In this task, you're given a passage that represents a legal contract or clause between multiple parties, followed by a question that needs to be answered. Based on the paragraph, you must write unambiguous answers to the questions and your answer must refer a specific phrase from the paragraph. If multiple answers seem to exist, write the answer that is the most plausible.
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Question: Exhibit 10.14

                              OUTSOURCING AGREEMENT

                                     BETWEEN

                   INTERNATIONAL BUSINESS MACHINES CORPORATION

                                       AND

              MANUFACTURERS' SERVICES WESTERN U.S. OPERATIONS, INC.

                                 EFFECTIVE DATE

                                  JUNE 1, 1998

---------- [*] = Information redacted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

                                IBM Confidential

                           OUTSOURCING BASE AGREEMENT

This Outsourcing Base Agreement and the five (5) attachments listed below which are hereby incorporated by reference (Agreement) is entered into by and between International Business Machines Corporation, a corporation incorporated under the laws of New York, U.S.A., having an office for the transaction of business at 8501 IBM Drive, Charlotte, North Carolina 28262 (IBM), and Manufacturers' Services Western US Operations, Inc., a corporation incorporated under the laws of California, U.S.A., having an office for the transaction of business at 5600 Mowry School Road, Newark, CA 94560 (MSL).

WHEREAS, IBM desires to sell certain IBM assets and transition services to MSL and MSL desires to purchase certain IBM assets and transition services from IBM in order for MSL to manufacture and sell products to IBM, and

WHEREAS, MSL desires to employ certain IBM personnel and lease certain IBM space in Charlotte, North Carolina, and IBM desires to make available certain IBM personnel and lease certain IBM space to MSL in order for MSL to manufacture and sell products to IBM, and

WHEREAS, MSL desires to manufacture and sell products to IBM and IBM desires to purchase such products,

NOW THEREFORE, in consideration of the promises contained herein, IBM and MSL (each a Party and together the Parties) agree to the following terms and conditions:

The Parties agree that this Agreement regarding this transaction consists of:

a)    the Outsourcing Base Agreement

b)    Attachment 1: Statement of Work and its Product Attachments, Appendices,       and Supplements

c)    Attachment 2: Employee list and Benefits Information

d)    Attachment 3: Asset List

e)    Attachment 4: Expense Participation

f)    Attachment 5: Equipment and Program Loan List

g)    Agreement for Exchange of Confidential Information Number 4998S60076

h)    IBM Purchase Orders

i)    IBM Customer Orders

j)    Equipment and Program Loan Agreement

The following is a related agreement between MSL and IBM:

      IBM Corporation (Landlord) and MSL (Tenant) Lease Agreement

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By signing below, the Parties agree to the terms of this Agreement. Once signed, 1) any signed reproduction of this Agreement made by reliable means (for example, photocopy or facsimile) is considered an original, and 2) all products and services delivered by either Party to the other under this Agreement are subject to the terms and conditions of this Agreement.

Agreed to:                               Agreed to: Manufacturers' Services Western U.S.     International Business Machines





Operations, Inc.                         Corporation

By: /s/ Kevin C. Melia                   By: /s/ R. G. Richter     --------------------                     --------------------------     Authorized Signature                     Authorized Signature

Name: Kevin C. Melia                     Name: R. G. Richter       ------------------                       ------------------------

Date: May 5, 1998                        Date: May 5, 1998       ------------------                       ------------------------

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                                IBM Confidential

SECTION 1.0 DEFINITIONS........................................   Page 4

SECTION 2.0 ORDER OF PRECEDENCE................................   Page 5

SECTION 3.0 SCOPE OF WORK......................................   Page 6

SECTION 4.0 TERM...............................................   Page 6

SECTION 5.0 TERMINATION........................................   Page 6

SECTION 6.0 PAYMENT............................................   Page 9

SECTION 7.0 AUDIT..............................................  Page 10

SECTION 8.0 PURCHASE OF ASSETS.................................  Page 11

SECTION 9.0 PERSONNEL..........................................  Page 12

SECTION 10.0 LEASE OF PREMISES.................................  Page 13

SECTION 11.0 MANUFACTURING, FULFILLMENT, AND INTEGRATION.......  Page 13

SECTION 12.0 TRANSITION SERVICES...............................  Page 13

SECTION 13.0 INTELLECTUAL AND INDUSTRIAL PROPERTY..............  Page 13

SECTION 14.0 WARRANTIES........................................  Page 15

SECTION 15.0 INDEMNIFICATION AND LIMITATION OF LIABILITY.......  Page 18

SECTION 16.0 GENERAL...........................................  Page 19

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                                IBM Confidential

SECTION 1.0 DEFINITIONS

1.1   Effective Date shall mean the time when the Parties have acknowledged in       the certificate to be provided pursuant to Sections 14.1 and 14.2 that       approval has been obtained for all Governmental Actions required by all       Government Authorities necessary for each of the Parties to perform its       obligations under this Agreement including expiration or early termination       of the waiting period under the Hart-Scott-Rodino Antitrust Improvements       Act of 1976, as amended.

1.2   Execution Date shall mean the date this Agreement is signed by       authorized representatives of both Parties.

1.3   Days shall mean business days as followed by a particular Work Center       (as defined below).

1.4   Delivery Date shall mean the committed ship date on the IBM Customer       Order or as specified by IBM.

1.5   GMSV shall mean Global Manufacturers' Services Valencia S.A. (an MSL       Related Company in Spain).

1.6   Governmental Actions shall mean any authorizations, consents, approvals,       waivers, exceptions, variances, franchises, permissions, permits, and       licenses of, and filings and declarations with Governmental Authorities

1.7   Governmental Authority shall mean any United States federal, state or       local, or other non-US court, governmental or administrative agency or       commission or other governmental agency, authority, instrumentality or       regulatory body.

1.8   IBM Customer Order shall mean orders from IBM and IBM customers that       will trigger the MSL fulfillment, manufacturing and/or integration       processes to meet the requested Delivery Date. Only orders received via       IBM's AAS, GEMS, EOSE, IPLS, IPRS, Q-Ship or an IBM Purchase Order shall       be authorization for MSL to build Products or provide services under this       Agreement.





1.9   IBM shall mean International Business Machines Corporation, Armonk, New       York, USA, and its Subsidiaries.

1.10  Integration shall mean a service associated with fulfillment for IBM       Customer Orders that require special treatment. Special treatment usually       consists of taking IBM and third party products and configuring the total       system to meet the integration statement of work.

1.11  Miscellaneous Equipment Specification (MES) shall mean a set of Parts       used to upgrade Products.

1.12  MSL Related Companies shall mean Manufacturers' Services Limited       (Delaware, USA) and its Subsidiaries, including Global Manufacturers'       Services Valencia S.A.

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1.13  Parts shall mean parts, components, subassemblies and other materials       used by MSL to fulfill orders for IBM. Parts shall also include the       following:

            (a)   IBM Parts are those Parts which are purchased by MSL from                   IBM,.

            (b)   IBM Designated Parts are those Parts purchased by MSL from IBM                   nominated suppliers,

            (c)   IBM Consigned Parts are those Parts owned by IBM or IBM                   customers which are consigned to MSL, and

            (d)   MSL Procured Parts are those Parts which are directly procured                   by MSL and are other than IBM Parts or IBM Designated Parts.

1.14  Products shall mean Parts, a MES, machine types, request for price       quotation (RPQ's), model numbers and feature types purchased by IBM       under this Agreement and as further described in the Product Attachments.

1.15  Product Attachment shall mean Attachments A through G of the Statement       of Work and Exhibit 1 to Supplement 1 of the Statement of Work to this       Agreement which describes the details of a specific transaction or series       of transactions. Product Attachments are incorporated into and made a part       of this Agreement.

1.16  Product Group shall mean those Products relating to a particular       division's Product Attachment, each of which may include more than one       Product family.

1.17  Purchase Order shall mean a general order issued by IBM in which IBM       Customer Orders will be placed from IBM or its customers to MSL. Such       Customer Orders shall specify Products to be delivered to IBM, and shall       include Product identification, Delivery Dates, quantity and       specifications.

1.18  Subsidiary shall mean an entity during the time that more than 50% of       its voting stock (or, if no voting stock, decision-making power) is owned       or controlled, directly or indirectly, by another entity.

1.19  Services shall mean any services provided by one Party to the other,       which is not included in the services for specific Products described in       the applicable Product Attachment.

1.20  Transition Services shall mean services performed from the Effective       Date of Agreement through December 31, 1998, as described in Supplement 1       to the Statement of Work.

1.21  Work Center shall mean the MSL or MSL Related Company plant site       utilized to fulfill the obligations of this Agreement.

SECTION 2.0 ORDER OF PRECEDENCE

This Agreement replaces any prior oral or written communication between the Parties with respect to the subject matter of this Agreement. Order of precedence with regard to any conflict for this Agreement shall be as follows:

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            1)    Product Attachments

            2)    Appendices

            3)    Supplements

            4)    Statement of Work

            5)    Outsourcing Base Agreement, Employee List and Benefits                   Information, Asset Lists





            6)    Purchase Orders

      Notwithstanding the order of precedence set forth above, the following       sections of the Outsourcing Base Agreement shall not be modified or       superseded by any of the listed documents unless amended by a written       instrument duly executed by an authorized representative of each Party       making specific reference to such section:

            i)    Sections 5.1 and 5.2 of Termination,

            ii)   Section 8.0, Purchase of Assets,

            iii)  Section 13.0, Intellectual and Industrial Property,

            iv)   Section 14.0, Warranties, and

            v)    Section 15.0, Indemnification.

SECTION 3.0 SCOPE OF WORK

      MSL will perform and manage selected manufacturing, Integration, and other       Services, as well as sell Products to IBM, as stated in the Statement of       Work and its Appendices, Attachments and Supplement for the Retail Store       Solutions (RS), Global Embedded Production Solutions (GEPS), Finance       Solutions, and other IBM business units.

SECTION 4.0 TERM

      This Agreement shall become effective on the Effective Date and shall       continue for a period of three (3) years unless terminated as provided in       Section 5.0. This Agreement will automatically be renewed for periods of       twelve (12) months unless either Party gives six (6) months written       notice of its intent to terminate this Agreement. Such renewals shall       continue for successive periods under the same terms and conditions,       unless otherwise agreed in writing by both Parties.

SECTION 5.0 TERMINATION

5.1   Breach

      Notwithstanding anything in this Agreement to the contrary, this Agreement       may be terminated by either Party for cause as follows:

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      a)    in the event of a material breach or default by the other Party of a             material obligation of such Party under the Agreement which is not             remedied within [*] Days after a written notice is given of such             default or breach;

      b)    upon the occurrence of any of the following:

            i)    the other Party resolves to go into voluntary liquidation;

            ii)   a court orders the other Party to cease doing business;

            iii)  a receiver or administrative receiver is appointed over the                   whole or any part of the assets or property of the other                   Party;

            iv)   the other Party becomes unable to pay its debts because it is                   subject to a suspension of payments order, bankruptcy, or                   other insolvency proceeding; or

            v)    substantially all of the shares or assets of one Party are                   acquired by an entity that competes directly with the other                   Party.

      In the case of i to v above, termination may also be effected by serving       notice on the liquidator, administrator, acquirer, or receiver, as the       case may be.

      c)    notice of the inability of the other Party to perform due to the             existence of a Force Majeure event, as described in Section 16.17 of             this Agreement, which is reasonably determined by the terminating             Party to be a continuing condition.

      Provided, however, that no such termination under this section after the       Effective Date shall operate to rescind the transfer of the assets, as       listed in Attachment 3: Asset List, unless IBM terminates this Agreement       pursuant to Section 5.0 for MSL's failure to pay for such assets, in which       case MSL shall return, at its cost, all such assets in MSL's possession at       termination.

