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Note: This Exhibit 10.14 omits certain confidential information. Such omitted
information, indicated with an asterisk (*), has been filed separately with the
Securities and Exchange Commission.
EXHIBIT 10.14
MANUFACTURING SERVICES AGREEMENT
This Manufacturing Services Agreement ("Agreement") is entered into by
and between Maxtor Corporation, a Delaware corporation, with its principal place
of business at 000 Xxxxx Xxxx Xxxxxxx, Xxx Xxxx, Xxxxxxxxxx 00000, X.X.X.
("Maxtor") and International Manufacturing Services, Inc., a Delaware
corporation, with its principal place of business at 000 Xxxxx Xxxx Xxxxxxx, Xxx
Xxxx, Xxxxxxxxxx 00000 X.X.X. ("IMS"). This Agreement is effective as of May 16,
1996 ("Effective Date").
RECITALS
WHEREAS, Maxtor wishes to procure certain products and manufacturing
services from IMS;
WHEREAS, IMS is willing to provide such products and services on the
terms and conditions set forth below;
WHEREAS, concurrent with the execution of this Agreement, Maxtor and
IMS will close certain related transactions set forth in that certain
Recapitalization Agreement dated as of May 16, 1996 and that certain Redemption
Agreement and Stockholders Agreement of even date therewith (the "Related
Agreements");
NOW THEREFORE, in consideration of the mutual promises and covenants
set forth herein and in the Related Agreements, the parties agree as follows:
AGREEMENT
1. Product Appendix. IMS will sell and Maxtor will purchase the
products set forth in Exhibit A, as amended from time to time by mutual
agreement ("Products"). For each Product, Maxtor will specify, from time to
time, (i) a xxxx of materials listing the components of the Product; (ii) which
components are to be procured by IMS and which are to be consigned to IMS by
Maxtor; and (iii) approved vendors from whom IMS must source particular
components. The parties shall agree in writing on any Product-specific tooling
(manufacturing or test) and any other equipment which is required to be acquired
by IMS solely for use in manufacturing or testing such Product, along with the
financial and ownership arrangements for such tooling and equipment. IMS shall
not change any vendor of a Product component or any manufacturing process for
any Product without Maxtor's prior written approval.
2. Orders and Forecasts. Every fiscal month, Maxtor shall issue to
IMS binding purchase orders ("Orders") for Products, covering a thirteen (13)
week period from such issue date and a nonbinding forecast for an additional
subsequent thirteen (13) week period. No Order shall be binding upon IMS unless
accepted by IMS in writing, subject to Section 7.3 ("Sales Commitment"),
provided
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that if such written acceptance is not received by Maxtor within five (5)
working days from date of Order issuance, said Order shall be deemed accepted.
3. Purchase Price. Purchase prices under this Agreement are set
forth in Exhibit A as amended from time to time by both parties in writing.
Purchase prices will be FOB IMS' applicable manufacturing facility and do not
include any foreign, federal, state, local or other taxes or duties or charges
of any kind that may be applicable. When IMS has the legal obligation to collect
such taxes, the appropriate amount (excluding taxes based on IMS' net Income)
will be added to Maxtor's invoice and paid by Maxtor unless Maxtor provides IMS
with a valid tax exemption certificate authorized by the appropriate taxing
authority. IMS agrees to keep its prices competitive and shall use reasonable
commercial efforts to achieve ongoing cost reductions and to lower prices
proportionately. The parties shall meet at least once a quarter, and more often
if appropriate in the reasonable judgement of either party, to negotiate price
changes. At such meetings, IMS will disclose to Maxtor all cost elements related
to the Products.
4. Payment Terms. Payment terms shall be net thirty (30) days from
receipt of invoice by Maxtor. All invoices shall be paid in U.S. dollars. If IMS
terminates this Agreement for cause pursuant to Section 14 ("Term and
Termination"), all outstanding invoices will automatically be accelerated and
will become immediately due and payable.
5. Shipping Terms, etc.
5.1 Shipping Terms. All Products shall be packed for shipment in
accordance with reasonable industrial practice and marked for shipment to
Maxtor's designated shipping destination and delivered to Maxtor's carrier agent
FOB IMS' applicable manufacturing facility. IMS will obtain Maxtor's written
approval prior to any change from IMS' present packaging. IMS will xxxx all
containers with necessary lifting, handling and shipping information and with
Order information, date of shipment and the names of the consignee and
consignor. An itemized packing list will accompany each shipment which shall
include (i) Order information, and (ii) the description, part number, revision
level and quantity of the Products so shipped. RISK OF LOSS SHALL PASS TO MAXTOR
AT IMS' SHIPPING LOCATION UPON DELIVERY TO MAXTOR'S CARRIER AGENT. Maxtor shall
select the carrier. All freight, insurance and other shipping expenses,
including without limitation any special packaging expenses, shall be paid by
Maxtor. Delivery shall not occur until IMS has obtained any export license or
other official authorization necessary for export of the Products. Export
licensing shall be the sole responsibility and at the sole expense of IMS.
