Exhibit 10.1
Solectron/IBM Confidential
INDIRECT SOURCING SERVICES AGREEMENT
(U.S. Master Agreement)
Between
Solectron USA, Inc.
And
International Business Machines Corporation
 
Effective Date: March 16, 2006

Indirect Sourcing Services Agreement
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Solectron/IBM Confidential
Indirect Sourcing Services Agreement
Between
Solectron USA, Inc. (“Solectron”)
A Delaware corporation, with a place of business at 847 Gibraltar Drive,
Milpitas, California 95035
And
International Business Machines Corporation (“IBM”)
A company organized under the laws of the state of New York with offices at
Armonk, NY.
Effective Date: March 16, 2006
Term: Five (5) Years
This Indirect Sourcing Services Agreement (the “Agreement”) consists of this
signature page plus the attached GENERAL TERMS AND CONDITIONS and Schedules A
through N. Exhibits attached to the Agreement are provided for convenience of
reference only and do not form part of the Agreement.
Intending to be legally bound, each of the undersigned parties has caused its
duly authorized representative to execute the Agreement as of the Effective
Date.

                               
 
                                                  Solectron USA, Inc.          
International Business Machines
Corporation        
By:
              By:            
 
                       
 
                           
Printed:
          Printed:        
 
 
 
             
 
       
 
                           
Title:
            Title:          
 
                           
 
                           
Date: 
            Date:           
 
                           
 
                                                 
By:
                           
 
                         
 
                           
Printed:
                       
 
 
 
                       
 
                           
Title:
                         
 
                           
 
                           
Date:
                         
 
                           
 
                                                   

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Solectron/IBM Confidential
TABLE OF CONTENTS

         
1. PREAMBLE
    1  
 
       
1.1 Background and Purpose
    1  
1.2 Objectives
    1  
1.3 Construction of Preamble
    2  
1.4 Local Adoption Agreements
    2  
1.5 Defined Terms
    2  
 
       
2. THE SERVICES
    3  
 
       
2.1 Obligation to Provide the Services, Generally
    3  
2.2 Scope of the Services
    3  
2.3 Recipients of the Services
    4  
2.4 Services Not Exclusive
    4  
2.5 Cooperation and Coordination with Other Parties
    4  
2.6 Maximizing Value of Services
    5  
2.7 Technological Currency.
    5  
2.8 New Services
    5  
2.9 Changes to the Services or the Service Delivery Environment
    6  
2.10 Compliance with Laws, Regulations and Solectron Policies
    6  
 
       
3. PERFORMANCE
    7  
 
       
3.1 Performance, Generally
    7  
3.2 Place of Performance
    7  
3.3 Time of Performance
    8  
3.4 Manner of Performance
    8  
3.5 Acceptance of Deliverables
    9  
3.6 Quality Assurance and Continuous Improvement
    9  
3.7 User Satisfaction
    10  
 
       
4. IBM PERSONNEL
    10  
 
       
4.1 Provision of Suitable Personnel
    10  
4.2 Screening and Background Checks
    10  
4.3 Responsibility for IBM Personnel, Generally
    11  
4.4 Key IBM Positions
    11  
4.5 Removal and Replacement of IBM Personnel
    12  
4.6 Controlling Turnover of IBM Personnel
    12  
4.7 Subcontracting
    13  
 
       
5. SOLECTRON RESPONSIBILITIES
    14  
 
       
5.1 Appointment of Solectron Program Management Office (PMO) Personnel
    14  
5.2 Retained Functions and Cooperation
    14  
5.3 Savings Clause
    15  
 
       
6. CHARGES
    16  

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7. TRANSFER OR USE OF EXISTING SOLECTRON RESOURCES
    16  
 
       
7.1 Affected Solectron Personnel
    16  
7.2 Required Consents
    17  
7.3 Solectron Facilities and Resources Provided to IBM Personnel Working On-site
    17  
7.4 Other Resources
    18  
 
       
8. TRANSITION
    18  
 
       
8.1 “Transition” Defined
    18  
8.2 IBM Solution Description and Transition Plan
    19  
8.3 Conduct of the Transition
    19  
8.4 Solectron Cooperation and Support
    19  
8.5 Completion of Transition
    19  
 
       
9. DATA SECURITY AND PROTECTION
    21  
 
       
9.1 “Solectron Data” Defined
    21  
9.2 Solectron Data, Generally
    21  
9.3 Data Security
    21  
9.4 Limitation
    22  
9.5 Compliance with Data Privacy and Data Protection Laws, Regulations, and
Policies
    22  
9.6 Import/Export Controls
    23  
 
       
10. INTELLECTUAL PROPERTY RIGHTS
    23  
 
       
10.1 “Intellectual Property Rights,” “Independent IP,” and “Work Product”
Defined
    23  
10.2 Solectron Independent IP
    24  
10.3 IBM Independent IP
    25  
10.4 Third Party Materials
    26  
10.5 Ownership of Deliverables
    26  
10.6 Rights in Inventions
    27  
10.7 Intellectual Property Rights Agreements with IBM Personnel
    28  
10.8 Other Obligations and Rights Regarding Work Product
    28  
10.9 Mental Impressions
    29  
10.10 Reservation of Rights
    29  
 
       
11. TERM AND TERMINATION
    30  
 
       
11.1 Initial Term and Renewal
    30  
11.2 Termination, Generally
    30  
11.3 Termination By Solectron
    30  
11.4 Termination By IBM
    32  
11.5 Extension of Termination Date
    33  
11.6 Partial Termination
    33  
11.7 Disengagement Assistance
    33  
11.8 Survival
    34  

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12. GOVERNANCE AND MANAGEMENT
    35  
 
       
12.1 Governance Structure and Processes
    35  
12.2 Meetings
    35  
12.3 Reports
    35  
12.4 Procedures Manual
    35  
 
       
13. AUDITS AND RECORDS
    37  
 
       
13.1 Audit Rights
    37  
13.2 Audit Follow-up
    39  
13.3 Records Retention
    39  
13.4 IBM Audits and Other Internal Reviews
    40  
 
       
14. REPRESENTATIONS, WARRANTIES AND COVENANTS OF IBM
    41  
 
       
14.1 Work Standards
    41  
14.2 Maintenance
    41  
14.3 Efficiency and Cost-Effectiveness
    41  
14.4 Technology
    41  
14.5 Non-Infringement
    41  
14.6 Compliance with Confidentiality Obligation
    43  
14.7 Viruses
    43  
14.8 No Improper Inducements
    44  
14.9 Information Security
    44  
 
       
15. MUTUAL REPRESENTATIONS AND WARRANTIES; DISCLAIMER
    44  
 
       
15.1 Mutual Representations and Warranties
    44  
15.2 DISCLAIMER
    45  
 
       
16. CONFIDENTIALITY
    45  
 
       
16.1 “Confidential Information” Defined
    45  
16.2 Obligations of Confidentiality
    45  
16.3 No Implied Rights
    47  
16.4 Compelled Disclosure
    47  
16.5 Confidential Treatment of the Agreement
    48  
16.6 Disclosure of Information Concerning Tax Treatment
    48  
16.7 Return or Destruction
    48  
16.8 Duration of Confidentiality Obligations
    48  
 
       
17. INSURANCE
    49  
 
       
18. INDEMNIFICATION
    49  
 
       
18.1 “Claim” and “Losses” Defined
    49  
18.2 Indemnification By IBM
    49  
18.3 Infringement Claims
    51  

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18.4 Indemnification By Solectron
    52  
18.5 Indemnification Procedures
    53  
18.6 Subrogation
    54  
 
       
19. LIABILITY
    55  
 
       
19.1 General Intent
    55  
19.2 Limitations of Liability
    55  
19.3 Force Majeure
    56  
 
       
20. RULES OF CONSTRUCTION
    58  
 
       
20.1 Entire Agreement
    58  
20.2 Contract Amendments and Modifications
    58  
20.3 Governing Law
    58  
20.4 Relationship of the Parties
    58  
20.5 Consents and Approvals
    59  
20.6 Waiver
    59  
20.7 Remedies Cumulative
    59  
20.8 Headings
    59  
20.9 Section References
    59  
20.10 Schedule References
    60  
20.11 Use of Certain Words
    60  
20.12 Order of Precedence
    60  
20.13 Severability
    61  
20.14 Counterparts
    61  
 
       
21. DISPUTE RESOLUTION
    61  
 
       
21.1 Informal Dispute Resolution
    61  
21.2 Litigation
    63  
21.3 Continued Performance
    63  
21.4 Equitable Remedies
    63  
 
       
22. MISCELLANEOUS
    64  
 
       
22.1 Binding Nature and Assignment
    64  
22.2 Notices
    64  
22.3 Covenant of Good Faith
    65  
22.4 Public Disclosures
    65  
22.5 Supplier Conduct Principles and Certifications.
    65  
 
       
23. CERTAIN DEFINITIONS
    65  

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TABLE OF CONTENTS
SCHEDULES AND ANNEXES

                  A.   IBM Services and Solution(s)
 
           
 
      A1   Statement(s) of Work/Scope Model(s)
 
           
 
      A2   Process Definitions
 
           
 
      A3   Reserved
 
           
 
      A4   Reserved
 
           
 
      A5   IBM Solution
 
           
 
      A6   In-flight Projects
 
           
 
      A7   Transition Plan
 
           
 
      A8   Interaction Models
 
           
 
      A9   IBM Competitive Content
 
                B.   Performance Management
 
           
 
      B1   Savings Measurement Rules
 
           
 
      B2   Operational Service Levels
 
           
 
      B3   Summary of Performance Management Methodology
 
           
 
      B4   Form Template of AP Data Pulled
 
                C.   Charges
 
           
 
      C1   Pricing Tables
 
           
 
      C2   Invoicing Process
 
           
 
      C3   Economic Change Adjustment Process
 
                D.   Reserved
 
                E.   Key IBM Positions
 
                F.   Governance Structure and Processes
 
           
 
      F1   IBM and Solectron Organization Structures
 
           
 
      F2   Reports
 
           
 
      F3   Template Meeting Map
 
           
 
      F4   Template Meeting Minutes
 
           
 
      F5   Draft Procedures Manual Table of Contents
 
                G.   IBM Delivery Excellence
 
                H.   Data Privacy and Data Protection Laws
 
                I.   Security
 
                J.   Disaster Recovery/Business Continuity
 
                K.   Disengagement Assistance

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                      L.   Approved Subcontractors
 
                    M.   IBM Insurance Coverage
 
                    N.   Change Control
 
                EXHIBITS            
 
                    1.   Form of Local Adoption Agreement
 
                    2.   Form of Work Order
 
                    3.   Emptoris Software License
 
                    4.   IBM Supplier Conduct Principles

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Solectron/IBM Confidential
GENERAL TERMS AND CONDITIONS

  1.   PREAMBLE

1.1 Background and Purpose
The Agreement is made and entered into with reference to the following:

  (a)   Solectron is a leading electronics manufacturing company that offers a
full range of integrated supply chain solutions for electronics original
equipment manufacturers. Solectron has been performing internally certain
procurement and strategic sourcing functions that Solectron has determined could
be better performed by a company that specializes in the performance of such
functions for others.     (b)   IBM performs, among other things, for other
companies the types of services encompassed by the Agreement.     (c)   The
Agreement documents the terms and conditions on which Solectron will obtain
indirect sourcing services from IBM.

1.2 Objectives
Solectron and IBM have agreed upon the following goals and objectives as those
they expect to be accomplished by their execution of the Agreement and
performance under it:

  (a)   Substantial and sustained savings in the cost of Solectron’s indirect
materials and services through:

  (i)   application of best practice strategic sourcing techniques and efforts
to minimize the prices paid by Solectron for indirect materials and services;  
  (ii)   means such as aggregation of suppliers and reduction in the variability
of product types so as to reduce indirect materials inventories and holding
costs, to the extent consistent with Solectron’s business needs; and     (iii)  
implementation of a purchase-to-pay operations platform that provides the
monitoring, measurement and reporting tools to enable Solectron to drive
increased compliance with Solectron’s indirect sourcing strategies.

  (b)   A flexible relationship in which the Services and associated charges are
adjusted periodically to accommodate changes in Solectron’s business.     (c)  
Market competitive pricing throughout the Term of the Agreement;

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  (d)   A global relationship and contract governance structure combined with a
single, integrated Service delivery model to facilitate the use of consistent,
integrated approaches and processes across geographies;

  (e)   IBM’s provision of value-added strategic thought, vision and leadership
to Solectron; and

  (f)   Continuous improvement and evolution of the Services throughout the Term
to meet the dynamic requirements of Solectron’s business.

1.3 Construction of Preamble
This Preamble is intended to provide a general introduction to the Agreement. It
is not intended to alter the plain meaning of the Agreement or to expand the
scope of the Parties’ express obligations under it. However, to the extent the
terms and conditions of the Agreement are unclear or ambiguous with respect to a
particular circumstance, such terms and conditions are to be interpreted and
construed within the context of the provisions of this Preamble.
1.4 Local Adoption Agreements

  (a)   The Agreement provides for and governs the provision of Services to
Solectron and its Affiliates in the United States and it provides a common set
of terms and conditions to be adopted by Local Parties through the execution of
Local Adoption Agreements. The Agreement is entered into solely between, and may
be enforced only by, Solectron and IBM, except that an Affiliate of Solectron or
IBM that has signed a Local Adoption Agreement may enforce the Agreement, as
incorporated by reference into the Local Adoption Agreement, against any other
signatory to that Local Adoption Agreement. The Agreement does not create any
legally enforceable rights in other third parties, including suppliers and
customers of a Party, except as provided in this Section 1.4 and Section 18
(INDEMNIFICATION).     (b)   Solectron or the applicable Solectron Affiliate
may, subject to the terms of Section 11.3 (Termination By Solectron), terminate
any Local Adoption Agreement without affecting the other Local Adoption
Agreements or the Agreement.     (c)   In relation to a Local Adoption
Agreement, all references in the Agreement to Solectron or IBM shall be regarded
as references to the signatory Local Solectron Party or Local IBM Party unless
the context requires otherwise.

1.5 Defined Terms
Capitalized terms used in the Agreement are defined in Section 23 CERTAIN
DEFINITIONS) or in-place where the term is used and have the meanings there

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given unless the context requires otherwise. (See the INDEX OF DEFINED TERMS
immediately following these GENERAL TERMS AND CONDITIONS for a listing of
defined terms and a reference to the location where each is defined.)
Section 20.11 (Use of Certain Words) provides rules of construction for certain
non-capitalized terms used in the Agreement.

  2.   THE SERVICES

2.1 Obligation to Provide the Services, Generally
Starting on the Effective Date, or any later date that may be specified in the
Agreement for any specific Services or location(s) (a “Service Commencement
Date”), and continuing during the Term, IBM will perform and deliver the
Services to Solectron, for use by Solectron and its Service Recipients.
2.2 Scope of the Services
The “Services” consist of the following, as they may evolve and be supplemented,
modified or replaced during the Term:

  (a)   the functions, responsibilities, activities and tasks (collectively,
“Functions”) expressly described in Schedule A (IBM Services and Solution(s)),
Schedule G (IBM Delivery Excellence), Schedule I (Security), Schedule J
(Disaster Recovery/Business Continuity) or elsewhere in the Agreement as
Functions for which IBM is responsible (collectively, the “Enumerated
Services”);     (b)   any Functions routinely performed during the twelve
(12) months preceding the Effective Date (excluding functions discontinued due
to reorganizations, business process reengineering, divestitures and
acquisitions) by any baseline personnel (employees and independent contractors)
of Solectron (and its Affiliates) who are displaced, or whose Functions are
displaced, as a result of the Agreement even if the Function being displaced is
not specifically described in the Agreement, but only to the extent that such
Functions are reasonably related to the Enumerated Services and are reasonably
necessary for the full and proper performance of the Enumerated Services;    
(c)   performance, management, and completion of the In-flight Projects listed
or described in Annex A6 (In-flight Projects), the Transition activities listed
or described in Annex A7 (Transition Plan), Projects described in any Work
Orders executed and issued by the Parties under the Agree ment, and any Projects
requested by Solectron and implemented via the Change Management Process; and  
  (d)   any Functions that are not specifically described in the Agreement but
only to the extent that such Functions are inherent, required and appro-

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priate for the proper performance and provision of the Enumerated Services in
compliance with the requirements of the Agreement.
2.3 Recipients of the Services
The Services may be received and used by Solectron and any of its Affiliates and
other persons and entities authorized by Solectron in the ordinary course of
business to receive and/or use the Services for the benefit of Solectron’s
global enterprise (each such authorized recipient of the Services a “Service
Recipient”). To the extent that the introduction of any new Service Recipient(s)
has a material impact on the scope or volume of the Services, such introduction
shall be subject to the Change Management Process. For purposes of the
Agreement, Services provided to Service Recipients will be deemed to be Services
provided to Solectron. If Solectron divests a Service Recipient and requests
that IBM continue to provide Services to the divested entity, the parties will
negotiate separate arrangements for that entity and shall use Commercially
Reasonable Efforts to give the divested entity the benefit of the same terms and
conditions (including pricing) for at least a transitional period of up to
twelve (12) months.
2.4 Services Not Exclusive

  (a)   Except as the Agreement expressly provides otherwise, the Agreement does
not grant to IBM the exclusive right to provide any products and services to
Solectron (or its Affiliates). Solectron (and its Affiliates) may contract with
other vendors for any products and services, including products and services
that are similar to or competitive with the Services or that formerly were part
of the Services. Conversely, subject to the terms of the Agreement, IBM (and its
Affiliates) may provide to other companies, services and products that are
similar to or competitive with the Services.     (b)   Except as the Agreement
expressly provides otherwise, Solectron (and its Affiliates) make no commitment
for any minimum or maximum amount of Services to be purchased under the
Agreement.

2.5 Cooperation and Coordination with Other Parties

  (a)   If Solectron performs itself, or retains a third party to perform, any
services that interface or interact with the Services, or that formerly were
part of the Services, IBM will cooperate and coordinate with Solectron or such
third party as reasonably required for Solectron or the third party to perform
such services. IBM’s cooperation and coordination will include, as applicable
and subject to any confidentiality restrictions: (A) providing full access to
Solectron Data; (B) providing reasonable assistance with necessary interfaces,
including providing information regarding the operating environment, system
constraints and other operating parameters as a person with reasonable
commercial skills and expertise would find reasonably necessary; and
(C) providing the opportunity

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for third party providers to communicate with IBM, as reasonably required,
through IBM’s normal service delivery channels.

  (b)   Third party service providers retained by Solectron shall comply with
IBM’s security and reasonable confidentiality requirements when accessing
facilities or other resources owned or controlled by IBM.

2.6 Maximizing Value of Services
IBM will seek to maximize the quality, efficiency and value of the Services to
Solectron including supporting Solectron’s efforts to maintain competitiveness
in the markets in which it competes. IBM will do this by (i) subject to security
and confidentiality obligations, utilizing market information, price benchmarks
and savings opportunities acquired by IBM in the course of providing services to
its customer base (including IBM’s internal customers), wherever practicable, so
as to maximize speed-to-value in the form of savings and other benefits
delivered to Solectron under this Agreement; (ii) identifying and applying ‘best
practice’ techniques and methods in performing and delivering the Services,
including keeping current with market conditions and industry trends and
providing information and training that are relevant to the Services.
2.7 Technological Currency.
IBM will make investments to keep reasonably current the network, systems,
equipment, systems software and other technologies provided by IBM in performing
the Services for Solectron, so that Solectron will receive the benefits of
upgrades in technology through improved performance, functionality and
recoverability. IBM will be proactive in identifying opportunities to implement
new technologies that will improve service and support. IBM will use
Commercially Reasonable Efforts to maintain the Software within one generation
of the most current release levels unless otherwise agreed in writing by the
Parties, but in no event will IBM allow the Software to fall behind the levels
supported by the relevant supplier. If Solectron requires that any other third
party system software products be maintained at particular release levels, such
requirement (and any associated pricing) shall be set forth in a mutually agreed
amendment to this Agreement.
2.8 New Services

  (a)   “New Services” means Functions Solectron requests IBM to perform under
the Agreement that are (i) materially dif ferent from the Services, or (ii) in
addition to the Services and for which no charging methodology exist.     (b)  
IBM will not perform any additional Functions that would constitute New Services
prior to informing Solectron what the additional charges would be for performing
them and receiving Solectron’s authorization to proceed. If IBM performs the
additional Functions without Solectron’s

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authorization, they will be deemed to have been performed as part of the
Services at no charge.

  (c)   New Services will be subject to the Change Management Process and will
be documented in a Change Order or, in the case of New Services that constitute
or are performed as part of Project in a Work Order issued under the Agreement.
    (d)   Solectron may elect to solicit and receive bids from third parties to
perform such additional Functions. If Solectron elects to have the additional
Functions performed by a third party, IBM will cooperate and coordinate with the
third party with respect to the provision of such Functions.     (e)  
“Replacement Services” are New Services, the performance of which will result in
a reduction or elimination of some kinds of resources then being used by IBM to
render the Services it is already providing. If the New Services requested by
Solectron would constitute Replacement Services, the Parties will determine the
incremental resources and expenses of IBM required to provide the Replacement
Services, including implementation and on-going support, and the reduction in
resources and expenses related to the Services being replaced. The net increase
or decrease in resources (and/or change in the mix of resources) and expenses of
IBM will be the basis on which IBM will quote a price to Solectron for the
Replacement Services.

2.9 Changes to the Services or the Service Delivery Environment
Any material changes (individually or in the aggregate) to the Services that
affects any aspect of Solectron’s performance of Solectron Retained Functions or
any connection to IBM’s Service Delivery Environment will be made in accordance
with Schedule N (Change Control).
2.10 Compliance with Laws, Regulations and Solectron Policies

  (a)   Each Party agrees at its cost and expense to obtain all necessary
regulatory approvals regulating its business, to obtain any necessary licenses
or permits regulating its business, and to comply with all laws and regulatory
requirements regulating its business (or that of its Affiliates) including as
such regulates, in the case of Solectron, Solectron’s performance of any
Functions designated as Solectron Retained Functions and in the case of IBM,
IBM’s performance of any Functions forming part of the Services, in each case as
set forth in Annex A1. Each Party will bear the risk of and have financial
responsibility for any change in laws and regulations applicable to it or its
Affiliates, or their respective businesses, including as such relates to the
performance of its obligations under the Agreement. For the avoidance of doubt,
IBM has no responsibility for compliance with any laws or regulations applicable
to Solectron’s business operations, provided this does not waive or limit IBM’s
responsibil-

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ity to (i) comply with laws and regulations regulating IBM’s performance of any
Functions forming part of the Services in Annex A1 or (ii) to provide
information or assistance to Solectron as required under the Agreement in
connection with Solectron’s efforts to comply with laws and regulatory
requirements in connection with the procurement of goods and services as
contemplated by this Agreement.

  (b)   In addition, if Solectron has adopted any written standards, policies or
procedures pertaining to Solectron’s compliance with any laws or regulatory
requirements that apply to Solectron and are applicable to IBM’s performance of
Services for or on behalf of Solectron, IBM will perform its obligations under
the Agreement in compliance with any such Solectron standards, policies and
requirements that have been disclosed to IBM in writing with an opportunity for
review. Notwithstanding the foregoing, Solectron acknowledges and agrees that
IBM is not responsible for providing regulatory compliance advice to Solectron
under the Agreement.     (c)   If a Party is charged with failing to comply with
any laws, or regulatory requirements in breach of the requirements of
Sections 2.10(a) or 2.10(b), above, or policies described in this Section 2.10
(Compliance with Laws, Regulations and Solectron Policies), it will promptly so
notify the other Party in writing to the extent the non-compliance or its
consequences may reasonably be expected to adversely affect the Services or the
other Party.

  3.   PERFORMANCE

3.1 Performance, Generally
IBM is responsible for managing and performing, completing, and delivering the
Services, subject to the overall direction of Solectron and with the cooperation
and support of Solectron as specified in the Agreement.
3.2 Place of Performance
IBM will perform the Services primarily at the Solectron Facilities and IBM
Facilities listed or described in Annex A5 (IBM Solution). Prior to any
IBM-initiated relocation of an operations facility from which the Services are
provided, IBM will notify Solectron. IBM will manage any relocations in
accordance with the Agreement and a migration plan to be prepared by IBM . Prior
to any proposed relocation, IBM will fully examine and evaluate the effects of
the contemplated relocation on the Services and Solectron, including the
operational, technical, security, regulatory, and other effects, and will
prepare and submit to Solectron an analysis of the effects. The Party initiating
any relocation will have financial responsibility for all incremental costs,
taxes and other expenses related to any such relocation. Notwithstanding the
foregoing, IBM shall obtain Solectron’s written approval before implementing a
relocation of Services that in-

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creases the cost of the Services to Solectron or has a non-trivial adverse
impact on Solectron.
3.3 Time of Performance

  (a)   IBM will (and will provide the resources necessary to) perform and
complete the Services diligently, in a timely manner, and in accordance with any
applicable time schedules set forth in the Agreement (including any Work Orders
issued under it).     (b)   IBM will promptly notify Solectron upon becoming
aware of any circumstances that may reasonably be expected to jeopardize the
timely and successful completion (or delivery) of any Service, Project or
Deliverable. IBM will use Commercially Reasonable Efforts to avoid or minimize
any delays in performance and will inform Solectron of the steps IBM is taking
or will take to do so, and the projected actual completion (or delivery) time.  
  (c)   If IBM believes a delay in performance by Solectron (or a third party
service provider Solectron is responsible for managing) has caused or will cause
IBM to be unable to perform its obligations on time, IBM will promptly so notify
Solectron and subject to Section 5.3 (Savings Clause), use Commercially
Reasonable Efforts to perform its obligations on time notwithstanding
Solectron’s (or its third party service provider’s) failure to perform.

3.4 Manner of Performance
Section 2.2 (Scope of the Services) and Schedule A (IBM Services and
Solution(s)) describe the scope of the Services IBM is responsible for rendering
under the Agreement (the ‘What’) and, to a limited extent, the manner in which
IBM is responsible for performing them (the ‘How’). The manner in which IBM is
required to perform the Services is further regulated in other provisions of the
Agreement, including these GENERAL TERMS AND CONDITIONS and the Schedules to the
Agreement. IBM will render the Services in a manner that meets or exceeds the
Performance Standards. In addition to rendering the Services in compliance with
all applicable requirements set forth in the Agreement, IBM will render the
Services in compliance with the following:

  (a)   The Procedures Manual (as further described in Section 12.4 (Procedures
Manual);     (b)   Applicable standards, policies and procedures of Solectron
(and its Affiliates) communicated to IBM in accordance with the Agreement;    
(c)   Section 2.10 (Compliance with Laws, Regulations and Solectron Policies);
and

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  (d)   In cases where the Agreement does not prescribe or otherwise regulate
the manner of IBM’s performance of the Services, proven best practices followed
by the well-managed providers of services similar to the Services provided
hereunder.

3.5 Acceptance of Deliverables

  (a)   “Deliverable” means any Work Product developed specifically for
Solectron (or its Affiliate) or according to Solectron’s (or its Affiliate’s)
specifications that is described as a ‘Deliverable’ in the Agreement or a
Project plan or Work Order issued under the Agreement.     (b)   IBM will review
all Deliverables (and test them in the case of any Software Deliverables) prior
to delivering them to Solectron for review and acceptance. Upon receipt of a
Deliverable, Solectron will review it within ten (10) business days in the case
of a written Deliverable and thirty (30) days in the case of a Software
Deliverable, or such other time period as the Parties agree to in writing (with
respect to each Deliverable, the “Acceptance Period”) to verify that it complies
with its applicable specifications. Subject to Section 5.3 (Savings Clause), if
Solectron notifies IBM within five (5) business days after the end of the
Acceptance Period that the Deliverable does not meet its applicable
specifications and describes the deficiencies in sufficient detail for IBM to
identify or reproduce them, IBM will promptly correct and redeliver the affected
Deliverable. If Solectron does not provide notice of acceptance or deficiency as
described in the preceding sentence, IBM may escalate the matter as specified in
Schedule F (Governance Structure and Processes) and if the delay in Solectron’s
provision of notice adversely impacts the schedule for other work to be
performed by IBM despite IBM’s use of Commercially Reasonable Efforts to perform
to the schedule despite the delay, the Parties will agree on an equitable
adjustment to such schedule to account for the delay and IBM will not be deemed
to in breach for failure to meet any deadlines impacted the delay.

3.6 Quality Assurance and Continuous Improvement
In performing the Services, IBM will (a) participate in and support Solectron’s
continuous improvement programs, including its “Six Sigma” and “Lean” programs,
to the extent they are dependant upon or related to the Services and (b) follow
the quality assurance procedures set forth in Schedule G (IBM Delivery
Excellence) and the Procedures Manual to help ensure, prior to delivery, that
the Services have been performed with a high degree of professional quality and
reliability. Such procedures shall include checkpoint reviews, testing,
acceptance, and other procedures for Solectron to confirm the quality of IBM’s
performance. IBM, as part of its total quality management process, will provide
continuous quality assurance and quality improvement through: (i) the
identification and application of proven techniques and tools from other
installations within its operations that IBM has determined will support the
above quality management

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process; and (ii) the implementation of concrete programs, practices and
measures designed to improve performance. IBM will utilize project management
tools, including productivity aids and project management systems, as
appropriate in performing the Services.
3.7 User Satisfaction

  (a)   Working in consultation with Solectron, IBM will conduct a survey
annually (or on such other frequency as the Parties may agree) of an agreed
percentage of Solectron’s End User community. The surveys will be designed to
determine the level of End User satisfaction with the Services and identify
areas where End User satisfaction could be improved. The surveys will include
representative samples of each major category of Solectron End User and an
agreed number of in-depth, face-to-face or telephone interviews. Solectron and
IBM will mutually agree on the form and content of the surveys, which will be no
less thorough than those used customarily by IBM. The Parties will jointly
review the results of the surveys, and IBM will develop and carry out a plan to
improve End User satisfaction in areas where Solectron considers it to be lower
than it should be.     (b)   Solectron’s satisfaction with the Services will be
a key performance factor in IBM’s performance appraisals of personnel filling
Key IBM Positions.     (c)   Solectron’s overall satisfaction with the Services
will be measured and subject to credits/bonus as specified in Schedule B
(Performance Management).

  4.   IBM PERSONNEL

4.1 Provision of Suitable Personnel
“IBM Personnel” means any and all personnel furnished or engaged by IBM to
perform any part of the Services, including employees and independent
contractors of (i) IBM, (ii) its Affiliates and (iii) other Subcontractors. IBM
will assign an adequate number of IBM Personnel to perform the Services who are
properly educated, trained and familiar with and fully qualified for the
Services they are assigned to perform. IBM is responsible for ensuring that IBM
Personnel assigned to perform Services have the legal right to work in the
country(ies) in which they are assigned to work.
4.2 Screening and Background Checks
IBM will be responsible for causing all IBM Personnel assigned to provide the
Services to be vetted through IBM’s standard employment (or subcontracting, as
applicable) and security screening processes.

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4.3 Responsibility for IBM Personnel, Generally
There is no employment relationship between IBM and Solectron. IBM will manage,
supervise and provide direction to IBM Personnel and cause them to comply with
the obligations and restrictions applicable to IBM under the Agreement. IBM will
make IBM Personnel aware of, and cause them to comply with, Solectron’s safety
and security policies while they are performing Services at Solectron Facilities
or accessing Solectron Data or systems, provided IBM is given copies of or
access to such policies in advance with opportunity for review. As between IBM
and Solectron, IBM is responsible for all wages, salaries and other amounts due
IBM Personnel, and for all tax withholdings, unemployment insurance premiums,
pension and social welfare plan contributions, and other employer obligations
with respect to IBM Personnel. IBM is responsible for the acts and omissions of
IBM Personnel under or relating to the Agreement.
4.4 Key IBM Positions

  (a)   “Key IBM Positions” means those positions designated as Key IBM
Positions in Schedule E (Key IBM Positions). IBM’s Global Project Executive will
be one of the Key IBM Positions. IBM Personnel filling the Key IBM Positions
will devote substantially full time and effort to the provision of the Services
except as Schedule E expressly provides otherwise. IBM Personnel approved as of
the Effective Date to fill the Key IBM Positions are listed in Schedule E.    
(b)   Before the initial and each subsequent assignment of an individual to a
Key IBM Position, IBM will notify Solectron of the proposed assignment,
introduce the individual to appropriate Solectron representatives and,
consistent with IBM’s personnel practices, provide Solectron a curriculum vitae
and other information about the individual reasonably requested by Solectron.
Upon request, IBM will provide Solectron representatives an opportunity to
interview the individual. If Solectron in good faith objects to the proposed
assignment, the Parties will attempt to resolve Solectron’s concerns on a
mutually agreeable basis. If the Parties have not been able to resolve
Solectron’s concerns within five (5) business days, IBM may not assign the
individual to that position and must propose the assignment of another suitably
qualified individual.     (c)   Solectron may from time to time change the
positions designated as Key IBM Positions under the Agreement with the consent
of IBM, which consent shall not be unreasonably withheld.     (d)   IBM will
give Solectron, where reasonably possible, at least thirty (30) days’ advance
notice of a proposed change in personnel filling a Key IBM Position, and will
discuss with Solectron any objections Solectron may have. Where reasonably
possible, IBM will arrange, at no charge, for the proposed replacement to work
side-by-side with the individual being replaced during the notice period to
effectuate a seamless transfer

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of knowledge prior to the incumbent leaving his or her position. IBM will not
reassign or replace any person assigned to a Key IBM Position during the first
year of his or her assignment to the Solectron service team unless Solectron
consents to such reassignment or replacement, or the IBM employee voluntarily
resigns from IBM, is terminated by IBM or is unable to work due to his or her
death or disability, or reassignment as a result of an employee request that IBM
in good faith believes will result in the employee’s resignation if not
accommodated. Individuals filling Key IBM Positions may not be transferred or
re-assigned until a suitable replacement has been approved by Solectron, and no
such re-assignment or transfer may occur at a time or in a manner that would
have an adverse impact on delivery of the Services or Solectron’s (or its
Affiliate’s) operations. IBM will establish and maintain an up-to-date
succession plan for the individuals serving in Key IBM Positions.

4.5   Removal and Replacement of IBM Personnel       Solectron may immediately
remove any IBM Personnel from any Solectron Facilities if the person is
threatening or abusive, commits a crime or engages in an act of dishonesty while
performing Services for Solectron or violates Solectron’s policies and
procedures pertaining to use of Solectron Facilities. If Solectron in good faith
finds any IBM Personnel to be unsatisfactory and so notifies IBM, IBM will,
unless instructed otherwise by Solectron, remove said IBM Personnel promptly and
will use Commercially Reasonable Efforts to provide a replacement, provided that
if such removal would result in a material adverse impact to IBM’s ability to
perform the Services, IBM will so notify Solectron and the Parties will use
Commercially Reasonable Efforts to develop a plan to mitigate such adverse
impact, which may include delaying the removal of such IBM Personnel until the
mitigation plan is completed. This provision does not in any way require,
endorse or approve (expressly or impliedly) the termination of employment by IBM
of any employee removed under the terms of this paragraph.   4.6   Controlling
Turnover of IBM Personnel       Solectron and IBM agree that it is in their
mutual best interests to keep the turnover of IBM Personnel to a reasonably low
level and IBM will use Commercially Reasonable Efforts to do so. Accordingly, if
Solectron believes that IBM’s turnover is excessive and so notifies IBM, IBM
will provide data concerning its turnover and meet with Solectron to discuss the
reasons for, and impact of, the turnover. If appropriate, IBM will submit to
Solectron its proposals for reducing the turnover and the Parties will mutually
agree on a program to bring the turnover down to an acceptable level.
Notwithstanding any turnover of IBM Personnel, IBM remains obligated to perform
the Services in compliance with the requirements of the Agreement.

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4.7   Subcontracting       "Subcontractor” means a third party engaged by IBM to
provide products and/or services used by IBM in rendering the Services, as well
as any entity to whom a Subcontractor further subcontracts (or otherwise
sub-delegates) any of its subcontracted duties or obligations, but does not
include individual independent contractors IBM may subcontract the performance
of Services only in accordance with the following:

  (a)   IBM may subcontract the performance of Services to (i) any of its
Affiliates that is qualified to conduct business in the country in which the
Agreement is in effect and where the Services are to be performed.     (b)   IBM
may, in the ordinary course of business, utilize third party services or
products that are not dedicated to performance of Services for Solectron, that
are not material to a particular Function constituting a part of the Services,
and that do not result in a material change in the way IBM conducts its
business, provided such utilization does not adversely affect Solectron. If
Solectron expresses concerns to IBM about a third party provider covered by this
paragraph, IBM will discuss such concerns with Solectron and work to resolve
Solectron’s concerns on a mutually acceptable basis.     (c)   Except as
provided in Sections 4.7(a) and 4.7(b), Solectron will have a right of prior
approval of all IBM Subcontractors and to require IBM to replace any previously
approved Subcontractor found, in the reasonable judgment of Solectron, to be
unacceptable.     (d)   As of the Effective Date, IBM has existing subcontracts
in place with a number of Subcontractors IBM plans to use in performing the
Services. A list of IBM’s Subcontractors that have been approved by Solectron
(“Approved Subcontractors”) is set forth as Schedule L (Approved
Subcontractors).     (e)   In any subcontracts entered into by IBM after the
Effective Date for performance of the Services, IBM will require the
Subcontractor to be bound to IBM by all applicable terms of the Agreement and to
assume toward IBM all of the applicable obligations and responsibilities that
IBM, by the Agreement, has assumed toward Solectron. Unless approved otherwise
by Solectron, IBM will also include in each such subcontract provisions (i) in
the case of subcontracts dedicated to the provision of the Services to
Solectron, permitting IBM to assign (without requiring Subcontractor’s approval)
such subcontract to Solectron if IBM ceases to provide the subcontracted
Services to Solectron, and (ii) using Commercially Reasonable Efforts to appoint
Solectron an express third party beneficiary of any Solectron-specific SOW or
work order under any such subcontract, or if there is no Solectron-specific SOW
or work order then an express third party beneficiary of such subcontract, and
en

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titling Solectron to enforce the terms of such SOW, work order or subcontract,
as the case may be, against the Subcontractor, provided that if, despite such
efforts, IBM is unable to so appoint Solectron, IBM will notify Solectron and
will use Commercially Reasonable Efforts to find a substitute Subcontractor or
negotiate with such Subcontractor a resolution reasonably acceptable to
Solectron. Prior to entering into any such subcontract, IBM will give Solectron
reasonable prior written notice specifying the components of the Services
affected, the scope of the proposed subcontract, the identity and qualifications
of the proposed Subcontractor and the results of any due diligence carried out
with regard to the proposed Subcontractor. At Solectron’s request, IBM will
forward to Solectron a description of the scope and material terms (other than
financial terms) of the proposed subcontract. Solectron may approve or reject
proposed Subcontractors.

  (f)   IBM may use Approved Subcontractors to perform the Services to the
extent permitted by Solectron’s approval. IBM is responsible for managing all
Subcontractors. IBM remains responsible for all Functions delegated to
Subcontractors to the same extent as if such Functions were retained by IBM and,
for purposes of the Agreement, such Functions will be deemed Functions performed
by IBM. IBM will be Solectron’s sole point of contact regarding the Services,
including with respect to payment.     (g)   IBM may disclose Solectron
Confidential Information only to Subcontractors who have agreed in writing to
protect the confidentiality of such Confidential Information in a manner
substantially equivalent to that required of IBM under the Agreement.

  5.   SOLECTRON RESPONSIBILITIES   5.1   Appointment of Solectron Program
Management Office (PMO) Personnel

  (a)   Solectron will designate an individual to serve as Solectron’s Global
Program Manager (Global PM), who will be IBM’s principal point of contact for
obtaining direction, decisions, information, approvals, and acceptances required
from Solectron.     (b)   Solectron will also designate individuals to serve in
the Solectron PMO roles described in Schedule F (Governance Structure and
Processes).

     5.2 Retained Functions and Cooperation

  (a)   In support of IBM’s performance of the Services, Solectron will
(i) perform the Functions identified in the Agreement as Solectron Retained
Functions (for purposes of this Section 5.2(a), the “Enumerated Retained
Functions"); (ii) perform any related activities that are not spe-

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cifically described in the Agreement but are nevertheless reasonably required
and appropriate for the proper performance and provision of the Enumerated
Retained Functions in compliance with the requirements of the Agreement; and
(iii) provide or make available to IBM the equipment, Software, facilities and
other resources that the Agreement specifies are to be provided by Solectron.

  (b)   Solectron will cooperate with IBM, including by making available
management decisions, information, approvals and acceptances, as well as access
to Solectron systems required for IBM to perform the Services, as reasonably
required by IBM so that IBM may accomplish its obligations and responsibilities
under the Agreement.

5.3   Savings Clause

  (a)   Solectron’s failure to perform its responsibilities set forth in the
Agreement (or cause them to be performed) will not constitute grounds for
termination by IBM except as provided in Section 11.4 (Termination By IBM);
provided, however, that IBM’s nonperformance of its obligations under the
Agreement will be excused (including, without limitation, compliance with
Performance Standards, including any Service Levels), and IBM will not be liable
for any resulting damages or other liabilities, if and to the extent (1) such
IBM nonperformance results from:

  (i)   a failure by Solectron (or a Solectron Affiliate or subcontractor) to
perform the Retained Functions (including the Enumerated Retained Functions) or,
notwithstanding Section 10.2(c), provide the resources required from Solectron
under this Agreement; or     (ii)   A breach by Solectron of any of its
obligations under this Agreement;     (iii)   IBM’s compliance with Solectron’s
written directions or required procedures; or     (iv)   the improper
functioning of Software or Equipment for which Solectron has operational
responsibility under the Agreement;         But only if and to the extent that
IBM provides Solectron with reasonable notice of such nonperformance and uses
Commercially Reasonable Efforts to perform notwithstanding Solectron’s failure
to perform (a “Workaround”). For purposes of this paragraph, neither IBM nor its
Affiliates or their subcontractors will be considered contractors of Solectron.

  (b)   Notwithstanding anything to the contrary in the Agreement, IBM shall
have no duty to incur additional costs in performing a Workaround. Solectron
shall reimburse IBM for the incremental labor charges and

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other expenses reasonably incurred by IBM to meet the Service Levels and perform
its other responsibilities under this Agreement through a Workaround; provided
that (i) to the extent practicable, IBM notifies Solectron of such additional
incremental charges and expenses and obtains Solectron’s approval prior to
incurring such costs; and (ii) IBM uses Commercially Reasonable Efforts to
minimize such costs (if and to the extent Solectron declines to approve certain
reasonable additional costs, IBM shall not be obligated to proceed with the
efforts associated therewith.)

  6.   CHARGES       Schedule C (Charges) sets forth all of the charges payable
to IBM for performing the Services and the rates and formulae for calculating
such charges as well as associated invoicing and payment procedures and terms.
Solectron will not be required to pay IBM any amounts for or in connection with
performing the Services and fulfilling IBM’s obligations under the Agreement
other than those amounts payable to IBM under Schedule C (Charges) and the
following Sections: 3.3(c), 5.3, 13.3(b), 11.3, and 11.5.     7.   TRANSFER OR
USE OF EXISTING SOLECTRON RESOURCES       This Section 7 sets forth the
processes by which certain resources used by Solectron (or its Affiliates) prior
to the Effective Date will be transferred or otherwise made available to IBM
(and its Affiliates) for use in providing the Services. RIGHTS OF USE GRANTED BY
SOLECTRON TO IBM UNDER THIS SECTION ARE GRANTED ON AN ‘AS-IS, WHERE-IS’ BASIS,
WITHOUT WARRANTIES OF ANY KIND.   7.1   Affected Solectron Personnel

  (a)   “Affected Personnel” means the employees and independent contractors of
Solectron and its Affiliates who were offered employment by IBM (or its
Affiliate) in contemplation of the Agreement or whose employment transfers to
IBM (or its Affiliate) by operation of law. The Affected Personnel will be
listed in the relevant Local Adoption Agreement. If specified in the relevant
Local Adoption Agreement, IBM has or will offer employment to the Affected
Personnel on terms that are at least as favorable to the Affected Personnel as
those set forth in such Local Adoption Agreement.     (b)   “Transferred
Personnel” means Affected Personnel who accept IBM’s (or its Affiliate’s) offer
of employment or whose employment transfers to IBM (or its Affiliate) in
connection with the Agreement by operation of law.

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  (c)   “Transfer Date” means, in relation to each Transferred Person, the date
on which his or her employment transfers to IBM (or its Affiliate).     (d)  
During the time period specified in the relevant Local Adoption Agreement, IBM
may not, without Solectron’s prior written approval: (i) terminate, except for
cause, the employment of any Key Transferred Personnel; or (ii) transfer or
reassign any Key Transferred Personnel from Solectron’s account.     (e)   The
contracts for any Affected Personnel who are contractors, not employees of
Solectron (or its Affiliates) will be terminated or, subject to receipt of any
Required Consents in the manner provided in Section 7.2 (Required Consents),
assigned to IBM. Actions to terminate or assign such contracts will be in
accordance with a plan prepared by IBM and approved by Solectron. The Party
responsible for any costs, charges and fees associated with such actions will be
specified in the relevant Local Adoption Agreement.

7.2   Required Consents

  (a)   Solectron, with the cooperation of IBM, is responsible for identifying
and resolving any confidentiality obligations or other restrictions on the
disclosure to IBM of existing contracts and supplier relationships that are to
be managed by IBM as part of the Services.     (b)   If any third party consents
are required to permit Solectron to disclose or assign to IBM, or permit IBM to
use, any Software, third party service contracts or other resources for the
purposes of this Agreement, IBM shall be responsible for obtaining such consents
with the assistance of Solectron. Solectron shall pay any consent fees imposed
by third party suppliers provided such fees are reasonably approved by Solectron
in advance. Unless and until any Required Consent has been obtained, IBM will
determine and adopt, subject to Solectron’s prior approval, such alternative
approaches as are necessary and sufficient for IBM to provide the Services
without the Required Consent, provided that IBM shall not be deemed in breach of
this Agreement for failure to obtain a Required Consent to the extent it has and
continues to exercise Commercially Reasonable Efforts to obtain such Required
Consent.

7.3   Solectron Facilities and Resources Provided to IBM Personnel Working
On-site

  (a)   To the extent required to provide the Services, and subject to IBM’s
compliance with relevant Solectron policies, IBM will be permitted access to
Solectron Facilities at no charge.     (b)   “On-site Solectron Resources” means
(to the extent that Schedule A or an Annex thereto may call for their provision)
the reasonable office

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space, furniture, fixtures, desktop computers, software, telephones, fax
machines, VPN, office supplies, and other resources to be provided or made
available by Solectron (or its Affiliates) to IBM Personnel assigned by mutual
agreement of the Parties to work on-site at facilities of Solectron (or its
Affiliates).

  (c)   Except as otherwise provided in the Agreement, Solectron will provide to
IBM Personnel located and authorized to work on-site at Solectron’s (or its
Affiliate’s) facilities the reasonable use of On-site Solectron Resources
substantially equivalent to those made available by Solectron (or its Affiliate)
to its own personnel who perform similar functions; provided, however, that
Solectron will not be responsible for providing any mobile or portable computing
or communications devices to IBM Personnel except as otherwise expressly
provided in the Agreement.     (d)   IBM will comply and cause IBM Personnel to
comply with Solectron’s policies and procedures regarding access to and use of
the On-site Solectron Resources that have been disclosed to IBM, including
procedures for physical and logical security, and shall submit to periodic
Solectron compliance inspections and security audits.     (e)   IBM will use the
On-site Solectron Resources in an efficient manner and for the sole purpose of
providing the Services. IBM will be responsible for damage to the On-site
Solectron Resources caused by IBM Personnel. IBM will permit Solectron and its
agents and representatives to enter into those portions of Solectron’s (or its
Affiliate’s) facilities occupied by IBM Personnel at any time. When the On-site
Solectron Resources are no longer required for performance of the Services, IBM
will return them to Solectron (or its applicable Affiliate) in substantially the
same condition as they were in when IBM began use of them, subject to reasonable
wear and tear.

7.4   Other Resources       Except for the resources made available by Solectron
to IBM pursuant to this Section 7 (TRANSFER OR USE OF EXISTING SOLECTRON
RESOURCES) and any other resources for which Solectron has financial
responsibility, IBM is solely responsible (and has financial responsibility) for
providing all Equipment, Software, facilities, personnel, third party services
and other resources required to perform and render the Services in accordance
with the Agreement.     8.   TRANSITION   8.1   “Transition” Defined      
“Transition” means the process (and associated time period, starting on the
Effective Date) of migrating performance of the in-scope Functions from
Solectron’s as-is operating environment to IBM’s Service Delivery Environment,
and

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effectuating, with Solectron’s cooperation and assistance, any required
knowledge transfer from Solectron personnel to IBM Personnel.

8.2   IBM Solution Description and Transition Plan

  (a)   As part of the process leading up to execution of the Agreement,
Solectron has communicated its business requirements to IBM. In response, IBM
has proposed a ‘solution’ intended to meet Solectron’s business requirements,
and IBM and Solectron have negotiated an agreed IBM solution to be implemented
by IBM under the Agreement. The agreed IBM solution is described in Annex A5
(IBM Solution).     (b)   Working with Solectron, IBM has developed a plan
describing the Projects and associated activities necessary to accomplish the
Transition successfully. That plan (the “Transition Plan”) is set forth or
described in Annex A7 (Transition Plan).     (c)   As part of the Transition,
IBM will also assume responsibility for completing the Projects listed or
described in Annex A6 (In-flight Projects), which are in progress as of the
Effective Date (the “In-flight Projects”).

8.3   Conduct of the Transition       Beginning on the Effective Date, IBM will
carry out and complete the Transition in accordance with the Transition Plan,
including its time schedule. Except as otherwise expressly provided in the
Transition Plan, IBM’s responsibilities with respect to the Transition include:

  (a)   Performing and managing the Transition and In-flight Projects;     (b)  
Establishing, setting up, configuring, and testing, prior to their use, any
communications lines, network connections, Equipment, Software, tapes, records
and supplies, as made necessary by the Transition; and     (c)   performing the
Services without material interruption, and without adversely disrupting
Solectron’s business operations.

8.4   Solectron Cooperation and Support       Solectron will cooperate with IBM
in the conduct of the Transition and provide support as described in the
Transition Plan.   8.5   Completion of Transition

  (a)   Solectron reserves the right to monitor, test and otherwise observe and
participate in the Transition. IBM will notify Solectron promptly if any
Solectron monitoring, testing or participation has caused (or IBM expects

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it to cause) a problem or delay in the Transition and work with Solectron to
prevent or circumvent the problem or delay.

  (b)   Solectron may elect to suspend the Transition at any time, including in
the event the Transition is not proceeding substantially in accordance with the
requirements of the approved Transition Plan or is causing unplanned disruptions
or other material adverse effects to Solectron’s (or its Affiliates’)
businesses. During any suspension period, IBM will continue to perform the
Services as required under the Agreement in the manner the Services were
performed prior to the commencement of the applicable phase of the Transition.
Suspension of the Transition, where caused by IBM’s failure to perform material
obligations in respect of the Transition in accordance with the requirements of
the approved Transition Plan or the Agreement, will be at no additional charge
to Solectron and will continue until IBM demonstrates, to Solectron’s reasonable
satisfaction, that IBM is ready to comply with such requirements and/or end any
disruptions or adverse effects. IBM will be responsible, at no additional
expense, for achieving the Transition schedule notwithstanding the suspension;
provided, however, that if Solectron suspends or stops the Transition due to no
fault of IBM, and if the suspension would cause IBM to incur incremental costs
or expenses, IBM may so notify Solectron, providing a good faith estimate of
such costs and expenses IBM expects to incur. In that case, Solectron’s right to
continue the suspension will be subject to Solectron agreeing to reimburse IBM
for its incremental costs and expenses incurred as a direct result of the
suspension     (c)   Delays In Transition         Notwithstanding any other
provision of this Agreement, if there are delays to the Transition, Solectron
shall have the right to terminate this Agreement as specified below:

  (i)   If the delays, whether or not material, to the Transition are due to the
fault of IBM and constitute a material breach, Solectron shall have the right,
subject to IBM’s right to cure such delay within 15 days of notice from
Solectron, to terminate this Agreement pursuant to Section 11.3(c).     (ii)  
If the material delays to the Transition are due to the actions or failures of
Solectron, its Affiliates or their contractors, as described in Section 5.3
(Savings Clause), Solectron shall have the right to terminate this Agreement
pursuant to Section 11.3(c). Solectron shall be responsible for the applicable
Wind Down Costs, Unamortized Costs [*], if any, as set forth in Schedule C
(Charges).

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  9.   DATA SECURITY AND PROTECTION   9.1   “Solectron Data” Defined      
“Solectron Data” means all data in any form entered in or processed through any
IBM Systems or Software, to the extent pertaining to Solectron or a Service
Recipient that is furnished, disclosed or otherwise made available to IBM
Personnel, directly or indirectly, by or on behalf of Solectron or a Service
Recipient, in connection with this Agreement, including data of or pertaining to
Solectron’s or its Affiliates’ customers or suppliers of products and services;
Solectron’s, it’s Affiliates or their suppliers’ products, marketing strategies,
financial affairs or employees, and any Derivative Works of such data. Solectron
Data shall not include any IBM confidential or proprietary information. For the
avoidance of doubt and subject to the foregoing, the Parties agree that:

  (a)   Information regarding savings and other financial benefits achieved by
Solectron in the course of the performance of this Agreement constitutes
Solectron Data;     (b)   The terms and conditions (including pricing) of any
third party contracts entered into by Solectron in the course of this Agreement
constitute Solectron Data;     (c)   The terms and conditions (including
pricing) of any standing offers, umbrella contracts and other arrangements
negotiated by IBM for multiple customers (collectively, “Multi Customer
Arrangements”) do not constitute Solectron Data, although the terms and
conditions (including pricing) of any individual contract entered into by
Solectron pursuant to such Multi Customer Arrangements (e.g., a
customer-specific SOW) do constitute Solectron Data.

9.2   Solectron Data, Generally       As between the Parties, Solectron Data
will be and remain the property of Solectron. IBM may not use Solectron Data for
any purpose other than to render the Services. No Solectron Data will be sold,
assigned, leased or otherwise disposed of to third parties or commercially
exploited by or on behalf of IBM (or its Subcontractors). Neither IBM nor any of
its Subcontractors may possess or assert any lien or other right against or to
Solectron Data.   9.3   Data Security

  (a)   The Parties’ respective responsibilities for data and systems security
are as set forth in Schedule A (IBM Services and Solution(s)).     (b)   When
present at Solectron Facilities or accessing Solectron Data or Solectron
systems, IBM will observe and comply with Solectron’s written security
procedures that have been communicated to IBM in advance

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with an opportunity for review. A copy of Solectron’s current security
procedures is set forth in Schedule I (Security).

  (c)   IBM will establish and maintain safeguards against the destruction, loss
or alteration of Solectron Data in the possession or control of IBM (or its
Subcontractors) that are no less rigorous than those maintained by IBM for its
own data of a similar nature, which shall in no event be less than those
maintained by other well-managed companies providing services similar to the
Services. IBM will document such safeguards in the Procedures Manual.     (d)  
Without limiting the generality of the foregoing:

  (i)   IBM will use Commercially Reasonable Efforts, including through systems
security measures, to guard against the unauthorized access, alteration or
destruction of Solectron Data. Such measures will include the installation of
Software, where applicable, that: (A) requires all users to enter a user
identification and password prior to gaining access to the information systems;
(B) controls and tracks the addition and deletion of users; and (C) controls and
tracks user access to areas and features of the information systems.     (ii)  
IBM will not permit IBM Personnel to access or allow others access to any
Solectron Data to which such IBM Personnel or such others are not permitted
access under the Agreement. If such access is attained, IBM will immediately
report such incident to Solectron, describing in detail the accessed Solectron
Data, and take all necessary measures to stop the access, prevent recurrences,
and recover any such copied or removed Solectron Data from any such IBM
Personnel or other employees of IBM, its Affiliates and their Subcontractors and
will make Commercially Reasonable Efforts to retrieve any copied or removed
Solectron Data from any other party.

9.4   Limitation       IBM will not be responsible for the loss, unauthorized
disclosure, or corruption of Solectron Data during transmission via public
communications facilities except to the extent that such loss, unauthorized
disclosure, or corruption is caused by IBM’s failure to perform its obligations
under or in accordance with the Agreement.   9.5   Compliance with Data Privacy
and Data Protection Laws, Regulations, and Policies       In carrying out its
activities under the Agreement, each Party will observe and comply with all
applicable data privacy and data protection laws and regulations,

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including consumer privacy laws (e.g., California Civil Code S. 1798.82 and
California Civil Code S. 1798.81.5, as well as any country-specific laws
implementing the European Data Privacy Act or other, similar country-specific
laws related to the transfer and handling of personal data) to the extent
applicable to the Services and those identified in Schedule H (Data Privacy and
Data Protection). In addition, when accessing or handling any Solectron Data
that contains personal identifying information, IBM will comply with all
reasonable policies of Solectron that have been disclosed to IBM in writing
relating to the use and disclosure of such information.

9.6   Import/Export Controls

  (a)   The Parties acknowledge that certain software and technical data
exchanged pursuant to the Agreement may be subject to import/export controls
under the laws of the United States and other countries. Neither Party will
import, export or re-export any such items, any direct product of those items,
or any technical data in violation of applicable import/export control laws.    
(b)   To the extent the exporting or importing of any such items is within IBM’s
control, IBM will have responsibility for, and will coordinate and oversee,
compliance with import/export control laws with respect to such items, including
responsibility for preparing and filing all required documentation and obtaining
at its expense all licenses, permits, and other authorizations required for
compliance. Each Party will cooperate with the other Party in that Party’s
efforts to comply with applicable import/export control laws.     (c)   IBM will
include with copies of all Software provided to IBM by Solectron’s U.S.-based
personnel that IBM will use outside of the United States documentation stating
that “These commodities, technology or software were exported from the United
States in accordance with Export Administration Regulations. Diversion or
re-export contrary to U.S. law is prohibited.”

10.   INTELLECTUAL PROPERTY RIGHTS       This Section 10 sets forth the Parties’
respective rights in Work Product and other materials provided or created
pursuant to the Agreement. As between the Parties, the rights apply as set forth
in this Section whether the work in question is performed solely by IBM
Personnel or by IBM Personnel working jointly with others.   10.1  
“Intellectual Property Rights,” “Independent IP,” and “Work Product" Defined

  (a)   “Intellectual Property Rights” means all intellectual and industrial
property rights recognized in any jurisdiction, including copyrights, mask

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work rights, moral rights, trade secrets, patent rights, rights in inventions,
trademarks, trade names, and service marks (including applications for, and
registrations, extensions, renewals, and re-issuances of, the foregoing).

  (b)   “Independent IP” of a party means any Software, documents, materials and
other works of authorship that either (i) were owned by the party prior to the
Effective Date, or (ii) are subsequently owned by the party outside the scope of
and independent from the Agreement.     (c)   “Work Product” means any
Deliverables, Software, documents, materials and other works of authorship
produced by IBM Personnel, whether alone or jointly with others, in the course
of performing the Services and delivered to Solectron or a Service Recipient. A
Work Product is either a “New Work” — i.e., one that is not based upon any
preexisting works — or a “Derivative Work” — i.e., one that is based upon one or
more preexisting works.

10.2   Solectron Independent IP

  (a)   Notwithstanding anything to the contrary in the Agreement, as between
the Parties, any Solectron Independent IP (and the data and information it
contains) will be and remain the property of Solectron. IBM will not possess or
assert any lien or other right against or to Solectron Independent IP. Solectron
Independent IP may not be utilized by IBM for any purpose other than that of
fulfilling its obligations under the Agreement without the prior written consent
of Solectron, which may be withheld in Solectron’s sole discretion. No Solectron
Independent IP, or any part thereof, may be sold, assigned, leased or otherwise
disposed of to third parties by IBM or permitted by IBM to be commercially
exploited by or on IBM’s behalf.     (b)   Solectron grants to IBM a worldwide,
royalty-free, nonexclusive, non-transferable license during the Term to use,
access, execute, display, perform, reproduce, maintain, modify, and enhance any
Solectron Independent IP furnished or made accessible to IBM, solely for the
purpose of performing the Services. Any modifications or enhancements to
Solectron Independent IP will be, and be treated as, Solectron Independent IP.  
  (c)   Without limiting the indemnity set forth in Section 18.4(d), Solectron
Independent IP will be made available to IBM in such form and on such media as
it exists at the time, ON AN ‘AS-IS, WHERE-IS’ BASIS, WITHOUT WARRANTIES OF ANY
KIND.     (d)   Except as otherwise approved by Solectron, IBM’s license to
Solectron Independent IP under this Section 10.2 (Solectron Independent IP) will

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terminate upon the end of the Term, and IBM will not access or use such
Solectron Independent IP thereafter.

  (e)   Upon the termination or expiration of this Agreement for any reason
(including termination for cause) or, with respect to any particular Solectron
Independent IP, on such earlier date that the same shall be no longer required
by IBM in order to render the Services thereunder, IBM will destroy the original
and all copies of such Solectron Independent IP in the possession or control of
IBM (or any its Affiliates or Subcontractors) and, at Solectron’s request,
certify that it has done so.     (f)   IBM will have the right to grant, to its
Approved Subcontractors who are authorized to perform Services hereunder, access
to and use of the applicable Solectron Independent IP solely for purposes of
performing the Services. In such event, IBM will be responsible for causing such
third party to comply with the applicable terms of the Agreement and, for
purposes of the Agreement, such access and use will be deemed access and use by
IBM.

10.3   IBM Independent IP

  (a)   Notwithstanding anything to the contrary in the Agreement, as between
the Parties, any IBM Independent IP (and the data and information it contains)
will be and remain the property of IBM. IBM Independent IP does not include
generally available commercial software.     (b)   To the extent IBM Independent
IP is delivered or otherwise provided to Solectron (or any of its Affiliates) by
IBM (or any of its Affiliates or Subcontractors) in connection with the
Agreement, IBM grants to Solectron and its Affiliates a worldwide, royalty-free,
nonexclusive, non-transferable license during the Term to use, access, execute,
display, perform, reproduce, maintain, modify, and enhance, and internally
distribute copies of, any such IBM Independent IP, solely for the benefit of
Solectron and its Affiliates and solely as necessary for Solectron and its
Affiliates to receive and use the Services. Any modifications or enhancements to
IBM Independent IP will be, and be treated as, IBM Independent IP.     (c)   IBM
Independent IP will be made available to Solectron and its Affiliates in such
form and on such media as they exist at the time.     (d)   Solectron and its
Affiliates will not be permitted to use IBM Independent IP for the benefit of
any entities other than Solectron and its Affiliates without the prior written
consent of IBM, which may be withheld in IBM’s sole discretion.     (e)   Except
(i) as otherwise approved by IBM in a separate signed writing, (ii) as specified
in Section 10.3(g), below, or (iii) as provided in Section 11.7 (Disengagement
Assistance), Solectron’s and its Affiliates’ license

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to IBM Independent IP set forth in this Section 10.3 (IBM Independent IP) will
terminate upon expiration or termination of this Agreement.

  (f)   Solectron will have the right to engage a third party to access and use
the IBM Independent IP on behalf of Solectron and its Affiliates solely for
benefit of Solectron and its Affiliates to the extent necessary for Solectron to
receive and use the Services. In such event, Solectron will be responsible for
causing such third party to comply with the applicable terms of the Agreement
and, as between Solectron and IBM, for purposes of the Agreement, such access
and use by a third party for Solectron will be deemed access and use by
Solectron.     (g)   If IBM embeds any IBM Independent IP in a Deliverable under
this Agreement, and this Agreement or a Project, Work Order or Statement of Work
issued hereunder, does not expressly identify such IBM Independent IP and does
not either specify the license Solectron would have in and to such IBM
Independent IP or make Solectron responsible for obtaining a license to such IBM
Independent IP, IBM hereby grants to Solectron and its Affiliates an
irrevocable, worldwide, fully paid-up, royalty-free, nonexclusive license to:
maintain, modify, and enhance, use, access, execute, display, perform, reproduce
and distribute copies of such IBM Independent IP solely in their imbedded form
and solely for the purpose of exercising any and all of Solectron’s and its
Affiliates’ intended rights pursuant to the Agreement in the Deliverables
containing them. Modifications to and enhancements of any such embedded IBM
Independent IP shall be and be treated as IBM Independent IP.

10.4   Third Party Materials       IBM will be responsible for obtaining all
Required Consents to third party Equipment, Software, middleware or other
products licensed or leased to IBM (or any of its Affiliates or Subcontractors)
that are provided by or on behalf of IBM to Solectron (or any of its Affiliates)
for their use in receiving and using the Services.   10.5   Ownership of
Deliverables

  (a)   During performance of the Services, IBM Personnel may produce
Deliverables. One or more Schedules to this Agreement will identify the
Deliverables as being “Type I Materials,” “Type II Materials,” “Type III
Materials” or otherwise as the Parties may agree. If not so identified,
Deliverables will be deemed to be Type I Materials. Deliverables that are
modifications or enhancements to IBM Independent IP will be treated as Type II
Materials.     (b)   “Type I Materials” are those Deliverables in which
Solectron will own all right, title and interest (including ownership of
copyright), and IBM hereby grants and assigns to Solectron all such right, title
and interest

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(including ownership of copyright). IBM will retain one copy of the Type I
Materials. Solectron hereby grants IBM (1) an irrevocable, nonexclusive,
worldwide, paid-up license to use, execute, reproduce, display, perform,
distribute (internally and externally) copies of, maintain, modify and enhance,
and prepare Derivative Works based on, Type I Materials, and (2) the right to
authorize others to do any of the former. IBM’s license rights to Type I
Materials will be subject to any and all obligations of confidentiality with
respect to any Solectron Confidential Information that may be contained therein.
Modifications to, enhancements of and Derivative Works from any such Type I
Materials will be, and be treated as Type I Materials.

  (c)   “Type II Materials” are those Deliverables in which IBM (or third
parties) will have all right, title and interest (including ownership of
copyright). To the extent Solectron would retain any such right, title and
interest (including ownership of copyright) under applicable law, Solectron
hereby grants and assigns to IBM all such right, title and interest (including
ownership of copyright). IBM will deliver one copy of any Deliverables that are
Type II Deliverables to Solectron, or such other number as the Parties may
agree. IBM hereby grants to Solectron and its Affiliates (1) an irrevocable,
nonexclusive, worldwide, paid-up license to use, execute, reproduce, display,
perform, distribute, maintain, modify, enhance and create Derivative Works of
(within Solectron’s Enterprise) copies of Type II Materials and (2) the right to
authorize others to do any of the foregoing solely for purposes of providing
services to Solectron or one or more of its Affiliates. Any modifications,
enhancements or Derivative Works of Type II Materials will be, and be treated
as, Type II Materials.     (d)   “Type III Materials” are those Deliverables in
which Solectron will have all right, title and interest (including ownership of
copyright) without IBM having any right of reuse. IBM hereby grants and assigns
to Solectron all such right, title and interest (including ownership of
copyright). Without limiting IBM’s rights under Section 10.2(b), IBM will
receive no license to Type III Materials. IBM may retain one copy of Type III
Materials solely for purposes of demonstrating compliance with the Agreement.
IBM will also be entitled to retain and use a reasonable number of copies of
Type III Materials during the term of this Agreement, for as long as IBM has
continuing support obligations with respect thereto, for the sole purpose of
performing such obligations. Any modifications, enhancements or Derivative Works
of Type III Materials will be, and be treated as, Type III Materials.

10.6   Rights in Inventions

  (a)   Inventions will be jointly owned by Solectron and IBM without regard to
the relative contributions of Solectron personnel (and contractors) and IBM
Personnel in creating the Invention. Title to all patents issued thereon will be
joint and equal. Each Party will have the worldwide, un-

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restricted right to grant licenses (including the right for any licensees to
grant sublicenses) to third parties thereunder without the consent of or
accounting to the other Party.