5.2   Rights Upon Termination





      a)    Upon the expiration or termination for default of this Agreement,             MSL will:

            i)    within [*] Days after expiration or receipt of termination                   notice for default of this Agreement from IBM, cancel all                   Parts purchase orders, and within [*] Days, after such                   expiration or termination notice, prepare and submit to IBM                   a written inventory in reasonable detail of each of the                   following items in MSL's possession as of the date of                   termination:

                  1. All Parts and partially completed Products. MSL shall             continue to provide a detailed listing of Parts purchase order             cancellations weekly until all issues are agreed to and resolved by             the Parties.

                  2. All labeling and packaging material used for Products.

                  3. All completed Products covered by a Purchase Order not             previously shipped to IBM.

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                  4. All IBM owned tooling.

            ii)   assist in the transfer of MSL responsibilities and Products as                   described in Attachment 1: Statement Of Work, to IBM or to                   another party that IBM designates.

            iii)  within [*] Days after expiration or termination of this                   Agreement, MSL shall return to IBM all copies of IBM Product                   documentation and all copies of any IBM confidential                   documents, discs, tapes and other media materials containing                   IBM confidential information of IBM.

      b)    Upon termination by IBM due to a default by MSL pursuant to Section             5.1 above, IBM shall, at its option, elect to do one of the             following:

            i)    be entitled to terminate all outstanding Purchase Orders                   without liability for such termination and purchase MSL's                   inventory of Parts, including Parts to be delivered to MSL to                   meet IBM's forecasted requirements, subject to the Supply                   Flexibility set forth in Appendix 4 to the Statement of Work.                   This purchase shall not include any Parts that are cancelable                   or otherwise transferable to IBM:

            ii)   require delivery of all partially completed, and completed                   Products and inventory of purchased Parts, and buy them. This                   shall include Parts purchased and to be delivered to MSL to                   meet IBM's forecasted requirements, subject to the Supply                   flexibility set forth in Appendix 4 to the Statement of Work,                   but shall not include any Parts that are cancelable or                   otherwise transferable to IBM; or

            iii)  require completion and delivery of any remaining units of                   Products on order as of the date of termination including                   inventory of purchased Parts and Parts purchased and to be                   delivered to MSL to meet IBM's forecasted requirements,                   subject to the Supply Flexibility set forth in Appendix 4 to                   the Statement of Work, but not including any Parts that are                   cancelable or otherwise transferable to IBM, and buy them, in                   which case MSL's obligations under 5.2 a) iii will be                   suspended until [*] Days after the appropriate Delivery Date.

      c)    Upon termination by MSL due to default by IBM, pursuant to Section             5.1 above, MSL shall complete Product(s) on order as of the date of             termination, sell them to IBM, and deliver and sell to IBM Parts             inventory. This shall include Parts purchased and to be delivered to             MSL to meet IBM's forecasted requirements, subject to the Supply             Flexibility set forth in Appendix 4 to the Statement of Work, but             shall not include any Parts that are cancelable or otherwise             transferable to IBM.

5.3   Prices Upon Termination

      a)    The price for completed Product(s) including provisions relating             to IBM's [*] status shall be as described in Attachment 1;             Statement of Work. The Parties agree to negotiate in good faith             the price for partially completed Products, but in no

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            event will MSL be required to accept a price for partially completed             Product that is lower than the completed Product price multiplied by             the percentage of Product completion. Such a percentage shall             equal [*] times a fraction, the numerator of which is the cost of             [*] within, and the cost of [*] and [*] expended on, such partially             completed Products to the date of termination, and the denominator             of which is equal to the [*] cost, and [*] and [*] cost of the             Product if completed, all as determined by MSL in good faith and             subject to verification and agreement by IBM. In no event will IBM             be required to pay more for a partially completed Product than the             price for a completed Product.

                                       [*]

      b)    The price for Parts, whether in inventory or on order to meet IBM's             forecasted requirements, shall be an amount equal to MSL's             cost for such [*] as provided in Apppendix I of the Statement of             Work. This shall not be applicable to Parts that are cancellable             or otherwise transferable to IBM.

SECTION 6.0 PAYMENT

6.1   IBM to MSL

      a)    MSL will invoice IBM [*] for all completed Products, after shipping             transactions have been processed by MSL. MSL will invoice IBM [*]             for all Integration work after shipping transactions have been             processed by MSL. For all other Services, MSL will invoice IBM [*].             IBM will pay MSL within [*] Days after receipt of an acceptable             invoice.

      b)    MSL may offset any amount owed IBM by MSL against any amounts owed             MSL by IBM upon written approval of IBM, provided any such debts             have been generated under this Agreement.

6.2   MSL to IBM

      a)    MSL will pay IBM within [*] Days of receipt of an acceptable invoice             from IBM.

            IBM may offset any amounts owed IBM by MSL against any amounts owed             MSL by IBM under this Agreement, upon written approval of MSL             provided any such debts have been generated under this Agreement

      b)    Invoices must reference this Agreement by name, date, and Purchase             Order number. Invoices will be sent to the addresses below:

            IBM Corporation             Accounts Payable             1701 North Street

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            P.O. Box 8098             Endicott, NY. 13760

            A copy of the invoice will be sent to:

            IBM Corporation             8501 IBM Drive             Charlotte, N.C. 28262-8563             Attn: MSL Project Office

      c)    Upon IBM request, MSL will send originals and copies of invoices to             other IBM locations.

      d)    Any amounts owed IBM should be sent to:

            IBM             8501 IBM Drive             Charlotte, NC 28262             Attn: MSL Project Office

6.3   Both parties agree to financially contribute to those activities defined       in Attachment 4: Expense Participation and at the stated contribution,       unless otherwise agreed to in writing.

SECTION 7.0 AUDIT





      a)    IBM may perform process audits at MSL's or an MSL Related Company's             Work Center or MSL's subcontractors' facilities to assure that             identified IBM specifications have been complied with. IBM shall             advise MSL [*] Days in advance of the scope and method by which             such audits are to be conducted. MSL will be given the opportunity             to comment upon these procedures prior to the audit taking place.             For all identified IBM specifications, MSL will maintain and             produce for IBM process documentation for use in all audits             performed by IBM and will have current copies of said documentation             available prior to the start of an audit.

      b)    Upon completion of all audits performed, IBM will provide written             documentation to MSL of the audit results in the form of an audit             report. MSL will be required to respond in writing to IBM on the             completion status of all actions and or requirements identified in             the audit report within [*] Days of receipt of the audit report.

SECTION 8.0 PURCHASE OF ASSETS

      a)    On the Effective Date, MSL shall purchase all tangible assets listed             in Attachment 3: Asset List, Part 1A and non-capitalized hand tools             used in the manufacture of Products for [*] U.S. dollars [*].             Within [*] days of the Effective Date, IBM shall give the tangible             assets listed in Attachment 3: Asset List, Part 1B to MSL. On the             Effective Date, MSL shall purchase

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            the assets listed in Attachment 3: Asset List, Part 2 for the amount             stated on the bill of sale for such assets and pay for such assets             in full by or before December 1, 1998 (the Payment Date).

      b)    The Parties acknowledge that the assets listed in Attachment 3:             Asset List, are a pro forma listing only and that within 10 (ten)             days of the Effective Date, both parties agree to perform a physical             audit of these assets listed and in IBM's possession as of the             Effective date to ascertain that the assets located during that             physical audit are verified. Within 20 (twenty) days after the             Effective Date, IBM will prepare a listing of the assets in             Attachment 3: Asset List, Part 1B to verify IBM's net book value of             the assets plus [*] for each non-capitalized printer. This listing             shall contain the price for each asset listed separately. MSL shall             notify IBM within 30 (thirty) days of the Effective Date if it does             not wish to receive all of the available tangible assets in             Attachment 3: Asset List, Part 1B by notifying IBM in writing of the             types of equipment it does not wish to receive. IBM shall choose             which equipment MSL will receive based on MSL's chosen equipment             type. The startup and investment expense defined in Attachment 4,             Section 3, shall be reduced by IBM's net book value of the assets in             Part 1B for the equipment accepted by MSL plus [*] U.S. dollars             [*] for each non-capitalized printer. In any event, the physical             audit for all assets shall result in a new listing for the assets             contemplated hereunder which listing shall be substituted for the             Attachment 3: Asset List that is attached to this Agreement at the             Effective Date. The amount stated on the bill of sale of the assets             listed in Part 2 shall reflect the results of a physical audit and             obsolescence review. Such adjustments shall be subject to the             mutual agreement of the Parties.

      c)    If by the Payment Date, MSL fails to pay IBM in full for the assets             listed in Attachment 3: Asset List, Part 2 at the price specified in             b) above, IBM may offset the balance owed by MSL as provided in             Section 6.2(a) above, and without MSL's further consent, until IBM             has recovered such balance.

      d)    MSL acknowledges that IBM has not made any representations or             warranties with respect to the assets listed in Attachment 3: Asset             List, except those expressly set forth in this Agreement, including,             but not limited to the representation and warranty of title. All             assets delivered to MSL pursuant to this section shall be provided             on an 'AS IS' basis. NO OTHER WARRANTIES, WHETHER EXPRESSED OR             IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF             MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR THE WARRANTY OF             NON-INFRINGMENT ARE PROVIDED HEREUNDER.

      e)    In the event of termination or expiration of this Agreement             pursuant to Section 5.0 above, IBM shall have an option, which             shall expire [*] days after such termination or expiration, to             purchase from MSL, at a reasonable price agreeable to the Parties,             all assets used by MSL to perform the manufacturing and fulfillment             functions

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            outlined in Attachment 1: Statement of Work, to the extent owned or             transferable by MSL, and required by IBM to perform such functions.

      f)    Assets purchased by MSL and listed in Attachment 3: Asset List, Part             2 are to be used solely in Products purchased by IBM pursuant to the             Attachment 1: Statement of Work.

SECTION 9.0 PERSONNEL

      a)    Attachment 2 contains a list of the individuals employed by IBM at             the date hereof in connection with this Agreement, including active             employees and employees who are on leave of absence or sick leave             (herein the Employees).

      b)    MSL will make an unconditional employment offer to the Employees,             listed in Attachment 2, to be effective on the Effective Date of             this Agreement. The Employees who accept employment offers from             MSL and who have begun their employment with MSL (Transferred             Employees) will be employed by MSL in accordance with the terms set             forth below. IBM will terminate all Employees, listed in Attachment             2, at the Effective Date of this Agreement and IBM will be             responsible for any and all employment related liabilities up to the             Effective Date, including, but not limited to, vacation and sick             time, workers compensation claims, variable compensation, and             severance.

      c)    MSL agrees that all Transferred Employees will be continuously             employed by MSL for at least [*] after the Effective Date, except as             otherwise provided herein, and will receive a total compensation             package as identified in Attachment 2: Employee list and Benefits             Information. Furthermore, with respect to the Transferred Employees,             MSL shall grant, to the extent granted by IBM, credit for service             with IBM prior to the Effective Date for purposes of participation             and eligibility to participate under MSL's employee benefit plans             and other policies and programs of MSL.

      d)    Nothing in this Agreement shall operate in any way to limit or             prevent MSL from terminating any Transferred Employee at any time             for reasons of cause related to poor job performance or conditions             of employment.

      e)    If MSL suffers a substantially adverse change in its business,             related to a reduction in IBM's Products requirements, including             reductions of Products requirements due to migration to a             competitive supplier, for the [*] from the Effective Date of this             Agreement, MSL may terminate such number of Transferred Employees             as it deems necessary. However, IBM shall only reimburse MSL for             termination benefits paid to such Transferred Employees, which are             substantially similar to IBM's then severance package, and             provided that all MSL subcontractors and other MSL non management             employees assigned to the US Work Center have been terminated             prior to or along with the termination of the Transferred             Employees.