5.2 Miscellaneous. Maxtor's Order number must appear on all
invoices, packing lists and bills of lading and shall appear on each package,
container or envelope on each shipment. Either an invoice or delivery order may
be used when making deliveries, with each set containing three (3) copies. A
complete packing list specifying Maxtor's applicable Order number, quantity of
goods shipped and part number shall be enclosed with each shipment. Bills of
lading shall be mailed in triplicate to the destination address shown on the
face of each Order, or to the consignee of the Order, on the day shipment is
made.
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6. Order Cancellation and Rescheduling.
6.1 Rescheduling. Maxtor may gives notice to IMS, either by
facsimile transmission, in other written form, or orally with follow-up written
confirmation, requesting rescheduling of Products for which purchase orders have
been accepted by IMS. IMS shall reply within two (2) working days. The following
rules shall apply based on the number of calendar weeks notice IMS is given
prior to the scheduled shipment date:
Time Prior to Delivery Limits on Rescheduling
-------------------------------------------------------------------
up to 1 week [*]
1+ to 4 weeks [*]
4+ to 8 weeks [*]
8+ weeks [*]
Maxtor's request for new ship date(s) more than ninety (90) days beyond the
original ship date(s) shown on the affected purchase order shall be deemed a
cancellation of the original purchase order governed by Section 7.2. If Maxtor's
reschedule request represents an acceleration or increase, IMS will use its best
efforts to meet the requested delivery dates.
6.2 Cancellation. Any purchases of material by IMS shall be
solely for the account of IMS, except for raw materials detailed in the bills of
materials for the corresponding Products. IMS shall not purchase any materials
to be consigned by Maxtor. Maxtor shall not be responsible for excess and
obsolete inventory which is not covered by a Maxtor Purchase Order or other
written form of authorization from Maxtor. Maxtor shall be responsible for
exposures caused by EOL, rescheduling and engineering changes where IMS has
purchased property under written authorization from Maxtor according to
lead-time and within the cancellation window on the attached Exhibit C. Beyond
that, IMS shall use reasonable commercial efforts to mitigate the costs incurred
by IMS on account of any such cancellation, and any and all resulting liability
of Maxtor. Once formal notification of cancellation has been received, IMS shall
promptly cease all efforts in fulfillment of canceled Orders and shall promptly
cancel orders to suppliers (in consultation with Maxtor where a cancellation
penalty may be incurred). At the option of IMS, Maxtor shall purchase all or any
portion of the materials purchased by IMS consistent with raw material lead
times, and within the cancellation windows in Exhibit C unless Maxtor has
provided written authorization to exceed the cancellation window. Maxtor must
settle all valid claims from IMS regarding surplus inventory within forty-five
(45) days of receipt of IMS' written demand setting for the grounds of the claim
in reasonable detail. The foregoing, together with the remedies set forth in
Section 7.1 ("Purchase Commitment"), shall be IMS' sole and exclusive remedies
for any canceled Orders. The foregoing remedies shall also apply to Products
manufactured by IMS for contractors of Maxtor named on Exhibit D, which Exhibit
may be amended by Maxtor from time to time.
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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6.3 Product Mix Changes. It is understood that market conditions
or requirements by Maxtor's customers may require changes in Product mix and it
is anticipated that such changes may occur frequently. IMS, therefore, grants to
Maxtor the right at any time to make changes to the Product mix without penalty
to the extent such changes do not materially alter IMS' raw materials
requirements, as long as such changes are made more than fifteen (15) days prior
to delivery. Maxtor and IMS agree to work together to respond to such changes in
a timely manner.
7. Purchase and Sale Commitments.
7.1 Purchase Commitment. Maxtor agrees to place Orders with IMS,
which Orders IMS shall accept, and Maxtor agrees to accept corresponding
conforming shipments from IMS aggregating as follows:
Period Quarterly Unit Volume
-----------------------------------------------------------------------------
Initial 12 month period following the [*]
Effective Date
Second 12 month period following the [*]
Effective Date
Third 12 month period following the Effective [*]
Date
IMS' sole and exclusive remedies for Maxtor's failure to place any of the above
orders and/or Maxtor's cancellation of such Orders once placed shall be (i)
suspension during the first year following the Effective Date, until cure of
such failure, of the interest payments not yet paid and due under that certain
Twenty Million Dollar ($20,000,000) Seven Percent (7%) Senior Subordinated Note
issued at the closing of the Acquisition Transaction, provided that such unpaid
interest will be repaid in equal monthly installments during the thirteen (13)
months following cure of such failure, and (ii) if applicable, the remedies set
forth in Section 6.2 ("Cancellation"). All purchases of Products by contractors
of Maxtor named on Exhibit D shall be considered purchases of Products by Maxtor
for purposes of this Section 7 ("Purchase and Sale Commitments").
