September 14, 2001

 

 

 

Mr. Mark Slaven

Vice President,Treasurer

3Com Corporation5400 Bayfront PlazaSanta Clara, CA 95052-8145

 

 

Re:          SupplyAgreement between Manufacturers’ Services Salt Lake City Operations, Inc.("MSSLO") and 3Com Corporation (“3Com”), and joined for the limitedpurposes set forth therein by Manufacturers’ Services Limited (“MSL”), datedSeptember 30, 2000, as amended by the First Amendment to Supply Agreement,dated January 15, 2001 (the“Supply Agreement”)

 

 

Dear Mark:

 

As a result of negotiations entered into at therequest of 3Com contained in your letter dated July 31, 2001 to Mr. RobertDonahue, President of MSL, and for good and valuable consideration, the receiptand adequacy of which is hereby acknowledged, MSL, MSSLO and 3Com have agreedto amend the Supply Agreement and the other agreements entered into inconnection therewith specified below as follows (with all capitalized termsused and not otherwise defined herein having the meaning set forth in theSupply Agreement):

1.             SupplyAgreement.  The Supply Agreement ishereby amended such that:

 (a)          Section 4A is deleted in its entiretyand, effective as of the date hereof, the Minimum Commitment for the InitialTerm shall consist of, and shall be fully paid and satisfied by payment by 3Comto MSSLO of: (i) $22,105,902 in cash within two business days of the datehereof for accrued Minimum Commitment through August 31, 2001; (ii) $8,000,000in cash within two business days of the date hereof for the Minimum Commitmentfor the period from September 1, 2001 to September 30, 2001; (iii) $520,000 incash within two business days of the date hereof for reimbursement forunavoidable labor expenses for the month of September 2001; (iv) an amount incash equal to the amount of cash (net of all fees and costs, including, withoutlimitation, stock brokerage or similar fees) received by 3Com in exchange forthe 1,551,220 shares of common stock, par value $.001 per share, of MSL (the"MSL Shares") held by 3Com in a transaction consummated within 30days of the date hereof within two business days of the date 3Com receives suchcash in respect of such transaction, or if no such transaction is consummatedwithin 30 days of the date hereof or if MSL earlier requests in writing that3Com transfer the MSL Shares, by transfer by 3Com to MSL of the MSL Shareswithin two business days of the earlier of the 30th day after the date hereofand the date of such request; and (v) beginning October 1, 2001, the followingamounts in cash or Value Add (or a combination thereof) (the "QuarterlyMinimum Commitment"): (A) $13,000,000 on December 14, 2001 for thecalendar quarter ending on December 31, 2001; (B) $11,000,000 on March 15, 2002for the calendar quarter ending on March 31, 2002; and (C) $11,000,000 on June14, 2002 for the calendar quarter ending on June 30, 2002.  The amounts paid pursuant to Section 1(a)(v)shall be subject to reconciliation within 30 days of the end of each calendarquarter and MSSLO shall promptly refund any overpayment of the QuarterlyMinimum Commitment in such calendar quarter to 3Com;

 

(b)           "Products" shall include butnot be limited to the products to be manufactured by MSSLO for the CommWorksbusiness pursuant to the award in September 2001 made by 3Com to MSSLO pursuantto the Request for Quote for CommWorks dated August 17, 2001 issued by 3Com(the "CommWorks Products");

 

(c)           no more than $1,000,000 of Value Addattributable to CommWorks Products purchased by 3Com in a calendar quarter("CommWorks Value Add") shall be counted toward satisfaction of theQuarterly Minimum Commitment in such calendar quarter and no credit shall begiven for any amount of CommWorks Value Add in excess of $1,000,000;

 

(d)           subject to Section 1(c) of thisletter and as mutually agreed by MSSLO and 3Com, the Value Add attributable tothe purchase of New Products produced at any Facility (other than the Facilityin Salt Lake City) shall be counted toward satisfaction of the QuarterlyMinimum Commitment;

 

