##### 



EXHIBIT 10.5 Confidential Portions
omitted and filed separately with the   Securities and Exchange
Commission. Bullet points denote omissions.   MASTER REPAIR SERVICES AGREEMENT between NORTEL NETWORKS LIMITED and FLEXTRONICS TELECOM SYSTEMS LTD.      Dated as of June 29, 2004




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TABLE OF CONTENTS DEFINITIONS
    
    
    6SECTION 1 SCOPE OF THE RELATIONSHIP
    
    
    131.1
    
    Expectations
    
    
    131.2
    
    Information Access
    
    
    131.3
    
    Commitments and Obligations
    
    
    131.4
    
    Competitiveness
    
    
    141.5
    
    Structure of the Agreement
    
    
    14SECTION 2 GOVERNANCE PROCESS
    
    
    152.1
    
    Transition Planning
    
    
    152.2
    
    Strategic Governance
    
    
    152.3
    
    Operations Governance
    
    
    152.4
    
    Monthly Operations Reviews
    
    
    162.5
    
    Resources for Repair Services Support
    
    
    16SECTION 3 ORDERS
    
    
    163.1
    
    Service Blanket Orders
    
    
    163.2
    
    Acceptance of Orders
    
    
    163.3
    
    Minimum Commitment
    
    
    173.3.1
    
    Adjustments to the Minimum Commitment
    
    
    173.3.2
    
    Remedy for Failure to Achieve Minimum Commitment
    
    
    173.3.3
    
    Forecast of Required Repair Services
    
    
    173.3.4
    
    Forecast of Additional Required Repair Services
    
    
    183.4
    
    Issuance of Orders Electronically
    
    
    18SECTION 4 TRANSFER OF TITLE AND RISK OF LOSS
    
    
    184.1
    
    Transfer of Title and Risk of Loss
    
    
    18SECTION 5 DELIVERY PROCESS
    
    
    185.1
    
    Repair and Delivery Period
    
    
    195.2
    
    Packaging, Labelling and Trade-Marks
    
    
    195.3
    
    Management of Third Party Contracts
    
    
    19SECTION 6 MATERIALS MANAGEMENT PROCESS
    
    
    196.1
    
    Repair Facility Location
    
    
    196.2
    
    Material and Supplier Management Services
    
    
    206.3
    
    Storing and Handling
    
    
    20SECTION 7 CHANGE MANAGEMENT
    
    
    207.1
    

Joint
Change Management Process
    
    
    207.1.1
    
    Flextronics Proposal
    
    
    207.1.2
    
    Nortel Networks Proposal
    
    
    217.2
    
    Joint Product Change Management Process
    
    
    217.3
    
    New Product for Repair Introduction (NPRI)
    
    
    227.4
    
    New Capital Investments
    
    
    22SECTION 8 INVENTORY MANAGEMENT
    
    
    228.1
    
    End-of-life Planning
    
    
    228.2
    
    Class B Inventory and Class C Inventory
    
    
    238.3
    
    Open Market Purchases
    
    
    238.4
    
    Components
    
    
    248.5
    
    Purges
    
    
    248.6
    
    Support of Nortel Networks Remanufacturing Activities
    
    
    25
    1




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8.7
    
    Excess Inventory
    
    
    258.8
    
    Consigned Inventory
    
    
    268.9
    
    Order of Inventory Usage
    
    
    268.10
    
    A-B Writedowns
    
    
    278.11
    
    Tracking of Inventory Furnished by Nortel Networks
    
    
    28SECTION 9 QUALITY
    
    
    289.1
    
    Metrics, Report Card and Liquidated Damages
    
    
    289.1.1
    
    Report Card
    
    
    289.1.2
    
    Liquidated Damages for Failure to Meet Metrics
    
    
    299.1.3
    
    Pass-through of Liquidated Damages from Customers
    
    
    309.1.4
    
    Termination for Breach of Metrics
    
    
    319.2
    
    Industry Standards
    
    
    329.3
    
    Source Inspection
    
    
    329.4
    
    Repair Quality
    
    
    32SECTION 10 REPAIR COST MANAGEMENT PROCESS
    
    
    3310.1
    
    Prices for Repair Services
    
    
    3310.2
    
    Payment, Taxes and Duties
    
    
    3410.2.1
    
    Invoices
    
    
    3410.2.2
    
    Payment
    
    
    3410.3
    
    Ongoing Cost Reduction
    
    
    3510.4
    
    Incremental Cost Reduction
    
    
    3510.4.1
    
    Definition of ICR
    
    
    3510.4.2
    
    ICR Commitment
    
    
    3610.4.3
    
    Implementation of ICR
    
    
    3610.4.4
    
    Year 4 Cost Reduction
    
    
    3610.5
    
    OCR Threshold Commitment
    
    
    36SECTION 11 BUSINESS CONTINUITY
    
    
    3711.1
    
    Business Continuity Planning
    
    
    37SECTION 12 WARRANTIES
    
    
    3812.1
    
    Repair Services
    
    
    3812.2
    
    Return of Products under Warranty
    
    
    3912.3
    
    Epidemic Failure
    
    
    3912.3.1
    
    Procedure for Epidemic Failure
    
    
    3912.3.2
    
    Remedies for Epidemic Condition
    
    
    39SECTION 13 INTELLECTUAL PROPERTY RIGHTS AND LICENSES
    
    
    4013.1
    
    License to Nortel Company Proprietary Information Granted
    
    
    4013.2
    
    Limitations on Grant of License
    
    
    4113.3
    
    Flextronics Inventions
    
    
    4113.4
    
    Specifications and Deliverables Owned by NNL
    
    
    4113.5
    
    Flextronics Retains Ownership of Flextronics Proprietary Information
    
    
    4113.6
    
    Assignment of Inventions Agreements with Employees
    
    
    41SECTION 14 INDEMNIFICATION
    
    
    4214.1
    
    Intellectual Property Indemnification
    
    
    4214.1.1
    
    By NNL
    
    
    4214.1.2
    
    By Flextronics
    
    
    4314.1.3
    
    Measures to Safeguard NNL against Liability
    
    
    4314.2
    
    Other Indemnification
    
    
    4414.2.1
    
    By Flextronics
    
    
    4414.2.2
    
    By Nortel Networks
    
    
    44SECTION 15 LIMITATION OF LIABILITY
    
    
    44
    2




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SECTION 16 COMMUNICATION AND INFORMATION TRANSFER
    
    
    4516.1
    
    Access to Nortel Networks Computer Systems by Flextronics
    
    
    4516.2
    
    Flextronics Compatibility with Nortel Networks Computer Systems
    
    
    4516.3
    
    Information Technology Services
    
    
    46SECTION 17 EQUIPMENT FURNISHED BY NORTEL NETWORKS
    
    
    4617.1
    
    Title to Equipment Furnished by Nortel Networks
    
    
    4617.2
    
    Risk, Insurance and Maintenance of Equipment Furnished by Nortel Networks
    
    
    46SECTION 18 RESERVED ASSETS
    
    
    46SECTION 19 LEGAL AND REGULATORY COMPLIANCE
    
    
    46SECTION 20 INTERNATIONAL TRADE
    
    
    4720.1
    
    Exports
    
    
    4720.2
    
    Customs Invoice
    
    
    4720.3
    
    Duty Drawback and Minimization
    
    
    48SECTION 21 ENVIRONMENTAL POLICIES
    
    
    4821.1
    
    ISO 14001
    
    
    4821.2
    
    Corporate Policy
    
    
    4821.3
    
    VOC Free and Lead-Free Technology
    
    
    4921.4
    
    European Union (EU) Environmental Directives
    
    
    4921.4.1
    
    Compliance
    
    
    4921.4.2
    
    Indemnification
    
    
    5021.5
    
    Packaging Reusable and Recyclable
    
    
    5021.6
    
    INTENTIONALLY LEFT BLANK
    
    
    5021.7
    
    Collaborate on Environmental Initiatives
    
    
    5021.8
    
    Hazardous Materials
    
    
    50SECTION 22 CONFIDENTIALITY AND PROPRIETARY INFORMATION
    
    
    5122.1
    
    Restriction on Disclosure and Use of Confidential Information
    
    
    5122.2
    
    Publicity
    
    
    52SECTION 23 INSURANCE
    
    
    5223.1
    
    General Liability Insurance
    
    
    5223.2
    
    Property and Business Insurance
    
    
    5323.3
    
    Certificate of Insurance
    
    
    53SECTION 24 EXPIRATION OR TERMINATION
    
    
    5324.1
    
    Termination
    
    
    5324.2
    
    Effect of Expiration or Termination
    
    
    55SECTION 25 TERMINATION ASSISTANCE
    
    
    5625.1
    
    Termination Assistance Services
    
    
    5625.2
    
    Obligation to Provide Termination Services
    
    
    5725.3
    
    Termination Assistance Period
    
    
    57SECTION 26
    
    
    57DISPUTE RESOLUTION
    
    
    5726.1
    
    Internal Dispute Resolution
    
    
    57SECTION 27 GENERAL PROVISIONS
    
    
    5727.1
    
    Access to Facilities
    
    
    5727.2
    
    Reporting
    
    
    58
    3




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27.3
    
    Documentation
    
    
    5827.4
    
    Audits
    
    
    5827.4.1
    
    Agreement Compliance
    
    
    5827.4.2
    
    Control & Security Compliance
    
    
    5827.5
    
    Force Majeure
    
    
    5827.6
    
    Notices
    
    
    5827.7
    
    Independent Contractor
    
    
    5927.8
    
    Flextronics Responsible for its Contractors
    
    
    6027.9
    
    Assignment
    
    
    6027.10
    
    Severability
    
    
    6027.11
    
    Governing Law; Waiver of Jury Trial
    
    
    6127.12
    
    Consent to Jurisdiction
    
    
    6127.13
    
    Entire Agreement; Amendments
    
    
    6127.14
    
    Most Favored Customer
    
    
    6227.15
    
    Construction
    
    
    6227.16
    
    Headings
    
    
    6227.17
    
    Time of Essence
    
    
    6227.18
    
    Agreement by All Flextronics Entities
    
    
    6227.19
    
    Language
    
    
    62
 EXHIBITS Exhibit 1
    
    Third Party Management Statement of WorkExhibit 2
    
    Logistics Services Statement of WorkExhibit 3
    
    Repair Services Statement of WorkExhibit 4
    
    A to B Writedown TemplatesExhibit 5
    
    Metrics & ScorecardExhibit 6
    
    ProductsExhibit 7
    
    Pricing and Cost Reduction ProcessExhibit 8
    
    SpecificationsExhibit 9-1
    
    Form of Agreement to Intellectual Property and Confidentiality (Nortel Networks)Exhibit 9-2
    
    Form of Employee Confidential Information and Inventions Agreement (Flextronics)Exhibit 10
    
    Dispute EscalationExhibit 11
    
    EMEA Employment ProvisionsExhibit 12
    
    Managed ContractsExhibit 13
    
    Reserved Assets
    4




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Exhibit 14
    
    Out of Scope ActivityExhibit 15
    
    Process to Establish Day One Pricing
    5




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Master Contract Repair Services Agreement This Agreement is entered into between Nortel Networks Limited, a Canadian
corporation with a place of business at 8200 Dixie Road, Suite 100, Brampton,
Ontario (NNL) and Flextronics Telecom Systems Ltd., a company organized under
the laws of Mauritius, and having its registered office located at Suite 802 St
James Court, St Denis Street, Port Louis, Mauritius, executed as of June 29,
2004 (Execution Date). As set out in the Phased Closing Side Letter, dated
as of the Execution Date, the Effective Date of this Master Repair Services
Agreement (the Agreement) shall be the date that the first Virtual System
House Agreement is executed (Effective Date). The Parties agree that the
terms and conditions of this Agreement shall come into effect for each VSHA
executed as such VSHAs are executed (VSHA Effective Date(s)). WHEREAS NNL wishes Flextronics to provide NNL certain repair services relating
to orders made by NNL to Flextronics in respect of products manufactured
pursuant to the terms of the MCMSA (as defined herein). WHEREAS Flextronics International Ltd., a company duly established under the
laws of Singapore, and having its registered office located at 2 Changi South
Lane, Singapore 486123 acting through its Hong Kong branch office with offices
at Room 908, Dominion Centre, 43-59 Queens Road East, Wanchai, Hong Kong and
NNL have executed that certain Performance Guarantee dated X, 2004; WHEREAS NNL has agreed to purchase and Flextronics has agreed, upon the terms
and conditions set out herein, to provide the services as more particularly
defined herein; NOW THEREFORE, in consideration of the mutual promises hereinafter set forth
(the receipt and sufficiency of which is hereby acknowledged), the Parties
hereby agree as follows: DEFINITIONS Affiliate means individually or collectively:  (a)
    
    a Manufacturing Licensee;(b)
    
    a joint venture or other cooperative business
enterprise formed between Nortel Networks and one (1) or more
person(s) which are not part of or related to Nortel Networks;
and/or(c)
    
    a corporation or other legal entity in which Nortel
Networks, directly or indirectly, at any time, owns or controls
twenty (20%) percent or more of the voting equity shares, or
securities convertible into such shares. Asset Purchase Agreement means the agreement executed between NNL and
Flextronics dated June 29, 2004.    6




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Assists means goods and services supplied directly or indirectly, free of
charge or at a reduced cost for use in connection with the production of
imported goods, such as raw materials, components, parts used for or
incorporated into the imported goods, tools, dies, moulds and other equipment
used to produce the finished goods, any materials used to produce the finished
goods being imported, engineering, development work, art work, designs, plans
or sketches undertaken anywhere other than the country of import. Business Continuity Plan has the meaning set forth in Section 11.1, known to
Flextronics as the Business Resumption Plan. Business Day means, for the purposes of dealings between (i) NNL and
Flextronics hereunder, any day other than Sunday, or a statutory holiday or
otherwise scheduled holiday agreed to in writing by the parties on which either
of such parties is closed for business. CA means a point of time at which the Class A material is available to select
customers. Carrying Charge means [] per annum. For Carrying Charge applied to
End-of-Life Inventory, the Carrying Charge will be []. Class A Inventory is sometimes referred to as Class A material and means
Products that are brand new and have not been installed in a Customers live
network. Class B Inventory is sometimes referred to as Class B material and means
those Products repaired and available for use. Class C Inventory is sometimes referred to as Class C material and means
unrepaired inventory. Commencement Date means the VSHA Effective Date for the last of the following
System Houses to be transferred: Calgary, Montreal, Monkstown, or Chateaudun;
provided that the optical designers in Ottawa and Monkstown and the logistics
management and embedded physical repair in St. Laurent and Calgary must have
been transferred. Competitor means any company with more than $50 million in revenues from the development or sale of telecom, optical or wireless networking
equipment or $10 million of repair revenue. Component Cost means Flextronics actual unburdened cost of components,
inclusive of freight and duty, as set forth and verifiable by Flextronics
purchase order with its components supplier. This cost will take into
consideration all rebates and favourable payment terms (cash, term or other). Confidential Information has the meaning set out in Section 22.1. Consigned
Inventory shall mean End-of-Life Inventory or other Inventory
purchased by Nortel Networks but held by Flextronics under the terms set out in
Section 8.8. Consumable Material means materials that are consumed in the repair and
logistics process, such as solder, finished goods packaging, labels, skids,
pallets and shipping packaging materials.    7




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##### 



Contact Center means the point of contact designated by Nortel Networks for
its Customers to request Repair Services. Control and
Responsibility means, for the purposes of this Agreement, []. Currency Conversion means a factor used in calculating Price or Material
Cost, or any part thereof, for purchases in a currency other than the currency
in which Nortel Networks is required to pay Flextronics hereunder, based on the
FX Bench forward currency rate as published by Reuters 12.00 CET on the
mutually agreed date for pricing (the Exchange Rate), or any other benchmark
as otherwise agreed in the applicable VSHA. Customer means a direct or indirect customer of Nortel Networks. Daily Usage Rate means the amount of Class B Inventory expressed in units
that were sold in the last 90 calendar days divided by 90. Delivery Location means the location specified in an Order to which the
Repaired Product shall be delivered or to the stocking location. Dollar or $ means U.S. dollars. ECO or Engineering Change Order means a written direction in the form of an
engineering change order to make a change to a Product including a change to
the design, manufacture, and repair or test procedure for a Product. EDI means electronic data interchange. End-of-Life Inventory means components that are necessary for the repair of
the Products which have been or are scheduled to be discontinued by suppliers. Epidemic Condition means when RDOA Repaired Product failures equal or exceed
the percentage as mutually agreed and set forth in Exhibit 5. Flextronics means Flextronics and, as applicable, any Subsidiary of
Flextronics that is to perform Repair Services pursuant to this Agreement. Flextronics Invention means any innovation, improvement, idea or feature,
whether or not patentable or registerable, which is conceived or created in the
course of the performance by Flextronics of the Repair Services, but shall not
include any Product Specific Inventions. Flextronics Proprietary Information means information, technology, processes,
or other proprietary property, including copyrights, trade secrets, know-how,
mask work rights, any waiver to moral rights, patents and/or patent
applications in any form or medium developed or acquired by Flextronics or its
licensors other than Nortel Networks, but for greater certainty, does not
include the following: (i) Nortel Company Proprietary Information or such
information or processes listed above which are derived from Nortel Company
Proprietary Information; (ii) the Specifications and all deliverables resulting
from the Services; (iii) Reserved Assets; (iv) materials and/or equipment
loaned pursuant to Section 17.1; (v) Product Specific Inventions; and    8