7.2 Condition of Purchase Obligation. Maxtor's commitment to
purchase the amounts set forth in Section 7.1 ("Purchase Commitment") is
conditioned upon IMS providing Products competitive in both price and quality.
If Maxtor qualifies, pursuant to the qualification criteria set forth in Exhibit
E, which criteria may be amended from time to time by Maxtor at its sole
discretion, one or more alternate suppliers of Products whose price or quality
is more favorable to Maxtor than IMS' price or quality and who are capable of
meeting Maxtor's quality and volume (in whole or in part) requirements, Maxtor
shall so notify IMS in writing. If such alternate supplier provides a more
favorable price, superior quality, or both, Maxtor shall notify IMS of the lower
price and/or superior quality and give IMS the opportunity to adjust its prices
and/or improve its quality. If IMS fails, within [*] to lower its prices and/or
provide a plan acceptable to Maxtor to improve IMS' quality, so as to be
competitive with such alternate supplier, Maxtor shall have the option of
placing orders with such alternate suppliers. Maxtor's purchase commitments set
forth in Section 7.1 ("Purchase Commitment") shall be reduced to the extent of
Products as to which IMS is not price or quality competitive.
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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7.3 Sales Commitment. IMS agrees to accept Orders placed by
Maxtor and to manufacture and sell such Products to Maxtor in the amounts
specified in Section 7.1 ("Purchase Commitment") above. IMS acknowledges that
due to the primary source nature of the Products, it is important that IMS
maintain the ability to increase its manufacturing capacity upon Maxtor's
reasonable request. IMS shall provide for reasonable contingency plans,
including but not limited to double shifts and triple shifts of personnel, so as
to expeditiously increase IMS' manufacturing capacity to meet Maxtor's customer
demand. [*] IMS will be responsible for processing sufficient Product starts,
procuring sufficient inventory (except those components to be procured by Maxtor
pursuant to Section 9 ("Product Materials")) and taking all other actions to
provide Maxtor with the quantity of Product set forth in accepted Orders.
8. Inspection and Acceptance.
8.1 Testing. IMS will ensure that each Product meets Maxtor
specifications and is tested prior to shipment in accordance with quality and
reliability testing methods and procedures for such Product as specified by
Maxtor from time to time. IMS will provide to Maxtor only those Products
conforming to the applicable test requirements unless IMS has obtained prior
written approval from Maxtor for any deviation from such requirements.
8.2 Acceptance. Maxtor shall inspect each shipment and return
all non-conforming units to IMS with a return authorization number obtained from
IMS with shipping cost to be borne by IMS. All returned Products must be
accompanied by a written notice describing with reasonable particularity any
defects rendering the Products non-conforming. IMS shall, at its expense,
replace within ten (10) business days of return all non-conforming Products or
refund the purchase price therefor. In addition to any such replacement and
refund, IMS shall promptly reimburse Maxtor for reasonable costs, expenses and
fees incurred by Maxtor as a result of non-conforming Products. Within ten (10)
business days of IMS' receipt of any non-conforming Product, IMS will perform
failure analysis and provide Maxtor with a failure analysis report and a
corrective action plan detailing the actions IMS shall take to avoid or minimize
similar defects in the future.
9. Consignment. Maxtor may consign to IMS certain component parts,
equipment and/or other materials (the "Materials") for use in assembling and
testing Products. IMS agrees to (1) receive shipments of Materials ordered by
Maxtor and designated for delivery to IMS, (2) perform incoming inspection and
testing of Materials as reasonably required by Maxtor (any such Maxtor-required
and Maxtor-unique testing to be at Maxtor's expense), (3) store and insure such
Materials until needed, (4) use such Materials solely for the benefit of Maxtor,
and (5) provide inventory and stocking reports to Maxtor. IMS shall provide such
services with respect to Materials stored by IMS for up to one hundred twenty
(120) days at no charge. The parties shall negotiate in good faith on
reimbursement to IMS for IMS' actual incremental costs incurred in connection
with storage of Material in excess of one hundred twenty (120) days. IMS shall
be responsible and liable for all Materials consigned by Maxtor to IMS, unless
IMS provides Maxtor within forty-eight (48) hours of arrival of any consigned
Materials with written notice and an accompanying receipt showing a discrepancy
between the amount and/or type of Materials actually received by IMS and the
amount and/or type consigned by Maxtor, as shown on
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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applicable shipping documents. Notwithstanding IMS' management and storage of
the consigned Materials, Maxtor will retain all rights, title and interest to
such Materials. IMS agrees that all Maxtor consigned Materials are the property
of Maxtor and shall not mortgage, pledge, assign or borrow against such
Materials or otherwise create or attempt to create a security interest in the
Materials. IMS will post signs, make public filings, and take such other steps
reasonably calculated to notify third parties concerning Maxtor's ownership of
such Materials. IMS agrees to maintain fire and extended insurance, including
all risk and earthquake coverage, on the building containing and contents of the
Materials in an amount agreed upon by the parties. IMS shall name Maxtor as an
additional assured with respect to the contents of the Materials and shall, if
required by Maxtor, furnish certificates or adequate proof of the foregoing
insurance. IMS will be liable to Maxtor for damages for loss of, or injury to,
the consigned Materials caused by IMS' failure to exercise such care in regard
to the Materials as a reasonably careful person would exercise under like
circumstances. IMS agrees to accept responsibility for the actual cash value of
any Materials while such Materials are in IMS' custody. In the event of any
canceled Orders involving Materials, IMS shall ship such Materials to Maxtor (at
Maxtor's expense). [*] IMS requests that consigned components are received by
IMS at least five (5) business days prior to the scheduled Product shipment date
and in sufficient quantities to allow for normal component attrition.