(e)           MSSLO shall have no obligation tomake available or maintain any capacity at the Chicago Facility otherthanas necessary to meet 3Com's actual production requirements at the ChicagoFacility as reflected in forecasts provided by 3Com to MSL pursuant to theSupply Agreement;

 

(f)            theamount of damages to MSSLO and MSL would be difficult or impossible toascertain if 3Com fails to pay the amounts specified in Section 1(a)(v), or anyportion thereof, when due; accordingly, in the event of any such failure, 3Comshall, as liquidated damages, in lieu of any amounts specified in Section1(a)(v) not previously paid, and not as a penalty or forfeiture, pay to MSSLOan amount in cash equal to $32,000,000, less any portion of the amounts setforth in Sections 1(a)(v)(A) - (C) previously paid (and if 3Com shall not havepreviously made the payment or the transfer required by Section 1(a)(iv),simultaneously 3Com shall make the payment or transfer required by Section1(a)(iv)).  Such amount (and payment ortransfer, if applicable) represents the best estimate of the amount of damagesMSSLO and MSL would suffer from such event; and

(g)           the parties agree to the otherchanges to the Supply Agreement reflected in the amended and restated SupplyAgreement attached as Exhibit A hereto.

 

2.             Lease.  The lease dated September 30, 2000 by andbetween 3Com and MSSLO (the "Lease") is hereby amended to effect thechanges to the Lease set forth in Exhibit B hereto.

 

3.             Distribution Services Agreement.  The Distribution Services Agreement  by and between MSSLO and 3Com, and joinedfor the limited purposes set forth therein by MSL, dated September 30, 2000(the "Distribution Services Agreement"), is hereby amended such thatMSSLO shall be under no obligation to provided space under Section 6.2 thereof otherthan as necessary to perform its obligations under the DistributionServices Agreement and only for up to a maximum of 1600 pallets of FinishedGoods Inventory (as defined in the Distribution Services Agreement).

 

This letter, to the extent set forth herein,constitutes a written amendment to the Supply Agreement, Lease and DistributionServices Agreement.  Except as expresslyset forth herein, the Supply Agreement, Lease and Distribution ServicesAgreement shall remain in full force and effect.  In the event of any conflict between this letter and the SupplyAgreement, Lease or Distribution Services Agreement, this letter shall controlwith respect to the subject hereof. 3Com hereby withdraws its letter of August 30, 2001 to Mr. Donahue withthe effect that no such letter was sent, and, subject to receipt of thepayments set forth in Sections 1(a)(i), (ii) and (iii), MSL and MSSLO herebywaive any breach of the Supply Agreement that may have resulted from suchletter and, except as set forth herein, hereby release any claim arising fromor relating to such letter, or the matters set forth therein, or anynon-payment of Minimum Commitment or Value Add. Each of MSL, MSSLO and 3Comshall execute such documents and take such further actions as may be reasonablyrequired or desirable to carry out the provisions set forth herein.

If this letter reflects the agreement MSL, MSSLO and3Com have reached with respect to foregoing, please sign, date and return theenclosed copy of this letter which will then constitute our agreement withrespect thereto.

                                                                                Verytruly yours,

 

                                                                                MANUFACTURERS'SERVICES LIMITED
| By:                     | /s/ Robert E. Donahue |
|-------------------------|-----------------------|
| Name:                   | Robert E. Donahue     |
| Title:                  | President             |
|                    |                  |
|                    |                  |
| MANUFACTURERS' SERVICES |
| SALT LAKE CITY          |
| OPERATIONS, INC.        |
|                    |                  |
|                    |                  |
| By:                     | /s/ Robert E. Donahue |
| Name:              | Robert E. Donahue     |
| Title:                  | President             |
|                    |                  |

 

 

Acknowledged and agreedas of September 14, 2001

 

3COM CORPORATION

 

 

 
| By:         | /s/ Mark Slaven |
|-------------|-----------------|
| Name:  | Mark Slaven     |
| Title:      | VP, Treasurer   |