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(vi) such information, technology, processes, etc. developed or arising out of Services
funded by Nortel Networks under this Agreement. Force Majeure means all acts or events beyond the reasonable control of a
Party. This definition shall not include any act or event that would have been
prevented, or the effects of which would have been substantially mitigated, by
implementation of a Business Continuity Plan in accordance with best practices
in the relevant equipment manufacturing industry for telecommunications by
Flextronics as required under Section 11.1, unless Flextronics demonstrates
that it has made a good faith effort to implement such a plan. For clarity,
the following will be considered an event of Force Majeure: an act of God, act
or decree of governmental or military bodies, strike, lock-out, fire, casualty, flood, earthquake, war, epidemic, destruction of production
facilities, riot, insurrection; provided however a Partys failure to resolve its own labour
difficulties such as strike or lock-out shall only be considered an event of Force Majeure if that
Party (i) has included specific action plans related to strikes and lock-outs in its Business
Continuity Plan (ii) is in compliance with fair labour practices under the law of the applicable
jurisdiction, and (iii) has made commercially reasonable efforts to resolve such labour
difficulties. GA means general availability of Class A material. Government Entity means any federal, provincial, state, municipal or other
governmental authority, domestic or foreign, or any entity exercising
executive, legislative, judicial, regulatory, or administrative functions of
government. Hub means a physical location where Customers return Products and where
Inventory is located. Inventory means components purchased by Flextronics, work in process, and
Products. Leadership Category means a business division within Nortel Networks, which
is currently designated as one of Wireless Networks, Optical Networks, Wireline
Networks and Enterprise Networks. License
Agreement means the agreement or agreements entered into between NNL
and Flextronics on the date of this Agreement whereby NNL has agreed to grant
to Flextronics certain licenses in respect of certain licensed intellectual
property, as defined therein. Life Cycle means, with respect to any Product, the time beginning at CA until
end-of-life. Logistics as more particularly described in Exhibit 2, means those services
including i) warehouse services, ii) transportation coordination and
management, iii) export services, iv) packaging and labeling, v) Inventory
control and reporting, and vi) trade and compliance. Manufacturing Licensee means a third party which enters into an agreement
with Nortel Networks to manufacture, in modified or unmodified form, Products,
whether or not associated with a right to lease, sell, sublicense or otherwise
distribute (directly or indirectly through distributors) such Products under
the brand name of a Nortel Company or that of the Manufacturing Licensee. Material and
Supplier Management Services shall mean those services to be
provided by Flextronics described in Section 6.2. of this Agreement.    9




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MCMSA means the Amended and Restated Master Contract Manufacturing Services
Agreement dated June 29, 2004, between NNL and Flextronics with respect to
manufacturing services to be provided to Nortel Networks relating to the
products specified therein. Minimum
Commitment means Nortel Networks spend on Repair Services as set
forth in Section 3.3. NC
Material or
NC means components or services which are sourced under a
contract or other commercial relationship with Nortel Networks and Nortel
Networks retains sourcing control. Nortel Company means NNL or any of its Subsidiaries. Nortel Company Proprietary Information means:  (a)
    
    Programs;(b)
    
    technology, designs or other information that enjoy issued or
pending statutory proprietary protection, including patents,
copyrights, waivers of moral rights, mask work rights or integrated
circuit topography registrations, industrial design registrations or
design patents but not trade-marks or other indicia of origin;(c)
    
    confidential or non public business information including ideas,
formulae, plans, proposals, designs, schematics, drawings, flow charts,
product and process and test specifications, trade secrets, know how,
technical data, algorithms, databases, and technical reports, and
customer, marketing and financial information; embodied in any form or medium and owned or developed by or on behalf of a
Nortel Company or acquired from its licensors with rights to disclose or
sublicense that pertains to Nortel Companys business, including Products and
their design, manufacture, use and testing and Pre-
Production Products as defined in the MCMSA, Systems, Specifications and all
deliverables resulting from the Repair Services, and Product Specific
Inventions or any Flextronics Proprietary Information deemed to be owned by a
Nortel Company pursuant to Section 13.4 hereof. Nortel Networks means NNL or, as applicable, any Nortel Company that has
become a Party to this Agreement by issuing an Order under this Agreement. Nortel Networks Supplier means an Affiliate or any Person who supplies repair
services to Nortel Networks. NPRI means new products and process introduction for Repair of Products that
are introduced for the first time at a Repair Facility. Order(s) means either the hard copy document or EDI used by Nortel Networks
to order Repair Services under this Agreement pursuant to Section 3.4 of this
Agreement. Party means either NNL or Flextronics and Parties shall mean both NNL
and Flextronics.    10




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Person means an individual, a partnership, a corporation, an association, a
limited liability company, a joint stock company, a trust, a joint venture, an
unincorporated organization or a Government Entity. Price means the price paid by Nortel Networks to Flextronics with respect to
any Repair Services as set forth herein. Product(s) means those products identified in Exhibit 6 as of the Effective
Date and any additions to Exhibit 6 specifically agreed as evidenced in a
written instrument signed by authorized representatives of the Parties. Product Family means NNLs Optical, Wireline, Wireless and Enterprise
leadership categories. Product Specific Inventions means Flextronics innovations, improvements,
ideas or features relating to or incorporated in a Product, but not including
any such innovations, ideas or feature relating solely to repair processes for
the Product. Programs means software used or retained for use in the provision of Repair
Services in whatever form, including that which is ROM resident, listings,
flowcharts, logic diagrams, operating instructions, and any other related
documentation, whether or not described in the Specification. Purge means the rework of Inventory as further defined in Section 8.5. Repair means test analysis, repair, upgrade, incircuit testing, system level
testing, packing, Logistics and refurbishment, as set out in the Statement of
Work, provided to Nortel Networks by Flextronics. Repair Change Impact Form means the form to be completed by Flextronics in
response to a change to the Repair or test procedure of a Product. This form
shall contain, at a minimum, an estimate of the change of the price in the
relevant Repair Services as well as any Purge charges as defined in Section
8.5. R DOA or Repair Dead On Arrival means Product that has been repaired and is
being returned for repair again within 90 days of the initial Repaired Product
shipment. Repair Facility(ies) means (a) Flextronics facility(ies) where Flextronics
performs Repair Services. Repair Services means the services specific to repair and distribution of the
Products, including engineering, technical, programming, Logistics, Repair,
overhaul and other functions and services as applicable, provided to Nortel
Networks by Flextronics as set forth in the applicable Statement of Work. Repair Warranty Period means twelve (12) months from Shipping Date.    11




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Repaired Product means a Product on which a Repair has been completed by
Flextronics or third parties managed by Flextronics. Replacement Value means the cost of replacing any Repaired Product, Product
to be Repaired or Nortel Networks property with an equivalent value asset. Reserved Assets means all test fixtures, functional test equipment, and
system test equipment unique to NNL as well as those assets included in the
Subject Assets as defined in the Asset Purchase Agreement and which may be
repurchased by Nortel Networks from Flextronics pursuant to the provisions of
Section 18 of this Agreement. SC
Material or SC means components or services sourced under a
contract or other commercial relationship with Flextronics and Flextronics
retains sourcing control. Service Blanket Order means an Order which does not set forth a delivery
date, Shipping Date and/or specific quantities. Shared Services Agreement means the Shared Services Agreement between NNL and
Flextronics as provided in the Asset Purchase Agreement. Shipping Date means the date when a Product shall be delivered to the carrier
at the Shipping Location for shipment to the Delivery Location. Shipping Location(s) means the location(s) as may be amended from time to
time by the Parties, from which a Product shall be shipped by Flextronics. Specifications means the documents referenced in Exhibit 8. These
Specifications may be amended from time to time as mutually agreed by the
Parties. Statement of Work means the description of Repair Services attached hereto as
Exhibits 1, 2 and 3. Subsidiary means, with respect to any specified Person, means any corporation
with respect to which the Person directly or indirectly owns more than fifty
percent (50%) of the issued and outstanding equity securities or securities
convertible into such securities or has the power to vote or direct the voting
of sufficient securities to elect a majority of the directors. With respect to
the Parties, a specified Person shall be Nortel Networks Corporation and
Flextronics International Ltd. System means a Nortel Networks product comprised of various components and
sub-assemblies and which incorporates one (1) or more Products. Term means has the meaning set forth in Section 1.6. Trade-Marks mean words, designs, shapes, configurations, guises or brands
that serve as indications that the origin of Products is Nortel Networks and
includes model numbers and product designations as used both internally and
externally on the Products or in conjunction with their sale or other
distribution.    12




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Virtual Systems
House Agreement or VSHA shall mean any Virtual Systems
House Agreement agreed upon in writing between Nortel Networks and Flextronics,
a form of which is attached to the MCMSA as Exhibit 2, which when executed,
together with its Schedules, shall form part of the MCMSA. Year One means the twelve months following the Commencement Date. Year Two means the twelve months following the first anniversary of the
Commencement Date. Year Three means the twelve months following the second anniversary of the
Commencement Date. Year Four means the twelve months following the third anniversary of the
Commencement Date. SECTION 1
SCOPE OF THE RELATIONSHIP  1.1
    
    Expectations Nortel Networks and Flextronics will collaborate in the development and
execution of strategic plans for support of Nortel Networks business strategy
worldwide for Repair Services. Nortel Networks has designated Flextronics as a
Strategic Supplier under Nortel Networks current Supplier Business Engagement
Model.  1.2
    
    Information Access Flextronics will have access to the Nortel Networks Proprietary Information and
NNL shall have access to Flextronics Proprietary Information as set forth in
this Agreement. To enable Flextronics to perform the Repair Services NNL shall
provide all mutually agreed to information related to those Repair Services.  1.3
    
    Commitments and Obligations Nortel Networks shall maintain a central Contact Center where Customers may
request Repair Services. During the Term, and provided Flextronics is not in
material breach of this Agreement, Nortel Networks agrees to purchase from
Flextronics []. Flextronics agrees to perform Repair Services in respect of all Products
received from Nortel Networks in accordance with the Statement of Work and the
Nortel Networks workmanship standards and procedures as set out in the
Specifications or any more stringent standard mutually agreed with Flextronics
and indicated herein in writing. Flextronics shall perform the Repair    13




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Services
solely for, either directly or on behalf of, Nortel Networks. Flextronics
shall not perform services on Nortel Networks Products for third parties.  1.4
    
    Competitiveness If Flextronics fails to remain Competitive with its competitors with respect to
the Repair Services, then Nortel Networks may source such Repair Service from
another supplier. Notwithstanding the foregoing, Nortel Networks will not
transfer the Repair Services if Flextronics becomes Competitive within
forty-five (45) days from notification by Nortel Networks. For the purposes of this Section, Competitive means terms and conditions
taken as a whole that are at least as favorable to Nortel Networks as any bona
fide benchmarking exercise or bona fide quote from a third party considering
price, product quality, lead times, local content, delivery, warranty,
technical support, Inventory ownership, payment terms, assumption of overhead,
logistics, and other criteria identified by Nortel Networks in writing to
Flextronics. A bona fide benchmarking exercise shall be considered to be one
performed by an independent
recognized benchmarking firm which is (i) selected by Nortel Networks from
those companies which are regularly engaged in the industry related to the
Repair Services, (ii) is not a Competitor of Flextronics and (iii) which has
executed a non-disclosure agreement reasonably satisfactory to Flextronics.
All fees and charges paid to such benchmarking firm shall be borne by Nortel
Networks, and such fees and charges shall not be contingent upon reaching a
conclusion favorable to Nortel Networks. Each party shall have the opportunity
to advise the benchmarking firm of any information or factors that it deems
relevant to the conduct of the benchmarking, with the intention of providing an
apples to apples comparison, so long as such information is disclosed to the
other Party. The benchmarking firm shall provide the written reports and the
core data resulting from the benchmarking to both Nortel Networks and
Flextronics, including the factors actually used to perform the benchmarking,
data on participants and confidence factors related to the accuracy of the data
and the benchmarking methodology. Flextronics will be entitled to challenge
the accuracy of the results of the benchmarking exercise pursuant to the
Dispute Resolution process in Exhibit 10.  1.5
    
    Structure of the Agreement This Agreement sets out the terms and conditions of the relationship between
NNL and Flextronics and the Repair Services to be performed by Flextronics
pursuant to this Agreement and the terms of performance of such Repair Services
by Flextronics. Each Order, or Service Blanket Order issued to Flextronics
shall create rights and obligations between the Nortel Company which issues the
Order and the Flextronics Subsidiary to which it is issued. An Order, or
Service Blanket Order, shall bind solely the Nortel Company that issued it and
the Flextronics Subsidiary to which it is issued, and neither NNL nor any other
Nortel Company shall be liable for any Order or Service Blanket Order not
issued by it. This Agreement shall continue to apply to an Order issued during the Term until
all obligations provided for in this Agreement are performed. Notwithstanding
that an Order does not refer to this Agreement, any Order issued by a Nortel
Company during the Term shall be deemed to have been issued pursuant to this
Agreement unless the Parties expressly agree in writing to the contrary. In
the event of any conflict or inconsistency between the terms of this Agreement
and    14




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any other document ancillary or relating thereto, the following order of
precedence shall apply, but only to the extent of an express conflict or
inconsistency: (1) this Agreement, (2) Exhibits, (3) Order(s), and (4) Service
Blanket Order(s).  1.6
    
    Term This Agreement shall commence on the Effective Date and continue until
terminated in accordance with this Agreement (the Term). For purposes of this
Section, Section 10 and related Exhibits, Year One shall begin on the
Commencement Date. Years Two, Three and Four shall begin on the respective
anniversaries of such Commencement Date. Either Party may deliver a notice for
termination for convenience to take effect [] following such notice; provided
however, that no such notice may be delivered before a date that is [] before
the fourth anniversary of the beginning of Year One. SECTION 2
GOVERNANCE PROCESS  2.1
    
    Transition Planning The Parties will mutually agree to meet to discuss transition planning in
respect of the Repair Services as frequently as is required. Such discussions
shall consider the terms of any transition implementation plans developed by
the Parties.  2.2
    
    Strategic Governance Nortel Networks and Flextronics shall meet quarterly at a management level to
exchange and align business strategies around the following areas:  (a)
    
    Quarterly Business Reviews. The Parties shall conduct quarterly business
reviews that are strategic and global in nature, to include but not
limited to: consolidated global Report Card performance, total business
and Nortel Networks business trends, key financial indicators, process
improvements, significant technology trends and advancements,
organizational alignments, and cost to market and time to market foot
print and trends.(b)
    
    Cost Reduction Opportunities. The Parties shall discuss cost reduction
opportunities, and Flextronics shall use its commercially reasonable
efforts to identify such opportunities including savings in the areas of
research and development, head count investment, risk, timeframe and
materials.(c)
    
    Metrics and Report Card. The Parties shall use the performance
indicators set forth in Section 9.1 and Exhibit 5 to establish the Report
Card.  2.3
    
    Operations Governance Nortel Networks and Flextronics shall:    15




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(a)
    
    Dedicate business management teams to provide consistent and efficient
responses to mutually agreed upon goals and requirements.(b)
    
    Create a process to communicate about and resolve issues promptly and to
drive continuous improvement of the day-to-day operation.(c)
    
    Comply with all reporting and meeting requirements, including collecting
and reporting scorecard metrics, as provided in this Agreement.(d)
    
    Upon reasonable prior notice, provide open book access for Nortel
Networks at Flextronics premises to resources, documents, records,
databases and any other information that is not in violation of any third
party agreements of confidentiality and is directly relevant to Nortel
Networks cost management, including but not limited to, information
relating to the On-going Cost Reduction and continuous improvement, as
more fully described in Section 10.3 and Exhibit 7. Each Party hereby
covenants and agrees that it shall keep confidential all information
gathered in the open book process, including not disclosing such
information directly or indirectly to any competitor or supplier of the
disclosing Party, all subject to the provisions of Section 22. Any
breach of the preceding sentence shall be considered to be a material
breach of this Agreement.(e)
    
    Review the total cost plan and provide the results of such review to
Nortel Networks on a timely basis  2.4
    
    Monthly Operations Reviews Flextronics and Nortel Networks shall conduct monthly (or on a schedule as
otherwise agreed) operations reviews of the business performance, processes and
procedures of both Flextronics and Nortel Networks at the leadership category
level with the intent to improve the overall supply chain performance.  2.5
    
    Resources for Repair Services Support Throughout the term of this Agreement, Flextronics shall provide Repair
Services in accordance with the terms of this Agreement. Flextronics will
maintain available repair resources which may at Flextronics discretion be
independent of manufacturing resources. SECTION 3
ORDERS  3.1
    
    Service Blanket Orders Nortel Networks may issue Service Blanket Orders to Flextronics for Repair
Services of Products. There shall be no minimum order quantity.  3.2
    
    Acceptance of Orders Nortel Networks or its designated Nortel Networks Supplier shall submit an
Order to Flextronics and if the Order complies with the terms of this
Agreement, Flextronics will    16




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acknowledge its acceptance of the Order issued by
Nortel Networks or its designated Nortel Networks Supplier.  3.3
    
    Minimum Commitment During the Term of this Agreement, Nortel Networks will source [] of its
spend on Repair Services with Flextronics (Minimum Commitment), excluding any
adjustments to the Minimum Commitment as set forth in Section 3.3.1.  3.3.1
    
    Adjustments to the Minimum Commitment  (A)
    
    Out of Scope Activity Flextronics acknowledges that the out of scope activity as defined in
Exhibit 14 will not be part of the Minimum Commitment calculations.  (B)
    
    Competitive Criteria If Flextronics fails to remain Competitive with its competitors with
respect to any Repair Service, then Nortel Networks may source such
Repair Services from another supplier. Records of any such deductions
from the Minimum Commitment will be made in writing and exchanged between
the Parties for full verification and agreement each quarter.
Notwithstanding the foregoing, Nortel Networks will not transfer Repair
Service(s) if Flextronics becomes Competitive within forty-five (45) days
from notification by Nortel Networks that Flextronics has failed to
remain Competitive, as defined below. For the purposes of this Section, Competitive shall have the same
meaning as Section 1.4 of the Agreement  (C)
    
    Performance Issues Nortel Networks may source its requirements for Repair Services from
other suppliers, in the event that Flextronics is in breach of the
breachable Report Card metrics as set out in Exhibit 5. These
requirements will not be part of the Minimum Commitment calculations.  3.3.2
    