10. Limited Warranty. IMS warrants that the Products sold to Maxtor
shall conform to the corresponding written product specification provided by
Maxtor to IMS and current at the time of Maxtor's Order ("Specification") [*]
for a period of twelve (12) months from the date of receipt by Maxtor. The
materials portion of this warranty shall not apply to the extent of defects in
the Product directly attributable to the failure of any Materials consigned or
supplied to IMS by Maxtor. All claims for breach of warranty with respect to any
unit of the Products must be received by IMS no later than fifteen (15) days
after the expiration of the warranty period. The warranty does not extend to any
Products (i) which have been subjected to misuse, neglect, excessive
deterioration or erosion, abuse, accident, improper installation, extreme
electrical or physical stress, or any other use by Maxtor in violation of or
contrary to IMS' instructions; (ii) which have been repaired or altered in any
manner by anyone other than IMS or persons expressly authorized by IMS; or (iii)
which are defective as a result of causes external to the Product. IMS' sole and
exclusive obligation with respect to defective Products returned under warranty
shall be, at IMS' option, repair or replacement thereof or refund of the
purchase price. THE EXPRESS WARRANTY AND WARRANTY REMEDIES PROVIDED IN THIS
SECTION ARE MAXTOR'S SOLE AND EXCLUSIVE REMEDIES FOR BREACH OF THE WARRANTIES IN
THIS SECTION. IMS MAKES, AND HAS MADE, NO OTHER WARRANTIES TO MAXTOR, AND IMS
HEREBY EXPRESSLY DISCLAIMS ANY AND ALL OTHER WARRANTIES, WRITTEN OR ORAL,
EXPRESS, IMPLIED, OR STATUTORY, IN ANY MANNER OR FORM WHATSOEVER, INCLUDING, BUT
NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR ANY PARTICULAR
PURPOSE OR NONINFRINGEMENT OF THIRD PARTY RIGHTS (EXCEPT AS EXPRESSLY PROVIDED
IN SECTION 17 ("INDEMNIFICATION")). Maxtor shall pay IMS such amounts as are
mutually agreed from time to time for (i) testing of returned units in "no
problem found" situations (i.e., where Product units returned to IMS conform to
the above warranty) and (ii) network of returned units where the failure
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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of the units to conform to the above warranty is not due to any breach of
warranty by IMS (e.g., situations where the Product unit has been abused or
damaged by persons other than IMS).
11. Epidemic Failure. In the event of an epidemic failure of a
Product, the parties shall immediately work together to identify the nature of
the failure and to determine whether the failure results from certain components
of the Product or manufacture of the Product. For purposes of this Section,
"epidemic failure" shall mean a group of failures occurring within a thirty (30)
day period of a same or similar nature where the failure rate for such thirty
(30) day period is ten percent (10%) or more above the failure rate for the
particular Product over the term of this Agreement prior to such event. Maxtor
and IMS shall agree on an equitable allocation of the cost of resolving the
problem vis-a-vis Maxtor's customers and in regard to the relevant component(s)
vendors which shall depend on whether the primary source of the problem is
Maxtor's procurement of Materials for the Products or IMS' procurement of
components for or manufacture of the Product. Maxtor and IMS shall cooperate in
good faith to identify the most cost-effective solution to the problem.
12. Limitation of Liability. EXCEPT AS SET FORTH IN SECTION 17.2
("INDEMNIFICATION BY IMS") AND SECTION 17.3 ("INFRINGEMENT INDEMNIFICATION BY
MAXTOR") AND EXCEPT FOR BREACH OF THE OBLIGATIONS SET FORTH IN SECTION 18.1
("CONFIDENTIAL INFORMATION"), EITHER PARTY'S MAXIMUM LIABILITY ARISING OUT OR
RELATING TO THIS AGREEMENT SHALL BE LIMITED TO THE TOTAL PAYMENTS MADE BY MAXTOR
TO IMS HEREUNDER. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR
ANY OTHER PERSON OR ENTITY FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, INDIRECT,
EXEMPLARY OR PUNITIVE DAMAGES, HOWEVER CAUSED, WHETHER FOR BREACH OF CONTRACT,
NEGLIGENCE OR OTHERWISE (INCLUDING, WITHOUT LIMITATION, DAMAGES BASED ON LOSS OF
PROFITS OR BUSINESS OPPORTUNITY), AND WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES. THIS LIMITATION SHALL APPLY NOTWITHSTANDING
ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY PROVIDED HEREIN.