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      f)    IBM agrees that, for a period of [*] years from the Effective Date             of this Agreement, it will not in any way solicit for employment             any Transferred Employees without the prior written consent of MSL;             provided, however, that the foregoing will not restrict or prevent             IBM from a) employing any such person who contacts IBM on his or her             own initiative without any solicitation or encouragement from IBM             or b) by using general employment advertising or communications or             independent search firms, hiring any person who responds thereto,             provided that IBM does not direct or encourage such independent             search firms to solicit such Transferred Employees.

SECTION 10.0 LEASE OF PREMISES

      The Lease of Premises Agreement is a separate agreement governing the       lease of certain IBM buildings to MSL, the execution of which is a       condition precedent to the effectiveness of this Agreement.

SECTION 11.0 MANUFACTURING, FULFILLMENT, AND INTEGRATION

      Attachment 1 is the Statement of Work that outlines the manufacturing,       fulfillment, and Integration requirements and responsibilities of both       parties.

SECTION 12.0 TRANSITION SERVICES





      Supplement 1 to the Statement of Work identifies the Transition Services       that the Parties are to perform in accordance with the prices set forth       therein and starting on the Effective Date of the Agreement. All       Transition Services will expire December 31, 1998.

SECTION 13.0 INTELLECTUAL AND INDUSTRIAL PROPERTY

13.1  IBM assumes and will assume ownership and MSL assigns and will assign all       intellectual and industrial property rights for hardware, software, design       and documentation of all Products delivered under this Agreement

      IBM will also own and MSL will assign any invention made by MSL on       Products, and on any invention related to IBM processes and systems that       MSL makes while MSL uses those processes and systems in the performance of       this Agreement provided that nothing herein shall restrict MSL's right to       use such inventions in the performance of its obligations hereunder. MSL       shall not use any proprietary processes for the assembly, subassembly and       final tests, and quality testing of the Products subject to this Agreement       unless otherwise agreed to by the Parties in writing.

13.2  Confidential Information and Advertising

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      a)    IBM shall not receive confidential information from MSL under this             Agreement. However, if it becomes necessary for IBM to give certain             confidential information to MSL, it will be done so pursuant to the             Agreement for Exchange of Confidential Information (AECI) Number             4998S60076.

      b)    All information considered confidential by IBM will be marked             confidential by IBM prior to the exchange. If the confidential             information is to be disclosed orally, IBM will promptly provide MSL             with a written summary following the disclosure. In the event, the             information is not marked confidential, it shall not be deemed             confidential.

      c)    Each time IBM wishes to disclose specific information to MSL, IBM             will issue a supplement to the above referenced AECI. All requests             to disclose confidential information must be approved by the             Relationship Managers. During the term of this Agreement and upon             the request of IBM, MSL shall return all confidential information             immediately.

      d)    Neither Party shall disclose the terms of this Agreement to any             third Party, including debt or financing institutions, without the             prior written consent of the other Party, which consent shall not be             unreasonably withheld or delayed, except as required by law. Each             Party shall provide the other with prior written notice of any such             required disclosure.

      e)    Neither Party shall make any public announcements regarding this             Agreement or matters pertaining hereto, other than as may be             expressly agreed upon in advance by the Parties in writing.

13.3  Licenses

      a)    Notwithstanding anything to the contrary in this Agreement, nothing             in this Agreement grants or may grant MSL any rights or licenses in             any preexisting intellectual property of IBM except that IBM grants             MSL a royalty-free license to use the confidential information             disclosed in connection with this Agreement under the AECI             referenced in 13.2 necessary to manufacture Products solely for IBM.             Any other license to IBM's intellectual property must be             accomplished through a separate written agreement signed by IBM.

      b)    As of the Effective Date, to the best of IBM's knowledge, IBM has             licenses and permits and other governmental authorizations and             approvals required for IBM's use of the assets in Attachment 3:             Asset List, except where the failure to have such licenses and             permits would not have a material adverse effect on IBM's ability to             use or operate the assets. All such licenses and permits held by IBM             which are material to the operation of the assets are valid and in             full force and effect and there are not pending or, to the knowledge             of IBM, threatened in a writing to IBM, any proceedings which could             result in the termination or impairment of any such license or             permit which termination or impairment would materially interfere             with the operation or use of the assets as

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            presently operated or used by IBM. The Parties acknowledge that MSL             may be required to seek and that IBM is not responsible for             obtaining for MSL regulatory or other permitted transfers of, or             obtain through separate application for itself, any applicable             licenses and permits, including environmental licenses and permits,





            which are required for MSL's operation or perfection ownership of             the assets.

SECTION 14.0 WARRANTIES

14.1  Representations and Warranties of IBM

      IBM represents and warrants to MSL that the statements contained in this       Section 14.1 are correct and complete, and the following representations       and warranties shall be deemed to have been made again on and as of the       Effective Date. The effectiveness of this Agreement shall be subject to       the condition that IBM deliver to MSL a certificate on and as of the       Effective Date that such representations and warranties are correct and       complete as of such date.

      To the best of IBM's knowledge shall be defined as the information       available to IBM Charlotte Management after due inquiry as of the       Effective Date. A materially adverse effect shall be defined as an outcome       where MSL is unable to acquire appropriate title for assets to be       purchased under this Agreement.

      a)    Organization of IBM

            IBM is a New York corporation, duly organized, validly existing, and             in good standing under the laws of New York. IBM has all corporate             powers and all material governmental licenses, authorizations,             permits, consents, and approvals required to carry on its business             as now conducted.

      b)    Authorization of Transaction

            IBM has the power and authority (including full corporate power and             authority) to execute and deliver this Agreement and all other             documents contemplated hereby and to perform its obligations             hereunder. All corporate and other actions or proceedings to be             taken by or on the part of IBM to authorize and permit the execution             and delivery by IBM of this Agreement and the instruments required             to be executed and delivered by IBM pursuant hereto, the performance             by IBM of its obligations hereunder, and the consummation by IBM of             the transactions contemplated herein, have been duly and properly             taken. This Agreement has been duly executed and delivered by IBM             and constitutes the legal, valid and binding obligation of IBM,             enforceable in accordance with its terms and conditions.

      c)    Noncontravention

            Neither the execution and the delivery of this Agreement, nor the             consummation of the transactions contemplated hereby do or will

Page 15                                  Dated 05/05/98

                                IBM Confidential

            i)    conflict with or result in a breach of any provision of the                   certificate of incorporation or bylaws of IBM, or

            ii)   result in or give rise to the imposition of any lien upon the                   assets listed in Attachment 3: Asset List that would have a                   materially adverse effect on the assets listed therein, or

            iii)  violate any constitution, statute, regulation, rule,                   injunction, judgment, order, decree, ruling charge or other                   restriction of any Governmental Authority to which IBM is                   subject.

            Except for the required filings under the Hart-Scott-Rodino Act, IBM             is not required by applicable law or other obligation to give any             notice to, make any filing with, or obtain any authorization,             consent, or approval of any Governmental Authority or other person             in order for the Parties to consummate the transactions contemplated             by this Agreement.

d)    Assets Used by IBM to Conduct Business

      The assets listed in Attachment 3: Asset List, Part 1 and in Attachment 5:       Equipment and Program Loan List are the tangible assets used by IBM up       until the Effective Date for the operation of the business to be conducted       by MSL on and after the Effective Date and pursuant to Attachment 1:       Statement of Work.

e)    Inventory

      The assets listed in Attachment 3: Asset Listing, Part 2 and in Attachment       5: Equipment and Program Loan List are the tangible assets used by IBM up       until the Effective Date to build to the IBM specification and designs to       be used by MSL in fulfilling its obligations on and after the Effective       Date and pursuant to Attachment 1: Statement of Work.

f)    Title to Assets

      IBM has good and marketable title to all assets listed on Attachment 3:       Asset Listing, free and clear of any liens or encumbrances and MSL shall       acquire a bill of sale transferring good and marketable title to said





      assets, free of liens and encumbrances. However, in the event MSL       discovers any materially adverse lien or encumbrance that prevents MSL       from using or operating the assets, within sixty (60) days after such       notice to IBM, IBM shall clear all such materially adverse lien or       encumbrances. If IBM is unable to clear all such materially adverse liens       or encumbrances within sixty (60) days after notice, IBM shall complete       reasonable actions necessary, to provide MSL with materially unencumbered       enjoyment of the assets.

g)    Employees

      To the best knowledge of the Charlotte Program Director of General       Hardware and Communications, Procurement, no employee or group of       employees has any plans to refuse to accept any offer of employment from       MSL made in compliance with this Agreement.

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                                IBM Confidential

14.2  Representations and Warranties of MSL

      MSL represents and warrants to IBM that the statements contained in this       Section 14.2 are correct and complete, and the following representations       and warranties shall be deemed to have been made again on and as of the       Effective Date. The effectiveness of this Agreement shall be subject to       the condition that IBM deliver to MSL a certificate on and as of the       Effective Date that such representations and warranties are correct and       complete as of such date.

      a)    Organization of MSL

            MSL is a California corporation, duly organized, validly existing,             and in good standing under the laws of California. MSL has all             corporate powers and all material governmental licenses,             authorizations, permits, consents, and approvals required to carry             on its business as now conducted.

      b)    Authorization of Transaction

            MSL has the power and authority (including full corporate power and             authority) to execute and deliver this Agreement and all other             documents contemplated hereby and to perform its obligations             hereunder. All corporate and other actions or proceedings to be             taken by or on the part of MSL to authorize and permit the execution             and delivery by MSL of this Agreement and the instruments required             to be executed and delivered by MSL pursuant hereto, the performance             by MSL of its obligations hereunder, and the consummation by MSL of             the transactions contemplated here, have been duly and properly             taken. This Agreement has been duly executed and delivered by MSL             and constitutes the legal, valid and binding obligation of MSL,             enforceable in accordance with its terms and conditions.

      c)    Noncontravention

            Neither the execution and the delivery of this Agreement, nor the             consummation of the transactions contemplated hereby do or will:

            i)    conflict with or result in a breach of any provision of the                   certificate of incorporation or bylaws of MSL or MSL Related                   Companies, or

            ii)   violate any constitution, statute, regulation, rule,                   injunction, judgment, order, decree, ruling charge or other                   restriction of any Governmental Authority to which MSL or MSL                   Related Companies is subject.

            Except for the required filings under the Hart-Scott-Rodino Act,             neither MSL nor any of its subsidiaries is required by applicable             law or other obligation to give any notice to, make any filing with,             or obtain any authorization, consent, or approval of any             Governmental Authority or other person in order for the Parties to             consummate the transactions contemplated by this Agreement.

      d)    I/T Solution Necessary to Conduct Business

            To the best of MSL's Vice President, Information Technology's             knowledge and in reliance on IBM's representations in Section             14.1(d), MSL has an appropriate I/T

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                                IBM Confidential

            Solution necessary to use the assets used by IBM as stated in             Section 14.1(d) to fulfill its obligations under Attachment 1:             Statement of Work.

SECTION 15.0 INDEMNIFICATION AND LIMITATION OF LIABILITY





15.1  Scope of MSL's Indemnity

      MSL agrees to protect, defend, hold harmless, and indemnify IBM from and       against any and all claims, damages, liabilities, losses and expenses,       arising out of the following, whether alleged or actual:

      a)    infringement by MSL in rendering performance under this Agreement or             any Product Attachments or by any MSL procured Parts, processes,             designs, deliverables or any preexisting material contributed by MSL             from which any Products are prepared, of any patent, trademark,             trade name, copyright, mask work right or trade secret valid             anywhere in the world, except that MSL shall have no indemnity             obligation for any claim alleging infringement of any trademark             including any trade name, product name or similar right resulting             from the use of any name or mark selected by IBM;

      b)    failure of MSL to comply with any governmental law, statute,             ordinance, administrative order, rule or regulation relating to the             manner of or carrying on of MSL's operations and/or parts and             processes used in Products,

      c)    failure of MSL to perform MSL's warranty described in the Statement             of Work and support obligations or similar services as set forth in             any Product Attachment issued hereunder.