    Remedy for Failure to Achieve Minimum Commitment If Nortel Networks fails to meet the Minimum Commitment for any reason other
than those set out in Section 3.3.1(A), (B) or (C) above, Nortel Networks
shall compensate Flextronics for []. The Parties will negotiate such costs in
good faith.  3.3.3
    
    Forecast of Required Repair Services If Nortel Networks provides Flextronics with a forecast or an estimate of
Repair Services that it expects to order, whether set forth in this Agreement
or otherwise, Flextronics acknowledges that Nortel Networks shall not be
obligated to submit an Order for any portion of such forecast or estimate.    17




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3.3.4
    
    Forecast of Additional Required Repair Services Should Flextronics require additional facilities from additional requirements
which did not exist at the Effective Date, and provided that Nortel Networks
approved Flextronics forecast or estimate, Nortel Networks shall be obliged to
discharge the commercially reasonable costs that may arise owing to an
underutilization of these additional facilities, additional Reserved Assets,
any related additional severance costs, or other mutually agreed costs caused
by the forecast or estimate of incremental Services.  3.4
    
    Issuance of Orders Electronically If Nortel Networks issues an Order electronically, such transaction shall be
carried out in accordance with the provisions set forth in Exhibit 26 of the
MCMSA. SECTION 4
TRANSFER OF TITLE AND RISK OF LOSS  4.1
    
    Transfer of Title and Risk of Loss Class B orders will be shipped DDU (Delivered Duty Unpaid) from Flextronics
Delivery Facility to a named destination within the same country, title shall
pass to Nortel Networks upon delivery to the named destination. Class B orders
will be shipped DDU (Delivered Duty Unpaid) from Flextronics Delivery Facility
to a Nortel Networks or a Customers named destination in a different country,
title shall pass to Nortel Networks immediately prior to importation into the
country specified in the named destination. Class C Inventory returns will be shipped DDU (Delivered Duty Unpaid) from
Nortel Networks or a Customer to Flextronics or Flextronics subcontractors
premises and title shall pass to Flextronics upon delivery to the named
destination. Nortel Networks may make a written request that title and risk of loss to Class
B orders or Class C Inventory pass to it at the points other than as outlined
above. Upon mutual agreement, Flextronics will comply with such request
provided that the revised transfer point is no later in the delivery process
then the relevant points stated above. For Class B orders and Class C Inventory returns that are shipped from
Flextronics Delivery Facility to another Flextronics Facility/Subcontractor
and/or repair vendor, title and risk of loss will remain with Flextronics.
Unless otherwise covered in existing third party/vendor agreements, all
shipping activities and costs are the responsibility of Flextronics. SECTION 5
DELIVERY PROCESS    18




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5.1
    
    Repair and Delivery Period Flextronics shall repair Products and deliver Repaired Products as set forth
in the Statement of Work.  5.2
    
    Packaging, Labelling and Trade-Marks Products shall be packaged and labeled in accordance with Nortel Networks
practices as more particularly set forth in Exhibit 2, the relevant
Specifications, or as Nortel Networks may otherwise direct in writing, and
consistent with the provisions of Section 21.5. Flextronics shall not
otherwise apply to or display on the Products Flextronics trade-marks or
other markings without the express written permission of Nortel Networks,
which may be withheld in its absolute discretion. Flextronics shall use the
Trade-Marks only to apply to Products on Nortel Networks behalf together with
other legends, notices or markings as Nortel Networks may direct.  5.3
    
    Management of Third Party Contracts Flextronics shall be responsible for managing applicable third party vendors as
set forth in Exhibit 1 in order to provide Repair Services under this
Agreement. 5.3.1 Where Nortel Networks has financial obligations in connection with
contracts or other agreements relating to assets, inventory, facilities or
services to which Nortel Networks is a party for the performance of Repair
Services contemplated under this Agreement with a third party and in the event
that Flextronics pursuant to such contracts or other agreements becomes liable
to discharge the financial obligations contained therein to any third party due
to a mutual decision by the Parties to terminate the relevant contract or other
documented agreement, then Nortel Networks shall have an obligation to pay
Flextronics a sum equal to the financial obligation required to be discharged
by Flextronics. Any sums due and not recovered under this Section may be
recovered by Flextronics from Nortel Networks as a debt. The parties hereby
intend that this obligation shall survive the termination of this Agreement and
will remain in effect until fulfilled. SECTION 6
MATERIALS MANAGEMENT PROCESS  6.1
    
    Repair Facility Location Flextronics shall repair each Product at the Site and/or on the repair line
initially agreed to by Flextronics and Nortel Networks, and Flextronics shall
not change such Site or repair line unless Nortel Networks consents in writing.
Flextronics shall follow Nortel Networks qualification process as set out in
Exhibit 3 of MCMSA. Where Flextronics proposes additional sites for Repair
Services to be performed, Flextronics shall provide a complete qualification
report. Nortel Networks shall provide its approval of the change within sixty
(60) days of receiving a complete and satisfactory qualification report. If
Nortel Networks fails to provide such approval    19




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within such time period,
Flextronics will be relieved of its obligation to provide Incremental Cost
Reduction (as defined in Section 10.4.1 below) related to such move for the
period of default. Flextronics agrees to support Nortel Networks customer needs by transferring
the Repair Services to alternate Flextronics sites or providing an equivalent
alternative solution to support such Nortel Networks customer in each region as
requested, provided that Nortel Networks and Flextronics will discuss and agree
upon the appropriate delivery terms. At Nortel Networks request, Flextronics will evaluate setting up operations in
another country or equivalent alternative solution, and each Party shall bear
its respective reasonable costs of such evaluation. If Flextronics is unable
or unwilling to meet such in-country or regional needs in a timely fashion, and
provided Flextronics has been provided prior written notice of such in-country
needs and a minimum of thirty (30) days to provide a plan in reasonable detail
to meet such needs, including, without limitation, cost, quality and service,
in a reasonable time frame as specified by Nortel Networks, Nortel Networks
shall have the right to place such business with an alternative supplier in
such new location. Any such sourcing changes shall not change NNL obligations
with respect to the Minimum Commitment unless otherwise specified in Section
3.3.  6.2
    
    Material and Supplier Management Services Flextronics shall perform Material and Supplier Management Services and
activities consistent with the Statement of Work and any other related services
the Parties agree to perform. All materials required by Flextronics for the
performance of Repair Services shall be purchased by Flextronics only from
suppliers approved by Nortel Networks. Flextronics agrees that only materials
approved by Nortel Networks and purchased from such approved suppliers shall be
used for the performance of Repair Services. Any alternative sources of supply shall be qualified and managed by
Flextronics, subject to Nortel Networks approval. Flextronics may recycle
various components as mutually agreed by the Parties.  6.3
    
    Storing and Handling Flextronics shall deal with all materials and Products in accordance with the
storage and handling standards as set out in Exhibit 2. SECTION 7
CHANGE MANAGEMENT  7.1
    
    Joint Change Management Process Either Party may propose in writing a change to the Repair or test procedure of
any Product, pursuant to the procedures set out below:  7.1.1
    
    Flextronics Proposal In the event Flextronics proposes in writing a change to the Repair or
test procedure of any Product, Nortel Networks shall provide an
acknowledgement in writing within ten    20




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(10) Business Days as to whether Flextronics is required to prepare and
provide Nortel Networks with a Repair Change Impact Form. If Flextronics
is required to prepare and provide Nortel Networks with a Repair Change
Impact Form, Nortel Networks shall, upon receipt of such Repair Change
Impact Form, promptly determine if it wants to go forward with the
change. If Nortel Networks requires the change to be implemented, the
Parties shall negotiate any open issues, including additional material or
software liability that shall be identified on a revised Repair Change
Impact Form, and set the implementation date. Flextronics shall fully
implement the change and co-ordinate the activities of Flextronics
sub-contractors, if necessary for such implementation. Nortel Networks
shall pay no charges not specifically identified by Flextronics on the
Repair Change Impact Form and agreed to by Nortel Networks. Flextronics
and Nortel Networks shall each pay their own respective administration
charges associated with the assessment and implementation of the change
to the Repair or test procedure of a Product. In the event that Nortel
Networks determines that it does not wish to proceed with a proposed
change, Flextronics shall be entitled to invoke the Dispute Resolution
Process in Exhibit 10.  7.1.2
    
    Nortel Networks Proposal In the event Nortel Networks proposes in writing a change to the Repair
or test procedure of any Product, Flextronics shall, within ten (10)
Business Days of receipt of Nortel Networks proposal, respond to such
proposal with a Repair Change Impact Form. Upon receipt by Nortel
Networks of the Repair Change Impact Form, Nortel Networks shall promptly
determine if it wants to go forward with the change. If Nortel Networks
requires the change to be implemented, the Parties shall negotiate any
open issues, including additional material or software liability that
shall be identified on a revised Repair Change Impact Form, and set the
implementation date. Flextronics shall fully implement the change and
co-ordinate the activities of Flextronics sub-contractors, if necessary
for such implementation. Nortel Networks shall pay no charges not
specifically identified by Flextronics on the original or the revised
Repair Change Impact Form. Flextronics and Nortel Networks shall each
pay their own respective administration charges associated with the
assessment and implementation of the change to the Repair or test
procedure of a Product.  7.2
    
    Joint Product Change Management Process In the event Nortel Networks has created an ECO for a Product, Nortel Networks
shall provide Flextronics with a copy of the ECO and any other relevant
information to enable Flextronics to determine the implications for the Repair
of the applicable Products. If Flextronics considers such implications to be
significant, Flextronics shall, within ten (10) Business Days of receipt of the
ECO or any such other relevant information, respond to the ECO with a Repair
Change Impact Form. Upon receipt of Flextronics Repair Change Impact Form,
Nortel Networks shall promptly determine if it wants to go forward with the
change. If Nortel Networks requires the ECO to be implemented, the Parties
shall use commercially reasonable efforts to negotiate any open issues,
including additional material or software liability and incremental costs
identified
and agreed upon on an implementation date. Flextronics shall fully implement
the ECO and co-ordinate the activities of third party suppliers, if necessary
for such implementation. Both parties    21




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have the right to invoke the Dispute
Resolution Process. Flextronics and Nortel Networks shall each pay their own
respective administration charges associated with ECO assessment.  7.3
    
    New Product for Repair Introduction (NPRI) Flextronics shall have a NPRI process and a transfer process for assuming
responsibility for the Repair of a Product which (a) are aligned with the
Nortel Networks NPRI process and transfer process; (b) which are common and
consistent at all Repair Facilities; and (c) are acceptable to Nortel Networks.
The parties shall be obliged to meet and negotiate in good faith a mutually
acceptable agreement for the transfer of responsibility to Flextronics for the
Repair of any new products. Prior to the transfer of responsibility for the Repair of any new product to
Flextronics hereunder, Flextronics shall demonstrate to Nortel Networks
reasonable satisfaction that such transfer shall not negatively affect cost,
quality, service or customer requirements. Without limiting the generality of
the foregoing, with respect to the Repair of any products identified in any
implementation plan relating to the Repair Facility, Flextronics shall meet all
Nortel Networks requirements specified therein prior to the transfer of
responsibility for the Repair of such products to Flextronics.  7.4
    
    New Capital Investments If Nortel Networks agrees that Flextronics must invest in equipment in order to
carry out a particular NPRI project, Nortel Networks shall reimburse
Flextronics for such equipment expenditures, which are (i) necessary for the
NPRI process, and (ii) pre-approved by Nortel Networks. Nortel Networks shall
determine, in consultation with Flextronics, if the cost of this equipment is
to be paid for by one of the following methods: (a) upfront at the start of
the project, (b) amortized over a specific quantity of Product, (c) in agreed
upon installation payments over a defined term or (d) built in the total cost
of Product. Nortel Networks preference for the applicable method of payment
for the equipment shall be set out in the project plan provided by Nortel
Networks prior to start of the project. This project plan may include a
mechanism to deal with any unamortized or un-recovered expenses incurred by
Flextronics under scenarios (b) or (c) above. In the case of scenario (b) or
(c), the calculation of the amortization costs will use the Carrying Charge as
the cost of money over a three (3) year period. Unique equipment shall be
deemed to be a Reserved Asset under this Agreement. In the event that the Reserved Assets have not been fully funded for the
applicable Product, within the agreed depreciation period, Nortel Networks will
reimburse Flextronics on the anniversary of the Effective Date for the
under-depreciated capital as described under scenario b), c) or d) above. SECTION 8
INVENTORY MANAGEMENT  8.1
    
    End-of-life Planning From time to time, Nortel Networks may declare that a Product is to be
manufacture discontinued, or Nortel Networks or a supplier may advise
Flextronics that a material or    22




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component required for the Repair of a Product
is to be manufacture discontinued. The Parties acknowledge that the Repair
requirements for the applicable Product shall continue well beyond the date at
which such Product, material or component is manufacture discontinued, and
Flextronics shall provide Repair Services consistent with the terms of this
agreement, including performance of all relevant test processes and securing
material availability, for each Product. At least quarterly, Nortel Networks
and Flextronics shall jointly meet to discuss actions involving Products which
could be eliminated from the Repair operations.  8.2
    
    Class B Inventory and Class C Inventory Flextronics shall be responsible for maintaining appropriate levels of Class B
Inventory in order to fulfil its obligations under this Agreement provided that
Flextronics is able to obtain from Nortel Networks such volumes and types of
Class C Inventory which shall be necessary in order to provide such Class B
Inventory levels. During the Term, Flextronics shall maintain the Class B Inventory, as
determined on a PEC by PEC basis, at levels which do not exceed the greater of
5 units or 90 times the Daily Usage Rate, unless Flextronics inherited such
excess Class B Inventory at the Effective Date or as otherwise mutually agreed
by the Parties. Should there be insufficient Class B Inventory available to service a Customer
order, it is expected that Flextronics will fast track a unit from Class C
Inventory in order to meet the level of service criteria as shown in Exhibit 5.
Should there not be enough Class C stock available to either service a
customer order or a normal Class B Inventory restocking demand, then
Flextronics shall inform the appropriate Nortel Networks representative as soon
as is reasonably practicable. Provided that Flextronics has met its
obligations in this Agreement for controlling, planning and securing Class C
Inventory, Flextronics shall not be held accountable for those level of service
misses caused by not having enough Class C Inventory. Flextronics shall not
hold Nortel Networks financially accountable for any loss of repair revenues
due to a lack of Class C Inventory. Should such event result in an A-B
writedown, then Nortel Networks will be financially accountable for any A-B
writedown costs. Except as otherwise agreed in writing by Nortel Networks, all Class B Inventory
and Class C Inventory acquired by Flextronics after the Effective Date shall be
used by Flextronics exclusively for the satisfaction of any obligation it may
have to provide Repair Services, directly or indirectly, to Nortel Networks
under this Agreement. If Flextronics decides to junk or dispose of Class C Inventory or Class B
Inventory, Flextronics will, upon authorization by Nortel Networks, dispose of
such Inventory free of processing charges to Flextronics utilizing Nortel
Networks designated reclamation center.  8.3
    
    Open Market Purchases Flextronics shall seek prior written approval from Nortel Networks prior to
obtaining any Class B Inventory or Class C Inventory from the open market.    23




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8.4
    
    Components Flextronics shall perform, on an ongoing basis, all activities necessary to
manage the supply of Repaired Products in accordance with the terms of this
Agreement, such activities to include, but not be limited to, the following:  (a)
    
    conduct and provide to Nortel Networks a summary and
forecast of components that any supplier in the supply chain
plans to discontinue;(b)
    
    identify, monitor and react to suppliers end-of-life
notifications;(c)
    
    apply strategic technical analysis of the supply base
to proactively warn of potential End-of-Life Inventory trouble
areas by product family;(d)
    
    maintain and provide to Nortel Networks a consolidated
list of components (including supplier part numbers) which are
approaching end-of-life;(e)
    
    for components that have had last time buys performed,
track and monitor Inventory on hand and projected use up dates
with the goal of continuity of supply and be able to react
accordingly if the use up date is advanced;(f)
    
    negotiate with supply base to maintain supply until an
alternative solution can be achieved;(g)
    
    if required by Nortel Networks, research, review and
recommend to Nortel Networks for approval (including business
case, detailed cost analysis, design plans, last time buy
quantity required, qualification and verification plans, scope of
intellectual property risk known to Flextronics and the basis of
Flextronics knowledge) of the best alternative available, such
as, perform last time buy, component substitutions, component
packaging foot print changes, elimination of the component by
incorporating function into another component, specification
relaxation to eliminate the need for the component. In this
regard, Nortel Networks will provide Flextronics with parameters
concerning its forecasted demand for the Product through the
Products end-of-life, including, without limitation, the
estimated sell-off period and aggregate quantity required and
anticipated Product mix (the End of Life Parameters).
Flextronics shall be entitled to rely on such End of Life
Parameters in conducting its analysis;(h)
    
    where last-time buy plan is approved by Nortel
Networks, Flextronics shall perform the activities set out in
this Section 8.4 including executing the last-time buy and such
Inventory will be considered End-of-Life Inventory.  8.5
    
    Purges Flextronics shall be responsible to keep Class B Inventory at or above the
baseline shippable release levels (Baseline). Upon either party determining
that such Inventory is not at Baseline,
Flextronics shall bring Inventory to Baseline provided that there is a viable
upgrade path. Flextronics shall propose via the process outlined in Section
7.2, and Nortel Networks shall pay, for those commercially reasonable costs
provided that Nortel Networks has approved those charges, and provided that
Flextronics has used commercially reasonable planning practices within its
control. Upon agreement that a Purge needs to be performed, Flextronics will
use commercially reasonable efforts to Purge the Inventory within 15 days.    24




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8.6
    
    Support of Nortel Networks Remanufacturing Activities From time to time, Nortel Networks may need to utilize Class C Inventory or
purchase Class B Inventory in order to satisfy Nortel Networks or Nortel
Networks third parties obligations for remanufacturing activities. Upon
request by Nortel, Flextronics shall use commercially reasonable efforts to
sell such Inventory and notify Nortel Networks of any potential negative impact
on service level agreement deliverables or commercially reasonable costs.  8.7
    