13. Engineering or Process Changes.
13.1 Definition. The term "Engineering Change(s)" shall mean
those mechanical, electrical, piece part or subassembly design or Specification
changes, made to the Products or to any manufacturing, assembly or testing
method, procedure or process ("Process"), or, which, if made, could affect the
schedule, performance, reliability, availability, serviceability, appearance,
dimensions, tolerances, safety or costs, such determination to be made solely by
Maxtor.
13.2 IMS Change(s). IMS will notify Maxtor of any Engineering
Change proposed to be made by IMS to the Products or Process, and will supply a
written description of the expected effect of the Engineering Change on the
Products, including its effect on price, performance, reliability and
serviceability. Maxtor may elect to evaluate the prototype, parts and/or designs
specified as part of the proposed change and IMS shall provide the prototype,
parts and/or design to Maxtor at no charge
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for such evaluation. Maxtor agrees to use commercially reasonable efforts to
respond, within five (5) working days after receipt of IMS' request for
non-critical changes and within twenty-four (24) hours for critical changes, as
to whether or not Maxtor will negotiate with IMS as to a transition plan and
time frame for implementing such Engineering Changes. IMS will not change or
modify the Products or Process by implementation of such Engineering Change
without Maxtor's prior written approval. Maxtor, in its reasonable discretion,
may reject any and all IMS requested changes.
13.3 Maxtor Change(s). Maxtor may request, in writing and in a
manner similar to IMS' request as set forth in Section 13.2 ("IMS Change(s)"),
that IMS incorporate any non-critical Engineering Change into the Products, and
IMS will provide to Maxtor its written response within five (5) working days
after receipt of Maxtor's request. For critical Engineering Changes, as
determined by Maxtor, IMS will respond within twenty-four (24) hours of Maxtor's
written request. IMS' response will state the cost savings or increase, and
labor, inventory and scrap material impact, if any, expected to be created by
the Engineering Change, and the effect on the schedule, performance,
reliability, availability, safety, serviceability, appearance, dimensions,
tolerances, and composition of bills of material of the Products. If Maxtor
requests IMS to incorporate an Engineering Change into the Products, the
applicable Specifications will. be amended as required subject to mutual
agreement on reimbursement to IMS for its extra costs (including labor,
manufacturing supplies and inventory) incurred as a result of the Engineering
Change. IMS will not unreasonably refuse to incorporate Maxtor's Engineering
Changes into the Products.
14. Term and Termination. The term of this Agreement shall begin on
the Effective Date and continue for three years thereafter unless earlier
terminated as provided herein. Either party may terminate this Agreement for
default by the other party of any material obligation, unless the defaulting
party cures such material breach within thirty (30) days after receipt of
written notice from the non-defaulting party. In the event this Agreement is
terminated by IMS upon Maxtor's default, Maxtor shall be responsible for payment
or cancellation charges for any issued and accepted Orders as provided in
Section 6 ("Order Cancellation and Rescheduling"). In the event this Agreement
is terminated by Maxtor for IMS' default, IMS shall be responsible for payment
of any and all costs and expenses associated with Maxtor's transfer of Orders to
another supplier, including without limitation the incremental cost to procure
substitute goods in accordance with Section 2712 of the Uniform Commercial Code.
15. Maxtor Equipment. IMS shall be responsible for diligence and care
in the use, routine calibration and repair, maintenance and protection of any
Maxtor furnished equipment, including without limitation any Product-specific
tooling and equipment, and shall be liable for repairs or replacement due to
normal failure or wear and tear, and maintenance costs, provided, that HDAs
shall be supplied, maintained, repaired and replenished by Maxtor.
16. Customer and Technical Support. IMS will supply Maxtor on an
on-going basis at no charge with technical support, including without
limitation: (i) reasonable amounts of specialized backup technical assistance
in English by telephone and e-mail, with prompt response time; (ii) English
language technical documentation necessary to permit Maxtor to perform customer
support and troubleshooting or to analyze the technical benefits and risks of
introducing new releases of the Products into Maxtor's customer base; and (iii)
all error notes or other technical documentation (translated into the English
language) defining symptoms, solutions or work-arounds for Product problems.
On-site problem support for Products shall be as mutually agreed by Maxtor and
IMS. In addition, in consideration of the Orders to be placed by Maxtor
hereunder, IMS shall provide Maxtor with the following services:
(i) early involvement support and input, including without
limitation manufacturability requirements and improvements for IMS' process at
its supplier base (e.g. PCB layouts), ICT design (testability) input,
functional test input, and component selection (e.g. cost reduction
opportunities);
(ii) materials support for introduction of prototype or new
Products, including without limitation quick turn (minimum cycle times) PCBA's
and/or kits of materials for all components common to IMS bills of materials;
(iii) PCB, passives, and discrete IC's commodity management,
including without limitation all quotation, negotiation, administration, and
qualification requirements (subject to any consignment arrangements specified
by Maxtor); and
(iv) quality assurance of all components provided by IMS,
including without limitation incoming inspection, supplier qualification and
audits, component qualification, and failure analysis of defective
components.