            Notwithstanding the foregoing, MSL shall have no obligation to             indemnify IBM under this Section 15.1 to the extent that such third             party claim (i) is caused by MSL's material compliance with a             written specification provided by an authorized representative of             IBM or (ii) results from a defective design of a Product, to the             extent that such defect is the result of the written specifications             or designs provided by an authorized representative at IBM.

15.2  Payment and Cooperation

      a)    MSL shall pay all damages, settlements, expenses and costs,             including court costs and attorneys' fees, reasonably incurred by             IBM, arising out of the matters set forth in Section 15.1 provided             that such payment shall be contingent on:

            i)    prompt notice by IBM to MSL in writing of such claim to enable                   MSL to defend;

            ii)   cooperation by IBM and MSL in the defense thereof; and

            iii)  IBM allowing MSL to control the defense or settlement of the                   claim, provided that IBM may at its option participate in the                   proceeding with its own counsel and at its own expense, but                   MSL shall retain control of the defense of the claim.

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                                IBM Confidential

      b)    In the event that any occurrence within the scope of the indemnity             set forth in 15.1 above is alleged or proved, MSL may, at its sole             discretion and at its own expense in order to remedy any such             infringement for the future, procure any necessary license rights,             or make use of non-infringing designs, processes, Parts,             deliverables or other materials, so long as such substitute items do             not result in the Products failing to comply with the             specifications, requirements, and warranties set forth in this             Agreement.

15.3  Limitations of Liability

      a)    Neither Party will be liable to the other for lost profits,             consequential, punitive, or incidental damages, even if informed of             the possibility that such damages may be incurred.

      b)    The total liability for either Party, regardless of the form of             action, whether contract or tort, is limited to three percent (3%)             of the value of the bill of materials contained in the Products             delivered to IBM and IBM Customers by MSL in the period beginning             with the Effective Date of the Agreement through the resolution of             the action.  .

SECTION 16.0 GENERAL

16.1  Product, Technology and Process Changes

      a)    If IBM elects to amend the specification or the process for             manufacturing Products, IBM will notify MSL of the changes in             writing. MSL will promptly inform IBM of any changes to Delivery             Dates, lead times, process changes, Parts requirements, Parts             obsolescence, scrap, rework and any requested price changes that             will result from the required changes. If IBM then elects to proceed             in accordance with the changes proposed by MSL, IBM and MSL will             agree to a plan to address the issues described in the proceeding             sentence. MSL will thereafter implement the agreed to changes.





      b)    MSL will not implement any change to its specifications, technology,             materials or process that may affect form, fit, or function of             characteristics of Products without IBM's prior written consent. IBM             will make a reasonable effort to accommodate MSL's request for             change; however, IBM is not obligated to accept any changes proposed             by MSL.

      c)    Once a plan described in a. above has been agreed to, MSL will not             start any new units of Product which do not incorporate the agreed             change.

16.2  Assignment

      Neither Party may assign, transfer or subcontract any rights or duties       under this Agreement without prior written approval by the other Party.       MSL may assign or subcontract all or any part of this Agreement to any MSL       Related Company with IBM's prior written consent which shall not be       unreasonably withheld or delayed. MSL may not assign or transfer any       rights or duties under this Agreement without prior written approval by       IBM. MSL shall

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                                IBM Confidential

      provide IBM with all relevant details prior to implementing any change to       its use of subcontractors performing work relating to IBM's Purchase       Orders.

16.3  Gratuities

      Each Party agrees that it shall maintain and enforce a corporate policy       designed to ensure that its employees, agents, or representatives will not       offer any gratuity to the other Party's employees, agents, or       representatives for any reason, including a view towards securing       favorable treatment from such other Party.

16.4  Compliance with Law

      In the performance of this Agreement and related Purchase Orders the       Parties shall comply with the laws of the United States unless otherwise       specified, including but not limited to, those affecting price,       production, purchase, sale, use and export of Products, environmental and       labor laws.

16.5  Sale or Merger

      During the term of this Agreement, if MSL decides to sell a substantial       portion of its assets or operations outside the ordinary course of its       business, or to merge or transfer ownership of MSL to a third Party, MSL       will immediately notify IBM. MSL warrants that any new company resulting       from the sale or merger of MSL will accept and assume full responsibility       for the performance of this Agreement.

16.6  Trademark

      Nothing in this Agreement gives either Party the right to use the other       Party's name, trademark, or logo except where necessary in the ordinary       course to perform this Agreement or where otherwise authorized in writing       by the other Party in conjunction with this Agreement.

16.7  Assignees and Visits

      If IBM determines that there is a business need for employees of IBM to       reside on the premises of MSL Work Centers. IBM will request MSL's       approval, and will request that MSL provide suitable working office space       and associated utilities for employees of IBM on the premises of MSL Work       Centers. MSL's approval and MSL's provision of office space and utilities       shall not be unreasonably withheld. MSL will also allow business visits by       employees of IBM and IBM customers to facilities of MSL. The details of       such visits will be agreed to between the Parties on a case-by-case basis.       Where business visits are exceptional and primarily for the benefit of       MSL, they will be paid for by MSL.

16.8  Failure to Enforce

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                                IBM Confidential

      The failure of either Party to enforce at any time or for any period of       time the provisions of this Agreement shall not be construed to be a       waiver of such provisions or of the right of such Party to enforce each       and every provision in the future.

16.9  Governing Law

      This Agreement and the performance of transactions under this Agreement       shall be governed by the substantive laws of the state of New York. The       parties expressly waive any right to a jury trail regarding disputes





      related to this Agreement. Any legal or other action related to a breach       of this Agreement must be commenced no later than [*] years from the date       of the breach in a court sited within the State of New York.

16.10 Severability

      If any of the provisions of this Agreement shall be held by a court or       other tribunal of competent jurisdiction to be unenforceable, the       remaining portions of this Agreement shall remain in full force and       effect.

16.11 Notices

      Any notice which any Party desires or is obligated to give to the other       shall be given in writing or by telecopy and sent to the appropriate       address. Notices required under this section must be addressed to the       address shown below. All other notices shall be sent to the address       specified in the appropriate Product Attachment or, if none is specified,       to the address shown below or to such other address as the Party to       receive the notice may have last designated in writing.

      The addresses for notices shall be:

      IBM                                MSL       8501 IBM Drive                     200 Baker Avenue       Charlotte, NC 28262                Concord, MA 01742       Attn: MSL Project Office           Attn: General Counsel

      Telephone: 704-594-1964             Telephone: 978-287-5630       Facsimile: 704-594-4108             Facsimile: 978-287-5635

      Either Party may change its address for this section by giving written       notice to the other Party. The notifying Party must receive a confirmation       within seven (7) Days of notification.

16.12 Agency

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                                IBM Confidential

      This Agreement does not create either a principal to agent, employer to       employee, partnership, joint venture, or any other relationship except       that of independent contractors between MSL and IBM.

16.13 Headings

      Headings to paragraphs and sections of this Agreement are for the       convenience of the Parties only. They do not form a part of this Agreement       and shall not in any way affect its interpretation.

16.14 Records

      The Parties agree to keep complete and accurate records related to the       manufacture of Products for a period of five (5) years after the       termination or expiration of the Product Attachment to which they relate.

16.15 Prohibited Suppliers

      IBM may provide MSL a lists of suppliers with whom MSL is prohibited from       conducting any business in connection with this Agreement for the purposes       of ensuring that IBM comply with the requirements of any governing laws.       MSL agrees to abide by the reasonable requirements of these lists except       to the extend that such compliance itself would constitute a violation of       the laws of the United States or of any state or local government.

16.16 Entire Agreement

      The provisions of this Agreement, including all Appendices, Supplements,       Attachments, and Purchase Orders, and all documents expressly incorporated       herein by reference, constitute the entire agreement between the Parties       and supersede all prior intentions, proposals, understandings, and       communications.

16.17 Force Majeure

      Neither Party shall be liable to the other for its failure to perform any       of its obligations hereunder during any period in which such performance       is delayed by circumstances or events that were not foreseeable, or if       foreseeable could not have been reasonably avoided including, but not       limited to, fire, flood, war, embargo, strike, riot, prolonged scarcity of       necessary raw materials, inability to secure transportation or the       intervention of any governmental authority, provided that the Party       suffering such delay immediately notifies the other Party of the delay. If       such delay shall continue for more than [*] Days, the Party injured by       the inability of the other to perform shall have the right upon written       notice to either a) terminate this Agreement as set forth in Section       5.1 c or b) treat this Agreement as suspended during the delay and       reduce any commitment in proportion to the duration of the delay.





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                                IBM Confidential

16.18 No Third Party Beneficiaries

      This Agreement shall not confer any rights or remedies upon any person       other than the Parties and their respective successors or permitted       assigns

16.19 Expiration of Representations and Warranties

      All representations and warranties made by the Parties in this Agreement       or in any schedule, document, certificate or other instrument delivered by       or on behalf of the Parties pursuant to this Agreement shall expire on       the [*] anniversary of the Effective Date.

16.20 Remedies Cumulative

      The remedies set forth in this Agreement are cumulative and are in       addition to any other remedies allowed at law or in equity. Resort to one       form of remedy shall not constitute a waiver of alternate remedies.

16.21 Excused Exceptions to MSL Performance

      a)    Notwithstanding anything herein to the contrary, MSL may, upon             written notice to IBM, delay or suspend performance to supply any             Products or Services to IBM (i) if MSL has received notice from a             third party, or based on the reasonable advice of legal counsel             reasonably believes, that the supply of such Products or Services             would subject MSL to liability for infringement or liability related             to a defective design to a Product caused by MSL's material             compliance with a written specification provided by an authorized             representative of IBM or (ii) if IBM, pursuant to the Equipment             Program and Loan Agreement, requires MSL to return a Loaned Item (as             defined in said Equipment Program and Loan Agreement) which MSL             reasonably believes is necessary to supply such Products or             Services. MSL's decision not to supply Products or Services as             provided in this Section 16.21 shall not constitute a breach or             other violation of this Agreement.

      b)    IBM may, at its sole discretion and at its own expense in order to             remedy any such suspensions listed in a) above, procure any             necessary license rights, or make use of non-infringing designs,             processes, Parts, deliverables, equipment or other materials, so             long as such substitute items do not result in the Products failing             to comply with the specifications, requirements, and warranties set             forth in this Agreement.

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                                IBM Confidential

              [The remainder of this page intentionally left blank]

Page 24                                  Dated 05/05/98

                     Amendment 001 to Outsourcing Agreement                                     between                                    IBM and MSL

This document amends Attachment 4 to the Outsourcing Base Agreement between International Business Machines Corporation and Manufacturer's Services Western U.S. Operations, Inc. The effective date of this Amendment is the date executed by both parties.

The parties agree to make the following change:

Delete Item 3 a) of Attachment 4 to the Outsourcing Base Agreement in its entirety and replace it with the following:

a) IBM shall pay MSL up to [*] U.S. dollars [*] for 1998 start up and investment expenses related to the US Work Center. MSL may submit invoices to IBM commencing on the Effective Date of the Agreement through March 31, 1999 for the following actual startup and investment expenses for the US Work Center: I/T application set up including related travel and consultant fees, hardware, software including application software and licenses, network infrastructure, line servers and user workstations and training. MSL shall, if requested by IBM, provide a projection of expenses by quarter.

All other terms and conditions of the Outsourcing Base Agreement and it's attachments shall remain in full force and effect.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective authorized representatives.