    Excess Inventory Nortel Networks shall have no obligation or liability to Flextronics with
respect to excess and obsolete Inventory, other than as set out herein. For every Product sold to Nortel Networks, Flextronics shall be permitted to
charge Nortel Networks an uplift percentage applicable on the Product Price.
The Parties will agree to the percentage uplift prior to the Effective Date.
The Parties understand that the uplift factor(s) during Year 1 will be greater
than for subsequent years due to the purchase of one years inventory at the
Effective Date by Flextronics. After the first anniversary of the Effective
Date, the uplift factor will reflect only the on-going events beyond
Flextronics control. The Parties agree that the uplift percentage will be
reviewed six (6) months after the Effective Date and annually on the
anniversary of the Effective Date. In conjunction with each uplift factor
review, Flextronics will perform an E & O calculation based on one years
historical demand, NPI forecast, and known events. During such reviews, the
Parties may mutually agree to adjust the uplift percentage. For any increase
of the uplift percentage, Flextronics must demonstrate to Nortel Networks that
such adjustment is material (greater than 2% of total Inventory) and the result
of an act or event outside Flextronics control. The table below provides an example of how the uplift percentage shall be
applied. Uplift AmountYear 1
    
    
    
    
    
    Year 2Units Sold
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Units SoldCurrent
    
    
    to Nortel
    
    
    Amount
    
    
    Uplift %
    
    
    Uplift
    
    
    
    
    
    
    Current
    
    
    to Nortel
    
    
    Amount
    
    
    Uplift %
    
    
    UpliftProduct
    
    Price
    
    
    During year
    
    
    Sold
    
    
    Factor
    
    
    Amount
    
    
    
    
    
    
    Price
    
    
    During year
    
    
    Sold
    
    
    Factor
    
    
    Amountaaaaaaaa
    
    $
    1,000
    
    
    
    400
    
    
    $
    400,000
    
    
    
    1.0
    %
    
    
    4000
    
    
    
    
    
    
    $
    990
    
    
    
    400
    
    
    $
    396,000
    
    
    
    1.0
    %
    
    
    3960bbbbbbb
    
    $
    400
    
    
    
    98
    
    
    $
    39,200
    
    
    
    1.0
    %
    
    
    392
    
    
    
    
    
    
    $
    360
    
    
    
    50
    
    
    $
    18,000
    
    
    
    1.0
    %
    
    
    180ccccccc
    
    $
    136
    
    
    
    4000
    
    
    $
    544,000
    
    
    
    1.0
    %
    
    
    5440
    
    
    
    
    
    
    $
    122
    
    
    
    3800
    
    
    $
    463,600
    
    
    
    1.0
    %
    
    
    4636ddddd
    
    $
    300
    
    
    
    35
    
    
    $
    10,500
    
    
    
    1.0
    %
    
    
    105
    
    
    
    
    
    
    $
    270
    
    
    
    30
    
    
    $
    8,100
    
    
    
    1.0
    %
    
    
    819,937
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8857Two yr sum
    
    
    
    
    
    
    
    
    
    
    18794
 
         25




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##### 



On an annual basis, Nortel Networks and Flextronics shall perform the
calculations as shown in the examples above and project the uplift percentage
required for the following year. In the event that the accumulated uplift fund
is greater than the excess Inventory requirements, Flextronics shall agree to
reduce the uplift factor to an agreed upon factor for on-going operations under
Flextronics control. Thirty days prior to the Effective Date both Parties will jointly meet and
agree on the percentage to be used as an uplift factor. Considerations in
determining the uplift factor will include analyzing Nortel Networks historical
E & O requirements and determining whether these factors are applicable to the
inventory model which Flextronics will be operating under after the Effective
Date.  8.8
    
    Consigned Inventory On the Effective Date, Nortel Networks will sell twelve (12) months demand of
Class B Inventory on a PEC code by PEC code basis to Flextronics. All other
transferred inventory will be held by Flextronics as Consigned Inventory. With respect to Consigned Inventory:  (a)
    
    Unless Nortel Networks otherwise directs, Flextronics shall
hold such inventory on behalf of and, in the ordinary course of
business, [];(b)
    
    Flextronics shall keep and care for such Consigned Inventory
with the same standard of care as if it were part of the Inventory,
including the obligation to hold at Flextronics risk and to insure
against loss. However, no such Consigned Inventory shall be, nor be
deemed to be, a part of the Inventory;(c)
    
    Flextronics shall repurchase all suitable Consigned Inventory
from Nortel Networks prior to repairing Class C Inventory;(d)
    
    When Flextronics is required to acquire Consignment
Inventory, Flextronics will acquire the lesser of all Consigned
Inventory or 30 times the Daily Usage Rate.(e)
    
    Flextronics shall make such purchase at the then current
Price unless otherwise agreed by the Parties. Flextronics shall
make payment to Nortel Networks for such purchases within forty (40)
days thereof;(f)
    
    In the event Flextronics does not repurchase Consigned
Inventory in accordance with the foregoing, Nortel Networks shall be
deemed to have sold such Inventory to Flextronics and Flextronics
will immediately credit Nortel Networks with the amount attributable
to such deemed repurchase;(g)
    
    Flextronics will be responsible for normal cycle count
adjustments for Consigned Inventory. []; and(h)
    
    If Nortel Networks requires Flextronics to increase the level
of Consigned Inventory above the level as of the Effective Date, the
Parties will mutually agree if an adjustment is required to the
Price.  8.9
    
    Order of Inventory Usage Flextronics shall utilize inventory in the following order:    26




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##### 



1.
    
    Flextronics Day 1 Inventory2.
    
    Flextronics Zero Cost E & O Inventory (if applicable)3.
    
    Consigned Inventory4.
    
    Class C Inventory repaired and converted to Class B  8.10
    
    A-B Writedowns On a regular basis Flextronics will be responsible for acquiring additional
Inventory to maintain appropriate levels of safety stocks in order to perform
the Repair Services under this Agreement. Such acquisitions may be made from
reliable secondary market sources approved by Nortel Networks, third party
manufacturers, Flextronics manufacturing facilities or any other Nortel
Networks qualified sources. Approximately fifteen days prior to the beginning of a quarter, Flextronics
will review the requirements for inventory replenishment as referenced in
Exhibit 4 and shall request written approval from Nortel Networks prior to
acquiring the Inventory. Provided that Flextronics remains within the approved
quarterly budget, Flextronics shall have the flexibility to respond to demand
changes to the approved plan for the quarter, provided that Flextronics
demonstrates that the deviation was necessary and Flextronics submits to Nortel
Networks a monthly summary of status against the plan. Payment will only be
made against authorized purchase orders. The Parties will be responsible for payment to replenish Inventory as follows: Flextronics Responsibility:  a)
    
    The Inventory was lost beyond the threshold as specified in Section
8.9 of this Agreement.b)
    
    Shortages are caused by Flextronics internal repair process(es)
non-performance. Joint Responsibility:  a)
    
    Provided Nortel Networks has received notice, and Flextronics has
used commercially reasonable efforts to mitigate the issue, Flextronics
will not be responsible for shortages resulting from the
non-performance of third-party suppliers under Nortel Networks control
and Flextronics management.b)
    
    Flextronics will be responsible for A-B writedowns if the scrap
rate on the part exceeds the Minimum Performance level as set forth in
Exhibit 5 for reasons other than Customer damage. Nortel Networks is
responsible for A-B writedown costs resulting from Freight Damage,
issues arising from ECO implementations beyond Flextronics control,
mutually agreed EOL scrapping, failure analysis authorized by Nortel
Networks or other Nortel Networks authorized scrap activities.c)
    
    Flextronics will be responsible for A-B writedowns that result from
shortages caused by a GCIP processing delay within Flextronics control
as agreed in Exhibit 5. Nortel Networks will be responsible for all
other A-B writedowns relating to GCIP delays. Nortel Networks reserves
the right to approve all related A-B writedowns.    27




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##### 



NNL Responsibility:  a)
    
    New Product Introductionb)
    
    Last Time Buysc)
    
    Material On Loand)
    
    Qualitye)
    
    Return ratesf)
    
    Retrofitsg)
    
    Manufacturing Discontinued Productsh)
    
    Remanufacturing  8.11
    
    Tracking of Inventory Furnished by Nortel Networks Flextronics shall maintain appropriate tracking and recording procedures to
mitigate against loss of Inventory and Consigned Inventory owned by Nortel
Networks. In addition to periodic cycle counts, Flextronics shall perform an
annual physical inventory. These records shall be made available upon request
to Nortel Networks and it may, at its discretion, perform a physical audit.
Should an audit or physical inventory indicate, in respect of any Inventory or
Consigned Inventory location, that a loss or shrinkage in excess of 0.5% of the
aggregate units owned by Nortel Networks has occurred; Flextronics will be
responsible for either the Book Value of such property or replacement of such
property, at Nortel Networks reasonable discretion. SECTION 9
QUALITY  9.1
    
    Metrics, Report Card and Liquidated Damages  9.1.1
    
    Report Card Flextronics shall complete report cards, which shall be used as a method
to measure against the goals of quality, service and cost and shall
deliver such report cards to Nortel Networks on a monthly basis
coinciding with the monthly reviews provided for in Section 2.4. The
metrics used to derive the report card scores and the formats for the
report cards shall be as set out in Exhibit 5. For each Metric, there will be two performance criteria: Minimum
Performance and Continuous Improvement. Minimum Performance criteria
will be used to measure whether the process is in control and meeting the
minimum performance expectations. Continuous Improvement criteria will be
used to assess improvement of the average performance of the applicable
process and reduction of process variations. The Minimum Performance Baseline and Continuous Improvement Baseline
will be established for each breachable metrics as follows, unless
otherwise mutually agreed.  (a)
    
    an operational definition of each metric will be
outlined in Exhibit 5,    28




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##### 



(b)
    
    Minimum Performance Baseline:  (i)
    
    Initial Minimum Performance Baseline will
be:Historical data from the [] prior to the Effective Date
will be used to calculate the average performance and
standard deviation. In the event that [] of historical
data is not available, Flextronics will measure the metric
for [] before establishing the average and standard
deviation. The calculation will be done at the Product
Family level.  1.
    
    For a process that should be
maximized (where a higher metric value is better),
the [].2.
    
    For a process that should be
minimized, (where a lower metric value is better),
the [].  (ii)
    
    The Minimum Performance Baseline will be
reviewed and adjusted each calendar year as follows;  1.
    
    For a process that should be
maximized, the [] will be the Minimum Performance
Baseline. However, this adjustment will not be lower
than the Initial Minimum Performance Baseline
established at the date of each Product transfer or
any Minimum Performance Baseline in following years,
which ever is better.2.
    
    For a process that should be
minimized, the [] will be the Minimum Performance
Baseline. However, this adjustment will not be
higher than the Initial Minimum Performance Baseline
established at the date of each Product transfer or
any Minimum Performance Baseline in following years,
which ever is better.  (c)
    
    Continuous Improvement Baseline:  (i)
    
    The initial Continuous Improvement
Baseline will be the [] prior to the Effective Date. In
the event that [] of historical data is not available,
Flextronics will measure the metric for [] before
establishing the average and standard deviation. The
calculation will be done at the Product Family level.(ii)
    
    The Continuous Improvement Baseline will
be reviewed and adjusted each calendar year as follows;  1.
    
    For a process that should be
maximized, the [] will be the Continuous Improvement
Baseline. However, this adjustment will not be lower
than the Initial Continuous Improvement Baseline
established at the date of each Product transfer or
any Continuous Improvement Baseline in following
years, which ever is better.2.
    
    For a process that should be
minimized, the [] will be the Continuous Improvement
Baseline. However, this adjustment will not be
higher than the Initial Continuous Improvement
Baseline established at the date of each Product
transfer or any Continuous Improvement Baseline in
following years, which ever is better.  9.1.2
    
    Liquidated Damages for Failure to Meet Metrics The Parties acknowledge that the failure of Flextronics to obtain
performance results better than or equal to the metric target for RDOA
and On-Time Delivery elements on the report card with respect to any
Product Family as a result of any act or omission within    29




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##### 



Flextronics
Control and Responsibility, for [] (measured as the weighted average of
the scorecards for each of those months), shall entitle Nortel Networks
to receive the applicable liquidated damages as set out in the table
below. The assessment of liquidated damages shall be limited to one assessment
per []. In instances where Nortel Networks is entitled to receive
damages for more than one metric, a single assessment (being the largest
of the applicable assessments) shall apply. Liquidated damages shall be
assessed as follows: For the period of 0-4 months after the Effective Date, no liquidated
damages shall be assessed for any Product. For the period of 5-8 months after the Effective Date, liquidated damages
shall be assessed as follows: After 2 consecutive
    
    
    After 3 or moreAfter 1 month
    
    
    months
    
    
    consecutive monthsPerformance between
Target and Passing
    
    
    []
    
    
    
    []
    
    
    
    []Performance below
Passing
    
    
    []
    
    
    
    []
    
    
    
    []
 After [] from the Effective Date, liquidated damage shall be assessed as
follows: After 2 consecutive
    
    
    After 3 or moreAfter 1 month
    
    
    months
    
    
    consecutive monthsPerformance between
Target and Passing
    
    
    []
    
    
    
    []
    
    
    
    []Performance below
Passing
    
    
    []
    
    
    
    []
    
    
    
    []
  *
    Flextronics revenue for the affected Product Family,
as measured in the aggregate on the relevant Report Card. Payments for liquidated damages shall be made 40 days from the date
Nortel Networks has documented the claim and the Parties have agreed on
the amount to be assessed.  9.1.3
    
    Pass-through of Liquidated Damages from Customers In the event Flextronics fails to meet its obligations for a specific
order, and as a result Nortel Networks is required to pay liquidated
damages to its Customer, Nortel Networks shall be entitled to receive
from Flextronics an amount representing [] imposed on Nortel Networks by
the Customer.    30




---



##### 



In the event that Flextronics is required to pay liquidated damages under
this Section 9.1.3, the order(s) against which damages were assessed
shall not be used in the calculation of whether Flextronics has met a
relevant metric under Section 9.1.2.  9.1.4
    
    Termination for Breach of Metrics The failure of Flextronics to obtain performance results better than or
equal to the passing grade for those breachable metrics identified in
Exhibit 5 for each element on the report card with respect to any
Product Family as a result of any act or omission within Flextronics
Control and Responsibility, for [] (measured as the weighted average of
the scorecards for each of those []), constitutes a material breach of
Flextronics obligations under this Agreement with respect to that
Product Family. If Nortel Networks does not exercise its right to
terminate for such breach, any applicable liquidated damages owing
pursuant to Section 9.1.2 will be paid by Flextronics for each successive
month that Flextronics fails to obtain metric target as set out herein.
If Nortel Networks does exercise its right to terminate for such breach,
Flextronics liability for any damages Nortel Networks may have suffered
due to the breach shall be reduced by the amount of liquidated damages
already paid. If Flextronics disputes whether there has been a material
breach for purposes of this Section 9.1.4, then such dispute will be
submitted to
the Dispute Resolution Process in Section 26 prior to Nortel Networks
exercise of its termination rights or Flextronics obligation to pay any
liquidated damages.  9.1.5
    
    Transition Performance Period Nortel Networks acknowledges that Flextronics ability to perform its
obligations at the Effective Date under the attached Exhibits is
dependent upon Flextronics ability to engage certain Nortel Networks
current internal/external suppliers to continue to perform the Repair
Services defined in this Agreement at the metric levels required in
Exhibit 5. In addition, Flextronics ability to perform its obligations
at the Effective Date is dependent upon Nortel Networks timely transfer
of the necessary Nortel Networks equipment, information, processes and
personnel, to satisfy the requirements set forth in Exhibits 2 and 3. Nortel Networks agrees to provide all reasonable assistance to
Flextronics including the assignment of certain agreements and as
appropriate the facilitation of discussions with other third parties that
Flextronics desires to engage, to assist Flextronics in gaining the
capability to deliver the Repair Services in accordance with the
stipulated service levels. Except where indicated in the relevant Statement of Work, Flextronics
shall be obligated to deliver all of the Repair Services as of the
Effective Date, provided however that during the four (4) month period
after the Effective Date, Nortel Networks shall not use any breachable
metric measured during this four (4) month period to terminate this
Agreement pursuant to Section 9.1.4 of this Agreement for Breach of
Metrics unless the breach of the performance metric is solely
attributable to an action of Flextronics. To the extent that during this four (4) month period Flextronics is able
to demonstrate that any of the service levels were not achieved prior to
the Effective Date, then Flextronics    31




---



##### 



shall be excused from achieving the
service level. In this circumstance, the Parties agree to meet and
negotiate in good faith a timeline for achieving the service level
including any associated cost issues and to amend the relevant Exhibit(s)
to reflect the agreed resolution. If subsequent to the agreed timeline to achieve the required service
level, Flextronics still cannot achieve the required service level then,
notwithstanding the commitments and obligations in Section 3.3 of this
Agreement, Nortel Networks shall be permitted to arrange for the Repair
Services from another service provider or provide the Repair Service
itself until Flextronics is able to reasonably demonstrate that
Flextronics can achieve the required service level.  9.2
    
    Industry Standards If in existence on the Effective Date, Flextronics agrees to maintain the
industry standards set out below. If Nortel Networks requires Flextronics to
implement an industry standard not certified
on the Effective Date, Flextronics will pursue such standard, subject to the
mutual agreement of the Parties on the associated costs.  (a)
    
    ISO 14001 and ISO 9001 compliance at Delivery Facilities;(b)
    
    applicable TL9000 requirements requested by Nortel Networks;(c)
    
    effective assessments and corrective/preventive actions in respect
of processes;(d)
    
    effective assessments and corrective/preventive actions in respect
of quality audits;(e)
    
    senior management reviews are undertaken to discuss quality across
all processes.  9.3
    