  (b)   Where one Party seeks patent protection on an Invention, it will do so
at its own expense and will have full control and discretion over the
prosecution and maintenance of such protection, even though title to any patent
issuing thereon will be and will remain joint without any consent or accounting,
as provided in Section 10.6(a), above. In the event that the Party responsible
for the maintenance of a patent elects to discontinue maintenance of any such
jointly owned patent, or otherwise take any action that could reasonably lead to
the invalidation or material diminishment in the scope of such patent, such
Party grants the other Party the right to take any reasonable action with regard
to the continued maintenance of such patent in such circumstances.     (c)  
Each Party (and their respective Affiliates) will be solely liable for any
compensation that may be due to any employees of such Party (or its Affiliates)
who first conceive or reduce to practice Inventions that are subject to the
provisions of Section 10.6(a), above.     (d)   Except as specified in this
Agreement, no other licenses (including licenses under patents or patent
applications arising out of any other invention of either Party) are granted.

10.7   Intellectual Property Rights Agreements with IBM Personnel       Each
Party warrants that it has and shall continue to have in place with all of its
respective Personnel (either directly or indirectly through their respective
employers) such agreements respecting Intellectual Property Rights as are
necessary for such Party to fulfill its obligations under this Section 10
(INTELLECTUAL PROPERTY RIGHTS).   10.8   Other Obligations and Rights Regarding
Work Product

  (a)   The Parties will meet periodically to discuss the creation of and
relevant details regarding any Work Product being developed with respect to
which any Intellectual Property Rights will be owned by Solectron. In addition,
such Work Product will not be marked with any IBM confidentiality or proprietary
rights notices for any portions that do not comprise confidential or proprietary
intellectual property.     (b)   Each Party will remain free to develop,
commercialize, use, publish and distribute materials that may be similar to or
competitive with Work Product provided such activities are effected without
breach of the Party’s obligations under the Agreement and do not infringe or
constitute a misappropriation of any Intellectual Property Rights of the other
Party.

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  (c)   All licenses and rights of Use granted under or pursuant to the
Agreement shall be deemed to be, for the purposes of Section 365(n) of the
United States Bankruptcy Code (the “Bankruptcy Code”), licenses to rights in
“intellectual property” as defined under the Bankruptcy Code. Accordingly, the
licensee of such rights shall retain and may fully exercise all of its rights
and elections under the Bankruptcy Code. Upon the commencement of bankruptcy
proceedings by or against either Party under the Bankruptcy Code, the other
Party shall be entitled to retain all of its license rights and Use rights
granted under the Agreement.

10.9   Mental Impressions

  (a)   “Mental Impressions” means ideas, concepts, know-how and techniques that
are:

  (i)   retained without deliberately memorizing them for purposes of reuse in
the unaided memory of a Party’s (or its Affiliates’) personnel involved in
performance of the Agreement; and     (ii)   developed by a Party or jointly by
the Parties in performance under this Agreement or learned through access to
Confidential Information or other materials of the other Party (and its
Affiliates).

  (b)   Each Party (and its Subcontractors and Affiliates) may use the Mental
Impressions of their personnel in their business activities as long as in doing
so they do not (i) use specific Solectron Data in a manner that is not permitted
by this Agreement; (ii) disclose specific Confidential Information of the other
Party (or its Affiliates) in violation of Section 16 (CONFIDENTIALITY); or
(iii) misappropriate or infringe the copyrights or patents of the other Party
(or its Affiliates) or third parties who have licensed or provided materials to
the other Party (or its Affiliates).

10.10   Reservation of Rights       Except for the express license rights
contained in this Section 10 (INTELLECTUAL PROPERTY RIGHTS), neither this
Agreement nor any disclosure made hereunder grants any license to either Party,
including under any patents or copyrights of the other Party.

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* Omitted and filed separately with the SEC pursuant to a confidential treatment
request
  11.  TERM AND TERMINATION

11.1   Initial Term and Renewal       The initial Term of the Agreement is as
stated on the signature page. By giving written notice to IBM no less than six
(6) months prior to the scheduled expiration date of the Term, Solectron will
have the right to extend the Term for one (1) year on the terms and conditions
then in effect. Solectron will have two (2) such extension options of one (1)
year each.

11.2   Termination, Generally

Prior to its scheduled expiration, the Agreement may only be terminated as
provided in this Section 11 (TERM AND TERMINATION). Except as the Agreement
expressly provides otherwise, termination by a Party will be without prejudice
to and with full reservation of any other rights and remedies available to the
Party. Solectron will not be obliged to pay any [*] Wind Down Costs in
connection with the termination of the Agreement except as expressly provided
elsewhere in this Agreement or in this Section 11 (TERM AND TERMINATION).

     

     

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11.3   Termination By Solectron

  (a)   Termination for Cause. Solectron may terminate the Agreement, in whole
or in part, for cause and effective as of a date specified in a written notice
of termination given to IBM in any of the following circumstances:

  (i)   a material breach of the Agreement by IBM that cannot reasonably be
cured within thirty (30) days after the date IBM receives notice of the breach
from Solectron (the “Notice Period”) (in which case Solectron’s termination
shall become effective within five (5) business days of Solectron’s notice);    
(ii)   a material breach of the Agreement by IBM that can reasonably be cured
within the Notice Period but which has not been cured within the Notice Period
unless IBM (A) has submitted to Solectron within the Notice Period a
commercially reasonable plan to cure the breach within sixty (60) days after the
date IBM receives notice of the breach from Solectron (the “Extended Cure
Period”), (B) proceeds diligently according to the plan and (C) cures the breach
within the Extended Cure Period (in which case Solectron’s termination shall
become effective when IBM fails to perform any one of steps (A) through (C)); or
    (iii)   a series of multiple breaches of its duties or obligations, none of
which individually need constitute a material breach of the Agreement, but
which, in view of IBM’s history of breaches, whether or not cured, collectively
constitute a material breach of the Agreement, provided that Solectron’s notice
to IBM shall be provided within a maximum of 6 months after the last such breach
upon which Solectron bases its termination. For the purposes of clarity, the
cure periods set forth in Sections 11.3(a)(i) or 11.3(a)(ii), as appropriate,
shall apply to a notice given under this Section 11.3(a)(iii);

  (b)   Removal of Services in Lieu of Termination. If Solectron is entitled to
terminate the Agreement for cause pursuant to Section 11.3(a), Solectron may
instead cancel or remove from scope any Functions that are the subject of the
breach or breaches giving rise to the right to terminate and any other Functions
that are materially affected by such breach or breaches; provided that if such
Functions form part of the P2P Operations Services, such cancellation or removal
will be accomplished via the Change Management Process. In such case, the
Parties will negotiate in good faith to identify equitable adjustments to the
Charges and other relevant terms necessary to reflect appropriately the removed
portion of the Services.

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* Omitted and filed separately with the SEC pursuant to a confidential treatment
request
Any such cancellation or removal will be without prejudice to any other rights
available to Solectron with respect to the breach or breaches entitling
Solectron to terminate the Agreement.

  (c)   Termination for Convenience.

  (i)   Solectron may terminate the Agreement for convenience (i.e., for any
reason or no reason), in whole or in part, effective twenty-four months after
the Master Agreement Effective Date by giving IBM at least ninety (90) days’
prior written notice specifying the terminated Services and designating the
termination date. In such event, Solectron will pay to IBM on the effective date
of termination any applicable Wind Down Costs, Unamortized Costs [*], if any,
set forth in Schedule C (Charges). If a purported termination for cause by
Solectron under Section 11.3(a) is found by a competent authority not to be a
proper termination for cause, then such termination will be deemed to be a
termination for convenience by Solectron under this paragraph.     (ii)  
Solectron may terminate the Strategic Sourcing Services provided under this
Agreement for convenience by paying the Wind Down Costs and Unamortized Cost, if
any, associated with such Services [*](as specified in Schedule C) if IBM fails
in any Contract Year to achieve Actual Savings equal to at least 40% or more of
Committed Savings for that Contract Year, after any applicable adjustments to
Committed Savings that are required in accordance with Annex B-1 (Savings
Calculation Methodology).

  (d)   Termination Following an IBM Change of Control. If (i) another entity
acquires Control, or all or substantially all of the assets, of IBM (or any
Affiliate of IBM involved in performance of a material portion of the Services),
whether directly or indirectly, in a single transaction or series of related
transactions, or (ii) IBM (or any Affiliate of IBM involved in performance of a
material portion of the Services) is merged with or into another entity, then,
at any time during (but not after) the 180-day period following the Change in
Control and subject to applicable Wind Down Costs, Unamortized Costs [*], if
any, set forth in Schedule C (Charges), Solectron may terminate the Agreement,
in whole or in part by giving IBM at any time during such 180-day period at
least ninety (90) days prior written notice specifying the terminated Services
and designating the termination date.     (e)   Termination in Other
Circumstances.

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  (i)   Force Majeure. Solectron may terminate the Agreement, in whole or in
part, as provided in Section 19.3 (Force Majeure).     (ii)  
Bankruptcy/Insolvency. Solectron may terminate the Agreement, in whole or in
part, if IBM becomes insolvent or is unable to pay its debts as they come due or
enters into or files (or has filed or commenced against it) a petition,
arrangement, application, action or other proceeding seeking relief or
protection from creditors under the bankruptcy laws or similar laws of the
United States, any state of the United States or any other Country Location (in
which case Solectron’s termination shall become effective within five (5) days
of Solectron’s notice).     (iii)   Termination for Cause of Local Adoption
Agreements. Without limiting its rights pursuant to Section 11.3(a), Solectron
may terminate the Agreement in whole or in part if Solectron terminates for
cause one or more Local Adoption Agreements that, individually or collectively,
constitute at least 40% of the total value of Services then contemplated to be
provided to Solectron and its Affiliates under the Agreement and all Local
Adoption Agreements (including the Local Adoption Agreement(s) to be terminated)
during the remainder of the Term as of the date that notice of termination of
such Local Adoption Agreement(s).

11.4   Termination By IBM

  (a)   If, and only if, Solectron fails to pay IBM when due undisputed charges
totaling at least one (1) months’ charges under the Agreement, or withholds
amounts in excess of those authorized by Section 9.4(c) (Disputed Charges) of
Schedule C (Charges), and does not cure the failure by the end of the notice
period set forth below, IBM may terminate the Agreement as of a date specified
in the notice of termination

  (b)   IBM’s notice of overdue payment will be sent to the attention of
Solectron’s Global Program Manager, with a copy to Solectron’s General Counsel,
will expressly reference this Section 11.4 (Termination By IBM), will set forth
the overdue amount, and will expressly state that IBM may terminate the
Agreement if such failure to make payment is not cured within ten (10) business
days after Solectron’s receipt of such notice.

11.5   Extension of Termination Date       Solectron may extend the effective
date of termination/expiration once in its discretion. The extension may not
exceed 180 days following the effective date of termination/expiration in place
immediately prior to the initial extension under this Section. If any extension
notice provided to IBM within 60 days of the then-scheduled date of
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Pocket Expenses, IBM may so notify Solectron, providing a good faith estimate of
such Out-of-Pocket Expenses IBM expects to incur. In that case, the extension of
the Agreement’s Term pursuant to the notice will be subject to Solectron
agreeing to reimburse IBM for its additional Out-of-Pocket Expenses incurred as
a result of the extension notice being provided within 60 days of the
then-scheduled date of termination/expiration.

11.6   Partial Termination

If the Agreement is terminated in part pursuant to this Section 11 (TERM AND
TERMINATION), the portions of the Agreement not terminated will continue in
force according to the terms of the Agreement. If the Agreement does not
otherwise provide or specify the basis for determining IBM’s charges for the
continuing Services that are not terminated, the charges payable under the
Agreement will be equitably adjusted to reflect the Services that have been
terminated.

11.7   Disengagement Assistance

  (a)   “Disengagement Assistance” means, collectively, the additional Functions
(i.e., in addition to the continued performance of the Services) that IBM is
required to carry out in connection with the cessation of any Services or the
expiration or earlier termination (for any reason) of the Agreement, in whole or
in part, to facilitate the orderly wind-down or, as applicable, migration of the
affected Services from IBM’s operating environment(s) to the replacement
operating environment(s) of Solectron and/or its designee(s), as directed by
Solectron as necessary to permit Solectron and/or its designee(s) to assume and
take over the performance of the Functions or to perform services similar to the
terminated Services.     (b)   Upon Solectron’s request, which in the case of
expiration may be made up to one year prior to the scheduled expiration of the
Agreement, IBM will provide such Disengagement Assistance as Solectron may
reasonably request, including the assistance described in Schedule K
(Disengagement Assistance). The Parties will develop and agree on a plan for the
performance of the Disengagement Assistance, which will indicate staffing levels
and additional IBM Personnel, as well as additional charges due IBM if
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Solectron is entitled under the Agreement to a sublicense or other right not
previously granted to Use after the termination or expiration of the Agreement
any Software owned or licensed by IBM (or its Subcontractors, if any), IBM will
timely grant such sublicense or other right in order to fully comply with its
obligations with respect to the grant of such license.

  (c)   In the process of deciding whether to undertake or allow termination,
expiration or renewal of the Agreement, in whole or in part, Solectron may
consider or seek offers for performance of services similar to the Services
following termination or expiration. As and when reasonably requested by
Solectron for use in such a process, IBM will provide to Solectron such
information and other cooperation regarding performance of the Services as would
be reasonably necessary for a third party to prepare an informed offer for such
services. The types of information and level of cooperation to be provided by
IBM pursuant to this paragraph will be no less than those initially provided by
Solectron to IBM prior to commencement of the Agreement and do not extend to the
publication of IBM Confidential Information or the disclosure of any information
listed in Annex A-9 (“IBM Competitive Content”).     (d)   Subject to (and in
addition to any extensions arising from Solectron’s exercise of its rights
under) Section 11.5 (Extension of Termination Date), the Disengagement
Assistance will continue, as requested by Solectron, for up to six (6) months
following the initially scheduled effective date of termination/expiration.
Charges (if any) for such activities by IBM will be as provided in Schedule C
(Charges).

11.8   Survival       Any provision of the Agreement that contemplates or
governs performance or observance subsequent to termination or expiration of the
Agreement will survive the expiration or termination of the Agreement for any
reason.     12.   GOVERNANCE AND MANAGEMENT   12.1   Governance Structure and
Processes

  (a)   IBM acknowledges that it is a key business requirement of Solectron that
IBM provide the Services in a consistent, integrated manner globally across all
Country Locations. To meet that requirement, IBM has organized its Solectron
relationship and service delivery team as described in Schedule F (Governance
Structure and Processes).     (b)   Schedule F (Governance Structure and
Processes) also contains a description of the committees and governance
processes the Parties have formed and will use to govern their relationship and
activities under the Agreement.

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12.2   Meetings       Within sixty (60) days after the Effective Date, the
Parties will determine an appropriate set of meetings to be held between their
representatives, which will include at least a quarterly meeting of IBM’s Global
PE with Solectron’s Global PM and at least a monthly meeting of each IBM
Regional PE with his or her counterpart Solectron Regional PM. IBM will prepare
and circulate an agenda sufficiently in advance of each meeting to give the
participants an opportunity to prepare for the meeting. IBM will make such
changes to the agenda as Solectron may request. Solectron will chair all such
meetings. At Solectron’s request, IBM will prepare and circulate minutes
promptly after each meeting. Minutes of the meetings will not be binding on
either Party to the extent they are inconsistent with the Agreement.   12.3  
Reports

  (a)   Within sixty (60) days after the Effective Date, the Parties will
determine an appropriate set of periodic reports to be issued by IBM to
Solectron, which will include the reports described in Annex F-2 (Reports) and
which be issued at the frequency reasonably requested by Solectron.     (b)  
Reports provided by IBM, including the reports described in Annex F-2 (Reports),
will be modified during the Term as reasonably requested by Solectron to enable
Solectron to achieve the objectives specified in Section 1.2 (Objectives).

12.4   Procedures Manual

  (a)   The “Procedures Manual” is a document (or set of documents) to be
prepared by IBM describing how IBM will perform and deliver the Services under
the Agreement, the Equipment and Software used, and the documentation (e.g.,
operations manuals, user guides, specifications) that provide further details of
the activities. The Procedures Manual will describe the activities IBM proposes
to undertake in order to provide the Services, including those direction,
supervision, monitoring, staffing, reporting, planning and oversight activities
normally undertaken to provide services of the type IBM is to provide under the
Agreement. The Procedures Manual will include any Interaction Models developed
to document specific processes or interactions between the Parties. The
Procedures Manual also will include descriptions of the acceptance testing
procedures approved by Solectron, IBM’s problem management and escalation
procedures, and the other standards and procedures of IBM pertinent to
Solectron’s interactions with IBM in obtaining the Services. The Procedures
Manual must be suitable for use by Solectron to understand the Services.     (b)
  Attached as Annex F5 (Draft Procedures Manual Table of Contents) is a draft
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tion with Solectron, IBM will deliver a draft Procedures Manual to Solectron
within thirty (30) days after the Effective Date for review and comment. The
draft Procedures Manual must be comprehensive (addressing all relevant
components of the Services) and customized to the Solectron engagement (i.e.,
neither generic nor high level), and must include drafts of the Interaction
Models. The Procedure Manual will be organized generally in accordance with
Annex F5 (Draft Procedures Manual Table of Contents), but may include additional
sections or provisions as appropriate. IBM will incorporate or address
reasonable comments or suggestions of Solectron and will finalize the Procedures
Manual within ninety (90) days after the Effective Date. The final Procedures
Manual will be subject to the approval of Solectron. The initial and final
versions of the Procedures Manual will be Deliverables under the Agreement.

  (c)   The Procedures Manual will be considered an operational document, which
IBM may revise with the written approval of Solectron’s Global PM without the
need to amend the Agreement. IBM will periodically update the Procedures Manual
to reflect changes in the operations or procedures described in it. Updates of
the Procedures Manual will be provided to Solectron for review, comment and
approval.     (d)   IBM will perform the Services in accordance with the most
recent Solectron-approved version of the Procedures Manual. In the event of a
conflict between the provisions of the Agreement and the Procedures Manual, the
provisions of the Agreement will control.     (e)   Within thirty (30) days
after the end of each Contract Year, IBM will provide a status report to
Solectron indicating the most recent date on which the Procedures Manual was
updated by IBM.     (f)   Notwithstanding anything to the contrary in Section 10
(INTELLECTUAL PROPERTY RIGHTS), Solectron (and its Affiliates) may retain and
Use the Procedures Manual in their businesses and for their benefit both during
the Term and following the expiration or termination (for any reason) of the
Agreement. Subject to appropriate non-disclosure agreements for the limited
purpose of protecting any Independent IP of IBM incorporated into the Procedures
Manual, Solectron (and its Affiliates) may permit any of their other service
providers to use the Procedures Manual during and after the Term, but solely in
connection with the provision of services for Solectron (and its Affiliates)
other than services similar to the Services, and solely to the limited extent,
if any, necessary for such service provider to provide such services. Following
the termination or expiration of the Agreement for any reason, or Solectron’s
election to terminate the Strategic Sourcing Services as authorized by this
Agreement, and subject to appropriate non-disclosure agreements for the limited
purpose of protecting any Independent IP of IBM incorporated into the Procedures
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ates) may permit any of their other service providers to use the Procedures
Manual to perform services similar to the terminated Services. If IBM considers
any Independent IP incorporated into the Procedures Manual to be highly
confidential, it may so notify Solectron. In that case, Solectron will cooperate
with IBM to permit IBM to prepare a special version of the Procedures Manual
redacting and/or otherwise masking the sensitive information that Solectron will
use when disclosing the Procedures Manual to other service providers in a
fashion designed to preserve to the fullest extent possible the usefulness of
the procedures manual for its primary intended purposes. In addition, the
content of Annex A-9 (“IBM Competitive Content”) shall not be included in any
version of the Procedures Manual provided to any third party.

  13.   AUDITS AND RECORDS

13.1   Audit Rights

  (a)   IBM will maintain a complete audit trail of financial and non-financial
transactions resulting from the Agreement. Solectron and its agents, auditors
(internal and external), regulators and other representatives as Solectron may
designate (collectively, “Auditors”) will have the right to inspect, examine and
audit the systems, records, data, practices and procedures of IBM or any of its
Affiliates or Subcontractors that are used in rendering the Services or pertain
to the Services (collectively, “Audits”) for any of the following purposes:

  (i)   to verify the accuracy of IBM’s invoices;     (ii)   audits and
examinations of Solectron by regulatory authorities;     (iii)   examination by
Solectron of data and records pertaining to its compliance with the
Sarbanes-Oxley Act of 2002 (and regulations promulgated under it);     (iv)   to
examine and inspect operations and procedures used in rendering the Services;  
  (v)   to verify the integrity of Solectron Data and IBM’s compliance with the
data privacy, data protection, confidentiality and security requirements of the
Agreement; and     (vi)   to verify IBM’s compliance with any other provisions
of the Agreement, including verifying IBM’s compliance with pertinent laws and
regulations.

  (b)   Audits will be conducted during business hours and upon reasonable
written advance notice to IBM, which notice may be in the form of an email to
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ness days, except in the case of Audits by regulators, emergency or security
Audits, and Audits investigating claims of illegal behavior (in which cases
Solectron shall provide such advance written notice as is reasonable under the
circumstances). Audits will be conducted in a manner that does not unreasonably
interfere with IBM’s (or, as applicable, its Affiliate’s or Subcontractor’s)
business. Solectron and its Auditors will comply with IBM’s security and
reasonable confidentiality requirements when accessing facilities or other
resources owned or controlled by IBM. IBM will cooperate fully with Solectron
and its Auditors in conducting Audits and provide such assistance as they
reasonably require to carry out the Audits, including installing and operating
audit software and providing such other assistance as is reasonably requested by
Solectron to enable Solectron to comply with the Sarbanes-Oxley Act of 2002 and
the rules of the Securities and Exchange Commission relating to disclosure
controls and procedures and other similar laws (the “Control Rules”).

  (c)   IBM will, at its cost and expense (except as otherwise provided in this
Section), maintain financial and operational controls and procedures (the
“Controls”) with respect to the Services for review and approval by Solectron in
accordance with the then-applicable Solectron standards. IBM will:

  (i)   update the Controls in accordance with the procedures set forth in the
Procedures Manual, as such procedures may be modified by Solectron from time to
time, such updates to be reviewed and approved by Solectron;     (ii)  
cooperate with Solectron’s Auditors in connection with executing Solectron’s
testing procedures in a manner that complies with Solectron’s then current
policies for the Controls and such other Solectron disclosure controls and
procedures for which such cooperation is reasonably necessary, to ensure that
the Controls function as documented;     (iii)   cooperate with Solectron and
its Auditors in their design, documentation and implementation of any changes in
the Controls requested by Solectron to comply with the Control Rules; and    
(iv)   promptly notify Solectron of and remediate within a reasonable amount of
time any significant deficiency (as that term in defined by the PCAOB) in the
performance of the Controls.

  (d)   The implementation of, and any changes to, the Controls will be subject
to Solectron’s prior approval. If Solectron requests any change to any
previously-approved Controls and such change would give rise to a non-trivial
increase in the cost to IBM of rendering the Services, IBM’s compliance with the
requested change will be subject to the Change Control Process.

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  (e)   If any Audit of IBM’s charges determines that IBM has incorrectly
invoiced Solectron, IBM will issue, on the next invoice submitted to Solectron,
a credit or debit, as appropriate, to correct the inaccuracy. Audits will be
conducted at Solectron’s expense; provided, however, that if any Audit of IBM’s
charges determines that IBM has over-charged Solectron by an amount equal to or
greater than five percent (5%) of IBM’s total invoiced charges for the period
being audited, and IBM does not successfully dispute the discrepancy identified
by such Audit, then IBM will reimburse Solectron upon request for the reasonable
cost of the Audit, if such Audit was conducted on a non-contingent basis.

13.2   Audit Follow-up

  (a)   Following an Audit, Solectron may provide IBM a written report
summarizing the Audit’s findings as to any actual or potential errors,
weaknesses in controls, or other problems affecting the Services or Solectron
Data, violations of the Agreement or other issues pertaining to IBM (or its
Subcontractors) (each, an “Audit Finding”).     (b)   Within thirty (30) days
after receiving a report from Solectron containing Audit Findings, IBM will
submit a corrective action plan to Solectron addressing each Audit Finding and
describing the steps IBM has taken or plans to take to rectify it, including the
timetable for completing each step. If IBM disputes any Audit Findings, the
corrective action plan will explain the basis on which IBM’s disputes them.    
(c)   IBM will incorporate or address any reasonable comments or suggestions of
Solectron concerning IBM’s corrective action plan.

13.3   Records Retention

  (a)   In support of Solectron’s Audit rights, IBM will keep and maintain (at
its own expense) (i) financial records relating to the Agreement in accordance
with generally accepted accounting principles applied on a consistent basis,
(ii) records substantiating IBM’s invoices, (iii) records pertaining to IBM’s
compliance with the Service Levels, including root cause analyses, (iv) records
pertinent to verifying the integrity of Solectron Data under the possession or
control of IBM (and its Affiliates and Subcontractors) and such entities’
compliance with the data privacy, data protection, confidentiality, intellectual
property and security requirements of the Agreement, (v) such records pertaining
to performance of the Services as are necessary for Solectron to comply and
demonstrate compliance with the Control Rules, and (vi) such other operational
records pertaining to performance of the Services as IBM keeps in the ordinary
course of its business.     (b)   IBM will retain such records and provide
access to them upon request for Audits until the last to occur of the following:
(i) five (5) years after ex-

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piration or termination of the Agreement; (ii) all pending matters relating to
the Agreement (including disputes) are closed; and (iii) the information is no
longer required to meet Solectron’s records retention policy as disclosed to
IBM, as such policy may be revised from time to time. Before destroying or
otherwise disposing of such records, IBM will provide Solectron with sixty
(60) days prior notice and offer Solectron the opportunity to recover the
records or to request IBM to deliver the records to Solectron, with Solectron
paying IBM’s Out-of-Pocket Expenses based on IBM’s good faith estimate of the
Out-of-Pocket Expenses IBM expects to incur.

13.4   IBM Audits and Other Internal Reviews

  (a)   IBM will perform a security Audit at least annually and will cause a
Type II Statement of Auditing Standards (SAS) 70 Audit (or equivalent audit) to
be conducted annually for each primary shared services facility at or from which
Services are provided. IBM shall, at its expense, no later than November 15 of
each Contract year, provide to Solectron a multi-client SAS 70 Type II report
covering the common processes performed by IBM at primary shared service
locations in controlling and administering client accounts. In the year of
transition, a SAS 70 will be provided only if transition is completed in
sufficient time to allow six months of IBM performance prior to September 30.  
  (b)   If IBM conducts other formal internal reviews, then to the extent the
results or findings of any such internal reviews or related reports of IBM (or
its Affiliates or Subcontractors) disclose information that reasonably could
have a material adverse impact on the Services, IBM will promptly provide a
summary of the report or finding from such internal review to Solectron and its
independent auditors for review and comment. IBM will also correct any errors or
problems identified by the review or in the report as soon as reasonably
possible.

  14.   REPRESENTATIONS, WARRANTIES AND COVENANTS OF IBM   14.1   Work Standards
      IBM warrants and covenants that the Services will be rendered with
promptness and diligence and be executed in a professional and workmanlike
manner in accordance with the practices and standards observed by the leading
companies in IBM’s industry when performing similar services and in accordance
with their current description (including any completion criteria) contained in
the Agreement. IBM warrants and covenants that it will use adequate numbers of
qualified IBM Personnel with suitable training, education, experience and skill
to perform the Services in accordance with timing and other requirements of the
Agreement.

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14.2   Maintenance       IBM warrants and covenants that it will maintain the
Equipment and Software used in performance of the Services and for which it has
financial responsibility, so that they operate in accordance with their
specifications, including (i) maintaining equipment in good operating condition,
subject to normal wear and tear; (ii) undertaking repairs and preventive
maintenance on equipment in accordance with the applicable Equipment
manufacturer’s recommendations; and (iii) performing Software maintenance in
accordance with the applicable Software vendor’s documentation and
recommendations.   14.3   Efficiency and Cost-Effectiveness       IBM warrants
and covenants that it will use Commercially Reasonable Efforts to use
efficiently the resources or services necessary to provide the Services to the
extent that the same are charged to Solectron on a resource consumption basis.
IBM warrants and covenants that it will use Commercially Reasonable Efforts to
perform the Services in a manner that is the most cost-effective for Solectron
consistent with the required level of quality and performance.   14.4  
Technology       IBM warrants and covenants that it will provide the Services
using, consistent with the Change Management Process, proven, current technology
in an effort to enable Solectron to take advantage of technological advancements
applicable to its and its Affiliates’ businesses and support Solectron’s efforts
to maintain competitiveness in the markets in which it competes.   14.5  
Non-Infringement

  (a)   Subject to Section 14.5(b) and Section 14.5(c), IBM warrants and
covenants as follows:

  (i)   that IBM and IBM Personnel will perform their responsibilities under the
Agreement in a manner that does not infringe or constitute an infringement or
misappropriation of any Intellectual Property Rights of any third party;    
(ii)   that IBM has all rights and licenses necessary to convey to Solectron
(and its Affiliates, where applicable) as required by this Agreement, the
ownership of (or license rights to Use, as applicable), all Deliverables, Work
Products and other materials provided to Solectron by or on behalf of IBM; and

(iii)   that no Deliverables, Work Products or other materials provided to
Solectron or other Service Recipients by or on behalf of IBM, nor their use by
Solectron or other Service Recipients, will in-

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      fringe or constitute an infringement or misappropriation of any
Intellectual Property Rights of any third party.

  (b)   IBM will not be considered in breach of the warranty and covenant set
forth in Section 14.5(a) to the extent (but only to the extent) any claimed
infringement or misappropriation is attributable to any of the following:

  (i)   Solectron’s modification of an item provided by or on behalf of IBM
unless the modification was authorized or approved by IBM in writing;     (ii)  
Solectron’s combination, operation or use of an item provided by or on behalf of
IBM with other specific items not furnished by, through or at the specification
of IBM or its Subcontractors; provider, however, that this exception will not be
deemed to apply to the combination, operation or use of an item with other
commercially available products that were anticipated to be used in combination
with the item provided by or on behalf of IBM (e.g., the combination, operation
or use of Application Software provided by IBM with a commercially available
computer and System Software not provided by IBM but which the Parties
anticipated would be used with the Application);     (iii)   Solectron’s failure
to use corrections or modifications provided and implemented by IBM at no
additional cost or expense to Solectron that offer equivalent features and
functionality;     (iv)   Solectron’s use of equipment or Software provided by
or on behalf of IBM in a country or countries other than those listed in Annex
A-5 (IBM Solution) or in which use of the equipment or Software in question has
not otherwise been approved by IBM; or     (v)   IBM’s use or provision to
Solectron of Software or other materials provided to IBM by Solectron, its
Affiliates or their subcontractors, provided that IBM was not aware of any
actual or potential infringement or misappropriation of the intellectual
property of a third party associated with the use by IBM of such Software or
other materials.

  (c)   Without limiting IBM’s obligations pursuant to the indemnities in
Section 18.2(e), IBM shall not be considered in breach of the warranty and
covenant set forth in Section 14.5(a) if and to the extent that a claimed
infringement or misappropriation is attributable to any software or material
owned by a third party (other than an Affiliate of IBM) that is used by IBM or
provided by IBM to Solectron or Service Recipients under license from the third
party licensor (a “Third Party Product Claim”).

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14.6   Compliance with Confidentiality Obligation       IBM warrants and
covenants that IBM and IBM Personnel will not misappropriate or disclose any
confidential or proprietary information of a third party in contravention of any
contractual obligation owed to such third party (i) by IBM in connection with
transactions, agreements and competitive bidding processes conducted or
negotiated by IBM as part of the Services; or (ii) by Solectron, to the extent
IBM is aware (or ought reasonably to be aware) of such obligations, in
connection with transactions, agreements and competitive bidding processes
conducted or negotiated by IBM as part of the Services. The foregoing warranty
and covenant does not limit IBM’s express obligations pursuant to Section 16.  
14.7   Viruses       “Virus” means (i) program code or programming
instruction(s) or set(s) of instructions intentionally designed to disrupt,
disable, harm, interfere with or otherwise adversely affect computer programs,
data files or operations; or (ii) other code typically described as a virus,
Trojan horse, worm, back door or other similar type of harmful code. IBM
warrants and covenants that IBM Personnel will not intentionally introduce a
Virus or allow a Virus to be introduced into Solectron’s or other Service
Recipients’ systems or the systems used to provide the Services. In addition,
IBM will use Commercially Reasonable Efforts to prevent IBM Personnel from
unknowingly introducing a Virus or allowing a Virus to be introduced into
Solectron’s or other Service Recipients’ systems or the systems used to provide
the Services. If a Virus is found to have been introduced into Solectron’s or
other Service Recipients’ systems or the systems used to provide the Services as
a result of a breach of the foregoing warranty and covenant, IBM will use
Commercially Reasonable Efforts, at no additional charge, to assist Solectron in
eradicating the Virus and reversing its effects and, if the Virus causes a loss
of data or operational efficiency, to assist Solectron in mitigating and
reversing such losses utilizing generally accepted data restoration techniques
and other applicable best practices.   14.8   No Improper Inducements       IBM
represents and warrants to Solectron that it has not violated any applicable
laws or regulations or any Solectron policies of which IBM has been given
advance written notice regarding the offering of unlawful or improper
inducements in connection with the Agreement. If at any time during the Term,
the foregoing representation and warranty is inaccurate, then, in addition to
any other rights Solectron may have at law or in equity and notwithstanding any
other provision of this Agreement to the contrary, Solectron may terminate the
Agreement for cause without affording IBM an opportunity to cure.   14.9  
Information Security       Without limiting IBM’s obligations under
Section 2.10(Compliance with Laws, Regulations and Solectron Policies) with
regard to compliance with Solectron‘s

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      information security policies, IBM represents and warrants to Solectron
that it will implement and comply with its own information security policies and
procedures, which will at least be commercially reasonable information security
policies and procedures that will afford at least due care to the protection of
Solectron data.

15.   MUTUAL REPRESENTATIONS AND WARRANTIES; DISCLAIMER   15.1   Mutual
Representations and Warranties       Each Party represents and warrants to the
other that:

  (a)   It has the requisite corporate power and authority to enter into the
Agreement and to carry out the transactions and activities contemplated by the
Agreement;     (b)   The execution, delivery and performance of the Agreement
and the con-summation of the transactions contemplated by the Agreement have
been duly authorized by the requisite corporate action on the part of such Party
and do not constitute a violation of any existing judgment, order or decree;    
(c)   The execution, delivery and performance of the Agreement and the
con-summation of the transactions contemplated by the Agreement do not
constitute a material default under any existing material contract by which it
or any of its material assets is bound, or an event that would, with notice or
lapse of time or both, constitute such a default; and     (d)   There is no
proceeding pending or, to the knowledge of the Party, threatened that challenges
or could reasonably be expected to have a material adverse affect on the
Agreement or the ability of the Party to perform and fulfill its obligations
under the Agreement.

15.2   DISCLAIMER       OTHER THAN AS PROVIDED IN THE AGREEMENT, THERE ARE NO
EXPRESS WARRANTIES AND THERE ARE NO IMPLIED WARRANTIES, INCLUDING THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.   16.  
CONFIDENTIALITY   16.1   “Confidential Information” Defined

  (a)   “Confidential Information” of a Party means any non-public, commercially
sensitive information (or materials) belonging to, concerning or in the
possession or control of the Party or its Affiliates (the “Furnishing

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      Party”) that is furnished,disclosed or otherwise made available to the
other Party (the “Receiving Party”) (or entities or persons acting on the other
Party’s behalf) and which is either marked or identified in writing as
confidential, proprietary, secret or with another designation sufficient to give
notice of its sensitive nature, or is of a type that a reasonable person would
recognize it to be of a confidential nature. Notwithstanding the foregoing, in
the case of Solectron, “Confidential Information” includes Solectron Data,
Solectron Software, Solectron system access codes and any portions of Work
Product comprising Solectron Data, Solectron Software, Solectron system access
codes. Any notes, memoranda, compilations, derivative works, data files or other
materials prepared by or on behalf of the Receiving Party that contain or
otherwise reflect Confidential Information of the Furnishing Party will also be
considered Confidential Information of the Furnishing Party.     (b)  
“Confidential Information” does not include any particular information that the
Receiving Party can demonstrate: (i) was in the possession of, or was rightfully
known by, the Receiving Party without an obligation to maintain its
confidentiality prior to receipt from the Furnishing Party; (ii) was or has
become generally available to the public other than as a result of disclosure by
the Receiving Party or its agents; (iii) after disclosure to the Receiving
Party, was received from a third party who, to the Receiving Party’s knowledge,
had a lawful right to disclose such information to the Receiving Party without
any obligation to restrict its further use or disclosure; or (iv) was
independently developed by the Receiving Party without use of or reference to
any Confidential Information of the Furnishing Party.

16.2   Obligations of Confidentiality

  (a)   Each Party acknowledges that it may be furnished, receive or otherwise
have access to Confidential Information of the other Party in connection with
the Agreement.     (b)   The Receiving Party will not reproduce Confidential
Information of the Furnishing Party except as reasonably required to accomplish
the purposes and objectives of the Agreement. The Receiving Party will not
disclose the Confidential Information of the Furnishing Party to any person, or
appropriate it, for the Receiving Party’s own use or for any other person’s use
or benefit except as specifically permitted by the Agreement or approved in
writing by the Furnishing Party.     (c)   The Receiving Party will keep the
Confidential Information of the Furnishing Party confidential and secure and
will protect it from unauthorized use or disclosure by using at least the same
degree of care as the Receiving Party employs to avoid unauthorized use or
disclosure of its own Confidential Information, but in no event less than
reasonable care.

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  (d)   As necessary to accomplish the purposes of the Agreement, the Receiving
Party may disclose Confidential Information of the Furnishing Party to any
employee, officer, director, contractor, Service Recipient, agent or
representative of the Receiving Party who has a legitimate need to know the
information in question and who is bound to the Receiving Party to protect the
confidentiality of the information in a manner substantially equivalent to that
required of the Receiving Party under the Agreement. The preceding sentence
notwithstanding, each Party will limit disclosure of any of the other Party’s
information to the receiving Party’s Personnel (in the case of IBM providing the
Services, and in the case Solectron, receiving the Services) who have a need to
know such information.

  (e)   Special Restrictions Regarding Certain Solectron Data.

  (i)   Without limiting the foregoing, IBM acknowledges that certain Solectron
Data comprising (i) cost savings and related financial benefits achieved for
Solectron in the course of providing the Services (ii) the terms and conditions
(including pricing) of any third party contracts entered into by Solectron in
connection with the Services provided under this Agreement, contains
commercially sensitive information that is relevant to Solectron’s business
dealings as a supplier of products and services to Solectron’s customers
including IBM and IBM’s Affiliates. Accordingly, IBM agrees that it will limit
the disclosure of such Solectron Data to IBM Personnel within IBM’s procurement
services group on a need to know basis, and certain other IBM Personnel outside
of the procurement services group as specifically necessary for the performance
of the Services, and will not permit such Solectron Data to be disclosed
(directly or indirectly) to other groups within IBM or its Affiliates including
groups responsible for the negotiation of agreements with Solectron in
Solectron’s capacity as a supplier to IBM. The Parties specifically agree that
the unauthorized disclosure of such Solectron Data to other groups within IBM or
its Affiliates shall constitute a material breach for the purposes of
Section 11.3(a) in the event such Solectron Data is used to the material
detriment of Solectron. For purposes of this Section 16.2(e)(i), “material
detriment” shall include the use of such Solectron Data in connection with any
negotiations regarding the purchase of products or services by IBM from
Solectron.     (ii)   Subject to Section 16.2(e)(i), IBM may use market
information (prices, terms, etc.) derived from agreements negotiated by IBM as
part of the Services for internal benchmarking and comparison with other IBM
customers transaction data, but solely for the purposes of providing business
process outsourcing services to IBM’s customers and subject to any obligations
of confidentiality owed to third party suppliers.

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  (f)   The Receiving Party may also disclose Confidential Information of the
Furnishing Party to the Receiving Party’s regulatory agencies and Auditors
provided they are made aware of the Receiving Party’s obligations of
confidentiality with respect to the Furnishing Party’s Confidential Information,
and in the case of Auditors are, subject to any statutory or regulatory
reporting or disclosure obligations to a governmental authority under applicable
law, bound by terms no less restrictive then those governing Receiving Party
with respect to Confidential Information.     (g)   If any unauthorized
disclosure, loss of, or inability to account for any Confidential Information of
the Furnishing Party occurs, the Receiving Party will promptly so notify the
Furnishing Party and will cooperate with the Furnishing Party and take such
actions as may be necessary or reasonably requested by the Furnishing Party to
minimize the violation and any damage resulting from it.

16.3   No Implied Rights       Each Party’s Confidential Information will remain
the property of that Party. Nothing contained in this
Section 16(CONFIDENTIALITY) will be construed as obligating a Party to disclose
its Confidential Information to the other Party, or as granting to or conferring
on a Party, expressly or by implication, any rights or license to the
Confidential Information of the other Party. Any such obligation or grant will
only be as provided by other provisions of the Agreement.   16.4   Compelled
Disclosure       If the Receiving Party becomes legally compelled to disclose
any Confidential Information of the Furnishing Party in a manner not otherwise
permitted by the Agreement, the Receiving Party will provide the Furnishing
Party with prompt notice of the request so that the Furnishing Party may seek a
protective order or other appropriate remedy. If a protective order or similar
order is not obtained by the date by which the Receiving Party must comply with
the request, the Receiving Party may furnish that portion of the Confidential
Information that it determines it is legally required to furnish. The Receiving
Party will exercise reasonable efforts to obtain assurances that confidential
treatment will be accorded to the Confidential Information so disclosed.   16.5
  Confidential Treatment of the Agreement       Each Party may disclose the
existence and general nature of the Agreement as permitted by Section 22.4
(Public Disclosures), but the specific terms and conditions of the Agreement
will be considered the Confidential Information of both Parties.

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16.6   Disclosure of Information Concerning Tax Treatment       Notwithstanding
anything to the contrary in this Section 16(CONFIDENTIALITY), each Party (and
its Affiliates), and any person acting on their behalf, may disclose to any
person or entity the “tax structure” and “tax treatment” (as such terms are
defined in the U.S. Internal Revenue Code and regulations under it) of the
transactions effected by the Agreement and any materials provided to that Party
(or its Affiliates) describing or relating to such tax structure and tax
treatment; provider, however, that this disclosure authorization will not be
interpreted to permit disclosure of (i) any materials or portions of materials
that are not related to the transaction’s tax structure or tax treatment, or
(ii) any materials or information that the Party (or its Affiliate(s)) must
refrain from disclosing to comply with applicable securities laws and
regulations.   16.7   Return or Destruction       As requested by the Furnishing
Party during the Term, the Receiving Party will return or provide the Furnishing
Party a copy of any designated Confidential Information of the Furnishing Party.
When Confidential Information of the Fur nishing Party is no longer required for
the Receiving Party’s performance under the Agreement, or in any event upon
expiration or termination of the Agreement, the Receiving Party will return all
materials in any medium that contain, refer to, or relate to Confidential
Information of the Furnishing Party or, at the Furnishing Party’s election,
destroy them. The Receiving Party may, however, keep any Confidential
Information of the Furnishing Party that the Receiving Party has a license to
continue using and it may also keep in the files of its legal department or
outside counsel, for record purposes only, one copy of any material requested to
be returned or destroyed. At the Furnishing Party’s request, the Receiving Party
will certify in writing that it has returned or destroyed all copies of the
Furnishing Party’s Confidential Information in the possession or control of the
Receiving Party’s or any of its Affiliates or contractors.   16.8   Duration of
Confidentiality Obligations       The Receiving Party’s obligations under this
Section 16(CONFIDENTIALITY) apply to Confidential Information of the Furnishing
Party disclosed to the Receiving Party in connection with the Services before or
after the Effective Date and will continue during the Term and survive the
expiration or termination of the Agreement as follows:

  (a)   The Receiving Party’s obligations under Section 16.7 (Return or
Destruction) will continue in effect until fully performed;     (b)   As to any
portion of the Furnishing Party’s Confidential Information that constitutes a
trade secret under applicable law, the obligations will continue for as long as
the information continues to constitute a trade secret under applicable law; and

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  (c)   As to all other Confidential Information of the Furnishing Party, the
obligations will survive for three (3) years after termination or expiration of
the Agreement.

17.   INSURANCE       IBM represents that it has, as of the Effective Date, and
agrees to maintain in force throughout the Term at least the types and amounts
of insurance coverage specified in Schedule M (IBM Insurance Coverage).   18.  
INDEMNIFICATION   18.1   “Claim” and “Losses” Defined       “Claim” means any
demand, lien, or any civil, criminal, administrative, or investigative claim,
action, or proceeding (including arbitration) asserted, commenced or threatened
against, as applicable, a Solectron Indemnitee or IBM Indemnitee (both as
defined below) by an entity or person that is not a Party to this Agreement.
“Losses” means all losses, liabilities, damages (to the extent finally awarded
by a court or agreed to in a settlement approved by the Parties), and, subject
to Section 18.5(Indemnification Procedures) all related costs, expenses, and
other charges suffered or incurred as a result of or in connection with a Claim,
including reasonable attorneys’ fees and disbursements, costs of investigation,
litigation, settlement, and judgment, and any taxes, interest, penalties, and
fines with respect to any of the foregoing, to the extent finally awarded by a
court or agreed to in a settlement approved by the Parties.   18.2  
Indemnification By IBM       IBM will at its expense indemnify, defend and hold
harmless Solectron and its Affiliates, and their respective officers, directors,
employees, agents, representatives, successors and assigns (collectively,
“Solectron Indemnitees”) from and against any and all Losses suffered or
incurred by any of them arising from, in connection with, or based on any of the
following, wherever and whenever made:

  (a)   Any Claim alleging unlawful discrimination, sexual harassment or
wrongful termination by IBM, its Affiliates or Subcontractors, or any of their
respective employees, based upon any protected class characteristic and
occurring in connection with performance under this Agreement;     (b)   Any
Claim by, on behalf of a Subcontractor or IBM Personnel arising in connection
with this Agreement, or IBM’s performance or non-performance hereunder, except
to the extent, if any, that Solectron is required under Section 18.4
(Indemnification By Solectron) to indemnify IBM in respect of the Claim. In the
case of a Claim by employees of IBM, IBM’s indemnification of Solectron
Indemnitees will be to the same extent as if the Claim was made by a person who
is not an employee of IBM;

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  (c)   Any Claim relating to an alleged breach of IBM’s obligations under
Section 16(CONFIDENTIALITY) to not disclose the Confidential Information of the
Furnishing Party to any person, or appropriate it, for the Receiving Party’s own
use or for any other person’s use or benefit except as specifically permitted by
the Agreement, or any Claim relating to an alleged breach of IBM’s obligations
under Section 14.6 (Compliance with Confidentiality Obligation).     (d)   Any
Claim of alleged infringement relating to IBM’s failure to secure appropriate
rights to the applicable patents held by Ronald A. Katz or Ronald A. Katz
Technology Licensing, L.P., to the extent relating to automated transaction
processing utilizing communication facilities and/or computer telephony
integration with respect to the operation of any service desk or call center in
a facility owned or leased by IBM (or any of its Subcontractors) and used on or
after the Effective Date to process calls related to the Services;     (e)   Any
Claim relating to:

  (i)   an alleged breach by IBM of the warranty and covenant contained in
Section 14.5 (Non-Infringement)     (ii)   A Third Party Product Claim (as
defined in Section 14.5(c)) with respect to the Emptoris or SAP products used by
IBM to perform the Services, if and to the extent that such Claim is:

  (1)   Brought by Emptoris or SAP as licensor on the basis of an alleged
unauthorized use, combination or operation of the product by IBM; or     (2)  
Brought by a third party other than the licensor and is attributable to the
modification or combination of those products with other products by IBM, unless
such modification or combination is made by IBM at the express direction of
Solectron; or

  (iii)   any Third Party Product Claim that does not relate to the Emptoris or
SAP products used by IBM to perform the Services, unless and to the extent that
such Claim is attributable to any of the circumstances described in paragraphs
14.5(b)(i) through (iv);

  (f)   Any Claim relating to an alleged breach of IBM’s obligations under
Section 2.10 (Compliance with Laws, Regulations and Solectron Policies) to
obtain all necessary regulatory approvals applicable to its business, to

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obtain any necessary licenses or permits for its business, and to comply with
all laws and regulatory requirements applicable to its business (or that of its
Affiliates);

  (g)   Any Claim for taxes (including interest and penalties) assessed against
Solectron that are the responsibility of IBM under the Agreement or according to
applicable law;     (h)   Any claim by a governmental entity for fines,
interest, penalties or other governmental sanctions resulting from IBM’s breach
of its obligations under Section 2.10(a);     (i)   Any Claim attributable to an
alleged breach by IBM of the warranty made by IBM in Section 14.7(Viruses) with
regard to the intentional introduction of a Virus or intentionally allowing a
Virus to be introduced into Solectron’s or other Service Recipients’ systems or
the systems used to provide the Services; and/or     (j)   Any Claim for death
or bodily injury, or the damage, loss or destruction of real or tangible
personal property of third parties (including employees of Solectron and IBM and
their respective subcontractors) brought against a Solectron Indemnitee in
connection with performance of the Services by IBM Personnel that are or are
alleged to have been caused by the tortious acts or omissions of IBM, IBM
Personnel or anyone else for whose acts IBM is responsible. However, IBM will
have a right of contribution from Solectron with respect to the Claim to the
extent Solectron is legally responsible for contributing to the alleged injury.

18.3   Infringement Claims       If any item used by IBM to provide the Services
becomes, or in IBM’s reasonable opinion is likely to become, the subject of an
infringement or misappropriation Claim that would be the subject of an indemnity
from IBM pursuant to Section 18.2(e), IBM will, in addition to indemnifying
Solectron Indemnitees as provided in this Section 18(INDEMNIFICATION) and to the
other rights Solectron may have under the Agreement, (i) promptly at IBM’s
expense secure the right to continue using the item, or (ii) if this cannot be
accomplished with Commercially Reasonable Efforts, then at IBM’s expense,
replace or modify the item to make it non-infringing or without
misappropriation, provided that any such replacement or modification will not
degrade the performance or quality of the affected components of the Services or
disrupt Solectron’s business operations, or (iii) if both of the foregoing are
commercially impracticable, and only in such event, then upon at least sixty
(60) days’ notice to Solectron, unless otherwise compelled by a court or
governmental order or agreed in writing by the parties, IBM may remove the item
from the Services, in which case IBM’s charges will be equitably adjusted to
reflect such removal. If removal of the item from Services causes the loss or
material degradation of the Services or any portion of the Services, or
disruption of Solectron’s business operations, Solectron may assert such loss or
deg-

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      radation or disruption constitutes a material breach of the Agreement by
IBM in respect of which Solectron may exercise its termination rights under
Section 11.3(a) with only 15 days for IBM to cure, and pursue its available
remedies under the Agreement, at law or in equity.

18.4   Indemnification By Solectron       Solectron will at its expense
indemnify, defend and hold harmless IBM, any of its Affiliates and its/their
respective officers, directors, employees, agents, representatives, successors
and assigns (collectively, “IBM Indemnitees”) from and against any and all
Losses suffered or incurred by any of them arising from, in connection with or
based on any of the following, whenever made:

  (a)   Any Claim alleging unlawful discrimination, sexual harassment or
wrongful termination by Solectron, its Affiliates or contractors, or any of
their respective employees, based upon any protected class characteristic and
occurring in connection with performance under this Agreement;     (b)   Any
Claim relating to an alleged breach of Solectron’s obligations under Section 16
(CONFIDENTIALITY) to not disclose the Confidential Information of the Furnishing
Party to any person, or appropriate it, for the Receiving Party’s own use or for
any other person’s use or benefit except as specifically permitted by the
Agreement or approved in writing by the Furnishing Party;     (c)   Any Claim
for death or bodily injury, or the damage, loss or destruction of real or
tangible personal property of third parties (including employees of Solectron
and IBM and their respective subcontractors) brought against a IBM Indemnitee to
the extent alleged to have been caused by the tortious acts or omissions of
Solectron, Solectron personnel or anyone else for whose acts Solectron is
legally responsible under applicable law; and     (d)   Any Claim of alleged
infringement as a result of Solectron’s failure to secure appropriate rights to
the applicable patents held by Ronald A. Katz or Ronald A. Katz Technology
Licensing, L.P., including those relating to automated transaction processing
utilizing communication facilities and/or computer telephony integration with
respect to the operation of any service desk or call center in a facility owned
or leased by Solectron and used on or after the Effective Date in connection
with the Services.     (e)   Any Claim by, on behalf of a Solectron employee or
contractor arising in connection with this Agreement, or Solectron’s performance
or non-performance or its responsibilities, hereunder, except to the extent, if
any, that IBM is required under Section 18.2(Indemnification By IBM) to
indemnify Solectron in respect of the Claim. In the case of a Claim by employees
of Solectron, Solectron’s indemnification of IBM Indemnitees

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      will be to the same extent as if the Claim was made by a person who is not
an employee of Solectron;

  (f)   Any Claim that an item provided to IBM by on behalf of Solectron, or
their use by IBM as authorized by this Agreement, infringes or constitutes
misappropriation of any Intellectual Property Rights of any third party. If any
item provided to IBM becomes, or in IBM’s or Solectron’s reasonable opinion is
likely to become, the subject of an infringement or misappropriation Claim, IBM
will promptly cease using such materials and, at Solectron’s direction, either
return or destroy such materials. For the avoidance of doubt, IBM’s ceasing to
use such materials shall be subject to Section 5.3(Savings Clause).     (g)  
Any Claim for taxes (including interest and penalties) assessed against IBM that
are the responsibility of Solectron under the Agreement or according to
applicable law (except to the extent that Solectron’s failure to pay such taxes
was due to a failure by IBM to perform the Services as specified in the
Agreement);     (h)   Any claim by a governmental entity for penalties, interest
or other governmental sanctions resulting from Solectron’s breach of its
obligations under Section 2.10(a)

18.5   Indemnification Procedures       The following procedures will apply to
Claims for which a Party seeks to be indemnified pursuant the Agreement:

  (a)   Notice.Promptly after an indemnitee receives notice of any Claim for
which it will seek indemnification pursuant to the Agreement, the indemnitee
will promptly notify the indemnitor of the Claim in writing. No failure to so
notify the indemnitor will abrogate or diminish the indemnitor’s obligations
under this Section 18(INDEMNIFICATION) if the indemnitor has or receives
knowledge of the Claim by other means or if the failure to notify the indemnitor
does not materially prejudice its ability to defend the Claim. Within fifteen
(15) days after receiving an indemnitee’s notice of a Claim, but no later than
ten (10) days before the date on which any formal response to the Claim is due,
the indemnitor will notify the indemnitee in writing as to whether the
indemnitor acknowledges its indemnification obligation and elects to assume
control of the defense and settlement of the Claim (a “Notice of Election”). In
issuing a Notice of Election, the indemnitor waives any right of contribution
against the indemnitee unless the Notice of Election expressly states that
indemnitor believes in good faith that the indemnitee may be liable for portions
of the Claim that are not subject to indemnification by the indemnitor, in which
case the indemnitee will have the right to participate jointly in the defense
and settlement of the Claim at its own expense using counsel selected by it.

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  (b)   Procedure Following Notice of Election.If the indemnitor timely delivers
a Notice of Election, it will be entitled to have sole control over the defense
and settlement of the Claim except as provided in Section 18.5(a)(Notice). After
delivering a timely Notice of Election, the indemnitor will not be liable to the
indemnitee for any legal expenses subsequently incurred by the indemnitee in
defending or settling the Claim. In addition, the indemnitor will not be
required to reimburse the indemnitee for any amount paid or payable by the
indemnitee in settlement of the Claim if the settlement was agreed to without
the written consent of the indemnitor.     (c)   Procedure Where No Notice of
Election Is Delivered.If the indemnitor does not deliver a timely Notice of
Election for a Claim, the indemnitee may defend and/or settle the Claim in such
manner as it may deem appropriate, at the cost and expense of the indemnitor,
including payment of any settlement, judgment or award and the costs of
defending or settling the Claim. The indemnitor will promptly reimburse the
indemnitee upon demand for all Losses suffered or incurred by the indemnitee as
a result of or in connection with the Claim.

18.6   Subrogation       Upon fulfilling all of its obligations under this
Section 18(INDEMNIFICATION) with respect to a Claim, including making payment in
full of all amounts due pursuant to its indemnification obligations, the
indemnitor will be subrogated to the rights of the indemnitee(s) with respect to
that Claim.

19.   LIABILITY   19.1   General Intent       Subject to the specific provisions
of this Section 19 (LIABILITY), it is the intent of the Parties that if a Party
fails to perform its obligations in the manner required by the Agreement, that
Party will be liable to the

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* Omitted and filed separately with the SEC pursuant to a confidential treatment
request
other Party for any actual dam-ages suffered or incurred by the other Party as a
result.

19.2   Limitations of Liability

  (a)   Excluded Types of Damages.Except as otherwise expressly provided in
Section 19.2(d),neither Party will be liable to the other for any indirect or
consequential, exemplary, punitive or special damages, or for any loss of
revenue, profit, business, savings, or goodwill, regardless of the form of
action or the theory of recovery, even if such Party has been advised in advance
of the possibility of such damages.     (b)   Liability Cap.Except as provided
in Section 19.2(d),each Party’s total liability to the other, whether in
contract or in tort (including breach of warranty, negligence and strict
liability in tort) or otherwise will be limited in the aggregate for all claims
and causes of action to an amount (the “Liability Cap”) equal to twelve
(12) times the average monthly fees paid or payable to IBM for the previous
twelve (12) months. No Savings Credits, Service Level Credits or any fees due
and payable for Services rendered hereunder (including Wind Down Costs,
Unamortized Costs [*], if any, as specified in Schedule C (Charges)) will be
considered damages subject to the foregoing exclusion of damages in
Section 19.2(a) (Excluded Types of Damages) or the Liability Cap in this
Section 19.2(b) and will not count against or reduce the amounts available under
it.     (c)   [*]     (d)   Exceptions to Limitations of Liability.The
limitations of liability set forth in this Section 19.2(Limitations of
Liability) will not apply to any of the following: (i) Claims and Losses that
are the subject of indemnification pursuant to Section 18(INDEMNIFICATION); or
(ii) damages attributable to a Party’s breach of its obligations under
Section 16(CONFIDENTIALITY) to not disclose the Confidential Information of the
Furnishing Party to any person, or appropriate it, for the Receiving Party’s own
use or for any other person’s use or benefit except as specifically permitted by
the Agreement or approved in writing by the Furnishing Party, or a Party’s
misappropriation or infringement of the other Party‘s Intellectual Property
Rights.     (e)   Stipulated Direct Damages.The Parties acknowledge and agree
that the following will be considered direct damages and that neither Party will
assert that they are types of damages that are excluded under Section 19.2(a) to
the extent they result from a Party’s failure to perform in accordance with the
Agreement:

  (i)   Costs and expenses of restoring or reloading any lost, stolen, corrupted
or damaged Solectron Data in the event that IBM fails to

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      make backups as required under the Agreement (including failure to
accurately or completely make such backups) or fails to maintain and store such
backups;

  (ii)   Costs and expenses of implementing a work-around in respect of a
failure to provide any Services as required by the Agreement;     (iii)   Costs
and expenses of replacing lost, stolen or damaged Equipment, Software or
materials;     (iv)   Incremental straight time, overtime and related expenses
incurred by either Party, including overhead allocations for employees, wages
and salaries of additional employees, travel expenses, overtime expenses,
telecommunications charges and similar charges, incurred in connection with
clauses (i) through (iii) above due to IBM’s failure to provide any Services as
required by the Agreement or to otherwise perform in accordance with the
Agreement;     (v)   Costs and expenses incurred for Solectron (or its
Affiliates) to bring the Services in-house or to contract to obtain services
similar to the Services from an alternate source, including the costs and
expenses associated with the retention of external consultants and legal counsel
to assist with any re-sourcing;     (vi)   Damages suffered by any Solectron
Affiliate that would be direct damages if they had instead been suffered by
Solectron; and     (vii)   Payments, fines, penalties or interest imposed by a
governmental body or regulatory entity for failure to comply with requirements
or deadlines to the extent they are the subject of Sections 18.2(h) or 18.4(h).

  (f)   Duty to Mitigate.Each Party has a duty to mitigate the damages suffered
by it for which the other Party is liable.

19.3   Force Majeure

  (a)   “Force Majeure Event” means a fire, flood, earthquake, other act of God
or nature, riot, civil disorder, act of terrorism or other similar cause beyond
the reasonable control of a Party that delays or prevents the Party, directly or
indirectly, from performing its obligations under the Agreement.     (b)   A
Party will not be liable for any default or delay in performing its obligations
under the Agreement to the extent the default or delay is attributable to a
Force Majeure Event provided (i) the non-performing Party (and any other vendors
or contractors of the non-performing Party to

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* Omitted and filed separately with the SEC pursuant to a confidential treatment
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      whom the performance has been delegated) are without material fault in
causing the default or delay, and (ii) the default or delay could not have been
prevented by reasonable precautions and cannot reasonably be circumvented by the
affected Party through the use of alternate sources, workaround plans or other
means (including, with respect to IBM, by IBM meeting its obligations under the
Agreement with respect to disaster recovery and business continuity).

  (c)   In such event the affected Party will be excused from further
performance or observance of the obligations so affected for as long as the
Force Majeure Event continues and the affected Party continues to use
Commercially Reasonable Efforts to perform whenever and to whatever extent is
commercially reasonable without delay. A Party so hindered in its performance
will immediately notify the Party to whom performance is due by telephone and
describe at a reasonable level of detail the circumstances causing the delay (to
be confirmed in writing within twenty- four (24) hours after inception of the
delay). That Party will also notify the other Party promptly when the Force
Majeure Event has abated.     (d)   If a Force Majeure Event substantially
prevents, hinders or delays performance of Services necessary for the
performance of Functions reasonably identified by Solectron as critical for more
than three (3) consecutive days following the end of the Recovery Time Objective
specified in Section 2.7 (DRP Commitments) of Schedule J (Disaster Recovery),
then at Solectron’s option: (i) Solectron may procure such Services from an
alternate source for so long as the delay in performance continues, in which
case IBM will be liable for reasonable payment for such Services from the
alternate source, with Solectron continuing to pay IBM for the Services as if
the Services provided by the alternate source were provided by IBM; (ii) if IBM
has not instituted a reasonable plan and related measures designed to promptly
restore performance of all affected Services as soon as practicable, but in any
event within twenty-one (21) days, Solectron may terminate all or any portion of
the Agreement and Services so affected, in which case IBM’s charges under the
Agreement will be equitably adjusted as necessary to reflect the terminated
Services; and/or (iii) until such time as IBM has fully restored performance of
the Services, Solectron may suspend the entire Agreement as of a date specified
by Solectron in a written notice of suspension to IBM and shall only owe IBM
compensation for Services performed prior to the Force Majeure Event. If
Solectron terminates the Agreement under clause (ii) or

  (iii)   above, Solectron will pay IBM’s charges for all Services performed
under the Agreement, and any applicable Wind Down Costs, Unamortized Cost [*],
if any, as specified in Schedule C (Charges). IBM will not be entitled to any
additional payments from Solectron for costs or expenses incurred by IBM as a
result of any Force Majeure Event.

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20.   RULES OF CONSTRUCTION   20.1   Entire Agreement       The Agreement –
consisting of the signature page, these GENERAL TERMS AND CONDITIONS and the
attached Schedules A through N – constitutes the entire agreement between the
Parties with respect to its subject matter and merges, integrates and supersedes
all prior and contemporaneous agreements and under-standings between the
Parties, whether written or oral, concerning its subject matter.   20.2  
Contract Amendments and Modifications       Any terms and conditions varying
from the Agreement on any order or written notification from either Party will
not be effective or binding on the other Party.       The Agreement may be
amended or modified solely in a writing signed by an authorized representative
of each Party. In the case of Solectron, only the Senior Director of Finance or
his designee will have contract signature authority and the authority to execute
Change Orders, Work Orders, or other contract modifications that do not modify
these GENERAL TERMS AND CONDITIONS. Any amendment of the Agreement that modifies
these GENERAL TERMS AND CONDITIONS must also be approved in writing by each
Party’s legal counsel.   20.3   Governing Law       The Agreement and
performance under it will be governed by and construed in accordance with the
substantive laws of the state of California and the laws of the United States of
America without regard to any choice of law principles.   20.4   Relationship of
the Parties       IBM, in furnishing the Services, is acting as an independent
contractor. IBM has the sole right and obligation to supervise, manage,
contract, direct, procure, perform or cause to be performed, all work to be
performed by IBM Personnel under the Agreement. IBM is not an agent or partner
of Solectron and has no authority to represent or bind Solectron as to any
matters, except as expressly authorized in the Agreement.   20.5   Consents and
Approvals       Where approval, acceptance, consent or similar action by either
Party is required under the Agreement, such action will not be unreasonably
delayed, conditioned or withheld unless the Agreement expressly provides that it
is in the discretion of the Party. No approval or consent given by a Party under
the Agreement will relieve the other Party from responsibility for complying
with the requirements of the Agreement, nor will it be construed as a waiver of
any rights under the Agreement (except to the extent, if any, expressly provided
in such approval or consent). Each Party will, at the request of the other
Party, perform those ac-

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      tions, including executing additional documents and instruments,
reasonably necessary to give full effect to the Agreement.

20.6   Waiver       No failure or delay by a Party in exercising any right,
power or remedy will operate as a waiver of that right, power or remedy, and no
waiver will be effective unless it is in writing and signed by an authorized
representative of the waiving Party. If a Party waives any right, power or
remedy, the waiver will not waive any successive or other right, power or remedy
that Party may have.   20.7   Remedies Cumulative       Except as otherwise
expressly provided in the Agreement, all remedies provided in the Agreement are
cumulative and in addition to and not in lieu of any other remedies available to
a Party under the Agreement, at law, or in equity.   20.8   Headings       The
section headings and the table of contents used in the Agreement are for
convenience of reference only and will not enter into the interpretation of the
Agreement.   20.9   Section References

  (a)   Unless otherwise indicated, section references are to sections of the
document in which the reference is contained. For example, section references in
these GENERAL TERMS AND CONDITIONS are to sections of the GENERAL TERMS AND
CONDITIONS and, likewise, section references in a Schedule to the Agreement are
to sections of that Schedule.     (b)   References to numbered (or lettered)
sections of the Agreement also refer to and include all subsections of the
referenced section.

20.10   Schedule References       Unless otherwise indicated, references to
Schedules to the Agreement also refer to and include all Annexes and other
attachments to the referenced Schedule.   20.11   Use of Certain Words      
Unless the context requires otherwise, (i) “including” (and any of its
derivative forms) means including but not limited to, (ii) “may” means has the
right, but not the obligation to do something and “may not” means does not have
the right to do something, (iii) “will” and “shall” are expressions of command,
not merely expressions of future intent or expectation, (iv) “written” or “in
writing” is used for emphasis in certain circumstances, but that will not
derogate from the general

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      application of the notice requirements setforth in Section 22.2(Notices)
in those and other circumstances, (v) use of the singular imports the plural and
vice versa, (vi) use of a specific gender imports the other gender(s),
(vii) where “and/or” is used, the overall condition is satisfied if any or all
of the referenced sub-conditions are satisfied; and (viii) references to “days”
means calendar days unless otherwise indicated.