          ACCEPTED AND AGREED TO:                 ACCEPTED AND AGREED TO:

          International Business                  Manufacturer's Services           Machines Corp.                          Western U.S. Operations, Inc

     By:  /s/ Roy B. Covington III           By:  /s/ Kevin C. Melia           ------------------------------          ----------------------------

          Roy B. Covington III                    Kevin C. Melia           ------------------------------          ----------------------------           Print Name                              Print Name

          Industry Solutions Production           President, CEO           ------------------------------          ----------------------------           Title  Procurement Manager              Title

          6/15/98                                 6/15/98           ------------------------------          ----------------------------           Date                                    Date

                     Amendment 002 to Outsourcing Agreement                                      between                                    IBM and MSL

The purpose of this document is to amend the Outsourcing Agreement between International Business Machines Corporation (IBM) and Manufacturer's Services Western U.S. Operations, Incorporated (MSL), dated 05/05/98 (Agreement). The effective date of this Amendment is the date executed by authorized representatives of both parties.

The parties agree to make the following changes:

1. Delete Section 24.2(d) in Attachment 1, Statement of Work of the Agreement in its entirety and replace with the following:

d) MSL SLA (Service Level Agreement) requirements for local or remote systems availability and performance will be negotiated in compliance with IBM's service level expectation for a manufacturing process on or before October 31, 1998.

2. Delete Section 3 (vii) in Supplement 1 Transition Services, Section II- Sale of IBM Services, Section 4.0 IBM Responsibilities in its entirety and replace with the following:

vii) create a net sum invoice to MSL weekly that represents monies owed to MSL by IBM and monies owed IBM by MSL. Lease payments will not be netted with this invoice.

All other terms and conditions of the Agreement and its attachments shall remain in full force and effect.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective authorized representatives.

          ACCEPTED AND AGREED TO:              ACCEPTED AND AGREED TO:

     By:  International Business          By:  Manufacturer's Services           Machines Corp.                       Western U.S. Operations, Inc

          /s/ Roy B. Covington III             /s/ Dale Johnson           ------------------------------       ----------------------------

          Roy B. Covington III                 Dale R. Johnson           ------------------------------       ----------------------------           Print Name                           Print Name

          Industry Solutions Production           Procurement                          Exec. Vice President           ------------------------------       ----------------------------           Title                                Title

          9/23/98                              9/23/98           ------------------------------       ----------------------------           Date                                 Date

                     Amendment 003 to Outsourcing Agreement                                      between                                    IBM and MSL

The purpose of this document is to amend the Outsourcing Agreement between International Business Machines Corporation (IBM) and Manufacture's Services Western U.S. Operations, Incorporated (MSL), dated May 5, 1998 (Agreement). Once signed by both parties the effective date of this amendment is January 1, 1999.

The parties agree to make the following changes:

1. Delete paragraph 2 in Supplement 1 to Attachment 1, Statement of Work, to the Agreement in its entirety and replace with the following:

This is a Supplement to Attachment 1, Statement of Work (SOW), and outlines the Transition Services that will be performed by both Parties from the Effective Date of the Agreement through February 25, 1999.





2. Delete Section 2.0 Term, SECTION I - Wedge Products in Supplement I to Attachment 1. Statement of Work, to the Agreement in its entirety and replace with the following:

The following replaces Section 2.0 of the SOW in its entirety.

This Supplement and its Attachments shall become effective upon execution of the SOW and expire February 26, 1999 unless terminated as provided in Section 5.0 of the Base Agreement. This Supplement may be extended for periods of three (3) months under mutually agreed to terms and conditions. Extensions will be mutually agreed to in writing by both parties.

3. Delete Section 2.0 Term. SECTION II - Sale of IBM Services in Supplement 1 to Attachment 1, Statement of Work, to the Agreement in its entirety and replace with the following:

The following replaces Section 2.0 of the SOW in its entirety.

This Supplement and its Attachments shall become effective upon execution of the SOW and expire February 26, 1999 unless terminated as provided in Section 5.0 of the Base Agreement. This Supplement may be extended for periods of three (3) months under mutually agreed to terms and conditions. Extensions must be mutually agreed to in writing by both parties.

4. Delete paragraph 2, Section 24.0 Information Technology Services (I/T Services), Section II - Sale of IBM Services in Supplement 1 to Attachment 1, Statement of Work, to the Agreement in its entirety and replace it with the following:

Within sixty (60) Days after the Effective Date of this Agreement, IBM and MSL must develop a mutually acceptable written migration plan to migrate to an MSL I/T solution for the U.S. Work Center. The migration plan will include the systems and applications identified on the attached Application Matrix below. All migration is to be completed by February 26, 1999. Any changes or upgrades to the mutually acceptable written migration plan shall be negotiated separately.

5. Delete Scope of Services: b), Section 24.0 Information Technologies Services (I/T Services), SECTION II - Sale of IBM Services in Supplement 1 to Attachment 1, Statement of Work, to the Agreement in its entirety and replace it with the following:

b) Any extension of the I/T Services beyond the February 26, 1999 date, due to an MSL delay, will be priced at IBM's then prevailing commercial rates.

                     Amendment 003 to Outsourcing Agreement                                      between                                    IBM and MSL

6. In addition to the above IBM and MSL agree to the following:

a) Negotiate in good faith an adjustment to the payment amount stated in Section 7.0 Price, SECTION II--Sale of IBM Services in Supplement 1 to Attachment 1, Statement of Work, to the Agreement on or before January 15, 1999. At this time, it is as follows,

Commencing on the Effective Date of the Agreement through December 31, 1998, IBM will not charge MSL for the services provided under Transition Services Section II--Sale of IBM Services. During any extension, due to any MSL delay, of Transition Services beyond December 31, 1998, MSL's payment to IBM shall be as mutually agreed to in writing by both parties and shall be [*] dollars per month.

b) Amend the Application Matrix of SECTION II--Sale of IBM Services in Supplement 1 to Attachment 1, Statement of Work, to the Agreement on or before January 15, 1999.

All other terms and conditions of the IBM/MSL Outsourcing Agreement, its attachments, and amendments shall remain in force and effect.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective authorized representatives.

          ACCEPTED AND AGREED TO:              ACCEPTED AND AGREED TO:

          International Business               Manufacturer's Services           Machines Corp.                       Western U.S. Operations, Inc.

     By:  /s/ Roy B. Covington III        By:  /s/ Dale Johnson           -------------------------------      --------------------------------

          Roy B. Covington III                 Dale R. Johnson           -------------------------------      --------------------------------           Print Name                           Print Name

          Industry Solutions Production           Proc Mgr                             Exec. V.P.           -------------------------------      --------------------------------           Title                                Title

          January 12, 1999                     January 12, 1999           -------------------------------      --------------------------------           Date                                 Date





                                  Supplement I                                Transition Services                                  (Amendment 003)

------------------------------------------------------------------------------------------------------------------                               Application Matrix ------------------------------------------------------------------------------------------------------------------ Application Name              Description                                    MSL Action ------------------------------------------------------------------------------------------------------------------

                                                                        ------------------------------------------------------------------------------------------------------------------ AAS                          Corp Order Entry System                         Cont to Use via online access ------------------------------------------------------------------------------------------------------------------ Alternate Channel Planning   Lotus Spreadsheets                              Cont to Use ------------------------------------------------------------------------------------------------------------------ ASPECT                       Eng for Technology Products                     N/A No longer ------------------------------------------------------------------------------------------------------------------ ATC                          EMLS transmission to Ger.                       Replace ------------------------------------------------------------------------------------------------------------------ Bwacs                        Box WAC Cost Application                        Replace ------------------------------------------------------------------------------------------------------------------ CADAM                        CAD Drawings                                    Replace ------------------------------------------------------------------------------------------------------------------ Carrier Direct               WT billing data & Mcs ships for Costs           Replace ------------------------------------------------------------------------------------------------------------------ CATIA                        CAD Application                                 MSL to use external license ------------------------------------------------------------------------------------------------------------------ Claim Ship                   Final Mach claims for Acct period               Replace ------------------------------------------------------------------------------------------------------------------ COATS & Bridges              COATS is corp bridges are local                 Replace ------------------------------------------------------------------------------------------------------------------ COLTS                        Purchasing Contracts                            Replace ------------------------------------------------------------------------------------------------------------------ Comp Trace Shell             Plant Control Shell                             Replace ------------------------------------------------------------------------------------------------------------------ Conveyor Shell               Plant Control Shell                             N/A No longer used ------------------------------------------------------------------------------------------------------------------ CPOPS                        Non Production Procurement                      Replace ------------------------------------------------------------------------------------------------------------------ CPQA                         CLT Product Quality Assurance                   Replace ------------------------------------------------------------------------------------------------------------------ CPS                          Common Purchasing Sys                           Replace ------------------------------------------------------------------------------------------------------------------ CPSLOCAL                     Common Purchasing Sys - Local                   Replace ------------------------------------------------------------------------------------------------------------------ CPS/CAPS Bridges             CPOPS orders for RTP nightly                    Replace ------------------------------------------------------------------------------------------------------------------ DAE                          Distributed Application Environment             Replace ------------------------------------------------------------------------------------------------------------------ DDB                          Boulder WT shipments                            Online Access ------------------------------------------------------------------------------------------------------------------ DDYS                         Distribution System                             Replace ------------------------------------------------------------------------------------------------------------------ DPRSBOX                      Development/Production Records Sys              Replace w/DPRS Receiver ------------------------------------------------------------------------------------------------------------------ EMLS                         Demands                                         Replace w/OEMLS interface ------------------------------------------------------------------------------------------------------------------ EMLS/EPRO Bridges            EMLSBX for the Box plant                        Replace ------------------------------------------------------------------------------------------------------------------ EOSE                         Enterprise Order/Scheduling & Excc              Interface ------------------------------------------------------------------------------------------------------------------ EPPS EXPRS                   Enterprise Prod Planning (feature planning)     Replace ------------------------------------------------------------------------------------------------------------------ ERE                          Engineering Documentation                       Replace with EGLNET ------------------------------------------------------------------------------------------------------------------ ESDP                         Enterprise Supply & Demand Planning             Interface ------------------------------------------------------------------------------------------------------------------ Financial MES                MES Billing System                              Interface ------------------------------------------------------------------------------------------------------------------ Fourth Element               Overhead Application                            Replace ------------------------------------------------------------------------------------------------------------------ FDR                          Financial Data Repository                       Interface ------------------------------------------------------------------------------------------------------------------ FQA                          Field Quality Assurance                         Replace ------------------------------------------------------------------------------------------------------------------ Gems                         Corp Order System                               Interface ------------------------------------------------------------------------------------------------------------------ Gems Billing Bridge          Corp Order System                               Interface ------------------------------------------------------------------------------------------------------------------ Gems MPI                     Warranty Tracking                               Interface ------------------------------------------------------------------------------------------------------------------ ICS                          Inventory Control System                        N/A no longer used ------------------------------------------------------------------------------------------------------------------ IDS                          Code A system orders                            Replace ------------------------------------------------------------------------------------------------------------------ IPBILL                       Financial Billing System                        Replace ------------------------------------------------------------------------------------------------------------------ IPLS                         Corporate Interplant System                     Interface via EDI ------------------------------------------------------------------------------------------------------------------ IPOPS                        Interplant Parts Order Process                  Replace ------------------------------------------------------------------------------------------------------------------ L718 Trx Interface           Pastes Serial # info into MCCS L718 scrn        Replace