    Source Inspection Nortel Networks may perform source inspections of parts, assemblies or
processes at a Flextronics supplier or subcontractor facility whenever Nortel
Networks decides it is necessary. The source inspection shall be conducted
during normal business hours and with reasonable prior written notice to
Flextronics.  9.4
    
    Repair Quality  (a)
    
    Flextronics shall maintain a level of quality with respect to
workmanship, testing and packaging processes that shall limit RDOA
occurrences as specified in Exhibit 5, measured on a monthly basis.
Flextronics will provide to Nortel Networks a weekly pareto of RDOA
occurrences and for the top three (3) issues Flextronics will provide
to Nortel Networks (a) a root cause analysis, (b) an action plan
detailing corrective actions required and (c) the action register
showing the status of the action plan. At its discretion, Nortel
Networks may participate in the development of these action plans.(b)
    
    For each Repair Facility, Flextronics will develop a quality
performance program no less stringent than the standards currently in
place, or as may be updated from time to time, in the relevant repair
facility of Nortel Networks. Flextronics compliance with these
standards will be measured monthly pursuant to Exhibit 5.    32




---



##### 



(c)
    
    Nortel may notify Flextronics in writing if Flextronics has failed
to meet the requirements set forth in either subsection (a) or (b)
above. If during the Term, NNL so notifies Flextronics in each of
three (3) consecutive months, Flextronics shall be deemed to be in
material breach of this Agreement. If Flextronics disputes whether
there has been a material breach for the purposes of this Section 9.4
then Flextronics shall be entitled to invoke the Dispute Resolution
Process in Exhibit 10. SECTION 10
REPAIR COST MANAGEMENT PROCESS  10.1
    
    Prices for Repair Services  10.1.1
    
    Repair Services Prices The initial Prices for Repair Services specific to each Product shall be
as set out in Exhibit 6 and periodically updated as set out in Exhibit 7.
The Parties agree that Prices for Repair Services will not be greater
after the Effective Date than before provided that there are no new
material services or capabilities required by Nortel Networks.  10.1.2
    
    Logistics Services The Prices for Logistics Services are set forth in Exhibit 6.  10.1.3
    
    Pricing and Scope The Scope of Work broadly defines the activities performed by Nortel
Networks prior to the Effective Date with respect to the Transitioned
Business. The Parties agree that the Prices set forth in this Agreement
include all such activities.  10.1.4
    
    Day One Pricing The Parties agree that the Price for Repair Services, on the Effective
Date, will not be greater than the cost incurred by Nortel Networks for
such Repair Services on the day before the Effective Date. In addition,
the Price for Repair Services on the day after Flextronics assumes
responsibility of such Repair Services from third party suppliers [].
These Prices are set out in Exhibit 6. Thereafter, Nortel Networks and
Flextronics will set Prices on an annual basis, using the process
described in Exhibit 7, incorporating the ICR and OCR into the committed
Price for the forward four quarters. In order to establish Prices as of the Effective Date, Nortel Networks
shall provide sufficient information to support current Prices as at such
date. This process is set forth in Exhibit 15. Flextronics will
determine by the end of four (4) months after the Effective Date whether
it is satisfied that the resources and cost responsibilities, as
transferred, are accurately reflected in the Prices as provided by Nortel
Networks. If Flextronics is not so satisfied, it will notify Nortel
Networks and present reasonable evidence to support this determination.
If Nortel Networks accepts this determination, the Parties will mutually
agree on restated Prices for the applicable Repair Services, which shall
be retroactive to the first invoice. If Nortel Networks does not accept
this determination, the Parties shall    33




---



##### 



follow the Dispute Resolution
Process. Upon acceptance or other resolution of the revised Pricing, the
Party which either overpaid or overcharged will pay the other Party the
difference between the amounts originally invoiced and the revised Prices
forty (40) days after receipt of invoice.  10.2
    
    Payment, Taxes and Duties  10.2.1
    
    Invoices Each invoice shall be rendered against the relevant Order. On each
invoice submitted to Nortel Networks, Flextronics shall reference the
number of the Order(s) issued for the
Repair Services covered by such invoice. Any taxes not included in the
Price but which are to be paid by Nortel Networks and collected by
Flextronics and remitted to the applicable taxing authority, shall be
itemized on the invoice except as is required by law to be included in
the Price; if Flextronics is unable to itemize such amounts attributable
to Repair Services listed on any invoice and does not include such
amounts on the invoice, Flextronics shall invoice the applicable Nortel
Company as soon as practicable the amount attributable to such charges
for such invoices issued during the preceding calendar month and provide
to Nortel Networks a reconciliation to each such invoice. Flextronics
agrees not to assess any applicable excise tax, sales tax, goods and
services tax, value added or similar taxes where Nortel Networks
furnishes Flextronics a tax exemption certificate, a certificate of
authority, a direct pay permit and/or any equivalent acceptable to the
applicable taxing authority. Nortel Networks shall withhold any
applicable withholding tax from payments made to Flextronics pursuant to
this Agreement. To assist Flextronics in obtaining any tax credits for
the amounts withheld, Nortel Networks shall promptly provide Flextronics
with such evidence as may be reasonably required by the applicable taxing
authorities to establish that such withholding tax has been paid.  10.2.2
    
    Payment Payment shall be made net [] after the date of the applicable invoice.
[]. Nortel Networks may deduct any undisputed credit due and owing it,
upon approval of Flextronics. Payment shall be made in U.S. dollars,
unless otherwise agreed upon in the appropriate Virtual Systems House
Agreement or otherwise between the Parties. If payment is made in
currency other than U.S. dollars, the Parties shall use the Currency
Conversion factor except as otherwise set out in the appropriate Virtual
Systems House Agreement to calculate payment. Nortel Networks shall pay
by wire transfer in the jurisdictions where this is possible. []. Nortel Networks shall identify any dispute with respect to an invoice
within thirty (30) days of its receipt of such invoice. [].    34




---



##### 



Flextronics reserves the right to make emergency surcharges (ie fuel,
security) to recover commercially reasonable costs associated with
temporary or industry wide situations which could not be reasonably
anticipated at the commencement of this Agreement. Nortel Networks will
receive thirty (30) days written notice of any emergency surcharges.
Surcharges will be reviewed between Nortel Networks and Flextronics every
thirty (30) days from the time that the initial notice period was served
until the time at which the temporary surcharges are removed. All
surcharges will be temporary, and will apply in
addition to negotiated rates and will be separately identified.
Flextronics will attempt to mitigate these costs wherever possible.  10.3
    
    Ongoing Cost Reduction Ongoing Cost Reduction or OCR means the universe of cost reductions minus
the Incremental Cost Reductions or ICR (as defined in Section 11.9.1 of the
MCMSA). The parties acknowledge that they have arrived at the concepts of OCR
and ICR by assigning cost reductions that Nortel Networks generally would have
been able to achieve through its own efforts, and/or through Nortel Networks
existing supply chain, had it retained the Transferred Business to the OCR
category and cost reduction that Nortel Networks generally would not have been
thus able to achieve to the ICR category. Flextronics commits to the cost
reduction to the Prices as set out in Exhibit 6 of the MRSA. The
implementation is set out in Exhibit 7 of the MRSA. Nortel Networks is
responsible for generating the plan for the OCR for Year One. OCR cannot be
used to fulfill the Committed ICR %. If Flextronics achieves more than the quarterly take-down in any given quarter,
it is not obligated to pass through the cost reduction in the current quarter,
or the quarter following, but will provide 100% of the reduction in the current
quarter plus two. The implementation of this method would be the 1st day of
the quarter following the full quarter of share. The Parties will enter into a
supplement to the Joint CR Commit and Pricing Agreement (as defined in Exhibit
17-1 of the MCMSA) to reflect this incremental cost reduction.  10.4
    
    Incremental Cost Reduction Flextronics will use its cost management, cost to market sites, vertical
integration, logistics, repair and design services capabilities to achieve
additional cost reductions, which are incremental to the OCR. The process for
measuring and implementing incremental cost reduction is set out in Exhibit 7. Flextronics will use its materials management capabilities to leverage SC and
NC spend, cost management, cost to market sites, vertical integration,
logistics, repair and design services capabilities to achieve additional cost
reductions, which are incremental to the OCR.  10.4.1
    
    Definition of ICR Incremental Cost Reduction or ICR means the list of cost reduction
programs set forth in Exhibit 7. In addition, the Parties agree that any
ICRs achieved by Flextronics    35




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consistent with the terms of Exhibit 7,
during the time period between the Execution Date and the Commencement
Date shall be credited towards Flextronics ICR Commitment.  10.4.2
    
    ICR Commitment Flextronics agrees that it will pass on to Nortel Networks ICR equal to a
certain percentage of the total revenue received from purchases of Repair
Services made by Nortel Networks (Total Revenue). This percentage is
defined as the Committed ICR %. []. If the Total Revenue is reduced
because Nortel Networks has not purchased Repair Services from
Flextronics for any of the reasons set out in Section 3.3.1(B) or (C),
the ICR to be delivered shall be calculated as if the Total Revenue had
not been so reduced.  10.4.3
    
    Implementation of ICR Incremental Cost Reduction (ICR) will be reflected in the Product price
using the Cost Plus, MPLP or PLP Process, as applicable, and not
recovered as a lump sum payment (except in the case of a true-up). If,
as determined in an annual true-up process, the annual guarantee is not
achieved by means of the product pricing at the end of Years 2 and 3
respectively, Flextronics will pay Nortel Networks the amount of the
shortfall as a lump-sum payment. The Baseline (as defined below) at the
end of Years 2 and 3 will be set to include the guaranteed ICR; provided
that the Baseline at the end of Year 3 will be for planning purposes only
for Year 4 and prices for Year 4 will be set according to market
conditions. ICR is an in-year amount calculated by applying the Committed ICR % to
the applicable years Total Revenue over a twelve month period. The
Baseline is the Total Revenue determined by Supplier and Nortel
Networks as of a certain date. The Year One Baseline will be the Total
Revenue as of the Effective Date assuming that all Transferred Business
has been transferred as of the Commencement Date. []. Cost reduction, including ICR, which exceed the agreed upon level will be
subject to the cost sharing provisions set out in Exhibit 7 of the MRSA;
provided, however, that Flextronics shall be entitled to retain 100% of
any ICRs, which exceed the total in-year ICR Commitment applicable to
Year 2. Any ICR achieved as of the end of Year 3 that is greater than the
ICR Commitment will be treated as OCR.  10.4.4
    
    Year 4 Cost Reduction In Year 4 all cost reduction will be managed using the process in Exhibit
7 for OCR [].  10.5
    
    OCR Threshold Commitment In the event that Flextronics considers that, due to any unforeseen event or
condition beyond Flextronics control that the OCR commitment will be missed by
a threshold of [] or greater. Flextronics will present to Nortel Networks
quantifiable information, including, third party benchmarking, to enable Nortel
Networks to validate that the Annual Commitment and Product Prices are not
achievable due to such conditions, the Parties will review the Annual
Commitment    36




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and Product Price at the monthly Cost Review Meeting. Where Nortel
Networks does so
validate, then the Parties will agree to revise the Product Prices and Annual
Commitment for the balance of the quarters remaining. Nortel Networks shall
have fifteen (15) calendar days to notify Flextronics that it is either
validating or rejecting Suppliers request. If Nortel Networks fails to
respond in such time, Flextronics will have the right to update the Exhibit 6
Pricing. The amount of this revision will reflect directly the validated
number/percentage. (Example: [].) SECTION 11
BUSINESS CONTINUITY  11.1
    
    Business Continuity Planning Flextronics shall maintain a business continuity plan for each Repair Facility
to be put into effect if a Repair Facility becomes unable to provide Repair
Services for any reason, including Force Majeure, for a period of more than
five (5) days (Business Continuity Plan). Flextronics goal is to be able to
continue to provide Repair Services in accordance with the time schedules
required under this Agreement. The Business Continuity Plan shall contain, at a minimum, (a) a risk assessment
and business impact analysis, (b) a prevention/mitigation plan, and (c) a
resumption of Repair Services plan, including a recovery/restoration plan. The
preceding will cover, but not be limited to, provisions for documentation
storage (product, process, fixture, tools), information systems technology
redundancy, a demonstration of Flextronics capability to recover in an
emergency if one of its own repair facilities or processes becomes unable to
provide Repair Services and if one of its component suppliers or
subcontractors experiences such an emergency. At Nortel Networks request and at no additional charge to Nortel Networks,
Flextronics will participate in any commercially reasonable tests implemented
by Nortel Networks or discussions initiated by Nortel Networks for purposes of
evaluating and coordinating and integrating the business continuity plans of
its suppliers with Nortel Networks overall business continuity plan, in so
much as current Repair Services and associated level of service metrics are not
impacted by said test. As reasonably requested by Nortel Networks during the
Term, Flextronics will adjust the Business Continuity Plan to better conform to
and integrate with Nortel Networks business continuity plan, on terms to be
mutually agreed to by the Parties. Throughout the Term, Flextronics shall provide a copy of any changes in the
Business Continuity Plan to NNL within ten (10) days of any such change. A
period of Force Majeure or other event causing inability to provide Services
shall be deemed to commence on the date that the event of Force Majeure or
other such event first occurs. NNL and Flextronics shall review Flextronics Business Continuity Plan
annually.    37




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SECTION 12
WARRANTIES  12.1
    
    Repair Services Flextronics covenants and warrants that:  (i)
    
    all Repair Services performed under this Agreement shall be
performed in a competent, professional and timely manner in
accordance with the standards generally accepted in the
telecommunications industry and in accordance with the applicable
Specifications and the terms of this Agreement;(ii)
    
    it shall use adequate numbers of qualified individuals with
suitable training, education, experience and skill to perform Repair
Services;(iii)
    
    it shall provide the Repair Services using proven, current
technology that will enable Customer to take advantage of
technological advancements in the telecommunications industry;(iv)
    
    Repaired Products shall be free of defects in material
controlled by Flextronics and workmanship during the Repair Warranty
Period, such period to start upon shipment of the Repaired Product
to Customer;(v)
    
    with the exception of those components recycled by Nortel
Networks as of the Effective Date, only new and unused materials
shall be used in the Repair Services, unless Nortel Networks, in its
sole discretion, authorizes Flextronics to use certified equivalent
to new materials for the repair of a specific Product;(vi)
    
    to the best of its knowledge, upon inquiry, it does not and
will not employ or contract the services of (i) forced or prison
labor or (ii) employees or contractors that are younger than the
minimum age legally entitled to work in each applicable jurisdiction
in which Repair Services are provided; and(vii)
    
    to the best of its knowledge, upon inquiry,no subcontractor
of Flextronics employs or contracts, directly or indirectly, the
services of (i) forced or prison labor or (ii) employees or
contractors that are younger than the minimum age legally entitled
to work in each applicable jurisdiction in which Repair Services are
provided. Nortel Networks represents and warrants that: (i) it has the right to enter
into this Agreement, including the right to grant the license set forth in
Section 13.1; (ii) no claim or action is pending
or threatened against Nortel Networks or, to Nortel Networks knowledge as of
the Effective Date, against any licensor or supplier of Nortel Networks that
might, if adversely decided, adversely affect the ability of Flextronics to
perform the Repair Services; (iii) it has all rights and powers necessary to
perform its obligations under this Agreement; and (iv) this Agreement does not
violate the terms of its agreements with any suppliers.    38




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Nortel Networks covenants and warrants that it will perform its obligations
under this Agreement in a competent, professional and timely manner in
accordance with the standards generally accepted in the telecommunications
industry and the terms of this Agreement. 12.2 Return of Products under Warranty Any Product for which Flextronics has performed Repair Services and which fails
while under the Repair Warranty Period described in Section 12.1 may be
returned to Flextronics and Flextronics shall replace or repair, as mutually
agreed, and bring to current baseline these Products at the agreed to costs in
Exhibit 6 (inclusive of upgrade costs unless otherwise defined in Exhibit 6).
During the Repair Warranty Period, in those instances where the Product is
diagnosed as No Trouble Found (NTF), Flextronics shall also bring the Product
to current baseline. If Products require repair during the Repair Warranty
Period due to reasons outside of Flextronics control such as customer abuse,
NTF, planned retrofits, destructive failure analysis authorized by Nortel
Networks, or freight damage, then Flextronics shall be entitled to charge the
appropriate rate for such services. NORTEL NETWORKS SOLE AND EXCLUSIVE REMEDY AND FLEXTRONICS ENTIRE LIABILITY
FOR BREACH OF WARRANTY IN RESPECT OF SECTIONS 12.1(iv) AND 12.1(v) SHALL BE AS
SET FORTH IN SECTIONS 12.2 AND 12.3 AND SUBJECT TO THE LIMITATIONS SET FORTH IN
SECTION 15 BELOW. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT
BUT SUBJECT TO SECTION 14 AND TO THE EXTENT PERMITTED BY LAW, THE FOREGOING IS
FLEXTRONICS SOLE WARRANTY WITH RESPECT TO THE REPAIRED PRODUCTS AND
FLEXTRONICS HEREBY EXPRESSLY DISCLAIMS ANY IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.  12.3
    
    Epidemic Failure  12.3.1
    
    Procedure for Epidemic Failure If a Repaired Product shows evidence of an Epidemic Condition, each Party
shall notify the other Party within two (2) Business Days of becoming
aware of such Epidemic Condition. Upon notification to Flextronics of
the Epidemic Condition, Nortel Networks shall have the right, pending
correction of the Epidemic Condition as provided herein, to postpone
further shipments of such Repaired Product evidencing the Epidemic
Condition, by giving notice of such postponement to Flextronics. Until
such Epidemic Condition is corrected, Flextronics shall negotiate a
remedy in good faith within a commercially reasonable period of time with
Nortel Networks which may include acquiring Class A
material in order to fulfill its obligations under this Agreement
provided that such Epidemic Condition has been caused solely by
Flextronics or Flextronics suppliers.  12.3.2
    