The services described in clauses (i) and (ii) shall be at no additional
charge. The services described in clauses (iii) and (iv) shall be at no
additional charge for the first six (6) months following the Effective Date. If
Maxtor, at its option, desires to procure such services for a longer period,
the parties shall negotiate in good faith as to a reasonable fee to be paid to
IMS for such services provided more than six (6) months following the Effective
Date.
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17. Indemnification.
17.1 Indemnification by Maxtor for Products. Maxtor shall defend,
indemnify and hold IMS, its successors and assigns, harmless from and against
all actions, claims, liabilities, losses and expenses (including reasonable
attorneys' fees) arising out of or relating to Maxtor's gross negligence or
intentional misconduct in its distribution, sale or use of any Product. Such
indemnification obligation will be conditioned upon IMS (i) giving Maxtor prompt
notification in writing as to any such action; (ii)
tendering full control of the defense of such action to Maxtor; and (iii)
providing Maxtor with full information and assistance (at Maxtor's expense) for
such defense. IMS may participate in any such defense with counsel of its
choosing at its expense. Maxtor will not be responsible for any settlement or
compromise made without its consent.
17.2 Indemnification by IMS. IMS shall defend, indemnify and hold
Maxtor, its successors and assigns, harmless from and against all actions,
claims, liabilities, losses and expenses (including reasonable attorneys' fees)
arising out of or relating to any claim of infringement or misappropriation by
the Products or components thereof supplied by IMS, or the processes used by IMS
to manufacture Products, of any patent, copyright, trade secret, or any other
intellectual property right of any third party, except to the extent Maxtor is
obligated to indemnify IMS under Section 17.3 ("Infringement Indemnification by
Maxtor"). Such indemnification obligation will be conditioned upon Maxtor (i)
giving IMS prompt notification in writing as to any such action; (ii) tendering
full control of the defense of such action to IMS; and (iii) providing IMS with
full information and assistance (at IMS' expense) for such defense. Maxtor may
participate in any such defense with counsel of its choosing at its expense.
IMS will not be responsible for any settlement or compromise made without its
consent.
17.3 Infringement Indemnification by Maxtor. Maxtor shall defend,
indemnify and hold IMS, its successors and assigns, harmless from and against
all actions, claims, liabilities, losses and expenses (including reasonable
attorneys' fees) arising out of or relating to any claim of infringement or
misappropriation by a Product developed from designs provided by Maxtor for such
development, of any patent, copyright, trade secret, or any other intellectual
property right of any third party to the extent such infringement or
misappropriation arises out of use of such Maxtor designs. Such indemnification
obligation will be conditioned upon IMS (i) giving Maxtor prompt notification in
writing as to any such action; (ii) tendering full control of the defense of
such action to Maxtor; and (iii) providing Maxtor with full information and
assistance (at Maxtor's expense) for such defense. IMS may participate in any
such defense with counsel of its choosing at its expense. Maxtor will not be
responsible for any settlement or compromise made without its consent.
18. Confidentiality; Intellectual Property Rights.
18.1 Confidential Information. Each party (the "Disclosing
Party", as applicable) agrees during the term of this Agreement and thereafter
to take all steps reasonably necessary to hold the Confidential Information of
the other party (the "Receiving Party", as applicable) in trust and confidence.
"Confidential Information" includes, but is not limited to, technical and
business information relating to the Disclosing Party's inventions or products,
research and development, production, manufacturing and engineering processes,
costs, profit or margin information, employee skills and salaries, finances,
customers, marketing, and production and future business plans, and any third
party's proprietary or confidential information disclosed to the Receiving Party
in the course of providing services to the Disclosing Party. Notwithstanding the
other provisions of this Agreement, nothing received by the Receiving Party will
be considered to be the Disclosing Party's Confidential Information if (1) it
has been published or is otherwise readily available to the public other than by
a breach of this Agreement; (2) it has been rightfully received by the Receiving
Party from a third party without confidential limitations; (3) it has been
independently developed for the Receiving Party by personnel or agents having no
access to the Disclosing Party's Confidential Information; or (4) it was known
to the Receiving Party prior to its first receipt from the Disclosing Party. The
Receiving Party shall use the
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Disclosing Party's Confidential Information only for the purposes of providing
and receiving Products and services to and from the Disclosing Party as set
forth herein, unless otherwise mutually agreed in writing. The Receiving Party
may disclose the Disclosing Party's Confidential Information to affiliates and
to third persons, including contractors, solely for the purposes of this
Agreement or as otherwise allowed herein (e.g., Section 18.4 ("License of IMS
Rights")), including consultation regarding the purchase or provision of
Products and services, but only under the terms of a written confidentiality
agreement with such third person containing confidentiality and use terms
substantially similar to those imposed herein upon a Receiving Party. The
foregoing shall not affect Maxtor's rights under Section 18.4 ("License of IMS
Rights"), except that Maxtor shall require third persons who receive such
Section 18.4 IMS Intellectual Property which is IMS Confidential Information, to
execute such written confidentiality agreement.