20.12   Order of Precedence

  (a)   In the event of a conflict between or among the documents comprising the
Agreement, the following order of precedence will apply (documents listed in
descending order of priority) unless expressly stated otherwise in the documents
themselves:

  (i)   these GENERAL TERMS AND CONDITIONS, together with Schedule K
(Disengagement Assistance) and Schedule M (IBM Insurance Coverage);     (ii)  
Schedule C (Charges), including its Annexes (and other attachments, if any);    
(iii)   Schedule B (Performance Management), including its Annexes (and other
attachments, if any);     (iv)   other Schedules apart from those listed in
Sections (i) – (iii), above;     (v)   other Annexes; and     (vi)   other
attachments.

  (b)   If there is a conflict among the terms in the Agreement, a Local
Adoption Agreement or their respective Schedules and Exhibits:

  (i)   the Local Adoption Agreement and its Schedules and Exhibits will prevail
over a conflicting term in this Agreement, its Schedules or Exhibits;     (ii)  
a Local Adoption Agreement will prevail over a conflicting term in the Schedules
and Exhibits to the Local Adoption Agreement; and     (iii)   a Local Adoption
Agreement and its Schedules (exclusive of any Exhibits) will prevail over a
conflicting term in the Exhibits to the Local Adoption Agreement.

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20.13   Severability       If any provision of the Agreement conflicts with the
law under which the Agreement is to be construed or if any provision of the
Agreement is held invalid by a competent authority, such provision will be
severed from the Agreement. In any event, the remainder of the Agreement will
remain in full force and effect.   20.14   Counterparts       The Agreement may
be executed in several counterparts, all of which taken together constitute a
single agreement between the Parties. Each signed counter-part, including a
signed counterpart reproduced by facsimile or other reliable means, will be
considered an original.   21.   DISPUTE RESOLUTION       Any material dispute
between the Parties arising out of or relating to the Agreement, including with
respect to the interpretation of any provision of the Agreement or with respect
to performance or non-performance under the Agreement, will be resolved as
provided in this Section 21(DISPUTE RESOLUTION).   21.1   Informal Dispute
Resolution

  (a)   Subject to Sections 21.1(b) and 21.1(c), the Parties initially will
attempt to resolve any dispute arising out of or relating to the Agreement
informally in accordance with the following:

  (i)   Within five (5) days after a Party receives notice of a dispute from the
other Party (“Dispute Date”), it will designate a senior representative (i.e., a
person whose rank within the company is superior to that Party’s Global PE/PM)
who does not devote substantially all of his time to performance under the
Agreement, who will offer to meet with the designated senior representative of
the other Party for the purpose of attempting to resolve the dispute amicably.  
  (ii)   The appointed representatives will meet promptly to discuss the dispute
and attempt to resolve it without the necessity of any formal proceeding. They
will meet as often as the Parties deem necessary in order that each Party may be
fully advised of the other’s position. During the course of discussion, all
reasonable requests made by one Party to the other for non-privileged
information reasonably related to the matters in dispute will be honored
promptly.     (iii)   The specific format for the discussions will be left to
the discretion of the appointed representatives.

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  (iv)   If the dispute has not been resolved within twenty-five (25) days after
the Dispute Date, upon the request of either Party, the presidents or chief
operating officers of IBM and Solectron will promptly meet and negotiate in good
faith to resolve the dispute.

  (b)   Within sixty (60) days after the Dispute Date, if neither Party has
commenced formal dispute resolution as permitted under Section 21.1(c), then
either Party may initiate non-binding mediation of the dispute by submitting a
written request for mediation describing the subject of the dispute and the
relief requested to JAMS, the dispute mediation entity, with a copy to the other
Party. The Parties will cooperate with JAMS and each other in the mediation
process. The mediation will be conducted in accordance with the applicable
practices and procedures of JAMS. If formal dispute resolution is commenced as
permitted under Section 21.1(c), either Party may terminate the mediation
process by so notifying JAMS and the other Party. Each Party will bear its own
expenses in the mediation process and will share equally the charges of JAMS.  
  (c)   Litigation of a dispute may be commenced by a Party upon the first to
occur of any of the following:

  (i)   the appointed representatives conclude in good faith that amicable
resolution of the dispute through continued negotiation does not appear likely;
    (ii)   ninety (90) days have passed from the Dispute Date if neither Party
has requested mediation under Section 21.1(b), or ninety (90) days have passed
from the date that one of the Parties requested mediation (these periods will be
deemed to run notwithstanding any claim that the process described in this
Section 21.1 Informal Dispute Resolution) was not followed or completed); or    
(iii)   commencement of litigation is deemed appropriate by a Party to avoid the
expiration of an applicable limitations period or to preserve a superior
position with respect to other creditors, or a Party makes a good faith
determination, including as provided in Section 21.4 (Equitable Remedies), that
a breach of the Agreement by the other Party is such that a temporary
restraining order or other injunctive or conservatory relief is necessary.

21.2   Litigation       For any litigation arising out of or relating to the
Agreement or the transactions and relationships contemplated by the Agreement,
regardless of the form of action or the Party that initiates it, the Parties
irrevocably and unconditionally submit to the non-exclusive jurisdiction of and
venue in the United States District

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      Court for the Northern District of California or, if that court does not
have jurisdiction, in the Superior Court of the State of California, Santa Clara
County. The Parties irrevocably and unconditionally waive any objection to the
laying of venue of any proceeding arising out of or relating to the Agreement in
the United States District Court for the Northern District of California or the
Superior Court of the State of California, Santa Clara County. The Parties
further consent to the jurisdiction of any state court located within a district
that encompasses assets of a Party against whom a judgment (or award) has been
rendered for the enforcement of the judgment (or award) against the assets of
such Party.

21.3   Continued Performance       Each Party agrees to continue performing its
obligations under the Agreement while a dispute is being resolved except to the
extent performance is prevented by the other Party or the issue in dispute
precludes performance. For the avoidance of doubt, Solectron’s withholding
payment of disputed charges as permitted under the Agreement will not be
considered to prevent IBM from performing the Services, nor will this Section be
interpreted to limit either Party’s right to terminate the Agreement as provided
in Section 11 (TERM AND TERMINATION).

21.4   Equitable Remedies       Each Party acknowledges that a breach of any of
its obligations under the Sections of the Agreement listed below, or its
infringement or misappropriation of any Intellectual Property Rights of the
other Party, may irreparably harm the other Party in a way that could not be
adequately compensated by money dam-ages. In such a circumstance, the aggrieved
Party may proceed directly to a court of competent jurisdiction notwithstanding
the other provisions of this Section 21(DISPUTE RESOLUTION). If such court
should find that a Party has breached (or attempted or threatened to breach) any
such obligations, such Party agrees that it will not oppose the entry of an
appropriate order compelling its performance of such obligations and restraining
it from any further breaches (or attempted or threatened breaches) of such
obligations, even if such court does not make any findings of irreparable injury
(provided the other required conditions to injunctive relief are satisfied). The
following Sections are subject to this paragraph:

  (a)   Section 9(DATA SECURITY AND PROTECTION);

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  (b)   Section 10 (INTELLECTUAL PROPERTY RIGHTS);     (c)   Section 16
(CONFIDENTIALITY);     (d)   Section 11.7 (Disengagement Assistance); and    
(e)   Section 18(INDEMNIFICATION)

22.   MISCELLANEOUS   22.1   Binding Nature and Assignment       The Agreement
is binding on the Parties and their respective successors and permitted assigns.
IBM acknowledges that the Services are personal in nature and that, as a result,
IBM may not assign the Agreement or delegate its rights or obligations under the
Agreement, whether by operation of law or otherwise, without the prior written
consent of Solectron except to an IBM Affiliate, subject to IBM retaining
ultimate responsibility for any assigned obligations. Solectron may not assign
the Agreement or delegate its rights or obligations under the Agreement without
the prior written consent of IBM except to a Solectron Affiliate, subject to
Solectron retaining ultimate responsibility for any assigned obligations, or to
the successor in a merger or reorganization of Solectron or an entity that
acquires Control of Solectron or acquires all or substantially all of
Solectron’s business or assets. Any attempted assignment in violation of this
Section will be void and will constitute a material breach of the Agreement by
the Party attempting the assignment. A Party assigning the Agreement or
delegating its rights or obligations under the Agreement must provide notice of
the assignment or delegation to the other Party within ten (10) business days
after its effective date.   22.2   Notices

     
In the case of Solectron:
  With a copy to:
Solectron Corporation
  Solectron Corporation
847 Gibraltar Drive
  847 Gibraltar Drive, Bldg 5
Milpitas, CA 95035
  Milpitas, CA 95035
 
   
Attn: Chief Procurement Officer.
  Attn: Chief Legal Officer
Fax:  
                                                                              
 
Fax:                                                                                

                     
In the case of IBM:
      With a copy to:    
 
                                   
 
                                   
 
                                   
 
                   
Attn:
          Attn:        
 
 
 
         
 
   
Fax:
          Fax:        
 
 
 
         
 
   

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  (a)   Notices given as described above will be considered received on the day
of actual delivery.     (b)   A Party may from time to time change its address
or designee for notification purposes by giving the other Party prior written
notice of the new address or designee in the manner provided above and the date
on which it will become effective.

22.3   Covenant of Good Faith       Each Party will act reasonably and in good
faith in its dealings with the other Party under or in connection with the
Agreement.   22.4   Public Disclosures       All media releases, public
announcements and public disclosures by either Party relating to the Agreement
or the subject matter of the Agreement, including pro-motional or marketing
material, but not including announcements intended solely for internal
distribution or disclosures to the extent required to meet legal or regulatory
requirements beyond the reasonable control of the disclosing Party, will be
coordinated with and approved by the other Party prior to release.   22.5  
Supplier Conduct Principles and Certifications.       IBM shall diligently
pursue effecting its performance and delivery of the Services in accordance with
the Supplier Conduct Principles (the “SCP”) set forth in Exhibit 4 (IBM Supplier
conduct Principles) and will throughout the Term, implement and maintain a
compliance program that requires IBM’s subcontractors and other suppliers
providing materials or services hereunder comply with the SCP. Upon request from
Solectron, IBM will provide reasonable documentation or other evidence of the
implementation of such compliance program.   23.   CERTAIN DEFINITIONS       The
following capitalized terms, when used in the Agreement, will have the meanings
given them below unless the context requires otherwise. Other capitalized terms
used in the Agreement are defined in-place where they are used. (See the INDEX
OF DEFINED TERMS immediately following these GENERAL TERMS AND CONDITIONS for a
listing of all defined terms used in the Agreement and a reference to the
location where each is defined.)

      Defined Term   Meaning
“Affiliate”
  With respect to an entity, any other entity or person Controlling, Controlled
by or under common Control with

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      Defined Term   Meaning
 
  such entity.
 
   
“Best Practice”
  Whether or not capitalized shall mean, with respect to IBM’s performance of
the Services, proven practices followed by the well-managed providers of
services similar to the Services.
 
   
“Commercially
Reasonable Efforts”
  Taking all such steps and performing in such a manner as a well managed
company would undertake where it was acting in a determined, prudent and
reasonable manner to achieve a particular desired result for its own benefit.
 
   
“Contract Year”
  Each one-year period during the Term, starting on the Effective Date.
 
   
“Control”
  Possessing, directly or indirectly, the power to direct or cause the direction
of the management policies or operations of an entity or person, whether through
ownership of voting securities, by contract or other objective criteria.
 
   
“Country Locations”
  Countries in which Solectron and its Affiliates receive the Services.
 
   
“Solectron Retained
Functions”
  The specific Functions set forth in the Agreement as Functions for which
Solectron retains responsibility during the Term.
 
   
“Effective Date”
  The date on which the Agreement first takes effect, which is set forth on the
signature page.
 
   
“End Users”
  Direct users of the Services provided under the Agreement.
 
   
“Equipment”
  All machines and other hardware used in the provision of the Services,
including all associated attachments, features, accessories and peripheral
devices.
 
   
“Local Adoption
Agreement”
  An agreement in substantially the form attached as Exhibit 1 (Form of Local
Adoption Agreement), pursuant to which Affiliates of the Parties in a country
subscribe to and incorporate by reference the Agreement in relation to their
home country.
 
   
“Local IBM Party”
  The entity signing a Local Adoption Agreement as IBM.
 
   

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Solectron/IBM Confidential

      Defined Term   Meaning
“Local Parties”
  The Local IBM Party and the Local Solectron Party, collectively, who are
signatories to the same Local Adoption Agreement.
 
   
“Local Solectron
Party”
  The entity signing a Local Adoption Agreement as Solectron.
 
   
“Out-of-Pocket
Expenses”
  Reasonable, demonstrable and actual out-of-pocket expenses incurred by IBM for
Equipment, materials, supplies or services provided to or for Solectron (or its
Affiliates) that are specified in the Agreement as reimbursable. Out-of-Pocket
Expenses are to be determined net of all rebates, discounts and allowances
received by IBM, and shall not include IBM’s actual or allocated overhead costs
or other mark-ups.
 
   
“Performance
Standards”
  Individually and collectively, the quantitative and qualitative performance
standards and commitments for the Services contained in this Agreement,
including Service Levels specified in Schedule B (Performance Management).
 
   
“Project”
  A group of related Functions or activities that spans multiple days, weeks, or
months and builds cumulatively toward the achievement of defined target outcomes
or objectives. A Project typically has multiple phases or life-cycle stages and
involves written project plans with defined interim milestones and Deliverables
to measure progress toward the achievement of its target outcomes or objectives.
 
   
“Service Levels”
  The quantitative standards of performance IBM is required to meet or exceed in
providing the Services. The Service Levels are set forth in Schedule B
(Performance Management).
 
   
“Service Delivery
Environment”
  Collectively, the Equipment, Software, communications networks and
connectivity, facilities and other infrastructure components owned, controlled
or operated by IBM (or its Affiliates or Subcontractors) and used by IBM
Personnel in performing and delivering the Services.
 
   
“Software”
  Program code (in both object code and source code forms to the extent
generally provided to the end user of the subject code) and all supporting
documentation, me-

            Indirect Sourcing Services Agreement
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Solectron/IBM Confidential

      Defined Term   Meaning
 
  dia, on-line help facilities and tutorials, including updates, enhancements,
modifications, releases and Derivative Works of any of them. Software shall not
include commercially available software products of either party.
 
   
“Use”
  The right to use, execute, copy, perform, distribute copies of, maintain,
modify, enhance, and create derivative works of Software or other copyrighted or
copyrightable works.
 
   
“Wind Down Costs”
  Has the meaning specified in Schedule C (Charges).

(End of General Terms and Conditions)

            Indirect Sourcing Services Agreement
EXECUTION COPY   General Terms and Conditions
Page 69 of 68

 

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Solectron/IBM Confidential
INDEX OF DEFINED TERMS

          Defined Term   Page
“Acceptance Period”
    9  
“Affected Personnel”
    16  
“Affiliate”
    66  
“Approved Subcontractors”
    13  
“Audit Finding”
    39  
“Auditors”
“Audits”
    37
37  
“Bankruptcy Code”
    29  
“Claim
    49  
“Commercially Reasonable Efforts”
    66  
“Confidential Information”
    45  
“Contract Year”
    66  
“Control”
    66  
“Country Locations”
    66  
“Customer Data”
    21  
“Customer Retained Functions”
    66  
“Deliverable”
    9  
“Derivative Work”
    24  
“Disengagement Assistance”
    33  
“Dispute Date”
    61  
“Effective Date”
    66  
“End Users”
    66  
“Equipment”
    66  
“Force Majeure Event”
    56  
“Functions”
    3  
“Furnishing Party”
    45  
“in writing”
    60  
“including”
    60  
“Independent IP”
    24  
“In-flight Projects”
    19  
“Intellectual Property Rights”
    23  
“Key Supplier Positions”
    11  
“Local Adoption Agreement”
    66  
“Losses”
    49  
“may not”
    60  
“may”
    60  
“Mental Impressions”
    29  
“New Services”
    5  
“New Work”
    24  
“Notice of Election”
    54  
“On-site Customer Resources”
    17  
“Out-of-Pocket Expenses”
    67  

            Indirect Sourcing Services Agreement
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Solectron/IBM Confidential
INDEX OF DEFINED TERMS

          Defined Term   Page
“Procedures Manual”
    35  
“Project”
    67  
“Receiving Party”
    45  
“Service Commencement Date”
    3  
“Service Levels”
    67  
“Service Recipient”
    4  
“Services”
    3  
“shall”
    60  
“Software”
    68  
“Subcontractor”
    13  
“Supplier Indemnitees”
    52  
“Supplier Personnel”
    10  
“Transfer Date”
    17  
“Transition Plan”
    19  
“Transition”
    18  
“Transitioned Personnel”
    16  
“Use”
    68  
“Virus”
    43  
“will”
    60  
“Work Product”
    24  
“written”
    60  

            Indirect Sourcing Services Agreement
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Local Adoption Agreement (COUNTRY)
with reference to the
Indirect Sourcing Services Agreement
between
Solectron USA, Inc.
and
International Business Machines Corporation

      Indirect Sourcing Services Agreement
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Local Adoption Agreement – [COUNTRY]
This Local Adoption Agreement for [COUNTRY] (the “Local Country”) is dated as of
the Effective Date and is between the Local Parties (“Local IBM Party” and
“Local Solectron Party”) set forth below.
This Local Adoption Agreement, together with the Master Agreement (as defined
below), was written and negotiated in English, is the complete and exclusive
agreement between the Local Parties regarding its subject matter, and replaces
any prior oral or written communications between the Local Parties with respect
to that subject matter.
By signing below, the Local Parties agree to be bound by the terms of this Local
Adoption Agreement. Once this Local Adoption Agreement is executed by the Local
Parties, all Services provided by and to them on or after the Effective Date
shall be deemed to have been provided under this Local Adoption Agreement and
subject to its terms.

     
Agreed to:
  Agreed to:
[SOLECTRON LOCAL PARTY]
  [IBM LOCAL PARTY]
 
   
By:
  By:
 
         
 
   
Authorized Signature
  Authorized Signature
 
         
Name and Title (Type or Print)
  Name and Title (Type or Print)
Address:
  Address:
 
   
Date:
  Date:
 
   

      Indirect Sourcing Services Agreement
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1.   Incorporation of Master Agreement terms.

  (i)   This Local Adoption Agreement expressly incorporates by reference the
terms of the Indirect Sourcing Services Agreement (U.S. Master Agreement) (the
“Master Agreement”) dated as of the Effective Date and made between Solectron
USA, Inc. (“Solectron”) and International Business Machines Corporation (“IBM”),
each a “Lead Party,” with the intent that the Local IBM Party will provide, and
the Local Solectron Party will receive and pay for, Services in the Local
Country to the extent required by the Local Solectron Party in compliance with
the terms of the Master Agreement     (ii)   Capitalized terms used but not
defined in this Local Adoption Agreement shall have the meanings given them in
the Master Agreement and its Schedules.

2.   Amendments to the Master Agreement. The Local Parties acknowledge and agree
that it is in their mutual interests, as far as practicable and subject to any
applicable Laws, to have a consistent service delivery framework, solution,
pricing and terms for the global delivery of Services provided by IBM and its
Affiliates to Solectron and its Affiliates under the Master Agreement and Local
Adoption Agreements. Accordingly, subject to any applicable Laws:

  (i)   Each of the Local Parties authorizes its Lead Party, acting through its
designated representatives, to act on the Local Party’s behalf in connection
with the negotiation and execution of any amendment to the Master Agreement or
its Schedules that is made after the execution of this Local Adoption Agreement
(each an “Amendment”). Each Local Party authorizes its Lead Party to (a) take
all actions necessary or appropriate to enter into, execute, effectuate,
deliver, perform and consummate any Amendment; and (b) take all such further
actions and to negotiate, prepare, execute, deliver and cause the performance of
all such further documents and to effect all such further filings as the Lead
Parties deem necessary or appropriate to effectuate the foregoing.     (ii)  
Notwithstanding Section 2(i), above, any Amendment will be deemed to be ratified
by the Local Solectron Party and will bind the Local Solectron Party as an
amendment to this Local Adoption Agreement unless (a) the Local Solectron Party
objects in writing to the Amendment within 30 days of the agreement between
Solectron and IBM or (b) the Local IBM Party objects to or fails to ratify the
Amendment within 30 days of the agreement between Solectron and IBM, as
specified in Section 2(iii), below.     (iii)   Notwithstanding Section 2(i),
above, the Local IBM Party will have 30 days from the date of the agreement
between Solectron and IBM to either ratify an Amendment in writing or object in
writing to the Amendment. If the Local IBM Party so ratifies the Amendment, the
Amendment will bind the Local IBM Party as an amendment to this Local Adoption
Agreement.     (iv)   If either Local Party objects to an Amendment (or the
Local IBM Party fails to ratify the Amendment) within such 30 day period, then
the matter will promptly be discussed among the Lead Parties and Local Parties,
to determine

      Indirect Sourcing Services Agreement
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whether the matter will be resolved in accordance with Section 6 (Dispute
Resolution) of this Local Adoption Agreement or Section 21 (Dispute Resolution)
of the Master Agreement.

3.   Governance. Without limiting the operation of Section 2 (Amendments to the
Master Agreement), each of the Local Parties will implement and be subject to
the governance process described in Section 12 (Governance and Management) of
the Master Agreement and Schedule F (Governance Structure and Processes) of the
Master Agreement.   4.   Transition.

  (i)   The Services provided under this Local Adoption Agreement will be
implemented in accordance with Annex A-7 (Transition Plan).     (ii)   No
functionality of Solectron’s as-is environment in the Local Country will be
disabled until IBM demonstrates to Solectron’s reasonable satisfaction that the
affected processes and operations have been successfully migrated to IBM’s
service delivery environment and are functioning properly in that environment.

5.   Notices and Enforcement Rights.

  (i)   Each of the Local Parties authorizes its Lead Party to give notices on
the Local Party’s behalf as provided in Section 22.2 (Notices) of the Master
Agreement. Notices under this Local Adoption Agreement shall be sent:

In the case of Local IBM Party:

     
To:
   
 
   
Attn:
  Attn: Senior Counsel
Fax:
  Fax:      416-478-5155

In the case of Local Solectron Party:

     
To:
  With a copy to:
 
         
 
         
 
         
 
   
Attn:
  Attn:
Fax:
  Fax:

  (ii)   Notwithstanding any other provision of this Local Adoption Agreement, a
Local Party may enforce this Local Adoption Agreement against the other

      Indirect Sourcing Services Agreement
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Local Party, in accordance with the provisions of Section 6 (Dispute Resolution)
of this Local Adoption Agreement.

6.   Dispute Resolution.

  (i)   Any complaints, problems or disputes relating to the provision of the
Services, the interpretation of this Local Adoption Agreement or otherwise shall
first be handled in accordance with the process set out at Section 21 (Dispute
Resolution) of the Master Agreement. The Local Solectron Party and the Local IBM
Party hereby appoint Solectron or IBM (as applicable) as agents to bring any
actions, claims or proceedings and agree to do all such further acts or things
and to execute all such deeds and other documents as may be required to perfect
such appointment and/or to exercise such rights as described in this Section 6.
    (ii)   The venue for any mediation proceedings which are requested by the
parties under the JAMS rules referred to in the Master Agreement shall be
determined by the Lead Parties as provided in the Master Agreement.     (iii)  
For any litigation arising out of or relating to this Local Adoption Agreement
or the transactions and relationships contemplated by this Local Adoption
Agreement, regardless of the form of action or the Party that initiates it, the
Local Parties irrevocably and unconditionally submit to the non-exclusive
jurisdiction of and venue in the United States District Court for the Northern
District of California or, if that court does not have jurisdiction, in the
Superior Court of the State of California, Santa Clara County. The Local Parties
irrevocably and unconditionally waive any objection to the laying of venue of
any proceeding arising out of or relating to this Local Adoption Agreement in
the United States District Court for the Northern District of California or the
Superior Court of the State of California, Santa Clara County. The Local Parties
further consent to the jurisdiction of any court located within a district that
encompasses assets of a Local Party against whom a judgment (or award) has been
rendered for the enforcement of the judgment (or award) against the assets of
such Local Party.     (iv)   Nothing in this Local Adoption Agreement shall
prevent a Local Party from seeking, obtaining or implementing interim or
conservatory measures or other immediate relief in the circumstances described
in Section 21.4 (Equitable Remedies) of the Master Agreement.

7.   Service of Process. The Local Solectron Party and the Local IBM Party
hereby appoint Solectron and IBM as their respective agents for service of
process and agree that receipt by a Lead Party of a notice given in accordance
with the requirements of the Master Agreement and addressed to, inter alia, a
Local Party care of the Lead Party’s address for service of notices will be
deemed to have been received by the Local Party.   8.   Limitation of Liability.
For the avoidance of doubt, the term “fees paid or payable to IBM” in
Section 19.2(b) (Liability Cap) of the Agreement means fees paid or payable by
Local Solectron Party to Local IBM Party under this Local Adoption Agreement.  
9.   Local Party Variations. Any additions to or variations in the terms and
conditions

      Indirect Sourcing Services Agreement
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applicable to, or the scope or performance requirements of, the Services that
the Local IBM Party will provide to the Local Solectron Party under this Local
Adoption Agreement are set forth in Annex A. In the event of any conflict
between any terms in Annex A and the terms of the Master Agreement or any of its
schedules, exhibits or attachments, the provisions in Annex A shall apply to
this Local Adoption Agreement notwithstanding any terms to the contrary in the
Master Agreement.

      Indirect Sourcing Services Agreement
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Annex A

      Indirect Sourcing Services Agreement
EXECUTION COPY   Exhibit 1
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Confidential to Solectron and IBM
INDIRECT SOURCING SERVICES AGREEMENT
Between
Solectron and IBM
Exhibit 2
Work Order Template

      Indirect Sourcing Services Agreement
EXECUTION COPY   Exhibit 2
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Confidential to Solectron and IBM
Exhibit 2
Work Order Template
[Not for Execution]
                                                                                
Solectron/IBM MASTER SERVICES AGREEMENT
WORK ORDER NO. ___
This Work Order No ___(this “Work Order”) is issued under and pursuant to the
Indirect Sourcing Services Agreement with an Effective Date of February [ ],
2006 (the “Agreement”) between Solectron USA, Inc. (“Solectron”) and
International Business Machines Corporation (“IBM”).
Work Order Name:1
initiative Name(s):2
                                                            
Start Date:                                                              End
Date/Event:3                                                             
Solectron Purchase Order No.: 4
                                                            
Maximum Authorized Work Order Expenditure:5
                                                            
Work Order Contacts:

              IBM       Solectron
 
           
Name:
      Name:    
 
           
 
            Address:   Address:
 
           
 
                 
Email:
      Email:    
 
           
 
           
Tel:
      Tel:    
 
           
 
           
Mob:
      Mob:    
 
           
 
           

 

1   Insert the name of the Work Order.   2   Insert the name/title of the
initiative(s) to be carried out under the Work Order.   3   The Work Order end
date can be specified either as a calendar date or in the form of a milestone
event that signifies completion of all of the work. A calendar date should be
used only where it is the Parties’ intention that the Work Order expire on that
date even if all of the work has not yet been completed.   4   Insert the number
of the Solectron Purchase Order that authorizes the expenditure of funds under
the Work Order.   5   Insert the dollar amount representing the maximum
expenditure authorized by Solectron under the Work Order, any increase in which
will be handled in accordance with Schedule C (Charges).

      Indirect Sourcing Services Agreement
EXECUTION COPY   Exhibit 2
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Confidential to Solectron and IBM

     
Fax:                                                             
  Fax:      
                                                                           

Intending to be legally bound, each of the undersigned parties has caused its
duly authorized representative to execute this Work Order as of the Start Date
set forth above.

              Solectron       IBM
 
           
By:
      By:    
 
           
 
            Printed:   Printed:
 
            Title:   Title:
 
            Date:   Date:    

LIST OF ATTACHMENTS
[Insert here a list of the attachments to the Work Order. Following is a
straw-man list.]

1.   DETAILED SERVICES DESCRIPTION   2.   DELIVERABLES ACCEPTANCE CRITERIA   3.
  INTEGRATED TASK AND STAFFING PLAN   4.   SOLECTRON FACILITIES AND RESOURCES TO
BE MADE AVAILABLE   5.   IBM FACILITIES AND RESOURCES TO BE MADE AVAILABLE   6.
  SOLECTRON RESPONSIBILITIES   7.   PERFORMANCE ASSESSMENT MECHANISMS AND
PROCESS   8.   IBM CHARGES

      Indirect Sourcing Services Agreement
EXECUTION COPY   Exhibit 2
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1.   BACKGROUND AND CONTEXT

[Insert an executive-level summary of the place of the Work Order.]

2.   OVERVIEW OF THE INITIATIVE

[Insert an executive-level summary of what the overall initiative is about –
e.g., what are its overall scope and objectives and the nature of the work to be
performed. If this Work Order is only for a particular phase or phases of the
overall work related to the initiative(s), indicate that here and summarize how
the work to be performed under this Work Order will fit into the overall
initiative(s) as a whole.]

3.   THE SERVICES

3.1   Roles and Responsibilities.       In general, the Parties shall perform
the respective roles set out below, unless indicated otherwise in the initiative
description, or as agreed from time to time in the carrying out of such
initiative(s):

IBM and Solectron shall jointly, and in a timely, efficient, and cost-effective
manner:

  •   manage the initiative(s);     •   allocate and prioritize the deployment
of resources to meet the timelines and budgets;     •   collect and collate such
information as is necessary for the PMO to provide adequate reporting;     •  
develop a staffing transition plan which indicates how Solectron and IBM
personnel will transition between initiatives within a Work Order, as
appropriate; and     •   seek to resolve all matters requiring resolution.

IBM shall, in a timely manner:

  •   have primary responsibility for producing Deliverables in accordance with
the relevant initiative schedule and milestone;     •   utilize ‘best practices’
for relevant business practices and processes;     •   produce initial drafts of
Deliverables assigned per the approved work plans;     •   review the work with
Solectron;     •   propose methodologies for conducting the work;     •  
integrate work products and Solectron’s input in furtherance of each initiative;
    •   assign IBM resources identified in the staffing plan; and     •  
provide the final Deliverables for Acceptance by Solectron

Solectron shall, in a timely manner:

      Indirect Sourcing Services Agreement
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Confidential to Solectron and IBM

  •   provide data and Solectron perspectives on the relevant business practice
and processes;     •   complete tasks assigned per the approved work plans;    
•   provide feedback to IBM on the interim and final work products produced by
IBM;     •   Accept the final Deliverables produced by IBM in accordance with
Section 3.5 (Acceptance Process for Deliverables) of the Agreement and any
agreed acceptance criteria for such Deliverables;     •   assign Solectron
resources identified in the staffing plan; and     •   provide reasonable access
to existing non-confidential documentation and systems to support analysis of
current business processes and to relevant information required to complete
Deliverables.

All Solectron responsibilities, including those set forth above shall be
Solectron Retained Functions in accordance with Section 5.2 (Retained Functions
and Cooperation) of the Agreement.

3.2   Services       The services to be performed within each initiative of the
[insert name of Work Order] Work Order are described below.

  (a)   [Insert Name of initiative] [Follow the below format for each
initiative]     (i)   Scope of Work     [Insert a narrative description of the
Services to be performed as part of the initiative. For additional detail
describing the Services, refer to the Activities and Deliverables section below
or refer to an Attachment containing more detailed descriptions.]     (ii)  
Activities and Deliverables, Schedule, Milestones, Interdependencies and
Assumptions     This section describes the activities and Deliverables, defines
schedule and milestones, and describes interdependencies and assumptions for the
Program Management Office function.     [Insert a list of specific
activities/tasks to be performed, along with associated Deliverables.]

  A.   Activities and Deliverables

Activity Name                     Activity Description
                    Deliverable(s)                     Acceptance Criteria Name

  B.   Schedule

The initiative activities will be performed according to the following schedule:
[Insert here, or refer to an attachment containing, an initiative schedule and
timeline.]

      Indirect Sourcing Services Agreement
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Confidential to Solectron and IBM

  C.   Milestones

[Insert a list of deliverables that mark important progress towards the
completion of the work. Include corresponding Deliverable due dates. If
necessary, refer to attachments containing a narrative definition or description
of each milestone and Deliverable, identifying the source document containing
its requirements and specifications (if any). The following is an example.]
The initiative will include the following key delivery Milestones:
Milestone Name                     Milestone Description
                              Achieve By

  D.   Key Interdependencies

[Insert any activities or programs (external to the work Order) upon which the
initiative is interdependent (e.g. particular workstreams within other Work
Orders, programs external the Business Transformation Program, etc.)]

  E.   Initiative Specific Assumptions

[Insert any assumptions upon which the initiative relies (e.g. no more than X
number of applications will be included within the scope of the review)]

  F.   Acceptance Criteria

[Insert objective Acceptance criteria for each Deliverable or milestone, if
appropriate.]

3.3   Staffing Plan       This section estimates the staffing plan for each
initiative, including position/role, sourcing (Solectron, IBM or third party)
and total days allocated to the effort).       [Insert, of if necessary, refer
to an attachment containing, a fully loaded, integrated staffing plan for the
work, showing the numbers and types of all IBM Personnel (including
Subcontractors), Solectron personnel resources and third parties that will be
assigned to or required for the Work Order, and the required level of resources
by time period. An example follows.]

Position / Role                               Source
                                        Days

3.4   Key Positions       [Insert here, or refer to an attachment containing, a
list of any Key Positions for purposes of this Work Order, together with any
agreed-upon terms pertaining to that designation – e.g., the name of the IBM
Personnel proposed to fill the Key Position, whether the person is assigned
full-time or a percentage of time to the project, where s/he will be located,
the duration and nature of the assigned role, etc. An example follows.]

      Indirect Sourcing Services Agreement
EXECUTION COPY   Exhibit 2
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Confidential to Solectron and IBM
The following are the Key Positions and associated Key Personnel for this Work
Order:
Key Position                                          Name of IBM Personnel
Key Position                                          Name of Solectron
Personnel

3.5   Subcontractors

[If any Subcontractors will be used to perform the work, identify them and their
role here. They must also be identified in the Staffing Plan above.]

3.6   Managed Third Parties

[See Section 4.7 of the Agreement for background. If the scope of IBM’s
responsibility under this Work Order will involve them managing the efforts of
Managed Third Parties, describe that here.]

3.7   Service Locations

[Identify here the locations at which the Services will be performed.]

3.8   Use of Solectron Facilities and Resources

[Insert here, or refer to an attachment containing, a list and description of
any Solectron facilities and other resources (e.g., equipment and software)
Solectron will be required to furnish or make available to IBM to enable or
facilitate IBM’s performance of the Services.]

3.9   IBM Facilities and Resources

[Insert here, or refer to an attachment containing, a list and description of
the facilities and other resources (e.g., equipment and software) IBM will
furnish to enable or facilitate its performance of the Services.]

3.10   General Assumptions

This section describes the general assumptions that have been made as part of
this Work Order.

  •   Adequate facilities to support the functions to be performed under this
Work Order will be established in a timely manner.

      Indirect Sourcing Services Agreement
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Confidential to Solectron and IBM
* Omitted and filed separately with the SEC pursuant to a confidential treatment
request

  •   Any Solectron resources, or third party resources, agreed to by Solectron
and IBM will have the availability, skills and ability necessary to deliver as
required as described in this Work Order.     •   Performance of this Work Order
is subject to Section 5.3 (Savings Clause) of the Agreement.     •   Solectron’s
staffing needs will be assigned in a timely manner to meet the schedule. If the
Solectron resources are not assigned to a specific function in a timely manner
or do not have the required skills, Solectron and IBM project management will
determine how to staff the work days. If the staffing decision results in an IBM
resource consuming the days, it will constitute a Change and will be handled
under the Change Management Process.     •   The Parties will mutually agree
upon the use of methodologies proposed by IBM.     [Insert here additional
assumptions, if any, not specific to a particular initiative.]

4.   PERFORMANCE ASSESSMENT

[Insert here a high-level description of the mechanisms and process that will be
used to monitor and evaluate IBM’s performance under this Work Order, referring
as appropriate to an attachment containing further details – e.g., specific
Service Levels. Indicate the frequency and nature of performance and status
reports that will be delivered to Solectron.]

5.   COMPENSATION

5.1   Billing Method [check one]

         
 
  o   T&M Services. The Project Services described in this Work Order are T&M
Services as described in Schedule C (Charges).
 
       
 
  o   Fixed Price Services. The Project Services described in this Work Order
are Fixed Price Services as described in Schedule C (Charges). The fixed price
will be due and payable in progress payments made in accordance with the
[following] Payment Milestone schedule [set forth as Attachment ___]: [Insert or
refer to attached Payment Milestone schedule.]
 
       
 
  o   Other Basis. [Specify method of compensation.]

6.   WORK ORDER TERMINATION

6.1   Early [*] and De-mobilization Costs

[Insert here any specific provisions or terms relating to termination of this
Work Order prior to its completion pursuant to Section 11 (Term and Termination)
of the Agreement – e.g., termination notice period, [*], etc.]

      Indirect Sourcing Services Agreement
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Confidential to Solectron and IBM

7.   SPECIAL TERMS

7.1   IP Designations

[Insert here any applicable IP designations that may apply to Deliverables or
Independent IP that may be incorporated into Deliverables. See Section 10
(Intellectual Property Rights) of the Agreement.]

7.2   Warranty Period

[Insert the warranty period for any operational Deliverables.]

7.3   Financial Responsibility for Equipment, Software, Facilities and Third
Party Services

[If any equipment, software, facilities or third party services are to be
procured as part of the Services or Deliverables in this Work Order, insert
details regarding same in this section and indicate which Party has financial
responsibility for same.]

7.4   Agreement Overrides

[If the Parties have agreed to deviate from or override any provisions of the
Agreement for purposes of this Work Order, identify the affected Agreement
provisions here by section number and set out the language describing what has
been agreed to instead. Please note that if this section is included in a Work
Order, that Work Order must be approved by both Parties’ legal counsel.]

7.5   Other Terms

[Insert here any other terms agreed by the Parties that are not within the scope
of the above sections.]

8.   DEFINED TERMS USED IN THIS WORK ORDER

Capitalized terms used in this Work Order and not defined shall have the meaning
ascribed to those terms in the Agreement.
This Work Order has received legal review and approval by Solectron and IBM, as
evidenced below.

              Solectron USA, Inc.   International Business Machines Corporation
 
           
By:
      By:    
 
           

             
 
            Printed:     Printed:    
 
           

             
 
            Title:       Title:      
 
           
 
            Date:   Date:    
 
           

     
 
   
Indirect Sourcing Services Agreement
EXECUTION COPY
  Exhibit 2 Page 9

 

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Confidential to Solectron and IBM
(End of Main Body of Work Order)

      Indirect Sourcing Services Agreement
EXECUTION COPY   Exhibit 2
Page 8

 

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INDIRECT SOURCING SERVICES AGREEMENT
Between
Solectron and Emptoris
Exhibit 3 (Part 1 of 2)
Emptoris License & Support Agreement (the “Agreement”)
1. License to Use. Emptoris, Inc. (“Emptoris”) grants Solectron Corporation, for
itself and for the benefit of its subsidiaries and Affiliates (“You,” “Your” and
“Yours”) a non-exclusive, non-transferable (except as permitted herein), fully
paid, royalty-free, worldwide and irrevocable license (the “License”) to use,
for Your internal business purposes, copy, execute, install, archive, maintain
and operate, the Emptoris’ software, known as Emptoris (further detailed in
Exhibit X) (the “Software”) and Documentation (defined hereinafter) and any
tools necessary to load and implement the Software, in machine-readable form
(the “Product”). Emptoris agrees to provide the Product to Solectron upon
Solectron’s request; provided that any delivery of the Product will be made by
electronically through FTP. “Documentation” means Emptoris’ then current
electronic published guides, marketing or promotional material user guides,
manuals, product descriptions, on-line help and training materials for the
Software produced by or on behalf of Emptoris. The term of the license shall be
perpetual. The license to use the Software permits You to, without limitation,
to use the Software in the same manner as You are permitted for indirect spend
only and includes the right to use and access the Software throughout the world
without limitation on the number of simultaneous or cumulative users or
installations and without limitation on the number or location of simultaneous
or cumulative sites of Yours. The license to use the Software permits You to
allow to independent contractors acting in the stead of employees and third
party contractors to use the Software to the same extent as You, but solely in
support of Your internal business purposes and provided each has a
confidentiality agreement with You that obligates them to maintain and protect
the confidentiality of third party materials to the same extent as required
herein. For the purposes of this Agreement, Solectron’s Affiliates shall mean
any entity which directly or indirectly: (i) controls Solectron; (ii) is
controlled by Solectron; or (iii) is under common control with Solectron.
“Control” hereunder means the direct or beneficial ownership of a voting
interest of at least fifty percent (50%) (or less in a foreign jurisdiction
where majority ownership is prohibited by law) or the right or power, directly
or indirectly, to elect a majority of the board of directors, or the right or
power to control management. Third Party Software: The term “Software” includes
certain third party software required to operate the Emptoris developed
software. The License Fee includes the right to operate the third party software
only when hosted by Emptoris. In the event that You move the software to any
system not hosted by Emptoris you will be required to sublicense the third party
software from Emptoris and to pay the associated fees therefore for each
instance of the Software not hosted by Emptoris.
1A. Support and Maintenance. Provided that Support and Maintenance has been
ordered, You will receive the Emptoris Support that IBM has ordered during the
outsourcing term, or that You have selected after the Outsourcing term is over.
Following termination of the Outsourcing Agreement, any Support and future
Revisions of the Product, along with any maintenance and support that You desire
to receive shall be provided according to these terms, provided that You pay a
Support and Maintenance Fee stated in Exhibit 3 (Part 2 of 2). Support, as used
herein, shall include the services described in Exhibit 3 (Part 2 of 2), at the
Supplier Support levels, in accordance with the performance level described
therein. In the event of any discontinuation or lapse by You in paying for the
services described herein, when required, You may reinstate these services at
the pro-rated annual Support and Maintenance Fee for the time during which You
actually receive the services, at the yearly rates set forth in Exhibit 3
(Part 2 of 2), and You shall pay the unpaid Maintenance and Support Fees for the
time You were off Maintenance and Support before You are reinstated, however,
you will not owe any additional reinstatement charges or penalties. In the event
Emptoris fails to meet the requirements for these services described herein and
such failure remains uncured 30 days following written notice by You, You, at
Your sole option may cancel these services and Emptoris shall immediately return
a pro rata refund of Support and Maintenance Fees previously paid by You for the
balance of the then-current term. For each Revision of the Software, Emptoris
shall offer these services for at least 2 years from each applicable Revision’s
release date for that Revision.
2. Proprietary Rights and Restrictions. Emptoris and/or its licensors retains
all right, title, and interest in the Product and in all copies thereof, and no
title to the Product or any intellectual property or other rights therein, are
transferred to You by virtue of this Agreement other than as specified herein.
No right, title or interest to any trademarks, service marks or trade names of
Emptoris or its licensors is granted by this Agreement. The Product is

      Indirect Sourcing Services Agreement
EXECUTION COPY   Exhibit 3.1
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copyrighted and contains proprietary information and trade secrets belonging to
Emptoris and/or its licensors. You will not use Product except as permitted
herein and for any purpose other than for Your own internal business purposes.
You shall ensure that all proprietary rights notices on Product are reproduced
and applied to any copies. You agree not to cause or permit the reverse
engineering, reverse assembly, or reverse compilation of the Product or
otherwise attempt to derive source code from the Product. You may not create
derivative works based upon all or part of Product. You may not transfer, lend,
lease, assign, sublicense, and/or make available through timesharing or through
managed services Product, in whole or in part.
3. Confidentiality. You agree that Product is and contains confidential property
of Emptoris (“Proprietary Information”). You will not use or disclose any
Proprietary Information except as permitted herein or to the extent You can
demonstrate that any such Proprietary Information: is in the public domain
through no fault of Your own and generally available for use and disclosure by
the general public without any charge, restriction or license, is required to be
disclosed by any authority having jurisdiction so long as You provide Emptoris
reasonable notice of such disclosure prior to its release, has been released by
Emptoris to third parties without restriction, was received by You without
restriction from a third party who is under no lawful obligation to provide it
under any restriction, was independently developed by You without breach of this
Agreement or was already in Your possession without restriction at the time You
received it under this Agreement . You recognize and agree that there may be no
adequate remedy at law for a breach of this Section, that such a breach could
irreparably harm Emptoris and that Emptoris may be entitled to equitable relief
(including, without limitation, injunctive relief) with respect to any such
breach or potential breach, in addition to any other remedies available at law.
Emptoris will protect any confidential information of Yours on these same terms.
Confidential information of Yours is any that you so designate, any that should
be known to Emptoris using reasonable business judgment as confidential
information and includes this Agreement, Your identity and the fact that we have
an Agreement with You. The parties’ obligations of confidentiality under this
Agreement shall not be construed to limit either party’s right to independently
develop or acquire products without use of the other party’s confidential
information. Further, except as otherwise provided herein, either party shall be
free to use, for any purpose, the residuals resulting from access to or work
with such confidential information, provided that such party shall maintain the
confidentiality of the confidential information as provided herein. The term
“residuals” means information in non-tangible form, which may be retained by
persons who have had access to the confidential information, including ideas,
concepts, know-how or techniques contained therein. Neither party shall have any
obligation to limit or restrict the assignment of such persons or to pay
royalties for any work resulting from the use of residuals. However, the
foregoing shall not be deemed to grant to either party a license under the other
party’s copyrights or patents.
4. Indemnification. Emptoris agrees to defend You, Your and Your affiliates, and
each of Your and their employees, directors and shareholders (the “Indemnities”)
from and against any third party claim or action based on any alleged
infringement of any patent, copyright, trade secret, or other proprietary right
as a result of the use of the Product according to the terms and conditions of
this Agreement, and Emptoris agrees to indemnify the Indemnitees from any costs
and/or damages awarded against them in any such infringement claim or action or
settlement thereof, provided that (i) Emptoris is promptly notified in writing
of such claim, (ii) the Indemnitees grant Emptoris sole control of the defense
and any related settlement negotiations; provided that such settlements do not
result in an admission of wrong-doing by the Indemnitee or payment by the
Indemnitee of any monies, and (iii) You cooperate with Emptoris in defense of
such claim. Notwithstanding the foregoing, Emptoris shall have no liability to
You if the infringement results from use of the Product in combination with
software not provided, known or approved by Emptoris that causes the
infringement or modifications to the Product not made, known or approved by
Emptoris. In the event of a likelihood of an injunction requiring the
discontinued use of the Product, Emptoris shall provide (i) a substitute with
same or similar functionality or (ii) obtain at not charge to You, a license to
continue use of the Product in accordance with the terms herein. or if neither
(i) or (ii) are reasonably available, refund the License Fees paid for the
infringing module pro-rated on a straight-line basis over the license term for
such module and any paid but unamortized Maintenance Fees (based on
straight-line amortization of the annual Maintenance Fee.) The foregoing states
the entire liability of Emptoris with respect to infringement of any patents,
copyrights, trade secrets, or other proprietary rights by the Product or any
part thereof.
5. Warranties and Limitations. A. Emptoris warrants and represents the following
the following: Emptoris warrants for a period of 90 days from delivery that the
media of any software provided under this Agreement, if any, shall be new and
shall be free from defects in manufacture, materials, and manufactured in a good
and workmanlike manner; any software provided under this Agreement shall:
conform to the functional features described in, and perform in accordance with,
the Documentation; accurately manipulate, process, compare, display and
calculate date or time data including leap years; not be interrupted or
adversely affected by

      Indirect Sourcing Services Agreement
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the manipulation, processing, comparison, display or calculation of dates,
including leap years; not contain any program routine, device, code or
instructions (including any code or instructions provided by third parties) or
other undisclosed feature, including, without limitation, a time bomb, virus,
software lock, drop-dead device, malicious logic, worm, Trojan horse, bug,
error, defect or trap door (including year 2000), that is capable of accessing,
modifying, deleting, damaging, disabling, deactivating, interfering with or
otherwise harming the Software, any computers, networks, data or other
electronically stored information, or computer programs or systems.
B. EMPTORIS AND ITS THIRD PARTY LICENSORS MAKE NO OTHER WARRANTIES TO YOU,
EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. EXCEPT FOR ITS OBLIGATIONS
PURSUANT TO SECTION 4 ABOVE, EMPTORIS’ AGGREGATE LIABILITY FOR ANY AND ALL
CLAIMS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, THE PERFORMANCE OF
PRODUCT PROVIDED HEREUNDER, AND/OR EMPTORIS’ PERFORMANCE OF SERVICES, SHALL NOT
EXCEED $500,000 WITHOUT REGARD TO WHETHER A CLAIM IS BASED ON CONTRACT OR TORT,
INCLUDING NEGLIGENCE. EXCEPT FOR DAMAGES RESULTING FROM UNAUTHORIZED USE OR
DISCLOSURE OF CONFIDENTIAL INFORMATION (INCLUDING THE SOFTWARE) RESULTING FROM
FAILURES TO PROTECT THE CONFIDENTIAL INFORMATION OF THE OTHER PARTY WITH THE
SAME DEGREE OF CARE AND SECURITY PRECAUTIONS THAT A PARTY USES TO PROTECT ITS
OWN INFORMATION (WHICH CANNOT BE LESS THAN REASONABLE PRECAUTIONS) IN NO EVENT
SHALL EMPTORIS OR ITS LICENSORS, OR YOU BE LIABLE TO THE OTHER FOR ANY INDIRECT,
SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT
LIMITATION, DAMAGES RESULTING FROM LOSS OF PROFITS, DATA, OR BUSINESS ARISING
OUT OF OR IN CONNECTION WITH THIS AGREEMENT, EVEN IF A PARTY HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES.
6. Delivery. Any delivery required hereunder shall be made electronically
through FTP.
7. Fees. No other fees are due and payable under this Agreement, except for any
Support and Maintenance Fees due after the termination of the Outsourcing
Agreement and then only provided You have issued a purchase order and purchase
order number for same for the services.
8. Term and Termination. Either party may suspend performance and/or terminate
(with the exception of the license and the rights and obligations thereunder)
this Agreement immediately upon written notice at any time if the other party is
in material breach of any material warranty, term, condition or covenant of this
Agreement, and fails to cure that breach within 30 days after written notice
thereof. In the event that You are in breach of Your obligations under
Section 1, 2 or 3 and fail to cure such breach within 30 days after written
notice thereof, then Emptoris may terminate the license in addition to the
Agreement.
In the event of termination or expiration of this Agreement for any reason, all
Section which by their nature should survive shall, but specifically including
Sections 2,3 4, and 5 shall survive termination. Neither party shall be liable
to the other for damages of any sort resulting solely from terminating this
Agreement in accordance with its terms. Emptoris agrees that upon termination of
this Agreement, it will promptly return all material provided by You, including,
but not limited to drawings, blueprints, notes, memoranda, specifications,
designs, devices, documents and any other material containing or disclosing any
confidential or proprietary information. An officer of Emptoris shall certify in
writing that all such materials have been returned at the time that such return
of materials occurs.
9. Insurance. Emptoris shall maintain insurance covering its liability to its
employees and to You in amounts and with companies satisfactory to You, admitted
to do business in the state or country (as applicable) in which the Agreement
will be performed and holding a current Best’s rating of “A minus” or better.
The insurance coverage required by the Agreement shall not be less than the
following: (i) Workers’ Compensation Insurance in accordance with the laws of
the state or country, as applicable, in which the Agreement is performed and
Employer’s Liability Insurance, in the amount required by such laws or
$1,000,000 per accident for bodily injury and $1,000,000 per employee/aggregate
for disease, whichever is greater; (ii) Commercial General Liability Insurance,
including contractual liability, with a $1,000,000 combined single limit per
occurrence and $2,000,000 annual aggregate; and (iii) Professional Liability and
Errors & Omissions Liability Insurance with policy limits of not less than US
$2,000,000.00 for each claim.. The Professional Liability and Errors & Omissions
Liability Insurance retroactive coverage date will be no later than the date of
the last to execute this Agreement, as between Emptoris and You.
10. Installation and Support. All installation and support will be provided to
You by IBM during the term of the Outsourcing Agreement.

      Indirect Sourcing Services Agreement
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11. Export Regulation and US Government Restricted Rights. Both parties shall
comply strictly with all US export control laws, including the US Export
Administration Act and its associated regulations.
12. General. This Agreement is made under the laws of the State of Delaware,
USA, excluding the choice of law and conflict of law provisions. This Agreement
is the entire agreement between You and Emptoris relating to Product and
supersedes all prior or contemporaneous or other oral or written communications,
proposals, and representations with respect to its subject matter, as well as
without limitation terms and conditions of any purchase order. No modification
to this Agreement is binding unless in writing and signed by a duly authorized
representative of each party. The waiver or failure of either party to exercise
any right provided for herein shall not be deemed a waiver of any further right
hereunder. If any provision of this Agreement is held invalid, all other
provisions shall remain valid unless such validity would frustrate the purpose
of this Agreement, and this Agreement shall be enforced to the full extent
allowable under applicable law. Except in the event of a merger or sale of
substantially all of its assets provided that it is not to a competitor of the
other party, neither party may assign its rights, duties or obligations under
this Agreement without the prior written consent of the other party and any
attempt to do so shall be void and of no effect. All of Emptoris’ licensors and
subsidiaries are direct and intended third-party beneficiaries of this Agreement
and may enforce it against You. Unless otherwise stated, all remedies provided
herein are cumulative of those at law or in equity. All notices required by this
Agreement shall be in writing and delivered by certified mail, return receipt
requested and all postage paid to the addresses set forth below or at such other
address as either party may furnish to the other in writing. Notwithstanding any
applicable “shrink wrap” license agreement or EULA (end user license agreement)
that may be imbedded as a part of the Product or packaged with the Product and
which You or a licensee is required to accept as a condition to the installation
and use of the Software, the parties agree that any such “shrink wrap” license
agreement(s) or EULA will have no legal effect and that this Agreement
supersedes any such “shrink wrap” license agreement, EULA or other licensing
terms and conditions. Any and all schedules, exhibits, and attachments that are
annexed to this Agreement are expressly made a part of this Agreement and are
incorporated herein by this reference. Any and all references to this Agreement
shall be deemed to refer to and include this Agreement and all such schedules,
exhibits and attachments, as amended from time to time. This Agreement may be
executed in any number of counterparts each of which shall be deemed an original
and as executed shall constitute one agreement, binding on both parties even
though both parties do not sign the same counterpart
13. Taxes. The amounts to be paid by You, if any do not include any foreign,
U.S. federal, state, local, municipal or other governmental taxes, duties,
levies, fees, excises or tariffs, arising as a result of or in connection with
the transactions contemplated under this Agreement. The only taxes You are
required to pay under or pursuant to this Agreement are those owed by You solely
as a result of entering into this Agreement and the payment of the fees
hereunder, that are required to be collected from You under applicable law, and
that are based solely upon the amounts payable under this Agreement (such taxes
the “Collected Taxes”). Collected Taxes shall be stated separately as applicable
on Emptoris invoices and shall be remitted by You to Emptoris, unless You have
provided a valid exemption certificate.
14. Escrow.
A.Contemporaneous with the execution of this Agreement, Emptoris agrees that
IBM, without further permission or action, may provide Solectron with continued
use and access to the Software as long a the Indirect Sourcing Services
Agreement between IBM and Solectron remains in effect or IBM otherwise provides
access and use of the Software to Solectron.
B. Upon the termination of Indirect Sourcing Services Agreement or when IBM
ceases to provide Solectron with use or access to the Software as contemplated
by the Indirect Sourcing Services Agreement, Emptoris and Solectron will,
execute an Escrowed Source Code Agreement (the “Source Code Agreement”),
substantially in the form as Exhibit E, pursuant to which GRM Information
Management Services or other reputable escrow agent selected by Solectron will
be designated as the escrow agent. Provided that, (i) upon the termination of
the Indirect Sourcing Services Agreement or Solectron otherwise determines to
use the Software independent of IBM or the Indirect Sourcing Services Agreement,
Emptoris agrees to pay the cost for the escrow under the Source Code Agreement
if Solectron enters into a maintenance agreement with Emptoris for the Software
or (ii) upon the termination of the Indirect Sourcing Services Agreement or
Solectron otherwise determines to use the Software independent of IBM or the
Indirect Sourcing Services Agreement and does not enter into a maintenance
agreement with Emptoris for the Software, Solectron will pay the cost for the
escrow under the Source Code Agreement.. In no event shall Emptoris have the
right or option, stated or otherwise, to unilaterally terminate the Source Code
Agreement. Emptoris acknowledges and agrees that the governing license for the
Software set forth in this Agreement includes the right to use the Source Code
received under this Section as necessary to maintain the

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Software. Emptoris will promptly and continuously update and supplement the
Source Code as necessary with all revisions, corrections, enhancements, and
other changes developed for the Software and related Documentation as set forth
in the Source Code Agreement.

              Solectron Corporation   Emptoris
 
           
By: 
 
  By: 
 
 
       
 
            Printed: 
 
  Printed: Bob Kellegrew
 
           
 
            Title: 
 
  Title: VP and General Counsel
 
           
 
            Date: 
 
  Date: 
 
 
              Address: 847 Gibraltar Drive,   Address: 200 Wheeler Road, 2nd
Floor Milpitas, CA, 95035   Burlington, MA 01803Milpitas, CA, 95035

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Exhibit X
Emptoris Software Modules Included for Solectron License:

  •   Supplier Qualification (RFI)     •   Sealed Bid Request for Quote (RFQ)  
  •   Request for Proposal (RFP)     •   Reverse Auction (Standard and Advanced)
    •   Buyer Decision Support Optimization     •   Category Management     •  
Contract Management     •   Contract Authoring     •   Basic Report Writer

Emptoris Software Modules Excluded for Solectron License:

  •   Buyer Survey     •   Executive Dashboard     •   Supplier Performance
Management     •   Supplier Assessment     •   Compliance (Procure-to-Pay
Monitoring)     •   Compliance (Supply Base Monitoring)     •   Supplier
Decision Support Optimization     •   Spend Analyzer     •   Spend Data Manager
    •   Project Management

      Indirect Sourcing Services Agreement
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INDIRECT SOURCING SERVICES AGREEMENT
Between
Solectron and Emptoris
Exhibit 3 (Part 2 of 2)
Support Services
1.0 TECHNICAL SUPPORT

  A)   Emptoris shall exercise commercially reasonable efforts to correct any
failure, malfunction, defect or non-conformity in an Emptoris module which
prevents an Emptoris module from performing in accordance with applicable
specifications and/or documentation following notification of any such failure,
malfunction, defect or non-conformity. In any event, Emptoris shall provide the
services herein and below in accordance with the Key Performance indicators
below. Emptoris shall provide Enhancements (new releases and versions, ) and
program fix tapes (and related documentation) made generally available to all
licensees of Emptoris who have purchased support and maintenance during the term
of this Agreement. Enhancements do not include modules or add-on products that
You have not licensed.     B)   Telephone and e-mail consultation services,
including problem solving, bug reporting, documentation clarification and
technical guidance for the Products are offered via the following service
levels:

             
Level
  Available to Participate   Language Support   Hours of Service Availability
Standard
  One Primary Contact

Multiple Alternate
Contact   English-only   8:00am-8:00pm Eastern Time (U.S.)
 
           
Extended
  One Primary Contact

Multiple Alternate
Contact   English-only   24x5, Monday through Friday,
in the US, Eastern Time
 
           
Premium
  Primary Contact

Multiple Alternate
Contacts

All Trained Client Buyers   English-only   24x5, Monday through Friday,
in the US, Eastern Time
(24x7 pager service with 1
hour response)
 
           
Supplier Support
  Primary Contact

Unlimited Alternate   English

Spanish   24x5, Monday through Friday, WHERE? English, 9am-5pm CET
 
  Contacts   Italian   for Spanish, Italian, German, Portuguese, and French,
9am-
 
  All Trained Client Buyers        

      Indirect Sourcing Services Agreement
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Level
  Available to Participate   Language Support   Hours of Service Availability
 
  All Trained Suppliers   German
Portuguese
Japanese
Chinese
French   5pm JST for Japanese, and 9am-5pm AWST for Hong Kong/Beijing

Standard Support: Emptoris will assist the Primary Contact or the Alternate
Contacts (as designated above), in identifying, verifying and attempting to
resolve problems in the Products. Client will pre-screen calls from Client’s
suppliers and end users. Telephone and e-mail consultations will be available
during the hours of 8:00 a.m. to 8:00 p.m.], United States Eastern Time, Monday
through Friday, exclusive of Emptoris holidays (generally Massachusetts’s
holidays). All Contacts (and any of their replacements) must receive appropriate
Emptoris training, at Client’s expense, on the Products prior to Emptoris’
obligation to perform telephone support. Emptoris support can be obtained by
sending e-mail to support@Emptoris.com or an alternate address that may be
supplied by Emptoris from time to time. In addition to phone and email support,
Frequently Asked Questions screens may be made available. Subject to Client’s
security requirements, Client shall provide Clarify with reasonable secure
access to and use of all information and system facilities including, but not
limited to, a modem connection to Client’s principal Server, which has been
determined by the parties to be required in order that timely Support may be
provided pursuant to this Agreement.
Extended Support: If Client has paid for Extended Support, Client will receive
all the services of Standard Support, 24 hours a day, 5 days a week.
Premium Support: If Client has paid for Premium Support, Client will receive all
the services of Extended Support and will additionally:

         
 
  i.   Be entitled to have unlimited Alternate Contacts
 
       
 
  ii.   Be entitled to have unlimited trained client buyers receive support from
the Emptoris help desk
 
       
 
  iii.   Have access to a support consultant, available by electronic pager, 24
hours each day, 7 days a week for severity 1 issues DURING LIVE AUCTIONS AND
SOURCING EVENTS.

Maintenance Level Service means the service provided when Client identifies an
error.

  a)   Level 1 is the service provided in response to the Client’s initial phone
call identifying an error     b)   Level 2 is the service provided to reproduce
and attempt to correct the error or to find that the service provider cannot
reproduce the error     c)   Level 3 is the service provided to isolate the
error at the component level of the Code. The service provider distributes the
Error Correction or circumvention or gives notice if no Error Correction or
circumvention is found

Service Support Documentation
Detail documentation in relation to service support will be maintained by
Emptoris. Each case will be recorded with the originator of the case within the
customer organization, the date and time of originating case, date and time of
resolution, and method of resolution at a minimum. Primary and Alternate
Contacts can monitor cases for their organization on-line via a web-based
customer service portal.
Key Performance Indicators

      Indirect Sourcing Services Agreement
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The key performance indicators defined in the columns of the Service description
and their exact definition are listed in the following table:

             
Standard-KPI
  Formula / Targets within the Hours of Service Availability, unless noted to
the contrary below   interval of measure   Interval for reporting
Help Desk Service
  5 minute response time for phone call.
2 hour response time for e-mail.   Minute / Hour   monthly
 
           
24x7 Pager Service for
Premium Support
  60 minute response time from initial call. Effective 10pm Atlantic time each
Friday through 3pm Atlantic time each Sunday 5 minute response time for phone
call to help desk 3pm Sunday through 10pm Friday each week.
2 hour response time for e-mail.   Minute / Hour   monthly
 
           
Resolution Efficiency
Targets (for product
usage inquiries)
  60% of product usage inquiries handled by first level support engineers  
Support tickets by
month   monthly
 
           
Resolution Timeframe
Targets (for product
usage inquiries)
  Level 1 escalation to level 2 engineer for all cases not resolved within 8
hours        
 
           
Response Time ( Error
diagnostic targets
  Severity Error 1 within
1 hour
Severity Error 2 within
4 hours
Severity Error 3 within
24 hours       monthly
 
           
Resolution Time
Targets
  Severity Error 1 within 48 hours
Severity Error 2 within 20 calendar days
Severity Error 3 to be determined on a case by case basis        

Definition of the KPI

  •   Availability         The availability is defined in a way that the
provided service must be delivered within the agreed service hours (normally
expressed as a percentage).     •   Service Availability         Service
Availability is the hours that the customer can expect the service to be
available.     •   Response Time         Response Time is the elapsed time
between the initial call by the customer and the verbal response from the
Emptoris Help Desk and/or Support Engineer.

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  •   Resolution Time         Resolution time is the elapsed time between the
initial call by the customer and when a resolution to an incident is in place.
This resolution may not be the final problem resolution but could also mean the
provision of a work-around.

2.0 SERVICE LEVEL COMMITMENTS. Emptoris will expend commercially reasonable
efforts to provide an Error Correction designed to solve or bypass a reported
Error. Emptoris shall reasonably determine the priority level of Errors.
Emptoris uses the following protocols (All times shown reflect regular business
hours)..:
“Response Time” means the period by which Emptoris must initially respond to any
Errors. The periods (for each of the severity levels) are set forth below and
are measured from when Supplier becomes aware of the problem and are based on
business hours and the level of service contracted for:

     
Severity 1 Errors
  within 1 hour  
Severity 2 Errors
  within 4 hours  
Severity 3 Errors
  within 24 hours

Error Correction targets:
Severity 1 Errors: Emptoris promptly initiates the following procedures:
(1) assigns specialists to correct the Error on an expedited basis; (2) provides
ongoing communication on the status of an Error Correction; and (3) commences
efforts to provide a temporary workaround or fix.
Severity 2 Errors: Emptoris assigns a specialist to commence an Error Correction
and provides additional, escalated procedures as reasonably determined necessary
by Emptoris support staff. Emptoris exercises all commercially reasonable
efforts to provide a workaround or include a fix in the next Maintenance
Release.
Severity 3 Errors: Emptoris will generally make commercially reasonable efforts
to include an Error Correction in the next Maintenance Release.
“Resolution Targets” means the time periods by which Emptoris will endeavour,
using commercially reasonable efforts, to resolve problems using an Error
Correction or Maintenance Release. The Resolution Targets, by severity of the
error, are as follows:

     
Severity 1 Errors
  48 hours  
Severity 2 Errors
  20 calendar days  
Severity 3 Errors
  To be determined on a case by case basis

The times set forth above shall commence at the conclusion of the Response Time
for the severity level.
Error” means a failure of the Product to conform to the specifications as set
forth in the Documentation resulting in the inability to use the Product as
described in the Documentation or a considerable restriction in use of the
Products. Errors are classed Severity 1, 2 or 3, as follows:
“Severity 1 Error”:

  •   Products production unit severely impacted or completely down.     •  
Project deliverables severely impacted.     •   Products operations of
mission-critical applications are down.     “Severity 2 Error”:     •  
Production unit functioning with limited use.     •   Production unit unstable,
with periodic interruptions.

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  •   Mission-critical applications are not affected, but Products interruptions
occur.     •   Time -sensitive question impacting performance or deliverables.  
  “Severity 3 Error”:     •   General information.     •   Need clarification of
procedures or information in documentation.     •   Product enhancement requests

“Error Correction” means either a Product modification or addition that, when
made or added to the Product, corrects the Error, or a procedure or routine
that, when observed in the regular operation of the Product, eliminates the
practical adverse effect of the Error on End User.
“Error Corrections” means all upgrades, updates, and fixes, workarounds, and
other modifications to the Product or to the Third-Party Products, other than
Enhancements, which are made in order to correct Errors in the Products as
defined herein.
Maintenance and Support Fees:
Solectron is not required to pay any Maintenance and Support Fees to Emptoris
during the term of the Outsourcing Agreement.
The Annual Maintenance & Support Fees will be, at maximum, as follows. Solectron
is not contracting in advance for these services and reserves the right to
negotiate a lower price for these services with Emptoris.
Current Year Annual Maintenance & Support pricing including escrow management:
Standard: $170,000
Extended: $199,840
Premium: $228,100
Solectron may contract with Emptoris for annual Maintenance & Support during the
next five years at an annual fee equivalent to the above prices adjusted
according to the US Employment Cost Index (ECI) as follows:
1. The Employment Cost Index (ECI) is a measure of the change in the cost of
labor, free from the influence of employment shifts among occupations and
industries. The compensation series includes changes in wages and salaries and
employer costs for employee benefits.http://www.bls.gov/news.release/eci.toc.htm
2. Example- If Solectron agrees to pay the annual Maintenance & Support fee
quoted above adjusted for the annual price increases as measured by the ECI
index. Thus, for purposes of illustration, if Solectron elects to contract with
Emptoris for Standard Maintenance & Support 5 years after the signing of this
agreement and the ECI increase is 3% in each of the next five years, then
Solectron’s price for annual Maintenance & Support for year 6 will be $197,077
based on the following calculation: $170,000 Base Price * (1 + .03)^5
Invoicing for the Maintenance and Support Fees will be done annually, in
advance, on the first day of each annual period. Payment will be made net
30 days after the receipt of acceptable invoice:
Hosting Services Fees:
Solectron is not required to pay any Hosting Services Fees to Emptoris during
the term of the Outsourcing Agreement. Should Solectron elect to use Emptoris
Hosting Services after the termination of the IBM Outsourcing Agreement, the
Annual Hosting Services Fees will be, at maximum, listed below: Solectron is not
contracting in advance for these services and reserves the right to negotiate a
lower price for these services with Emptoris.