------------------------------------------------------------------------------------------------------------------ MAC                          Mfg Auto Control Sys...controls UWIPS            Replace ------------------------------------------------------------------------------------------------------------------ Mach/Scl                     Costs to MCCS                                   Replace ------------------------------------------------------------------------------------------------------------------ Maptools                     Batch load of ME/PC data to DPRS                Replace ------------------------------------------------------------------------------------------------------------------ MAXI                         Mfg Inventory (Large parts)                     Interface ------------------------------------------------------------------------------------------------------------------ MCCS                         Material Cost & Control Sys                     Replace ------------------------------------------------------------------------------------------------------------------ MES EDI                      EDI                                             Replace ------------------------------------------------------------------------------------------------------------------ MES FC                       MES Forecasting                                 Replace ------------------------------------------------------------------------------------------------------------------ MES Global Labels            MES shipping label reqts                        Replace ------------------------------------------------------------------------------------------------------------------ MES Local                    Explode MES BOMs                                Replace ------------------------------------------------------------------------------------------------------------------ MFG Rel Shell                Plant control Inter to rel UWIPS                Replace ------------------------------------------------------------------------------------------------------------------ MODLOAD                      Machine ships for ACCT period                   Replace ------------------------------------------------------------------------------------------------------------------ MPL History                  MPL History pgms in 'C'                         N/A no longer used ------------------------------------------------------------------------------------------------------------------ Office products              LNOTES.VM.servers                               MSL IT Solution ------------------------------------------------------------------------------------------------------------------ OPAL                         Manual orders                                   Replace ------------------------------------------------------------------------------------------------------------------ P12l's                       FFI's                                           Manual Interface ------------------------------------------------------------------------------------------------------------------

1/14199                                                            Page 13 of 14

                                  Supplement I                                Transition Services                                  (Amendment 003)

                                                                        ------------------------------------------------------------------------------------------------------------------ Packaging Label set          Label Printing                                  Replace ------------------------------------------------------------------------------------------------------------------ Pallet Action set            Serial Numbers per Pallet                       N/A not needed ------------------------------------------------------------------------------------------------------------------ Pallet Label Printing        Prints label for NHD cust room & WH             N/A No longer used ------------------------------------------------------------------------------------------------------------------ Pallet Shell                 Plant Control Shell                             Replace ------------------------------------------------------------------------------------------------------------------ PCA                          M'burg PCA data                                 Interface ------------------------------------------------------------------------------------------------------------------ PCS                          Mach Shipping system                            Replace ------------------------------------------------------------------------------------------------------------------ PEP                          Paperless Eng Proc shadow                       Replace ------------------------------------------------------------------------------------------------------------------ Pick/Pack Validation         Validates all comps picked thru MAC             Replace ------------------------------------------------------------------------------------------------------------------ PIE                          Sourcing Approval System                        Interface ------------------------------------------------------------------------------------------------------------------ Plant Control                Plant Floor Control System                      Replace ------------------------------------------------------------------------------------------------------------------ Plant Works                  MPL conveyor interface                          N/A no longer used ------------------------------------------------------------------------------------------------------------------ PLUMP                        Plant Local Update Min corp I/F                 MFI manual interface ------------------------------------------------------------------------------------------------------------------ PPP                          Interplant sourcing                             Replace ------------------------------------------------------------------------------------------------------------------ PM                           Product Manager/DPRS Receiver                   Interface via DPRS Receiver ------------------------------------------------------------------------------------------------------------------ PRP                          Procurement Planning data                       Interface ------------------------------------------------------------------------------------------------------------------ PTS (ELITE)                  Product Tracking System                         EDI interface(data services gateway) ------------------------------------------------------------------------------------------------------------------ QSHIP                        Shipping System                                 Replace ------------------------------------------------------------------------------------------------------------------ RMAT                         Lotus Returns Tool                              Replace ------------------------------------------------------------------------------------------------------------------ RNB/BNR                      Rec'd not Billed/Billed not Rec'd               Replace ------------------------------------------------------------------------------------------------------------------ Ship Audit                   Mach ships and Costs to PCS deltas              Replace ------------------------------------------------------------------------------------------------------------------ TAXIS                        Engineering Development                         Manual lnterface ------------------------------------------------------------------------------------------------------------------ TEP                          Tracking Engineering Processes                  Replace ------------------------------------------------------------------------------------------------------------------ Transfer Price               Financial Billing System                        Interface ------------------------------------------------------------------------------------------------------------------ User Tools                   SAS, QMF, Smartsuite                            MSL IT solution ------------------------------------------------------------------------------------------------------------------ USPS                         US Postal Orders                                Interface ------------------------------------------------------------------------------------------------------------------ VMMCCS                       VM Matr'l Cost & Cntl Sys                       Replace ------------------------------------------------------------------------------------------------------------------





WSC                          Workstation Integration Database                Replace ------------------------------------------------------------------------------------------------------------------ WTBILL                       WT Billing/Ships to Boulder                     Interface ------------------------------------------------------------------------------------------------------------------

1/14199                                                            Page 14 of 14

                     Amendment 004 to Outsourcing Agreement                                      between                                    IBM and MSL

The purpose of this document is to amend the IBM/MSL Outsourcing Agreement between International Business Machines Corporation (IBM) and Manufacture's Services Western U.S. Operations. Incorporated (MSL), dated May 5, 1998 (Agreement). This amendment will be effective upon execution by IBM and MSL (each a Party and together the Parties).

The Parties agree to amend the Agreement as follows:

1. Add to the Agreement as Attachment H, Product Attachment - Complementary Products, to Attachment 1, Statement of Work to the Agreement. Attachment H will be referred to as a Complementary Products. Complementary Products (CP) is an IBM business unit.

2. Delete the list of appendices, attachments, and supplements and associated attachments as listed on page 1 of Attachment 1, Statement of Work to the Agreement in its entirety and replace it with the following list:

a)  Appendix 1 Markup b)  Appendix 2 Requirements Accuracy c)  Appendix 3 Performance Specifications d)  Appendix 4 Inventory Supply Flexibility e)  Appendix 5 EC Process Flow and EC Cycle Time f)  Attachment A - Product Attachment for RS g)  Attachment B - Product Attachment for GEPS h)  Attachment C- Product Attachment for Finance Solutions i)  Attachment D - Product Attachment for OEM Agreement A j)  Attachment E - Product Attachment for OEM Agreement B k)  Attachment F - Product Attachment for OEM Agreement C l)  Attachment G - Product Attachment for Security Products m)  Attachment H - Product Attachment for Complimentary Products ('CP) n)  Supplement 1 - Transition Services and associated Attachments as listed; o)  Exhibit 1 to Supplement 1 - Product Attachment for Wedge Products p)  Exhibit 2 to Supplement 1 - Wedge Inventory List q)  Agreement Exchange of Confidential Information Number 4998S60076 r)  IBM Purchase Orders s)  IBM Customer Orders t)  Equipment and Program Loan Agreement

3. Delete the first sentence in Section 7.1 in Attachment 1, Statement of Work, to the Agreement in its entirety and replace with the following:

      MSL's price to IBM for the fulfillment of Products for RS and MSL's price       to IBM for the manufacturing and fulfillment of GEPS, Finance Products,       and CP will be determined according to the following formula:

                     Amendment 004 to Outsourcing Agreement                                      between                                    IBM and MSL

4. Delete the table in Section 7.3 a) in Attachment 1, Statement of Work, to the Agreement in its entirety and replace with the following:

SHIPMENT                       PROFIT RATE

                                 RS              GEPS, Finance, and CP      GEPS, Finance and CP                                  Fulfillment     A-Sourced                  Mfg. and Fulfillment

                                                                        On Time                      [*]             [*]                        [*]

    1 Day delinquent             [*]             [*]                        [*]

    2 or more Days delinquent    [*]             [*]                        [*]

5. Delete the table in 1. a) of Appendix 1: Mark Up to Attachment 1, Statement of Work of the Agreement in its entirety and replace it with the following:

  a) Value Add and Profit Rates are per the following table:

                                                       VALUE ADD RATES     PROFIT RATES (*)                                                        ---------------     ----------------







    RS Fulfillment (US & VALENCIA Work Centers               [*]                 [*]

    GEPS, Finance, CP, and Security Mfg & Fulfillment            A-Sourced Products                                [*]                 [*]            MSL Manufactured Products                         [*]                 [*]

    Spares to Mechanicsburg and Amsterdam            US Work Center                                    [*]                 [*]

           Valencia Work Center                              [*]                 [*]            (Through September 30, 1998)            Valencia Work Center                              [*]                 [*]            (After September 30, 1998)

    *Profit Rates are subject to the adjustments of Section 7.3, Attachment 1, SOW

                     Amendment 004 to Outsourcing Agreement                                      between                                    IBM and MSL

All other terms and conditions of the Agreement, its attachments, and amendments shall remain in full force and effect.

IN WITNESS WHEREOF, the Parties hereto have caused this amendment to be executed by their respective authorized representatives.

     ACCEPTED AND AGREED TO:               ACCEPTED AND AGREED TO:

     International Business                Manufacturer's Services      Machines Corp.                        Western U.S. Operations, Inc.

     By: /s/ Roy B. Covington III          By: /s/ Dale R. Johnson          ----------------------------          ----------------------------

         Roy B. Covington III                  Dale R. Johnson          ----------------------------          ----------------------------          Print Name                            Print Name

         Industry Solutions Production          Procurement Manager                   EXEC. V.P          ----------------------------          ----------------------------          Title                                 Title

         2/9/99                                2/10/99          ----------------------------          ----------------------------          Date                                  Date

                     Amendment 005 to Outsourcing Agreement                                Between IBM and MSL

The purpose of this document is to amend the IBM/MSL Outsourcing Agreement between International Business Machines Corporation (IBM) and Manufacture's Services Western U.S. Operations, Incorporated (MSL), dated May 5, 1998 (Agreement). This amendment will be effective upon execution by IBM and MSL (each a Party and together the Parties).

The Parties agree to amend the Agreement as follow:

1. Delete October 31, 1998 from item 1. of Amendment 002 to the Agreement and replace it with the following:

April 3, 1999

2. Delete through February 26, 1999 from the end of sentence of item 1. in Amendment 003 to the Agreement and replace it with the following:

      Up to October 31, 1999 for SECTION I - WEDGE PRODUCTS to Supplement 1, -       Transition Services to Attachment 1,Statement of Work to the Agreement and       through April 3, 1999 for SECTION II - SALE OF IBM SERVICES to Supplement       1, - Transition Service to Attachment 1, Statement of Work to the       Agreement.

3. Delete the item 2 in Amendment 003 in its entirety and replace it with the following:

The following replace Section 2.0 of the SOW in its entirety.

      This Supplement and its Attachments shall become effective upon       execution of the SOW and will terminate upon [*] Days notice by IBM TO       MSL. Termination will be with the period from August 31, 1999 to       October 31, 1999 unless terminated as provided in Section 5.0 of the       Base Agreement. This Supplement may be extended under mutually agreed       to terms and conditions. Extensions will be in writing and signed by       both Parties.

4. Delete the wording in Section 7.0 Price, SECTION I Supplement 1, Transition Services to Attachment 1 Statement of Work to the Agreement in its entirety and replace it with the following:





The following replaces Section 7.0 of the SOW in its entirety.

      Commencing on the Effective Date of this Agreement, IBM shall pay MSL [*]       dollars [*] on the first Day of each calendar month through March

      31, 1999. Beginning April 1, 1999 and through the end of the period       defined in Section

                     Amendment 005 to Outsourcing Agreement                                between IBM and MSL

      2.0 Term SECTION I - WEDGE PRODUCTS in Supplement 1 to Attachment 1,       Statement of Work to the Agreement, as amended in item 3 of Amendment 005.       IBM shall pay MSL [*] dollars [*] on the first day of each calendar       month. For any period of less than one month, the above amount shall be       apportioned based on the number of Days in the Month.

5. Delete February 26, 1999 from item 3. of Amendment 003 to the Agreement and replace it with the following:

April 3, 1999

6. Delete the last two sentences from item 3. of Amendment 003 to the Agreement and replace them with the following:

This Supplement may be extended under mutually agreed to terms and conditions. Extensions will be in writing and signed by both parties.

7. Delete February 26, 1999 from item 4. of Amendment 003 to the Agreement and replace it with the following:

April 3, 1999

8. Delete item 5. of Amendment 003 to the Agreement in its entirety and replace it with the following:

b) Any extension of the I/T Services beyond the April 3, 1999 date, due to an MSL delay, will be priced at IBM's then prevailing commercial rates.