    Remedies for Epidemic Condition Nortel Networks shall pay the costs of implementing the remedy on
Repaired Products to the extent that the Epidemic Condition results from
Flextronics compliance with the Specifications. Flextronics shall bear
all reasonable costs of implementing the remedy to the extent the
Epidemic Condition arose from Flextronics non-conformance with the    39




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Specifications, defects in SC Material, or defects in workmanship or
manufacturing processes. The Parties shall use reasonable efforts to
minimize the costs associated with the recovery plan without compromising
NNLs ability to aggressively respond to Customer needs. Subject to the foregoing, Flextronics shall:  (a)
    
    Incorporate the remedy in the affected Repaired
Products in accordance with Nortel Networks ECO procedures;(b)
    
    Subsequently ship only Repaired Products incorporating
the required modification correcting the Epidemic Condition;(c)
    
    Rework, repair and/or replace any Repaired Product at
no cost to Nortel Networks, that shows evidence of the Epidemic
Condition; and(d)
    
    At Nortel Networks option, reimburse Nortel Networks
for all costs associated with the repair or replacement of
Repaired Products for Nortel Networks. Flextronics obligations for Epidemic Condition relating to a Repaired
Product unit shall continue for [] after the shipment of such Repaired
Product. The foregoing provisions shall survive termination and expiry of this
Agreement. SECTION 13
INTELLECTUAL PROPERTY RIGHTS AND LICENSES  13.1
    
    License to Nortel Company Proprietary Information Granted Flextronics shall have the right and Nortel Networks hereby grants to
Flextronics, to the extent of its legal right to do so, a world-wide,
non-exclusive, non-transferable, royalty-free license to use Nortel Company
Proprietary Information communicated to Flextronics by Nortel Networks as
appropriate for provision of the Repair Services in question solely for
internal use for the purpose of performing the Repair Services hereunder in
connection with Repaired Products. Nortel Networks shall retain exclusive
rights and title to all Nortel Company Proprietary Information
provided hereunder. This license is non-transferable, may be used only in
connection with the performance of Repair Services by Flextronics for Nortel
Networks under this Agreement, and shall expire on the date on which
Flextronics obligations to support the repair Product or to perform Repair
Services terminate under this Agreement.    40




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13.2
    
    Limitations on Grant of License Except as expressly stated herein, nothing in this Agreement shall be deemed to
grant, either directly or indirectly by implication, estoppel or otherwise, any
licenses to Flextronics of Nortel Company Proprietary Information or any
Trade-Marks, and Flextronics acknowledges that Nortel Networks shall retain
exclusive right and title to the foregoing.  13.3
    
    Flextronics Inventions Flextronics Inventions, including Flextronics Inventions relating solely to a
repair process not specific to the repair of a Product, shall be the property
of Flextronics. Flextronics shall and does hereby grant Nortel Networks,
subject to fulfillment of its payment obligation, a limited, irrevocable,
world-wide, non-exclusive, royalty-free license, but not as a standalone
license, solely to make or have made and use such Flextronics Invention and
Nortel Networks shall have the right to sub-license such rights to Nortel
Networks Suppliers for the purpose of repairing Products. Nortel Networks
shall be fully responsible for any damages accrued to Flextronics arising out
of any third partys violation of the scope of the license granted hereunder.  13.4
    
    Specifications and Deliverables Owned by NNL The Specifications and all deliverables resulting from the Repair Services
shall be the property of Nortel Networks. Flextronics agrees not to offer or
provide the Specifications or deliverables to any third parties without Nortel
Networks prior written consent, which shall not be unreasonably withheld.  13.5
    
    Flextronics Retains Ownership of Flextronics Proprietary Information Flextronics shall retain exclusive right, title, and interest to all
Flextronics Proprietary Information; and provided, that Nortel Networks has
fulfilled its payment obligations, Flextronics will grant NNL a limited,
world-wide, non-exclusive, and royalty-free license, but not as a stand-alone
license, solely to make or have made, use, and sell any Flextronics Proprietary
Information incorporated into the Products or used in the repair of the
Products and provided that Nortel Networks shall have the right to sub-license
such rights to Nortel Networks Suppliers for the purpose of repairing Products.  13.6
    
    Assignment of Inventions Agreements with Employees In respect of any inventions which are specific and related to the repair of
Nortel Networks Products, Flextronics shall have agreements with its
employees, consultants, agents or representatives (individually
Counter-Party), in which each such Counter-Party shall agree in
writing that any and all inventions, discoveries, developments, modifications,
procedures, ideas, innovations, systems, Programs, know-how or designs
developed by any such Counter-Party during the term of its relationship with
Flextronics, shall be the property of Flextronics. Furthermore, such agreement
between any such Counter-Party and Flextronics shall contain usual clauses
including an undertaking by such Counter-Party to execute applications for
patents, copyrights, industrial designs, mask work rights, integrated circuit
topographies and other registerable intellectual property rights thereon to the
extent so requested by Flextronics and/or to assign the same to Flextronics.    41




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SECTION 14
INDEMNIFICATION  14.1
    
    Intellectual Property Indemnification  14.1.1
    
    By NNL Except as otherwise provided in this Section 14, Nortel Networks shall,
at its expense and at Flextronics request, indemnify and defend
Flextronics against any claim or action brought against Flextronics by a
third party to the extent that such claim is based on an assertion that
Flextronics activities as part of the Repair Services infringe, directly
as a result of Flextronics compliance with the Specifications or
directions by Nortel Networks to Flextronics relating to a Product for
use under this Agreement, any patent, copyright or trademark, or violates
any trade secret or other proprietary right of a third party. Nortel
Networks shall pay any pre-judgment and pre-settlement costs as wells as
any resulting costs and damages finally awarded against Flextronics or
agreed to in any settlement, and Flextronics reasonable attorneys or
patent agents or other experts fees incurred in connection therewith,
provided that (i) Flextronics promptly notifies Nortel Networks in
writing of any such claim, (ii) Nortel Networks has sole control of the
defense and all related settlement negotiations, and (iii) Flextronics
reasonably cooperates, at Nortel Networks cost, in the defense and
furnishes all related evidence under its control. Notwithstanding the foregoing, Nortel Networks shall have no liability
under Section 14.1 to the extent the alleged infringement or violation:  (a)
    
    arises from Flextronics modification or alteration
of the information supplied by Nortel Networks relating to a
Product or the Specifications, and such modification or
alteration is not authorized by Nortel Networks;(b)
    
    arises from any method or process used in or
practiced as a part of the Repair Services provided by
Flextronics under this Agreement (unless such method or process
was specifically requested by Nortel Networks); or(c)
    
    arises from any Repair Services provided by
Flextronics under this Agreement (unless the method or process
of providing such Service was specifically requested by Nortel
Networks).    42




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14.1.2
    
    By Flextronics Flextronics shall, at its expense and at Nortel Networks request,
indemnify and defend all Nortel Companies against any claim or action
brought against any Nortel Company by a third party to the extent that
such claim is based on an assertion that any method or process used or
practiced by Flextronics in or during the provision of any Service
provided by Flextronics under this Agreement infringes any patent,
copyright or trademark, or violates any trade secret or other proprietary
right of a third party, unless such method or process was specifically
requested by Nortel Networks []. In any such case Flextronics shall pay any pre-judgment and
pre-settlement costs as well as any resulting costs and damages finally
awarded against Nortel Networks or agreed to in any settlement, and
Nortel Networks reasonable attorneys or patent agents or other
experts fees incurred in connection therewith, provided that (a) Nortel
Networks promptly notifies Flextronics in writing of any such claim, (b)
Flextronics has sole control of the defense and all related settlement
negotiations, and (c) Nortel Networks reasonably cooperates, at
Flextronics cost, in the defense and furnishes all related evidence
under its control. Notwithstanding the foregoing, Flextronics shall have no liability under
Section 14.1 to the extent the alleged infringement or violation:  (a)
    
    arises from Nortel Networks modification or
alteration of the information supplied by Flextronics relating
to the Repair Services, and such modification or alteration is
not authorized by Flextronics;(b)
    
    would not have arisen but for the combination of the
information provided by Flextronics or other result of such
method or process or Service provided by Flextronics with any
other product or technology not supplied by Flextronics, or not
authorized by Flextronics.  14.1.3
    
    Measures to Safeguard NNL against Liability If, as a result of a claim described in 14.1.2 above, the continued use
by Flextronics of any method or process used in or practices as part of
the Repair Services or the continued use of any intellectual property
component of the Repair Services, an injunction is obtained against the
sale or distribution of any Repaired Product or the continued use of such
method or process or intellectual property component, or if either Party
reasonably determines on the advice of counsel that there is a likelihood
of such continued use exposing either Party to material liability,
Flextronics shall forthwith at its option and
expense, unless such element, method or process was specifically
requested by Nortel Networks, use its reasonable efforts to either:  (a)
    
    procure the right to continue using such process or
method or intellectual property component, to continue selling
the Products or to continue providing such Repair Services; or    43




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(b)
    
    modify the process or method, intellectual property
component, or Repair Services, so that the provision of Repair
Services, as applicable, no longer infringes. THE FOREGOING SECTION 14.1 STATES THE ENTIRE LIABILITY OF THE PARTIES TO
EACH OTHER CONCERNING INFRINGEMENT OF PATENT, COPYRIGHT, TRADE SECRET OR
OTHER INTELLECTUAL PROPERTY RIGHTS HELD BY THIRD PARTIES.  14.2
    
    Other Indemnification  14.2.1
    
    By Flextronics With respect to matters not covered in Section 14.1, Flextronics shall
indemnify and hold Nortel Networks, its customers, distributors and their
employees, harmless from any losses, damages, liabilities and costs
including reasonable attorneys fees arising from any injury or death to
persons or loss of or damage to property to the extent caused by any
method or process used in the performance of Repair Services, and, any
defect or deficiency including any defect or deficiency in any parts or
components used in the Repair process, or Flextronics negligence or
willful misconduct.  14.2.2
    
    By Nortel Networks With respect to matters not covered in Section 14.1 or 14.2.1, Nortel
Networks shall indemnify and hold Flextronics, its customers,
distributors and their employees, harmless from any losses, damages,
liabilities and costs including reasonable attorneys fees arising from
any injury or death to persons or loss of or damage to property to the
extent caused by Nortel Networks negligence or willful misconduct. SECTION 15
LIMITATION OF LIABILITY NOTWITHSTANDING ANY PROVISION OF THIS AGREEMENT EXCEPT FOR THE PARTIES
OBLIGATIONS UNDER SECTION 14 AND A BREACH OF THE OBLIGATIONS IN SECTIONS 12.3,
AND 22, TO THE MAXIMUM EXTENT PERMITTED BY LAW, UNDER NO CIRCUMSTANCES AND
UNDER NO LEGAL THEORY, WHETHER TORT
(INCLUDING NEGLIGENCE), PRODUCT LIABILITY, CONTRACT, OR OTHERWISE, SHALL ONE
PARTY BE LIABLE TO THE SECOND PARTY OR ANY OTHER PERSON FOR ANY LOSS OF PROFIT
OR ANY INDIRECT, SPECIAL, INCIDENTAL, RELIANCE OR CONSEQUENTIAL DAMAGES, EVEN
IF THE FIRST PARTY SHALL HAVE BEEN INFORMED OF THE POSSIBILITY OF SUCH DAMAGES.
NOTHING IN THIS AGREEMENT SHALL ACT TO RESTRICT OR EXCLUDE LIABILITY FOR DEATH
OR PERSONAL INJURY CAUSED BY THE NEGLIGENCE OF ANY PARTY. FOR PURPOSES OF
CLARITY, THE PARTIES AGREE THAT THE PAYMENT OF PERFORMANCE LIQUIDATED DAMAGES,
CUSTOMER PASS-THROUGH    44




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LIQUIDATED DAMAGES AND REVENUE SHORTFALL LIQUIDATED
DAMAGES SHALL NOT BE RESTRICTED OR EXCLUDED BY THIS LIMITATION OF LIABILITY. SECTION 16
COMMUNICATION AND INFORMATION TRANSFER  16.1
    
    Access to Nortel Networks Computer Systems by Flextronics Flextronics shall limit access and use of any Nortel Networks computer systems
solely to the supply of Products and/or Repair Services and shall not access or
attempt to access any intranet, computer systems, files, software or services
other than those required for the supply of Products and/or Repair Services.
Flextronics shall limit such access to those employees with an express
requirement to have such access in connection with supply of Products and/or
Repair Services, and shall strictly follow all security rules and procedures of
Nortel Networks for restricting access to its computer systems. All user
identification numbers and passwords disclosed to Flextronics and any
information obtained by Flextronics as a result of Flextronics access to, and
use of Nortel Networks computer systems shall be deemed to be, and treated as,
Nortel Company Proprietary Information in accordance with the provisions set
forth in Section 22, with the same degree of care as such Flextronics uses for
its own information of a similar nature, but in no event a lower standard than
a reasonable standard of care. Flextronics shall cooperate in the
investigation of any apparent unauthorized access to any Nortel Networks
computer system. The requirements of this Section shall apply equally to any
access and use by Flextronics of any Nortel Networks intranet, electronic mail
system, of any Nortel Networks electronic switched network, either directly or
via a direct inward service access (DISA) feature or of any other property,
equipment or service of Nortel Networks.  16.2
    
    Flextronics Compatibility with Nortel Networks Computer Systems Flextronics shall use and maintain business systems capable of interfacing with
Nortel Networks business systems in such a way that meets the Nortel Networks
definition of managed access for electronic information exchange as set out in
Exhibit 26 of the MCMSA. Information to be exchanged as of the Effective Date,
as applicable, may include: on time shipment, on line work-in-process status,
Product Quality status, shipment notification, and Product design information. Nortel Networks will assist Flextronics with the integration of Flextronics
information technology systems with the Nortel Networks systems, as further set
out in Exhibit 26 to the MCMSA. Flextronics and Nortel Networks shall each take necessary precautions to put in
place contingency plans adequate to safeguard data and enable ongoing
operations in the event of a systems outage.    45




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16.3
    
    Information Technology Services Flextronics shall be responsible for providing the information technology
services as set out in Exhibit 26 of the MCMSA. SECTION 17
EQUIPMENT FURNISHED BY NORTEL NETWORKS  17.1
    
    Title to Equipment Furnished by Nortel Networks Any equipment loaned by Nortel Networks in connection with the Repair Services
described in the Statement of Work, with or without charge to Flextronics,
shall be deemed bailed to Flextronics, and title thereto shall at all times
remain with Nortel Networks. Upon the earlier of such Nortel Networks request
therefore or the completion of the Repair Services, Flextronics shall return,
at a commercially reasonable expense and risk borne by Nortel Networks, all
such equipment in the same condition as they were when furnished to
Flextronics, reasonable wear and tear excepted. Flextronics shall provide
Nortel Networks a list of all such equipment in Flextronics possession on a
quarterly basis.  17.2
    
    Risk, Insurance and Maintenance of Equipment Furnished by Nortel Networks All Nortel Networks equipment in Flextronics custody or control shall be held
at Flextronics risk and be kept insured by Flextronics at Flextronics expense
in an amount no less than the replacement cost with loss payable to the
supplying Nortel Company. Flextronics shall use such equipment solely in the
performance of its obligations hereunder and with the consent of Nortel
Networks Flextronics may use such equipment for other tasks. Upon the
expiration or termination of this Agreement, or upon the written request of
Nortel Networks at any time, Flextronics shall deliver such equipment to the
supplying Nortel Company in the same condition as originally received by
Flextronics, reasonable wear and tear excepted. The supplying Nortel Company
shall have the right, at all reasonable times, upon prior request, to enter
Flextronics premises to inspect any and all of its equipment and any equipment
or goods manufactured, developed or created with the aid of its equipment. SECTION 18
RESERVED ASSETS From time to time Nortel Networks may convey or otherwise transfer Reserved
Assets in connection with this Agreement and, in such event; the provisions of
Exhibit 13 shall apply. SECTION 19
LEGAL AND REGULATORY COMPLIANCE    46




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Flextronics shall at no additional charge to Nortel Networks, comply with and
obtain all licenses and permits necessary to repair Products and provide Repair
Services in accordance with this Agreement and, for Products in respect of
which Flextronics provides Logistics pursuant to Exhibit 2, Flextronics
covenants and agrees that each Repaired Product shall, with respect to the
repair, conform with, all applicable laws, governmental orders and regulations
in effect in all countries to which such Repaired Product is shipped and any
other relevant international agreements relating to the Products Each Party
shall provide all information under its control, which is necessary or useful
to obtain any export, or import license or document required to ship or receive
product, including but not limited to, U.S. Customs Certificates of Delivery,
Affidavits or Origin and U.S. Federal Communications Commission Identifier, if
applicable. SECTION 20
INTERNATIONAL TRADE  20.1
    
    Exports In addition to the requirements of Exhibit 2, each Party agrees that it shall
not knowingly (i) export or re-export, tangible or intangible, any technical
data (as defined by the U.S. Export Administration Regulations or any other
jurisdiction with import or export restrictions), including software received
from the other under this Agreement or (ii) export or re-export, tangibly or
intangibly, any direct product of such technical data, including software, to
any destination to which such export or re-export is restricted or prohibited
by U.S. or applicable non-U.S. law without obtaining prior authorization from
the U.S. Department of Commerce and/or other competent government authorities
to the extent required by those laws. In addition, each Party agrees to comply
with all the requirements of the Export and Import Permits Act (Canada) all
export control laws and regulations of the exporting country, and any other
applicable legislation throughout the world. As it is relevant to all
outstanding shipments, this clause shall survive termination or cancellation of
this Agreement.  20.2
    