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The Current Year pricing is $155,000 per year to support the usage requirements
described below and including all required hardware, third-party software,
infrastructure, and hosting services. Solectron agrees to pay this annual
Hosting fee adjusted for annual price increases as measured by the ECI index
described above.
The hosting pricing is based on the current usage requirement in the IBM
Outsourcing Agreement and is as follows: Emptoris will support, on a per month
basis, 100 simultaneous users, 30 standard auctions with 50 items and 20
suppliers each having 15 bids per item, 30 advanced auctions with 50 items and
20 suppliers each having 15 bids per item, 30 RFQ’s or RFP’s with 100 line items
and 50 suppliers each having up to 5 bids per item, 30 RFI’s with 20
questionairres each with 20 questions and 50 suppliers responding. In any event,
the support will not be less than the current IBM Outsourcing Agreement. In the
event, the current usage requirements change in the IBM Outsourcing Agreement,
Emptoris will provide pricing for the increases and we agree to negotiate a fair
price for these Services.
Invoicing for the Hosting Fees will be done annually, in advance on the first
day of each annual period. Payment will be made net 30 days after the receipt of
acceptable invoice:

      Indirect Sourcing Services Agreement
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EXHIBIT 4
TO
INDIRECT SOURCING SERVICES AGREEMENT
IBM Supplier Conduct Principles
Forced or Involuntary Labor
IBM Suppliers will not use forced or involuntary labor of any type (e.g.,
forced, bonded, indentured or involuntary prison labor); employment is
voluntary.
Child Labor
IBM Suppliers will not use child labor. The term “child” refers to any person
employed under the age of 15 (or 14 where the law of the country permits), or
under the age for completing compulsory education, or under the minimum age for
employment in the country, whichever is greatest.We support the use of
legitimate workplace apprenticeship programs which comply with all laws and
regulations applicable to such apprenticeship programs.
Wages and Benefits
IBM Suppliers will, at a minimum, comply with all applicable wage and hour laws
and regulations, including those relating to minimum wages, overtime hours,
piece rates and other elements of compensation, and provide legally mandated
benefits.
Working Hours
IBM Suppliers will not exceed prevailing local work hours and will appropriately
compensate overtime. Workers shall not be required to work more than 60 hours
per week, including overtime, except in extraordinary business circumstances
with their consent. In countries where the maximum work week is less, that
standard shall apply. Employees should be allowed at least one day off per
seven-day week.
Nondiscrimination
IBM Suppliers will not discriminate in hiring and employment practices on
grounds of race, religion, age, nationality, social or ethnic origin, sexual
orientation, gender, gender identity or expression, marital status, pregnancy,
political affiliation, or disability.
Respect and Dignity
IBM Suppliers will treat all employees with respect and will not use corporal
punishment, threats of violence or other forms of physical coercion or
harassment.
Freedom of Association
Suppliers shall respect the legal rights of employees to join or to refrain from
joining worker organizations, including trade unions. Suppliers have the right
to establish favorable employment conditions and to maintain effective employee
communication programs as a means of promoting positive employee relations that
make employees view third-party representation as unnecessary.
Health and Safety
Suppliers will provide their employees with a safe and healthy workplace in
compliance with all applicable laws and regulations. Consistent with these
obligations, IBM Suppliers must have and implement effective programs that
encompass life safety, incident investigation, chemical safety, ergonomics,
etc., and provide the same standard of health and safety in any housing that is
provided for employees. Suppliers should strive to implement management systems
to meet these requirements.
Protection of the Environment
IBM Suppliers will operate in a manner that is protective of the environment. At
a minimum, suppliers must comply with all applicable environmental laws,
regulations and standards, such as requirements

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EXHIBIT 4
TO
INDIRECT SOURCING SERVICES AGREEMENT
regarding chemical and waste management and disposal, recycling, industrial
wastewater treatment and discharge, air emissions controls, environmental
permits and environmental reporting. Suppliers must also comply with any
additional environmental requirements specific to the products or services being
provided to IBM as called for in design and product specifications, and contract
documents. Suppliers should strive to implement management systems to meet these
requirements.
Laws, Including Regulations and Other Legal Requirements
IBM Suppliers will comply with all applicable laws and regulations in all
locations where they conduct business.
Ethical Dealings
IBM expects our suppliers to conduct their business in accordance with the
highest ethical standards. Suppliers must strictly comply with all laws and
regulations on bribery, corruption and prohibited business practices.
Communications
Suppliers must make the IBM Supplier Conduct Principles and other relevant
information available to employees in the native language(s) of the employees
and supervisors.
Monitoring/Record Keeping
Suppliers must maintain documentation necessary to demonstrate compliance with
IBM’s Supplier Conduct Principles and must provide IBM with access to that
documentation upon IBM’s request.

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Confidential to Solectron and IBM
INDIRECT SOURCING SERVICES AGREEMENT
Between
Solectron and IBM
SCHEDULE A
SERVICES

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Confidential to Solectron and IBM
SCHEDULE A
Services
Table of Contents

         
1.    INTRODUCTION
    1  
  1.1    General Approach
    1  
  1.2    Manner of Performance
    1  
2.    ORGANIZATION
    2  
  2.1    Interlinking Documents
    2  
  2.2    Components
    2  
3.    DEFINITIONS
    2  
  3.1    Certain Definitions
    2  
4.    SERVICES
    3  
  4.1    General
    3  
  4.2    Solectron Retained Functions
    4  
  4.3    Locations
    4  
  4.4    Projects
    4  
5.    CHANGES TO SCOPE MODELS, SERVICE GROUPS, ELEMENTS AND ACTORS
    4  
  5.1    Scope Model Modifications
    4  
  5.2    New Services
    4  
6.    INTERACTION MODELS
    4  
7.    OTHER SOLECTRON RESPONSIBILITIES
    5  
 
       
TABLE OF EXHIBITS:
       
 
       
Annex A-1:   Scope Model(s)
       
Annex A-2:   Processes Definitions
       
Annex A-3:   RESERVED
       
Annex A-4:   RESERVED
       
Annex A-5:   IBM Solution
       
Annex A-6:   In-Flight projects
       
Annex A-7:   Transition Plan
       
Annex A-8:   Interaction Model(s)
       
Annex A-9:   IBM Competitive Content
       

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Confidential to Solectron and IBM
SCHEDULE A
Services

1.   INTRODUCTION

1.1   General Approach.

  (a)   This Schedule A describes the portions of Solectron’s indirect sourcing
operations that are within the scope of the Agreement. It does so by means of
the Scope Model set out in Annex A1 – matrices that map the standard processes
(i.e., the functions, responsibilities, activities and tasks) performed by
procurement organizations (referred to as the “Procurement Value Chain
Processes” or “Processes”) against various categories of procured item and
services (“Categories”) and the geography (“GEO”) to which the Categories are to
be delivered (the combination of a Category and a GEO is referred to as an
“Element”). This mapping is completed through the use of two matrices or sets of
matrices. The first matrix (Matrix A2-1 entitled “Process — Service Group
Matrix”) maps the Processes to standard Services Groupings. As an example: the
“Issue PO” process is one of the processes that makes up the “P2P” Service
Grouping. The second set of similar matrices (Matrices A2-1-a through e entitled
“Service Group — Element Matrix Pass Through, P2P, Assess, Source and OCM”
respectively) defines the Elements for which IBM is designated as the Actor for
the identified Service Grouping. Each cell of a Service Grouping — Element
Matrix represents the intersection of an Element with a Service Grouping and
designates the Actor responsible for performing that Service Grouping with
respect to such Element. As an example; IBM is the Actor responsible for the
Source” Service-Groupings” for the “Contract Labor GL Code (#5050) in the EMEA
GEO during Wave 1” Element and Solectron is responsible for the “P2P
Service-Grouping” for the “Travel GL Code (5301) for the EMEA GEO” Element
Element.     (b)   The Actor designated in a Service Grouping — Element
intersection is responsible not only for performing the indicated Service
Grouping with respect to such Element, but also for providing the resources
necessary to perform that Service Grouping, except to the extent (if any) that
this Agreement expressly designates another Actor as having responsibility for
providing any of those resources. Where IBM is the designated Actor for a
Service Grouping in an Element intersection and the Agreement designates another
Actor as having responsibility for providing resources, IBM’s responsibility to
perform is subject to IBM receiving such resources from the Actor designated as
having responsibility for providing those resources.     (c)   Where an
Interaction Model exists for a certain Service Grouping — Element intersection,
each Actor is responsible for performing its identified responsibilities as
described in that Interaction Model.

1.2   Manner of Performance.

  (a)   As to the manner in which IBM is to perform the Services (the ‘How’),
IBM shall perform the Services in accordance with the provisions of the
Agreement and its Schedules, that specify or otherwise regulate the manner of
IBM’s performance of the Services.

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Confidential to Solectron and IBM

  (b)   References to specific resources (e.g., tools, systems) in this
Schedule A and the Annexes attached hereto that are used by IBM in performing
the Services shall be deemed to include successor or replacement resources at no
additional charge unless agreed via the Change Management Process.     (c)   IBM
shall perform the Services without regard to the technology platform used by
IBM. Any changes to the technology platform shall be at IBM’s discretion to the
extent such changes do not increase Solectron’s cost or adversely impact the
performance of the Services, and shall be at IBM’s cost, unless agreed via the
Change Management Process.     (d)   Except as otherwise specified, references
to time in this Schedule A shall be in local time for the Solectron location
where the Services are performed.

2.   ORGANIZATION

2.1   Interlinking Documents.       This Schedule A is comprised of interlinking
documents, which together describe (a) the roles and responsibilities of the
various Actors (including Solectron, IBM, and third parties) that manage and
deliver indirect sourcing Services to Solectron.

2.2   Components.       The components of this Schedule A are:

  (a)   The Scope Model, attached hereto as Annex A-1, which depict via
color-coded matrices: (A) the span of Elements comprising the indirect goods and
services; (B) the Processes applicable to each Service Grouping; and (C) for
each Service Grouping and each Element, the identification by color code of the
Actor with responsibility for performing that Service Group with respect to the
Element;     (b)   The definitions of the Processes, attached hereto as Annex
A-2, which are intended to provide a set of processes that comprehensively
describe the activities along the Procurement Value Chain that are to be
performed by Actors with respect to the Elements.     (c)   The definitions of
the Categories, attached hereto in Annex A-1, which are intended to provide a
set of categories defined in terms of Solectron’s General Ledger (GL) codes of
goods and services acquired through the indirect sourcing Services; and     (d)
  The Interaction Models, attached hereto as Annex A-8, which depict for certain
Service Group — Element intersections, the manner in which the relevant Actors
will perform their responsibilities and/or interact with other Actors with
related responsibilities.

3.   DEFINITIONS   3.1   Certain Definitions.       Unless otherwise expressly
defined herein, the capitalized terms used herein shall have the meaning
assigned to them in the Agreement:

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Confidential to Solectron and IBM

  (a)   “Actor” means the entity or individual identified in the Scope Models as
having responsibility for performing the Service Grouping with respect to a
particular Element. The Actors as of the Effective Date are identified in the
Scope Models and include Solectron and IBM.     (b)   “Element” means an item or
category of goods and services defined in terms of Solectron GL Codes in Annex
A-1 supplied to a GEO (Elements Definitions) and identified in the Scope Model.
    (c)   “Processes” means the Procurement Value Chain Processes defined in
Annex A-2 (Processes Definitions), which definitions include three levels of
detail. A reference in this Schedule A to “Processes” generally means to the
Processes at levels one (e.g., Strategic Sourcing), two (e.g., Analyze) and
three (e.g., Project spend data and consumption data). A reference in this
Schedule A to a specific “Process” means to the named Process and the
sub-categories of Processes and activities defined at the levels below the
specifically referenced Process.     (d)   “Scope Model” means a Service Group —
Element matrix that identifies the various Actors responsible for performing the
Service Groups with respect to the Elements. The Scope Model as of the Effective
Date is set out in Annex A-1 (Scope Model).     (e)   “Third Party Actor” means,
for purposes of this Schedule A (Services) only, with respect to the
intersection of a particular Element and Service Group an Actor other than
Solectron (and its contractors) or IBM (and its Subcontractors).

4.   SERVICES   4.1   General.

  (a)   As part of the Services, IBM shall provide to and perform for Solectron
the functions, responsibilities, tasks and activities for which IBM is
identified as the responsible Actor in the Scope Models and as otherwise set
forth in Section 2 (The Services) of the Agreement. Identification of IBM as the
relevant Actor with respect to the intersection of Elements and Service Groups
in the Scope Model means that IBM has responsibility for performing, or causing
to be performed, such Service Groups (including the Processes, tasks, and
activities defined therein) with respect to such Elements. As part of such
responsibility IBM shall perform the associated Processes, sub-Processes and
activities identified in Annex A-2 (Processes Definitions) that are relevant or
necessary under the circumstances.     (b)   As a designated Actor, IBM shall
proactively interact and coordinate with other Actors (including Third Party
Actors and Solectron) designated by Solectron as responsible for related
Elements and/or Processes as needed to drive the IBM Processes to completion and
integrate the IBM Processes with the activities of such other Actors.     (c)  
IBM shall provide the Services starting on the Effective Date unless expressly
specified otherwise in the Transition Plan, in which case IBM will commence
providing Services so designated in accordance with the timescales set out in
the Transition Plan. Where the Services so specified include a number of
sub-processes and/or activities, only a sub-set of which are addressed in the
Transition Plan as commencing on a date later than the Effective Date, only the
commencement of those sub-processes and/or activities addressed in the

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Confidential to Solectron and IBM

      Transition Plan as having a commencement date later than the Effective
Date shall be delayed beyond the Effective Date

4.2   Solectron Retained Functions.       As part of the Solectron retained
functions, Solectron shall perform those functions, responsibilities, tasks and
activities for which Solectron is identified as the responsible Actor in the
Scope Models. Identification of Solectron as the relevant Actor with respect to
the intersection of Elements and Service Groups in the Scope Models means that,
as part of Solectron retained functions, Solectron has responsibility for either
performing such Service Group (including the Processes, functions, tasks and
activities defined therein) with respect to such Elements or causing such
Service Groups (including the Processes, functions, tasks and activities defined
therein) to be performed with respect to such Element.   4.3   Locations.      
The locations at which the Services will be provided (the “Services Locations”)
as of the Effective Date are set forth in Annex A-5 (IBM Solution). The Parties
acknowledge and agree that although the Services (i.e. Actors, Service Groups
and Elements) may be the same at different types of Service Locations, the
manner in which the Services are performed may differ. IBM shall perform the
Services at each location in accordance with the Procedures Manual, which will
identify differences in the manner in which the Services are performed at
different Services Locations.   4.4   Projects.       As part of the Services,
IBM shall complete and manage projects, if any, for Solectron in accordance with
Annex A-6 (In-Flight Projects). Solectron may add new projects from time-to-time
during the Term in accordance with Schedule N (Change Control).   5.   CHANGES
TO SCOPE MODELS, SERVICE GROUPS, ELEMENTS AND ACTORS       The Parties shall
maintain the Scope Models, Service Groups, Elements and designated Actors to
reflect changes as follows:   5.1   Scope Model Modifications.       Subject to
Schedule N (Change Control), Solectron may modify the Scope Models by (i) adding
or deleting Elements (including the addition of new Elements to Annex A-1) or
(ii) changing the designated Actors or (iii) both (i) and (ii), upon at least
thirty (30) days’ advance written notice to IBM.   5.2   New Services.       The
Parties shall determine whether a change to the Scope Model, Elements, Service
Groups or designated Actors is a New Service pursuant to Section 2.8 (New
Services) of the Agreement.   6.   INTERACTION MODELS       The Parties have
developed a number of models describing how the Parties will interact with each
other and other Actors in certain areas of activity under the Agreement that are
expected to

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Confidential to Solectron and IBM

    involve significant interactions between the Parties. The Interaction Models
the Parties have developed, as of the Effective Date, are set forth in Annex A-8
(Interaction Models). By mutual written agreement of the Parties’ Project
Executives, the Parties may modify the attached Interaction Models or develop
additional Interaction Models without requiring amendment of the Agreement.   7.
  OTHER SOLECTRON RESPONSIBILITIES

  (a)   For Elements for which IBM is designated as the Actor for the “Assess”
Service Grouping, Solectron will provide IBM provide access to contracts, third
party suppliers and sourcing history of covering the previous five (5) years,
and other data as may be required, to the extent such information is reasonably
commercially available, to accurately determine addressable spend;     (b)   For
Elements for which IBM is designated as the Actor for the “Source” Service
Grouping and such designation is made after completion of the Transition but
before twelve months of spend and compliance data have been accumulated for the
respective Element in the P2P platform, Solectron will provide IBM detailed
spend and compliance data to complete a total of twelve months of such data to
the extent that such data are reasonably commercially available.

  8.   SPEND AND COMPLIANCE DATA RESPONSIBILITIES     involve significant
interactions between the Parties. The Interaction Models the Parties have
developed, as of the Effective Date, are set forth in Annex A-8 (Interaction
Models). By mutual written agreement of the Parties’ Project Executives, the
Parties may modify the attached Interaction Models or develop additional
Interaction Models without requiring amendment of the Agreement.     Spend and
compliance data are available from three sources, the P2P Platform, Solectron’s
ERP and financial systems and the suppliers. IBM is responsible for gathering
spend and compliance data from the P2P and to the extent it is required and it
is reasonably commercially available, from the supplier. If such data are
required from Solectron’s ERP and financial systems to the extent that it is
reasonably commercially available, Solectron is responsible for gathering such
data, and providing the same to IBM in the format reasonably required by IBM.
For the purposes of performing the Services Groupings with respect to the
Elements for which IBM (or Solectron) is identified as the Actor in Annex A-1
IBM (or Solectron) is responsible for analyzing such data to the extent those
responsibilities are identified in Annex A-1. For the purposes of determining
Actual Savings, Compliance Rates and adjustments to the Committed Strategic and
Tactical Sourcing Savings as discussed in Schedule B (Performance Management)
and Annexe B-1 (Savings Calculation Methodology), IBM is responsible for the
analysis of all spend and compliance data irrespective of the source.

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Confidential to Solectron and IBM
Annex A-1
STATEMENT OF WORK/ SCOPE MODELS
[Attached]

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Confidential to Solectron and IBM
Annex A-2
PROCESSES DEFINITIONS
[Attached]

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Confidential to Solectron and IBM
Annex A-3
[Reserved]

      Indirect Sourcing Services Agreement
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Confidential to Solectron and IBM
Annex A-4
[Reserved]

      Indirect Sourcing Services Agreement
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Confidential to Solectron and IBM
Annex A-8
INTERACTION MODEL(S)
[Attached]

      Indirect Sourcing Services Agreement
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Confidential to Solectron and IBM
* Omitted and filed separately with the SEC pursuant to a confidential treatment
request
Annex A-1
Matrix A1 — 1
PROCESS — SERVICE GROUPING

 
 
          [*]

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Annex A-1
Matrix A1 - 2-a
SERVICE GROUPING — ELEMENT
PASS THROUGH

 
* Omitted and filed separately with the SEC pursuant to a confidential treatment
request
[*]

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Annex A-1
Matrix A1 - 2-b
SERVICE GROUPING — ELEMENT
P2P

 
* Omitted and filed separately with the SEC pursuant to a confidential treatment
request
[*]

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EXECUTION COPY   Annex A-1
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Annex A-1
Matrix A1 - 2 — d
SERVICE GROUPING — ELEMENT
SOURCE

 
* Omitted and filed separately with the SEC pursuant to a confidential treatment
request
[*]

      Indirect Sourcing Services Agreement
EXECUTION COPY   Annex A-1
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Confidential to Solectron and IBM
Annex A-1
Matrix A1 - 2-e
SERVICE GROUPING — ELEMENT
OCM

 
* Omitted and filed separately with the SEC pursuant to a confidential treatment
request
[*]

      Indirect Sourcing Services Agreement
EXECUTION COPY   Annex A-1
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Confidential to Solectron and IBM
Annex A-1
GL CODE — CATEGORY — GEO SPEND

 
* Omitted and filed separately with the SEC pursuant to a confidential treatment
request
[*]

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              PROCESS   DEFINITION
1.
  Stategic Sourcing   The purpose of the “Strategic Sourcing” process is to
secure contracts for the acquisition of repetitively purchased items that
contain optimum pricing, quality and measurable service levels that,
collectively, meet the requirements of and provide meaningful, strategic-level
benefits to the Requesting Entity by using Commercially Reasonable Efforts,
including leveraging current and as applicable future purchasing volumes of
Receiving Entity and the Procuring Entity. Strategic Sourcing also includes
securing a non-repetitively purchased item but which is of such importance or
value that the Strategic Sourcing processes, rigors and talents must be applied.
 
       
 
      The Strategic Sourcing process includes the following activities:
 
       
1.1.
  Spend Visibility   The purpose of the Spend Visibility process is to gain a
complete understanding of spend in a Category for strategic sourcing.

The “Spend Visibility” process includes the following activities:
 
       
1.1.1.
  Aggregate historical spend data and consumption data   For the applicable
commodity, category or category segment and geography, gathering historical
spend data (currency based) and consumption (unit based) data and to the extent
it is applicable, information on the activities that drive consumption.
 
       
1.2.
  Analyze   The purpose of the “Analyze” process is to analyze data related to
consumption of specific goods and services, characteristics of the market for
such goods and services and any identified restrictions or issues related to the
selection or performance of specific suppliers providing such goods and
services.
 
       
 
      The “Analyze” process includes the following activities:
 
       
1.2.1.
  Analyze historical and/or projected spend data and consumption data  
Analyzing historical and projected spend and consumption data to identify
category segments for sourcing activities;

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              PROCESS   DEFINITION
1.2.2.
  Project spend data and consumption data   Estimating the future consumption
and spend within a category or category segment or geography based on identified
driver activity and growth. This includes holding discussions with business
units to identify projects and activities that can cause changes in consumption.
[IBM Note: Suggest to include in Analyze section]
 
       
1.2.3.
  Investigate and evaluate market place for strategic sourcing   Evaluating the
market for a category or category segment to determine its size, growth, price,
constraints and the Receiving Entity’s (and, if different from the Receiving
Entity, the Procuring Entity’s) position in it. This includes the identification
of the number of suppliers required to adequately cover the category as well as
possible suppliers of the category or category segment to the Receiving Entity.
 
       
1.2.4.
  Current supplier performance and constraints review   Conducting an in-depth
review of (a) the Receiving Entity’s current category suppliers and the adequacy
of their performance (including taking into account, for example, such
suppliers’ performance, technical ability and relationship with the Receiving
Entity); (b) the constraints or special considerations to be used going forward
in continuing to utilize then-existing suppliers and/or entering into contracts
with new or additional suppliers for the category (taking into account, for
example, prices, unique requirements, and potential supply and delivery
considerations) and (c) the expiration of the Receiving Entity’s current
contract.
 
       
1.3.
  Opportunity Identification   The purpose of the “Opportunity Identification”
process is to use the information developed from the Analyze process to identify
opportunities for strategic sourcing that address the Receiving Entity’s
business needs related to indirect spend (including savings) and to prioritize
the identified sourcing projects. The Opportunity Identification process
includes the following activities:
 
       
1.3.1.
  Identify strategic sourcing opportunity   Identifying and documenting
commercially reasonable strategic sourcing opportunities for a Category
irrespective of the cost and benefit to the Actor to pursue such opportunity
were the Receiving Entity to elect to have the Actor pursue it .. This includes
identifying, with respect to the pursuit of each such opportunity, the cost to
the Receiving Entity, business needs of the Receiving Entity satisfied,
resources of the Receiving Entity required and potential benefits to the
Receiving Entity.

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              PROCESS   DEFINITION
1.3.2.
  Prioritize sourcing projects   Present to Receiving Party all identified
opportunities and priorite such identified opportunities to maximize the
benefits to and minimize the consumption of limited resources of the Receiving
Entity while gaining the acceptance of stakeholders. Actor shall prioritize
opportunities in accordance with the standard of those opportunities that a well
managed company would undertake where it was acting in a determined, prudent and
reasonable manner to achieve a particular desired result for its own benefit.
 
       
1.4.
  Category Strategy Development   The purpose of the “Category Strategy
Development” process is to develop a strategy for a specific strategic sourcing
exercise, including developing criteria for proposal evaluation,
gathering/documenting product specifications; creating and maintaining a
category-specific sourcing strategy. The Strategy Development process includes
the following activities:
 
       
1.4.1.
  Develop, commodity strategy for category   The purpose of the Commodity (a
segment of a Category) Strategy is to balance, manage and implement the
Receiving Entity’s needs goals and objectives for the commodities.
 
       
 
      Develop, gain approval, maintain and promulgate a strategy that reflects
and balances the Receiving Entity’s needs, goals and objectives for the
commodity
 
       
 
      As an example, commodity strategy would address the efforts necessary to
use and acquire only one type of solder paste in the Receiving Entity’s
production.
 
       
1.4.2.
  Create Strategic Sourcing evaluation rules   Creating the method and criteria
for evaluating the proposals for the supply of the goods and services covered by
the category.
 
       
1.4.3.
  Gather product specifications   Gathering existing product specifications
including but not limited to those related to form, fit and function in the
Receiving Entity’s business environment as well as normal and emergency lead
times or availability, probable life expectancy, warranty considerations,
maintenance terms, and quality requirements. Identify special features of the
goods or services required. Gather relevant trends (for example, new technology,
specialized products, price

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              PROCESS   DEFINITION
 
      changes); and recommend for the Receiving Entity’s approval changes to
existing product specifications to further decrease procurement costs and/or
improve services provided by the suppliers.
 
       
1.4.4.
  Gather applicable business unit plans and objectives   Gathering and reviewing
the plans and objectives of the business units impacted by the Strategic
Sourcing effort. This includes the analysis of the impact these plans and
objective may have on the Sourcing Strategy and vice versa and reconciling these
impacts.
 
       
1.4.5.
  Develop supplier strategy for each category   The purpose of the Supplier
Strategy is to balance, manage and implement the Receiving Entity’s needs goals
and objectives for the supply base contracted to provide the Category to the
Receiving Entity.
 
       
 
      The Supplier Strategy process includes the following activities:
 
       
 
      Develop, gain approval, maintain and promulgate a Supplier Strategy for
the Category. As an example, the supplier strategy would address the efforts
necessary to use and no more than one software reseller in each country.
 
       
1.4.6.
  Develop community impact strategy for category   The purpose of the Community
Impact Strategy is to balance, manage and implement the Receiving Entity’s needs
goals and objectives for the its procurement activities’ impact on the
community.
 
       
 
      The Develop Community Impact Strategy process for the category includes
the following activities:
 
       
 
      Develop, gain approval, maintain and promulgate a Community Impact
Strategy. As an example, the Community Impact strategy would address the efforts
necessary to achieve X% spend with minority and disadvantage business owners.
 
       
1.4.7.
  Create Category-Specific Sourcing Strategy   Distilling the results of the
analysis, requirements, goals and objectives into a single Category-Specific
Sourcing Strategy for a category or category segment, and promulgating it for
the Receiving Entity’s review and comment.

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              PROCESS   DEFINITION
1.4.8.
  Obtain stakeholder buy-in to Category-Specific Sourcing Strategy   Soliciting
and resolving comments and issues from the stakeholders and submitting the
Category-Specific Sourcing Strategy for the Receiving Entity’s approval.
 
       
1.4.9.
  Load, and maintain sourcing strategy   Physically publishing, filing and
loading (to the extent applicable for the sourcing tools employed) of the
strategy documentation. Including the process of keeping the strategy
documentation current during the strategy’s execution.
 
       
1.4.10.
  Approve Category-Specific Sourcing Strategy   Approving the Category-Specific
Sourcing Strategy.
 
       
1.5.
  Sourcing   The purpose of the Sourcing process is to perform the functions
necessary to identify potential suppliers and solicit and evaluate “proposals”
from the potential suppliers.

The Sourcing process includes the following activities:
 
       
1.5.1.
  Identify potential suppliers for Category-Specific Strategic Sourcing  
Developing, updating and maintaining a listing of and information on potential
vendors for the Category-Specific Strategic Sourcing developed in accordance
with the Category-Specific Sourcing Strategy from the listing of qualified
suppliers.
 
       
1.5.2.
  Gather bidding rules for Category-Specific Strategic Sourcing   Gathering,
reviewing and analyzing business rules for bidding for Category-Specific
Strategic Sourcing. This includes the efforts to recommend exceptions to the
bidding rules and obtaining the Requiring Entity’s approval should specific
requirements of the category warrant the exceptions.
 
       
1.5.3.
  Gather standard forms of agreements for Category-Specific Strategic Sourcing  
Gathering, reviewing and analyzing approved standard forms of agreement
applicable to the category. This includes the efforts to recommend exceptions to
the standard forms of agreement and obtaining the Receiving Entity’s approval
should specific requirements of the category warrant the exceptions.
 
       
1.5.4.
  Issue strategic sourcing RFx to potential suppliers   Creating and issuing
category specific RFI’s, RFQ’s and RFP’s (as applicable to the Category-Specific
Sourcing Strategy) and in accordance with approved business rules for bidding to
the list of potential suppliers. This includes the effort necessary to obtain
the acceptance of stakeholders, as appropriate for the RFI, RFQ or RFP.
 
       
1.5.5.
  Evaluate strategic sourcing proposals   Analyzing the potential suppliers’
responses to the RFI/RFP/RFQ (as applicable) against each other and against

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              PROCESS   DEFINITION
 
      the requirements, goals and objectives of the Category-Specific Sourcing
Strategy and publishing the results of the analysis. This includes soliciting
and coordinating stakeholder participation the analysis.
 
       
1.5.6.
  Recommend Category-Specific Strategic Sourcing supplier   Recommending the
selection of a supplier(s) with which to negotiate a contract(s) based on the
results of the analysis of the suppliers’ responses to the RFI/RFP/RFQ (as
applicable).
 
       
1.5.7.
  Obtain stakeholders approval of selected strategic sourcing vendor   Creating
and publishing the rationale for selecting the supplier(s) with which to
negotiate a contract(s) and soliciting and resolving comments and issues of
stakeholders.
 
       
1.6.
  Approve selected supplier   Approving the supplier(s) with which the Procuring
Entity will negotiate a contract(s).
 
       
1.7.
  Negotiate   The purpose of the “Negotiate” process is to bring to bear the
skills and experience of the Procuring Entity, as well as the leverage provided
by the status of the Procuring Entity and the Requiring Entity in the relevant
marketplace to create a deal that allocates risk appropriate for the transaction
between the Requiring Party and the Supplier and provides benefit to the
Requiring Entity while providing an appropriate rate of return for the Supplier.
 
       
 
      The Negotiate process includes the following activities:
 
       
1.7.1.
  Negotiate price, delivery, terms, contracts for strategic sourcing  
Developing and executing the appropriate negotiation strategy to establish
(including objectives for) the final price and terms for the contract(s) for the
goods or services covered by the category.
 
       
1.7.2.
  Obtain legal review as necessary for strategic sourcing   Soliciting and
resolving comments and issues of Receiving Entity’s Law Department in accordance
with Receiving Entity’s rules for legal review and for deviation from Receiving
Entity’s standard forms of agreement.
 
       
1.7.3.
  Execute contract   Preparing the requisite number of copies of the final
document and obtaining Receiving Entity’s and the Supplier’s approval of the
contract.
 
       
1.7.4.
  Load and Maintain the record of the strategic sourcing execution   Physically
publishing, filing, archiving and loading (to the extent applicable for the
tools employed) all documentation and reports used and in developed during the
execution of the Category Specific Sourcing Strategy. This includes the process
of keeping the files current during Category Specific

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              PROCESS   DEFINITION
 
      Sourcing Strategy’s execution. Documentation and reports includes the
results of all analysis, the selection criteria for Suppliers used and the
process and documentations used in selecting a Supplier,
 
       
1.8.
  New Supplier Implementation   The purpose of the “New Supplier Implementation”
process is to communicate, implement and manage the implementation of new
supplier relationships and contracts so as to achieve the greatest acceptance by
the Receiving Entity’s organization.

The New Supplier Implementations process includes the following activities:
 
       
1.8.1.
  Develop and implement communication strategy   Developing a strategy to
communicate as appropriate for the transaction the results of the sourcing
within the Receiving Entity and with Suppliers who participated in the bidding
or negotiations process but were not selected. The latter is to include an
explanation of the key reasons for non-selection and inform such Suppliers
whether future opportunities will be available to them.
 
       
1.8.2.
  New Contract Implementation   Implementing a new contract and Supplier
including all steps to communicate the change to the Receiving Entity’s
organization, all changes to reflect change in the P2P platform (e.g., loading
hosted catalogues, linking with punch out catalogues) all steps to train the
Supplier in conducting business with, Receiving Entity (e.g., training suppliers
in invoicing processes etc.) and all other supplier on boarding activities.
 
       
1.8.3.
  Project manage implementation   Managing the entire implementation of a new
contract and Supplier. This includes defining and providing the problem
management procedures to Suppliers, the wind down of expired and replaced
contracts, and implementation of a new contract and supplier (introductions,
catalogue deployment etc.)
 
       
1.9.
  Performance Measurement   The purpose of the “Performance Measurement” process
is to establish the rules, standards and methods for judging the supplier’s
performance in meeting the requirements of the Receiving Entity.

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              PROCESS   DEFINITION
 
      The Performance Measurement process includes the following activities:
 
       
1.9.1.
  Create strategic vendor performance measuring rules   Creating and securing
the supplier’s agreement to rules to measure the suppliers’ performance under
the contract. This includes establishing the “Measure” itself (e.g. the average
time in days between the purchase order’s receipt by the supplier and Receiving
Entity’s receipt of the goods ordered.) and the standard to which the supplier’s
actual performance will be compared (e.g. in any one quarter 95% delivered
within 5 days.)
 
       
1.9.2.
  Create process to measure performance of strategic vendors   Creating,
securing the supplier’s agreement to the method of measuring performance (e.g.,
the time between the issuance of the PO in the P2P tool and the notice of
receipt by Receiving Entity as registered in the P2P tools), measuring
performance and then reporting the performance to the supplier and resolving any
issues with the supplier
 
       
1.10.
  Ongoing Category Management.   The purpose of the Ongoing Category Management
process is to routinely monitor changes in the market, the Receiving Entity’s
business, its goals and objects and the supplier’s performance, and maintain,
keep current and make changes to contracts and strategies to insure their
effectiveness. The Ongoing Category Management process includes the following
activities:
 
       
1.10.1.
  Monitor contracts and keep current   Monitor the Contracts and take action, as
appropriate, for modification (for example, with respect to Receiving Entity or
Supplier initiated technical or commercial changes), renewal, expiration,
termination, or renegotiation as agreed by the Receiving Entity. Review
then-standard forms of agreement and actual terms and conditions in the
then-current Contracts and make recommendations for improvements for Receiving
Entity’s review and approval.
 
       
1.10.2.
  Measure strategic sourcing project results to objectives   Measuring and
reporting on the actual results of a strategic sourcing against the goals
established for the sourcing.
 
       
1.10.3.
  Maintain Sourcing Strategy   Review, update and implement changes to the
Sourcing Strategies for each Commodity to determine whether the Sourcing
Strategy continues to meet Receiving Entity’s need for the products and goals
for cost and performance and using the results of such review (and other
information)

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              PROCESS   DEFINITION
 
      recommend changes to the Receiving Entity.
 
       
1.10.4.
  Measure strategic vendor performance   Measuring the performance of the
strategically sourced suppliers using the measurement process and measurement
standard determined during the sourcing effort.
 
       
1.10.5.
  Measure tactical buying vendor’s performance   Measuring the performance of
the tactically sourced supplier using the measurement process and measurement
standard determined during the sourcing effort.
 
       
1.10.6.
  Manage dispute resolutions with supplier   Manage and resolve disputes with
suppliers, including any decision to pursue, initiate, and/or conduct (and for
pursuing, initiating and/or conducting) legal proceedings to resolve supplier
contract or agreement issues.
 
       
2.
  Tactical Buying   The purpose of the “Tactical Buying” process is to use
reasonable commercial efforts (including leveraging Receiving Entity’s current
and, as applicable, future purchasing volumes) to secure a contract, for the
acquisition of a single or irregularly (non-repetitively) purchased item, which
contain optimum pricing and the quality and measurable service levels to meet
Receiving Entity’s requirements. The Category Sourcing Strategy will establish
criteria for when Tactical Buying processes will be used and when the rigors of
Strategic Sourcing will be applied to the purchases which otherwise will be
tactically purchased.
 
       
 
      The Tactical Buying process includes the following activities:  
2.1.
  Sourcing for Tactical Purchases   The purpose of the Sourcing for Tactical
Purchases process is to perform the functions necessary to identify potential
suppliers and solicit and evaluate “proposals” from the potential suppliers for
Tactical Purchases.
 
       
 
      The Sourcing for Tactical Purchases process includes the following
activities
 
       
2.1.1.
  Confirm product and service specifications   Confirming the product and
service specification called for in the originating requisition. This includes
expanding the details of the specification to a level required for Tactical
Buying and as necessary including the goals and objectives(business
requirements) of the Receiving Entity for the good and services acquired.

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              PROCESS   DEFINITION
2.1.2.
  Identify potential source for Tactical Purchase   Identifying a potential
supplier for the scope of the tactical purchase
 
       
2.1.3.
  Issue RFx to potential tactical buying vendors   Creating and issuing specific
RFI’s, RFQ’s and RFP’s (as applicable to the strategy) and in accordance with
Receiving Entity’s business rules for bidding to the list of potential
suppliers. This includes the effort necessary to obtain the acceptance of
Receiving Entity’s stakeholders.
 
       
2.1.4.
  Evaluate tactical buying proposals   Analyzing the suppliers’ responses to the
RFI’s, RFP’s and RFQ’s (as applicable) against each other and the requirements,
goals and objectives of the applicable category sourcing strategy and publishing
the results of the analysis.  
2.1.5.
  Select tactical buying vendor   Selecting a supplier(s) with which to
negotiate a contract(s) based on the results of the analysis of the suppliers’
responses.
 
       
2.1.6.
  Confirm recommended tactical buying vendor with stakeholders   Creating and
publishing the rationale for selecting the supplier(s) with which to negotiate a
contract(s) and soliciting and resolving comments and issues of the
stakeholders.
 
       
2.1.7.
  Negotiate price, delivery, terms, contract of tactical buying   Developing and
executing the appropriate negotiation strategy to establish (including
objectives for the final price and terms for the contract(s) for the tactically
sourced product.
 
       
2.1.8.
  Obtain legal review as necessary for tactical sourcing   Soliciting and
resolving comments and issues of Receiving Entity’s Law Department in accordance
with Receiving Entity’s rules for legal review and for deviation from Receiving
Entity’s standard forms of agreement.
 
       
2.1.9.
  Execute contract   Preparing the requisite number of copies of the final
document and obtaining Receiving Entity’s and the supplier’s approval of the
contract.
 
       
2.1.10.
  Communicate specifics of tactical buying contract   Communicate the results of
the sourcing internally within the Receiving Entity and with suppliers who
participated in the bidding or negotiations process but were not selected. The
latter is to include an explanation of the key reasons for non-selection and
inform such suppliers whether future opportunities will be available to them.
 
       
2.2.
  Performance Measurement on Tactical Purchase   The purpose of the “Performance
Measurement on Tactical Purchases” process is to establish the rules, standards
and methods for judging the supplier’s performance in meeting

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              PROCESS   DEFINITION
 
      the requirements of the Receiving Entity.
 
      The Performance Measurement on Tactical Purchases process includes the
following activities:
 
       
2.2.1.
  Measure tactical project results to objectives   Compare the results of the
tactical buying with the goals and objectives identified in the requisition and
the respective product specification.
 
       
2.2.2.
  Create tactical vendor performance measuring rules   Creating and securing the
supplier’s agreement to the rules to measure the suppliers’ performance under
the contract. This includes establishing the “Measure” itself (e.g. the average
time in days between the purchase order’s receipt by the supplier and Receiving
Entity’s receipt of the goods ordered.) and the standard to which the supplier’s
actual performance will be compared (e.g. in any one quarter 95% delivered
within 5 days.)
 
       
2.2.3.
  Create process to measure performance of tactically sourced vendor   Creating,
securing the supplier’s agreement to the method of measuring performance.
measuring performance and then reporting the performance to the supplier and
resolving any issues with the supplier
 
       
2.2.4.
  Issue tactical buying PO (Purchase Order)   Issuing the purchase order to the
tactically sourced supplier.
 
       
3.
  Stakeholder   The purpose of the Stakeholder process is to gain the insight,
participation and approval of the appropriate individuals from the Receiving
Entity.
 
       
 
      The “Stakeholder” process includes the following activities:
 
       
3.1.
  Stakeholder requirements   Specify the skills, knowledge, and authority levels
required and the required commitment for the category activity.
 
       
3.2.
  Stakeholder Participation   Identify the appropriate individuals from the
Receiving Entity and provide stakeholder input.
 
       
4.
  Contract and Catalogue Management   The purpose of the Contract and Catalogue
Management process is to assure that Contracts and Catalogues are available for
future use and are accurate when used.

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              PROCESS   DEFINITION
 
      The Contract and Catalogue Management process includes the following
activities:
 
       
4.1.
  Contract Management   The purpose of the Contract Management process is to
assure that Contracts are available for future use and are accurate when used.
 
       
 
      The Contract Management process includes the following activities:
 
       
4.1.1.
  Create contract files/documents   Gathering the contracts and the supporting
documentation (RFx’s proposals, negotiating notes)
 
       
4.1.2.
  Load and maintain contract files   File and load (as appropriate for the tools
employed) contract files and keeping file current.
 
       
4.1.3.
  Maintain repository of all original contracts   Maintain a repository for all
original contract documents in accordance with Receiving Entity’s record
retention business rules.
 
       
4.2.
  Catalog Management   The purpose of the Catalogue Management process is to
assure that catalogs are available for future use and are accurate when used.
 
       
 
      The Catalogue Management process includes the following activities:
 
       
4.2.1.
  Create catalog of pre-negotiated items, source, price, delivery   Create and
maintain in the P2P Platform a commodity catalog database customized for the
Receiving Entity containing products and their pre-negotiated prices.
 
       
 
      Two types of catalogues are anticipated. The Punch-Out Catalogue is
typically used when the supplier’s catalogue of products is too large to be
hosted in the P2P platform or when it is more commercially reasonable to make
use of the supplier’s catalogue and still provide the required functionality and
performance. The Hosted Catalogue is a supplier’s catalogue hosted in the P2P
platform.
 
       
 
      For Hosted Catalogues , this is the process of gathering, from suppliers
with which a contract has been made, product and commodity data, pricing and
other pre-negotiated terms and conditions (and updates thereto) for the products
covered by the contract.

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      For Punch-Out Catalogues, this is the process for gathering all the
required information necessary to enable access to the supplier’s catalogue.
 
       
4.2.2.
  Load catalog of pre-negotiated items, source, price, delivery   Load a
commodity catalog database customized for the Receiving Entity containing
products and their pre-negotiated prices in the P2P Platform.
 
       
 
      For Hosted Catalogues, the process includes loading the catalogue content
(and updates thereto) into the P2P platform and enabling its use including
managing the testing and cutover of required changes to existing catalogs in
production or the promotion of new catalogs into production.
 
       
 
      For Punch-Out Catalogues, the process of enabling access to the supplier’s
catalogue by the P2P and make use of the functionality, (including managing the
testing and cutover of required changes to existing catalogs in production or
the promotion of new catalogs into production).
 
       
4.2.3.
  Maintain catalog of pre-negotiated items, source, price, delivery   Update
(and recommending updates to) catalogues and links already loaded in the P2P
including managing the testing and cutover of required changes to existing
catalogs in production or the promotion of new catalogs into production. With
respect to Hosted Catalogues this includes cleansing data and maintaining data
integrity.
 
       
5.
  Procurement   The purpose of the Procurement process is to transform the
transactional needs of the Receiving Entity into actionable documentation for
the acquisition of goods and services.

The Procurement process includes the following activities:
 
       
5.1.
  Scoping   The purpose of the Scoping process is to gather the needs for goods
and services.

The Scoping process includes the following activities:
 
       
5.1.1.
  Identify scope and schedule requirements   Establishing the scope of supply
for a purchase. This includes identifying products or product specifications and
quantities and comparing these requirements against existing inventories if any
to establish net requirements, including

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      determining and managing the required inventory items and inventory levels
as well as developing and specifying delivery requirements.
 
       
5.2.
  Requisitioning   The purpose of the Requisitioning process is to reduce the
scope of supply for a purchase and to associate accounting requirements into an
actionable instrument and to gain the requisite approvals to the requisition.
 
       
 
      The Requisitioning process includes the following activities:  
5.2.1.
  Create requisition   Reducing scope and schedule requirements to an actionable
document, the requisition. This includes the specification of accounting and
financial information to assure proper handling of costs. This may include
identification of a suggest supplier of the product.
 
       
5.2.2.
  Approve or reject requisition   Approving or rejecting a requisition of goods
and services and specification of accounting and financial information.
 
       
5.3.
  Ordering   The purpose of the Ordering process is to place an order for a
scope of supply and associate schedule with a supplier.
 
       
 
      The Ordering process includes the following activities:  
5.3.1.
  Validate content of approved requisitions with vendors   Comparing the scope
and schedule contained in the requisition with what is available from the
suppliers. This includes reconciling discrepancies with the supplier and the
requester and correcting data to maintain data integrity. For orders covered by
contracts and catalogues this includes comparing the requisition with the
contract and catalogue and making corrections. For non-contract orders this
includes interaction with the vendors and the requestors to confirm and then to
make corrections.
 
       
5.3.2.
  Re-direct orders to preferred vendors and catalogues   Directing requisitions
to preferred suppliers and catalogues. For requisitions that include a suggested
supplier but not a preferred supplier or an existing contract, this may include
communications with the requester and/or the approver directly.
 
       
5.3.3.
  Report nonconforming requisitions   Reporting nonconforming requisitions to
the Receiving Entity for follow up to increase compliance. Nonconforming
requisitions are requisitions which request order placement with non-preferred
suppliers or requisitions which request non standard products or services and
which when pressed the requester insists on placement with a non-preferred
supplier

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      or the non-standard product.
 
       
5.3.4.
  Identify requisitions for tactical buying   Identifying a requisition in
accordance with the Receiving Entity’s business rules for the increased rigors
of tactical buying. The business rule may include cost and/or category criteria.
 
       
5.3.5.
  Identify potential source   Identifying a potential supplier in accordance
with when a requisition does not specify a suggested vendor and where a
preferred supplier is not available and where the business rules for tactical
sourcing have not been met.
 
       
5.3.6.
  Manage resolution of requisition inconsistencies   Managing the resolution of
inconsistencies between the approved requisitions and supplier’s catalogues.
 
       
5.3.7.
  Gather business rules for import/export, tax, freight and duty requirements.  
Gathering and reviewing Receiving Entity’s business rules regarding
import/export, tax, freight and duty and analyzing their impact on the
requisition.
 
       
5.3.8.
  Confirm import/export, tax, freight and duty with vendor.   Reviewing
Receiving Entity’s business rules regarding import/export, tax, freight and duty
with the supplier (or the contract) and confirming the supplier’s acceptance.
 
       
5.3.9.
  Issue PO   Issue the purchase order to the supplier. This may be done in paper
or via electronic means.
 
       
5.3.10.
  Confirm vendor receipt of PO and acknowledgement of delivery   Confirming the
supplier’s receipt of the purchase order and receiving the supplier’s acceptance
or acknowledgement of the purchase order. This may be done in paper or via
electronic means.
 
       
5.3.11.
  Adjusting delivery/expedite   Expediting delivery to meet the needs of the
Receiving Entity. This includes working with the requester to determine the
actual schedule needs, negotiating schedule improvement and expediting charges
with the supplier and maintaining a record the transaction for future
improvement. This also includes escalating the issue to increasing levels within
the supplier organization to meet the Receiving Entity’s needs.
 
       
5.3.12.
  Monitor ordering activity to identify strategic sourcing opportunities  
Monitoring ordering activities to identify strategic sourcing opportunities.
Typical examples include consumption which greatly exceeds the projected use for
the sourcing and repetitive purchases of a product that was not previously
sourced.
 
       
6.
  Receiving   The purpose of the Receiving process is to physically take
possession of the goods or services ordered and to advise the appropriate
parties.

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      The Receiving process includes the following activities:
 
       
6.1.
  Receiving    
 
       
6.1.1.
  Receive delivered materials   Receiving the goods ordered from the supplier.
This includes the receipt and any and all receiving inspections, verification of
compliance to specification and certification requirements, and the placement of
the goods into inventory as necessary.
 
       
6.1.2.
  Manage delivery of ordered services   Managing and monitoring the delivery of
services ordered from the supplier. This includes the receipt and all receiving
inspections, verification of compliance to specification and certification of
the deliverables, tracking time, resolving corrective action requirements,
monitoring the quality of the service, receiving all insurance and quality
documentations and final inspections of work.
 
       
6.1.3.
  Load receipt of materials and services   Loading the receipt of materials and
services into the P2P solution.
 
       
6.1.4.
  Reconcile data integrity   Updating data sources for consistency to reflect
product and quantities actually received and accepted.
 
       
7.
  Accounts Payable   The purpose of the Accounts Payable process is to take
possession of the supplier’s invoice for goods or services ordered and received,
to verify its correctness and make payment, as applicable.
 
       
 
      The Accounts Payable process includes the following activities:  
7.1.
  PO related Invoice   A “PO Invoice” is a supplier’s invoice that is related to
an issued PO.
 
       
7.1.1.
  Receive PO Invoice   Taking receipt of the supplier’s PO Invoice.
 
       
7.1.2.
  Load PO invoice   Loading the supplier’s PO Invoice into the P2P platform.
This may include scanning a paper PO Invoice and loading appropriate data into
the P2P platform.
 
       
7.1.3.
  Match PO invoice,   Matching the PO Invoice to the notice of receipt of the
goods or services and to the PO
 
       
7.1.4.
  Approve PO invoice   Providing final approval of the PO Invoice. This can be
in the form of a positive confirmation approving the invoice (e.g., “I approve
the invoice.” POS CON) or a negative confirmation

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      approving the invoice (e.g., “Unless you advise otherwise by mm/dd/yy the
invoice will be paid on MM/DD/YY.” NEG CON) or if applicable, a record of the
goods receipt depending on the business rules.
 
       
7.1.5.
  Resolve PO invoice discrepancies   Resolving discrepancies among the PO
Invoice, the PO and the products actually received.
 
       
7.1.6.
  Archive PO invoice   Placing the PO Invoice in long term retention consistent
with the business rules.
 
       
7.2.
  Non PO related Invoice   A “non-PO Invoice” is a supplier’s invoice that is
not related to an issued PO.
 
       
7.2.1.
  Receive non-PO invoice   Taking receipt of a supplier’s non-PO Invoice.
 
       
7.2.2.
  Load non-PO invoice   Loading the supplier’s non-PO Invoice into the P2P
platform.
 
       
7.2.3.
  Approve non-PO invoice   Providing final approval of the non-PO Invoice.
 
       
7.2.4.
  Resolve non-PO invoice issues   Resolving issues regarding the non PO Invoice.
 
       
7.2.5.
  Archive non -PO invoice   Placing the non-PO Invoice in long term retention
consistent with the business rules.
 
       
7.3.
  Pay   The purpose of the Pay process is to pay the approved invoices presented
to the Receiving Entity.
 
       
 
      The Pay process includes the following activities:
 
       
7.3.1.
  Create and transmit the payment proposal file   Creating an electronic file
that provides the Receiving Entity the data reasonably necessary to pay and
account for all approved PO and non-PO Invoices (payment proposal file) and
transmitting the file to the Receiving Entity for review and comment. The format
of the file and the number of file will be as provided for in business rules.
 
       
7.3.2.
  Revise the payment proposal file   As applicable, revise the payment proposal
file as required by the comments of the Receiving Entity.
 
       
7.3.3.
  Approve payment proposal file   Approve the revised or original payment
proposal file (as appropriate).
 
       
7.3.4.
  Create and Send “OK to Pay” file   Based up on the approved payment proposal
file, creating and sending an electronic file (or files) that provides the
Receiving Entity all of the data reasonably necessary to pay and account for all
approved PO and non-PO Invoices (the “OK to Pay” file). The format of the file,
the number of files

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      and the mode of transmittal will be as provided for in business rules.
 
       
7.3.5.
  Pay invoices   Receive “OK to Pay” file, account for and pay the approved PO
and non-PO Invoices in accordance with business rules.
 
       
7.3.6.
  Provide payment confirmation   Create and transmit confirmation of payment
(includes providing payment status, as necessary).
 
       
7.3.7.
  Provide accounting data   Creating an electronic file that provides the
Receiving Entity the data reasonably necessary to account for all received but
not yet approved PO and non-PO Invoices and all paid invoices. The format of the
file, the number of files and the accounting rules by which the data are develop
will be as provided for in the business rules.
 
       
8.
  Return   The purpose of the Return process is to identify non-conforming and
excess goods, return them to the supplier and obtain payment or credit in
exchange.

The Return process includes the following activities:  
8.1.
  Identify   The purpose of the Identify process is to identify non-conforming
and excess goods and determine whether actions should put into place to return
the goods and obtain payment or credit.
 
       
 
      The Identify process includes the following activities:
 
       
8.1.1.
  Identify non conforming and excess material   Identify material that does not
conform to the PO, material that fails to meet supplier’s warranty obligations
and material which is excess of actual requirements.
 
       
8.1.2.
  Determine Return requirements   Gather and review business rules regarding the
return of good, analyzing the rules impact on previously identified excess,
non-conforming and warranty claim material to determine the actual products and
quantities to be returned to the supplier and other follow up activities. Other
follow up activities may include tracking supplier nonconformance and other
performance.
 
       
8.2.
  Obtain Authorization   The purpose of the Obtain Authorization process is to
obtain the supplier’s authorization to return goods.
 
       
 
      The Obtain Authorization process includes the following activities:

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8.2.1.
  Obtain authorization for returns from vendor   Communicating with the
suppliers to arrange for and gaining authorization to return products. This may
include obtaining necessary return authorization numbers, negotiating the terms
of the return and the credits afforded the Receiving Entity.
 
       
8.2.2.
  Communicate return requirements to requestor   Informing the Receiving Entity
of the terms and specific rudiments of the return.
 
       
8.3.
  Returning   The purpose of the Returning process is to physically return goods
to the supplier.

The Returning process includes the following activities:
 
       
8.3.1.
  Return of materials to supplier   Physically return material to the supplier
in accordance with the terms and specific rudiments of the return authorization.
This includes packing, affixing appropriate package identification, and
arranging for and shipping product.
 
       
8.4.
  Return Follow up and Closure   The purpose of the Return Follow up and Closure
process is to assure that the supplier has taken possession of the return goods
and that all follow up actions are completed.
 
       
 
      The Return Follow up and Closure process includes the following
activities:
 
       
8.4.1.
  Manage and Resolve Manage return corrective actions   Resolve issues and track
completion of the return process with the supplier. This includes following up
with the supplier’s to confirm their receipt of the goods and that credits are
approved and project managing the activities of the Receiving Entity and the
supplier to resolve disputes and complete the return or disposition.
 
       
8.4.2.
  Return Closure   Ensure payment, credit or replacement has been received from
the supplier and create a complete record of the return. This latter step
includes changes, as appropriate, to the requisition, PO, and PO invoice that
return occurred as well as other steps to insure data integrity thought out the
P2P platform.
 
       
9.
  Supply Base Management    
 
       
9.1.
  Vendor Qualification   The purpose of the Vendor Qualification process is to
provide assurance the entities that serve as suppliers meet the financial and
community goals of the Receiving Entity.
 
       
 
      The Vendor Qualification process includes the following

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      activities:
 
       
9.1.1.
  Supplier qualification/disqualification process   Qualifying or disqualify an
entity to serve as a supplier in accordance with the business rules
 
       
9.1.2.
  Qualify new vendors   Obtain and review supplier information about themselves
and their products and compare it to the business rules. Perform any other
investigations required by the business rules.
 
       
9.2.
  Create Load and Maintain data   The purpose of the Create Load and Maintain
data process is to assure that required data is created, filed and maintained
current for future use and reporting.
 
       
 
      The Create Load and Maintain data process includes the following
activities:
 
       
9.2.1.
  Create, load and maintain Spend data   Create, load (as appropriate for the
tools employed) and maintain as current data on Receiving Entity’s spend in
order to support Receiving Entity’s Finance and Accounting requirements and to
support the needs of Strategic and Tactical buying activities.
 
       
9.2.2.
  Create, load and maintain Vendor data   Gather, create, load (as appropriate
for the tool employed), and maintain as current supplier data that is necessary
to conduct business to ensure accuracy.
 
       
9.2.3.
  Create, load and maintain Vendor performance data   Gather, create, load (as
appropriate for the tool employed), and maintain as current data as acquired
from the Vendor Performance Measurement Process, supplier management needs and
to support the needs of the Strategic and Tactical Buying activities.
 
       
9.2.4.
  Create, load and maintain Consumption Data   Gather, create, load (as
appropriate for the tool employed), and maintain as current data on consumption
in order to support business management needs and to support the needs of
Strategic and Tactical Buying activities.
 
       
9.2.5.
  Create, load and maintain Market data   Gather, create, load (as appropriate
for the tool employed), and maintain as current category market data to support
the needs of Strategic and Tactical Buying activities.
 
       
9.2.6.
  Create and update requisitioner and approver data   Gather, create and update,
requisitioner and approver data (including identification of persons authorized
to create or approve requisitions including approval levels), as required for
the P2P tool.
 
       
9.2.7.
  Load and maintain requisitioner and approver data   Load (as appropriate for
the tool employed), and maintain as current requisitioner and approver data,
(including updates) required for the P2P tool.

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9.3.
  Reporting   The purpose of the Reporting process is to provide timely and
accurate reports for managing the supply chain activities. This includes
finance, accounting, performance monitoring and strategic and Tactical Buying.
 
       
 
      The Reporting process includes the following activities:
 
       
9.3.1.
  Create report generating facility   Loading all data into a reporting
facility. Create standard report templates for all Procurement, Receiving,
Accounts Payable Returns and Performance activities.
 
       
9.3.2.
  Provide agreed up on reports   Provide agreed upon reports on all Procurement,
Receiving, Accounts Payable Returns and Performance activities.
 
       
9.3.3.
  Issue ad hoc reports   Generate ad hoc (or, one time or irregularly generated)
reports as required on all Procurement, Receiving, Accounts Payable Returns and
Performance activities.
 
       
9.4.
  Create Load and Maintain Plans and Files   The purpose of the Create, Load and
Maintain Plans and Files process is to assure that required plans and files are
created, filed and maintained current for future use and reporting.
 
       
 
      The Create Load and Maintain Plans and Files process includes the
following activities:
 
       
9.4.1.
  Load and maintain Strategic Sourcing Plans   File and load (as appropriate for
the tools employed) all strategic sourcing plans developed and to keep the
sourcing files current.
 
       
9.4.2.
  Create, load and maintain business unit plans   Create and publish business
plans as needed to conduct strategic and tactical buying. File and load (as
appropriate for the tools employed) and keep the files current.
 
       
9.4.3.
  Create, load and maintain contract files   Create and publish the executed
contracts as needed to allow them to be used to conduct business. File, load (as
appropriate for the tools employed) and keep the files current.
 
       
9.4.4.
  Create product specifications   Create and update specifications for the form,
fit and functions and the performance and quality requirements for the products
required by the Receiving Entity.
 
       
9.4.5.
  Load and maintain product specifications   File and load (as appropriate for
the tool employed), specifications for the form, fit and functions and the
performance and quality requirements for the products required by Receiving
Entity and for maintain the files current.

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10.
  Supply Chain Management    
 
       
10.1.
  Create Standard RFx instruments   The process of creating, maintaining and
periodically updating, as required for each Commodity, electronic RFx templates
(for example, RFI, RFP and RFQ forms) that include, for example, Customer’s
standard procurement terms and conditions, contact information, Commodity
specifications, financing and payment terms and preferences, if applicable,
delivery tolerances and required service levels;
 
       
10.2.
  Create and Update Business Rules   The purpose of the Create Business Rules
process is to assure required business rules are in place, current for
conducting all supply chain activities.
 
       
 
      The Create Load and Maintain Business Rules process includes the following
activities:  
10.2.1.1
  Strategic sourcing rules   Establish, document and update the business rules
that guide the Strategic Sourcing. These rules may be specific to specific
categories including rules associated with efforts by Customer to maintain other
business relationships.
 
       
10.2.1.2
  Bidding rules   Establish, document and update the business rules that guide
the competitive bidding process, rules for exemptions from the competitive
bidding process and rules for assuring the acquisition of competitive pricing
when bidding is not possible.
 
       
10.2.1.3
  Tactical buying rules   Establish, document and update the business rules that
initiate tactical buying and that guide the tactical buying process.
 
       
10.2.1.4
  “Qualified Vendor” business rules   Establish, document and update the
business rules that establish the minimum acceptance criteria for becoming a
supplier. Including Certification requirements for Hazardous materials and the
such
 
       
10.2.1.5
  Logistic rules   Establish, document and update the business rules that
establish the logistic channels used by supplier providing products.
 
       
10.2.1.6
  Standard forms of agreement   Establish, document and update the standard
forms of agreements for the acquisition of goods and services.
 
       
10.2.1.7
  Contracting/deviation from of standard forms of agreement rules   Establish,
document and update the business rules that outline the allowed flexibility in
negotiation of terms and conditions which deviate those identified in the
Standard forms of Agreement. The rules also include the criteria (price,

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      commodity, etc.) where separate legal review by Receiving Entity is
required.
 
       
10.2.1.8
  Import/export tax freight and duty rules   Establish, document and update the
business rules that guide the handling of import and export tax, freight and
duty.
 
       
10.2.1.9
  Returns rules   Establish, document and update the business rules that guide
the return of excess or non-conforming goods. These may include minimum value of
returns and the steps to be taken when a products value is small when compared
with the cost of returning.
 
       
10.2.2.
  Load, File and Maintain Business Rules   The purpose of the Load, File and
Maintain Business Rules process is to assure that the required business rules
are in current and available for future use in conducting all supply chain
activities.

The Load, File and Maintain Business Rules process includes the following
activities:
 
       
10.2.2.1
  Strategic Sourcing rule   Load (as appropriate for the tool employed) File and
Maintain the business rules that guide the Strategic Sourcing. These rules may
be specific to specific categories including rules associated with efforts by
Customer to maintain other business relationships.
 
       
10.2.2.2
  Bidding rules   Load (as appropriate for the tool employed) File and Maintain
the business rules that guide the competitive bidding process, rules for
exemptions from the competitive bidding process and rules for assuring the
acquisition of competitive pricing when bidding is not possible.
 
       
10.2.2.3
  Tactical buying rules   Load (as appropriate for the tool employed) File and
Maintain the business rules that initiate tactical buying and that guide the
tactical buying process.
 
       
10.2.2.4
  “Qualified Vendor” business rules   Load (as appropriate for the tool
employed) File and Maintain the business rules that establish the minimum
acceptance criteria for becoming a supplier.
 
       
10.2.2.5
  Logistic rules   Load (as appropriate for the tool employed) File and Maintain
the business rules that establish the logistic channels used by supplier
providing products.
 
       
10.2.2.6
  Standard forms of agreement   Establish, document and update the standard
forms of agreements for the acquisition of goods and services.
 
       
10.2.2.7
  Contracting/deviation from of standard forms of agreement rules   Load (as
appropriate for the tool employed) File and Maintain the business rules that
outline the allowed flexibility in

      

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      negotiation of terms and conditions which deviate those identified in the
Standard forms of Agreement. The rules also include the criteria (price,
commodity, etc.) where separate legal review by Receiving Entity is required.
 
       
10.2.2.8
  Import/export tax freight and duty rules   Load (as appropriate for the tool
employed) File and Maintain the business rules that guide the handling of import
and export tax, freight and duty.
 
       
10.2.2.9
  Returns rules   Load (as appropriate for the tool employed) File and Maintain
the business rules that guide the return of excess or non-conforming goods.
These may include minimum value of returns and the steps to be taken when a
products value is small when compared with the cost of returning.
 
       
10.3.
  Enforce Business Rules   The purpose of the Enforce Business Rules is to
assure compliance with the business rules.

The Enforce Business Rules process includes the following activities:
 
       
10.3.1.
  Monitor compliance with business rules   Monitor all of the processes’
compliance to the business rules by continuous observation or by periodic audit
in accordance with pre-established routine or by cause.
 
       
10.3.2.
  Enforce compliance with business rules   Enforce compliance with to the
business rules by requiring actions to correct and prevent recurrence.
 
       
10.4.
  Legal   The purpose of the Legal process is to provide assurance that the
contracts developed meet the required legal standards.

The Legal process includes the following activities:
 
       
10.4.1.
  Conduct legal review   Conducting the legal review of contracts which terms
and conditions deviate from the Standard forms of Agreement beyond the
flexibility afforded in the applicable business rules or where established
criteria have been met which initiate separate legal review.
 
       
10.5.
  Tax   The purpose of the Tax process is to assure that the Receiving Entity’s
tax liability is adequately addressed.
 
       
10.5.1.
  Administration   Identify which taxes and amounts are included in the invoices
for the goods and services acquired. Track taxes as presented and paid.
 
       
10.5.2.
  Pay Taxes   Pay taxes imposed by applicable legislative bodies.

      

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              PROCESS   DEFINITION
10.5.3.
  Compliance   Assuring compliance to laws and regulations for taxes on the
goods and services acquired and for paying taxes due but not collected and for
recovering taxes paid but not due.
 
       
10.5.4.
  Audit   Auditing compliance to the laws and regulations for taxes on the goods
and services acquired on a routine pre-established schedule or on an ad hoc for
cause basis.
 
       
10.5.5.
  Planning strategy   Creating the strategy for minimizing the taxes paid by
Receiving Entity on the goods and services acquired.
 
       
11.
  Other    
 
       
11.1.
  Call Center   Operating a call center to respond to inquiries about and
requests for assistance with all aspects of the Services and the platforms
provided by the outsourcer.
 
       
11.2.
  Platform and Security   The platform (functionality and availability as
mutually agreed) and all platform security in accordance with Customer’s
requirements.
 
       
11.2.1.
  Requisitioning, ordering, receiving, return and accounts payable platform  
Provide the platform (functionality and availability) and all security in
accordance with Receiving Entity’s Requirements for the Requisitioning,
ordering, receiving, returns and accounts payable platform.
 
       
11.2.2.
  Sourcing platform   Provide the platform (functionality and availability) and
all security in accordance with Receiving Entity’s Requirements for the Sourcing
platform
 
       
11.2.3.
  Data exchange platform   Providing the platform (functionality and
availability) and all security in accordance with Receiving Entity’s
Requirements. for the Data exchange platform
 
       
11.2.4.
  File transfer   Receiving and sending data files in accordance with the agreed
upon protocol.
 
       
11.2.5.
  Internet access   Providing the platform (functionality and availability) and
all security in accordance with Receiving Entity’s Requirements for internet
access (including for e-mail access, as necessary).