18.2 No Conflict of Interest. Each party agrees during the term
of this Agreement not to accept work, enter into a contract or accept an
obligation inconsistent or incompatible with such party's obligations under this
Agreement or the scope of services rendered for the other party hereunder. Each
party warrants that to the best of its knowledge, there is no other existing
contract or duty on such party's part inconsistent with this Agreement. The
parties agree that the foregoing obligations shall not be construed in any
manner to supersede or conflict with the terms and conditions of Section 7.2
("Condition of Purchase Obligation") above.
18.3 Ownership of Proprietary Rights. Nothing in this Agreement
shall convey to either party any proprietary or intellectual property rights,
including without limitation, copyrights, trademarks, trade secrets, patents,
moral rights, contract rights and licensing rights (the "Intellectual Property
Rights") belonging to the other party, or be deemed to license either party to
use any such Intellectual Property Rights of the other party, except for the
express limited purposes set forth herein.
18.4 [*]
18.5 Joint Work Product. The term "Joint Work Product" means any
new or useful art, discovery, improvement or invention whether or not
patentable, and all related know-how, designs, mask works, trademarks, formulae,
processes, manufacturing techniques, trade secrets, ideas, artwork, software or
other copyrightable or patentable works, where the conception or reduction to
practice thereof occurs subsequent to the Effective Date and one or more
personnel of both Maxtor and IMS contribute materially to such conception or
reduction to practice. Maxtor and IMS shall jointly own the Joint Work Product,
with each owning an undivided one-half interest, and each shall be free to
commercially exploit Joint Work Product far its own account and nonexclusively
license Joint Work Product to third parties without any obligation to account
for profits to the other joint owner.
18.6 Return of Maxtor Property. The term "Maxtor Work Product"
means any new or useful art, discovery, improvement or invention whether or not
patentable, and all related know-how, designs, mask works, trademarks, formulae,
processes, manufacturing techniques, trade secrets, ideas, artwork, software or
other copyrightable or patentable works developed by Maxtor without the material
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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contribution of IMS or otherwise acquired or licensed by Maxtor. Except as set
forth in a separate written licensing agreement:
(a) IMS shall have no right to use any Maxtor Work
Product provided by Maxtor to IMS, or learned by IMS from Maxtor, except to
perform services for Maxtor as contemplated by this Agreement.
(b) Upon termination of this Agreement for any reason
or in any manner, or at any earlier time upon Maxtor's request, IMS agrees to
promptly deliver all Maxtor property, including but not limited to all tangible
embodiments of the Maxtor Work Product, and all copies of Maxtor property in
IMS' possession to Maxtor, or promptly destroy all such Maxtor property and
promptly certify in writing to its destruction.
19. Miscellaneous Provisions.
19.1 Entire Agreement. This Agreement constitutes the entire
agreement between the parties regarding the subject matter hereof and supersedes
all prior agreements and understandings between the parties relating thereto.
This Agreement may not be modified except by a writing signed by an authorized
representative of both parties.
19.2 Independent Contractor. The relationship of the parties
established by this Agreement is that of independent contractors, and nothing
contained herein shall be constructed to constitute either party as the agent of
the other party or as partners, joint ventures, co-owners or otherwise as
participants in a joint or common undertaking.
19.3 Advertising. No advertising by either party shall display or
contain any trademarks or references to the other party without the other
party's prior written approval.
19.4 Assignment and Subcontracting. This Agreement may not be
assigned by either party without the advance written consent of the other party,
which shall not be unreasonably withheld. Notwithstanding the foregoing, either
party may assign this Agreement to any affiliate or subsidiary or pursuant to a
merger, sale of all or substantially all of its assets, or other corporate
reorganization. IMS shall not subcontract any of its rights or obligations
hereunder to any third party without Maxtor's prior written approval, which
shall not be unreasonably withheld.
19.5 Force Majeure. Except for Maxtor's payment obligations,
neither party shall be liable to the other party arising out of delays or
failures to perform under the Agreement to the extent that any such delays or
failures result from any cause beyond the reasonable control of the party
affected by a force majeure event; provided, that the party affected by any such
cause shall promptly inform the other of all relevant information. If any such
force majeure event extends beyond ninety (90) days, either party shall have the
right to terminate this Agreement upon written notice to the other party.
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19.6 Governing Law. This Agreement shall be governed by the laws
of the State of California, without reference to conflict of laws principles.