    Customs Invoice Unless otherwise set forth in this Agreement, Flextronics shall produce customs
invoices and country of origin documents for all shipments crossing
international borders which comply with all laws, treaties and regulations of
both the exporting country and the importing country. If a
Product is repaired in more than one country, then to the extent required by
applicable laws, the different countries of origin must be identified on the
customs invoices, along with the related quantities/serial numbers of such
Materials. If any upgrade of Products to the most recent revision level in
accordance with this Agreement is performed, the applicable fee for this
upgrade must be included on the customs invoice, or, if such upgrade is
performed at no charge to Nortel Networks, the value of such upgrade shall be
so indicated. Flextronics shall be solely responsible for all fines, penalties
and costs resulting from any customs invoice, document, or declaration not
being so compliant unless such non-compliance is solely the result of an action
or omission of Nortel Networks in which case, Nortel Networks shall be
responsible for the fine, penalty and costs or its proportionate share of that
fine and/or penalty and cost. Any cost related to Value Added Tax, duties and
fines will be charged to Nortel Networks at Flextronics cost with no    47




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markup.
All customs invoices must indicate whether or not any Assists were provided and
the value of said Assists.  20.3
    
    Duty Drawback and Minimization In the countries where Nortel Networks maintains a duty drawback program,
Flextronics shall provide Nortel Networks with a quarterly report of part
numbers and import duties paid or refunded (at entry and through subsequent
adjustment) on behalf of Nortel Networks for all deliveries in country and for
which Nortel Networks may become a subsequent exporter entitled to duty
drawback. Flextronics shall provide a duty drawback waiver on the appropriate
form for duty paid on any materials imported by Flextronics and used or
consumed in the manufacture of Products supplied to Nortel Networks. Nortel
Networks shall provide guidelines to Flextronics with respect to the data
required to be provided by Flextronics. In the countries in which Nortel Networks does not currently maintain a duty
drawback program, the Parties shall work together with a view to implementing a
similar duty drawback program as soon as practicable and as mutually deemed
required. When Nortel Networks determines that duties warrant a drawback claim,
Flextronics shall provide all necessary and relevant data and/or documentation
and shall cooperate with Nortel Networks in pursuing the claim. Flextronics
will cooperate with Nortel Networks in any audit relating to this Section.
Similarly, when Flextronics determines that duties warrant a drawback claim,
Nortel Networks shall provide all necessary and relevant data and/or
documentation and shall cooperate with Flextronics in pursuing the claim. In
either case, the costs of preparing and filing the drawback claim will be borne
by the parties in proportion to their relative drawback benefits and Nortel
Networks will cooperate with Flextronics in any audit relating to this Section. Flextronics will utilize duty minimization programs such as inward and outward
processing relief, ATA Carnets (An international customs document that permits
duty-free and tax-free temporary import of goods for up to one year), and
temporary imports to mitigate duty costs to Nortel Networks. Duty minimization
programs will be reviewed and agreed by both parties. Flextronics shall not be
required to pursue a specific duty minimization program if that program is
unlikely to yield savings greater than the cost of implementing it. SECTION 21
ENVIRONMENTAL POLICIES  21.1
    
    ISO 14001 Flextronics agrees to maintain ISO 14001 registration for those Repair
Facilities so registered as of the Effective Date and to obtain such
registration within [] of the Effective Date for those Repair Facilities not
so registered as of the Effective Date.  21.2
    
    Corporate Policy Within [] of the Effective Date, Flextronics shall produce for Nortel
Networks review and approval its corporate-wide Environmental Policy.    48




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21.3
    
    VOC Free and Lead-Free Technology Where applicable, Flextronics shall use VOC-free technology in the provision of
Repair Services. Except in the circumstances where exemptions allowing the use of lead shall
apply under applicable law, Flextronics agrees to have fully qualified and be
ready to deploy lead-free technology in the Repair Facilities by []. Such
implementation shall include lead-free components to the extent required in a
Virtual Systems House Agreement or in the relevant bill of material. The
Parties acknowledge the required use of lead-free components may involve
different components and costs attributable to these different components in
the Price, and the Parties will allocate such costs to Nortel Networks unless
otherwise agreed. Nortel Networks and Flextronics agree to address jointly any
problems of supply. If Flextronics can demonstrate that compliance with any VOC-free or lead-free
requirements will result in change to costs or delay in delivery, the Parties
will agree on appropriate changes to the Price or delivery schedule, only to
the extent such costs or delays are directly related to the provision of Repair
Services. Flextronics acknowledges that changes to VOC-free and lead-free
requirements may result in decreases or increases to costs and that it will
bring any such change to Nortel Networks attention. Nortel Networks shall be
responsible for those associated costs that result from Flextronics bringing
operations in legacy Repair Facilities into initial compliance with regulations
regarding lead and VOC-free technology.  21.4
    
    European Union (EU) Environmental Directives  21.4.1
    
    Compliance Flextronics will engage with Nortel Networks or its designate and
mutually agree on the development and provision of a plan (the
Compliance Plan) for the implementation and management of the WEEE
(Waste Electrical and Electronic Equipment) Directive and the RoHS
(Restriction of Hazardous Substances) Directive, as well as any other EU
environmental directives that affect Products to be sold in the EU.
Flextronics will provide the Compliance Plan to Nortel Networks for its
approval, within 90 days on receipt of specific Nortel Networks
requirements, which shall include at a minimum: a) overall objectives in
regard to the directives, b) Specifications and other requirements that
must be complied with, c) Products that are impacted, d) an outline of
Flextronics and Nortel Networks responsibilities for achieving the
foregoing objectives and requirements and (e) allocation of any
applicable increase in Price to Nortel Networks unless otherwise agreed
to by the Parties. Nortel Networks shall be responsible for those
associated costs that result from Flextronics bringing operations in a
legacy Repair Facilities into initial compliance with regulations
regarding any applicable EU directives. Flextronics will provide Nortel Networks with any changes to the
Compliance Plan within ten (10) days of the change coming into effect.
Nortel Networks reserves the right to inspect Flextronics facilities to
validate compliance with the EU directives.    49




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To the extent Flextronics is responsible under the Compliance Plan,
Flextronics must be able to demonstrate to Nortel Networks satisfaction
by [] that no hexavalent chromium, cadmium, mercury or polybrominated
biphenyls (PBB)/polybrominated diphenyl ethers (PBDE) are present in
Products to be sold in the EU. To the extent Nortel Networks is
responsible under the Compliance Plan, Nortel must be able to demonstrate
to Flextronics satisfaction by [] that no hexavalent chromium, cadmium,
mercury or polybrominated biphenyls (PBB)/polybrominated diphenyl ethers
(PBDE) are present in Products to be sold in the EU. []. Nortel
Networks and Flextronics agree to address jointly any problems of supply.
If Flextronics can demonstrate that compliance with any EU directives
will result in change to costs or delay in delivery, the Parties will
agree on appropriate changes to the Price or delivery schedule, only to
the extent such costs or delays are directly related to the provision of
Repair Services. Flextronics acknowledges that changes to EU directives
may result in decreases or increases to costs and that it will bring any
such change to Nortel Networks attention.  21.4.2
    
    Indemnification [].  21.5
    
    Packaging Reusable and Recyclable Flextronics shall use only packaging that complies with the Canadian Code of
Preferred Packaging Practices and equivalent legislated requirements, as
applicable. Flextronics shall strive to minimize all product packaging and to
design packaging that delivers reusable/returnable packaging options or is
constructed of recyclable materials.  21.6
    
    INTENTIONALLY LEFT BLANK  21.7
    
    Collaborate on Environmental Initiatives Flextronics and Nortel Networks agree to collaborate in good faith on
environmental initiatives aimed at addressing particular customer and market
requirements.  21.8
    
    Hazardous Materials Flextronics shall supply to Nortel Networks a list of all components used in
the Repair of a Product which are classified as toxic or hazardous under
applicable laws and regulations, information on the safe handling of each
Repaired Product and any pertinent information concerning any adverse effects
on people or the environment that may result from use of, exposure to, or
disposal of such Repaired Product. []. Nortel Networks shall cooperate with
Flextronics to facilitate and minimize the damages, costs and expenses of any
recall or prohibition against such use.    50




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SECTION 22
CONFIDENTIALITY AND PROPRIETARY INFORMATION  22.1
    
    Restriction on Disclosure and Use of Confidential Information Any Nortel Company Proprietary Information provided or made available by any
Nortel Company to Flextronics and any Flextronics Proprietary Information
provided or made available by Flextronics to Nortel Networks shall be deemed
for the purposes of this Agreement to be Confidential Information of the
person disclosing (discloser) such information to another person
(recipient), except if such information disclosed to recipient is (a) in or
becomes part of the public domain through no fault of recipient; (b) disclosed
to recipient by a third party without breach of any obligation or other
restriction; (c) known to recipient at the time of disclosure and has been so
documented prior to receipt thereof; (d) independently developed by recipient
without access to any information furnished to it by discloser and has been or
is so documented; or (e) disclosed by recipient to the extent required to be
disclosed pursuant to any applicable law or order, decree or directive of any
competent judicial, legislative or regulatory body or authority, provided that
the recipient shall have provided prior notice to discloser of such requirement
and an opportunity for discloser to take action to contest or attempt to
prohibit or limit such disclosure as permitted by law and such information
shall continue to be Confidential Information for the purposes hereof to the
extent disclosure is prohibited or limited by law. All Confidential Information
shall be owned and remain the sole and exclusive property of discloser, and all
rights to Confidential Information made available to recipient by discloser
shall be held in trust by recipient for the exclusive benefit of discloser.
All Confidential Information of discloser shall be held in confidence by
recipient and, if in a form of any physical media of any kind, returned by
recipient upon request of discloser. Recipient shall not (i) reproduce the
Confidential Information of discloser without the written consent of discloser
or (ii) use the Confidential Information for any purpose other than the
performance by recipient of its obligations under this Agreement. Each Nortel
Company and Flextronics shall cause each of their respective employees,
consultants, agents and representatives who shall have access to Confidential
Information to sign a written agreement setting forth confidentiality
obligations of each such employee, consultant, agent and representative,
substantially in the form of Exhibits 9-1 and 9-2, which are attached hereto
and incorporated herein by reference. Flextronics shall be liable for and shall
indemnify NNL and each Nortel Company, its officers, directors, employees,
subcontractors, agents against any losses, claims, costs or expenses arising
from the failure of Flextronics or its employees, consultants, agents and
representatives against any losses, claims, costs or expenses arising from the
failure of Flextronics or its employees, consultants, agents and
representatives, for whatever reason, to execute the form of agreement set out
in Exhibit 9 hereof or to comply with the terms thereof, and Nortel Networks
shall be liable for and shall indemnify Flextronics, its officers, directors,
employees, subcontractors, agents against any losses, claims, costs or expenses
arising from the failure of each Nortel Network Company or NNL, its respective
employees, consultants, agents and representatives for any corresponding
failures by Nortel Company to Flextronics in respect of such obligations. Each
Party acknowledges that monetary damages may not be adequate in the event of a
default of this Section, and the discloser shall be entitled to injunctive or
other affirmative relief and/or to give notice of default pursuant to this
Agreement, or both.    51




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22.2
    
    Publicity Flextronics shall not in any advertising, sales promotion materials, press
releases or any other publicity matters use the name NORTEL NETWORKS,
Northern Telecom, BNR, Bell-Northern Research, Nortel Networks
Technology or the name of any Affiliate, or any variation thereof or language
from which the connection of said names may be implied, nor shall Flextronics
disclose or advertise in any manner the nature of Products repaired or Repair
Services which are part of the repair process or any order by Nortel Networks
hereunder, or the fact that Flextronics has entered into this Agreement, unless
Flextronics is otherwise required to make such disclosure under applicable law
or Nortel Networks, in its sole discretion, grants Flextronics prior written
permission to do so. No Nortel Company shall in any advertising, sales promotion materials, press
releases or any other publicity matters use the name FLEXTRONICS CORPORATION,
Flextronics, or any variation thereof or language from which the connection
of said names may be implied, nor shall any Nortel Company disclose or
advertise in any manner the fact that Nortel Networks has entered into this
Agreement, unless Nortel Networks is otherwise required to make such disclosure
under applicable law or Flextronics, in its sole discretion, grants Nortel
Networks prior written permission to do so. SECTION 23
INSURANCE  23.1
    
    General Liability Insurance Flextronics shall maintain during the Term, with insurers with an A.M. Best
rating of A- or better policies providing the following insurance coverage: 1)
general umbrella liability insurance (including contractual and products
liability ) with limits of either [] combined single limit per occurrence for
bodily injury and property damage or [] bodily injury per occurrence and []
property damage per occurrence, 2) workers compensation insurance and other
employee insurance coverage required by law, and employers liability insurance
with limits of [] 3) owned or non-owned automobile liability with limits of
[] and 4) Errors & Omissions insurance with limits of not less than []. Nortel Networks shall maintain during the Term, insurance coverage: 1) general
liability insurance (including contractual, products liability and broad form
vendors endorsement) with limits of either [] combined single limit per
occurrence for bodily injury and property damage or [] bodily injury per
occurrence and [] property damage per occurrence, 2) workers compensation
insurance and other employee insurance coverage required by law, and employers
liability insurance with limits of []. Flextronics insurance shall be primary and non-contributory (except with
respect of Errors & Omissions referred to in subparagraph 4) above, which may
be primary and non-contributory as
regards negligence or negligent acts, as applicable) with respect to any
insurance that Nortel Networks may have and each applicable Nortel Company
shall be named under Flextronics general liability insurance as an additional
insured.    52




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23.2
    
    Property and Business Insurance Flextronics shall provide evidence satisfactory to Nortel Networks that its
property and business are adequately insured up to at least [] against all
risks of loss or damage, including business interruption, for at least the
amount of the Maximum Foreseeable Loss as defined within the insurance
industry.  23.3
    
    Certificate of Insurance Prior to the commencement of the Initial Term and upon demand of Nortel
Networks thereafter, Flextronics shall furnish to Nortel Networks a certificate
or certificates of insurance evidencing that all insurance required in this
Section 23 is in effect. Flextronics will endeavor to provide at least 30 days
notice of any change in insurance coverage which would impact compliance with
the requirements of this Section 23.3. Flextronics shall in such event furnish
a new certificate in the event of cancellation or expiration of any insurance
evidencing that replacement coverage is in effect.  23.4
    
    Business Continuity Flextronics acknowledges that the existence, content and adequacy of its
Business Continuity Plan shall be used by Nortel Networks as part of initial
and ongoing assessment criteria for review of Flextronics overall performance
under this Agreement. Flextronics shall maintain its property conservation
program to address risks in its worldwide locations. Flextronics will share a
description of this program with Nortel Networks, and shall provide Nortel
Networks annually, or as requested upon reasonable notice, information related
to property protection and insurers engineering recommendations for the
locations relevant to the Repair Services. Nortel Networks and/or its
insurance companies shall be allowed to inspect any Site at any time upon
reasonable notice and during normal business hours and to recommend to
Flextronics any appropriate protection improvements. Nortel Networks and
Flextronics shall review any recommendations made as a result of such
inspection and Flextronics shall implement any recommendations or alternative
solutions which are mutually agreed. SECTION 24
EXPIRATION OR TERMINATION  24.1
    
    Termination  (a)
    
    In the event the MCMSA is terminated, the Parties agree to meet and
consider the continuance of this Agreement on terms that are mutually
acceptable. If the Parties are unable to agree, either Party has the
right to terminate this Agreement.(b)
    
    In addition to any other right or remedy available to Nortel Networks or
any Nortel Company under this Agreement or at law or in equity, if
Flextronics breaches any material term of this Agreement or an Order and
such breach is susceptible of cure but is not corrected within thirty (30)
days after the delivery of written notice thereof by Nortel    53




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Networks to
Flextronics or if Flextronics defaults in any payment to Nortel Networks
and does not correct the default in payment issue within thirty (30) days
after the date of notice of the breach to Flextronics NNL may terminate
this Agreement and any Nortel Company may terminate any Order. For
greater certainty, if any Service Blanket Order is terminated, all Orders
relating thereto shall be deemed to be concurrently terminated.
Notwithstanding the foregoing, (i) Nortel Networks and any Nortel Company
shall have the same rights and remedies without the requirement to wait
for thirty (30) days for cure if the breach by Flextronics relates to
Nortel Company Proprietary Information under Section 13 or Section 22
hereof and such breach is not susceptible of cure; and (ii) Flextronics
shall have the same rights and remedies without the requirement to wait
for thirty (30) days for cure if the breach by any Nortel Company relates
to Flextronics Company Proprietary Information under Section 13 or
Section 22 hereof and such breach is not susceptible of cure.(c)
    
    Regardless of the excuse of Force Majeure, if a Party is not able to
perform within ninety (90) days after such event which constitutes Force
Majeure, the other Party may terminate this Agreement in accordance with
this Section 24.1 provided such Party purporting to terminate is not
otherwise in default of any of its material obligations under this
Agreement. Termination of this Agreement shall not release or diminish any
other obligations of any Party hereunder that exist as of the date of
termination.(d)
    
    If Flextronics shall be declared insolvent or bankrupt, or if any
assignment of its property shall be made for the benefit of creditors or
otherwise, or if its interest herein shall be levied upon under execution
or seized by virtue of any writ of any court, or if a petition for
assignment for the benefit of creditor is filed in a court is filed by
Flextronics to declare Flextronics bankrupt, or if a petition is filed by
any person other than Flextronics in any court to declare Flextronics
bankrupt which is not dismissed within sixty (60) days of the filing of
such petition, or if a trustee in bankruptcy, receiver or receiver-manager
or similar officer is appointed for or in respect of Flextronics or its
assets, then NNL may terminate this Agreement and/or any Order at its
option, and without charge, and shall thereupon be free from all
liability and obligations thereunder except as specifically
provided in Section 24.2(c), all subject to applicable bankruptcy and
insolvency legislation which may otherwise provide. For greater
certainty, if any Service Blanket Order is terminated, all Orders
relating thereto shall be deemed to be concurrently terminated.(e)
    
    Flextronics may terminate an Order only if the Nortel Company which
issued the Order is in material breach of a term, including, without
limitation, any payment obligation of this Agreement or an Order, and
such breach has not been cured within thirty (30) days after the delivery
of written notice thereof by Flextronics to Nortel Company defaulting in
any payment to Flextronics and for any other breach within thirty (30)
days after the date of Flextronics written notice thereof to the
applicable Nortel Company in respect of the particular breach, provided
that Flextronics has sent a copy of such notice to NNL. The failure of
Nortel Networks to pay to Flextronics in a timely manner any moneys in
dispute shall not constitute a material breach hereof.(f)
    