      

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INDIRECT SOURCING SERVICES AGREEMENT
Between
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Annex A-3
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Between
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Annex A-4
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INDIRECT SOURCING SERVICES AGREEMENT
Between
Solectron and IBM
Schedule A-5
IBM Solution
      

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Table of Contents
1. Overview and General Approach
2. Strategic Sourcing and P2P Operations Services
2.1 Strategic Sourcing
2.2 P2P Operations
3. Technical Solution
4. Customer Assistance Center (CAC)
5. IBM Delivery Organization Model
6. Solectron Facilities
APPENDIX A — Strategic Sourcing Methodology
APPENDIX B — Data/File Transfers
      

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1. Overview and General Approach

  1.1.   IBM will provide to Solectron, the managed procurement operations
services that comprise (a) Strategic Sourcing Services and (b) P2P Operations
Services. IBM will deliver Strategic Sourcing Services in two initial waves, as
described in Annex A-7 (Transition Plan) and then continue to strategically
source the Categories by providing Ongoing Category Management Services, as
described in Annex A-1 (Scope Model) and Annex A-2 (Process Definitions). IBM
will implement the P2P Operations Services in two waves, as described in Annex 7
(Transition Plan). Wave 1 will include the U.S and Canada and Wave 2 will
include China, Japan, Malaysia, Singapore, Brazil, UK, France, Hungary, Romania,
Mexico, Sweden, Germany and Taiwan.     1.2.   IBM’s procurement solution is
based on the following key principles:

  1.2.1.   utilization of IBM’s P2P Platform and IBM’s standard P2P processes to
provide standardization across the Solectron organization globally while
maintaining the appropriate balance between local and global needs;     1.2.2.  
limited P2P Platform configuration to meet Solectron business requirements as
described in the Preamble to the Agreement and as further specified in the
Agreement;     1.2.3.   leveraging IBM’s global scale, sourcing expertise and
market knowledge; and     1.2.4.   leveraging IBM’s skills and resources that
have helped position procurement as a core competency within IBM; and     1.2.5.
  using the Emptoris suite of e-sourcing and contract management modules.

  1.3.   Common Business Processes — Except for unique business processes
required by local country laws, common business processes will be implemented on
a global basis.

  1.3.1.   There will be: one common tax solution using standard SAP tax
functionality (e.g. pay as presented); one common set of commodity codes; one
common set of layout sets (five per company code (PO, Contract, PO Alteration,
Dunning and RTV)); and one common set of general ledger and cost center
information providing financial and accounting information for a single
financial legacy system accepting HR data from a single HR system and providing
invoice information to a single consolidated payment system (Harbor).     1.3.2.
  IBM will set up User IDs for Solectron Users pursuant to Annex A-7 (Transition
Plan), and IBM will make up to 100 User IDs available to Solectron that grant
access to the P2P Business Warehouse functionality.     1.3.3.   There will be a
standard approval process employed with three hierarchy-based approvers. There
will be three levels of hierarchical management approval (i.e. an HR-driven
approval structure specified by Solectron), and a special approver at the
company-code level for a maximum of twenty limited commodities to be specified
by Solectron.     1.3.4.   Language Support for Solectron and supplier
interactions will be as set out in the below table.

      

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      Description   Language
Enterprise Buyer / BW User Interface
  English
 
   
Hosted Catalogs within EBP
  English
 
   
Punch-out Catalogs
  Language of the existing catalog
 
   
Output Documents to Suppliers
  English unless other legal requirements
 
   
IBM Buyer Interactions (with both Solectron stakeholders/requesters
  North America — English
and with Suppliers)
  Latin America — English, Portuguese, Spanish
 
  Europe — English (with limited German & French support)   AsiaPac — English
(with support in Japanese, Chinese)
 
   
Call Center (for both Solectron end-users and Suppliers)
  Multi-lingual as per Section 4.4 below.
 
   
Solectron end-user documentation (including procedures manual, training
documentation, etc.)
  English
 
   
Web Order Invoice (Supplier Portal)
  English, French, German, Hungarian,
Portuguese, Spanish, Swedish

  1.4.   Reporting and Performance Measures — IBM’s solution provides for
web-based reporting to authorized Solectron employees for the operational
reports listed in Annex F2 (Operational Reports). Upon completion of the
Transition, IBM will populate its business warehouse with the data from
requisitions, purchase orders, non-PO requests, and invoices, for contracts and
suppliers that are loaded onto the P2P Platform, after which, defined reports
may be run on-demand by Solectron licensed users. The data in the business
warehouse will be updated on a nightly basis. Data will be maintained online for
a period of three years, and will be archived after such three year period in
accordance with a mutually agreed data-archiving plan.     1.5.   Compliance —
Compliance is comprised of two factors: (1) contractual compliance (i.e. use of
strategically sourced contracts) and (2) process compliance (i.e. adherence to
the procurement process.) IBM’s solution is designed to capture 100% of actual
indirect spend.

  1.5.1.   Contractual Compliance — IBM’s approach is to direct as much
commodity spend and transactional volume as is practical to strategically
sourced catalogs and contracts.

  1.5.1.1.   Requisitions for purchases that can not be executed through an
available contract or catalog will be routed to a professional buyer. The buyer
will seek to understand and clarify the requirements for the purchase. When the
requirements are clear, the purchase will be sourced in accordance with the
preferred sourcing strategy and suppliers. If, in clarifying the requirements,
it becomes clear that an existing catalog or contract purchase can be used, the
requisition will be modified accordingly.     1.5.1.2.   Buyers who perform Full
Buyer Purchases are responsible for analyzing why a Full Buyer Purchase was
necessary, and when appropriate, interacting with strategic sourcing teams to
confirm that the available catalogs and contracts are expanded and updated to
keep the system current and applicable to Solectron’s business needs. Buyers who
perform Full Buyer Purchases are measured and rewarded as a result of how
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      purchase and also in terms of actions taken to avoid repeat events in the
future.

  1.5.2.   Process Compliance — The key to managing non-compliant spend is the
IBM centralized management of indirect invoices. IBM’s solution is designed so
that the only way to have an invoice paid for indirect spend is through the IBM
process. Invoices received by IBM directly that do not have a matching PO, and
are not from a specified list of Non-PO categories, people etc, will be noted
and followed up in accordance with the process set out in Section 1.5.2.1.
Invoices received directly by Solectron employees must be submitted for payment
authorization through IBM’s solution via a Web Payment Request.

  1.5.2.1.   IBM will route such invoices to the appropriate supplier (based
upon the supplier information on the invoice), notify such supplier that a
purchase order is needed for the invoice and that the supplier should contact
their requester. The requester must then generate a proper requisition, which is
routed for approvals and bridges over to the buyer. The IBM buyer is then
responsible for contacting the requester to understand why the purchase was made
outside the procurement process The IBM buyer will generate a corresponding
purchase order. and will code the PO as a non-compliant procurement (a
“Bypass”), allowing for subsequent reporting metrics. IBM will measure process
Bypasses on a monthly basis and will educate the appropriate Solectron employees
and management regarding the value of adhering to the established procurement
processes. IBM buyers will also contact and educate the supplier who provided
the goods or services without a purchase order, implementing corrective actions
with the supplier as well.     1.5.2.2.   These interactions with users and
suppliers typically provide for “low key education” in the initial weeks and
months. However, as Bypass events are recorded and reported, users and/or
suppliers with repeated events without justifiable reasons, will require
additional and firmer action. Regarding suppliers, IBM will take increasingly
firm positions with the supplier, advising on and implementing agreed
consequences around payment of the invoices due to process delays (late
payment), as well as consequences of being an unreliable supplier when strategic
sourcing waves are undertaken.     1.5.2.3.   Regarding Solectron employees, IBM
will provide reports on commodities and individuals who purchase items outside
the procurement processes to Solectron through the regular governance process.
To maximize the value of the Services to Solectron, IBM recommends that
Solectron implement strong, consistent and effective management policies to
prevent such activities in the future, recognizing that 100% compliance is
typically not feasible due to local conditions and one-off situations. As above,
this will typically take the form of communications from executives to verify
the business process requirements are understood by these individuals, but as
time elapses, and repeat Bypass occurrences continue, IBM recommends that
Solectron Management implement management actions to handle and reduce Bypasses,
including disciplinary action proportionate to the event.

      

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  1.5.3.   Communication and Assistance — To reinforce the above processes and
reports, IBM will provide a Customer Assistance Center so that a simple, single
point of contact exists so that Solectron users and suppliers can make easy
contact to clarify requisitions, purchase orders, specifications, delivery
requirements, etc. This Customer Assistance Center is the hub of the integrated
solution and has the responsibility to provide usability assistance, resolve
queries and/or connect requisitioners and/or suppliers with appropriate buyers.
    1.5.4.   Management and Business Model — IBM Committed Savings is based on
an assumed range of compliance levels over the Term. Such compliance levels are
lower in the first two years, increasing as the systems and processes are rolled
out. For clarity, the assumed compliance levels also assume that strategic
sourcing contracts and catalogs are in place for those contracts that have been
negotiated.

2. Strategic Sourcing and P2P Operations Services

  2.1.   Strategic Sourcing

  2.1.1.   IBM will assume responsibility for the strategic sourcing processes
for assigned Categories and Geographies as of the Effective Date of the
Agreement. There will be a mix of dedicated and non-dedicated strategic sourcing
resources placed on the Solectron account. Such resources will be skilled in
specific in-scope indirect commodities. The majority of these resources will
reside regionally and globally, while some may be co-located (as required) at
Solectron sites for a period of time in order to meet Solectron’s business
requirements defined in the Preamble to the Agreement and as further specified
in the Agreement.     2.1.2.   The strategic sourcing group will liaise with key
Solectron stakeholders, in developing and executing Solectron’s commodity
strategies, and with the IBM Procurement buyers to implement and manage
Solectron’s commodity fulfillment channel strategies. The strategic sourcing
group will provide leadership to guide Solectron stakeholders through the
strategic sourcing process and to elicit information from Solectron as required
allowing strategic sourcing projects to proceed efficiently. This group will
also work closely within their respective commodity markets to understand
industry trends and relate them to the supply base for integration into their
ongoing commodity strategies.     2.1.3.   IBM will conduct strategic sourcing
activities for in-scope commodities utilizing the Emptoris suite of e-sourcing
and contract management modules.     2.1.4.   Approach and Commodity Groupings —
IBM utilizes a proven six step strategic sourcing methodology, which IBM has
used both internally and with external clients. The approach is to form
commodity teams, comprised of IBM commodity subject matter experts (SMEs) and
key Solectron stakeholders, who will define and execute detailed commodity
sourcing strategies tailored to Solectron’s business requirements.     2.1.5  
Measuring Compliance During The Migration Period — During the migration period,
IBM will conduct strategic sourcing activities that may generate commodity
savings. Pending implementation of an automated method to calculate and track
compliance via the P2P Platform, IBM will utilize a manual approach to measure
Solectron’s user compliance to the strategically sourced contracts.

      

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  2.1.5.1   Committed Savings from these initial strategic sourcing activities
are based on certain levels of Solectron user compliance. To increase the
probability of Solectron user compliance:

  2.1.5.1.1   Solectron will distribute IBM-provided education materials related
to the strategic sourcing services and will consider IBM guidance and
suggestions with regard to effective and reasonable enforcement policies.    
2.1.5.1.2   IBM will, as part of it’s strategic sourcing methodology, develop
and implement a comprehensive transition plan to newly sourced contracts that
includes Solectron management and user involvement.     2.1.5.1.3   In the
absence of a fully implemented P2P Platform, IBM will measure User compliance to
strategically sourced contracts through a combination of supplier data,
cross-checked against Solectron legacy system data for the contracted suppliers
and commodity codes where data is available.

  2.2   P2P Operations

  2.2.1   In addition to the ongoing Strategic Sourcing Services described
above, IBM will assume responsibility for Solectron’s indirect procurement and
accounts payable operations for each in-scope country effective upon completion
of the applicable Wave.     2.2.2   There will be fifteen legal entities on the
P2P Platform, one legal entity per country will be implemented in accordance
with Annex A-7 (Transition Plan).     2.2.3   Requisitioning — The IBM solution
will direct all in-scope Solectron spend through six (6) commodity-specific
fulfillment channels:

  2.2.3.1   Method 1 — Hosted Catalogs — This method will be used for low value,
high volume purchases. Catalog content is strategically sourced by IBM on
Solectron’s behalf. Solectron requesters will select goods or services from
these catalogs and the ensuing requisitions will be routed for management
approval via established workflow within EBP. Approved requisitions are sent
automatically to IBM’s SAP 4.7 system, which will automatically issue a
corresponding purchase order to the supplier.     2.2.3.2   Method 2 — Punch Out
Catalogs — This method will be used for suppliers where the catalog is too large
to host internally or where the supplier has a ‘configuration engine’ built into
their website. Catalog content is strategically sourced by IBM on Solectron’s
behalf. The requester will be automatically routed to the supplier website for
purposes of filling the shopping cart, but the completed shopping cart is pulled
back into EBP and then routed for approvals via established workflow. Approved

      

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      requisitions are sent automatically to IBM’s SAP 4.7 system, which will
automatically issue a corresponding purchase order to the supplier.     2.2.3.3
  Method 3 — Contract Purchasing — This method will be used where orders are to
be tied to strategically sourced contracts. IBM buyers will load these contracts
into EBP for incorporation in the hosted catalog, which will provide only
authorized groups and individuals visibility to specific supplier content which
can be used to automate the population of a requisition which is then routed for
approvals within EBP via established workflow. Approved requisitions are sent
automatically to IBM’s SAP 4.7 system, which will automatically issue a
corresponding Purchase order to the supplier.     2.2.3.4   Method 4 — Full
Buyer (Tactical Buying) — This method (a “Full Buyer Purchase”) will be utilized
where there are no supplier catalogs or contracts in place for the required
commodity. This may be because the requester requires items that are custom or
one-off goods or services, or are to be sourced from non-standard suppliers. The
Solectron requester will complete a purchase requisition in EBP, which is then
routed for approvals based upon established workflow. Approved requisitions are
sent automatically to IBM’s SAP 4.7 system, which routes the requisition to the
proper IBM buyer, based on commodity grouping or location. The buyer will verify
that no existing contract or catalog covers the required goods or services and
if applicable based on established business rules, the IBM buyer will perform
Tactical sourcing and issue a corresponding Purchase order to the chosen
supplier.     2.2.3.5   Method 5 — Non PO (Web Based Payment Request (WPR) —
Certain in-scope commodities may not be suitable to direct through a purchase
requisition/purchase order process due to limited potential value-add of the
procurement process. For example, honorariums for guest speaker engagements
would not benefit from a purchasing process, yet the spend may be considered
in-scope. IBM’s solution offers an alternate (non-PO) process called Web Payment
Request, which allows Solectron requesters to input invoice details into EBP to
enable payment of suppliers. It is important to note that IBM and Solectron will
agree on which specific sub-commodities will be approved only for this process.
This process is intended for use on a strictly controlled basis and is not
intended to be an approved procurement bypass mechanism. This facility validates
that 100% of spend is visible through the procurement system for reporting and
audit purposes.     2.2.3.6   Method 6 — Corporate Procurement Card — This
method is available only to the extent Solectron selects and utilizes American
Express as the Solectron Procurement card provider. IBM will use the existing
Solectron Procurement card provider, American Express. Each P-card holder will
require a profile with default accounting information populated. IBM will work
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      that can be fed into to the P2P Platform as a non-PO interface. No account
checking will be performed prior to the electronic upload. American Express will
send an invoice statement to the American Express cardholder with as much
invoice detail as American Express is able to provide. Managers will also be
able to obtain a copy of the statement by pulling it from an access controlled
American Express website.         The file for P-Card will be consolidated by
American Express and come into P2P as one single electronic batch invoice file
without any account validation. Reporting information from IBM BW will be
limited to what is provided by American Express on the batch file into IBM.    
    American Express will either (1) send an invoice statement to the Solectron
Requester based on employee serial number with as much invoice detail as
American Express is able to provide or (2) provide an online statement for the
requestor to review. The statement to the employee will be a negative
confirmation; if there are invoice discrepancies, the employee will need to
resolve with the supplier. In such a case, the supplier will have to issue a
credit to the card account which will be posted on the next monthly feed from
American Express. Managers will also be able to obtain a copy of the statement
by pulling it from an access controlled American Express website.

  2.2.4   Requisition Tool — The key attributes of the requisition tool are:

  2.2.4.1   Requesters may select from a list of family codes available for use
based on type of buy, as well as selecting from a list of Sub-Commodities based
on family code. Requesters may search for an item by Text, Supplier Part Number,
Buying Company Part Number or Manufacturing Part Number. A fuzzy search
capability is also provided.     2.2.4.2   Requesters may buy on behalf of
another person.     2.2.4.3   Based on commodity or commodity code, requisitions
will be automatically populated with the correct accounting information. Split
accounting can be specified. Accounting validation will be performed.    
2.2.4.4   Requesters will be able to select the desired type of accounting:
capital accounting, expense accounting.     2.2.4.5   Requesters may expedite a
requisition or identify it as an emergency requisition.     2.2.4.6   Requesters
may enter a suggested supplier on the requisition, except if a Preferred
Supplier already exists.     2.2.4.7   Requesters may add notes to suppliers or
buyers when submitting a requisition, or they may attach documents to a
requisition at the line item level. Requesters may also add additional fields
for individual line items.

      

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  2.2.4.8   Special approvers can be configured to meet Solectron business needs
(tax, financial, capital, safety, chemical, corporate).     2.2.4.9   An
Approver may delegate responsibility to another Approver.     2.2.4.10   Anyone
in the approval chain may add another, non-standard approver.     2.2.4.11   If
a requisition has been rejected, notification of the rejected requisition will
be sent to the requester together with the reason for the rejection.

  2.2.5   Catalog Management — IBM will create and maintain online supplier
catalogs as the result of the initial migration and strategic sourcing efforts.
As part of the ongoing Strategic Sourcing Services, IBM will support and
maintain additional catalogs as a result of the ongoing strategic sourcing
efforts. IBM will bring new supplier catalogs into the system, test and stage
those catalogs prior to moving them to production, and will set up the proper
authorizations to allow Solectron requesters to buy from them. Authorized IBM
buyers must approve each catalog for use in the production environment.

  2.2.5.1   The IBM catalog manager will have the ability to establish user
access controls to catalogs and contracts through the establishment and
maintenance of user views at the global, company, plant, and department levels.
The IBM catalog manager will also have the ability to modify the catalog content
to improve fuzzy search capabilities.     2.2.5.2   Hosted catalogs will be
received and loaded into EBP. Multiple supplier catalogs can be merged into a
single EBP hosted catalog (for example, a single commodity catalog), and
requesters will be able to search individual supplier catalogs inside the main
hosted catalog. Catalogs will display graphic images of items if provided by the
suppliers.

  2.2.6   Procurement — The procurement delivery organization is aligned across
six delivery centers located in Endicott, New York; Greenock, Scotland;
Bangalore, India; Budapest, Hungary; Hortolandia, Brazil and Shanghai, China.

  2.2.6.1   IBM’s approach to tactical procurement covers a wide continuum and
extends far beyond traditional transaction execution.

      

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(FLOW CHART) [f18842f1884207.gif]

  2.2.6.2   IBM’s tactical buyers will communicate regularly and coordinate with
the strategic sourcing teams to collaborate on new opportunities and to assist
in deploying contracts. Also, the tactical buyers will provide input to the
teams regarding compliance issues, supplier performance issues, and operational
trends.     2.2.6.3   IBM buyers manage to the established procurement policies
and procedures. Records and documentation of controls are maintained in a manner
that will allow independent assessment of overall compliance posture. Quarterly
self-audits are performed and exceptions must have management signoff.    
2.2.6.4   IBM manages the approved requisitions that require Full Buyer
Purchases (as described in Method 4 above) according to a dollar clip level
which will be specified in the Procedures Manual. Below the clip level, IBM
buyers will drive to place the order with a contracted supplier. Above the clip
level, should there be no strategic contract in place, IBM buyers will perform
tactical sourcing on behalf of Solectron to establish fair value determination
and select the best supplier for the specific requisition.     2.2.6.5   Prior
to conducting a tactical sourcing exercise, IBM will analyze commodity data,
validate any existing contractual obligations, seek to leverage the spend
opportunity, and identify and validate the potential supply base.

      

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  2.2.6.6   IBM uses four primary approaches in tactical sourcing to evaluate
pricing and select the best supplier for a specific requisition:

  2.2.6.6.1   Competitive Evaluation — A competitive evaluation is performed by
cross-functional teams, including Solectron stakeholders. The approach is
collaborative with IBM and Solectron stakeholders to pre-define scoring criteria
and weighting and may include factors other than price (i.e. delivery
performance, technical advantages, etc).     2.2.6.6.2   Competitive Bid — A
competitive bid process includes collaboration with Solectron stakeholder to
pre-define the evaluation criteria; communication of defined scope and project
specifications; arranging site visits and pre-bid meetings; receiving and
evaluating bid proposals and summarizing proposals for review with Solectron
stakeholders.     2.2.6.6.3   Auctions — An auction involves creating standard
RFQ/Auction templates, which include standard terms and conditions, contact
information, specifications, financing/payment preferences & terms and delivery
tolerances or auction length. Under this approach, IBM will establish criteria
for supplier selection, in accordance with business rules provided by Solectron,
and, to the extent the business rules do not specify or are not appropriate, the
criteria may include credit rating, contact information and area of expertise;
circulate the RFQ/Auction to internal Solectron organizations such as legal,
finance, engineering and management for review and approval, as required. There
are multiple RFQ/Auctions scheduled at the same time. The process includes
utilizing auction tools to execute on line bidding process.     2.2.6.6.4  
Analytic Techniques — IBM will leverage its market intelligence database
resources; use spend analysis benchmarking and cost-build-up analysis.

  2.2.6.7   IBM buyers will access the Emptoris e-Sourcing Portfolio for the
purpose of creating RFx documents in support of the buyer-initiated RFx process.
Qualified suppliers can also access the Emptoris application via web browser,
for the purpose of reviewing and responding to RFx documents, via direct access
to the application and/or via the IBM Supply Portal. Suppliers will be allowed
to discount bids with flexible pricing schedules, bundled pricing and volume
discounts.     2.2.6.8   IBM buyers will use Emptoris to perform bid analysis,
establish and exercise “what if” award scenarios, and to finalize supplier
award. Emptoris will automatically send win/loss notices to participants via
e-mail. IBM buyers can indicate whether

      

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      awarded bids, RFx or Auction, are to be satisfied by issuing a Purchase
order or creating a Contract.     2.2.6.9   IBM will manage the day-to day
routine purchasing functions, including review of requisitions, preparing the
necessary documentation on each purchase order, verifying hat price and payment
terms are consistent with Solectron requirements, placement of purchase orders,
processing alterations and cancellations, delivery expediting, and managing
blocked invoices. IBM buyers will act as the day-to-day focal point for supplier
relations and will liaise between suppliers and Solectron requestors, addressing
supplier performance issues, managing returns, clarifying requirements, and
addressing miscellaneous business issues. In the United States, IBM buyers will
identify and engage qualified minority (MWBE) suppliers and drive appropriate
spend to them consistent with the overall commodity strategy established by the
strategic sourcing teams.     2.2.6.10   The tactical buying team will develop
and foster relationships with key stakeholders through on-site presence and
quarterly reviews.

  2.2.7  Accounts Payable Processing — The Accounts Payable delivery
organization is aligned across six (6) delivery centers located in Endicott, New
York; Bangalore, India; Budapest, Hungary; Buenos Aires, Argentina; Shanghai,
China; and Dalian, China.

  2.2.7.1   A single chart of accounts will be implemented globally.

      The following diagram describes the accounts payable activities that occur
in each center

(ACCOUNTS PAYABLE CHART) [f18842f1884208.gif]
      

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      The following diagram depicts the accounts payable General Process
Overview.

(ACCOUNTS PAYABLE CHART) [f18842f1884209.gif]

  2.2.7.2   There will be six scanning locations (as set out in the table below)
and resources setup at IBM in-country facilities. Those countries without a
scanner will need to receive the invoices from the supplier and mail the invoice
to an IBM shared delivery center. Negative confirmation will be used for goods
receipt matching for indirect non-receivable type of invoices, but there will be
positive confirmation for items exceeding a specified value (to be determined).
SAP’s EBP will be used globally by Solectron to submit non-PO check requests for
indirect payables.

          Countries in scope   Scanning Location   Comment
France
  Bratislava — Iron Mountain   Supplier Mails to Scanning Location
Germany
  Bratislava — Iron Mountain   Supplier Mails to Scanning Location
Hungary
  Bratislava— Iron Mountain   Supplier Mails to Scanning Location
UK
  Bratislava — Iron Mountain   Supplier Mails to Scanning Location
Sweden
  Bratislava — Iron Mountain   Supplier Mails to Scanning Location
Romania
  Bratislava — Iron Mountain   Supplier Mails to Scanning Location
Singapore
  Singapore— IBM   Supplier Mails to Scanning Location
Taiwan
  Singapore— IBM   Solectron Taiwan Mailroom send to IBM Singapore
Malaysia
  Singapore— IBM   Solectron Malaysia Mailroom send to IBM Singapore
Japan
  Japan —IBM   Scan thru Supplier Mail
China
  China —IBM   Scan thru Supplier Mail
Brazil
  Brazil —IBM   Scan thru Supplier Mail
Mexico
  Endicott —IBM   Solectron Mexico Mailroom to send to IBM Endicott
US/Canada
  Endicott —IBM   Scan thru Supplier Mail
Corp
  Endicott —IBM   Scan thru Supplier Mail

      

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  2.2.7.3   IBM’s electronic invoicing tools will be used for indirect invoices
on the P2P Platform for countries where it is applicable. IBM will utilize a
global imaging and workflow technology as well as scanners.

  2.2.8   IBM’s Enabling Technology for Accounts Payable — The following tools
will be incorporated into the P2P Platform :

  2.2.8.1.1   Electronic Invoice Processing

  2.2.8.1.1.1   Supply Portal — IBM’s Supply Portal solution is a web
application for vendors that hosts the WOI (Web Order and Invoicing)
application. In addition, the portal offers a number of features for suppliers:
(1) Supplier registration and administration; (2) Display PO, PO Confirmation,
Invoice Data, Rejected Invoice; (3) Sort and search for specific
(invoicing) documents; (4) Collect invoice data via a browser; (5) Ability to
allow a supplier to accept, reject or recommend changes to a purchase order and
generate an order response transaction back to SAP; (6) Displaying general
contact information like phone number and email address including feedback
function via email to a help desk to report problems and get questions answered
and (7) Generating e-mail alerts for suppliers’ action.     2.2.8.1.1.2   WOI
(Web Order and Invoice) — WOI is an invoicing application accessed by the
supplier via the Supply Portal. It uses the purchase orders generated in IBM’s
EBP and SAP systems to pre-populate a standard invoice form which the supplier
can then finalize and submit as an electronic invoice. This process avoids the
invoicing errors typically encountered, thereby greatly reducing the number of
invoices that need to be returned to suppliers.     2.2.8.1.1.3   WPR (Web
Payment Request) — WPR is a web-based application which will allow Solectron
personnel to request payments and reimbursements for non-purchase order-related
purchases. It will be used for invoices directly received by / sent to the
requester.

  2.2.8.1.2   Paper Invoice Processing — Invoice Scanning & Archiving via
‘Content Manager’ — In the absence of electronic invoices, the IBM platform
offers a

      

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      manual, paper-based invoicing process. In this case the supplier will send
the invoice to a central mailbox. The invoice will be imaged and electronically
stored in the archive (Content Manager). After approval and invoice posting, the
SAP document number will be automatically attached to the imaged document.    
2.2.8.1.3   Confirmation of Receipt — Positive or Negative Confirmation of Goods
Receipt — IBM’s platform includes either a positive or negative confirmation, by
the requestor, of ordered indirect goods and services. Once an invoice is
received, an approval (which may be either a positive or negative confirmation)
is required to validate the 3-way match (for PO-based invoices only). Depending
on the commodity type, the system requires either a positive confirmation (after
being informed via workflow the requestor has to confirm the goods receipt in
EBP) or a negative confirmation (the receipt is assumed, the requestor will only
intervene if the goods were not received). The advantage of utilizing the
negative confirmation process is a more efficient end-to-end ‘no touch’ process.
It is important to note that IBM and Solectron will agree on which specific
sub-commodities will require a positive confirmation.

  2.2.9   Vendor Master Maintenance — Accuracy of vendor master data is one of
the key factors to achieving efficient, timely and accurate transactional
supplier management. As such, this solution assumes that the platform will hold
the primary vendor master file for Solectron’s indirect suppliers.

3   Technical Solution — For the post-migration strategic platform operations,
global IT support will be provided primarily from the IBM sites located in
Poughkeepsie, New York, and Endicott, New York. Application Maintenance Services
will be conducted in Endicott, and Application Hosting services will be
conducted in Poughkeepsie. These two sites will also provide appropriate Level 2
and Level 3 support to the global Customer Assistance Center. Solectron users
will access the hosted IBM environment via the internet.

      

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The following diagram depicts the P2P Platform.
(P2P PLATFORM CHART) [f18842f1884210.gif]

  3.1   SAP e-Procurement Platform — EBP Version 4.0 - EBP 4.0 will function as
the front-end requisitioning tool for in-scope procurement. Key attributes are
follows:

  3.1.1   Provided in local currency for in-scope countries.     3.1.2  
Configured to handle catalog purchases (either hosted or “shop-out/roundtrip”),
on-line contracts based on SAP outline agreement capabilities, free-form
requisitions for ad-hoc purchases, and Web Payment Requests for non-purchase
order activity.     3.1.3   Desktop Receiving will be enabled only for specific
commodities which require a positive confirmation of delivery.     3.1.4  
Approval workflow and commodity code structure are targeted to be consistent
across the Solectron enterprise.     3.1.5   Accounting structures will be
configured to meet Solectron’s business requirements.     3.1.6   Standard
requester query capabilities.

  3.2   SAP 4.7 — SAP 4.7 will function as the Purchasing and Invoice Matching
engine. Key attributes are follows:

  3.2.1   Purchase order creation and transmission     3.2.2   Configuration to
allow invoice imaging and Web Order Invoicing     3.2.3   Cost element
validation (cost center, G/L, etc.)

      

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  3.2.4   Vendor master replication     3.2.5   Purchasing organization and
company code assignment validation     3.2.6   Invoice matching

  3.3   SAP BW Version 3.5 — IBM has an SAP BW platform configured and in use. A
Solectron-specific data cube will be built enabling Solectron end-users to
access reports on demand.     3.4   e-Sourcing and Contract Management — IBM’s
solution includes Emptoris as an e-sourcing tool in order to facilitate RFP/RFI
and auction capabilities or as a stand-alone tool for sourcing engagements.    
3.5   Data/File Transfer — As of the first Go-live date, the IBM solution will
deploy a hub to hub architecture to achieve integration between Solectron and
IBM systems. The hub to hub solution will allow structured data to be sent and
received between each environment. Appendix B attached hereto lists a
description of the data/files to be exchanged. The Parties will agree on the
necessary data and file formats as specified in Annex A-7. For clarity, on the
receiving end, IBM is responsible for providing the data/file standards to which
the Solectron-provided data must comply. On the sending end, IBM will provide
data in accordance with the data/file standards provided by Solectron; Solectron
is responsible for loading this data into Oracle.

4   Customer Assistance Center (CAC)— The IBM BTO Procurement Customer
Assistance Center is a customer focused contact center designed to deliver a
high quality service in an efficient, cost effective manner. The Solectron
Global Customer Assistance Contact Center service will encompass supplier
management, an end user helpdesk dealing both with employee and supplier
queries, as well as service management. Performance measures will be tracked and
reported monthly.

  4.1   Support Details — Solectron users and suppliers may contact the CAC via
telephone, fax and email. They will reach a dedicated desk in one of the
center’s three locations, supporting the following activities: (1) Single point
of contact for user and supplier enquiries throughout the procurement process;
(2) “How to” usability questions on procurement applications; (3) First point of
contact for technical support on procurement applications and (4) Supplier
status inquiries.     4.2   On calling the Solectron CAC, should there be any
major issues affecting a significant number of users, users will initially hear
a service status message advising of the problem and the anticipated resolution.
This means that a significant number of users calling about that major incident
will immediately receive the information they require without the need to speak
with a customer service agent.     4.3   Following any status message, users
will be routed to a skilled agent. Routing is automatic for language, but users
will be offered an options menu in their local language to enable their call to
be directed to an appropriately skilled agent. Solectron’s users can also choose
to create their service request by email.     4.4   Support will be provided for
the following Geographies/Countries and associated languages as described below.

      

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      Geography   Hours of Support
United States and Canada
Languages: English, French
  8:00 AM to 6:00 PM EST
 
   
Europe (France, Germany, Hungary, Romania, Sweden,
United Kingdom)
  9:00 AM to 6:00 PM CET
Languages: French, German, Hungarian, English,
Swedish
 
 
   
Latin America (Brazil, Mexico)
  9:00 AM to 6:00 PM EST
Languages: Brazilian Portuguese, Spanish
 
 
   
Asia (China, Japan, Malaysia, Singapore, Taiwan)
  9:00 AM to 6:00 PM Local Country Time
Languages: Chinese, Japanese, English
 

  4.5   A group leader will monitor incoming customer interactions on a real
time basis deploy staff to cover peaks, particularly on incoming telephone
contacts.     4.6   Calls will be routed primarily via the telephony system to
the agent best equipped to resolve the issue the first time. IBM’s customer
service agents will be trained on the procurement systems and processes. To
achieve this, IBM has invested heavily on training program within IBM’s contact
centers that not only provide technical expertise in core roles but also cross
training to broaden the agents’ personal skills and to offer additional
flexibility and increased utilization. IBM will operate a multi-skilled team of
agents, group leaders and managers who will support Solectron’s users, providing
an end-to-end Solectron Customer Assistance Center service via phone, fax and
email.

5   IBM Delivery Organization Model

  5.1   IBM has defined a delivery organizational structure which leverages
IBM’s global, regional, and local capabilities to meet Solectron’s business
requirements as defined in the preamble of the Agreement and as set out in Annex
A1 and Annex A2.     5.2   IBM will assign both dedicated and shared resources
to Solectron at the outset of the engagement; such dedicated roles (except for
the Transition Manager) will remain in place through the Term.     5.3   The
Solectron delivery team will report through a single global delivery
organization, with some local presence, as well as regional and global centers.
    5.4   IBM Global Project Executive (PE) — The PE will have overall
day-to-day accountability for the IBM solution as described in Schedule F
(Governance).

6   Solectron Facilities

This table below lists Solectron’s locations within In-Scope Countries, where
IBM will provide the Services.

              Ref.#   Country   Facility   Address
1.
  Brazil   Solectron Brasil Ltda   Rodovia Campinas Mogi Mirim km 133 — Roseira
Jaguariuna, Sao Paulo
 
           
2.
  Canada   Solectron Corporation — Systems Solutions Group   1455 Mountain
Avenue, Winnipeg,
Manitoba R2X 2Y9
 
           
3.
  Canada   Solectron Kanata   425 Legget Drive, Kanata, Ontario
K2K 2W2
 
           
4.
  Canada   Solectron Global Services Canada   213 Harry Walker Parkway, South
Newmarket, Ontario L3Y 8T3

      

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              Ref.#   Country   Facility   Address
5.
  Canada   Solectron Invotronics   365 Passmore Avenue, Scarborough,
Ontario L3Y 8T3
 
           
6.
  Canada   Solectron Saint-Laurent   5005 Levy Street, Saint-Laurent,
Quebec H4R 2N9
 
           
7.
  Canada   Solectron Sherbrooke   4025 Letellier Street,
Sherbrooke, Quebec J1E 1K2
 
           
8.
  Canada   Solectron — Metaltek (Canada)   12 Hotel de Ville
Dollard des Ormeaux, Quebec
 
           
9.
  China   Solectron (Shanghai) Technology Co., Ltd.   3F Building 5, 258 Jinzang
Road,
Jinqiao Export Processing Zone,
Pudong, Shanghai
 
           
10.
  China   Solectron Global Services Shanghai   No. 78 Ying Run Road, Wai Gao
Qiao Free Trade Zone, Pudong, Shanghai
 
           
11.
  China   Solectron (Shenzhen) Technology Co., Ltd.   3, Tian Fu Road, Tong Fu
Yu
Industrial Park, Fu Yong Town,
Vao An District, Shenzhen
 
           
12.
  China   Solectron (Suzhou) Technology Co., Ltd.   No. 9, Suqian Road,
China-Singapore Suzhou Industrial Park, Suzhou, Jiangsu
 
           
13.
  France   Solectron Bordeaux   Chemin Departemental 109E,
Canejan, BP6, 33611 Cestas Cedex
 
           
14.
  France   Solectron Paris   4 Place de la Defense, La Defense
4, 92974 Paris La Defense Cedex
 
           
15.
  Germany   Solectron GmbH   Solectronstrasse 2, D-71083
Herrenberg
 
           
16.
  Germany   Solectron GmbH — European Customer Center   Theresieanhohe 13,
D-80339 Munich
 
           
17.
  Hungary   Solectron Hungary   H-1183 Budapest, Hangar Utca 5-37
 
           
18.
  Japan   Solectron K.K. — Japan Headquarters   Yaesu guchi Kaikan 6F, 1-7-20
Yaesu, Chuo-ku, Tokyo 103-0028

      

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              Ref.#   Country   Facility   Address
19.
  Japan   Solectron K.K. — SLR-Ibaraki   367-2 Sekitate, Chikusei-shi,
Ibaraki 308-0193
 
           
20.
  Japan   Solectron K.K. — Shonan NPI Center   1-14-1 Midorigaoka,
Ninomiay-machi Naka-gun, Kanagawa
259-0132
 
           
21.
  Japan   Solectron K.K. — SGS-Japan   1-17 Machiikedai, Koriyama,
Fukushima 963-0215
 
           
22.
  Malaysia   Solectron Technology Sdn Bhd   Plot 13, Phase IV, Prai
Industrial Estate, 13600 Prai,
Penang
 
           
23.
  Mexico   Solectron Chihuahua   Rudyard Kipling # 11530, Complejo Ind. Chih.,
Chihuahua
 
           
24.
  Mexico   Solectron de Mexico, S.A. de C.V.   Prol. Av. Lopez Mateos Sur No.
2915 Km. 6.5 Tlajomulco de Zuniga, Jalisco C.P. 45640
 
           
25.
  Romania   Solectron Romania S.R.L.   Calea Torontalului, km 6.5, 1900
Timisoara
 
           
26.
  Singapore   Solectron Global Services Singapore   31 Joo Koon Circle
Jurong Town, Singapore 629108
 
           
27.
  Singapore   Solectron Technology Singapore Pte. Ltd.   12 Kallang Way
Singapore 349216
 
           
28.
  Singapore   Solectron Technology Singapore Pte. Ltd. (Chai Chee)   Block 750B
Chai Chee Road #01-01
TechnoPark @ Chai Chee
Singapore 469002
 
           
29.
  Sweden   Solectron Sweden AB (Kista)   Farogatan 33 — Kista Science Tower,
SE-164 51 Kista
 
           
30.
  Sweden   Solectron Sweden AB   Odenskogsvagen 27-29, Box 370,
SE-831 25 Ostersund
 
           
31.
  Taiwan   Solectron Taiwan   7F-2, No. 51, Sec. 2, Keelung Road Taipei 110

      

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              Ref.#   Country   Facility   Address
32.
  U.K.   Solectron England   Shinei UK Arisdale Avenue, South
Ockendon, Essex, RM15 5NR,
England
 
           
33.
  U.K.   Solectron ServiceSource
Streetton Green
Distribution Center   Langford Way, Appleton,
Warrington, Cheshire, WA4 4TQ
 
           
34.
  U.K.   Solectron Scotland, Ltd.   Queensferry Road, Dunfermline,
Fife, KY11 8PX, Scotland
 
           
35.
  U.K.   Solectron Wales   Chapel Farm Industrial Estate,
Cwmcam, Crosskeys, Newport, Gwent
NP11 7ZB
 
           
36.
  USA   Solectron Corporate   647 Gibraltar Drive

Milpitas, CA 95035
 
           
37.
  USA   FinePitch Technology   44300 Christy Street

Freemont, CA 94538
 
           
38.
  USA   Solecton Global
Services Kentucky   4500 Commerce Crossing

Louisville, KY 40229
 
           
39.
  USA   Solectron Invotronics   26525 American Drive

Southfield, MI 48034
 
           
40.
  USA   Solectron Lumberton   100 Mount Holly By-Pass

Lumberton, NJ 08048
 
           
41.
  USA   Solectron Technology, Inc. (North Carolina)   6800 Solectron Drive

Charlotte, NC 28256
 
           
42.
  USA   Solectron Systems Solutions — Creedmoor   1187 Telecom Drive

Creedmoor, NC 27522
 
           
43.
  USA   Solectron Global Services – Raleigh   1000 Innovation Avenue

Morrisville, NC 27560
 
           
44.
  USA   Solectron South
Carolina Corporation   1000 Technology Drive

West Columbia, SC 29170

      

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              Ref.#   Country   Facility   Address
45.
  USA   Solectron Global Services — Tennessee   6269 East Shelby Drive

Memphis, TN 38141
 
           
46.
  USA   Solectron Texas, Inc.   12455 Research Boulevard

Austin, TX 78759

      

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APPENDIX A — Strategic Sourcing Methodology
(CHART) [f18842f1884201.gif]

A)   Sourcing Opportunity Assessment

      Objective:         Establish agreement between IBM and Solectron on
categories of spend to be strategically sourced         Key Activities     •  
Identify historical spend and transactions across all Solectron locations and
subsidiaries. Initially, the best source of data will be from Accounts Payable
and ideally at an item level to allow proper grouping by category. The strategic
source of data will be the IBM Data warehouse     •   Define the scope of the
sourcing group in terms of commodities and Solectron subsidiaries to be
strategically sourced.     •   Brief stakeholders and agree team charter,
decision making process and escalation routes     •   Conduct kick off meeting
for core and extended team members, to include a review of the existing
situation, high level spend assessment, review of possible sourcing approaches,
roles and responsibilities, time plan and log of identified issues that must be
taken into account by the team in its work     •   Validate list of potential
suppliers, savings opportunities and goals         Outputs     •   Agreement on
list of categories to be strategically sourced and potential suppliers to be
engaged     •   Historical prices/data that establish baseline for savings
calculations     •   Team charter and project plan, with confirmed scope,
preliminary spend analysis, savings targets, team member roles, responsibilities
and time allocation and overall time schedule

      

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B)   Determine Business Requirements

      Objective     •   Develop a detailed, facts-based baseline of internal
demand for the commodity so that stakeholder needs are understood, constraints
are identified and savings can be accurately defined and measured         Key
Activities     •   Identify existing contracts and commitments.     •   Conduct
workshops or interviews with key stakeholders to identify and understand
cultural and organizational requirements, dependencies, forecasted requirements
and specifications, issues with current suppliers, conditions of satisfaction,
and metrics.     •   Identify and validate any constraints that the sourcing
team should take into account (switching costs, unique Solectron requirements
etc)     •   Validate savings opportunities and goals         Outputs     •  
Current and future spend forecasts and specifications by Solectron subsidiary
(as a basis for tendering and “baseline” for savings calculation)     •   Key
Stakeholder and Procurement conditions of satisfaction and expectations     •  
Documented valid constraints     •   Documented savings opportunities

C)   Conduct RFP and Shortlist Suppliers

      Objective     •   Latest supply market knowledge and insights are
available to the team and are built into the thinking to complement the internal
perspective to support development and issuance of RFP, and issue/analyze RFP  
      Key Activities     •   Review available supply market intelligence (trade
journals, market research, bulletins) and identify relevant trends (new
technology, legislation, best of breed suppliers, industry best practice amongst
buyers). Identify a list of potential suppliers, comprising both new and
existing suppliers     •   Review Solectron’s current sourcing approach     •  
Analyze existing supplier base, pricing, share of Solectron’s spend,
performance. Identify and interview key industry suppliers     •   Develop
supplier selection criteria based on internal and external inputs     •  
Develop and issue Request for Information (RFI) based on agreed supplier
selection criteria     •   Analyze RFI responses, develop list of qualified
suppliers

      

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  •   Develop and issue Request for Proposal (RFP)     •   Receive and analyze
bid responses and propose shortlist         Outputs     •   Supply market
analysis     •   Commodity RFI and RFP     •   Qualified supplier list     •  
RFP responses and analysis     •   Shortlist of suppliers

D)   Negotiate and Select

      Objective     •   Capture the business value by executing the chosen
sourcing strategy         Key Activities     •   Reconfirm supplier selection
criteria     •   Approve list of prequalified suppliers with extended team/
stakeholders     •   Develop and approve negotiations strategy     •   Conduct
negotiations, confirm savings     •   Develop contract and implementation plan,
including plan for e-enablement     •   Communicate new agreement to
stakeholders     •   Implement new agreement, including e-enablement     •  
Debrief team and conduct lessons learned         Outputs     •   Negotiation
strategy     •   Supplier selection and award     •   Confirm expected savings  
  •   Supplier e-enablement plan

E)   Institute Monitoring and Control Process & Ongoing Continuous Improvement

      Objective     •   Business value is delivered by proactively working with
the chosen supplier(s) to implement all identified improvements         Key
Activities     •   Establish Solectron/Supplier team

      

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  •   Develop relationship plan     •   Implement supplier e-enablement plan    
•   Survey user levels     •   Conduct periodic business reviews     •   Solicit
and receive feedback from supplier(s)     •   Track and report spend
development, compliance and savings     •   Benchmark contract and supplier
performance at agreed intervals         Outputs     •   Supplier relationship
plan     •   Delivery of realized improvement-related savings     •   Compliance
reporting     •   User reports     •   Periodic contract benchmarking and
updates as required

      

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APPENDIX B — Data/File Transfers

                      Type (From/                 To             Data Type  
Solectron   Oracle   SAP   Other
Accounting Validation
  From   Yes        
Payment File
  To           Harbor
Ledger
  To   Yes        
User master data (name, ID, roles, etc.)
  From       Yes    
Payment status
  From           Harbor
Cashed Check
  From           Bank
Batch Files
  From           P-Card
Bank & 3rd party Organizational structure for approval   From   Manual
maintenance on P2P Utility by IBM
Mass Accounting Update   From   Manual file transfer to IBM

      

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Confidential to Solectron and IBM
INDIRECT SOURCING SERVICES AGREEMENT
Between
Solectron and IBM
Annex A6
In-Flight Projects

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* Omitted and filed separately with the SEC pursuant to a confidential treatment
request
This Annex A6 sets out the projects to be completed pursuant to the letters of
authorizations (LOA) executed by the Parties dated 9th December, 2005 and 9th
January, 2006 (as extended) prior to the execution of this Agreement. Any
additional projects will be pursuant to the Change Management Process.

                                  Description of the           Expected  
Expected Completion Ref.#   Category   Opportunity   Vendors involved   Status  
Completion Date   QTR
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Confidential to Solectron and IBM
INDIRECT SOURCING SERVICES AGREEMENT
Between
Solectron and IBM
Annex A7
Transition Plan
      

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Table of Contents

                      1.   Introduction     3  
 
    1.1     Transition Overview     3  
 
      1.1.1   IBM will:     4  
 
      1.1.2   Solectron will:     4  
 
    1.2     Overall Implementation Timeline     4   2   Governance: Roles and
Responsibilities     5  
 
    2.1     IBM will:     5  
 
    2.2     Solectron will:     5  
 
    2.3     Transition Management     6  
 
      2.3.1   IBM will:     6  
 
      2.3.2   Solectron will:     7  
 
    2.4     Change Management     7  
 
      2.4.1   IBM will:     7  
 
      2.4.2   Solectron will:     7  
 
    2.5     Training     8  
 
    2.6     Solectron HR Management     8  
 
    2.7     Business Requirements     8  
 
    2.8     IT Delivery     8  
 
      2.8.1   IBM will:     8  
 
      2.8.2   Solectron will:     9  
 
    2.9     Region / Country Roles & Responsibilities     9  
 
      2.9.1   Region / Country Transition Managers (IBM and Solectron) (each a
“Region / Country Transition Managers”)     9  
 
      2.9.2   Solectron Region/Country Change Management     10  
 
      2.9.3   Solectron Region/Country Business Process     10  
 
      2.9.4   Solectron Power Users     10   3   Transition Workstreams     11  
 
    3.1     Workstream Detailed Transition Plans     11  
 
    3.2     Project Management Workstream     11  
 
      3.2.1   IBM will:     11  
 
      3.2.2   Solectron will:     12  
 
    3.3     Change Management Workstream     12  
 
      3.3.1   Solectron’s Stakeholder Management     12  
 
      3.3.2   Communication     13  
 
      3.3.3   Go Live Readiness     14  
 
      3.3.4   Solectron Train-the-Trainer and End-User Training     15  
 
      3.3.5   Solectron Human Resources (HR)     17  
 
    3.4     Business Process / IT Workstream (P2P Platform)     17  
 
      3.4.1   Project Organization     17  
 
      3.4.2   Concept Phase     18  
 
      3.4.3   Plan Phase     20  
 
      3.4.4   Develop Phase     21  
 
      3.4.5   Qualify Phase     23  
 
      3.4.6   Rollout Phase     24  
 
      3.4.7   Catalogue Customization and Supplier Adoption     25  
 
    3.5     Customer Assistance Center Workstream     25  
 
      3.5.1   IBM will:     25  
 
      3.5.2   Solectron will:     25   Appendix A7-1     26  

      

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Confidential to Solectron and IBM
* Omitted and filed separately with the SEC pursuant to a confidential treatment
request
          1. Introduction
This Annex 7 (Transition Plan) to Schedule A (Services) outlines the activities
and describes the specific objectives of the work necessary to implement the P2P
Platform and complete the initial sourcing (the work is referred to as the
“Transition” and this outline is referred to as the “Transition Plan”))
including Solectron’s and IBM’s respective responsibilities, the required time
frames, and people responsible for individual tasks necessary for the migration
of the Services from Solectron to IBM. Within 30 days after the Effective Date,
IBM will draft the detailed Transition Plan for Solectron’s review and approval.
The detailed Transition Plan will be consistent in all respects with this Annex
7, including the activities and deliverables described herein.
1.1 Transition Overview
Transition activities will commence as of the Effective Date and shall include
certain sourcing activities performed under the LOA (signed January 9, 2006).
From the start of the Transition activities through the completion of the Wave 2
P2P implementation (the “Transition Period”), IBM will migrate the Services from
Solectron to IBM. The graph below depicts the transition overview.
[*]
Within the Transition Plan, the following applies:

  •   Transition of the Services shall occur in two waves, each ending with a
common Go Live Date for the countries included in as in scope for that wave;    
•   The first wave (“Wave 1”) shall include Canada and the U.S., and the second
wave (“Wave 2”) includes China, Japan, Malaysia, Singapore, Brazil, UK, France,
Hungary, Romania, Mexico, Sweden, Germany, Taiwan. Wave 2 may also include
certain other countries in which Solectron operates. The inclusion of any such
additional countries in Wave 2 will be determined on or before a date specified
in the Transition Plan and will be subject to the Change Management Process. The
start date for Wave 1 shall be the Effective Date of the Agreement;     •   The
P2P Platform shall be enabled during the Wave 1 period for user acceptance
testing, IBM buyer training and to induct suppliers onto the P2P Platform
(“Supplier On-Boarding)”;     •   New users shall be provided access to the P2P
Platform at fixed dates in accordance with the detailed Transition Plan;     •  
The Services shall be implemented directly by IBM, without any transfer of
Solectron’s employees to IBM, unless otherwise specified in the Local Adoption
Agreements;     •   IBM shall provide Strategic Sourcing Services for each
in-scope country as of the Effective Date. Upon completion of the initial
assessment and sourcing activities for contracts in place as of the Effective
Date, IBM will provide Ongoing Category Management Services and perform any new
Strategic Sourcing activities as part of the Steady State Services.     •   IBM
shall provide P2P Services for the countries included in each Wave at the
completion of the applicable Wave. Solectron retains full responsibility for
performing the Functions associated with the P2P Services for a particular
country until the Go-Live Date of the Wave that includes that country;     •  
Unless otherwise specified in Annex A-5 (IBM Solution), required by local law in
a given country or otherwise agreed between the Parties, all activities,
materials, and Deliverables will be communicated and written in English.

      

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*   Omitted and filed separately with the SEC pursuant to a confidential
treatment request

     1.1.1 IBM will:

(a)   identify and manage, the business and technical issues that may impact the
Transition Plan;

(b)   identify to Solectron and establish contact with Solectron personnel
possessing information or otherwise reasonably necessary for IBM to perform its
Functions associated with the Transition;

     1.1.2 Solectron will:

(a)   provide reasonably requested assistance as it relates to identifying
business and technical issues that may impact the Transition Plan   (b)  
without limiting IBM’s obligations, provide reasonably requested assistance
(including advice regarding interactions with Solectron, identification of
stakeholders, reviews and comments) in the development of Transition Plan and
Workstream Detailed Transition Plans;   (c)   provide IBM personnel with access
to the Solectron Facilities as set out in Annex A5 and infrastructure as
reasonably required to provide the Services, subject to IBM complying with
Solectron’s security and access procedures pursuant to the Agreement;   (d)  
provide the current documentation reasonably requested by IBM that is relevant
to the Transition and the Transition Plan (to include but not be limited to
Solectron Third Party supplier information, site information, existing
operational processes and procedures, systems documentation, and configuration
documentation and Commodity data, to the extent such documentation exists at
Effective Date, is needed for the provision of the Services, and is available);
  (e)   review and provide input on the Transition Reports; and   (f)   be
responsible for Solectron’s policies and procedures.

1.2 Overall Implementation Timeline
The overall Transition Services implementation timeline is depicted in the graph
below.
[*]
      

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          2 Governance: Roles and Responsibilities
2.1 IBM will:

(a)   perform IBM’s responsibilities to meet the objectives of the Transition;  
(b)   identify in the Transition Plan any tasks and resources (such as staff,
equipment, facilities, IT infrastructure, applications, software, and
connectivity) specifically required from Solectron to complete the Transition
Plan;   (c)   appoint a Global Transition Manager, reporting to the IBM Project
Executive;   (d)   appoint a Geography/Country Transition Manager for each
in-scope country or cluster of countries;   (e)   establish a Transition Project
Office and a transition team to complete the Transition; and   (f)   designate
IBM Personnel to fill the roles and responsibilities as set forth below.

2.2 Solectron will:
designate resources (such as staff, equipment, facilities, IT infrastructure,
applications, software, and connectivity) to perform the roles set forth in this
Annex 7;
The Transition organization structure is represented in the following table,
which identifies positions to be staffed by Solectron and IBM, and indicates the
members of each of Solectron’s and IBM’s Global Transition Teams for the
Transition Services. Within the respective Parties’ scope or work, Transition
Team members will be assigned specific tasks to accomplish within the time
frames set forth in the Transition Plan and will present issues, concerns and
comments to the attention of the Transition Managers at the scheduled meetings
or as necessary. The Parties may decide to assign one or more roles to the same
individual, according to the functions of the particular role. The Parties’
respective obligations will not be limited by the provision of the people
filling the Parties’ respective roles, by the Parties’ respective roles being
filled with a full time, part time or single individual, nor by the respective
Party’s failure to assign a full time, part time or single individual to the
positions outlined above or discussed below.
      

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(FLOW CHART) [f18842f1884202.gif]
2.3 Transition Management
The Parties’ Transition Managers are responsible for the day-to-day oversight of
the P2P Transition Plan, without limiting IBM’s responsibility to provide
Transition Services. The respective team will coordinate the services of the
respective Party during the Transition Period. The Parties’ country and regional
teams shall support the rollout within a given in-scope country;
Global Transition Managers will be in place from the Effective Date and until
such times as Steady-State has begun for all in-scope countries.
     2.3.1 IBM will:

  (a)   provide and manage Transition Plan status, including the following:

  1.   activities scheduled during the then-current reporting period,     2.  
activities planned for the next reporting period,     3.   status of Change
Requests: cumulative, approved, rejected, implemented,     4.   address and
response to concerns and recommendations of Solectron,     5.   issues and risk
identification and update

  (b)   provide weekly reports until the completion of the Transition, unless
otherwise agreed by the Parties;

      

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  (c)   oversee the completion of IBM activities and Deliverables to the agreed
schedule and processes, as set forth within the Transition Plan, and will
coordinate activities with Solectron;     (d)   schedule Transition meetings
(including frequency and location) to review the status of the Transition Plan
activities, to address any issues, and coordinate their resolution (including
the identification of the responsible team members and the scheduled dates for
resolution);     (e)   assess and monitor the implementation of Transition and
reporting on the project progress, status, issues and risks to the Steering
Committee and Management Board as set forth in Schedule F (Governance);     (f)
  assess during an established checkpoint prior Start of Wave 2 whether
additional countries will be added to Wave 2.

     2.3.2 Solectron will:

  (a)   oversee the completion of Solectron activities, as set forth within the
Transition Plan, and will coordinate activities with IBM;     (b)   cooperate
with IBM and provide such assistance and perform such activities as reasonably
required by IBM and are necessary to complete the transition;     (c)   attend
scheduled Transition meetings to review the status of the Transition Plan
activities to address any issues, and coordinate their resolution (including the
identification of the responsible team members and the scheduled dates for
resolution); and

2.4 Change Management
     2.4.1 IBM will:

  (a)   analyze the impact of Services within Solectron with regard to roles,
rules, business processes and tools and assess change management implications;  
  (b)   assist and provide guidance to Solectron with regards to the
identification of stakeholders     (c)   set up the global communication
approach and plan in cooperation with Solectron;     (d)   provide templates for
appropriate communication activities, develop target group specific messages;  
  (e)   support the execution of the change management plan, which is a plan to
communicate, involve and secure participation of the Solectron Employees to the
Services;     (f)   determine new roles and responsibilities according to the
new processes in conjunction with Solectron;     (g)   manage the development of
training materials and monitor the training plans;     (h)   conduct a readiness
assessment in conjunction with Solectron to close possible gaps before the Go
Live Dates.

     2.4.2 Solectron will:

  (a)   manage the local change managers and the training coordinator and
validate that consistent messages and activities are communicated;     (b)  
analyze the potential impact of deploying Services within Solectron;     (c)  
inform, involve and manage all critical stakeholders;     (d)   be responsible
for the execution of the change management and communication plans to confirm
acceptance of the P2P Platform and Services;

      

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  (e)   be responsible for identification of any internal issues and constraints
which need to be resolved for a successful Transition to the Services;     (f)  
be responsible for the implementation of changes in roles, responsibilities,
incentives/objectives, desktop procedures, job descriptions, and similar matters
before the Go Live Dates; and     (g)   assess feedback from different
stakeholder groups on a regular basis.

2.5 Training
IBM will schedule and conduct the Train-the-Trainer sessions and provide advice
and direction to the end user training approach and plan.
Solectron will:

  (a)   plan, manage and coordinate all training activities including the
training approach and plan, including conducting End User training;     (b)  
validate training material and adding country specific requirements to training
material; and     (c)   capture user feedback and relaying inquiries to project
team.

2.6 Solectron HR Management
Solectron will work with country HR leads to address in-country specific
requirements.
2.7 Business Requirements

  (a)   IBM will collect Solectron’s functional requirements associated with the
implementation of the P2P Platform;     (b)   Solectron will review IBM’s P2P
business processes with Solectron stakeholders and gather any additional or
unique Solectron business requirements for submission to IBM     (c)   IBM will
prepare, for Solectron review and approval, a Requirements Document that
incorporates the Solectron requirements collected by or otherwise provided to
IBM.

2.8 IT Delivery
     2.8.1 IBM will:

  (a)   be responsible for complying the agreed to data files specifications and
verifying that Solectron’s data files transfers work between Solectron Legacy
Systems and IBM’s P2P Platform, as required (i.e. FTP night job is tested, etc.)
;     (b)   will set up IBM’s connectivity and verify that IBM’s connectivity is
functioning correctly for file transfers between Solectron’s server and IBM’s
Hub server.     (c)   be responsible for the configuration,deployment,
maintenance and modification of P2P Platform, in line with approved requirements
per the project plan.

      

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     2.8.2 Solectron will:

  (a)   be responsible for complying with the agreed to data files
specifications and verifying that IBM’s data files transfers work between
Solectron Legacy Systems and IBM’s P2P Platform, as required (i.e. FTP night job
is tested, etc.)     (b)   be responsible for setting up Solectron’s
connectivity and verifying that Solectron’s connectivity is functioning
correctly for file transfers between Solectron’s server and IBM’s Hub server;  
  (c)   based on the results of workshops and as necessary for the transition,
be responsible for making any identified changes to Solectron Legacy Systems;  
  (d)   set up its Web Methods server, in accordance with the applicable
Transition Plan for data communication and mapping; and     (e)   be responsible
for any updates to Solectron legacy system platform(s) for integration with the
P2P Platform, if required.

2.9 Region / Country Roles & Responsibilities
     2.9.1 Region / Country Transition Managers (IBM and Solectron) (each a
“Region / Country Transition Managers”)
     For each country or cluster of Countries the Parties will perform the
following activities.
2.9.1.1 IBM will:

  (a)   execute the in-scope country implementation;     (b)   draft an in-scope
region/country specific Transition Plan which shall become an integral part of
the Detailed Transition Plan, The region/country specific Transition Plan will
represent the standard activities to be performed within the in-scope country,
as well as any potential additional specific activities identified by the
Parties pursuant to the Change Management Process. Any amendments to the
Detailed Transition Plan will be made upon mutual agreement in writing, in
accordance with the terms of this Annex;     (c)   implement the Services for
each Wave according to the specific requirements, including mobilization, Go
Live Dates; and     (d)   identify the exit criteria associated with the
successful deployment of the Services in the in-scope region/country Facilities.

2.9.1.2 Solectron will:

  (a)   provide reasonably requested support to IBM with regard to the country
implementations;     (b)   coordinate inputs from all Service Recipients and
Solectron Facilities involved in a particular transition;     (c)   verify the
readiness of the in-scope region/country for the deployment;     (d)   provide
reasonable assistance to IBM during deployment for example, participate in
required workshops, provide necessary data.,;     (e)   make available the local
Facilities as reasonably required for the country Transition; and

      

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  (f)   upon IBM request, provide reasonable access to senior Solectron
executives to confirm business and country issues are resolved in a timely
manner.

2.9.2 Solectron Region/Country Change Management
Solectron will:

  (a)   implement the communication plan;     (b)   coordinate local training
activities.     (c)   Designate an End User contact on site

2.9.3 Solectron Region/Country Business Process
Solectron will:

  (a)   assist as reasonably requested by IBM with knowledge capture and
transfer. The necessary activities will be dependant on the number of employees
at the location and the degree to which existing processes are documented;    
(b)   to the extent commercially reasonably available to Solectron, provide to
IBM consolidated requirements and process knowledge from other Solectron
employees.

2.9.4 Solectron Power Users
Power Users are Solectron personnel available for training and to support End
Users during Transition and after the Go Live. The Power Users will:

  (a)   participate in the project during Transition; and     (b)   participate
in the train the trainer sessions.

      

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          3 Transition Workstreams
3.1 Workstream Detailed Transition Plans
IBM shall draft, and Solectron review, comment upon and if acceptable shall
approve the detailed Transition Plan for each Wave. The detailed Transition Plan
will include Workstream Detailed Transition Plans for each Transition
Workstream.
The Workstream Detailed Transition Plans shall be consistent in all respects
with the mutually approved Detailed Transition Plan, which shall include the
activities and Transition Deliverables described therein. The Workstream
Detailed Transition Plans shall become integral parts of the Detailed Transition
Plan, and any amendments to the Detailed Transition Plan will be made in
accordance with the Change Management Process.
3.2 Project Management Workstream
3.2.1 IBM will:

  (a)   perform the Transition Plan;     (b)   assign transition personnel
within two weeks before the Effective Date:

  1.   Project Executive     2.   Transition Manager;     3.   Change Manager;  
  4.   Delivery Project Executive     5.   Procurement Process Lead;     6.  
Accounts Payable Process Lead;     7.   IT Lead;

  (c)   recommend to Solectron the Solectron employees whom IBM believes would
be appropriate Transition Team members;     (d)   Provide project organization
charts by roles and responsibilities;     (e)   Develop Transition team contact
list for each Wave;     (f)   Provide Transition team contact list for each
Wave;     (g)   Schedule, in coordination with Solectron, the first Steering
Committee Meeting in the timeframes specified in Schedule F (Governance);    
(h)   Within two weeks before the Start Date, schedule, in coordination with
Solectron, the first meeting of the Transition Team to be held within the first
month after the Effective Date, unless otherwise agreed by the Parties;     (i)
  Within one week before the Start Date schedule, in coordination with
Solectron, the initial meeting for each of the Transition Workstreams, to be
held within the first month following the Start Date, unless otherwise agreed by
the Parties; and

      

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3.2.2 Solectron will:

  (a)   designate members of the Solectron Governance organization as set forth
in Schedule F (Governance) within the timeframes specified therein;     (b)  
Designate transition personnel within two (2) weeks before the Effective Date:

  1.   Transition Manager;     2.   Change Manager (Change Management,
Communications & Training);     3.   Procurement Process Lead;     4.   Accounts
Payable Process Lead;     5.   IT Lead;     6.   HR Engagement Manager;

  (c)   Designate geography/country specific transition personnel within two
(2) weeks before the respective Transition Wave start date:

  1.   Transition Manager/Geography/Country Lead;     2.   Change Manager
(Geography associated);     3.   IT support, as required.

3.3 Change Management Workstream
This Workstream includes communication and training activities that are planned
to facilitate the adoption and utilization of the Services among Solectron’s
employees and suppliers. The activities shall be reported within a Communication
and Training plan to be mutually agreed upon, and executed by the Parties.
The Change Management Workstream includes the following activities:

  (a)   Solectron’s stakeholder management;     (b)   Communication;     (c)  
Go Live readiness; and     (d)   Train-the-Trainer and End User Training.

     3.3.1 Solectron’s Stakeholder Management
Solectron’s stakeholders include key employees such as; executives, managers and
budget owners responsible for accounting, finance or procurement who have a
specific interest in and/or a business responsibility impacted by the Services.
3.3.1.1 IBM will:

  (a)   assist and provide guidance to Solectron in identifying the relevant
stakeholders;     (b)   develop the stakeholder management approach and the
stakeholder communication package to Solectron.

      

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3.3.1.2 Solectron will:

  (a)   assist in developing the stakeholder management approach and the
stakeholder communication package to Solectron;     (b)   facilitate
participation of all identified stakeholders in meetings and follow up on
actions items;     (c)   communicate to stakeholders, per the Stakeholder
Communications Plan;     (d)   identify groups of stakeholders (e.g., those who
have similar interests or communication requirements (“Stakeholder Clustering”).

The Parties shall manage the communication between the Transition Teams and
stakeholders to achieve understanding of each activity described in the
Transition Plan. Both Parties will work diligently to collaborate, communicate
and resolve issues.
Deliverables for Solectron’s Stakeholder Management

                          Short                 Description   Responsible  
Completion #   Deliverables   of Content   Party   Criteria
1
  Stakeholder Map   Identifies   IBM with Solectron   Stakeholder Map
 
      Solectron   input   completed and
 
      stakeholder       delivered
 
               
3
  Stakeholder   Communication plan   IBM   Communication Plan
 
  Communication Plan   for each group of       established
 
      Stakeholders        

     3.3.2 Communication
3.3.2.1 IBM will:

  (a)   set up a global communication approach and plan in cooperation with
Solectron;     (b)   provide proposals and templates in English for
communication activities (with Solectron input); and     (c)   develop a set of
communication activities according to a mutually agreed communication plan that
will be handed over to the Solectron’s local communication resources.

