINES or Users.
4. ODM and TGA, as applicable, shall provide EMACHINES with weekly reports on
Product repair. The format of such reports will be mutually agreed upon by ODM
and EMACHINES.
5. For a period of 2 years after the last Product is delivered to the Shipping
Port by ODM, inclusive of the applicable warranty period, ODM or its Subsidiary
will provide return-to-factory repair or replacement of Defective Products and
Parts for EMACHINES' customers on a per incident basis at a charge to be
determined by EMACHINES and ODM prior to the date the Products are delivered to
the Shipping Port. Such agreement may be set forth in the Product Addendum.
6. ODM agrees to maintain adequate service personnel and stock of the original
Parts or their functional equivalent to ensure compliance with the requirements
of this Exhibit B.
7. ODM agrees to provide EMACHINES' support team with xxxx of materials and any
updates to it during the support life of each Product listed in Product Addenda.
8. Upon request by EMACHINES, ODM shall disclose its inspection process used to
determine whether a returned Product is a Defective Product to EMACHINES, and
shall permit EMACHINES and its representatives to inspect such process and audit
any documentation related to such process or the determination of whether any
Product returned hereunder is defective.
9. Any Products returned to ODM which are not then sent to EMACHINES or User
after repair or refurbishment may be sold by ODM, provided that such Products
have been repaired to comply with their specifications, are in their original
condition and have all of (but no more than) the software that was initially
installed on the Product when it was first delivered to EMACHINES.
10. ODM shall be responsible for paying EMACHINES all Microsoft royalties due
from EMACHINES to Microsoft for Products sold by ODM under the EMACHINES Marks.
B-3
EXHIBIT C
NON-RECURRING EXPENSES
[TO BE AGREED BY THE PARTIES]
ODM and EMACHINES have agreed that EMACHINES shall reimburse ODM or TGA for the
following non-recurring expenses that ODM has incurred on EMACHINES' behalf :
Packaging Tooling: US$ [to be determined]
Certification Fees: US$ [to be determined]
Chassis Tooling: US$ [to be determined]
C-1
EXHIBIT D
Description of Continued Use Model
D-1
EXHIBIT E
[TO BE COMPLETED BY ODM]
Intellectual Infringement Disclosure
E-1
EXHIBIT F
[TO BE AGREED BY THE PARTIES]
First Annual Plan (2000)
F-1