The United Nations Convention on Contracts for the International Sale of Goods
is specifically excluded from application to this Agreement.
19.7 Venue. All disputes arising under this Agreement shall be
brought in the Superior Court of the State of California in Santa Xxxxx County
or the Federal District Court of San Jose, California, as permitted by law. The
Superior Court of Santa Xxxxx County and the Federal District Court of San Xxxx
shall each have exclusive jurisdiction over disputes under this Agreement. IMS
consents to the personal jurisdiction of the above courts.
19.8 English Language. This Agreement is executed in the English
language only, and any translations hereof are of no force and effect.
19.9 Invalidity. If any provisions or portion thereof of this
Agreement is held to be unenforceable or invalid, the remaining provisions and
portions thereof shall nevertheless be given full force and effect.
19.10 No Waiver. No failure to delay on the part of either party
in exercising any right or remedy hereunder shall operate as a waiver thereof;
nor shall any single or partial exercise of any such right or remedy preclude
any other or further exercise thereof or of any other right or remedy. No
provision of this Agreement may be waived except in a writing signed by the
party granting such waiver.
19.11 No Licenses Created. Nothing contained in this Agreement
shall be construed as conferring any license, right to use or other right with
respect to information, trademark or tradenames of either party.
19.12 Counterparts. This Agreement may be executed in
counterparts, all of which taken together shall constitute one single agreement
between the parties.
19.13 Limitation of Action. No action, regardless of form,
arising out of this Agreement, may be brought by either party more than one year
after the cause of action has arisen, or in the case of nonpayment, one year
from the date the last payment was due.
19.14 Survival. Sections 10, 11, 12, 15, 17, 18 and 19 shall
survive any expiration or termination of this Agreement.
19.15 Construction. This Agreement has been negotiated by the
parties and their respective counsel. This Agreement will be fairly interpreted
in accordance with its terms and without any strict construction in favor of or
against any party. Any ambiguity will not be interpreted against the drafting
party.
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IN WITNESS WHEREOF, Maxtor and IMS have caused this Manufacturing
Services Agreement to be executed by their respective officers, duly authorized.
MAXTOR: IMS:
Maxtor Corporation International Manufacturing Services, Inc.
By: ___________________________ By: ______________________________________
Name: _________________________ Name: ____________________________________
Title: ________________________ Title: ___________________________________
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EXHIBIT A
PRODUCTS AND PRICES
Maxtor and IMS have agreed that in calendar 1996, Maxtor will give IMS
first right of refusal to manufacture units up to 1.924 million each quarter.
The forgoing does not constitute a purchase order.
CQ2 96 CQ3 96 CQ4 96 CQ1 96
BOM NO. DESCRIPTION PRICE PRICE PRICE PRICE
------- ----------- ----- ----- ----- -----
US$ US$ US$ US$
[*] [*] [*] [*] [*] [*]
REWORK*
1" REWORK (NORMAL)
1" REWORK (FIELD)
2.5 REWORK
MXT REWORK
* Rework charges above are for full rework completed by IMS. Partial rework
charges will be negotiated in good faith between the parties.
Note:
1. The price for CQ296 is confirmed while the price for the rest of three
quarters is for reference only.
2. The selling price for 2.5" is full turnkey and sales is from IMS to HSD.
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
15
EXHIBIT A
(Continued)
CONSIGNED PARTS LIST
PART NO. DESCRIPTION
--------------- ----------------------------------------------------
[*] [*]
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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EXHIBIT B
THIS EXHIBIT IS INTENTIONALLY OMITTED
17
EXHIBIT C
CANCELLATION WINDOWS
CANCELLATION
COMMODITY (NOT-TO-EXCEED)
---------------- ---------------
ASICx* [*] Days
Memory * [*] Days
Osc. Custom [*] Days
Transistors [*] Days
Diodes [*] Days
Caps (Tant.) [*] Days
Resistor [*] Days
PCB [*] Days
Ferrite [*] Days
Connector/Socket [*] Days
Cap Cer [*] Days
Inductor [*] Days
* Per supplier cancellation window plus [*] worth of raw and WIP in IMS.
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
-----------------------
18
EXHIBIT D
Hyundai Storage Division
00
XXXXXXXX X
# XXXXXXXX MAX. POINT WEIGHT AGE MAX. WEIGHT
1. Quality 5 X2 10
2. Total Cost 5 X2 10
3. Capacity 5 X2 10
4. Time To Market 5 X2 10
5. Joint Profit Program 5 X1 5
6. Delivery Performance 5 X1 5
7. Technology Leadership 5 X1 5
8. Finance 5 X1 5
9. History/Flexibility 5 X1 5
10. Fit for Application 5 X1 5
The Maximum Total Weighted Score is 70 and Minimum is 35.
We can assign the following grading:
WEIGHT SCORE GRADING
----------------------- --------------------------
35-49 Pass/Average
50-59 Good
60-70 Very Good/Excellent