3.3.2.2 Solectron will:

  (a)   designate the in-scope country/ local change management resources to
start the communication / change management network;     (b)   provide a
knowledge-base repository for communicating project information and activities;
    (c)   implement the global and local communication activities according to a
mutually agreed communication plan;     (d)   adapt communication plans and
communication material locally, execute global and country-level communication,
handle translations of communication material into local language, if required;

      

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  (e)   collect feedback on communication and change management activities; and
    (f)   communicate to suppliers, by sending initial supplier communication
and receiving supplier approval to cooperate with IBM and approval for IBM to
manage supplier data (e.g. Data Privacy).

     Deliverables for Communication

                          Short Description of   Responsible   Completion #  
Deliverables   Content of Document   Party   Criteria
1
  Communication Plan   Project plan of all communication activities on a
schedule linked to key events identified in the Transition Plan   IBM   Plan
sent to Solectron for discussion
 
               
2
  Project
communication
template   Template for project communication   IBM   Sent for Solectron
approval
 
               
3
  Template for End
User Go Live Date
communication   e-mail campaign to announce Training and Go Live activities  
IBM   Sent for Solectron
approval
 
               
4
  Global
Communication /Change
Management Tool kit   Centrally developed set of communication and change
management activities   IBM   Tool kit provided to local Communication Managers

     3.3.3 Go Live Readiness
3.3.3.1 IBM will:

  (a)   isolate impact to roles and responsibilities of Solectron employees;    
(b)   conduct a site readiness assessment of Solectron Facilities with the
assistance of Solectron to close possible gaps before Go Live Date for each
in-scope country;     (c)   perform a supplier readiness survey before Go Live
Date for each in-scope country; and     (d)   evaluate project impact on
different target groups.

3.3.3.2 Solectron will:

  (a)   communicate with any impacted personnel and implement required changes
in roles, responsibilities, incentives/objectives, desktop procedures, job
descriptions etc. before Go Live Date; and     (b)   communicate training
requirements and schedules to end users before the Go Live Date for each
in-scope country.

      

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Deliverables for Go Live Readiness

                          Short Description         #   Deliverables   of
Content   Responsible Party   Completion Criteria
1
  Roles and Responsibilities Document   List of impacts to roles and
responsibilities to Solectron employees   IBM   Provided to Solectron
 
               
2
  Site Readiness
Questionnaire   Checklist to evaluate if the sites are prepared for the Go Live
Dates   IBM   Provided to Solectron
 
               
3
  Site Readiness
Assessment   Go through check list with the Solectron sites and evaluate status
  IBM   Assessment conducted
 
               
4
  Supplier Readiness
Survey   Assess if suppliers are ready for Go Live Dates   IBM   Assessment
conducted
 
               

     3.3.4 Solectron Train-the-Trainer and End-User Training
3.3.4.1 IBM will:

  (a)   implement the training activities as set forth in this Annex 7;     (b)
  set up a training approach and overall plan with Solectron;     (c)  
configure the system based on designation by Solectron as to which Solectron
Users will be requisitioners, approvers, receivers, Power Users for each
in-scope country;     (d)   provide electronic training materials in Powerpoint
format on the use of the P2P Platform and associated processes. Training
material will be provided in English for subsequent use by Solectron Power
User/Trainers;     (e)   deliver three (one per geography) train the trainer
sessions of four to five days each to train Solectron Power Users on the
requisitioning, approval, receiving and invoicing processes. The sessions will
be held on dates and at Solectron Facilities to be mutually agreed upon by the
Parties to timely prepare for the applicable Go Live Dates;     (f)   collect,
evaluate and report on feedback from IBM training sessions;     (g)   provide
all training in English unless otherwise mutually agreed to by Parties; and    
(h)   train Power Users on P2P Platform and processes.

      

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3.3.4.2 Solectron will:

  (a)   designate a global training coordinator and a training coordinator for
every country to facilitate and coordinate training activities;     (b)  
designate Power Users to enable local support of End Users;     (c)   designate
Power Users to enable ongoing training (in case new users are nominated after
the Go Live Dates);     (d)   designate and update as required which Solectron
Users will be requisitioners, approvers, receivers, Power Users for each
in-scope country;     (e)   designate Power Users (fluent in Business English)
2 weeks prior to Train the Trainer sessions;     (f)   cause its Power Users to
participate in one of the train-the-trainer sessions offered by IBM;     (g)  
Train all remaining Solectron Employees who are authorized to place and approve
requisitions/web payment requests and associated processes;     (h)   provide
training facilities for any planned classroom sessions with access to the
training environment as defined in the Training Plan;     (i)   provide input to
the development of training material, validate the material (if required), print
the material (IBM recommends a printed “Quick Reference Guide” for approvers and
requisitioners), as necessary;     (j)   provide training communication
(invitations, reminders, confirmations, changes, tracking, follow-up) for all
training sessions;     (k)   provide progress reports and training feedback for
training conducted by Power Users throughout the training phase; and     (l)  
train End Users (not trained by IBM) on the P2P Platform and processes.

     Deliverables for Training

                          Short                 Description   Responsible  
Completion #   Deliverable   of Content   Party   Criteria
1
  Training approach and plan Document   List of Solectron employees to be
trained, (how, when and by whom)   IBM   Provided to Solectron
 
               
2
  End User Training
Material   ‘How to’ guide to P2P platform and processes   IBM   Provide to
Solectron
 
               
3
  Train the trainer
training material
(PowerPoint)   Train the trainer
material   IBM   Provide to Solectron
 
               
4
  Training plan for
End Users (not
trained by IBM)
(Document)   List of who will be trained, and when by Power Users   Solectron  
Plan completed

      

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     3.3.5 Solectron Human Resources (HR)
Except as specified by the Local Adoption Agreement for a particular in-scope
country, the Services do not include any transfer of Solectron employees to IBM,
Solectron will undertake all the Human Resources activities related to retained
resources including:

  (a)   HR planning;     (b)   European and local country Works Council
consultation, as required;     (c)   plan and execute the Communication Plan
related to Solectron employees;     (d)   guide and support change management;
and     (e)   support other initiatives designed to mitigate the impact to
potentially affected employees.

3.4 Business Process / IT Workstream (P2P Platform)
Dates in this section are relative to the Go Live Date for each in-scope
country. Within thirty (30) Days after the Effective Date, the appropriate IBM
representatives will draft, for Solectron review and approval a detailed P2P
Platform Deployment Plan (the “P2P Platform Deployment Plan”), which will be
incorporated into the Transition Plan. The P2P Platform Deployment Plan
comprises several phases, as set forth below. The beginning of a specific phase
will be executed pursuant to successful completion of the previous phase, as
determined by the exit criteria for the previous phase.
     3.4.1 Project Organization
IBM will organize, in coordination with Solectron, a “Procurement Solution
Mapping Workshop” with Solectron and IBM Business Process Leads and IT
Workstream Leads. There will be one workshop per Wave where the Solectron local
country representatives will provide such input and information as is reasonably
required by IBM.
3.4.1.1 Entry Criteria

  •   Solectron personnel assigned and briefed on project purpose and goals.    
•   IBM team assigned and briefed on project purpose and goals.

3.4.1.2 IBM Responsibilities & Deliverables

              Key Task   Deliverable
§
  Conduct Solectron & IBM
Procurement Solution
Mapping Workshop   §   P2P Requirements Document

3.4.1.3 Solectron Responsibilities & Deliverables

              Key Task   Key Transition Deliverable
•
  Participate in Solectron   §   Review, Comment upon, and Once
 
  & IBM Procurement Solution       Acceptable, Approve P2P Requirements
 
  Mapping Workshop       Document

      

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Confidential to Solectron and IBM
3.4.1.4 Exit Criteria

  •   Approved P2P Requirements Document

     3.4.2 Concept Phase
During this phase, the Parties will validate the standard P2P processes to be
implemented and any unique Solectron requirement which might have to be taken
into account.
3.4.2.1 IBM Responsibilities and Deliverables

          Key Task       Deliverables
Conduct Requirement Workshops
  §   P2P Platform Standard Business
 
      Processes & Reports
 
  §   P2P Platform Standard Data Files
 
      Specifications
 
  §   Workshop Meeting Minutes
 
  §   Gap Requirements Document
 
  §   Completed EBP Requirements Template
Prepare Consolidated Requirements
  §   Business Process Requirements Document
 
  §   Data Files Requirements Document
 
  §   EBP Configuration Requirements
 
      Document
Prepare Updated Project Plan
  §   Updated Project Plan

      

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Confidential to Solectron and IBM
3.4.2.2 Solectron Responsibilities and Activities

          Key Task   Activities
Participate in Mapping Workshops
  §   Provide:
 
  §   Unique business process requirements (non-P2P Platform standard business
process requirements)
 
  §   Detailed Data Files Requirements
 
  §   Inputs to EBP Requirements Template
 
  §   Layout Set Feedback & Solectron Specifications
 
  §   Accounting Structure & Details
 
  §   Configuration Data
 
  §   Approval Values
 
  §   Freight Procedures & Supplier Freight Guidelines
 
  §   Vendor Master Listing of Suppliers (Provide appropriate vendor details for
ongoing timely and correct creation / maintenance of Vendor Master Records)
 
  §   Changes to Welcome Supplier Package
 
  §   Tax Table as applicable
 
  §   Commodity Code Scoping
 
  §   Commodity Code Special Approver Designations
Review, Comment upon & if Acceptable, Accept Workshop
  §   Standard P2P Platform Business Processes & Reports
Deliverables
  §   Standard P2P Platform Data Files Specifications

 
  §   Workshop Meeting Minutes
 
  §   Gap Requirements Document
 
  §   Completed EBP Requirements Template
Review, Comment upon and if Acceptable, Approve Consolidated
  §   Business Process Requirements Document
Requirements
  §   Data Files Requirements Document
 
  §   EBP Configuration Requirements Document
Review, Comment upon and if Acceptable, Approve Updated
  §   Approved Project Plan
Project Plan
       
 
       

      

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Confidential to Solectron and IBM
3.4.2.3 Exit Criteria

•   Completed Business Requirements Review

  o   Solectron approved business requirements     o   completed Systems
Requirements Review

•   Documented and Agreed Project Plan

  o   detailed plan for Plan Phase     o   outline for Qualify and Rollout
Phases

     3.4.3 Plan Phase
During this phase, the Parties will produce the technical requirements and a
detailed development and test plan, in accordance with the approved business
requirements generated during the “Concept Phase.” Detailed requirements will be
reviewed and approved. Development and Qualify Test plans will be developed and
agreed upon by the Parties. This will be accomplished through physical and
remote meetings between the technical and process teams.
3.4.3.1 IBM Responsibilities

          Key Task   Deliverable
Conduct Detailed Data Files Definition Workshops
  §

§   Final Data Files Specifications (for IBM and Solectron Applications and Hub
servers) to be included as part of Final Requirements Document, including unique
(non-P2P Platform standard) Data Files specifications including:

           o   Vendor Master – Creation & Update

           o   GL Bookings (invoices, payments)

           o   Payment File

Detailed Data Files Mappings (Field Values) to be included as part of Final
Requirements Document (including unique (non-P2P Platform standard) Data Files
mapping requirements

Conduct Plan Design Review (PDR)

Prepare Final Requirements

Conduct Test Strategy Workshop

Prepare Updated Project Plan
  §

§

§
§   PDR Meeting Minutes

Final Requirements Document

Test Strategy Document

Updated Project Plan

      

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Confidential to Solectron and IBM
3.4.3.2 Solectron Responsibilities

          Key Task   Deliverable
Complete Commodity Mapping (General Ledger & Special Approver)

Data Files (Inbound to IBM) Design
  §

§   Completed Commodity Mapping Document

Agreed Data Files Feed Design including:

 
                o   HR Feed/Org Structure
 
                o   User Master Data
 
                o   Single Cleansed supplier file
 
                o   Accounting Validation file
 
                o   Pay Status file

Review, Comment upon and if Acceptable, Approve Key Transition
  §   Approved Final Data Files Specifications
Deliverables from Detailed Data Files Workshops
  §   Approved Detailed Data Files Mappings (Field Values)

Review, Comment upon and if Acceptable, Approve Key Transition Deliverables from
Plan Design Review (PDR)
 
  §   Approved PDR Meeting minutes

Review, Comment upon and if Acceptable, Approve Final Requirements Document
 
  §   Approved Final Requirements Document

Participate in Test Strategy Workshop
  §   Approved Test Strategy Document

Review, Comment upon & if Acceptable Approve Updated Project
Plan
 
  §   Approved Updated Project Plan

Prepare Supplier Memo
  §   Completed Supplier Memo

3.4.3.3 Exit Criteria

•   Completed Commodity Mapping Document   •   Data Files Feed Design   •  
Approved Final Requirements Document   •   Approved Test Strategy Document   •  
Approved Updated Project Plan   •   Completed PDR   •   Completed Supplier Memo

     3.4.4 Develop Phase
Develop Phase is the phase during which IBM configures the P2P Platform and both
IBM and Solectron teams work separately and together to develop all required
data files based upon the Approved Development Requirements and
      

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data files specifications documents. Detailed Testing Plans (such as, Test
Scripts) will be developed, reviewed and approved. Qualify and Rollout project
plans will be detailed and mutually agreed upon. This will be accomplished
through physical and remote (such as telephonic or videoconference) meetings
between the technical and process teams.
3.4.4.1 IBM Responsibilities

          Key Task   Deliverable
Establish IBM Hub to Solectron Hub Connectivity
  §   Validated Connectivity between IBM & Solectron Hubs

Conduct Test Interlock Workshop
  §   Test Documentation
 
                o    Integration Test
 
                o    System Test
 
                o    User Acceptance Test
 
  §   Schedule and Confirm Test Execution Plans
 
                o    Integration Test
 
                o   System Test
 
                o   User Acceptance Test
 
  §   Interlocked Test Communication Process and meeting schedule
 
  §   Test Roles & Responsibilities

Develop Supplier Welcome Package
  §   Supplier Welcome Packages
 
                o    Catalogue Supplier
 
                o   Non-Catalogue Supplier  
Prepare Updated Project Plan
  §   Updated Project Plan

3.4.4.2 Solectron Responsibilities

          Key Task   Deliverable
Establish Solectron Hub to IBM Hub Connectivity
  §   Validated Connectivity between Solectron and IBM Hubs  
Participate in Test Interlock Workshop
  §   Approved Test Documentation and Confirm Test Execution Plan
 
  §   Approved Test Communication Process & Meeting Schedule
 
  §   Approved Test Roles & Responsibilities  
Review, Comment upon and if Acceptable, Approve Supplier Welcome Package
  §   Approved Supplier Welcome Package
Review, Comment upon and if Acceptable, Approve Updated Project Plan
  §   Approved Updated Project Plan

      

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Confidential to Solectron and IBM
3.4.4.3 Exit Criteria

•   Validated Connectivity between IBM and Solectron Hubs   •   Approved Test
Documentation   •   Approved Test Execution Plan   •   Approved Supplier Welcome
Packages   •   Approved Updated Project Plan

     3.4.5 Qualify Phase
Qualify Phase is the phase in which the IBM and Solectron teams work both
separately and jointly to test all [connectivity and data files based on the
data files specifications documents Test Scripts will be executed, the results
documented and then approved. All problems and solutions will be documented.
Rollout project plans will be refined and approved.
3.4.5.1 IBM Responsibilities

          Key Task   Deliverable
Establish Supplier Migration Plan with Solectron’s assistance
  §   Supplier Migration Plan
 
       
Conduct Data Files Shakedown Verification (Provide files to Solectron and
Process files from Solectron)
  §   Verified Data Files Ready for Test Execution
 
       
Conduct IBM Integration Test and support Solectron
  §   Test Environment Ready to Execute System Test
Integration Test Activities
       
 
       
Develop Deployment Plan for Solectron & IBM with Solectron’s assistance
  §   Interlocked Deployment Plan
 
       
Conduct System Test
  §   System Test Results Document
 
       
Conduct User Acceptance Test & Document Results
       

3.4.5.2 Solectron Responsibilities

          Key Task   Deliverable
Provide Sample Data Files
  §   Sample Data Files
 
       
Conduct Data Files Shakedown Verification (Provide files to IBM and Process
files from IBM)
  §   Verified Data Files Ready for Test Execution

      

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Conduct Solectron Integration Test and Support IBM Integration Test activities
(File Exchange, etc.)
  §   Test Environment Ready to Execute System Test
 
       
Participate in System Test & Review, Comment upon and if
  §   Approved System Test Results
Acceptable, Approve Document
      Document
 
       
Designate users to participate in User Acceptance Test
  §   Attend User Acceptance Sessions
 
       
Review Comment upon and if Acceptable Approve t User
  §   Approved User Acceptance Test
Acceptance Test Results
      Results Document
 
       

3.4.5.3 Exit Criteria

•   Developed and Agreed Supplier Migration Plan   •   Approved System Test
Results Document   •   Developed and Approved Deployment Plan   •   Approved
User Acceptance Test Results Document   •   Approval to Deploy

     3.4.6 Rollout Phase
Rollout Phase is the phase during which IBM and Solectron teams work together to
confirm that the services are ready to use by Solectron End Users.. Rollout
within Solectron locations will be done in phases, in accordance with the
Overall Implementation Timeline.
3.4.6.1 IBM Responsibilities

          Key Task   Deliverable
Deploy IBM Applications /Data Files to Production
  §   Production System Ready for Use & Capable of Producing Data Files in
Specified Format

3.4.6.2 Solectron Responsibilities

          Key Task   Deliverable
Deploy Solectron Application / Data Files to Production
  §   Solectron Legacy Systems Capable of Producing Data Files in Specified
Format

3.4.6.3 Exit Criteria
Deployment completed in accordance with the Overall Implementation Timeline.
      

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     3.4.7 Catalogue Customization and Supplier Adoption
3.4.7.1 IBM will:

  (a)   populate the P2P Platform with catalogue information for existing
contracts;     (b)   populate the P2P platform with catalogues for newly
negotiated contracts.

3.4.7.2 Solectron will
provide IBM with catalogues for the Solectron legacy contracts to be migrated to
the P2P Platform. The catalogues will be in softcopy standard format, to allow
migration to the P2P Platform.
3.5 Customer Assistance Center Workstream
The Customer Assistance Center will be enabled by completing the following
activities for each Wave.
     3.5.1 IBM will:

  (a)   staff Customer Assistance Centre (“CAC”) in accordance with the
availability dates set out in Schedule A5 IBM Solution;     (b)   train CAC
staff on the Services to be supported by the CAC;     (c)   set-up CAC telephony
numbers as required;     (d)   provide CAC contact telephone numbers to
Solectron;     (e)   roll out call logging Database; and     (f)   enable CAC
learnings to be entered into the Knowledge Base.

     3.5.2 Solectron will:

  (a)   communicate CAC services and support functions and CAC contact numbers
to appropriate Solectron Employees and, where applicable, to suppliers;     (b)
  provide contact information of Solectron-internal support for Solectron
retained/hosted applications, Solectron financial analysts, and supplier
contacts to be used by the Customer Assistance Center to refer problem calls /
inquiries / requests for service from end users concerning all questions not
related to the services provided by IBM. Contact information includes contact
numbers, location, e-mail addresses and contact names, mobile and fax numbers
for escalation as required by IBM for referral of calls to be routed to
Solectron; and     (c)   provide a list of Solectronkey points of contact for
different functions within SLR (e.g. AP, Procurement, IT, sourcing) including
name, e-mail address, telephone, mobile and fax numbers to IBM and confirm sure
that such personnel are reasonably available to assist Customer Service Centre
personnel with problem resolution.

      

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Confidential to Solectron and IBM
Appendix A7-1
* Omitted and filed separately with the SEC pursuant to a confidential treatment
request
Solectron Employee Requirements
IBM acknowledges and agrees that certain Solectron individuals may have more
than one role during the Transition, and Solectron shall determine how and when
Solectron employees shall discharge Solectron’s obligations. The following table
sets forth IBM’s estimate of and recommendation for the resources to be provided
by Solectron in order to fulfill Solectron’s responsibilities as described in
this Annex 7.
IBM Estimated Solectron Global Resource Requirements
[*]
Solectron Region/ Country Resources
Solectron will assess the needs for each region//country role, which may vary
from country to country. The role is to facilitate the execution of Solectron’s
responsibilities the in-scope region/country Transition. The following table
contains IBM’s estimates of the resources to be provided by Solectron.
[*]
IBM Projected Resources
The following tables represent IBM’s anticipated staffing in meeting IBM’s
obligations to execute the Transition.
[*]
[*]
[*]
[*]
      

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Confidential to Solectron and IBM
INDIRECT SOURCING SERVICES AGREEMENT
Between
Solectron and IBM
Schedule A9
IBM Competitive Content

      Indirect Sourcing Services Agreement
EXECUTION COPY   Annex A-9
Page A-9-1

 

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Confidential to Solectron and IBM
Neither Solectron, the Services Recipients and/or their designee(s) nor third
party service providers will have any right or license to the content listed
below following expiration and/or termination of the Services and any
Disengagement Services:

  1.   P2P Platform software components and P2P Platform detailed technical and
functional design documentation.

      Indirect Sourcing Services Agreement
EXECUTION COPY   Annex A-9
Page A-9-2

 

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Confidential to Solectron and IBM
INDIRECT SOURCING SERVICES AGREEMENT
Between
Solectron and IBM
SCHEDULE B
PERFORMANCE MEASUREMENT AND INCENTIVES
for
ACTUAL SAVINGS
and
OPERATIONAL SERVICE LEVELS

      Indirect Sourcing Services Agreement
EXECUTION COPY   Schedule B
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Confidential to Solectron and IBM
 

*   Omitted and filed separately with the SEC pursuant to a confidential
treatment request

Table of Contents

                              Page   1.   INTRODUCTION     1  
 
               
 
  1.1   General     1  
 
  1.2   Definitions     1  
 
  1.3   Reporting     2  
 
                2.   ACTUAL SAVINGS     3  
 
               
 
  2.1   Measurement     3  
 
  2.2   Incentive Credit and Bonus Methodology     3  
 
                3.   OPERATIONAL SERVICE LEVELS AND CUSTOMER SATISFACTION     4
 
 
               
 
  3.1   Critical Service Levels     4  
 
  3.2   Failure to Perform     4  
 
  3.3   Service Level Credits     5  
 
  3.4   Solectron Management Customer Satisfaction Survey     6  
 
  3.5   End-User Customer Satisfaction Survey     8  
 
  3.6   Right of Access to Operational Service Level Information     8  
 
  3.7   Multiple Operational Service Level Conditions     9  
 
  3.8   Exceptions     9  
 
                4.   IMPROVEMENT OF OPERATIONAL SERVICE LEVELS     10  
 
               
 
  4.1   General     10  
 
  4.2   Annual Improvement     10  
 
                5.   NEW OPERATIONAL SERVICE LEVELS     10  
 
               
 
  5.1   Specification by Solectron     10  
 
  5.2   Baselining Process     11  
 
  5.3   Designation as Critical Service Level     11  
 
                6.   CRITICAL DELIVERABLES AND MILESTONES     12  
 
                1.   INTRODUCTION     1  
 
                2.   DEFINITIONS     1  
 
                3.   RESPONSIBILITIES     3  
 
               
 
  3.1   IBM Responsibilities     3  
 
  [*]         4  
 
  3.2   Solectron Responsibilities     4  
 
                4.   SAVINGS CALCULATION     4  
 
               
 
  4.1   Actual Strategic Sourcing Savings Calculation     4  
 
  4.2   Actual Tactical Savings Calculation     6  
 
  4.3   Actual P2P Savings     7  

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                              Page   5.   GENERAL ITEMS RELATED TO SAVINGS
CALCULATIONS     7  
 
               
 
  5.1   Timing     7  
 
  5.2   Specific Item Calculation     7  
 
  5.3   Alternative Methods of Savings Calculations     7  
 
                6.   BASELINE     8  
 
               
 
  6.1   Prior Period Price     8  
 
  6.2   New Item Purchases — Acceptable Bid     8  
 
  6.3   Indexing Adjustment     9  
 
  6.4   Incremental Discounts     9  
 
  6.5   Baseline adjustments for TCO Elements     9  
 
                7.   SAVINGS TRACKING     11  
 
               
 
  7.1   Responsibility     11  
 
  7.2   Measurement        
 
  7.3   Review & Agreement     11  
 
  7.4   Addressable Spend and Compliant Spend     12  
 
  7.5   Adjustment of Committed Savings     12  
 
  7.6   Savings Opportunities Rejected by Solectron     13  
 
  7.7   Committed Savings Quarterly Adjustment and Annual True Up     14  
 
  7.8   Solectron Timeliness Responsibility     15  
 
                1.   P2P PLATFORM     1  
 
               
 
  1.1   System Availability     1  
 
  1.2   % of Hand-free Orders     2  
 
  1.3   PO Cycle time (Approved requisition to PO)     2  
 
  1.4   PO Accuracy     3  
 
  1.5   Supplier Profile Set Up / Modification Time     4  
 
  1.6   % Electronic PO     5  
 
                2.   CUSTOMER ASSISTANCE CENTER (CAC)     5  
 
               
 
  2.1   SLA Detail     6  
 
  2.2   Accounts Payable     8  

Annexes
B-1       Savings Measurement Rules

B-2       Service Level Metrics and Weightings

B-3       Summary of Performance Management Methods

B-4       Form Template of AP Data Pulled

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*   Omitted and filed separately with the SEC pursuant to a confidential
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1.   INTRODUCTION

  1.1   General         This Schedule B describes certain qualitative and
quantitative measurements, against which IBM’s performance of the Services will
be measured beginning on the Effective Date, including:

  (a)   The methodologies that the Parties will use to:

  (i)   measure and report Solectron’s achievement of Actual Savings through the
implementation of this Agreement, as more fully described in Section 2 (Actual
Savings); and     (ii)   track and report IBM’s performance of the Services as
measured against the Operational Service Levels, and as measured by the
Management Survey, as more fully described in Section 3 (Operational Service
Levels).

  (b)   A credit and bonus methodology to incent IBM to maximize Actual Savings,
achieve required levels of service as measured by the Operational Service
Levels, and complete certain Deliverables with respect to the implementation of
the Services within the required time frames.     (c)   A table summarizing the
performance management measurements and methods described in this Schedule B
(Performance Measurement) for various periods during the Term is attached as
Annex B-3 (Summary of Performance Management Methods).

  1.2   Definitions

  (a)   The following terms shall have the meaning specified:

  (i)   “Actual Savings” has the meaning specified in Section 2 (Definitions) of
Annex B-1 (Savings Measurement Methodology).     (ii)   “Expected P2P Savings”
shall have the meaning specified in Annex B-1.     (iii)   “Critical Service
Level” means an Operational Service Level to which a non-zero Weighting Factor
has been assigned as listed in Annex B-2 (Critical Service Levels and
Weightings).     (iv)   [*]     (v)   “Management Survey” has the meaning
specified in Section 3.4(a)(i).

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*   Omitted and filed separately with the SEC pursuant to a confidential
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  (vi)   “Operational Service Level” has the meaning specified in the Agreement.
    (vii)   [*]     (viii)   [*]     (ix)   “Steady State Period” means the
period beginning on the date that IBM commences to provide P2P Operations
Services for Wave 2 countries (as described in the Transition Plan) and ending
on the date of termination/expiration of the Agreement.     (x)   “Transition
Period” means the Transition Wave 1 Period and the Transition Wave 2 Period.    
(xi)   “Transition Wave 1 Period” means the period beginning on the Effective
Date and ending on the date that IBM commences to provide P2P Operations
Services for Wave 1 countries (as described in the Transition Plan).     (xii)  
“Transition Wave 2 Period” means the period beginning with the completion of
Transition Wave 1 Period and ending on the date that IBM commences to provide
P2P Operations Services for Wave 2 countries (as described in the Transition
Plan).

  (b)   All capitalized terms used but not defined in this Schedule B shall have
the meanings assigned to them in the Agreement, unless otherwise indicated.    
(c)   Unless otherwise specified: (i) all references to time shall be references
to local time at the facility where the Services are being received, (ii) all
references to months shall be to the calendar months, during the Term (including
any portions thereof), (iii) all references to quarter shall be quarters of the
contract year (iv) all references to days shall be to calendar days, and (v) all
references to Years (and “Annual”) shall be as defined in the Agreement.

  1.3   Reporting

  (a)   As specified in Section 7 (Savings Tracking) of Annex B-1, IBM’s
performance with respect to Actual Savings will be measured and reported on a
monthly basis. Adjustments to Committed Savings and any associated credit/bonus
will be measured and reported quarterly with an annual true-up. The credit/bonus
will be included in IBM’s invoices for the first month of the following quarter.
    (b)   Unless otherwise indicated herein, all Operational Service Levels and
Critical Service Levels shall be measured and reported on a monthly basis.
Management Survey results will be measured and reported on a quarterly basis.

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  (c)   IBM shall submit to Solectron each month, beginning with the fourth
month following the Effective Date, a performance report (soft and hard copies)
which shall document the following:

  (i)   IBM’s performance during the previous quarter with respect to the
Management Survey;     (ii)   After the Wave 1 Transition Period, IBM’s
performance during the previous month with respect to Operational Service
Levels; and     (iii)   Any data specified by Solectron as being required for
its reporting, in such format as is reasonably required by Solectron that is
collected by IBM in the normal course of its operations;     (iv)   Any data
otherwise reasonably requested by Solectron, provided that Solectron will
reimburse IBM for reasonable incremental costs, if any, incurred in the
provision of such data.

  (d)   The monthly performance report shall also contain, to the extent
relevant to each of the Operational Service Levels failed for two consecutive
months, and Critical Service Levels missed during the previous month: (i) the
initial or, where available, the complete “root cause(s)” of the problem;
(ii) the start times, and both the estimated and the actual end times for
problem repair; (iii) the component of failure where it has been identified; and
(iv) in all cases, the actions IBM has taken, is taking and/or will take to
correct such problem and prevent a similar future problem.     (e)   The monthly
performance report shall be provided to Solectron on or before the fifteenth
(15th) Business Day of the month following the month for which Service
performance is being reported.

2.   ACTUAL SAVINGS

  2.1   Measurement         Actual Savings for each quarter beginning with the
quarter that begins on September 1, 2006, will be calculated as specified in
Section 4 (Savings Calculations) of Annex B-1. Actual P2P Savings for each
quarter beginning with the quarter following the Transition Wave 1 Period, will
be calculated as specified in Section 4 of Annex B-1.     2.2   Incentive Credit
and Bonus Methodology

  (a)   For the purpose of this Section 2.2, “Committed Savings” means:

  (i)   the amounts specified as Committed Strategic and Tactical Savings shown
in Section 3, Table B of Annex B-1 plus

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*   Omitted and filed separately with the SEC pursuant to a confidential
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  (ii)   the first and second adjustments to the Committed Strategic Sourcing
Savings described in Section 7.5. of Annex B-1, plus     (iii)   the adjustment
of the Committed Tactical Sourcing Savings contained in Section 7.5. of Annex
B-1.

  (b)   This section sets forth the method to be used to calculate the credits
that shall be payable by IBM to Solectron (the “Savings Credit”) or the bonus
that shall be payable by Solectron to IBM (the “Savings Bonus”) based on the
Actual Savings for each calendar quarter.     (c)   [*]

3.   OPERATIONAL SERVICE LEVELS AND CUSTOMER SATISFACTION

  3.1   Critical Service Levels

  (a)   The initial Critical Service Levels are identified in Annex B-2 (Service
Level Metrics and Weightings). Subject to Section 5.3 (Savings Clause) of the
Agreement, failure to satisfy a Critical Service Level shall result in IBM
granting to Solectron a Service Level Credit in accordance with Section 3.3
(Service Level Credits.)     (b)   Except as specified in Annex B-2 (Service
Level Metrics and Weightings), at any time, but not more than once every three
(3) months for a given Operational Service Level, Solectron may change the
designation of a non-critical Operational Service Level to a Critical Service
Level and/or change the designation of a Critical Service Level to a
non-critical Operational Service Level by sending written notice to IBM no later
than two (2) calendar months prior to the first day of the month in which such
change is to be effective.     (c)   Beginning with the Wave 1 Go Live date the
Baselining process set out below in Section 5.2 (Baselining Process) shall apply
to the “PO Cycle Time” and “% Electronic PO” Operating Service Level described
in Section 1.3 of Annex B-2.

  3.2   Failure to Perform.

  (a)   If IBM fails to meet the same Operational Service Level for two
consecutive months or a single Critical Service Level, IBM shall
(i) investigate, assemble and preserve pertinent information with respect to,
and report on the causes of, the problem, including performing a root cause
analysis of the problem; (ii) advise Solectron, as and to the extent requested
by Solectron, of the status of remedial efforts being undertaken with respect to
such problem; (iii) minimize the impact of and correct the problem and begin
meeting the Critical Service Level; and (iv) take appropriate preventive
measures so that the problem does not recur.

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*   Omitted and filed separately with the SEC pursuant to a confidential
treatment request

  (b)   Subject to Section 5.3 (Savings Clause) of the Agreement, in the event
that IBM fails to meet Critical Service Levels for reasons other than the
wrongful actions of Solectron or circumstances that constitute force majeure
under Section 19.3 (Force Majeure) of the Agreement, IBM will issue to Solectron
the Service Level Credits specified in this Schedule B. Any amounts credited to
Solectron under this Section 3.2(b) shall be separate from any credit/bonus
calculated pursuant to Annex B-1.

  3.3   Service Level Credits         This section sets forth the method to be
used to calculate the credits that shall be issued by IBM to Solectron (“Service
Level Credit”) in the event of a Critical Service Level Default or an
insufficient score on the Management Survey. The Service Level Credits
contemplated by this Section 3 (Operational Service Levels) are (a) intended as
a management incentive to draw attention to performance that does not meet
expectations and (b) do not constitute liquidated damages and shall not preclude
Solectron from exercising any other remedies available to Solectron under the
Agreement or at law. Any damages recovered by Solectron with respect to a
particular Critical Service Level Default shall be reduced by an amount equal to
any Service Level Credits issued by IBM to Solectron for such Critical Service
Level Default. Service Level Credits shall begin to accrue with respect to any
Critical Service Level Default occurring after the date that IBM begins to
process Solectron purchase requests through the P2P Platform.

  (a)   For each Critical Service Level Default, IBM shall grant Solectron a
Service Level Credit that will be computed in accordance with the following
formula:

      Service Level Credit = [*]         Where:         [*]         [*]

  (b)   [*]

  (i)   During the Transition Wave 1 Period, IBM will, to the extent relevant,
comply with the Operational Service Levels and report on IBM’s performance;
however, there will be no [*].     (ii)   During the Transition Wave 2 Period,
the [*] for a particular month means [*] of the amount that IBM charges to
Solectron for the Services for that month, as identified in Schedule C
(Charges);

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*   Omitted and filed separately with the SEC pursuant to a confidential
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  (iii)   During the Steady State Period, the [*] for a particular month means
[*] IBM charges to Solectron for the Services for that month as identified in
Schedule C (Charges).

  (c)   Weighting Factors

  (i)   “Weighting Factor” shall mean the percentage specified for a specific
Operational Service Level in Annex B-2 (Service Level Metrics and Weightings).  
  (ii)   Solectron shall have the right from time to time to change, in its sole
discretion, the Weighting Factor for any Critical Service Level upon sixty
(60) days’ advance written notice to IBM; provided, however, that in no event
may the aggregate of the Weighting Factors for all Critical Service Levels with
respect to one (1) month exceed [*] of the [*].     (iii)   Solectron may not
allocate more than [*] of the [*] to any individual Critical Service Level.

  (d)   If more than one Critical Service Level Default occurs in a single
month, the sum of the corresponding Service Level Credits shall be credited to
Solectron.     (e)   In no event shall the total amount of Service Level Credits
credited to Solectron with respect to Critical Service Level Defaults occurring
in a single month exceed, in the aggregate, the [*].     (f)   IBM shall notify
Solectron if Solectron becomes entitled to a Service Level Credit in the monthly
performance report. The monthly performance report shall describe (i) the
Critical Service Level Defaults for the month covered by the monthly performance
report, (ii) a calculation of the amount of each Service Level Credit relating
to such Critical Service Level Defaults, and (iii) any failure to meet
non-Critical Service Levels for the month being reported on.     (g)   IBM shall
settle the amount of any Service Level Credits owed by IBM to Solectron by
granting to Solectron a credit on the next regular monthly invoice for the month
after the Service Level Credit is identified. If there will be no further IBM
invoices, IBM will pay the amount of the credit to Solectron by bank wire within
thirty (30) days after the date of the last invoice.

  3.4   Solectron Management Customer Satisfaction Survey

  (a)   General

  (i)   On a quarterly basis, beginning in the fourth month following the
Effective Date, IBM will perform a customer satisfaction survey of such
Solectron senior management personnel reasonably involved with

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      Solectron’s receipt of the Services (the “Management Survey”). IBM and
Solectron will mutually agree upon the levels of management to be surveyed and
the geographic distribution of such management but Solectron will designate
which individuals will be surveyed. IBM and Solectron will agree as to the
number of persons surveyed provided that the actual number will between 5 and 15
inclusive.     (ii)   During the Transition Period, the overall score for each
Management Survey will be the average score for all items listed in Section
3.4(c), and IBM’s actual performance for that month will be calculated by
averaging the overall scores of all Management Surveys conducted for that
quarter.     (iii)   During the Steady State Period, the overall score for each
Management Survey will be the average score for all items listed in Section
3.4(d), and IBM’s actual performance for that month will be calculated by
averaging the overall scores of all Management Surveys conducted for that
quarter.     (iv)   In general, the Solectron senior management personnel
completing the Management Survey are not expected to change materially from one
survey to the next.

  (b)   The Management Survey will measure Solectron management satisfaction
with IBM’s performance on the following scale:

  1.0 —   Significantly Fails to Meet Expectations;     2.0 —   Fails to Meet
Expectations;     3.0 —   Meets Expectations;     4.0 —   Exceeds Expectations;
or     5.0 —   Significantly Exceeds Expectations.

  (c)   During the Transition Period, the Management Survey will measure
Solectron management satisfaction in the following areas:

  (i)   Efficiency of and level of business disruption associated with the
implementation of the Transition Plan;     (ii)   IBM communications, including
meetings and reports; and     (iii)   IBM contribution toward achieving
Solectron’s program goals.

  (d)   During the Steady State Period, the survey will measure Solectron
management satisfaction in the following areas:

  (i)   Continuous improvement activities;

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*   Omitted and filed separately with the SEC pursuant to a confidential
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  (ii)   IBM communications, including meetings and reports;     (iii)   IBM’s
general recommendations for Services improvement, including implementation of
best practices;     (iv)   IBM contribution toward achieving Solectron’s program
goals: and     (v)   The extent of IBM’s leadership and initiative in seeking
ongoing opportunities to drive Actual Savings.     (vi)   [*]

  (e)   [*]

  3.5   End-User Customer Satisfaction Survey

  (a)   On a semi-annual basis, IBM will perform a customer satisfaction survey
of a statistically significant sample of end users that received the Services
during the six-month period covered by the survey (the “End User Survey”)    
(b)   Within sixty (60) days after the Effective Date, IBM will propose to
Solectron a customer satisfaction survey methodology that rates IBM’s
performance on the following scale:

  1.0 —   Significantly Fails to Meet Expectations     2.0 —   Fails to Meet
Expectations     3.0 —   Meets Expectations     4.0 —   Exceeds Expectations    
5.0 —   Significantly Exceeds Expectations

      across a selection of performance criteria.

  (c)   Solectron’s overall satisfaction with the Services for that six month
period shall be calculated as the average of the End User Survey.     (d)   The
first customer satisfaction survey shall be performed six (6) months following
completion of the Transition Wave 1 Period.

  3.6   Right of Access to Operational Service Level Information

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      Detailed performance information used to calculate each Operational
Service Level will be maintained by IBM. Upon Solectron’s reasonable request,
IBM shall provide, and provide access to, such performance information to allow
Solectron to verify the accuracy of reported Operational Service Level
measurements.     3.7   Multiple Operational Service Level Conditions        
Unless otherwise expressly agreed, where an Operational Service Level includes
multiple conditions or components (e.g., components (a), (b), (c)), satisfaction
of each and every condition (i.e., conditions (a), (b) and (c)) is necessary for
the satisfaction of the corresponding Operational Service Level.     3.8  
Exceptions

  (a)   IBM shall not be responsible for its failure to meet an Operational
Service Level that would have been met but for an event if and to the extent:

  (i)   IBM has identified such event and the applicable exclusions in the
Monthly Report; and     (ii)   the failure to meet the Operational Service Level
was due to any one or more of the following:

  (1)   failure of equipment for which Solectron or a third party managed by
Solectron has maintenance responsibility, except to the extent that such event
could have been prevented by reasonable precautions taken by IBM and cannot
reasonably be circumvented by IBM through the use of alternate sources,
work-around plans or other means (including compliance with IBM’s obligations
with respect to the provision of any disaster recovery services, if any); or    
(2)   is caused, directly or indirectly, without fault by IBM, by a Force
Majeure Event beyond the reasonable control of IBM, and such Force Majeure Event
could not have been prevented by reasonable precautions and cannot reasonably be
circumvented by IBM through the use of alternate sources, work-around plans or
other means (including compliance with IBM’s obligations with respect to the
provision of any disaster recovery services, if any); or     (3)   outages
during scheduled Maintenance Windows, where the failure is limited to the work
performed by IBM during such Maintenance Window and does not affect any other
system or Service; or     (4)   the failure of Solectron or Solectron’s third
party provider to perform or provide any relevant assistance, data or
information specifically required or reasonably requested by IBM.

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  (b)   If IBM asserts that its failure to meet an Operational Service Level was
due to any of the exceptions in the Section above, then IBM shall provide
adequate root cause analysis (including accountability for the problem), and IBM
shall be required to demonstrate to Solectron’s reasonable satisfaction the
applicability of the foregoing exceptions.

4.   IMPROVEMENT OF OPERATIONAL SERVICE LEVELS

  4.1   General         The Parties anticipate that Operational Service Levels
will improve during the Term, and be adjusted (i) as set forth in this section,
and (ii) in addition by mutual agreement through a periodic review process.    
4.2   Annual Improvement

  (a)   For each twelve (12) consecutive month period where IBM has not failed a
given Critical Service Level, the Critical Service Level metrics for that
Critical Service Level shall be improved by an amount equal to [*] of the
difference between such then-current Critical Service Levels and IBM’s actual
performance (as defined below) of such Critical Service Levels.     (b)   As
used in this Section 4.2 and Section 5.2(c), below, “IBM’s Actual Performance”
means the average monthly performance achieved by IBM during the immediately
preceding twelve (12) month period.

5.   NEW OPERATIONAL SERVICE LEVELS

  5.1   Specification by Solectron

  (a)   Solectron shall have the right to have new Operational Service Levels
established in response to changes in Solectron’s business or technology needs,
changes in the Services, and similar circumstances. Solectron shall exercise
such right by providing written notice to IBM, via the Change Management
Process, identifying the new Operational Service Levels to be established.    
(b)   Not later than fifteen (15) days after the receipt of Solectron’s notice,
IBM and Solectron shall meet to discuss (i) the new Operational Service Level,
(ii) the tool, software, or other method to be used to measure the new
Operational Service Level, (iii) whether such new Operational Service Levels is
eligible is to be a Critical Service Level, and (iv) such other matters as are
necessary to establish the new Operational Service Level. Solectron shall, based
on historical attainment, information provided by IBM or another process,
specify the performance level (the “Initial Service Level”) for any new
Operational Service Level.

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  (c)   If IBM agrees with the Initial Service Level proposed by Solectron, such
new Operational Service Level will become effective on the first day of the
third month following the month in which the new Operational Service Level is
agreed, or such other date as the Parties agree. If IBM does not agree with the
Initial Service Level, then the Initial Service Level will be revised based on
the process specified in Section 5.2, below.

  5.2   Baselining Process

  (a)   In the event that IBM does not agree with the Initial Service Level
specified by Solectron for the new Operational Service Level, then not later
than thirty (30) days after such meeting, IBM shall submit to Solectron
(i) industry-standard benchmarks for such Operational Service Level, to the
extent available to IBM, or (ii) performance measurements for such Operational
Service Level based on IBM’s experience, to the extent available, or (iii) a
baselining plan for generating statistically valid samples of performance
measurements for such new service level (each, a “Baselining Plan”). Baselining
Plans shall be subject to Solectron’s approval.     (b)   Upon approval of a
Baselining Plan, IBM shall collect the measurements for the new Operational
Service Level for a period not to exceed six (6) months, or such other period as
is agreed to by the Parties, (the “Baselining Period”). During the Baselining
Period, IBM will use reasonable efforts to meet or perform superior to the
Initial Service Level but will be excused from any Service Level Credits for
failure to perform the Service at the Initial Service Level.     (c)   After the
Baselining Period, if IBM has satisfied the Initial Service Level specified by
Solectron in any 3 consecutive months during the Baselining Period, the actual
measurement(s) shall be averaged to determine such Initial Service Level. If for
any five (5) months during the Baselining Period IBM did not meet or perform
superior to the Initial Service Level, IBM shall propose to Solectron a
modification to the Initial Service Level based on one of the following:
(i) IBM’s Actual Performance during the Baselining Period unless the Parties
agree that a longer period is required to statistically represent the Solectron
environment, (ii) the industry benchmark provided by IBM pursuant to
Section 5.2, or (iii) the performance level based on IBM’s experience provided
by IBM pursuant to Section 5.2.     (d)   If the Parties are unable to agree on
a Baselining Plan within forty (40) days after the meeting denoted in
Section 5.2(a), above, or if the Parties are unable to agree upon an Operational
Service Level within thirty (30) days after the Baselining Period, the Parties
shall take such matter to the dispute resolution process described in the
Agreement.

  5.3   Designation as Critical Service Level

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      The new Operational Service Level may be designated by Solectron as a
Critical Service Level. In such case, Solectron will assign a Weighting Factor
to the new Critical Service Level and the Weighting Factors for other Critical
Service Levels will be adjusted accordingly.     6.   CRITICAL DELIVERABLES AND
MILESTONES         IBM shall deliver to Solectron the Critical Deliverables as
described herein and in accordance with Section 3.5 (Acceptance of Deliverables)
of the Agreement based on satisfaction of the Acceptance Criteria set out below.

                          Description/         Ref. #   Critical Deliverable  
IBM Responsibility   Acceptance criteria   Due Date                 * Omitted
and                 filed separately                 with the SEC              
  pursuant to a                 confidential                 treatment          
      request
1.
  Draft Procedures Manual

(Output in MS Word file)   Deliver to Solectron, the draft Procedures Manual as
described in and in accordance with Section 12.4 of the Agreement.   A
reasonably thorough and well written Draft Procedures Manual delivered via email
or other means as mutually agreed, to Solectron in electronic format, consistent
with Annex F5   [*]
 
               
2.
  Final Procedures
Manual

(Output in MS Word file)   Deliver to Solectron the final Procedures Manual as
described in and in accordance with Section 12.4 of the Agreement.   A
reasonably thorough and well written Final Procedures Manual, consistent with
draft Procedures Manual that addresses reasonable comments and concerns raised
by Solectron delivered via email or other means as mutually agreed, to Solectron
in electronic format   [*]
 
               
3.
  Revised Procedures Manual

(Output in MS Word file)   Deliver to Solectron the revised Procedures Manual
incorporating Wave 2 content.   A reasonably thorough and well written Revised
Procedures Manual consistent with Finalized Procedures Manual prepared for Wave
1 and, addressing reasonable comments and concerns raised by Solectron delivered
to Solectron in electronic format.   [*]

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                          Description/         Ref. #   Critical Deliverable  
IBM Responsibility   Acceptance criteria   Due Date                 * Omitted
and                 filed separately                 with the SEC              
  pursuant to a                 confidential                 treatment          
      request
4.
  First use of Emptoris   Emptoris is available for use for strategic sourcing
activities.   First use of Emptoris suite by IBM in performing services for
Solectron. Emptoris suite is operating substantially in accordance with its
specifications.   [*]
 
               
5.
  Wave 1:
Detailed Transition Plan

(Output in MS Project file)   Develop a detailed Transition Plan according to
Transition timeline and Transition work stream as set forth Annex A7   A
reasonably thorough and well written Transition plan, consistent with Annex A7,
delivered to Solectron in electronic format,   [*]
 
               
6.
  Wave 2:
Detailed Transition Plan

(Output in MS Project file)   Develop a detailed Transition Plan according to
Transition timeline and Transition work stream as set forth Annex A7   A
reasonably thorough and well written Transition plan, consistent with Annex A-7,
delivered via email or other means as mutually agreed, to Solectron in
electronic format.   [*]
 
               
7.
  Communication Plan

(Output in MS Project file)   Develop detailed communication plan, communication
approach and messages as set forth Annex A7   A reasonably thorough and
reasonably well written Communication plan delivered via email or other means as
mutually agreed to Solectron in electronic format.   [*]
 
               
8.
  Wave1:
Training Plan

(Output in MS Project file)   For Wave 1: Develop detailed Training Plan and
Training approach as set forth Annex A7   A reasonably thorough and well written
Training plan delivered via email or other means as mutually agreed, to
Solectron in electronic format.   [*]

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                          Description/         Ref. #   Critical Deliverable  
IBM Responsibility   Acceptance criteria   Due Date                 * Omitted
and                 filed separately                 with the SEC              
  pursuant to a                 confidential                 treatment          
      request
9.
  Wave 2:
Training Plan

(Output in MS Project file)   For Wave 2: Develop detailed Training Plan and
Training approach as set forth Annex A7   A reasonably thorough and reasonable
well written Training plan delivered via email or other means as mutually
agreed, to Solectron in electronic format.   [*]
 
               
10.
  Wave 1: Complete P2P Platform
implementation   Implement P2P Platform in each in-scope country for Wave 1 in
accordance with the timeline as set forth Annex A7   P2P user data completely
loaded, P2P Platform is fully capable for all applicable countries and P2P is
accepting requisitions and issuing Purchase Orders.   [*]
 
               
11.
  Wave 2:
Complete P2P Platform implementation   Implement P2P Platform in each in-scope
country for Wave 2 in accordance with the timeline as set forth Schedule A7  
P2P user data completely loaded, P2P Platform is fully capable for all
applicable countries and P2P is accepting requisitions and issuing Purchase
Orders.   [*]
 
               
12.
  Wave 1:
IBM Customer Assistance Center
Readiness

(Output in MS Word file)   IBM Customer Assistance Center ready   Customer
Assistance Center (“CAC”) for Wave 1 countries is established, staffed and
functioning with local language support capability in accordance with
Schedule A.   [*]
 
               
13.
  Wave 2:
IBM Customer Assistance Center
Readiness

(Output in MS Word file)   IBM Customer Assistance Center ready for Wave 2.  
Customer Assistance Center (“CAC”) for Wave 2 countries is established, staffed
and functioning with local language support capability in accordance with
Schedule A   [*]
 
               
14.
  Wave 1:
Complete Power User training

(Output in MS Word file)   Completion of training on processes, tool and trainer
skills for Wave 1 Power Users   Power user training courses completed, training
evaluation forms received and compiled by IBM and delivered to Solectron.   [*]
 
               
15.
  Wave 2: Complete Power User training   Completion of training on processes,
tool and trainer skills for Wave 2 Power Users   Power user training courses
completed,
training evaluation   [*]

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                          Description/         Ref. #   Critical Deliverable  
IBM Responsibility   Acceptance criteria   Due Date                 * Omitted
and                 filed separately                 with the SEC              
  pursuant to a                 confidential                 treatment          
      request
 
  (Output in MS Word file)       forms received and compiled by IBM and
delivered to Solectron    

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Annex B1
Savings Measurement Methodology
1. INTRODUCTION
This Annex B1 (Savings Measurement Methodology) describes the method by which
Actual and Committed Savings will be calculated.
2. DEFINITIONS
Unless otherwise defined in the Agreement, the following capitalized terms used
in this Annex B2 shall have the meanings specified below:

  (a)   “Actual Savings” shall mean the sum of the Actual Strategic Sourcing
Savings plus Actual Tactical Savings.     (b)   “Actual Strategic Sourcing
Savings” shall mean the actual savings produced through IBM’s strategic sourcing
activities, as calculated in accordance with Section 4 (Savings Calculation) as
and when realized and as validated and agreed to by Solectron in Sections 7.3
(Review & Agreement) and 7.6 (Savings Opportunities Rejected by Solectron).
These savings will be compared to Committed Strategic Sourcing Savings to
determine any savings shortfall or excess.     (c)   “Actual Tactical Savings”
shall mean the actual savings produced through IBM’s tactical sourcing
activities as calculated in accordance with Section 4 (Savings Calculation) as
and when realized and as validated and agreed to by Solectron in Sections 7.3
(Review & Agreement) and 7.6 (Savings Opportunities Rejected by Solectron). The
Actual Tactical Savings will be compared to Committed Tactical Savings to
determine any savings shortfall or excess.     (d)   “Actual P2P Savings” means
the actual level of P2P Savings achieved in a period. Actual P2P Savings shall
be calculated in accordance with Section 4 and shall be validated and agreed to
by Solectron.     (e)   “Addressable Spend” is defined in Schedule C (Charges).
    (f)   “Addressable Strategic Sourcing Spend” mean Addressable Spend as
defined in Schedule C.     (g)   “Addressable Tactical Sourcing Spend” means the
spend that IBM has estimated, as being Tactically Sourced during the Term.    
(h)   “Baseline” shall mean the measure of the price of a category that
Solectron would have paid but for IBM’s Strategic or Tactical Sourcing actions,
as determined pursuant to Section 6 (Baseline).

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  (i)   “Category” shall mean a grouping of similar goods or services.     (j)  
“Committed Savings” shall mean the sum of Committed Strategic Sourcing Savings
and Committed Tactical Sourcing Savings. Committed Savings may be adjusted in
accordance with Section 7.5 (Adjustment of Committed Savings).     (k)  
“Committed Strategic Sourcing Savings” are the savings that IBM commits to
achieving by its efforts to strategically source the Addressable Spend. IBM’s
Committed Strategic Sourcing Savings as of the Effective Date are shown in Table
B of Section 3.1 (IBM Responsibilities).     (l)   “Committed Tactical Sourcing
Savings” are the savings that IBM commits to achieving by its efforts to
tactically source the Addressable Tactical Souring Spend. IBM’s Committed
Tactical Sourcing Savings are shown in Table B of Section 3.1 (IBM
Responsibilities).     (m)   “Compliance Rate” shall mean the Compliant Spend
for the period of interest divided by the sum of Compliant Spend for the period
of interest plus non-Compliant Spend for the period of interest, with the
resulting amount expressed as a percentage.     (n)   “Compliant Spend” shall
mean with respect to (i) an IBM strategically sourced contract and (ii) a
Solectron strategically sourced contract renegotiated by IBM, (individually the
“SSC” and collectively the “SSCs”), spend placed through the SSCs after notice
of each is provided to the applicable organization or personnel within
Solectron, and, if applicable, once each SSC is fully functionally represented
on the P2P platform. Compliant Spend shall mean, with respect to a period of
interest, all compliant spend made with respect to all SSCs in place during the
period of interest and while the SSCs were in place during the period of
interest. Spend during the period of interest that should have been placed
through the SSCs but for the actions or insistence of Solectron, was not placed
through the SSCs is “non-Compliant Spend” during the period of interest. Spend
is neither Compliant Spend nor non-Compliant Spend during the period of interest
if (A) there are no SSCs in place covering the supply of the applicable good or
service for the geography involved or (B) the spend is not placed with an SSC
because the good or service is not in stock, or is unavailable within the time
period required if ordered through the SSC or (C) a Solectron strategically
sourced contract.     (o)   “Expected P2P Savings” are the P2P Savings that IBM
has projected as the likely result of the implementation of this Agreement.
Solectron has included these Expected P2P Savings in its business case for this
Agreement.     (p)   [*]

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  (q)   “Finance Manager” shall mean a party accountable within each of
Solectron and IBM who manages day-to-day issues relating to Baseline and Savings
determination and calculation.     (r)   “Management Committee” shall have the
meaning specified in Schedule F (Governance Structure and Processes).     (s)  
“P2P Savings” are savings IBM achieved through the implementation of IBM’s P2P
platform and the improvements implemented by IBM in the management of the P2P
processes for Solectron. These savings include cost reductions to Solectron
resulting from: (a) reductions in demand, in the number of duplicate payments to
suppliers, in the number of payment discounts missed, in the number of exception
invoices, in the payments made for goods not received, and in the interest paid
on exception invoices; and (b) increases in Compliant Spend.     (t)   “Savings”
for a particular period shall mean the difference between the agreed to Baseline
for a good or service and the actual cost of that good or service (including as
appropriate similar approved Total Cost of Ownership elements as where included
in the determination of the Baseline) times the quantities of the goods or
services actually purchase during the period.     (u)   “Savings Contribution
Report” shall mean the collection of reports on Committed, and Actual Savings as
well as actual Addressable Spend and the Addressable Spend assumed to be present
at the time the spend was made available to IBM for Strategic or Tactical
Sourcing.     (v)   “Supplier” shall mean a supplier or potential supplier of
goods and/or services to Solectron.     (w)   “Total Cost of Ownership
(TCO) Elements” shall mean those selected cost elements that contribute to
Solectron’s total cost, direct and indirect, incurred throughout the life cycle
of an asset or service, including acquisition, deployment, operation, support
and retirement that the parties agree are to be considered in determining the
Baseline.     (x)   “True Up” shall mean the adjustment process described in
Section 7.7 (Committed Savings Quarterly Adjustment and Annual True Up).     (y)
  “True Up Amount” shall mean the adjustment amount determined in Section 7.7
(Committed Savings Quarterly Adjustment and Annual True Up).     (z)   “WPR”
shall mean the “web payment request” functionality of the P2P Platform through
which Solectron may request a check be issued for a non-PO-based invoice related
to specifically authorized types of spend.

3. RESPONSIBILITIES
     3.1 IBM Responsibilities

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  (a)   IBM will calculate and document Baselines as in accordance with
Section 6 (Baseline), below, for review, comment and as appropriate confirmation
by Solectron;     (b)   IBM will forecast, measure, and report on Savings,
Addressable Spend and Compliance as identified in this Schedule;     (c)   IBM
will propose and plan strategies and support Solectron to execute strategies to
attain the Compliance Rates identified in Table B below;     (d)   IBM will
produce the Actual Strategic Sourcing Savings and the Actual Tactical Sourcing
Savings that at least meet the Committed Strategic Sourcing Savings and the
Committed Tactical Sourcing Savings identified in Table B below when the
Compliance Rate meets the level identified in Table B and when the actual level
of Addressable Strategic and Tactical Sourcing Spend reaches the Spend
identified in Table A below. These levels of Addressable Strategic and Tactical
Sourcing Spend are expected (but not guaranteed) to be the values identified, in
millions of US Dollars for each Contract Year, and shall be further detailed in
Schedule C (Pricing); and     (e)   IBM will produce the Expected P2P Savings
identified in Table B below when (i) Solectron achieves the Compliance Rate
identified therein and (ii) the Spend processed through the P2P platform is as
shown in Table A below. These levels of Spend processed through the P2P platform
are expected (but not guaranteed) to be the values identified, in millions of US
Dollars for each Contract Year.

      [*]

     3.2 Solectron Responsibilities

  (a)   Review, comment and, when agreed, confirm the Baselines calculated by
IBM;     (b)   Review, comment and, when agreed, confirm the Actual Savings
calculated by IBM; and     (c)   Provide or make available to IBM, historical
data (including supplier contracts and supporting documentation) to the extent
that they are reasonably necessary for IBM to perform the Services, that they
are not provided otherwise pursuant to the Agreement and they are reasonably
commercially available within Solectron.

4. SAVINGS CALCULATION
     4.1 Actual Strategic Sourcing Savings Calculation.

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  (a)   Actual Strategic Sourcing Savings will be calculated based on actual
spend during the term of the contract in which the newly negotiated pricing is
in place by multiplying the variance between:

  (i)   [*]

  (b)   Notwithstanding the foregoing:

  (i)   For any contract strategically sourced by IBM, except as specified in
Sections 4.1(b)(ii) or 4.1(b)(iii), no savings will be calculated to accrue
against such contract after the earlier of (A) 12 months following the effective
date of such contract, (B) the effective date of a new contract which replaces
such contract, or (C) the date upon which such contract expires.     (ii)  
Renegotiated Contracts. In the event that during a 12-month period following the
effective date of a contract that IBM has strategically sourced, IBM
renegotiates that contract to achieve additional savings for Solectron, and
provided that the contract and renegotiation has been negotiated and structured
by IBM in good faith to maximize the savings to Solectron and not to circumvent
the provisions of Section 4.1(b)(i) above, and provided the provisions of
Section 6 respecting current market pricing are adhered to, IBM will be allowed
to accrue savings equal to the sum of the discounts achieved by IBM from the
initial negotiation and the subsequent negotiation until the end of the initial
12-month period. After the end of the initial 12-month period, the limitations
imposed by Section 4.1(b)(i) would apply to the renegotiated pricing.        
[*]     (iii)   Multi-Year Contracts. In the event that IBM strategically
sources a contract for Solectron that has a term that exceeds 12 months and that
provides for multiple period over period reductions in the price to Solectron
and provided further that the contract has been negotiated and structured by IBM
in good faith to maximize the savings to Solectron and not to circumvent the
provisions of Section 4.1(b)(i), above, IBM will be entitled to accrue savings
to this contract after the limitations imposed by Section 4.1(b)(i) until such
period over period reduction ends. For the purposes of Section 6 (Baseline), and
in a manner consistent with Section 6.1 (Prior Period Price), the Baseline
applicable to the savings that accrue after the limitation of Section 4.1(b)(i)
shall be the price paid during the previous period, assuming the then-current
market price for the product remains above the price paid during the previous
period.         [*]

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     4.2 Actual Tactical Savings Calculation

  (a)   Actual Tactical Savings shall be calculated using processed invoices
with prices from newly negotiated agreements that result from tactical sourcing
activities. Such Savings represent actual compliance and are calculated by
multiplying the variance between:

  (i)   [*]

  (b)   Notwithstanding the foregoing:

  (i)   For any contract tactically sourced by IBM, except as specified in
Sections Error! Reference source not found. or 4.1(b)(iii)4.2(b)(iii), no
savings will be calculated to accrue against such contract after the earlier of
(A) 12 months following the date notice of each is provided to the applicable
organization or personnel within Solectron, and, if applicable, once such
tactically sourced contract is fully functionally represented on the P2P
platform, (B) the effective date of a new contract which replaces such contract
or (C) the date upon which such contract expires.     (ii)   Renegotiated
Contracts. In the event that during a 12-month period following the effective
date of a contract that IBM has strategically sourced, IBM renegotiates that
contract to achieve additional savings for Solectron, and provided that the
contract and renegotiation has been negotiated and structured by IBM in good
faith to maximize the savings to Solectron and not to circumvent the provisions
of Section 4.1(b)(i) above, and provided the provisions of Section 6 respecting
current market pricing are adhered to, IBM will be allowed to accrue savings
equal to the sum of the discounts achieved by IBM from the initial negotiation
and the subsequent negotiation until the end of the initial 12-month period.
After the end of the initial 12-month period, the limitations imposed by
Section 4.1(b)(i) would apply to the renegotiated pricing.         [*]     (iii)
  Multi-Year Contracts. In the event that IBM tactically sources a contract for
Solectron that has a term that exceeds 12 months and that provides for multiple
period over period reductions in the price to Solectron and provided further
that the contract has been negotiated and structured by IBM in good faith to
maximize the savings to Solectron and not to circumvent the provisions of
Section 4.2(b)(i), above, IBM will be entitled to accrue savings to this
contract after the limitations imposed by Section 4.2(b)(i) until such period
over period reduction ends. For the purposes of Section 6 (Baseline), and in a
manner consistent with Section 6.1 (Prior Period Price), the Baseline applicable
to the savings that accrue after the

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limitation of Section 4.2(b)(i) shall be the price paid during the previous
period, assuming the then-current market price for the product remains above the
price paid during the previous period.
[*]
     4.3 Actual P2P Savings
The parties intend to maximize Actual P2P Savings. IBM will use commercially
reasonable efforts to identify, quantify and report Actual P2P Savings in a
manner consistent with the methods underlying the representations of similar
savings made in IBM’s various proposals leading up to this agreement. IBM will
formulate the calculation and submit it for Solectron review within 30 days
following the execution of this Agreement. Once acceptable IBM will begin to
quantify and report on Actual P2P Savings.
5. GENERAL ITEMS RELATED TO SAVINGS CALCULATIONS
     5.1 Timing

  (a)   Actual Savings and Actual P2P Savings are calculated at the time an
invoice is processed and approved in P2P or other applicable platform (e.g.,
Travel).     (b)   Savings calculations shall be made in the currency of the
governing Local Country Agreement and also expressed in US dollars based on the
exchange rate methodology set out in Schedule C (Charges).     (c)   IBM will
make the Savings calculation and present it to Solectron for their review,
comment and, as appropriate, approval.

     5.2 Specific Item Calculation.
Specific Item Calculation is the preferred Actual Savings calculation method.
The “Specific Item Calculation” applies to price Savings achieved via strategic
sourcing and/or a tactical buy. The calculation utilizes new price vs. old price
for each specific item to determine change in price. The change in price is then
be multiplied by actual current period volume to determine Actual Savings.

      [*]

     5.3 Alternative Methods of Savings Calculations

  (a)   The practicalities associated with the nature of the purchases may
necessitate alternate methods of determining Savings. There are several
alternative calculations methods that have been identified (below), that
maintain the spirit of

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      the Specific Item Calculation and address the practical necessities. These
methods can be applied to calculations for Actual Savings, targets, and
forecasts. Where the methods contain discretionary elements, IBM will provide
justification and will secure Solectron’s approval, which will not be
unreasonably withheld, to the elements prior to their use.     (b)   Market
Basket Calculation. The market basket calculation utilizes geographically
representative “market basket samples” of indirect goods or services and is the
preferred approach to use where there are too many items in a sourcing
transaction to track Savings on each item. In this calculation, IBM shall
identify a geographically representative sample or basket of the goods or
services, price the basket using Baseline and new unit prices and then calculate
a weighted average expected Savings percentage of the Baseline. Savings will
then be determined by applying this percentage to the actual spend of the entire
group of items.         [*]     (c)   Lump-Sum Spend Calculation. The lump sum
calculation is used primarily for like services that have been previously
purchased. Savings are calculated as previous amount paid versus newly
negotiated amount paid. The Baseline for this methodology shall be the price
paid in the prior year for the like service.         [*]

6. BASELINE
Baselines will be calculated by IBM, reviewed by Solectron and agreed during the
sourcing process for the good or service in question. The methods of determining
and adjusting the Baseline appear below. Except for adjustments for TCO Elements
the Baseline may never at any time exceed the then current market price for the
good or service in question.
     6.1 Prior Period Price
Prior period actual price is the preferred method for determining the Baseline
for indirect goods and services. In this case, for any new contract, the Prior
Year Price Baseline is the volume weighted average price paid for the good or
service purchased during the lesser of (a) the 12 months prior to the point of
interest (i.e. effective date of supplier contract) or (b) for purchases made
against agreements that have been in place for less than 12 months, the duration
of such agreement to be replaced by the new contract. This Baseline can be
developed from various data (e.g., from invoice level detail, purchase order
detail (if utilized), or by requesting the information from the Supplier).
     6.2 New Item Purchases —Acceptable Bid

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Frequently, new indirect goods or services may be procured for the first time or
they may have been purchase intermittently and historical pricing may not be
representative of the market and thus an apples-to-apples price and product
comparison may not be available. For these purchases, the Baseline will be the
second lowest acceptable bid that meets the required specifications for the
indirect good or service when IBM has obtained three or more bids for the
purchase.
     For Example: IBM requests bids from three Suppliers for a piece of capital
equipment that has not been purchased before:

  o   Supplier A bids $10,000 for equipment that meets Solectron’s
specifications;     o   Supplier B bids $9,000 for equipment that meets the
Solectron’s specifications;     o   Supplier C bids $5,000 for equipment that
meets the Solectron’s specifications.