    The Parties agree that the provisions of Exhibit 11 shall apply with
respect to those employees in the United Kingdom or European Union
countries who were employed by    54




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Nortel Networks prior to the VSHA Effective
Date applicable to Monkstown and Chateaudun System Houses, respectively,
and were transferred to Flextronics pursuant to the Asset Purchase
Agreement.  24.2
    
    Effect of Expiration or Termination Upon expiration or any termination of this Agreement by either Party:  (a)
    
    Nortel Networks shall pay all applicable undisputed amounts or charges
owed to Flextronics as provided in this Agreement. Either Party shall have
the right with prior written notification and mutual agreement to set-off
any such amounts or charges owed to the Party against any amounts owing to
the other Party pursuant to this Agreement. If the aggregate amount owing
by Nortel Networks to Flextronics is less than the aggregate amount owing
by Flextronics to Nortel Networks, Flextronics shall pay such net amount
owing to Nortel Networks promptly and in full within [] of the date which
is the earliest of expiry or termination, as the case may be.(b)
    
    So long as Nortel Networks has made all payments required pursuant to
paragraph (a) above, Flextronics shall complete all partially completed
Repair Services and deliver such Repaired Products in accordance with
the terms of this Agreement that would have otherwise applied to such
Repair Services. Provided Nortel Networks has made all payments required
pursuant to paragraph (a) above, Flextronics shall deliver within three
(3) weeks of the later of the date of expiry or termination or such
payment, if required, to Nortel Networks all Products, Inventory, any
Nortel Networks property described in Section 17, in exchange for payment
by Nortel Networks of the Price for Products and Inventory.(c)
    
    The provisions of this Agreement relating to Warranties (Section 12),
Equipment Furnished by Nortel Networks (Section 17), Reserved Assets
(Section 18), Confidential and Proprietary Information (Section 22),
Intellectual Property Rights (Section 13) except the license granted to
Flextronics in Section 13.1, Indemnification (Section 14) and Audit
(Section 27.4), shall remain in effect beyond any expiration or
termination.(d)
    
    Flextronics shall return all Nortel Company Proprietary Information and
any Reserved Assets with respect to which Nortel Networks exercises its
right to purchase pursuant to Section 6 of Exhibit 13 to the locations
designated by Nortel Networks and under Nortel Networks supervision,
either return, destroy or erase all copies of such Nortel Company
Proprietary Information in the possession of Flextronics or any of its
employees, consultants, agents or representatives, including copies on
paper or other hard copy and copies on computer or other storage media,
provided, however, that this provision shall not apply to any such Nortel
Company Proprietary Information in respect of which Flextronics has a
continuing license or obligation which survives the expiry or termination
of this Agreement as expressly provided herein.(e)
    
    Nortel Networks shall return to the locations designated by Flextronics
all Flextronics Proprietary Information under Flextronics supervision,
either return, destroy or erase all copies of such Flextronics Proprietary
Information in the possession of any Nortel Company or any of their
respective employees, consultants, agents or representatives,    55




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including
copies on paper or other hard copy and copies on computer or other storage
media; provided, however, that this provision shall not apply to any such
Flextronics Proprietary Information in respect of which Nortel Networks
has a continuing license or obligation which survives the expiry or
termination of this Agreement as expressly provided herein.(f)
    
    In the event that Nortel Networks exercises its right to terminate the
purchase of any Repair Services pursuant to Section 3.3.1(B) and (C) or
either Party exercises its right to terminate the purchase or supply of
any Products for convenience upon 180 days notice pursuant to Section 1.6,
and in addition to Flextronics obligations in this Section 24.2,
Flextronics will (a) at the beginning of the notice period, put in place a
dedicated transition team to manage the transfer of Repair Services back
to Nortel Networks or to a third party (b) fulfill all obligations under
this Agreement for the notice period at the same level required under this
Agreement (c) upon reasonable prior notice, allow Nortel Networks and any
third party designated by Nortel Networks access to Flextronics Sites and
to data and information necessary for a successful transition, and (d)
actively support the transition of Repair Services to Nortel Networks or a
third party designated by Nortel Networks.Upon termination, NNL shall have the obligation, to purchase any or all
last time buy components at Flextronics acquisition cost as well as
Class B Inventory at the current Price and Class C Inventory at zero
cost.(g)
    
    At Nortel Networks option but subject to Flextronics agreement,
Flextronics shall continue to perform any requested services for a period
of time that continues beyond the expiration or termination of the Term,
on terms and conditions to be mutually agreed upon. SECTION 25
TERMINATION ASSISTANCE  25.1
    
    Termination Assistance Services On notice from Nortel Networks to Flextronics after a determination that an
expiration or termination of this Agreement will occur, Flextronics shall
provide to Nortel Networks any and all termination services (collectively, the
Termination Assistance Services) reasonably requested by Nortel Networks to
facilitate the orderly transfer of responsibility for the Repair Services to
Nortel Networks or its designee. The Termination Assistance Services may
include:  (a)
    
    cooperating with Nortel Networks in effecting the orderly
Repair Services transfer to a third party or Repair Services
resumption by Nortel Networks, provided that (i) such third parties
comply with Flextronics security and confidentiality requirements,
including executing a confidentiality agreement reasonably
acceptable to Flextronics, and (ii) Flextronics shall not be
required to disclose any of its Confidential Information or
Flextronics Proprietary Information;    56




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(b)
    
    continuing to perform Repair Services until the effective
date of expiration or termination of this Agreement (Conclusion
Date); and(c)
    
    continuing to perform those Repair Services requested by
Nortel Networks after the Conclusion Date.  25.2
    
    Obligation to Provide Termination Services Except as otherwise agreed within the scope of Termination Assistance Services,
Flextronics will have no obligation to provide Repair Services or any part
thereof after the Conclusion Date.  25.3
    
    Termination Assistance Period Flextronics shall provide the Termination Assistance Services, and Nortel
Networks shall pay applicable fees for provision of Termination Assistance
Services for a period of up to four (4) months after the Conclusion Date
(Termination Assistance Period), at []. SECTION 26
DISPUTE RESOLUTION  26.1
    
    Internal Dispute Resolution Except as otherwise expressly provided in this Agreement, the Parties initially
shall attempt to resolve all disputes, claims, questions or differences between
the Parties with respect to the interpretation of any provision of this
Agreement or with respect to the performance by Contractor or Customer of their
respective obligations hereunder (a Dispute), informally in accordance with
the dispute resolution procedure set forth in Exhibit 10. SECTION 27
GENERAL PROVISIONS  27.1
    
    Access to Facilities Nortel Networks shall have the right to review Flextronics facilities,
operations, and procedures as they relate to the Repair Services, at any
reasonable time with adequate prior notice for purposes of determining
compliance with the requirements of this Agreement. From time to time a
Customer may request the right to review Flextronics facilities and operations
for the purpose of qualification. Flextronics shall permit such reviews with
notice of five (5) Business Days, provided that Flextronics does not consider
the Customer to be a competitor of Flextronics, and such Customer signs an
acceptable non-disclosure agreement. Flextronics shall not grant access to
those areas of its facilities where Repair Services are conducted to a
Competitor of Nortel Networks without Nortel Networks express written
permission.    57




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27.2
    
    Reporting Flextronics shall provide Nortel Networks with the reports as set forth herein
and in the Statement of Work or as mutually agreed by the parties consistent
with the appropriate management of the Repair Services.  27.3
    
    Documentation Flextronics shall maintain documentation and information relating to the Repair
Services and Specifications, and updates thereto consistent with industry best
practices, but in no event less than [].  27.4
    
    Audits  27.4.1
    
    Agreement Compliance []  27.4.2
    
    Control & Security Compliance []  27.5
    
    Force Majeure A Party affected by an event of Force Majeure shall be released without any
liability on its part from the performance of its obligations (other than an
obligation to pay money) under this Agreement, but only to the extent and only
for the period that its performance of such obligations is prevented by
circumstances of Force Majeure and provided that such Party shall have given
prompt notice to the other Party. Such notice shall include a description of
the nature of the event of Force Majeure, its cause, and its possible
consequences. The Party claiming circumstances of Force Majeure shall promptly
notify the other Party of the conclusion of the event.  27.6
    
    Notices All demands, notices, communications and reports provided for in this Agreement
shall be in writing and shall be either sent by facsimile transmission with
confirmation to the number specified below or personally delivered or sent by
reputable overnight courier services (delivery charges prepaid) to any party at
the address specified below, or at such address, to the attention of such other
person, and with such other copy as the recipient party has specified by prior
written notice to the sending party pursuant to the provisions of this Section: Nortel Networks: Nortel Networks
3500 Carling Avenue
Ottawa, Ontario
Canada K2H 8E9    58




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Attention: Vice President Supply Management With a copy to: NNL Corporate Secretary
8200 Dixie Road, Suite 100,
Brampton, Ontario
Canada L6T 5P6 Flextronics: Flextronics Telecom Systems Ltd.
802 St. James Court,
St. Denis Street,
Port Louis,
Mauritius
Phone: 230 212 7600
Fax: 230 210 9168
Attention: President With a copy to: Flextronics International Inc.
Room 908, Dominion Centre,
43-59 Queens Road East, Wanchai, Hong Kong
Attention: President With a copy to: Corporate Legal Department at the address above Any such demand, notice, communication or report shall be deemed to have been
given pursuant to this Agreement when delivered personally, when confirmed if
by facsimile transmission, or on the Business Day after deposit with a
reputable overnight courier service, as the case may be.  27.7
    
    Independent Contractor This Agreement shall not constitute Flextronics the agent or legal
representative of Nortel Networks for any purpose and Flextronics shall not
hold itself out as an agent of Nortel Networks other than as expressly provided
in this Agreement. This Agreement creates no relationship of joint venturers,
partners, associates, employment or principal and agent between the Parties,
and both Parties are acting as independent contractors. Neither Party shall
have the right to exercise any control or direction over the operations,
activities, employees or agents of the other Party in connection with this
Agreement. Other than as expressly permitted or provided elsewhere in this
Agreement, Flextronics is not granted any right or authority to, and shall not
attempt to, assume or create any obligation or responsibility for or on behalf
of any Nortel Company or Affiliate. Flextronics shall have no authority to
bind any Nortel Company or Affiliate to any contract, whether of employment or
otherwise, and Flextronics shall bear all of its own expenses for its
operations, including the compensation of its employees, contractors,
representatives and agents    59




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and the maintenance of its offices, service,
warehouse and transportation facilities. Flextronics shall be solely
responsible for its own employees and sales people and for their omissions,
acts and the things done by them. Other than as expressly permitted or
provided elsewhere in this Agreement, Nortel Networks expressly disclaims any
liability for any commitments on behalf of Nortel Networks made by Flextronics.  27.8
    
    Flextronics Responsible for its Contractors Flextronics may subcontract Repair Services only with Nortel Networks prior
written approval, which approval may be withheld in Nortel Networks sole
discretion. The approval by Nortel Networks of any subcontractor chosen by
Flextronics shall in no way be construed to relieve Flextronics of any of its
duties, responsibilities and obligations to Nortel Networks under this
Agreement.  27.9
    
    Assignment Except as expressly set forth in this Agreement, neither this Agreement nor any
license or rights hereunder, in whole or in part, shall be assignable or
otherwise transferable whether by merger, operation of law or otherwise,
without the prior written consent of the other Party. Any change of control in
fact of a Party shall be deemed to constitute an assignment for the purposes of
this Section. Subject to the condition that Flextronics is satisfied, upon reasonable
evidence, that such future assignee possesses sufficient creditworthiness and
future assignee has accepted the assignment without reservation, NNL may assign
this Agreement or any portion thereof (i) to any of NNLs Subsidiaries or
company of which NNL becomes a Subsidiary; or (ii) to a person or entity into
which it has merged or which has otherwise succeeded to all or substantially
all of its business and assets to which this Agreement pertains, by purchase of
stock, assets, merger, reorganization or otherwise, and which has assumed in
writing or by operation of law its obligations under this Agreement. Any
attempted assignment in violation of the provisions of this Section shall be
void. In any assignment in case (ii) above, the person or entity into which
NNL has merged or which has otherwise succeeded to all or substantially all of
NNLs business and assets, shall agree in writing to be bound by the terms of
this Agreement. Flextronics agrees to give NNL, to the extent legally permissible, notice of
the direct or indirect acquisition by any entity of (1) shares in the capital
of Flextronics or of any Subsidiary of Flextronics, if rights sufficient to
elect a majority of the board of directors of such entity (pursuant to a
shareholders agreement or otherwise) are attached to such shares or such
Subsidiary of Flextronics ceases to be a Subsidiary of Flextronics, or (2)
substantially all of the assets of Flextronics or of such Subsidiary of
Flextronics.  27.10
    
    Severability If any provision of this Agreement is held illegal, invalid or unenforceable by
any competent authority in any jurisdiction, such illegality, invalidity or
unenforceability shall not in any manner affect or render illegal, invalid or
unenforceable    60




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such provision in any other jurisdiction or any other provision
of this Agreement in any jurisdiction, and such invalid or unenforceable
provision shall be replaced for the purposes of the jurisdiction in which it is
held to be illegal, invalid or unenforceable with an enforceable clause which
most closely achieves the result intended by the invalid provision.  27.11
    
    Governing Law; Waiver of Jury Trial All issues and questions concerning the construction, validity, enforcement,
interpretation and performance of this Agreement, the rights and obligations
arising hereunder and any purchase made hereunder shall be governed by the laws
of the Province of Ontario and the federal laws of Canada applicable therein,
without reference to the UNCITRAL Conventions on Contracts for the
International Sale of Goods and without giving effect to any choice of law or
conflict of law,
rules or provisions (whether of such Province or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the
Province of Ontario. In furtherance of the foregoing, the internal Laws of the
Province of Ontario shall control the interpretation and construction of this
Agreement, even though under that jurisdictions choice of Law or conflict of
Law analysis, the substantive Law of some other jurisdiction would ordinarily
apply. IN THE EVENT OF ANY DISPUTE BETWEEN THE PARTIES, WHETHER IT RESULTS IN
PROCEEDINGS IN ANY COURT IN ANY JURISDICTION OR IN ARBITRATION, THE PARTIES
HEREBY KNOWINGLY AND VOLUNTARILY, AND HAVING HAD AN OPPORTUNITY TO CONSULT WITH
COUNSEL, WAIVE ALL RIGHTS TO TRIAL BY JURY, AND AGREE THAT ANY AND ALL MATTERS
SHALL BE DECIDED BY A JUDGE OR ARBITRATOR WITHOUT A JURY TO THE FULLEST EXTENT
PERMISSIBLE UNDER APPLICABLE LAW.  27.12
    
    Consent to Jurisdiction The parties hereto submit to and consent to the non-exclusive jurisdiction of
Courts located in each Province within Canada.  27.13
    
    Entire Agreement; Amendments This Agreement, including all Exhibits and Schedules thereto, and the other
transaction documents referenced therein, constitutes the entire agreement
between the parties pertaining to the subject matter thereof and such Exhibits
and Schedules thereto are incorporated herein by reference. This Agreement
supersedes all prior agreements and understandings between the parties, written
or oral, with respect to such subject matter. No representation or statement of
any kind made by a representative of either Party that is not stated in this
Agreement shall be binding. The provisions of this Agreement may be amended or
waived only by an instrument in writing signed by the authorized
representatives of each Party, except as otherwise expressly provided in this
Agreement.    61




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27.14
    
    Most Favored Customer [].  27.15
    
    Construction Unless the context requires otherwise, all words used in this Agreement in the
singular number shall extend to and include the plural, all words in the plural
number shall extend to and include the singular, and all words in any gender
shall extend to and include all genders. Wherever the Agreement uses the expression including or such as or similar
expressions denoting examples, such expressions shall be interpreted as being
without limitation.  27.16
    
    Headings The headings used in this Agreement are for the purpose of reference only and
shall not affect the meaning or interpretation of any provision of this
Agreement.  27.17
    
    Time of Essence Time shall be of the essence of this Agreement, except as otherwise expressly
provided in this Agreement.  27.18
    
    Agreement by All Flextronics Entities Flextronics has entered into this Agreement for and on behalf of itself and its
Subsidiaries. Flextronics represents and warrants that it has full power and
authority to negotiate this Agreement for itself and for and on behalf of each
of its Subsidiaries.  27.19
    
    Language The Parties have requested that this Agreement and all documents contemplated
thereby or relating thereto be drawn up in the English language. Les Parties
ont requis que cette Convention ainsi que tous les documents qui y sont
envisagés ou qui sy rapportent soient rédigés en langue anglaise.     REMAINDER OF PAGE INTENTIONALLY LEFT BLANK    62




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IN WITNESS WHEREOF, the Parties hereto have signed this Agreement by their duly
authorized representatives, to be effective as of the Effective Date, although
actually signed by the Parties on the dates shown below their respective
signatures. NORTEL NETWORKS LIMITED
    
    FLEXTRONICS TELECOM SYSTEMS, LTD.By: /s/ Chahram Bolouri
    
    By:Print Name: Chahram Bolouri
    
    Print Name:Title: President, Global Operations
    
    Title:By:Print Name:Title:
 (Signature Page to Repair Agreement) 63




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IN WITNESS WHEREOF, the Parties hereto have signed this Agreement by their duly
authorized representatives, to be effective as of the Effective Date, although actually signed by
the Parties on the dates shown below their respective signatures. NORTEL NETWORKS LIMITED
    
    FLEXTRONICS TELECOM SYSTEMS, LTD.By:
/s/ Chahram Bolouri
    
    By: /s/ Manny MarimuthuPrint Name: Chahram Bolouri
    
    Print Name: Manny MarimuthuTitle:
President, Global Operations
    
    Title:By:Print Name:Title:
 (Signature Page to Repair Agreement) 64