If the implementation of the MSL I/T solution for the U.S. Work Center is delayed beyond April 3, 1999 by IBM, other than for reasons attributable to MSL, then IBM shall continue to provide I/T Services to MSL at no cost and shall also bear all of MSL's incremental costs associated with such delay including without limitation, hardware, software and consulting costs subject to a maximum amount of [*] ([*] dollars) per month. For any period of less than one month, the above amount shall be apportioned based on the number of Days in that month.

9. Add the following, as a new paragraph, to the bottom of Page 1, following the paragraph that reads In addition, there may be associated features or accessory part numbers (not included in the Bill of Material listing). of Exhibit 1, Product Attachment - Wedge Products to Supplement 1, Transition Services to Attachment 1, SOW to the agreement.

                     Amendment 005 to Outsourcing Agreement                                between IBM and MSL

The Wedge Machine Types and the ARCTIC product set will be phased out of the transition services described in SECTION I - WEDGE PRODUCTS in Supplement 1 - Transition Services prior to October 31, 1999.

Note: Wedge Machine Types 5308, 7429, 7526 no longer apply to Exhibit 1 - Product Attachment - Wedge Products as they have been phased out.

10. Delete January 15, 1999 from 6. a) from Amendment 003 to the Agreement and replace it with the following:

March 15, 1999

All other terms and conditions of the Agreement, its attachments, and amendments shall remain in full force and effect.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment 005 to be executed by their respective authorized representatives.

ACCEPTED AND AGREED TO:                        ACCEPTED AND AGREED TO:

International Business Machines Corp.          Manufacturer's Services                                                Western U.S. Operations, Inc.

By: /s/ Roy B. Covington III                   By: /s/ Dale Johnson     -------------------------------------          -----------------------------





    Roy B. Covington III                           Dale R. Johnson     -------------------------------------          -----------------------------     Print Name                                     Print Name

    Ind. Solutions Production Procurement          Exec. V.P.     -------------------------------------          -----------------------------     Title                                          Title

    2/8/99                                         2/8/99     -------------------------------------          -----------------------------     Date                                           Date

                     Amendment 006 to Outsourcing Agreement                                      between                                    IBM and MSL

The purpose of this document is to amend the IBM/MSL Outsourcing Agreement between International Business Machines Corporation (IBM) and Manufacture's Services Western U.S. Operations, Incorporated (MSL), dated May 5, 1998 (Agreement). This amendment will be effective upon execution by IBM and MSL (each a Party and together the Parties).

The Parties agree to amend the Agreement as follow:

1. Delete the following Product Attachments to Attachment 1, Statement of Work to the Agreement in their entirety and replace them with the attached Product Attachments, of the same name:

      *     Attachment A - Product Attachment - Retail Store Solutions (RS)       *     Attachment B - Product Attachment - GEPS, Global Embedded Production             Solutions       *     Attachment C - Product Attachment - Finance Solutions       *     Attachment D - Product Attachment - OEM A, Global Embedded             Production Solutions       *     Attachment E - Product Attachment - OEM B, Global Embedded             Production Solutions       *     Attachment F - Product Attachment - OEM C, Global Embedded             Production Solutions       *     Attachment G - Product Attachment - Security Products

2. Delete the table in 1. a) of Appendix 1: Mark Up, as amended by Amendment 004, to Attachment 1, Statement of Work of the Agreement in its entirety and replace it with the following:

   a) Value Add and Profit Rates are per the following table:

                                                         VALUE ADD RATES       PROFIT RATES (**)                                                          ---------------       -----------------                                                                                       RS Fulfillment (US & VALENCIA Work Centers                      [*]                [*]

     GEPS, Finance, CP, and Security Mfg & Fulfillment              [*]                [*]            [*]                                                      [*]                [*]

     Spares to Mechanicsburg and Amsterdam             US Work Center                                          [*]                [*]

            Valencia Work Center                                    [*]                [*]             (Through September 30, 1998)             Valencia Work Center                                    [*]                [*]             (After September 30, 1998)

*     [*]                                                           [*]                [*]

**    Profit Rates are subject to the adjustments of Section 7.3, Attachment 1,       SOW

                                                                     Page 1 of 2

                     Amendment 006 to Outsourcing Agreement                                      between                                    IBM and MSL

All other terms and conditions of the Agreement, its attachments, and amendments shall remain in full force and effect.

IN WITNESS WHEREOF, the Parties hereto have caused this Amendment 006 to be executed by their respective authorized representatives.

ACCEPTED AND AGREED TO:                        ACCEPTED AND AGREED TO:

International Business Machines Corp.          Manufacturer's Services                                                Western U.S. Operations, Inc.

By: /s/ Roy B. Covington III                   By: /s/ Dale Johnson





    -------------------------------------          -----------------------------

    Roy B. Covington III                           Dale R. Johnson     -------------------------------------          -----------------------------     Print Name                                     Print Name

    Ind Solutions Procurement MGR                  Exec. V.P.     -------------------------------------          -----------------------------     Title                                          Title

    3/15/99                                        6/25/99     -------------------------------------          -----------------------------     Date                                           Date

                                                                     Page 2 of 2

                     Amendment 007 to Outsourcing Agreement                                      between                                    IBM and MSL

The purpose of this document is to amend the IBM/MSL Outsourcing Agreement between International Business Machines Corporation (IBM) and Manufacturer's Services Western U.S. Operations, Incorporated (MSL), dated May 5, 1998 (Agreement). This amendment will be effective upon execution by IBM and MSL (each a Party and together the Parties).

The Parties agree to amend the Agreement as follow:

1. Add Attachment I, Product Attachment - OEM Agreement D, and Attachment J, Product Attachment - OEM Agreement E, to Attachment 1, Statement of Work to the Agreement.

2. Delete the list of appendices, attachments, and supplements and associated attachments as listed on page 1 of Attachment 1, Statement of Work to the Agreement, and as amended by Amendment 004, in its entirety and replace it with the following list:

a) Appendix 1 Markup b) Appendix 2 Requirements Accuracy c) Appendix 3 Performance Specifications d) Appendix 4 Inventory Supply Flexibility e) Appendix 5 EC Process Flow and EC Cycle Time f) Attachment A - Product Attachment for RS g) Attachment B - Product Attachment for GEPS h) Attachment C - Product Attachment for Finance Solutions i) Attachment D - Product Attachment for OEM Agreement A j) Attachment E - Product Attachment for OEM Agreement B k) Attachment F - Product Attachment for OEM Agreement C l) Attachment G - Product Attachment for Security Products m) Attachment H - Product Attachment for Complimentary Products ('CP) n) Attachment I - Product Attachment for OEM Agreement D 0) Attachment J - Product Attachment for OEM Agreement E p) Supplement 1 - Transition Services and associated Attachments as listed; q) Exhibit 1 to Supplement 1 - Product Attachment for Wedge Products r) Exhibit 2 to Supplement 1 - Wedge Inventory List s) Agreement Exchange of Confidential Information Number 4998S60076 t) IBM Purchase Orders u) IBM Customer Orders v) Equipment and Program Loan Agreement

3. Delete the following Product Attachments to Attachment 1, Statement of Work to the Agreement in their entirety and replace them with the attached Product Attachments, of the same name:

      Attachment F - Product Attachment - OEM C, Global Embedded Production           Solutions       Attachment H - Product Attachement - Complementary Products

                                                                     Page 1 of 3

                     Amendment 007 to Outsourcing Agreement                                      between                                    IBM and MSL

4. Delete the table in 1 a) of Appendix 1: Mark Up, as amended by Amendment 006, to Attachment 1, Statement of Work of the Agreement in its entirety and replace it with the following:

     a) Value Add and Profit Rates are per the following table:

                                                         VALUE ADD RATES     PROFIT RATES (**)                                                          ---------------     -----------------

                                                                                  RS Fulfillment (US & VALENCIA Work Centers                [*]                [*]

         GEPS, Finance, CP, and Security Mfg & Fulfillment             [*]                                                [*]                [*]                                                                [*]                [*]





         Spares to Mechanicsburg and Amsterdam             US Work Center                                     [*]                [*]

            Valencia Work Center                               [*]                [*]             (Through September 30, 1998)             Valencia Work Center                               [*]                [*]             (After September 30, 1998)

         *  [*]                                                [*]                [*]          *  [*]                                                [*]                [*]          *  [*]                                                [*]                [*]          *  [*]                                                [*]                [*]          *  [*]                                                [*]                [*]

      ** Profit Rates are subject to the adjustments of Section 7.3, Attachment 1, SOW

5. Delete in Section 17.0 b) to Attachment 1, Statement of Work to the Agreement, 12/31/98 and replace it with 12/31/99.

                                                                     Page 2 of 3

                     Amendment 007 to Outsourcing Agreement                                      between                                    IBM and MSL

All other terms and conditions of the Agreement, its attachments, and amendments shall remain in full force and effect.

IN WITNESS WHEREOF, the Parties hereto have caused this Amendment 006 to be executed by their respective authorized representatives.

     ACCEPTED AND AGREED TO:               ACCEPTED AND AGREED TO:

     International Business                Manufacturer's Services      Machines Corp.                        Western U.S. Operations, Inc.

     By: /s/ Roy B. Covington III          By: /s/ Dale R. Johnson          ----------------------------          ----------------------------

         Roy B. Covington III                  Dale R. Johnson          ----------------------------          ----------------------------          Print Name                            Print Name

         Industry Solutions Production          Procurement Manager                   EXEC. V.P          ----------------------------          ----------------------------          Title                                 Title

         May 20, 1999                          6/25/99          ----------------------------          ----------------------------          Date                                  Date

                                                                     Page 3 of 3

                     Amendment 008 to Outsourcing Agreement                                      between                                    IBM and MSL

The purpose of this document is to amend the IBM/MSL Outsourcing Agreement between International Business Machines Corporation (IBM) and Manufacturer's Services Western U.S. Operations, Incorporated (MSL), dated May 5, 1998 (Agreement). This amendment will be effective upon execution by IBM and MSL (each a Party and together the Parties).

The Parties agree to amend the Agreement as follow:

1. Add Attachment K, Product Attachment - IBM 5494 for NHD, to Attachment 1, Statement of Work to the Agreement.

2. Delete the list of appendices, attachments, and supplements and associated attachments as listed on page 1 of Attachment 1, Statement of Work to the Agreement, and as amended by Amendment 007, in its entirety and replace it with the following list:

a)  Appendix 1 Markup b)  Appendix 2 Requirements Accuracy c)  Appendix 3 Performance Specifications d)  Appendix 4 Inventory Supply Flexibility e)  Appendix 5 EC Process Flow and EC Cycle Time f)  Attachment A - Product Attachment for RS g)  Attachment B - Product Attachment for GEPS h)  Attachment C - Product Attachment for Finance Solutions i)  Attachment D - Product Attachment for OEM Agreement A j)  Attachment E - Product Attachment for OEM Agreement B k)  Attachment F - Product Attachment for OEM Agreement C l)  Attachment G - Product Attachment for Security Products m)  Attachment H - Product Attachment for Complimentary Products (CP)





n)  Attachment I - Product Attachment for OEM Agreement D o)  Attachment J - Product Attachment for OEM Agreement D p)  Attachment K - Product Attachment for IBM 5494 for NHD q)  Supplement 1 - Transition Services and associated Attachments as listed; r)  Exhibit 1 to Supplement 1 - Product Attachment for Wedge Products s)  Exhibit 2 to Supplement 1 - Wedge Inventory List t)  Agreement Exchange of Confidential Information Number 4998S60076 u)  IBM Purchase Orders v)  IBM Customer Orders w)  Equipment and Program Loan Agreement

                                                                     Page 1 of 2

                     Amendment 008 to Outsourcing Agreement                                      between                                    IBM and MSL

All other terms and conditions of the Agreement, its attachments, and amendments shall remain in full force and effect.