Thus Supplier B has the second-lowest acceptable bid that meets the required
specifications. Therefore $9,000 will be the Baseline. In the case where only
two satisfactory bids are obtained the Baseline will be the average of the two
bids. In cases where only one bid is obtained, this single bid will serve as a
Baseline.
     6.3 Indexing Adjustment.
IBM may propose to adjust the otherwise determined Baseline by use of an
industry trend indicator that can be identified that reasonably reflects the
market trend for that category.
Example: Weighted average historical hotel room rate is $100 per night (the
otherwise determined Baseline); representative market index for hotel rates
indicates a 5% price increase in the marketplace; and the adjusted Baseline
(assuming Solectron concurs with the correctness of the index) is $105 ($100
time 1.05).
     6.4 Incremental Discounts
For a number of indirect purchases (for example, airlines and vehicles),
negotiations are typically focused around discounts off of list price. The
Baseline in this case would be the (weighted average list price) times (1 minus
the previously negotiated discount).
     6.5 Baseline adjustments for TCO Elements
The Baseline for goods and services may be adjusted to reflect the TCO Elements
listed below when it is anticipated that sourcing activities may uncover
improvements which can contribute to savings. While this list represents the
elements with the highest probability of occurrence, other elements may become
relevant to Solectron’s business, or Category requirements in the future may be
included subject to mutual agreement to adjustment of the Baseline.

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  (a)   Delivery or transport charges as part of the landed cost of the good or
service. For selected services (e.g., professional & labor-based services),
these cost may be in the form of travel expenses on top of negotiated hourly
rates.     (b)   Deployment or Installation costs or Service charges negotiated
as part of the purchased price of a good. As an example if a supplier quotes a
price for a piece of equipment that is higher than a competitive supplier quote,
but offers a substantial reduction on the installation fees (assuming the
installation service meets specifications) this can result in an overall better
value and for Solectron. This may also apply to selected services where a
Supplier may offer measurable value-added deployment support services.     (c)  
Product specification changes may be identified which, while meeting Solectron’s
performance requirements, may represent changes in Solectron’s TOC. Examples
include:

  (i)   Substitution materials (for example generics for brand names);     (ii)
  Specification optimization: Savings arising from specification optimization
that provides measurable Savings while meeting Solectron requirements (Example:
IBM and Solectron key stakeholders agree that a current requirement for service
response time for specific machine maintenance is over-specified for Solectron’s
actual requirements. IBM proposes a measurable Savings based on the revised
specifications);     (iii)   Returnable Containers: IBM may identify incremental
Savings identified through IBM and arising out of lower costs based on a
combination of the unit cost and the refund for returned containers;     (iv)  
Reductions of internal material handling charges. (Example: Supplier delivers
goods to point of use therefore reducing Customer’s internal handling costs);  
  (v)   Additional valued added services. (Example: IBM negotiates skills
upgrading/training with a Supplier of temporary labor services that provides
Customer with a measurable benefit);     (vi)   Life cycle optimization for
high-value capital items. (Example: IBM influences requisitioner to change the
product specifications such that client experiences a P&L benefit from a longer
life cycle for the sourced item);     (vii)   Cash flow improvements from
reductions in inventory; and     (viii)   Value improvement or total systems
effectiveness improvement. (Examples: Savings from reduced lead times, prolonged
guarantee terms, improved delivery terms, substitution of components.)

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7. SAVINGS TRACKING
     7.1 Responsibility
IBM and Solectron will manage the Savings tracking process in accordance with
Schedule F (Governance), with both parties identifying a person to act as
Finance Manager in their respective project offices. These roles will serve as
the primary point of contact between Solectron and IBM for analysis of Savings
achievement, discussion of issues related to Savings achievement, and initial
efforts to resolve any disputes arising between the parties associated with
Savings initiatives.
     7.2 Measurement
Using the calculation methods identified in Section 4 (Savings Calculation), on
a monthly and annual basis IBM shall measure, track, report on and forecast
Actual Savings for each category and/or subcategory for which IBM has Strategic
Sourcing responsibility and shall compare such Actual Savings to the Committed
Savings and prior year Actual Savings (the “Savings Contribution Report”).
     7.3 Review & Agreement

  (a)   Except as specified in the Section 7.3(b) below, the Savings
Contribution Report for each Category will be made available by IBM for review
by Solectron on a monthly basis by the 10th business day of the month. Solectron
will have up to ten (10) business days, following receipt of the monthly Savings
Contribution Reports, to review and question the Savings contributions declared
by IBM. During this time IBM will support Solectron’s requests for information
or evidence of achievement. During that period, Solectron will identify any
specific areas of dispute and document the rationale for such dispute. Those
areas undisputed will be considered accepted by Solectron. The disputed items
will first be discussed at the Management Committee meeting and, if still
unresolved, will be escalated in accordance with the Dispute Resolution process.
    (b)   Prior to P2P Platform implementation:

  (i)   Within thirty (30) days after the end of each month (or as otherwise
mutually agreed by the Parties), Solectron will provide to IBM a report, in a
format substantially similar to the template provided in Annex B-4 that provides
IBM with data related to Solectron’s spend amounts for indirect purchases. IBM
will obtain reports from suppliers on contracts it has sourced with data
elements such as SKU consumption, unit price and total price. IBM will manually
reconcile the Solectron reports and supplier reports to determine and measure
Actual Addressable Spend and associated Actual Savings.

  (ii)   If the spend amount for a specific supplier as reported on the
Solectron report and the supplier report is within 10% of the supplier-reported

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      amount, IBM will use the amount specified on the supplier report to
determine Actual Addressable Spend and calculate Actual Savings.     (iii)   If
the spend amount for a specific supplier as reported on the Solectron report and
the supplier report does not match and the discrepancy is greater than 10% of
the supplier-reported spend amount, with Solectron’s assistance, IBM will
reconcile the two reports and identify root causes of the discrepancy. As
necessary to reconcile the spend amounts specified in the Solectron report and a
supplier report, Solectron will identify all contracts between Solectron and the
relevant supplier and will provide such data as is reasonably available to
Solectron related to Solectron’s purchases from that supplier. IBM will obtain
from the supplier a summary of amounts invoiced to Solectron by the supplier
under contracts not sourced by IBM. Solectron will reimburse IBM for any
Out-of-Pocket Expenses associated with obtaining such summary from such
supplier. IBM will use the reconciled spend to determine Actual Addressable
Spend and calculate Actual Savings.     (iv)   If AP data is unavailable, IBM
will use relevant Solectron PO data and any relevant supplier reports to
determine Actual Addressable Spend in order to calculate Actual Savings based on
the supplier reports. If the Parties agree that the PO data is consistently
inaccurate or inconsistent, the Parties may elect to rely solely on the supplier
reports where no AP data is available.     (v)   Unless otherwise agreed by the
Parties, IBM will provide the Savings Contribution report within sixty (60) days
after the end of each month.

     7.4 Addressable Spend and Compliant Spend

  (a)   IBM will report on Addressable Spend, Compliance Rates and Compliant
Spend.     (b)   [*]

     7.5 Adjustment of Committed Savings

  (a)   Committed Strategic Sourcing Savings and Committed Tactical Sourcing
Savings will vary respectively with Actual Addressable Strategic Sourcing Spend
and Actual Addressable Tactical Sourcing Spend. In addition Committed Strategic
Sourcing Savings will vary with the actual Compliance Rates achieved.     (b)  
[*]     (c)   [*]

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     7.6 Savings Opportunities Rejected by Solectron

  (a)   IBM will notify Solectron of sourcing opportunities that have been
rejected by End Users and the Savings from such opportunity IBM believes should
still be accepted as Actual Savings. IBM will not be entitled to claim Actual
Savings under any contract until after notice of each is provided to the
applicable organization or personnel within Solectron, and, if applicable, once
each contract is fully functionally represented on the P2P platform.     (b)  
Without restricting “for cause” rejection, Solectron may reject IBM request that
the Saving which might have accrued to such opportunity be accepted as Actual
Savings if there is a reasonable good faith belief that pursuit of the
opportunity will be detrimental to its business. Solectron will provide
supporting documentation of this determination to IBM. The reasons for such a
good faith belief could include:

  (i)   Past experience with the proposed supplier or source of the commodity
(e.g., poor quality or responsiveness);     (ii)   The terms and conditions
proposed to the extent they depart significantly from the terms and conditions
specified in the request;     (iii)   Solectron’s contractual commitments to or
business relationships with Solectron clients or business partners;     (iv)  
An anticipated negative competitive or strategic impact on Solectron, such as
sourcing from a competitor of Solectron or a potential business partner of
Solectron; or     (v)   Reasonable anticipation of a negative impact on quality
or service as compared to the request or specification.

  (c)   Solectron will use Commercially Reasonable Efforts to disclose and IBM
will use Commercially Reasonable Efforts to solicit, at the time of the sourcing
request, information pertaining to the items above and any other items which IBM
may take into account in its sourcing to facilitate acceptance of the Savings
opportunity. Lessons learned and corrective actions with Solectron and IBM will
also be defined and implemented in order to minimize the recurrence of future
rejections for the same or similar circumstances. IBM will also report on
Savings opportunities that have been rejected by Solectron at the regular
Management Committee meetings.

  (d)   The Savings believed by IBM to have been achieved by the opportunities
rejected by Solectron will be handled as follows:

  (i)   For each purchase request submitted by an End User or other sourcing
opportunity identified by IBM, IBM will complete the Functions necessary to
present the relevant End User with an executable transaction

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      that satisfies the requirements of the purchase request or an executable
sourcing strategy to implement the sourcing opportunity. This presentation may
include providing Solectron with a supportable calculation of the Savings to be
achieved through execution of such transaction or sourcing strategy in the
manner proposed by IBM. If Solectron, for reasons other than for cause or those
reasons specified in Section 7.6(b), rejects the transaction or otherwise
directs IBM to execute the transaction with a supplier other than that proposed
by IBM, IBM may request credit for the savings that would have been achieved
through execution of the transaction as proposed by IBM. Solectron will promptly
evaluate the request for Savings credit.     (ii)   [*]If Solectron believes the
End User’s rejection was fair and the anticipated Savings invalid and IBM
requests, the issue will be escalated within two (2) business days to the
Management Committee for review and determination. If the Management Committees
determination is unacceptable to IBM, IBM may at its option further escalate the
issue to the Dispute Resolution process.     (iii)   [*]

     7.7 Committed Savings Quarterly Adjustment and Annual True Up

  (a)   Adjustments to Committed Savings provided for in this Section 7.7 will
be determined quarterly with an overall annual true-up to occur as part of the
fourth quarter analysis.     (b)   Actual Savings will be compared with the
Committed Savings (as adjusted) on a quarterly basis to calculate any credit or
bonus to be provided to or paid by Solectron, respectively, for that quarter in
accordance with Schedule B. Any quarterly credit/bonus will be credited/invoiced
to Solectron on the next monthly invoice following the completion of the
quarter.     (c)   At year-end, annual Actual Savings will be compared with
annual Committed Savings to calculate any adjustments to the quarterly
credits/bonuses provided to or paid by Solectron necessary to reflect Actual
Savings for the entire year (the “True Up Amount”).     (d)   Upon Solectron’s
reasonable request, IBM will make data available to support Solectron’s year-end
accrual process     (e)   The True-Up Amount will be invoiced (or credited) to
Solectron within thirty (30) days after the completion of the process specified
in Section (b) (the “True Up Process”).

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  (f)   The True Up Process shall be completed within two weeks of the date that
Solectron receives the Savings Contribution Report applying to the third month
of each calendar quarter. If agreement on the Committed Savings, the Actual
Savings and True Up Amount is not achieved by the IBM and Solectron Responsible
Executives by the end of such period, then the Dispute Resolution Process shall
be invoked to complete the True-Up Process.     (g)   Invoices for the True Up
Amount shall be paid or credited in accordance with the payment terms set forth
in Schedule C (Charges).     (h)   Notwithstanding the above, the Parties agree
as follows with respect to Contract Year 1: (a) there will be no annual True-Up;
and (b) adjustments to Committed Savings will be determined for quarter 3 and
quarter 4.

     7.8 Solectron Timeliness Responsibility
In case the start of the realization of a savings is delayed because of
Solectron’s failure to discharge their responsibilities in a timely manner, IBM
shall be credited with the lost savings (as a result of the delay) as Actual
Savings unless otherwise agreed to by the Parties. IBM shall notify Solectron in
writing within seven (7) business days of Solectron not fulfilling a
responsibility that is causing or is likely to cause the delay. If IBM fails to
notify Solectron that their actions caused a delay within seven (7) business
days of Solectron not fulfilling a responsibility, IBM shall not be credited
with the lost savings (as a result of the delay) to count towards Actual
Savings. If the Parties do not agree on the responsibility of the delay, they
may invoke the dispute resolution procedure as appropriate.

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request
Annex B-2
Service Level Metrics and Weightings
1. P2P PLATFORM
     1.1 System Availability

              Definitions   Available for Use   A system is considered to be
"Available for Use” when the hardware and systems software making up the
system’s hardware/system software platform are properly running so as to enable
the proper execution of all applications software scheduled to run on such
system.
 
                Availability   The percentage of Scheduled Uptime that a given
service or system is Available for Use. Availability is calculated as the
aggregate minutes during the periods of Scheduled Uptime for such system that
such system is Available for Use during such month, divided by the total
aggregate minutes of Scheduled Uptime for such system during such month, with
the result expressed as a percentage.
 
           
 
      AvailForUse X [100%] 
 
       
 
      SchedUptime
 
           
 
      Where;   SchedUptime = the total number of minutes the System is scheduled
to be available for use.
 
          AvailForUse = the total number of minutes the System is actually
available for use.
 
                Maintenance Window   A pre-scheduled maintenance period when a
system is not scheduled to be Available for Use.
 
                Scheduled Uptime   The period of time when a system is scheduled
to be Available for Use. Scheduled Uptime does not include Maintenance Windows.

P2P Platform Availability —

              Performance Requirement   Weighting Factor %
P2P System Availability
  [*]    

     
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     1.2 % of Hand-free Orders

     
Definition
  “% Hands-free Orders” means the percentage of all purchase orders for items in
Categories sourced by IBM that are placed during the reporting period through a
Hosted Catalogue or a Punchout Catalogue or a Contract. Except as otherwise
agreed, this Operational Service Level may not be designated as a Critical
Service Level pursuant to Section 5.3 (Designation as Critical Service Level) of
Schedule B.

% Hands-Free Orders

                  Performance Requirement   Weighting Factor % % Hands-Free
Orders   On a quarterly basis during Contract Years 1 through 5, [*] of all POs
issued will be placed through a Hosted Catalogue or a Punchout Catalogue or a
Contract.   N/A
 
           
 
  HFPOs X [100%]     
 
       
 
  POs    
 
           
 
  Where;   HFPOs = the number of hands free PO’s issued    
 
      POs = the number POs issued    

     1.3 PO Cycle time (Approved requisition to PO)

     
Definition
  “PO Cycle Time” means the amount of time between the time that an approved
requisition is submitted to IBM and the time that a completed PO is released by
IBM.

     
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PO Cycle Time

                  Performance Requirement   Weighting Factor % PO Cycle Time
(Tactical Sourcing)   On a monthly basis, at least [*] of all POs issued
following Tactical Sourcing will be completed by IBM within 7 business days of
IBM receipt of an approved requisition.    
 
           
 
  POs X [100%]     
 
       
 
  Reqs    
 
           
 
  Where;  
Reqs = the number of Approved Requisitions routed for Tactical Sourcing
   
 
     
POs = the number of resulting POs issued in the specified time (7 business days)
   
 
            PO Cycle Time
(Buyer involved)   On a monthly basis, at least [*] of all POs issued as a
result of the requisition being routed to a buyer for PO placement but not
Tactical Sourcing will be completed by IBM within 2 business days of IBM receipt
of an approved requisition.    
 
           
 
  POs X [100%]     
 
       
 
  Reqs    
 
           
 
  Where;  
Reqs = the number of Approved Requisitions that are routed to a buyer for PO
placement but not Tactical Sourcing
   
 
     
POs = the number of resulting POs issued in the specified time (2 business days)
   
 
            PO Cycle Time
(Automated Catalog
Purchase)   On a monthly basis, at least [*] of all POs issued without any buyer
involvement will be issued by IBM within 1 business day of IBM receipt of an
approved requisition.    
 
           
 
  POs X [100%]     
 
       
 
  Reqs    
 
           
 
  Where;  
Reqs = the number of Approved Requisitions that are not routed to a buyer for PO
placement.

 
     
POs = the number of resulting POs issued in the specified time (1 business day)
   
   

     1.4 PO Accuracy

     
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Definition
  “PO Accuracy” means the percentage of all purchase orders issued which are
returned by supplier or which must be modified because of erroneous part number
or descriptions or pricing. Except as otherwise agreed, this Operational Service
Level may not be designated as a Critical Service Level pursuant to Section 5.3
(Designation as Critical Service Level) of Schedule B.

PO Accuracy

                  Performance Requirement   Weighting Factor % PO Accuracy   On
a monthly basis, no more than [*] of all purchase orders issued will returned by
the supplier or require modification because of erroneous part numbers,
descriptions or pricing.   N/A
 
           
 
  PORs X [100%]     
 
       
 
  POs    
 
           
 
  Where;  
PORs = number of PO returned by the supplier or require modification because of
erroneous part numbers, descriptions or pricing
   
 
      POs = the number of POs issued    

     1.5 Supplier Profile Set Up / Modification Time

     
Definition
  “Supplier Profile Set Up / Modification Time” means the amount of time between
the time that an approved request to create or modify the profile for a supplier
is submitted to IBM and the time that the new/modified profile for that supplier
is materially correct and available for use in the P2P Platform.

     
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Supplier Profile Set Up / Modification Time

                  Performance Requirement   Weighting Factor % Supplier Profile
Set
Up / Modification Time   On a monthly basis, at least [*] of all requests to
create/modify a supplier profile in the P2P Platform will be completed by IBM
within 2 business days of IBM receipt of an approved request. Note: There is a
special process for expediting the creation or modification of a supplier
record.    
 
           
 
  Comp X [100%]     
 
       
 
  Reqst      
 
         
 
  Where;  
Reqst = the number of Supplier Profile creation/Modification Requests made
   
 
     
Comp = the number of Supplier Profile creation/Modification Requests completed
within the specified time (2 business days)
   

     1.6 % Electronic PO

     
Definition
  “% Electronic PO” means the percentage of all purchase orders that may be
issued in electronic form during the reporting period that are issued to the
supplier in electronic form. Except as otherwise agreed, this Operational
Service Level may not be designated as a Critical Service Level pursuant to
Section 5.3 (Designation as Critical Service Level) of Schedule B.

% Electronic PO

              Performance Requirement   Weighting Factor %
% Electronic PO
  On a monthly basis, at least [*] of all purchased orders issued shall be
issued in electronic form   N/A

2.   CUSTOMER ASSISTANCE CENTER (CAC)       In addition to the terms defined in
the Agreement, the following defined terms will apply to the CAC:

     
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Definitions
  Abandonment   A Call is considered abandoned if, more than [*] after a caller
selects the option in the IVR to speak to a CAC agent, the Call is terminated
(including by caller hangup) prior to pickup of the Call by a CAC agent.
 
       
 
  Call   A telephone call to the CAC where the caller makes the selection using
the automated call distribution system to speak to a member of the CAC staff.
 
       
 
  Call Answer   A Call is considered answered when the caller is interacting
with a CAC agent.
 
       
 
  Call Back   Defined as a follow-up Call from IBM CAC to a user regarding a
previous call ticket.
 
       
 
  CAC Ticket   Refers to a unique logical electronic record that IBM will
create, update, maintain and archive for each incident. A CAC Ticket is used to
record all user/IBM interaction pertaining to an incident and all IBM-related
actions, and corresponding date/time, taken to resolve an incident, from the
time it is first reported to the CAC until Incident Resolution and closure by
the CAC.
 
       
 
  Speed-To-Answer   Total elapsed time from the point that the CAC automated
call director (ACD) call-circuitry places a Call into queue until a human
operator picks up the Call.

2.1   SLA Detail       IBM shall provide CAC Support Services that meet or
exceed the following service levels as of the first P2P Platform Go Live Date.

  (a)   Response Time SLA

     
Definition
  Response time is the number of seconds it takes a caller to connect with IBM’s
contact center representative.

CAC Response Time

         
CAC
Responsiveness
  Performance Requirement   Weighting Factor %

     
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              CAC         Responsiveness   Performance Requirement   Weighting
Factor % Speed-to-Answer   At least [*] of all Calls to the CAC in a given month
will be answered in [*] or less.    
 
           
 
  Answered   X [100%]     
 
         
 
  Made      
 
           
 
  Where;   Made = the number of calls made to the CAC    
 
     
Answered = the number of calls answered by the CAC within the specified time (30
seconds)
   
 
            Call Abandonment
Rate   On a monthly basis, not more than [*] of all Calls to the CAC will be
Abandoned.    
 
           
 
  Abandoned   X [100%]     
 
         
 
  Made      
 
           
 
  Where;   Made = the number of calls made to the CAC    
 
      Abandoned = the number of calls abandoned by the caller    
 
            Recurring Problem   Repeat Calls On a monthly basis, not more than
[*] of all Calls to the CAC shall be regarding the same problem for the same
user as described in a CAC Ticket within [*] of the closure of that CAC Ticket.
   
 
           
 
  Re peats   X [100%]     
 
         
 
  Made      
 
           
 
  Where;  
Repeats = the number of calls to the CAC that are regarding the same problem for
the same user as described in a CAC Ticket within [*] of the closure of the CAC
Ticket.
   
 
      Made = the number of calls made to the CAC    

     (b) Incident Resolution SLA

     
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Definition
  “First Call Resolution” means that during the first Call that the customer
makes to the CAC, IBM is able to answer the question, resolve the problem, or
dispatch service where appropriate, even if the Call is transferred to another
person, provided that the Call is not terminated.

Incident Resolution Table

              CAC Incident Resolution   Performance Requirement       Weighting
Factor %
1st Call
Resolution Rate
  In a given month, IBM will resolve at least [*] of all Level 1 Calls that are
technically capable of being resolved on the first Call.        
 
           
 
  Calls Resolved X [100%]     
 
       
 
  Calls Capable      
 
       
 
           
 
  Where;  
CallsCapable = the number of calls to the CAC that are capable of being resolved
on the first call to the CAC
   
 
     
CallsResolved = the number of calls to the CAC that are capable of being
resolved on the first call to the CAC that are actually resolved during the
first call.
   

     2.2 Accounts Payable
     Invoice Payment Errors

     
Definition
  An Invoice Payment Error means a payment of (i) an incorrect amount (when all
relevant taxes or other adjustments are taken into an account) (ii) a payment to
an incorrect party or (iii) a payment that is not within the terms approved by
Solectron for that supplier.

Invoice Payment Errors

         
 
  Performance Requirement   Weighting Factor %

     
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Invoice Payment Errors

                Performance Requirement     Weighting Factor %
Invoice Payment Errors
  On a yearly basis, not more than [*] of all payments proposed by IBM will have
an invoice payment error.      
 
         
 
  InvpayErrors X [100%]     
 
       
 
  InvPaid    
 
         
 
  Where;
InvPayErrors = using a sample size appropriate for six sigma confidence, the
number of invoice payment errors (any error causing Solectron to have paid more
than was rightfully due, e.g., double payments, overpayments) in the sample of
invoices proposed by IBM for payment
   
 
   
InvPaid = the number of invoices proposed by IBM for payment in the sample
(sized appropriate for six sigma confidence).
   

* Omitted and filed separately with the SEC pursuant to a confidential treatment
request

     
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Annex B-3
Summary of Performance Management Methods

                  Transition Wave 1 Period Performance Management    
Measurement   Measurement         Measurement   Period   Metric(s)   [*]   [*]
Critical
Deliverables
  N/A   Based on acceptance of Critical Deliverables   [*]   [*]
 
               
Savings
  Quarterly   As described in Annex B-1 (Savings Calculation Methodology)   [*]
  [*]
 
               
Customer
Satisfaction
  Quarterly   Management Survey   [*]   [*]

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                  Transition Wave 2 Period Performance Management    
Measurement   Measurement         Measurement   Period   Metric(s)   [*]   [*]
Critical
Deliverables
  N/A   Based on acceptance of Critical Deliverables   [*]   [*]
 
               
Savings Contract Y1
  Quarterly   As described in Annex B-1 (Savings Calculation Methodology)   [*]
  [*]
 
               
Savings Contract Y2 through end of Transition Wave 2
  Quarterly   As described in Annex B-1 (Savings Calculation Methodology)   [*]
  [*]
 
               
Customer
Satisfaction
  Quarterly   Management Survey   [*]   [*]
 
               
Critical SLAs
  Monthly   As specified in
Annex B-2
(Operational SLAs)   [*]   [*]

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                              Steady State Period Performance Management      
Measurement   Measurement                   Measurement   Period   Metric(s)  
[*]   [*]  
Savings
  Quarterly   As described in Annex B-1 (Savings Calculation Methodology)   [*]
  [*]            
 
                           
 
                           
 
                           
 
                           
Customer
Satisfaction
  Quarterly   Management Survey   [*]   [*]            
 
                           
Critical SLAs
  Monthly   As specified in Annex B-2 (Operational SLAs)   [*]   [*]            
 
                           
 
                           

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Annex B-4
Form Template of AP Data Pulled

                                                                  ATA_SOURCE  
CORP_CODE     DIVISION     VENDOR_NUM     VENDOR_NAME     INVOICE AMT    
INVOICE #     CHECK_AMT     DATE_INVOICED  
 
                                                               

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Confidential to Solectron and IBM
INDIRECT SOURCING SERVICES AGREEMENT
Between
Solectron and IBM
Schedule C
Charges

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Confidential to Solectron and IBM
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request
TABLE OF CONTENTS

         
1. INTRODUCTION
    4  
 
       
2. DEFINITIONS
    4  
 
       
3. STRATEGIC SOURCING SERVICE CHARGES
    5  
3.1 Overview of Strategic Sourcing Charges
    5  
3.2 Definitions Specific to Strategic Sourcing
    5  
3.3 OCM Charge
    6  
3.4 Strategic Sourcing Fixed Charge
    7  
3.5 Applicability of Volume Based Adjustments and Volume Band Limits for OCM
Services
    7  
3.6 Removal of Strategic Sourcing Services from Scope
    9  
 
       
4. P2P OPERATIONS SERVICES
    9  
4.1 P2P Operations Services
    9  
4.2 Inclusion of Additional Countries
    10  
 
       
5. [RESERVED]
    10  
 
       
6. [RESERVED]
    10  
 
       
7. PASS-THROUGH PROCESSING
    10  
 
       
8. OTHER ITEMS
    10  
8.1 Credit for LOA Payments
    10  
8.2 Out of Pocket Expenses
    11  
8.3 Cost of Compliance with Performance Standards
    11  
8.4 Software Licenses
    11  
8.5 Other Adjustments to Service Charges
    11  
 
       
9. INVOICING AND PAYMENT
    11  
9.1 Invoicing
    11  
9.2 Payment Due
    13  
9.3 Proration
    13  
9.4 Refundable Items
    13  
9.5 Disputed Charges
    13  
 
       
10. [*]
    13  
10.1 [*]
    13  
10.2 [*]
    13  
 
       
11. TAXES
    13  
11.1 Introduction
    13  
11.2 Service-Related Taxes
    14  
11.3 Mutual Cooperation
    14  
 
       
12. PERFORMANCE OF T&M WORK
    14  
 
       
13. CERTAIN ADJUSTMENTS TO CHARGES
    15  
13.1 Economic Change Adjustment (ECA)
    15  
13.2 Credit / Bonus for Savings and Service Level Credits
    15  
 
       
14. TERMINATION & TERMINATION ASSISTANCE CHARGES
    15  
14.1 [*]
    15  
14.2 Wind Down Costs
    15  
14.3 [*]
    16  

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List of Annexes
* OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST

      C1 [*]         C2 Invoicing Process

      C2-1 Overview of Country Allocations, Currency Conversion and Invoice
Calculation Process         C 2-2 Invoice Template         C 2-3 Global Summary
Report

      C3 Economic Change Adjustment (ECA)

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SCHEDULE C
CHARGES

1.   INTRODUCTION       This Schedule C (Charges) describes the methodology for
calculating the charges for the Services provided by IBM to Solectron pursuant
to this Agreement (the “Service Charges”). All capitalized terms used in this
Schedule C but not defined herein shall have the meanings given them in the
Agreement or other Schedules. The Service Charges described in this Schedule C
are subject to adjustment for:

  (a)   The credit described in Section 9.1 (Credit for LOA Payments) of this
Schedule C;     (b)   The ECA provided in Section 13.1 of this Schedule C;    
(c)   The savings credit/bonus provided in Section 2.2 (Incentive Credit and
Bonus Methodology) of Schedule B (Performance Management);     (d)   Any Service
Level Credits as provided in Section 3.3 (Service Level Credits) of Schedule B
(Performance Management);     (e)   Any New Services performed by IBM as
provided in Section 2.8 (New Services) of the Agreement;     (f)   The
adjustments permitted under Section 11.3 (Termination by Solectron) of the
Agreement; and     (g)   The adjustments permitted under Section 19.3 (Force
Majeure) of the Agreement.

2.   DEFINITIONS       As used in this Schedule C:

  (a)   “Economic Change Adjustment” or “ECA” means any adjustment to the Volume
Baselines, Trigger Values, Volume Adjustment Rates and prices specified in the
Pricing Tables resulting from the process described in Annex C-3 (Economic
Change Adjustment).     (b)   “Country Invoice” means the invoices to be
provided at the country level as described in Section 9.1(d) of this Schedule C.
    (c)   “Pricing Tables” means the tables set forth in Annex C-1.     (d)  
“T&M Rates” means the labor rates per billable hour shown in the Pricing Tables.
    (e)   “T&M Work” is defined in Section 12 (Performance of T&M Work) of this
Schedule.

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  (f)   “Volume Adjustment Rates” means the rates used to calculate variable
charges or to make certain adjustments to estimated charges, as described in
this Schedule.     (g)   “Volume Adjustments” means the adjustments to variable
charges to account for increases and decreases in Service volumes relative to
the applicable Volume Baselines.     (h)   “Volume Baselines” means the
estimated Service volumes upon which variable charges have been estimated as of
the effective date, as described in this Schedule. The Volume Baseline for
Ongoing Category Management variable charges is the OCM Spend Estimate (as
defined in Section 3). The Volume Baseline for P2P Operations variable charges
is Managed Spend (as defined in Section 4).

3.   STRATEGIC SOURCING SERVICE CHARGES       This Section describes the
methodology to be used to compute charges for the Strategic Sourcing Services
performed by IBM during the Term. The charges calculated pursuant to this
Section fully compensate IBM for providing Strategic Sourcing Services.

  3.1   Overview of Strategic Sourcing Charges.         Strategic Sourcing
Services are priced by Category and GEO (as defined in Section 3.2 below), for
each of the Categories and GEOs that Solectron authorizes IBM to source and/or
manage from time to time during the Term. There are two charges for each
Category:

  (a)   An “Ongoing Category Management” or “OCM” charge. See Section 3.3.    
(b)   A Strategic Sourcing Fixed Charge. See Section 3.4.

  3.2   Definitions Specific to Strategic Sourcing.

  (a)   “Addressable Spend” means the fees and charges paid to Commodity
suppliers by Solectron (stated in U.S. dollars) for Commodities included within
all In-scope Categories included in a Complexity Level in a GEO. It is the spend
that can be strategically sourced by IBM — i.e., where the existing supplier
arrangements can be changed or terminated without any significant financial
consequences due to existing contractual obligations, and where Solectron does
not have any other business need to continue existing supplier relationships.
The Addressable Spend for a Category will be determined by the Parties at the
time that IBM assumes responsibility for Strategic Sourcing of that Category and
will be the Parties’ best estimate of the actual addressable fees and charges
paid by Solectron in the twelve months preceding the transfer of sourcing
responsibility to IBM, adjusted for any known changes in volumes.     (b)  
“In-scope Categories” means the commodity Categories (as defined in Schedule A)
for which IBM provides Strategic Sourcing Services to Solectron from time to
time within a particular GEO. A Category may be

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      included in scope for Initial Sourcing and then subsequently removed from
scope; alternatively a Category may be included in scope for Ongoing Category
Management Services only, without an Initial Sourcing.     (c)   “GEO” means
each of the geographical regions listed in the Pricing Tables.     (d)  
“Complexity Level” means the level of complexity and associated work effort and
cost required to provide Strategic Sourcing Services for a particular Category.
As of the Effective Date, Solectron’s general ledger codes for indirect
materials and services have been allocated to High, Medium and Low Complexity
Levels as shown in Schedule A, Annex A-1.     (e)   “OCM Spend” for a Category
means the total dollar value of the fees and charges paid by Solectron to
suppliers under contracts that are strategically sourced by IBM or by Solectron
and that are included in IBM’s Ongoing Category Management Services. OCM Spend
includes Addressable Spend and other non-Addressable Spend for which IBM
performs Ongoing Category Management at Solectron’s request, but does not
include spend for which IBM provides tactical sourcing Services as part of P2P
Operations Services.     (f)   “OCM Spend Estimate” means the estimate of OCM
Spend by Complexity Level, by GEO as of the Effective Date, as set forth in the
Pricing Tables in Annex C1.     (g)   “Trigger Value” means the change in spend
that will trigger an adjustment to the OCM Charge for a Complexity Level, as set
forth in the Pricing Tables. The Trigger Values for changes to the OCM Charge
are expressed in dollars of OCM Spend.

  3.3   OCM Charge.

  (a)   OCM Spend. The price for Ongoing Category Management Services is based
on the dollar value of OCM Spend managed by IBM each month.     (b)   Volume
Adjustment. The OCM Charge for each In-Scope Category and GEO is set forth in
the Pricing Tables. That charge is based on the OCM Spend Estimate. The charge
will be adjusted each month based on the actual OCM Spend within that Category
and GEO using the following method:

  (i)   Determine the actual total OCM Spend for all In-Scope Categories within
the Complexity Level and GEO (the “OCM Actual").     (ii)   Calculate the
difference between the OCM Actual and the OCM Estimate (the “OCM Variance") —
positive (if OCM Actual exceeds the OCM Estimate) or negative (if OCM Actual is
less than the OCM Estimate).     (iii)   The price adjustment factor is the OCM
Variance divided by the Trigger Value for the relevant Complexity Level and GEO,
rounded down to the nearest whole integer number. If the Trigger Value

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      exceeds the Volume Baseline and the Complexity Level is removed from
scope, the Trigger Value is deemed to equal the Volume Baseline (so that the
entire charge for that Complexity Level is eliminated).     (iv)   The price
adjustment equals the price adjustment factor multiplied by the applicable
Volume Adjustment Rate stipulated in the Pricing Tables in Annex C1-4. If the
OCM Variance is positive, the price adjustment increases the charges payable by
Solectron. If the OCM Variance is negative, the price adjustment reduces the
charges payable by Solectron.

Example:

  •   [*]

  (c)   Calculation of Monthly Invoiced Charges. The OCM Charge will be
calculated and billed in arrears based on the actual volume of OCM Spend
processed through the P2P System in that month.

  3.4   Strategic Sourcing Fixed Charge.         During the continuance of IBM’s
performance of Strategic Sourcing Services, Solectron shall pay IBM the fixed
charge as specified in the Pricing Tables, Annex C1-2. The fixed charge
compensates IBM for all work performed by IBM in connection with strategic
sourcing activity as contemplated within Annex A-1 of the Agreement as of the
Effective Date, regardless of the volume of Addressable Spend involved in such
activity, and certain other fixed costs associated with Strategic Sourcing
Services.

  3.5   Applicability of Volume Based Adjustments and Volume Band Limits for OCM
Services.

  (a)   For the avoidance of doubt, the typical circumstances in which the
Volume Adjustment Rates for Ongoing Category Management Services do and do not
apply are summarized below:

              Covered by         Adjustment     Events as applied to  
Methodology     OCM Services   (Y/N)   Comment
Change in OCM Spend (including “Organic” increase/decrease in spend) within
in-scope Category
  Yes, subject to Volume Band Limits.   Adjustment calculated against Volume
Baseline for applicable Complexity Level and GEO
 
       
Delay in rolling Category into scope (e.g., Category anticipated in month 13,
but not approved until month 18)
  Yes, subject to Volume Band Limits.   Adjustment calculated against Volume
Baseline for applicable Complexity Level and GEO. Decision by Solectron to delay
requires 30 days’ notice.

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  Yes, subject to Volume Band Limits.   Parties agree on case by case
categorization of new category — H/M/L Complexity Level and GEO classification
 
       
Add New Category (only those Categories identified in Annex A-1 as of the
Effective Date)
      Entirely new categories (i.e., not identified in Annex A-1 as of the
Effective Date) will be subject to separate negotiation (the Change Management
Process) and are not covered by the Volume Adjustment Rates.
 
       
Remove Category
  Yes, subject to Volume Band Limits   Decision by Solectron to remove a
Category from scope requires 30 days’ notice.
 
       
Add New Country
  No   Subject to separate negotiation via the Change Management Process. Not
covered by Volume Adjustment Rates.
 
       
Remove Country
  Yes, subject to Volume Band Limits   Decision by Solectron to remove a
Category from scope requires 30 days’ notice.

  (b)   OCM Volume Band Limits. The OCM Volume Adjustment Rate applicable to
each Complexity Level and GEO is subject to a Variable Fee Ceiling and a
Variable Fee Floor which are calculated by reference to the dollar value of the
variable charge payable for that Complexity Level and GEO. While the parties are
negotiating an equitable adjustment, the Volume Adjustment Rate will be [*] of
the rate published in Schedule C1-4 for the volumes below the [*] threshold.
Once the negotiations are complete a retroactive adjustment will be invoiced
dating back to the quarter when volumes fell below the floor. The “Variable Fee
Ceiling” equals [*] of the variable charge that would be payable for that
Complexity Level and GEO at the applicable Volume Baseline. The “Variable Fee
Floor” equals [*] of the variable charge that would be payable for that
Complexity Level and GEO at the applicable Volume Baseline.     (c)   Rate
Adjustment outside Ceiling and Floor. If, during any quarter, the actual OCM
variable charge for a Complexity Level/GEO exceeds the applicable Variable Fee
Ceiling or falls below the Variable Fee Floor, the Parties shall negotiate in
good faith regarding an equitable adjustment to the Volume Adjustment Rate for
that Complexity Level/GEO. In the event that the Parties are unable to agree
upon such equitable adjustments within a reasonable amount of time, but no more
than sixty (60) days, then the matter shall be referred to the dispute
resolution process set out in the Agreement.

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  3.6   Removal of Strategic Sourcing Services from Scope.

  (a)   If the aggregate value of all actual OCM variable charges for a quarter
falls below the aggregate value of all OCM variable charges that would be
payable at the aggregate Variable Fee Floor for all OCM In-scope Categories (the
“Aggregate OCM Floor") for that quarter, Solectron may elect to:

  (i)   continue to pay IBM the variable charges equating to the Aggregate OCM
Floor; or     (ii)   discontinue the Strategic Sourcing Services, subject to
providing IBM sixty (60) days prior written notice in accordance with the
following:

  (A)   If Solectron’s election to discontinue the Strategic Sourcing Services
is due to Solectron’s right to terminate pursuant to Section 11.3(c) (ii) of the
Agreement, then Solectron may discontinue the Strategic Sourcing Services and
pay IBM its reasonable Wind Down Costs and Unamortized Costs, if any.     (B)  
If Solectron’s election to discontinue the Strategic Sourcing Services is due to
any other reason, then Solectron shall pay IBM Termination for Convenience
Charges, its reasonable Wind Down Costs, and Unamortized Costs.

4.   P2P OPERATIONS SERVICES

4.1 P2P Operations Services.

  (a)   Summary. The charges for the P2P Operations Services will be:

  (i)   A fixed annual service charge, as specified in the Pricing Tables,
payable in equal monthly installments each year; plus     (ii)   Volume-based
variable charges based on the actual Managed Spend each month, as specified in
the Pricing Tables.

  (b)   Variable Charge calculation. The unit of measure used to calculate the
P2P Operations Volume Baseline and variable charge is the Managed Spend, which
is a single global Volume Baseline for all countries, as shown in the Pricing
Tables. The Volume Adjustment Rate specified in the Pricing Tables is expressed
as a percentage of Managed Spend and is used to calculate the variable P2P
Operations charge on a monthly basis.

  (i)   “Managed Spend” means the total fees and charges paid to third party
suppliers that is processed through the P2P platform by IBM, excluding spend
associated with Pass Through Processing. Managed Spend is measured as the dollar
value of purchased goods and services authorized for payment using the P2P
system (excluding Pass Through Processing), and will be reported monthly from
the P2P Business Warehouse system.

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  (ii)   “Pass Through Processing” is defined in Schedule A.

Example:

  •   [*]

  (c)   Volume Band. The Volume Adjustment Rate shall be valid for application
up to [*] over or under the P2P Operations Volume Baseline as specified in the
Pricing Tables (the “Volume Band”). If, during any month, the Managed Spend
exceeds [*] of, or is less than [*] of, the P2P Operations Volume Baseline, and
is expected to continue outside the Volume Band for at least 90 days, the
Parties shall negotiate in good faith regarding an equitable adjustment to the
Volume Adjustment Rate. In the event that the Parties are unable to agree upon
such equitable adjustments within a reasonable amount of time, but no more than
sixty (60) days, then the matter shall be referred to the dispute resolution
process set out in the Agreement.     (d)   The charges calculated pursuant to
this Section fully compensate IBM for providing the P2P Operations Services.

  4.2   Inclusion of Additional Countries.         The Parties agree to include
P2P Operations Services for The Netherlands, India, Indonesia and Puerto Rico
within the scope of the P2P Operations Services for an additional P2P Operations
charge not exceeding [*] in the aggregate for all of those locations, assuming a
go-live date of April 2007 and Managed Spend of [*] per year. Such additional
not-to-exceed charge includes any additional transition and setup costs, fixed
charges and variable charges for the Term, Within 14 days after the execution of
the Agreement, IBM will provide detailed pricing that is valid for 60 days for
those locations that is, to the extent possible, consistent with the pricing
methodology and pricing structure used for the other in-scope countries. If that
pricing is approved by Solectron, IBM will prepare additional Local Adoption
Agreements for Solectron’s approval and execution by the parties.

5.   [RESERVED]   6.   [RESERVED]   7.   PASS-THROUGH PROCESSING       There
shall be no charge to Solectron for the Pass-Through Processing Services.   8.  
OTHER ITEMS

  8.1   Credit for LOA Payments.

IBM will provide a credit to Solectron for any fees paid to IBM for work
performed under the letters of agreement dated 9th December, 2005, and 9th
January, 2006, (as extended, supplemented or replaced) prior to the execution of
this Agreement. The credit will be applied

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against the first monthly invoice for Services provided under this Agreement.
Any credit amounts in excess of such invoice will be credited against the
successive monthly invoices for Services under the Agreement up to the total
amount of such invoices, until the entire credit has been applied.

  8.2   Out of Pocket Expenses.

Solectron shall reimburse IBM for any Out-Of-Pocket Expenses that are to be paid
by Solectron in accordance with the Agreement.

  8.3   Cost of Compliance with Performance Standards.

In managing its resources, IBM shall make Commercially Reasonable Efforts to
include the flexibility to respond to planned changes in Solectron’s demand,
particularly as to those portions of the Services where Solectron experiences
significant spikes in demand. Unless otherwise provided in the Agreement, if
performing the Services in compliance with the Performance Standards requires
more dedicated support, additional resources, or extended hours of service, IBM
shall, provide such support at no additional charge to Solectron, other than for
Volume Adjustments, as provided herein, and equipment, software, and other costs
where the Agreement expressly provides that Solectron is to bear such cost. New
Services will be subject to separate pricing in accordance with Section 2.8 (New
Services) of the Agreement.

  8.4   Software Licenses.

Unless otherwise set forth herein, the Service Charges and [*] (if any) payable
by Solectron pursuant to this Schedule include the cost of software license and
support agreements with Emptoris. Emptoris will grant Solectron a fully paid up
license as set forth Exhibit 3 to the Agreement. The fees payable to Emptoris
for ongoing maintenance and support following the expiration or termination of
this Agreement are a matter for Solectron and Emptoris and are not included in
the Service Charges.

  8.5   Other Adjustments to Service Charges.

  (a)   The parties acknowledge that language support in addition to those
languages specified in Schedule A, Annex A-5 is not included in IBM’s pricing
for Strategic Sourcing or P2P Operations.     (b)   IBM will invoice Solectron
separately for:

  (i)   project related travel expenses in accordance with Solectron’s travel
policies; and     (ii)   postage (not including routine office communications)
required to satisfy any requirements by Solectron for high volume physical
record transfers.

9.   INVOICING AND PAYMENT.

  9.1   Invoicing.

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  (a)   Each IBM Local Affiliate will invoice each corresponding Solectron Local
Affiliate for all amounts due for Services rendered to such Local Affiliate
under this Agreement on a monthly basis in arrears. Country Invoices shall be
calculated in accordance with the methodology described in Annex C-2-1 and shall
follow the format set forth in Annex C-2-2, unless otherwise approved by
Solectron.     (b)   Each Country Invoice shall, for each charge broken out on
the invoice, cite the specific section(s) of the Agreement on which such charge
is based. IBM shall include the calculations utilized to establish the charges.
    (c)   To the extent a credit may be due Solectron pursuant to this
Agreement, IBM shall provide Solectron with an appropriate credit against
amounts then due and owing; if no further payments are due to IBM, IBM shall pay
such amounts to Solectron within [*] after the amount of the credit is
determined.     (d)   Each Country Invoice shall separately itemize, consistent
with the pricing units and methodology set forth in the Pricing Tables:

  (i)   Fixed charges;     (ii)   Variable Service Charges;     (iii)   the
applicable portion of any Service Level Credits and/or Savings Credit/Bonus
payable pursuant to Schedule B;     (iv)   any other charges specifically
relevant to that Country; and     (v)   any taxes payable by Solectron in
accordance with Section 11 (Taxes.) that are applicable to that Country.

  (e)   Each month the Lead IBM Party shall submit to the Lead Solectron Party:

  (i)   An electronic copy of all Country Invoices submitted for the month;    
(ii)   A global report summarizing all Country Invoices.

  (f)   With respect to (i) the expiration of this Agreement, or (ii) any
termination of this Agreement, IBM shall provide an invoice demonstrating such
information as described in Section 9.1(d), above, for receipt by Solectron
within ten (10) business days following the effective date of expiration or
termination. Any [*] or other amounts payable with respect to the termination of
this Agreement will be allocated among countries and documented in Country
Invoices in a manner consistent with the allocation methodology used for routine
Service Charges.

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  9.2   Payment Due.         [*]     9.3   Proration.         Except as may be
otherwise provided in this Agreement, periodic charges under this Agreement are
to be computed on a calendar month basis, and shall be prorated for any partial
month.     9.4   Refundable Items.

  (a)   Prepaid Amounts. Where Solectron has prepaid for a service or function
for which IBM is assuming financial responsibility under this Agreement, IBM
shall refund to Solectron, upon either Party identifying the prepayment, that
portion of such prepaid expense which is attributable to periods on and after
the Effective Date.     (b)   Refunds and Credits. If IBM should receive a
refund, credit or other rebate for goods or services previously paid for by
Solectron, IBM shall promptly notify Solectron of such refund, credit or rebate
and shall promptly pay the full amount of such refund, credit or rebate, as the
case may be, to Solectron.

  9.5   Disputed Charges.

Solectron shall pay undisputed charges when such payments are due. If Solectron
withholds, in good faith, payment of disputed fees in excess of two (2) months
worth of Charges, such excess shall be placed in an interest bearing escrow
account for the benefit of both Parties, at a financial institution reasonably
acceptable to IBM until such dispute has been resolved. Upon resolution of such
dispute, the prevailing party shall be entitled to such escrowed amounts and
interest earned on such escrowed amounts.

10.   [*]

  10.1   [*]         [*]     10.2   [*]         [*]

11.   TAXES.

  11.1   Introduction.         This Section 11 (Taxes.) sets forth the
allocation of responsibility between the Parties for taxes arising out of or in
relation to the Agreement. Except as otherwise expressly

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provided in this Section, each Party remains solely responsible for any real or
personal property taxes, assessments, or levies on property it or any of its
Affiliates owns or leases; for any franchise, business, occupation and similar
taxes on its and its Affiliates’ businesses; and for any taxes based on its or
its Affiliates’ net income, gross receipts, or employer-related taxes.

  11.2   Service-Related Taxes.

  (a)   Solectron will pay (or reimburse IBM if IBM pays) the following taxes:

  (i)   All taxes on goods and services purchased by Solectron from third party
suppliers through IBM’s Services; and     (ii)   all sales, use, services,
consumption and excise taxes assessed by applicable tax authorities in respect
of the provision of the Services to Solectron, but excluding any such taxes that
are assessed on any goods or services used or consumed by IBM (or its Affiliates
or Subcontractors) in order to perform the Services where the tax is imposed on
Supplier’s (or its Affiliate’s or Subcontractor’s) acquisition or use of such
goods or services.

  (b)   Solectron will remit to the relevant taxing authorities any withholding
taxes payable in connection with the fees payable to IBM pursuant to this
Agreement. There will be no gross-up to compensate IBM for such taxes. Solectron
will provide IBM on a timely basis with valid certificates evidencing that such
withholding tax has been paid.

  11.3   Mutual Cooperation.         Each Party agrees to fully cooperate with
the other in the event of a tax audit and to enable each to more accurately
determine its own tax liability and to minimize such liability to the extent
legally permissible. Each Party will provide and make available to the other
upon request any direct pay permits, resale certificates, information regarding
out-of-state sales or use of equipment, materials, or services, and other
exemption certificates or information reasonably requested by the other Party.

12.   PERFORMANCE OF T&M WORK

  (a)   IBM’s charges for performance of any strategic sourcing work requested
by Solectron on an ad-hoc basis shall, unless otherwise agreed, be performed on
a time and materials basis utilizing the T&M Rates provided in the Pricing
Tables, Annex C1-6. Before commencement of any such T&M Work, IBM shall provide
to Solectron in writing, for Solectron’s review and approval, a budget (or, if
requested by Solectron, a fixed price) for the charges to be incurred with
respect to such T&M Work. IBM shall not commence any T&M Work until Solectron
has provided written approval of the charges to IBM.     (b)   At such time that
the total charges for any T&M Work performed by IBM (other than on a fixed price
basis) equals eighty percent (80%) of the approved budget, IBM shall notify
Solectron in writing whether or not it

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believes that the total charges for that work will exceed the approved budget,
describing the basis for its conclusions. IBM will stop work when the budget is
exhausted, unless Solectron agrees in writing to increase the budget.

13.   CERTAIN ADJUSTMENTS TO CHARGES

  13.1   Economic Change Adjustment (ECA).         The ECA shall be calculated
in accordance with Annex C-3 (Economic Change Adjustment).     13.2   Credit /
Bonus for Savings and Service Level Credits.

  (a)   IBM shall compute and provide the Credit/Bonus for Savings and Service
Level Credits to Solectron, as provided in the Agreement and Schedule B
(Performance Management).     (b)   Any Credit/Bonus for Savings earned in each
quarter will be allocated to each Country Invoice as specified in Annex C-2
(Country Invoicing).     (c)   Service Level Credits earned in each month
(calculated on the basis of the charges actually paid for such month) shall be
calculated against the following month’s charges and allocated to each Country
Invoice as specified in Annex C-2 (Country Invoicing).

14.   TERMINATION & TERMINATION ASSISTANCE CHARGES

  14.1   [*]                [*]     14.2   Wind Down Costs.

  (a)   “Wind Down Costs” means the amount that IBM may invoice to Solectron for
the actual, demonstrable and reasonable costs that IBM incurs in the disposition
or reallocation of the following resources, to the extent the same are used
solely to the performance of the Services for Solectron and not on a
multi-customer basis: Equipment, Software (other than Software owned by IBM or
its Affiliates) and IBM employee severance payments, if any. Wind Down Costs are
to be determined net of all rebates, discounts and allowances received by IBM,
and shall not include IBM’s actual or allocated overhead costs or other
mark-ups.     (b)   IBM shall use Commercially Reasonable Efforts to mitigate
and minimize the amount of Wind Down Costs, including by reallocation of
Equipment, Software and IBM Personnel to other accounts. IBM shall not enter
into any agreements of the acquisition, lease or licensing of Equipment or
Software that would give rise to a liability for Solectron to pay Wind Down
Costs in

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      the event of termination by Solectron without first obtaining Solectron’s
prior written approval.     (c)   IBM shall prepare and provide to Solectron an
itemized calculation within thirty (30) days after IBM’s receipt of the relevant
termination notice. Such calculation shall be accompanied by documentation as is
reasonably necessary to validate the Wind Down Costs proposed by IBM.     (d)  
Notwithstanding the foregoing:

  (i)   Solectron shall not be obligated to pay any Wind Down Costs with respect
to Equipment, Software and third party service contracts to the extent Solectron
purchases any IBM-owned Equipment or assumes any IBM held third party Software
licenses, Equipment leases or third party service contracts, except for any
costs associated with such assumption that were approved in advance by
Solectron.     (ii)   Solectron shall not be obligated to pay employee severance
if Solectron gives IBM at least 60 days’ notice of termination. If Solectron
gives IBM less than 60 days’ notice of termination, Solectron shall be required
to reimburse IBM for employee severance payments made to IBM employees for such
employees who were dedicated to the performance of Services for Solectron and
whose positions were made redundant as a result of such termination.

  (e)   Wind Down Costs shall be subject to audit by Solectron pursuant to
Section 13 (Audits) of the Agreement.

  14.3   [*]         [*]

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[f18842f18842z0015.gif]

Solectron: Contract Documents Reports: Volume Report (Monthly) Performance
Report (Monthly) Savings Report (Quarterly) Global Summary Report (Schedule
C2-3) Charges (Schedule C1) Fixed Charges - Schedule C1-2 Variable Charges -
Schedule C1-2 (Calculated based on actuals) SLAs - Performance Report Gainshare
- Savings Report (quarterly basis w/ annual true-up) ECA - will be calculated at
a Global Level (annual basis) Taxes - Import/Export (Schedule C1-2) Service
(actuals) Allocation Methodology Allocated based on step 1 (slides 3-7) Local
Country Invoices 15 In-Scope Countries - Invoiced in each country, local
currency

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BACKUP SLIDES

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[f18842f18842z0017.gif]

Step 1: Charges Allocation to Countries P2P Operations "Fixed Charges & Variable
Charges" Global "Fixed Charges" & "Variable Charges" in US$ will be allocated to
the countries Allocation Methodology: Allocated based on Managed Spend Year 1 &
Year 2 allocations based on P2P allocation table (slide 4) Years 3-5 will have
an annual adjustment to the allocations based on previous years spend profile
unless the Parties mutually agree on a new allocation ("TBD") Strategic Sourcing
"Fixed Charges & Ongoing Category Management Charges" Global "Fixed Charges" &
"Ongoing Category Management" in US$ will be allocated to the countries
Allocation Methodology: Year 1 & Year 2 allocations based on strategic sourcing
allocation table (slide 5) Years 3-5 will have an annual adjustment to the
allocations based on previous years spend profile unless the Parties mutually
agree on a new allocation ("TBD") Operational SLA Credits: Global "SLA Credits"
in US$ will be allocated to the countries Allocation Methodology: Follow the
same process as P2P Operations above..

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[f18842f18842z0018.gif]

Step 1: Charges Allocation to Countries Gainshare Credit / Charges: Global
"Gainshare Credit / Charges" in US$ will be allocated to the countries
Allocation Methodology: Follow the same process as Strategic Sourcing above..
Import / Export Tax Charges: Global "Import / Export Charges" in US$ will be
allocated to the countries Allocation Methodology: Follow the same process as
Strategic Sourcing above.. ECA: ECA will be calculated at a global level and
Schedule C2-1 will be updated based on ECA Calculation Service Taxes: Invoiced
as actuals in local country

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request [*]

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                  Please direct inquiries   Invoice       Page and
correspondence to:   Number   Date   Number
IBM Global Services
  XXXXXXX   xx/xx/xx     1  
Name
               
City, State
  Purchase Order            
 
               
Phone
  Account Number            
(xxx) xxx-xxxx
  XXXXXXXX            
 
               
Installed At:
  Invoice to:            
 
               
 
  Solectron Street City, State (Country, etc.)            
 
               
Terms:
  Customer Reference:            
Net xx days
               
 
               
Please remit payment to:
  Comments:            
IBM xx City, State, zip (country, etc.)
  Please reference the IBM Invoice and
Account Number on your wire transfer.            

         
Strategic Sourcing
  Schedule C 3.0   $ xxx
- OCM Charges
  Schedule C 3.3   $ xxx
- Strategic Sourcing Fixed Charges
  Schedule C 3.4   $ xxx
 
       
P2P Operations
  Schedule C 4.0   $ xxx
- Variable Charges
  Schedule C 4.1aii   $ xxx
- Fixed Charges
  Schedule C 4.1ai   $ xxx
 
       
Taxes (Import / Export)
  Schedule C 11.2   $ xxx
 
       
Service Level Credits
  Schedule B 3.3   $ xxx
 
       
Savings Credit or Bonus
  Schedule B 2   $ xxx
 
       
Taxes (Service Tax Actuals)
  Schedule C 11.0   $ xxx
 
       
Other Charges (New Business, etc.)
  Schedule C 8.0   $ xxx
 
       
Total Charges ($US)
      $ xxx
 
       
Currency Conversion (Spot Rate)
      xxx
 
        Invoice...Please Pay This Amount (Local Currency)   xxx

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Annex C-3
Economic Change Adjustment
This Annex outlines the process by which annual adjustments to the Service
Charges, Volume Baselines, Trigger Values and Volume Adjustment Rates may be
made to allow for inflation during the Term (an “Economic Change Adjustment” or
“ECA”). Beginning in March 2007 and on each anniversary thereof during the Term,
the Parties will apply the methodology described in this Annex to determine the
ECA for the ensuing Contract Year.
1.0 ECA for Contract Year 2 (beginning 1 March, 2007)
The Parties will determine an ECA for the second Contract Year, beginning March
1st, 2007 (the “2007 ECA”), using the methodology and formulas set forth below.

(a)   Indices. The following indices will be used to calculate the 2007 ECA
(each an “Index”):

  1.   United States. The Unadjusted Employment Cost Index (ECI) for Total
Compensation, Private Industry Workers as published by the Bureau of Labor
Statistics, U.S. Department of Labor available on the Internet at
http://data.bls.gov/cgi-bin/surveymost?ec .     2.   India. The Consumer Price
Index (CPI-IW), as published by the Government of India, Labor Bureau, available
on the Internet at http://labourbureau.nic.in/indtab.html (CPI-Industrial
Workers Index).     3.   Hungary. The Consumer Price Index (CPI) by Main Group
of Commodities as published by the Hungarian Central Statistical Office (KSH),
available on the Internet at
http://portal.ksh.hu/pls/ksh/docs/eng/stadat/load2_01_06_22.html .     4.  
China. The Consumer Price Index (CPI) — Province as published by the National
Bureau of Statistics of China available on the internet at
http://www.stats.gov.cn/english/statisticaldata/yearlydata/ .     5.   United
Kingdom. The Consumer Price Index from The Annual Survey of Hours and Earning
(ASHE) as published by the Office of National Statistics available on the
internet at
http://www.statistics.gov.uk/STATBASE/tsdataset.asp?vlnk=7174&More=N&All=Y.    
6.   Brazil. The Indice Geral de Preços de Mercado released by Fundação Getúlio
Vargas — IGPM (FGV) on the internet at
http://www.estadao.com.br/ext/economia/financas/historico/hist_aeigpm.htm. In
the event such IGPM (FGV) is no longer published or its content or format is
substantially changed or become illegal, the Parties agree to substitute such
Index with Indice de Preços ao Consumidor released by Fundação Instituto de
Pesquisas Economicas – IPC(FIPE).

(b)   Replacement or Rebaselining of Indices. If an Index is no longer published
or its content and format is substantially changed, Solectron and IBM will
substitute another

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    reasonably comparable index published at least annually by a mutually
agreeable source. If the Index base year is redefined to another year, Solectron
and IBM will continue to use that Index, but will convert the base year Index to
the new base year by using an appropriate conversion formula.   (c)   Index
Change. The Parties will determine the change in each of the Indices (“Index
Change”) from December 2006 to December 2007 (or using the nearest available
publication date if the Index is not published in that month). The Index Change
may be negative or positive, resulting in a negative or positive impact on the
charges and other items being adjusted pursuant to this methodology.   (d)  
Delivery Allocation: The following table sets out the percentage allocated by
delivery location used to calculate the ECA:

         
 
  [*]   [*]
 
  [*]   [*]
 
  [*]   [*]
 
  [*]   [*]
 
  [*]   [*]
 
  [*]   [*]
 
  [*]   [*]

(e)   New Countries. If any Services are provided from a country (not
contemplated as of the Effective Date) resulting from an IBM initiated move,
then the incremental inflation risk will be borne by IBM unless otherwise
approved by Solectron.   (f)   ECA Factor. The ECA Factor will be calculated as
follows:

ECA Factor = (U.S Index Change * U.S Delivery Allocation) + (Indian Index Change
* India Delivery Allocation) + (Hungary Index Change * Hungary Delivery
Allocation) + (China Index Change * China Delivery Allocation) + (U.K. Index
Change * U.K. Delivery Allocation) + (Brazil Index Change * Brazil Delivery
Allocation)

(g)   Inflation Sensitivity. The inflation sensitivity factor identifies the
portion of the Charges that is inflation-sensitive. The inflation sensitivity is
[*].   (h)   Adjustment. The ECA Adjustment equals the ECA Factor multiplied by
the Inflation Sensitivity Factor. Each of the Volume Baselines, Service Charges,
Trigger Values and Volume Adjustment Rates shall be adjusted by the final ECA
Adjustment, effective March 1st, 2007.   (i)   Timing and True-Up. If the ECA
Adjustment is not finally determined before March 1st, 2007, IBM will invoice
for Services rendered on and after that date at the rates in effect for the
first Contract Year. The Parties will true-up for any change in rates resulting
from the ECA once the ECA Adjustment is determined.   (j)   2007 ECA Calculation
Example.

[ *]
2.0 ECA for Contract Years 3, 4 and 5
The Parties will determine an ECA for Contract Year 3, beginning March 1st,
2008, and each subsequent Contract Year, using the process and principles set
forth below.

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Prior to the beginning of each of those Contract Years, the Parties will
negotiate an appropriate Economic Change Adjustment that takes account of:

  1.   The indices, inflation sensitivity factor and methodology set out in
Section 1.0 above;     2.   Changes in independent published indices of costs
and prices that are relevant to the delivery of the Services;     3.   Changes
in the compensation paid by IBM to employees located in delivery centers from
which services are delivered to Solectron, during the preceeding twelve month
period on a global basis, as verified by IBM’s VP of the Industrial Sector; and
    4.   Such other factors as a Party believes relevant, including
opportunities to avoid cost increases (for example, by transferring work to
lower-cost locations where such transfers are commercially reasonable,
operationally practicable and Solectron has consented, or is willing to consent,
to the transfers as provided in the Agreement).

If the Parties fail to agree on an ECA for the ensuing Contract Year within
45 days after the commencement of that Contract Year, the matter will be
referred within 15 days to binding arbitration to be conducted by JAMS/Endispute
within 30 days after such referral and in accordance with that organization’s
rules. The arbitrator’s jurisdiction will be limited solely to determining the
ECA to be applied for the upcoming year in dispute, having regard to any or all
of the factors described above, to the extent submitted by the Parties. Pending
final determination of the dispute, IBM will invoice Solectron at the rates
applicable to the prior Contract Year and a true-up will be made once the final
determination is made.

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Confidential to Solectron and IBM
INDIRECT SOURCING SERVICES AGREEMENT
Between
Solectron and IBM
SCHEDULE D
[RESERVED]

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Confidential to Solectron and IBM
INDIRECT SOURCING SERVICES AGREEMENT
Between
Solectron and IBM
SCHEDULE E
Key IBM Positions

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Key IBM Positions

      Position   Location
Project Executive
  Milpitas, CA
Delivery Project Executive
   

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Confidential to Solectron and IBM
INDIRECT SOURCING SERVICES AGREEMENT
Between
Solectron and IBM
Schedule F
Governance Structure and Process

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Table of Contents

                  1.   INTRODUCTION     1  
 
                2.   RELATIONSHIP OBJECTIVES     1  
 
                3.   ORGANIZATION     1  
 
               
 
  3.2   Global Project Executive     2  
 
               
 
  3.3   Steering Committee     2  
 
               
 
  3.4   Management Board     4  
 
               
 
  3.5   Operation Review Team     7  
 
               
 
  3.6   Other Teams/Meetings     8  
 
                4.   MEETING MAPS AND MINUTES     8  
 
               
 
  4.1   Meeting Maps     8  
 
               
 
  4.2   Meeting Minutes     8  
 
                5.   ESCALATION     8  
 
                6.   PROJECT MANAGEMENT OFFICE     9  

ANNEX F1: GOVERNANCE TRANSITION
ANNEX F2: REPORTS
ANNEX F3: TEMPLATE MEETING MAP
ANNEX F4: TEMPLATE MEETING MINUTES
ANNEX F5: PROCEDURES MANUAL CONTENT

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1.   INTRODUCTION

This Schedule F describes the governance structure and roles and
responsibilities of the various Solectron and IBM management teams responsible
for overseeing and managing the Agreement. The Solectron and IBM management
teams consist of the Steering Committee, the Management Board and any Operation
Review Team(s) created by the Steering Committee.

2.   RELATIONSHIP OBJECTIVES

The governance structure is designed to support the achievement of the
Agreement’s goals by adhering to the following principles:

  (a)   Provide open communications and access between key individuals at
Solectron and IBM;     (b)   Be flexible and responsive to the dynamics of
Solectron’s and the Service Recipients’ businesses; and     (c)   Achieve the
expected commitments and benefits of the relationship.

3.   ORGANIZATION

The major elements of the governance structure shall be as follows:

  (a)   Lean and efficient structure;     (b)   Ability to grow as the
relationship evolves;     (c)   Delegation of authority to speed up decision
making; and     (d)   Minimization of bureaucracy.

The table below summarizes the organization structure with the associated
timeline for establishing structure outlined in Appendix F1:

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(FLOW CHART) [f18842f1884204.gif]

3.2   Global Project Executive

IBM shall appoint one of its employees to be its “Global Project Executive” (or
“Global PE”). Such employee shall be full time on this engagement and shall have
the authority to represent and bind IBM in connection with all aspects of the
Agreement. The Solectron Global PM (also known as the Solectron Project
Executive) is described in Section 5.1 of the Agreement.
Before assigning an IBM Employee to serve as its initial Global PE, and before
assigning any successors to this position, IBM shall comply with the obligations
set forth in Section 4.4(b) of the Agreement.

3.3   Steering Committee

Promptly following the Effective Date, the Parties will establish a “Steering
Committee” that will be responsible for overseeing the performance of the
Services and the strategic direction of the relationship between Solectron and
IBM.

  (a)   Members

The Steering Committee will be comprised of the following membership:

  (i)   Solectron’s Executive Sponsor

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(ii) Solectron’s CFO;
(iii) Solectron’s CPO;
(iv) Solectron’s CIO;
(v) Solectron’s Senior Vice President of Finance;
(vi) Solectron’s Global Materials Controller;
(vii) Solectron’s Project Executive (also known as the Global PM);
(viii) Solectron’s Program Manager;
(ix) IBM’s BTO Executive;
(x) IBM’s Global PE;
(xi) Two of IBM’s Global Procurement BTO Delivery Executives; and
(xii) IBM’s CPO.

  (b)   Key Responsibilities

The responsibilities of the Steering Committee include:

  (i)   Directing the strategic relationship between Solectron and IBM with
respect to the Agreement;     (ii)   Implementing the strategic direction with
respect to the Services to be provided pursuant to the Agreement;     (iii)  
Overseeing the management of the Agreement;     (iv)   May participate in the
Dispute Resolution Process, as set out in the Agreement     (v)   Assessing and
monitoring the implementation of the Services, including:

  (1)   Provide overall management of Transition Plan activities;     (2)  
Resolution of key strategic issues;     (3)   Generating senior stakeholder
support within both organizations;     (4)   Approving any change to IBM Key
Positions.

  (c)   Meetings

The Steering Committee shall meet once each month in person or by conference
call as the Parties’ Global PM/PE shall agree during the first six (6) months of
the Term and afterwards on a quarterly basis, unless the Parties’ Global PM/PE
shall otherwise agree. The meetings shall take place on dates mutually agreed to
by the Parties’ Global PM/PE,

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which agreement shall not to be unreasonably withheld or delayed. IBM shall keep
accurate minutes of all meetings as specified in Section 4.2 (Meeting Minutes)
and a copy of the minutes shall be provided to Solectron within seven (7) days
of the meeting for its approval. If necessary, the Parties shall revise the
minutes by mutual agreement.

3.4   Management Board

A management board (the “Management Board”) shall be established by the Steering
Committee to oversee the provision of Services and management of the Agreement.
(FLOW CHART) [f18842f1884205.gif]

  (a)   Members

  (i)   The Management Board shall be comprised of representatives of each Party
as indicated in the table, above.     (ii)   During the Transition, the
Transition Manager for IBM and the Transition Manager for Solectron will also be
members of the Management Board.

  (b)   Authority

Subject to the Steering Committee, the Management Board shall have general
authority and responsibility for operational, technical, financial, and general
management and

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oversight of the Agreement.

  (c)   Solectron Commitment

The Solectron personnel occupying the Solectron Global Project Executive and the
Solectron Global Delivery Manager positions will devote substantially full time
and effort to the Functions and activities for which Solectron is responsible.

  (d)   Key Responsibilities

The Management Board shall manage the Agreement, operations and performance of
the Services and Agreement at an operational level, and shall be the day-to-day
interface between the Parties. The Management Board shall:

  (i)   Review information and data provided on operational or performance
issues by the service management team;     (ii)   Provide a forum for the
Parties to discuss potential changes that either Party may wish to make prior to
submitting a proposed change. This may include discussing initial feasibility
and assessment of suitable process improvements identified by either Party to
potentially be made into a proposed change, in accordance with Change Control;  
  (iii)   Identify and manage proposed changes, draft Change Orders and Change
Orders through the Change Control process in accordance with Change Control as
described in Schedule N (Change Control);     (iv)   Identify, review and agree
on any major initiative aimed to improve the Services. For those initiatives
already planned within the business case, the Management Board will review the
operational plan prepared by IBM to verify that no major disruption will affect
the Services. The Management Board will then approve the changes;     (v)  
Review outstanding proposed changes or draft Change Orders;     (vi)   Review
changes to, and compliance with, law, as applicable to IBM’s performance of the
Services;     (vii)   Consider any changes that IBM would like to make to IBM
Key Positions and other important staff positions;     (viii)   Review
performance of the Services and Service Level reports;     (ix)   Investigate
and resolve any failure by IBM to comply with the Key Transition Milestones,
Critical Service Levels and Operational Service Levels;     (x)   Investigate
and resolve any failure by Solectron to comply with its responsibilities for the
Retained Functions;     (xi)   Review IBM invoices and payments and address any
queries related to them;

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  (xii)   Resolve any disputes involving the amount of Service Levels Credits;  
  (xiii)   Review and propose modifications to the Annual Savings Targets and
review the Savings Credit/Gainshare calculations;     (xiv)   Review the results
of any Audit or other IBM internal review that Solectron or IBM may carry out
pursuant to Section 13.1 (Audit Rights) or Section 13.4 (IBM Audits) in the
Agreement;     (xv)   May participate in the Dispute Resolution Process – clause
in the Agreement     (xvi)   Escalate issues through the Dispute Resolution
Process, to the Steering Committee;     (xvii)   Review the Disengagement
Services Plan pursuant to Section 11.7 (Disengagement Assistance) in the
Agreement, if required;     (xviii)   During Transition, without limiting IBM’s
responsibilities pursuant to the Agreement the Management Board shall:     (xix)
  Have an oversight role to monitor the implementation of IBM’s Transition Plan
and Solectron’s performance of its obligations during the Transition Period;    
(xx)   Support the Global PM/PE in building and sustaining relationships with
Solectron management teams, including Solectron Country management teams;    
(xxi)   Report progress, issues and risks of the Services to the Steering
Committee; and     (xxii)   Review information and data provided on any
operational or performance issues with respect to both transitioned and existing
Solectron operations during Transition.     (xxiii)   May participate in
Resolving/escalating issues, according to the Dispute Resolution Process as set
forth in the Agreement, Dispute Resolution Process.

  (e)   Reports

  (i)   The Management Board shall prepare and deliver management reports
pursuant to Section 1 of Schedule F2 (Operational Reports).     (ii)   Via the
Change Management Process, the Management Board shall prepare investment
proposals to support proposed changes associated with the improvement in the
Services and Solectron’s operations with respect to the Services.

  (f)   Meetings

The Management Board will meet initially every month, and at other times as
agreed between the Parties, to review:

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  (i)   Service delivery, including the items listed in Section 3.4(c)
(Solectron Commitment

The Solectron personnel occupying the Solectron Global Project Executive and the
Solectron Global Delivery Manager positions will devote substantially full time
and effort to the Functions and activities for which Solectron is responsible.

  (ii)   Key Responsibilities);     (ii)   Transition; and     (iii)  
Development of investment proposals to support proposed changes associated with
improvement in the Services and Solectron’s operations with respect to the
Services, subject to the Change Control Process.

IBM shall keep accurate minutes of all meetings as specified in Section 4.2
(Meeting Minutes) and a copy of the minutes shall be provided to Solectron
within seven (7) days of the meeting for its approval. If necessary, the Parties
shall revise the minutes by mutual agreement.

3.5   Operation Review Team

  (a)   The Steering Committee may from time to time establish for any specific
Solectron Country/Region an operational review team (each an “Operational Review
Team”) comprising:

  (i)   Solectron’s Service Delivery Manager;     (ii)   Solectron’s In-Country
Buyers;     (iii)   IBM’s Sourcing Commodity Manager; and     (iv)   IBM’s
In-Country Leads.

  (b)   Authority

An Operational Review Team shall:

  (i)   Report to the Management Board on Service delivery problems and
resolution in the relevant Solectron Country/Region; and     (ii)   Notify the
Management Board of all opportunities or issues that might result in the
addition, deletion or modification of the Services or terms and conditions of
the Agreement.

  (c)   Key Responsibilities

The responsibilities and authority of an Operational Review Team shall be agreed
upon by the Steering Committee from time to time. Its typical responsibilities
and authority would include:

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  (i)   Service delivery reviews;     (ii)   Standardization and continuous
improvement initiatives; and     (iii)   Quarterly reporting.

The exact nature of the responsibilities and authority is expected to evolve
over time.

  (d)   Meetings

The Operational Team Review will meet at the times and at the locations set by
the Management Board. IBM shall keep accurate minutes of all meetings as
specified in Section 4.2 (Meeting Minutes) and a copy of the minutes shall be
provided to Solectron within seven (7) days of the meeting for its approval. If
necessary, the Parties shall revise the minutes by mutual agreement.

3.6   Other Teams/Meetings

The Global PE/PM shall meet once each week in person or by conference call as
the Parties’ Global PM/PE shall agree. The meetings shall take place on dates
mutually agreed to by the Parties’ Global PM/PE.
Key responsibilities of the Global PE/PM include:

  (a)   Provide management and coordination of items as listed in Annex A7
(Transition Plan), Section 2 (Governace: Roles & Responsibilities) and establish
a set of ongoing activities as appropriate once the Transition Period is
completed;     (b)   Coordinate activities as described in Section 6 (Project
Management Office) of this Schedule F;     (c)   Solectron PM to provide to IBM
a list of all current and future Solectron plans related to the Services known
to Solectron with reasonable knowledge that may impact Services.

4.   MEETING MAPS AND MINUTES   4.1   Meeting Maps

IBM will prepare and maintain, for each regularly scheduled or repeating meeting
a meeting map in the form of Annex F3 (Template Meeting Map).

4.2   Meeting Minutes

IBM will record the minutes for each meeting using the form provided in Annex F4
(Template Meeting Minutes.

5.   ESCALATION

The escalation path between both parties as of the Effective Date is described
below (from bottom to top).

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              Solectron Title   Solectron Name   IBM Title   IBM Name
CTO
  Marc Onetto   SVP, Integrated Ops   Bob Moffatt
CPO
  Perry Mulligan   CPO   John Paterson
Executive Sponsor
  Jeff Dixon   BTO Executive   TBD
Global PM
  Dan Bohen   Global PE   Srinivas Cherukumilli

6.   PROJECT MANAGEMENT OFFICE

  (a)   Within 30 days following the Effective Date, IBM will staff a dedicated
Project Management Office (“IBM PMO”) in support of the Solectron solution. The
IBM PMO will contain skills relevant to financial tracking and invoicing,
Gainshare coordination, management, plans and controls, and general program
administration. The IBM PMO will have global responsibility for the IBM business
office services required to support the Agreement. The IBM PMO shall remain
in-place for the duration of the Agreement, and shall interface directly with
the Solectron PMO in regard to the execution of its responsibilities. The IBM
PMO responsibilities, in coordination with the Solectron PMO, shall include:

  (i)   Governance processes development     (ii)   Contracts change control
management     (iii)   Business controls, audits, and audit interface     (iv)  
Procedures and documentation control and management     (v)   IBM systems access
control     (vi)   Financial reporting (to Solectron and IBM)     (vii)   Cost
accounting     (viii)   Performance measurements, reports, tools (to Solectron
and IBM)     (ix)   Customer satisfaction surveys     (x)   Issues management  
  (xi)   Billings, invoicing, tax     (xii)   Asset control     (xiii)  
Staffing     (xiv)   Contracts interpretations, reviews     (xv)   Corporate
policies compliance

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  (xvi)   Security — (physical, data, etc.)     (xvii)   3rd party contracts
management     (xviii)   Solectron stakeholder meetings support     (xix)  
Interface with Solectron PMO     (xx)   Risk management plans     (xxi)  
Emergency, critical situations management     (xxii)   Space and infrastructure
    (xxiii)   Governance boards and committees coordination     (xxiv)  
Reports, monthly and ad hoc     (xxv)   Day-to-day support of the Global
Transition Team     (xxvi)   Monitoring and updating the Transition Plan with
Solectron and IBM approvals; reporting variances from the baseline as required

  (b)   Within 30 days following the Effective Date, Solectron shall establish a
Program Management Office (the “Solectron PMO”) to support the Service as
provided by IBM as part the Agreement. The PMO shall coordinate its activities
with the IBM PMO function. The Solectron PMO responsibilities, in coordination
with the IBM PMO, shall include:

  (i)   Governance process development     (ii)   Solectron change request
submissions, reviews, approvals and centralized coordination     (iii)  
Business controls, audits interface     (iv)   Financial reporting to Solectron
    (v)   Performance measurements reviews     (vi)   Customer satisfaction
surveys interface and centralized coordination     (vii)   Issues resolution    
(viii)   IBM invoice approvals, reconciliations     (ix)   Contract
interpretations, reviews     (x)   Corporate policies communications,
interpretations     (xi)   Stakeholder meetings interface and support     (xii)
  Emergency, critical situations interface

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  (xiii)   Space and infrastructure support     (xiv)   Solectron HR interface;
staffing of project teams     (xv)   Interface with IBM Transition Manager and
IBM PMO     (xvi)   Participation in development, review, and approvals of
project plans     (xvii)   Transition/transformation deliverables reviews,
approvals     (xviii)   Change management plan execution (including
communications plans)     (xix)   Training execution     (xx)   I/T projects’
requirements inputs and document approvals     (xxi)   User acceptance tests
coordination     (xxii)   “Go-live” readiness reviews and approvals     (xxiii)
  Day-to-day support of the Global Transition Team

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ANNEX F1
GOVERNANCE TRANSITION

                  DUE DATE             (after Agreement         ACTIVITY  
effective date)   KEY DELIVERABLE   EXHIBIT F REFERENCE
Designate the Solectron Responsible Executive
  Within 5 calendar days   Solectron Responsible Executive Finalized  
Section 3.1
 
           
Designate the IBM Responsible Executive
  Within 5 calendar days   IBM Responsible Executive Finalized   Section 3.1
 
           
Jointly Define Responsibilities For Solectron and IBM Key Governance Roles
  Within 30 calendar days   Roles and Responsibilities By Governance Role  
Section 3.2
 
           
Jointly Establish Meeting Calendar for Steering Committee Meetings
  Within 30 calendar days   Meeting Calendar   Section 3.2.3
 
           
Jointly Establish Management Board
  Within 30 calendar days   Named Board Members   Section 3.3.1
 
           
Jointly Establish Meeting Calendar for Management Board Meetings
  Within 30 calendar days   Meeting Calendar   Section 3.2.3

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INDIRECT SOURCING SERVICES AGREEMENT
Between
Solectron and IBM
Annex F1
[RESERVED]

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INDIRECT SOURCING SERVICES AGREEMENT
Between
Solectron and IBM
Annex F-2
Reports

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Table of Contents

                  Section     Title   Page #     1.    
Monthly Measurements Reports
    3     2.    
Standard Operational Reports available in IBM Platform Business Warehouse
    4  

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This Schedule set outs the standard operational measurement data that IBM will
prepare and present to Solectron as part of the monthly operational review
beginning thirty (30) days following the Effective Date. IBM will provide the
monthly measurement reports set forth in the table below, as specified in Annex
A-7 (Transition Plan) or as otherwise agreed. As used in this Schedule,
“Transition” applies to Solectron Countries which have experienced their
respective Go-Live Dates.

1.   Monthly Measurements Reports

IBM will provide Solectron the following measurement reports, in soft copy
format.

              Description     Measurement   (for example, Purpose, Data Field
Examples)   Frequency PO and Non-PO
Activity   PO Activity — Purchase order Commitment (number of purchase orders,
total dollars);   Monthly (after Transition)       Non-PO activity, total
dollars               Procurement Bypass   Bypass incidents in which funds are
committed without IBM Procurement involvement.   Monthly (after Transition)    
Calculated as the number of Bypassed purchase orders divided by the number of
purchase orders issued for the month.    

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2.   Standard Operational Reports available in IBM Platform Business Warehouse

This Section sets forth the standard operational reports that Solectron will be
able to obtain from IBM as on demand reports. These reports will be generated
through a web- based Table of Contents that will extract the data from the IBM
Platform Business Warehouse.
The reports will be available for each Solectron Country as each Solectron
County achieves its Go-Live Date after Transition.
The reports are standard and will be accessible only to those Solectron
employees who have been issued a license by IBM. Licenses shall be issued at the
request of Solectron. IBM has planned for, and shall issue at the request of
Solectron, licenses for one hundred (100) Solectron employees. Solectron may
substitute employees from time to time.
In general, the reports will be made available by Service Beneficiary and
Division. All reports extracted will then allow drill downs on the fields
available within the report, according to the SAP business warehouse extracting
capabilities.

          Description Report Name   (for example, Purpose, Data Field Examples)
 
Strategic IBM
Commitments
  This report provides an analysis of the purchase order line items which have
been created (sourced) with Strategic Suppliers.  
 
  Strategic Suppliers related purchase orders will be indicated by using the
‘strategic’ sourcing code.  
IBM Diversity (Commitment
PO)
  This report provides purchase order commitment information with all suppliers
that have a minority or otherwise noted diversity supplier indicator.  
 
  This report will enable Solectron to track suppliers denoted in the system as
a supplier that falls into the appropriate designation. The report will provide
the committed purchase order amount with minority or otherwise noted diversity
suppliers  
IBM Diversity (Invoiced)
  This report provides supplier invoice information with all suppliers that have
a minority or otherwise noted diversity supplier indicator.  
 
  This report will enable Solectron to track suppliers denoted in the system as
a supplier that falls into the appropriate designation The report will provide
the obligated amount (invoiced amount) with the minority or otherwise noted
diversity suppliers.  
IBM Diversity (Paid)
  This report provides supplier paid information with all suppliers that have a
minority or otherwise noted diversity supplier indicator.  
 
  The report allows Solectron to track suppliers denoted in the system as a
supplier that falls into a specific designation.  
Shopping Cart Cycle-time
  This report tracks the cycle time of the Shopping Cart. Cycle time starts when
a Shopping Cart has been created and is placed into the “submit’ mode to start
the approval process. The cycle time ends once the Shopping cart is fully
approved and transferred to IBM’s SAP R3. The cycle time is measured in days.  
 
  The report will be used to track Solectron internal requisition approval
process cycle time.  
PO Commitment
  Solectron PO Commitment – This report provides purchase order commitment
(value of commitments) for all purchase orders that have been placed.

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          Description Report Name   (for example, Purpose, Data Field Examples)
Shopping Cart Details
  Details of Shopping Cart – This report will provide Solectron the ability to
run reports based on the shopping cart information that is contained in EBP,
prior to purchase order placement (requisition).  
Vendor Details
  This report provides vendor detail information from the Vendor Master Data.
This will be a generic report that will have the capability to drill down and
provide general information. This is to provide information to the client for
their Vendor detail so the client will have the ability to drill down to
different information  
Spend by Supplier
  This report provides information on invoices which have been cleared within a
specified clearing date range. The report calculates the applicable freight and
shipping charges using Commodity Categories and subtracts all taxes. The report
calculates the applicable paid amount as the amount paid to the supplier minus
the tax and minus the freight.  
Good Receipt Accrual
  This report provides information when receipts have been posted against a
purchase order line item where no corresponding invoice has been posted. The
receipt will be done on EBP from the requester/by on behalf of/receiving
department. The receipt will then be sent to and posted in SAP against the PO.
This report provides information to Solectron to prepare accruals at month end.
The report can also be used on demand to forecast what may be coming during a
month.  
PO Details
  This report provides procurement detail information. This is a generic report
with drill down functionality which can be used to provide detailed purchase
order line item information at a Solectron determined level (for example, by
country, cost center, etc.).  
SAP Contract Details
  This report provides detailed supplier contract information. This is a generic
report with drill down functionality which can be used to provide detailed
contract information at a Solectron determined level (for example, by country,
cost center, etc.).  
 
  If information relating to the use of the contract (e.g. purchase order
releases and invoiced amounts) is required, a “Report to Report “ link will be
provided to contract value.  
Receipt Details
  This report provides receipt detail information, as entered in EBP. This is a
generic report with drill down functionality which can provide detailed EBP
receipt information at a Solectron determined level (for example, by country,
cost center, etc.).  
Requisiton Details
  This report provides requisition detail information. This will be a generic
report that has the ability to drill down and provide general information. This
is to provide information to the client for their requisition detail so the
client will have the ability to drill down to different information.  
Non-PO Commitment
  This reports provides a list of all accounting documents (invoice related)
posted to SAP during a given time period which are not related to a purchase
order.  
Invoice Detail
  This report provides detailed invoice information. This is a generic report
with drill down functionality which can be used to provide detailed Invoice item
information at a Solectron determined level (for example, by country, cost
center, etc.).  
 
  This report is designed to provide information on invoice detail behind
posting information.  
Invoice History
  This report shows a list of all accounting documents (invoice related) posted
to SAP during a designated time period. This report has the capability to
identify all invoice related activity with a vendor during a selected time
period.

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          Description Report Name   (for example, Purpose, Data Field Examples)
Accounting Header
  This report provides Accounting Header document information, for example
invoices. This is a generic report with drill down functionality which has the
capability to provide detailed information at a Solectron determined level (for
example, by country, cost center, etc.).  
Payment Details
  This report provides detailed payment information. This is a generic report
with drill down functionality which has the ability to provide detailed
information at a Solectron determined level (for example, by country, cost
center, etc.).  
 
  This report is designed to provide detailed information on all P2P Platform
payments.

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MEETING MAP

             
Meeting Name
                Meeting Name    
Purpose
                Meeting Purpose    
Frequency
                Dates/Times (ex. Daily — 1:00pm EST - 2:00pm EST)
Chair
                Chair person’s name and title or role
Participants
                Vendor             Titles or Roles with individual names    
Governance             Titles or Roles with individual names and respective
organizations     Customer             Titles or Roles with individual names and
respective organizations
 
           
Agenda
                Example:             1 Status Review         2 Review vendor or
process issues         3 Discuss Process Issues and Actions
 
           
Inputs/Outputs
           
 
  Inputs        
 
      Customer    
 
          SLA Concerns
 
          Process Issue Concerns
 
          Escalation Items
 
      Vendor    
 
          Status & Action Reporting
 
          Process Issue Concerns
 
          Escalation Items
 
      IT    
 
          Action Reporting
 
          SLA Reporting
 
          Process Issue Concerns
 
          Escalation Items     Outputs             Action Items (i.e. updated
previous list, new)         Escalation Responses

     
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Meeting Minutes

          Meeting Info    
 
  Name:    
 
  Date / Time:    
 
  Location:   (TC or Face-to-Face)
 
  Purpose:    
 
  Participants:    
 
  Attendees:    
 
       
 
  Chair Person:    

Summary
     Summary section should describe in paragraph format a summary of the
meeting outcome and relevant events.
Agenda
     This section should list the agenda in order of topic importance
Discussion Details
     This section should list discussion details in paragraph format
Issues
     This section should list all relavent issues (i.e. past, new, possible
future issues) presented at the meeting. Issues need to be clearly stated,
prioritized, and accompanied with possible resolution options.
Action Items
     In this section list an updated action item list including new ones that
resulted from the meeting
Legend

Task   Completed

  Time line is impacted

  Time line may be impacted

                                  Item Type   Action / Issue Item   Lead  
Status   Importance   Due Date   Close Date   Comments   Solution
Issue
                               

Miscellaneous Notes
     This section is for general notes of interest which may or may not have
direct relation to the specific topic.

     
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INDIRECT SOURCING SERVICES AGREEMENT
Between
Solectron and IBM
Annex F-5
POLICIES AND PROCEDURES MANUAL CONTENT

     
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1.   INTRODUCTION

This document describes the general content and organization of the Policies and
Procedures Manual that will be developed to support governance of the Agreement.

2.   GENERAL CONTENT AND ORGANIZATION

The table below provides the general organization and content of the Policies
and Procedures Manual to be developed by IBM with reasonable assistance from
Solectron. The Policies and Procedures Manual is intended to complement the
Agreement and will provide comprehensive documentation of the procedures that
will be followed to implement and manage the Agreement and the overall
relationship. Specific references to detailed text or requirements in the
Agreement may be incorporated within the Policies and Procedures Manual.
The Policies and Procedures Manual will document how IBM and Solectron will
perform the responsibilities assigned to each Party in Schedule A (Services),
and, where relevant, may provide additional detail regarding the Functions to be
performed. The Functions and activities to be performed by each Party should be
clearly indicated within the document (including specific Functions and
activities by job title or function). The manual will be used jointly by the
Parties to assist with overall coordination and communication regarding the
Agreement.

              Content       Brief Description 1.1   Organizational Overview    
 
           
 
  (a)   Solectron Governance Organization.   Include organization charts,
description of functions performed, contact information.
 
           
 
  (b)   IBM Management and Delivery Organization   Include organization charts,
description of functions performed, contact information.
 
           
 
  (c)   Key Contacts — Solectron   A list of contacts within Solectron that are
key users of the Services and/or perform a liaison function in regard to the
Services (by business unit, by geography).
 
           
 
  (d)   Key Contacts — Third Parties   A list of key Third Parties (maintenance
providers, software providers, telecom carriers, etc).
 
           
 
          Transition procedures and policies, consistent with Annex A-7
(Transition Plan) and the Detailed Transition 1.2   Transition Activities and
Responsibilities   Plan; content below will include information on coordination
activities, responsibilities of each Party (by title/function)
 
           
 
  (a)   Overall Management and Reporting Process (To be   A description of
Solectron and IBM management structure, reporting, and review process associated
with Transition.

     
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              Content       Brief Description
 
      included in As-Is Operations Procedures Manual.)    
 
           
 
  (b)   Critical Deliverables (To be included in As-Is Operations Procedures
Manual).   A list of Critical Deliverables, which will include the Critical
Deliverables listed in Schedule B (Performance Measurement), acceptance criteria
and timeline for the Transition period.
 
           
 
  (c)   As-Is Operations
Procedures Manual   A description of interim procedures to monitor and
coordinate Service delivery, including problem management, change management,
Service Level monitoring and reporting, physical and logical security, project
management, work authorization, etc.

A description of the Functions and activities to be performed by both Parties.
 
           
 
  (d)   Transition Financial Management (To be included in As-Is Operations
Procedures Manual.)   A description of interim procedures for invoicing, invoice
verification, etc.

A description of the Functions and activities to be performed by both Parties.
 
           
 
  (e)   Transition Contract Management (To be included in As-Is Operations
Procedures Manual.)   A description of interim procedures for managing and
administering the contract including proposed changes to the Agreement,
interpretation procedures, issue escalation process, and disputes.

A description of the Functions and activities to be performed by of both
Parties.
 
           
 
  (f)   Interim Relationship Management Procedures (To be included in As-Is
Operations Procedures Manual.)   The procedures and responsibility for
communication and coordination with Solectron employees, third party vendors,
etc.

A description of the Functions and activities to be performed by of both
Parties.
 
           
 
  (g)   Other Transition Procedures and Responsibilities (To be included in
As-Is Operations Procedures Manual.)   Any other pertinent procedures, Functions
or activities.

     
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              Content       Brief Description
 
          Ongoing, “steady state” procedures and policies; 1.3   Performance
Management
Procedures   content below will include information on coordination Functions
and activities to be performed by each Party (by title/function)
 
           
 
  (a)   Performance Monitoring and Reporting Procedures   IBM will describe
procedures it will use to verify proper Service delivery on a day-to-day basis,
including internal reporting and reporting to Solectron.
 
           
 
  (b)   Problem Management and Escalation Procedures   IBM will describe
procedures it will use to identify problems, report and resolve problems, and
escalate as necessary within IBM’s organization and/or Solectron.
 
           
 
  (c)   Root Cause Analysis
Procedures   IBM will describe procedures it will use to determine root cause of
problems, including involvement of (and/or support to) applicable third parties
or Solectron.
 
           
 
  (d)   Service Level Measurement and Reporting Procedures   IBM will describe
procedures it will use to measure and report Service Levels to Solectron.
 
           
 
  (e)   Project Management
Procedures   IBM will describe the methodology and procedures it will use to
manage and report on projects.
 
           
 
  (f)   Change Management - Operational and Technical Procedures   IBM will
describe the procedures it will use (including the notification process, timing,
planning, authorization, and implementation) regarding changes to the
operational and technical environment. IBM will include Functions and activities
to be performed by Solectron, including any necessary Solectron approvals.
 
           
 
  (g)   Physical Access &
Security Procedures   IBM will describe the physical access and security
procedures it will use (at both Solectron Sites and IBM locations) as necessary
and appropriate to comply with Solectron security policies that are relevant and
appropriate to the Services.
 
           
 
  (h)   Network Access &
Security Procedures   IBM will describe the network access and security
procedures it will use as necessary and appropriate to comply with Solectron
security policies that are relevant and appropriate to the Services.
 
           
 
  (i)   Disaster Recovery and Business Continuity Procedures   IBM will describe
the procedures it will use in regard to disaster recovery and business
continuity, which will be consistent with those described in Schedule J
(Disaster Recovery). (IBM may reference other documents containing comprehensive
procedures, but will at least provide general

     
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              Content       Brief Description
 
          overview within the Policies and Procedures Manual).
 
           
 
  (j)   Other relevant procedures   IBM will describe any other procedures
required to deliver the Services as agreed to by the Parties
 
            1.4   Financial Management Procedures   Ongoing, “steady state”
procedures and policies; content below will include information on Functions and
activities, including coordination activities to be performed by each Party (by
title/function).
 
           
 
  (a)   Invoicing   IBM will describe procedures for invoicing (and verification
of invoice by Solectron), including processes for invoicing base charges and
Gain Share, together with processes for true-up reconciliation and allocating to
local entities. The content will include procedures regarding disputed invoice
amounts.
 
           
 
  (b)   Forecasting   IBM will describe procedures for forecasting Savings vs.
plan.
 
           
 
  (c)   Performance Credits   IBM will describe procedures for calculating
Performance Credits on invoices and calculations.
 
           
 
  (d)   Other relevant procedures   IBM will describe any other procedures
required to deliver the Services as mutually agreed to by the Parties.
 
            1.5   Contract Management Procedures   Ongoing, “steady state”
procedures and policies; content below will include information on Functions and
activities, including coordination activities to be performed by each Party (by
title/function)
 
           
 
  (a)   Contract Change Control   IBM will describe procedures regarding changes
to the Agreement, including changes to any Exhibit or Attachment.

Content will include procedures to classify services as a New Service, and
resulting process to change the Agreement (including pricing).

Content will include notification period and process, authority levels, and
escalation procedures for changes to Agreement.
 
           
 
  (b)   Reporting   IBM will describe procedures and activities regarding key
standard reports and requests for ad-hoc reports from Solectron.
 
           
 
  (c)   New Service Levels   IBM will describe procedures for determining new
Service Levels (based on continuous improvement and/or Solectron request).

     
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              Content       Brief Description
 
  (d)   Benchmarking   IBM will describe procedures for benchmarking exercises,
including determination and agreement of benchmark firm, sample peer group and
process used for benchmark, payment for benchmark, review of results, and
potential outcome.

Content will include dispute resolution process.
 
           
 
  (e)   Auditing   IBM will describe procedures for operational and/or financial
audits (as required by Solectron auditing and/or regulatory agencies).

IBM will describe notification process and procedures to resolve audit findings.
 
           
 
  (f)   IBM Key Personnel   IBM will describe procedures for Solectron approval
regarding replacement or removal of IBM Key Personnel.
 
           
 
  (g)   Dispute Resolution   IBM will describe procedures regarding formal
dispute resolution process.
 
           
 
  (h)   Other relevant procedures   IBM will describe any other procedures
required to deliver the Services as mutually agreed to by the Parties.
 
           
 
          Ongoing, “steady state” procedures and policies; 1.6   Relationship
Management
Procedures   content below will include information on Functions an activities,
including coordination activities to be performed by each Party (by
title/function).
 
           
 
  (a)   Customer Satisfaction
Surveys   IBM will describe the process to be used for conducting customer
satisfaction surveys. Content will include procedures regarding action items and
attempts to resolve customer issues.
 
           
 
  (b)   Authorized Users   IBM will describe procedures and responsibilities
regarding responding to authorized users problems, requests, and questions.
 
           
 
  (c)   Third Party Vendors   IBM to describe procedures for relationship
regarding third party vendors which may provide services or products that are
ancillary to (or support) the overall delivery of Services.

Procedures and coordination with key third party vendors will be documented.
 
           
 
  (d)   Other Third Parties   IBM will describe procedures for any other contact
or requests from other third parties in regard to the Agreement.
 
           
 
  (e)   Other relevant procedures   IBM will describe any other procedures
required to deliver the Services as mutually agreed to by the Parties.

     
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              Content       Brief Description 1.7   IBM Operational Procedures  
Ongoing, “steady state” procedures and policies; content below will include
information on Functions and activities, including coordination activities to be
performed by each Party (by title/function)
 
              Operational Procedures (by
function, as applicable)   IBM will describe the activities that IBM will
undertake in order to provide the Services, including those directions,
supervision, monitoring, staffing, reporting, planning and oversight activities
normally undertaken by IBM which shall be consistent with those IBM activities
used to provide services similar to the Services.

     
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Confidential to Solectron and IBM
INDIRECT SOURCING SERVICES AGREEMENT
Between
Solectron and IBM
SCHEDULE G
IBM DELIVERY EXCELLENCE

     
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1. QUALITY MANAGEMENT
1.1 Delivery Excellence Defined
Delivery Excellence is the measurable level of work quality delivered by our
client teams across all phases of a project lifecycle in order to satisfy our
clients and be the leader in the marketplace.
Delivery excellence consists of two distinct and important elements when it
comes to successful completion of any major project: “Starting it right, and
executing it right .” Supporting these two elements is the structural framework
embodied in our proprietory Seven Keys to Success project health evaluation
tool. Before we examine these delivery excellence elements, let’s explore the
details associated with the Seven Keys to Success health indicators. This will
provide an understanding of how the Seven Keys to Success is used to support
“Starting it right and Executing it right.”
(7 KEYS TO SUCCESS) [f18842f1884206.gif]
Each of the Seven Keys represents a single dimension or view of a project’s
health for a particular category, for example, risk mitigation or project team
performance. We have learned that the comprehensive health of any significant
project at any point in time can be represented by analyzing each of these
dimensions. As a result of the health analysis of each dimension, a color code
(Green, Yellow, or Red) is assigned with the following indicated actions:

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l   Stay the course — no corrective action required   l   WARNING- Corrective
action required in the Near Term   l   URGENT- Indicates significant problems
that are likely to impact the ability to maintain scope and deliver the project
on time and within budget

Corrective actions are then planned and executed to address those dimensions
that have a “yellow” or “Red” status health indicator. By examining past
projects, we know that delivery failures do not happen “overnight,” but by
failing to recognize warning signs along the way and take appropriate corrective
actions before recovery is too late.
Stakeholders are committed — Identifying, evaluating, informing, and influencing
the individuals and groups who are affected by or who influence the program or
project.
Partial list of attributes:

  ¡   Effective project steering committee     ¡   Active project sponsorship  
  ¡   Organizational readiness to accept new systems and processes     ¡  
Affected business users are actively involved

Business Benefits are Realized — Estimating, measuring, and monitoring the
benefits the business will gain from the program or project. Benefit includes
expected result and the associated cost, both financial and non-financial, of
achieving that result.
Partial list of attributes:

  ¡   Business case for the project has been defined; project otherwise
justified     ¡   A monitoring and measurement process is in place to gauge
project’s continuing focus on the end benefit     ¡   Project budget is
monitored against actual expenditures and cash flow expectations

Work and Schedule are Predictable — Controlling the production and acceptance of
program or project services and deliverables, and ensuring they meet specified
performance and acceptance requirements.
Partial list of attributes:

  ¡   The project schedule is being used to manage the activities of
participants and accurately reflects progress planned versus progress achieved  
  ¡   Milestones and associated achievement dates are actively monitored

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  ¡   Deliverables are identified with sufficient criteria to judge quality and
completeness; deliverable acceptance process in place and being executed

Scope is Realistic and Managed — Agreeing, maintaining, and amending the
boundaries of the program or project.
Partial list of attributes:

  ¡   Project scope is explicitly defined and understood by project participants
    ¡   “Scope creep” is actively monitored     ¡   A well defined scope change
process is in place and being followed

Team is High Performing — Identifying, mobilizing, and developing the people
required for the program or project team. Obtaining and maintaining appropriate
space, equipment, and other resources required to successfully complete the
project.
Partial list of attributes:

  ¡   Resource needs, roles and responsibilities are clearly identified     ¡  
Staffing plan consistent with project schedule     ¡   Skills of participants
meet expectations for assigned roles     ¡   Team morale and teamwork is evident

Risks are Mitigated — Identifying and evaluating risks and issues. Developing
avoidance, mitigation, and resolution activities to counteract those risks and
issues.
Partial list of attributes:

  ¡   Risk management plan and process is in place and being monitored     ¡  
Each identified risk is evaluated as to potential impact, potential for
realization and risk mitigation strategy/actions     ¡   Issues are recorded,
tracked and resolved to meet project timeline and budget constraints

Delivery organization benefits are being realized — Establishing, agreeing, and
monitoring the benefits that we will gain from the project. Maintaining and
protecting the delivery organization’s interests in relation to the project.
Partial list of attributes:

  ¡   Knowledge transfer is planned and being monitored for effectiveness
consistent with project objectives

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  ¡   Actual expenditures are aligned with budget expectations     ¡   Favorable
project citations are expected     ¡   Project is expected to enhance personnel
skills and depth of experience

1.2 Delivery Excellence “Starting it right”
All major projects begin with common project initiation activities—clarify scope
boundaries, confirm staffing assignments, develop detailed work schedules,
etc.—as a necessary requirement for launching the project. IBM has established a
formal Project Launch process that each major project must execute during the
first 45 days of the start of the project. This process is designed to help all
projects benefit from a common launch process.
There are two internal IBM actions generated from this process, (1) Pre-launch
Seven Keys Assessment (to be completed within the first 10 business days of
project start, and (2) Work Products and Tools Assessment (to be completed
within the total 45 day period).
1.2.1 Pre-launch Seven Keys Assessment
This assessment, based upon the Seven Keys mentioned above, is intended to
document the “as-is” condition of the project so that early indicators of
potential issues can be acted upon promptly. Accordingly, the evaluation
criteria are slightly different in each category, for example:
Stakeholders are Committed -

  ¡   Have key client stakeholders been identified?     ¡   Has a steering
committee for the project been identified?

Scope is realistic and managed –

  ¡   Has the delivery contract/Statement of Work (SOW) been reviewed with the
client sponsor?     ¡   Are client/IBM expectations regarding scope in
agreement?

Team is high performing -

  ¡   Is the required infrastructure to support the project team in place or
being fulfilled?

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  ¡   Are key project start-up personnel (both IBM and client) identified and
available as required?

These are just a few of the questions to be answered. Although early in the
project life cycle, the assessment does identify potential problem areas that
can be quickly resolved.
1.2.2 Work Products & Tools Assessment
This second action of the Project Launch process is intended to confirm that the
key project control tools and processes are in place to support the project
until completion. Project managers are allowed to introduce additional
tools/templates and processes, but at a minimum, the Project Manager is required
to establish the following components within the 45 day launch period:

  ¡   Communications Management Plan – The plan describes the key reporting
relationships and meeting requirements between the client and IBM management
teams.     ¡   Detailed Project Schedule and Work Breakdown Structure (WBS) –
work activities and dependencies, key milestones, task assignments.     ¡  
Deliverable Definition Process – Describes the deliverables and the associated
delivery and acceptance process. This information is typically provided in the
SOW, and is discussed with the client as part of the SOW review process in the
Project Launch activities.     ¡   Seven Keys to Success Status Report – The
Project manager is expected to establish a monthly process for completing this
internal IBM project status report. This report is made available to IBM Sector
leadership and the Risk management person assigned to this project for the
entire project life cycle.     ¡   Change Management Process – This process is
established to help manage project scope. IBM employ’s a rigorous approach to
the change control process to prevent unauthorized changes in scope and the
potential cost/schedule impacts.     ¡   Human Resource Plan – This is a
staffing plan for both client and IBM resources, including project organization
chart with identified roles and responsibilities.     ¡   Issue Management
Process – This process is established to provide a comprehensive approach to
managing the identification, recording, tracking and resolution of project
issues that will occur throughout the project life cycle.     ¡   Conditions of
Satisfaction – It is important that the IBM team understands what the client
expects from IBM in this project. Once established with the client, the
conditions of satisfaction attendant IBM actions are periodically reviewed by
the project partner/manager as

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      well as in independent discussions with the client conducted by the
assigned Risk manager (RM)1.     ¡   Risk Management Plan – This plan identifies
the initial project risks that might occur and is periodically updated
throughout the project life cycle. The plan identifies the risk, probability of
occurrence, potential impacts and risk mitigating actions.

As stated above, the IBM project manager will establish additional project
controls or project support tools and processes including those desired by the
client where applicable.
Once these two deliverables are complete, the assigned Risk Manager will review
the assessments with the project manager and project partner to determine if
additional support is needed to complete the Project Launch process or the
review indicates that the launch is completed. Once completed, the assigned Risk
Manager reviews the Seven Keys Status Report each month to stay informed
regarding project progress and to monitor action plans associated with any
identified “yellow” or “red” health indicators.
1.3 Delivery Excellence “Executing it right”
Following the completion of the Project launch, the project status is identified
as “in delivery” and will continue that way until the project is officially
closed by obtaining, if necessary, final client sign-off that the project is
complete, deliverable materials (subject to the SOW or IBM Customer Agreement)
are complete and signed-off, and financial obligations between IBM and the
client have been completed.
During the “in delivery” period, the assigned Risk Manager will conduct periodic
on-site Project Management Reviews (PMR) to meet with IBM project management,
client project management and client project sponsor to perform a project health
check based upon the Seven Keys framework discussed earlier. The frequency and
duration of the on-site PMRs will vary based upon project size/complexity, and
is typically linked to key milestone delivery dates. The PMR schedule will be
discussed with IBM project management upon completion of the Project Launch
process, but may be adjusted as needed during the project.
 

1   The assigned Risk Manager is an experienced project manager with many years
of hands-on project management for large/complex projects. The RM understands
the challenges inherent in projects and this knowledge enables the RM to
evaluate the impacts of project dynamics and offer help and recommendations when
needed.

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The PMR process routinely includes the following activities:

  ¡   Conducting a general status overview with the project manager and partner
    ¡   Conducting one-on-one interviews with IBM and client team leads (if
client resources are assigned in this role) to understand their perspective on
the project; issues or concerns; the project control process they support and
their role in supporting them; project risks and recommended actions.     ¡  
Conducting one-on-one interviews with the client sponsor to understand the
sponsor’s view of the project; concerns and issues; IBM performance to date;
what IBM is doing well, areas where IBM needs to improve; Conditions of
Satisfaction, etc.     ¡   Reviewing the various project control processes
including project schedule status and maintenance procedures; issues/risks;
change control; key deliverables and the agreed approval process; project status
reports, etc.     ¡   The RM analyzes the information gathered in the interviews
and document reviews, and then records key findings, recommended actions and
health indicators in a draft report to the project manager and partner. They are
expected to provide feedback, including correcting misunderstandings and errors.
Recommendations and health indicator decisions remain in the purview of the RM
as an independent reviewer.     ¡   Once approved, the report is issued in a
final status to designated IBM Sector executives for follow-up action if
required.     ¡   Recommended actions are reviewed in the next scheduled on-site
PMR to insure that recommendations are implemented.

The project partner or manager may share selected summary results from the
report with the client depending upon arrangements between IBM project
management and the client.
Summary
The Delivery Excellence process as described herein is followed by all IBM
sectors under the Business Consulting Services (BCS) umbrella. We have realized
substantial benefits from this process in areas of:

  ¡   project portfolio management     ¡   project performance “dashboard”
reporting     ¡   better controlled and managed projects     ¡   improved client
satisfaction     ¡   consistency across projects     ¡   improvements in project
management processes and controls     ¡   tool/template improvements

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Each of the processes and actions described above work together to achieve
Delivery Excellence. IBM continually evaluates our delivery processes for
improvement opportunities to achieve the ultimate indicator of success—satisfied
clients.

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INDIRECT SOURCING SERVICES AGREEMENT
Between
Solectron and IBM
SCHEDULE H
DATA PRIVACY

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IBM will comply with Solectron’s written data privacy policies provided to IBM
in advance to the extent such policies are relevant and appropriate to the
Services. The procedures for implementing and complying with such policies will
be specified in the Policies and Procedures Manual.

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INDIRECT SOURCING SERVICES AGREEMENT
Between
Solectron and IBM
SCHEDULE I
SECURITY

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IBM will comply with Solectron’s written data privacy policies provided to IBM
in advance to the extent such policies are relevant and appropriate to the
Services. The procedures for implementing and complying with such policies will
be specified in the Policies and Procedures Manual.

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INDIRECT SOURCING SERVICES AGREEMENT
Between
Solectron and IBM
Schedule J
Disaster Recovery

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1.0 Introduction
Terms with initial capitalization have the meanings set forth in the Agreement
unless otherwise defined in this Schedule J. IBM will be responsible for the
provision of disaster recovery services and capabilities in support of the
Services to Solectron as set forth in this Schedule J and the Disaster Recovery
Plan (“DRP”). The Disaster Recovery Plan for the Services shall be effective no
later than the first Go Live Date (as such term is defined in the Agreement).
Within ninety (90) days after the Effective Date, IBM will develop and submit to
Solectron the Disaster Recovery Plan for the Services covering the items
summarized in Section 2.0 of this Schedule.
The Disaster Recovery Plan will serve IBM’s clients using the P2P Platform,
including Solectron, which are hosted in the IBM Platform and the shared
facilities from which IBM will deliver the Services (“P2P Platform Clients”) .
2.0 Disaster Recovery Plan (DRP)
2.1 DRP components
The Disaster Recovery Plan shall include:

1.   a brief description of the services and functions covered by the DRP;   2.
  the recovery times after the occurrence of a declared Disaster agreed upon by
the Parties for each critical service, which will be subject to the DRP recovery
commitments set out in Section 2.7 of this Schedule J;   3.   hardware and
software comprising the Configurations used for disaster recovery by IBM;   4.  
contact listings of Solectron and IBM key employees with respect to the DRP;  
5.   identification of IBM and Solectron recovery teams;   6.   criteria for
Disaster declaration, recovery and testing;   7.   names and titles of those
individuals who are authorized by Solectron and IBM to declare a Disaster;   8.
  backup process and components of IBM supplied Configuration and personnel;  
9.   the location and schedule for the periodic tape backup made by IBM of the
Services;   10.   the location and schedule for off-site storage of the tape
backups made by IBM;   11.   notification procedures;   12.   recovery
information, procedures, and schedules;   13.   testing results and any required
corrective action plans;   14.   procedures for maintaining the DRP.

2.2 IBM Responsibilities
IBM shall:

1.   provide an IBM Employee as its representative who is knowledgeable in
disaster recovery and business continuity planning and the DRP for the Services
to serve as a single point of contact for Solectron’s business continuity
related communications and activities. The IBM representative will be
responsible for the development and maintenance of the DRP and will provide safe
storage and distribution of copies as follows:

  •   one copy to the DRP Alternative Site     •   one copy to the IBM P2P
Platform disaster recovery coordinator

2.   review and update the DRP in accordance with the Agreement;   3.   test the
DRP one (1) month prior to the first Go Live Date and annually thereafter as
agreed by the Parties to validate that the DRP remains practicable and current;
  4.   provide Solectron with a report of the test results within thirty
(30) days of each DRP test; and   5.   make available to Solectron the IBM
recovery and emergency processes and commitments set forth herein.

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2.3 Solectron Responsibilities
Solectron shall designate a Solectron employee who is knowledgeable in disaster
recovery and business continuity planning and the existing Solectron disaster
recovery plan to serve as a single point of contact for Solectron and who shall:

1.   act as the primary interface to IBM’s representative;   2.   be available
on a continuous basis in the event a Disaster is declared;   3.   have knowledge
of the contents and procedures of the DRP;   4.   participate in the testing of
the DRP when reasonably needed;   5.   review the results of IBM tests;   6.  
communicate internally any updates made by IBM to the DRP, to ensure that the
DRP remains current; and   7.   develop and maintain the Solectron disaster
recovery plan for network connectivity and recovery in the event of a Disaster
subject to this Schedule J and the DRP.

2.4 IBM Changes to the DRP
IBM will periodically review the DRP and may at any time, upon notification to
Solectron, modify the DRP to reflect and implement the general requirements of
the IBM Platform.
Any proposed modifications shall be communicated in writing by IBM to Solectron
and IBM shall implement those changes which aim to maintain the stability of, or
improve the overall DRP and recovery times; provided, however, that IBM shall
first notify Solectron of modifications which might result in a decreased level
of coverage, or protection by, the DRP for Solectron.
2.5 Solectron Requested Changes to the DRP
As the DRP provided by IBM will be made available to IBM P2P Platform Clients on
a standard basis, Solectron might require IBM to implement some specific
changes. Such updates to the DRP that are necessary as a result of actions by or
changes requested by Solectron which materially change the scope of the DRP will
be considered out-of-scope Services and will be handled as Change Requests
within the Change Control Process as set forth in Schedule F (Governance). IBM
will evaluate if the Change request will be compatible with the DRP for the IBM
Platform and will submit to Solectron the results of the analysis and its
proposal for implementing the same (which proposal shall include the cost, if
any, to Solectron).
2.6 Services to Be Provided under the DRP.
In the event a Disaster is declared pursuant to the terms of this Schedule J,
which interrupts the Services, IBM shall implement the DRP and provide the
disaster recovery services described in the DRP at a level of performance that
will allow Solectron to use and receive the Services.
In the event the point of origin of any Disaster occurs on the IBM Platform or
at any point from the IBM Platform to any IBM or IBM-subcontracted facility or
network used to provide Services (an “IBM Disaster”), IBM will remain
responsible for meeting the Service Levels during such IBM Disaster unless such
IBM Disaster constitutes a Force Majeure Event.
In the event the origin of any Disaster occurs at a point from within any
Solectron facility or from a Solectron facility to the IBM Platform (a
“Solectron Disaster”), IBM will make commercially reasonable efforts to meet the
Service Levels during such Solectron Disaster; provided, however, that IBM will
be relieved of any Service Level Credits to the extent that because of such
Solectron Disaster IBM does not achieve the applicable Service Levels using
commercially reasonable efforts during a Solectron Disaster. Solectron shall be
responsible for business continuity services with respect to the Solectron
facilities.

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The Parties agree that the DRP will allocate responsibility as follows:
Network Recovery

•   Solectron will be responsible for all network services for which Solectron
has control, including any costs associated with connectivity and support.

•   IBM will be responsible for all network services of which IBM has control
(including those services contracted with Third Parties), including any costs
associated with connectivity and support.

2.7 DRP Recovery Committments
IBM commits to recover the Services within fifty-six (56) hours from the
Disaster declaration (which is the RTO – Recovery Time Objective), as follows:

•   Within twenty-four (24) hours from the declaration of a Disaster, IBM will
make available the DRP Alternative Site;

•   Within thirty-two (32) hours from access to the DRP Alternative Site, IBM
will restore the functional environment and the Services.

IBM will backup the IBM Platform and Solectron data and information used in the
provision of the Services on a twenty-four (24) hour basis and transfer those
backups to the DRP Alternative Site, accordingly, Solectron data will be
recovered as of the point of the most recent backup.

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3.0   Non-Disaster Situations: Severity Standards and Service Restoration
Objectives for P2P Platform

Continuous efforts to address any Services interruption, including those for
which IBM is responsible or are under its control, shall be undertaken in
non-disaster situations as well. The severity of a problem is based on the
initial impact of the problem and can be determined by the criteria set forth in
the table below. The Service Restoration Objectives indicate the expected
resolution time for such Services interrruptions (“Service Restoration
Objectives”).

                      Service Restoration     Severity   Characteristics  
Objective   Problem Examples
1
Severe Business
Impact
 
-   Critical System, network or key application outage (or imminent outage) with
critical impact on service delivery or
-   Total loss of production service to all P2P Platform Client or
-   Impacts one or more service level commitments or
-   Revenue or delivery schedule impact
  Continuous effort aimed to restore service within 24 hours  
-  Server down
-  IBM network component down preventing access to production application
-   Application down
 
           
2
Major Business
Impact
 
-   Key component, application, critical P2P Platform Client computer or network
is down, degraded, or unusable or
-   Potential critical impact on service delivery or
-   Service performance degradation; service delivery impacted or
-   Some P2P Platform Clients affected
  3 calendar days  
-   Degraded
performance
-   Intermittent problem
 
           
3
Minor
Business
Impact
 
-   A component, minor application or procedure is down, unusable, or difficult
to use or
-   Some operational impact, but no immediate impact on service delivery or
-   Service outage but alternative workaround available or
-   Problems that degrade service but do not prevent delivery of service or
-   Potential exposure to ability to deliver service or
-   Scattered P2P Platform Clients affected
  7 calendar days  
-   automated monitoring problem (require manual monitoring until problem is
resolved)
 
           
4
Minimal or No
Business Impact
 
-   Component, procedure not critical to customer is unusable or
-   Alternative is available; deferred maintenance is acceptable or
-   No impact to service or
-   No Production affected or
-   Individual P2P Platform Client (such as Solectron) affected
  30 calendar days  
-   Development or test
environment problem

4.0   Operational Centers: Business Continuity

A situation may arise which affects continuity of Services provided by the
Procurement Operations Centers, Customer Assistance Centers, and Accounts
Payable Operations Centers with respect to the P2P Platform. Specifically, there
could be a situation in which an event such as flood or a fire renders an IBM
Operational center unusable yet does not impact the availability of the P2P
infrastructure. In this event, IBM will invoke its existing contingency plans to
relocate the affected team(s) and/or workload to other IBM facilities or
Locations, in accordance with the Agreement, which can provide the necessary
connectivity to the P2P Platform infrastructure and Services. IBM has multiple
Procurement Operations Centers, Customer Assistance Centers, and Accounts
Payable Operations Centers around the globe. The restoration objective is to
restore services for emergency services within twenty- four (24) hours of such
an event, and to restore normal services within fifty-six (56) hours of such an
event.

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5.0   Emergency Communications Procedures

IBM maintains a Standard Emergency Communications Procedure which describes the
emergency communications procedures to follow in the event of either a natural
disaster or a technical problem which results in any component of the P2P
Platform infrastructure being unavailable and which prevents P2P Platform
Clients and / or IBM support teams from fully using the P2P Platform
infrastructure for an extended period of time, such as a period in excess of
four (4) hours.
The key focal point for communications with Solectron will be the IBM Global
Project Executive (described In Schedule F (Governance)). The IBM Global Project
Executive will be responsible for informing Solectron of the event and for
providing regular status reports to the Management Committee and/or the
Executive Steering Committee during the period of Services interruption. These
status reports will be provided on a weekly basis at a minimum, or on a more
frequent basis as mutually agreed by the Parties, or is otherwise apporpriate
given the nature of the problem.

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INDIRECT SOURCING SERVICES AGREEMENT
Between
Solectron and IBM
SCHEDULE K
DISENGAGEMENT ASSISTANCE

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TABLE OF CONTENTS

              1.   INTRODUCTION   1
 
  1.1   Definition   1
 
  1.2   Disengagement Plan   1
 
            2.   SOLECTRON ACCESS TO PERSONNEL, EQUIPMENT, THIRD PARTY SERVICE
CONTRACTS AND SOFTWARE LICENSES   1
 
  2.1   Personnel   1
 
  2.2   Third Party Service Contracts   1
 
            3.   OTHER TERMS REGARDING DISENGAGEMENT ASSISTANCE   2
 
  3.1   Commercially Reasonable Efforts   2
 
  3.2   Duration   2
 
  3.3   Survival of Agreement   2
 
  3.4   Compensation   2

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1.   INTRODUCTION.   1.1   Definition.       “Disengagement Assistance” means,
collectively, the Functions (in addition to continued performance of the
Services) that IBM is required to carry out in connection with the cessation of
any Services or the expiration or earlier termination (for any reason) of the
Agreement (or any Local Adoption Agreement(s)) or to facilitate the orderly
wind-down and, where applicable, migration of the affected Services from IBM to
Solectron and/or its designee(s), as directed by Solectron including, if
requested by Solectron, upon the removal of any Services from scope.

1.2   Disengagement Plan.

  (a)   Disengagement Assistance will be provided pursuant to a mutually agreed
plan, including a ramp-down schedule for the IBM Personnel performing the
affected Services (the “Disengagement Plan”).     (b)   The Parties will develop
the Disengagement Plan as described in Section 1.2.3, below, promptly upon any
of the following: (i) receipt of a notice of termination of the Agreement or a
Local Adoption Agreement; (ii) upon request from Solectron upon the removal of
any Services from scope; (iii) six (6) months before the scheduled expiration of
the Agreement; and (iv) receipt of a notice of a Force Majeure Event under
Section 19.3 (Force Majeure) of the Agreement.     (c)   IBM will prepare the
proposed Disengagement Plan for review, comment and mutual agreement. Once the
Disengagement Plan has been agreed, both Parties will comply with it, subject to
Solectron’s right to extend the Disengagement Assistance period as provided in
the Agreement (or the applicable Local Adoption Agreement).

2   SOLECTRON ACCESS TO PERSONNEL, EQUIPMENT, THIRD PARTY SERVICE CONTRACTS AND
SOFTWARE LICENSES.   2.1   Personel.       If relevant under a particular Local
Adoption Agreement, Solectron will have the right to recruit and hire IBM
Personnel as specified in such Local Adoption Agreement.

2.2   Third Party Service Contracts.       At Solectron’s request, IBM will
provide information to Solectron or its designee concerning the third party
service contracts of IBM (or its Subcontractors) that are used primarily to
perform the Services being terminated. IBM will use Commercially Reasonable
Efforts to obtain any Required Consents and thereafter, to the extent permitted
under the applicable agreement, assign some or all of such contracts to
Solectron or its designee, as directed by Solectron. To the extent permitted
under the applicable agreements, the assignee will assume the as-

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    signing Party’s obligations under such contracts relating to periods after
the date of assignment.

3.0   OTHER TERMS REGARDING DISENGAGEMENT ASSISTANCE.   3.1   Commercially
Reasonable Efforts.       The Disengagement Plan will provide for each Party to
use Commercially Reasonable Efforts to assist the other Party in the orderly
termination of the affected Services and the transfer of Deliverables,
work-in-progress, and other materials required to facilitate the orderly,
non-disrupted business continuation of each Party.

3.2   Duration.       IBM agrees to provide Disengagement Assistance for up to
six (6) months following the initially scheduled effective date of
termination/expiration (or such other period as is set forth in the mutually
agreed Disengagement Plan).

3.3   Survival of Agreement.       Disengagement Assistance will be deemed to be
governed by the terms and conditions of the Agreement notwithstanding its
earlier termination or expiration, other than any terms or conditions that do
not reasonably apply to the Disengagement Assistance.

3.4   Compensation.       Solectron will compensate IBM for all Disengagement
Assistance on a T&M basis in accordance with Schedule C (Charges) or on such
other basis as may be mutually agreed by the Parties provided, however, that
Solectron’s payment for such Disengagement Assistance shall be without prejudice
to any right Solectron may have to claim that such amounts paid by it constitute
recoverable damages were IBM found to have breached the Agreement. If the
Agreement is being terminated by IBM under Section 11.4 (Termination By IBM) of
the Agreement, then IBM may condition its provision of the Disengagement
Assistance under this Schedule K on monthly pre-payment for such assistance.

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INDIRECT SOURCING SERVICES AGREEMENT
Between
Solectron and IBM
SCHEDULE L
APPROVED SUBCONTRACTORS

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          Ref.#   IBM Subcontractor(s)   IBM Subcontractor Location
1.
  Emptoris   200 Wheeler Road
Burlington, MA 01803

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INDIRECT SOURCING SERVICES AGREEMENT
Between
Solectron and IBM
SCHEDULE M
IBM INSURANCE COVERAGE

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  1   INSURANCE coverage requirements         IBM shall maintain the following
insurance coverage and be responsible for its Subcontractors (if any)
maintaining sufficient limits of the appropriate insurance coverage.     1.1  
Workers Compensation         Statutory workers’ compensation in accordance with
all applicable statutory requirements and applicable local country laws, if any;
    1.2   Liability Insurance

  (a)   Employer’s liability insurance with minimum limits of $1,000,000;    
(b)   Commercial general liability (including contractual liability insurance)
with a combined single limit of $1,000,000 per occurrence, subject to a
$2,000,000 annual aggregate, Solectron shall be included on such policy as an
additional insured;     (c)   Comprehensive automobile liability covering all
vehicles that IBM owns, hires or leases in an amount not less than $1,000,000
per occurrence (combined single limit for bodily injury and property damage);
and

  1.3   Property Insurance     IBM will maintain Property insurance, including
coverage for electronic data processing equipment, providing “all risk” or
“special cause of loss” coverage on a replacement cost basis, on all IBM
Machines owned or leased by IBM and used to provide the Services.     1.4  
Fidelity/Crime Insurance         IBM will maintain Fidelity/Crime Insurance
covering employee dishonesty for IBM’s employees involved in the performance of
this Agreement with limits not less than US$10,000,000.     2.   ADDITIONAL
INSURANCE PROVISIONS

  (a)   Before commencing performance of the Services, IBM shall furnish
Solectron with certificates of insurance and endorsements of all required
insurance for IBM.     (b)   The documentation shall state that the insurer
shall endeavor to provide thirty (30) days’ prior written notice to Solectron
prior to cancellation.     (c)   Upon request, IBM shall furnish Solectron the
same evidence of insurance for its Subcontractors as Solectron requires of IBM.

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  (d)   In the case of loss or damage or other event that requires notice or
other action under the terms of any insurance coverage described above, IBM will
be solely responsible for taking such action. IBM will provide Solectron with
contemporaneous notice and with such other information as Solectron may
reasonably request regarding the event.     (e)   The Parties do not intend to
shift all risk of loss to insurance. IBM’s obligation to maintain insurance
coverage in specified amounts will not act as a limitation on any other
liability or obligation which IBM would otherwise have under the Agreement.
Similarly, the naming of Solectron and its Affiliates as additional insureds is
not intended to be a limitation of IBM’s liability under the Agreement and will
in no event be deemed to, or serve to, limit IBM’s liability to Solectron to
available insurance coverage or to the policy limits specified in this
Schedule M, nor to limit Solectron’s rights to exercise any and all remedies
available to Solectron under the Agreement, at law or in equity.

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INDIRECT SOURCING SERVICES AGREEMENT
Between
Solectron and IBM
Schedule N
Change Control

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1.0   Change Management Process

  1.1   Objectives         The objectives of the Change Management Process are:

  1.1.1   To manage each Change Request in order to keep the scope of the
Services under control with full traceability;     1.1.2   To make sure each
Change Request is assessed by key stakeholders;     1.1.3   To make sure each
assessed Change Request is accepted, rejected, or deferred by the Parties;    
1.1.4   To track the implementation of each accepted Change Request and the
creation of relevant documentation associated with amendments to the Agreement;
and     1.1.5   To allow the impact of all Changes to be understood, documented,
and managed.

  1.2   Process

  1.2.1   The Services, including the P2P and Strategic Sourcing standards,
processes, procedures and controls or associated IT technologies, architectures,
standards, products, Software, Equipment, and Systems provided, operated,
managed, supported or used to provide the Services may be changed only by a
writing signed by authorized representatives of Solectron and IBM. Either
Solectron or IBM may request a change to the Services subject to the following
change control procedure:     1.2.2   A Change Request will be submitted by the
requesting Parties’ Project Executive and will reference the Services, describe
at a reasonable level of detail the change, the rationale for the change and the
impact the change may have on the Services both if it is accepted and if it is
rejected.     1.2.3   The Project Executives will review the Change Request and
will do one of the following:

  (a)   Approve the change by authorized representatives of Solectron and IBM
signing the Change Request. Upon such approval, the change will be implemented,
except that any Change Request proposing any modification to or that would
otherwise conflict with any provision of the Terms and Conditions, Schedule B
(Performance Management) or Schedule C (Charges) will not be effective until
also reviewed and approved by each Party’s legal department; or

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  (b)   agree in writing to submit the Change Request for further investigation
in accordance with Section 6.4 (Detailed Analysis), and, if the Change Request
was submitted by Solectron, to pay IBM in accordance with Section 7 (Performance
of T&M Work) of Schedule C for IBM’s investigation. Solectron and IBM will then
agree to mutually approve or reject the Change Request. If Solectron and IBM do
not agree, either IBM or Solectron may submit such Change Request to the
Management Board for resolution; or     (c)   reject the Change Request. If
rejected, the Change Request will be returned to the requesting Project
Executive along with the reason for rejection.     (d)   The Parties shall agree
upon which Party shall bear financial responsibility for the charges, fees and
costs associated with any change, including all charges, fees and costs
associated with (i) the design, installation, implementation, testing and
rollout of such change, (ii) any modification or enhancement to, or substitution
for, any impacted business process or associated Software, Equipment, System, or
Services, (iii) any increase in the cost to Solectron or the Services Recipients
of operating, maintaining or supporting any impacted business process or
associated Software, Equipment, System, or Services, and (iv) any increase in
Resource Unit usage resulting from such change.     (e)   Until a change is
agreed upon in writing, IBM and Solectron will continue to act in accordance
with the latest agreed version of the Agreement.

  1.3   Impact Assessment

  1.3.1   Except for upgrades to the P2P Platform, if IBM desires to make any
change to the Services, including any upgrade, replacement or addition that may
(i) increase Solectron’s total cost of receiving the Services; (ii) require
changes that will have a non-trivial adverse impact on Solectron’s or an
Affiliate’s or Service Recipient’s business; (iii) require IBM, Solectron or any
Service Recipients to install a new version, release, upgrade of, or replacement
for, any Software or Equipment or to modify any Software or Equipment, or
(iv) have a material adverse impact on the functionality, interoperability,
performance, accuracy, speed, responsiveness, quality or resource efficiency of
the Services, then IBM shall provide to Solectron a written proposal describing
in detail the extent to which the desired change may affect the functionality,
performance, price or resource efficiency of the Services and any benefits,
savings or risks to Solectron or the Service Recipients associated with such
change.

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  1.3.2   For planned upgrades to the P2P Platform, IBM shall provide to
Solectron a written plan describing in detail the extent to which the planned
upgrade may affect the functionality, performance, or resources and any
benefits, savings or risks to Solectron or the Service Recipients associated
with such change. Such upgrades shall be performed at IBM’s discretion, however,
IBM will be responsible for any incremental costs to Solectron necessary to
prevent any degradation in Solectron’s ability to receive the Services related
to such upgrade.

  1.4   Detailed Analysis         If Solectron directs IBM to perform a Detailed
Analysis, IBM will provide to Solectron in writing an assessment and evaluation
of the impact of the Change on the then-current scope, price, and performance of
the Services in accordance with the timescale agreed between the Parties. In
doing so, IBM will include at least the following:

  1.4.1   a description of the Change     1.4.2   an analysis of the impact of
the Change on the following (as appropriate given the nature of the Change):

  (a)   Scope of the Agreement;     (b)   Savings;     (c)   Service Levels or
other performance metrics;     (d)   Delivery dates;     (e)   Any disaster
recovery or business continuity plan     (f)   Infrastructure requirements    
(g)   Any other matter reasonably requested by PG&E or reasonably considered by
IBM to be relevant

  1.4.3   a list of Work Products or Deliverables required from each Party for
implementing the Change     1.4.4   a timetable for implementation of the Change
    1.4.5   any proposed changes to the Charges, including;     1.4.6   an
analysis of the reasons that IBM believes its costs will be materially impacted
by the Change and any supporting documentation

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  1.4.7   any proposed modifications or additions to or deletions from the
pricing elements from which the Charges are calculated     1.4.8   any other
relevant information, including information justifying the proposed charges or
modifications to the Charges     1.4.9   an assessment of the added value of a
proposed Change to Solectron     1.4.10   an assessment whether any or all of
the activities identified in the proposed Change constitute New Services, as
defined in Section 2.8 (New Services) of the Agreement;     1.4.11   any
consequent amendments to the Agreement required to implement the Change.

  1.5   Testing         Prior to making any change or using any new (e.g., not
tested in or for the Solectron environment) Software, Equipment or System used
to provide the Services, IBM shall have verified by appropriate testing that the
change or item has been properly installed, is operating in accordance with its
specifications and is performing its intended functions in a reliable manner.  
  1.6   Implementation of changes         IBM shall schedule and implement all
changes so as not to (i) non-trivially disrupt or adversely impact the business
or operations of Solectron or any Service Recipient, (ii) degrade the Services
then being received by them, or (iii) unreasonably interfere with their ability
to obtain the full benefit of the Services.     1.7   Temporary Emergency
Changes         Notwithstanding the foregoing, IBM may make temporary changes
required by an emergency if it has been unable to contact the Solectron Global
PM or his or her designee to obtain approval after making reasonable efforts.
IBM shall document and report such emergency changes to Solectron as promptly as
reasonably possible given the circumstances, but not later than two business
days after the change is made. Such changes shall not be implemented on a
permanent basis unless and until agreed by the Parties.

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