IN WITNESS WHEREOF, the Parties hereto have caused this Amendment 008 to be executed by their respective authorized representatives.

     ACCEPTED AND AGREED TO:               ACCEPTED AND AGREED TO:

     International Business                Manufacturer's Services      Machines Corp.                        Western U.S. Operations, Inc.

     By: /s/ Roy B. Covington III          By: /s/ Dale R. Johnson          ----------------------------          ----------------------------

         Roy B. Covington III                  Dale R. Johnson          ----------------------------          ----------------------------          Print Name                            Print Name

         Industry Solutions Production          Procurement Manager                   EXEC. V.P          ----------------------------          ----------------------------          Title                                 Title

         6/7/99                                July 5, 1999          ----------------------------          ----------------------------          Date                                  Date

                                                                     Page 2 of 2

                     Amendment 009 to Outsourcing Agreement                                      between                                    IBM and MSL

The purpose of this document is to amend the IBM/MSL Outsourcing Agreement between International Business Machines Corporation (IBM) and Manufacturer's Services Western U.S. Operations, Incorporated (MSL), dated May 5, 1998 (Agreement). This amendment will be effective upon execution by IBM and MSL (each a Party and together the Parties).

The Parties agree to amend the Agreement as follow:

1. Add Attachment 6: Software Installation Terms and Conditions to Outsourcing Base Agreement.

2. Delete the list following the sentence The Parties agree that this Agreement regarding this transaction consist of: found on Page 1 of the Outsourcing Base Agreement in its entirety and replace it with the following:

a) the Outsourcing Base Agreement b) Attachment 1: Statement of Work and its Product Attachments, Appendices, and    Supplements c) Attachment 2: Employee list and Benefits Information d) Attachment 3: Asset List e) Attachment 4: Expense Participation f) Attachment 5: Equipment and Program Loan List g) Attachment 6: Software Installation Terms and Conditions h) Agreement for Exchange of Confidential Information Number 4998S60076 i) IBM Purchase Orders j) IBM Customer Orders k) Equipment and Program Loan Agreement

All other terms and conditions of the Agreement, its attachments, and amendments shall remain in full force and effect.

IN WITNESS WHEREOF, the Parties hereto have caused this Amendment 009 to be executed by their respective authorized representatives.

     ACCEPTED AND AGREED TO:               ACCEPTED AND AGREED TO:

     International Business                Manufacturer's Services      Machines Corp.                        Western U.S. Operations, Inc.

     By: /s/ Roy B. Covington III          By: /s/ Dale R. Johnson





         ----------------------------          ----------------------------

         Roy B. Covington III                  Dale R. Johnson          ----------------------------          ----------------------------          Print Name                            Print Name

         Industry Solutions Production          Procurement Manager                   EXEC. V.P, GENERAL COUNSEL          ----------------------------          ----------------------------          Title                                 Title

         6/7/99                                6/9/99          ----------------------------          ----------------------------          Date                                  Date

                                                                     Page 1 of 1

                     Amendment 010 to Outsourcing Agreement                                      between                                    IBM and MSL

The purpose of this document is to amend the IBM/MSL Outsourcing Agreement between International Business Machines Corporation (IBM) and Manufacturer's Services Western U.S. Operations, Incorporated (MSL), dated May 5, 1998 (Agreement). This amendment will be effective upon execution by IBM and MSL (each a Party and together the Parties).

The Parties agree to amend the Agreement as follow:

1. Delete up to October 31, 1999 for SECTION I - WEDGE PRODUCTS to Supplement 1, Transition Services to Attachment 1, Statement of Work to the Agreement and through April 3, 1999 for SECTION II - SALE OF IBM SERVICES to Supplement 1, Transition Services to Attachment 1, Statement of Work to the Agreement., as amended in Amendment 005, from the end of sentence in paragraph 2 in Supplement 1 to Attachment 1, Statement of Work, to the Agreement, in its entirety and replace with the following:

      through March 31, 2000 for SECTION I-WEDGE PRODUCTS to Supplement 1,       Transition Services to Attachment 1, Statement of Work to the Agreement       and through April 3, 1999 for SECTION II - SALE OF IBM SERVICES to       Supplement 1, Transition Services to Attachment 1, Statement of Work to       the Agreement.

2. Delete the wording in Section 2.0 Term, as last amended in Amendment 005, from SECTION I - WEDGE PRODUCTS to Supplement 1, Transitions Services to Attachment 1, Statement of Work to the Agreement, in its entirety and replace with the following:

The following replaces Section 2.0 of the SOW in its entirety.

      This Supplement and its Attachments shall become effective upon execution       of the SOW and expire March 31, 2000 unless terminated as provided in       Section 5.0 of the Base Agreement. This supplement may be extended under       mutually agreed to terms and conditions. Extensions will be in writing       and signed by both Parties.

3. Delete the wording in Section 7.0 Price, as amended in Amendment 005, from SECTION I - WEDGE PRODUCTS to Supplement 1, Transitions Services to Attachment 1, Statement of Work to the Agreement, in its entirety and replace with the following:

The following replaces Section 7.0 of the SOW in its entirety.

      Commencing on the Effective Date of this Agreement, IBM shall pay MSL       [*] dollars ([*]) on the first Day of each calendar month through March       31, 1999. Beginning April 1, 1999 and through October 31, 1999, IBM       shall pay MSL [*] dollars ([*]) on the first Day of each calendar month.       Beginning November 1, 1999 and through the end of the period defined in       Section 2.0 Term, SECTION I - WEDGE PRODUCTS in Supplement 1 to       Attachment 1 of Work to the Agreement, IBM shall pay MSL [*] dollars       ([*]) on the first day of each calendar month. For any period of less       than one month, the above amount shall be apportioned based upon the       number of Days in that month.

                                                                     Page 1 of 2

                     Amendment 010 to Outsourcing Agreement                                      between                                    IBM and MSL

4. Delete the wording in the last paragraph of Specific Product Description as added by Amendment 005, of Exhibit 1, Product Attachment - Wedge Products to Supplement 1, Transition Services to Attachment 1, Statement of Work to the Agreement, in its entirety and replace it with the following:





      The ARCTIC product set will be phased out of the transition services       described in SECTION I - WEDGE PRODUCTS prior to October 31, 1999. The       Wedge Machine Types will be phased out of the transitions services       described in SECTION I - WEDGE PRODUCTS on or before March 31, 2000.

5. Delete Attachment 5: Equipment and Program Loan List, to the Outsourcing Base Agreement dated October 01, 1998 and replace it in its entirety with the Attachment 5: Equipment and Program Loan List, to the Outsourcing Base Agreement dated July 20, 1999.

All other terms and conditions of the IBM/MSL Outsourcing Agreement, its attachments, and amendments shall remain in full force and effect.

IN WITNESS WHEREOF, the Parties hereto have caused this Amendment 010 to be executed by their respective authorized representatives.

     ACCEPTED AND AGREED TO:               ACCEPTED AND AGREED TO:

     International Business                Manufacturer's Services      Machines Corp.                        Western U.S. Operations, Inc.

     By: /s/ Nigel D. Davis                By: /s/ Dale R. Johnson          ----------------------------          ----------------------------

         Nigel D. Davis                        Dale R. Johnson          ----------------------------          ----------------------------          Print Name                            Print Name

         [ILLEGIBLE] Procurement Mgr.          EXEC. V.P          ----------------------------          ----------------------------          Title                                 Title

         11-16-99                              11/29/99          ----------------------------          ----------------------------          Date                                  Date

                                  ATTACHMENT 1

              IBM/MSL Outsourcing Base Agreement Statement of Work

The Statement of Work (SOW) is an Attachment issued under the IBM/MSL Outsourcing Base Agreement (Base Agreement) for the manufacturing, fulfillment, Integration, and Services currently performed and managed by and for IBM that are to be performed and managed by MSL for the Retail Store Solutions (RS), Global Embedded Production Solutions (GEPS), Finance Solutions, other IBM business units, and current IBM OEM Agreements.

By signing below, each of us agrees that the complete agreement between us regarding this transaction document consists of the Outsourcing Base Agreement and this SOW and associated Appendices, Attachments, and Supplements and associated Attachments as listed:

a) Appendix 1 Markup b) Appendix 2 Requirements Accuracy c) Appendix 3 Performance Specifications d) Appendix 4 Inventory Supply Flexibility e) Appendix 5 EC Process Flow and EC Cycle Time f) Attachment A - Product Attachment for RS g) Attachment B - Product Attachment for GEPS h) Attachment C - Product Attachment for Finance Solutions i) Attachment D - Product Attachment for OEM Agreement A j) Attachment E - Product Attachment for OEM Agreement B k) Attachment F - Product Attachment for OEM Agreement C l) Attachment G - Product Attachment for Security Products m) Supplement 1 - Transition Services and associated Attachments as listed; n) Exhibit 1 to Supplement 1 - Product Attachment for Wedge Products o) Exhibit 2 to Supplement 1 - Wedge Inventory List p) Agreement Exchange of Confidential Information Number 4998S60076 q) IBM Purchase Orders r) IBM Customer Orders s) Equipment and Program Loan Agreement

The following is a related agreement between MSL and IBM:

      IBM Corporation (Landlord) and MSL (Tenant) Lease Agreement

IBM Confidential                                                    Page 1 of 39 sow501.lwp

                                  ATTACHMENT 1

              IBM/MSL Outsourcing Base Agreement Statement of Work

Any signed copy of this SOW and its Attachments made by reliable means (for example, photocopy or facsimile) is considered an original.

Agreed To:                           Agreed To:

Manufacturers' Services Western      International Business Machines Corporation U.S. Operations, Inc.





By: /s/ Kevin C. Melia               By: /s/ R. G. Richter     -----------------------------        -----------------------------     Authorized Signature                 Authorized Signature

Name: KEVIN C. MELIA                 Name: R. G. Richter       ---------------------------          ---------------------------

Date: May 5, 1998                    Date: May 5, 1998       ---------------------------          ---------------------------

IBM Confidential                                                    Page 2 of 39 sow501.lwp

                                  ATTACHMENT 1

              IBM/MSL Outsourcing Base Agreement Statement of Work

SECTION 1.0 DEFINITIONS ...............................................   Page 5

SECTION 2.0 TERM ......................................................   Page 6

SECTION 3.0 MSL RESPONSIBILITIES ......................................   Page 7

SECTION 4.0 IBM RESPONSIBILITIES ......................................   Page 8

SECTION 5.0 MUTUAL RESPONSIBILITIES ...................................   Page 9

SECTION 6.0 PURCHASE OF PRODUCTS ......................................  Page 11

SECTION 7.0 PRICE .....................................................  Page 11

SECTION 8.0 PARTS PRICING .............................................  Page 16

SECTION 9.0 PREMIUM COST ..............................................  Page 16

SECTION 10.0 ORDER MANAGEMENT, DELIVERY, AND SHIPMENT .................  Page 18

SECTION 11.0 PRODUCT FORECAST .........................................  Page 20

SECTION 12.0 ENGINEERING CHANGE .......................................  Page 21

SECTION 13.0 INVENTORY ................................................  Page 22

SECTION 14.0 INTEGRATION ..............................................  Page 24

SECTION 15.0 DROP SHIPMENTS ...........................................  Page 29

SECTION 16.0 PACKAGING ................................................  Page 30

SECTION 17.0 QUALITY ..................................................  Page 30

SECTION 18.0 ACCEPTANCE TEST ..........................................  Page 31

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SECTION 19.0 WARRANTY .................................................  Page 32

SECTION 20.0 COMMON TOOLING ...........................................  Page 34

SECTION 21.0 TOOLING TO BE ACQUIRED ...................................  Page 34

SECTION 22.0 RETURN OF PRODUCT - US AND VALENCIA WORK CENTER. .........  Page 36

SECTION 23.0 DISASTER RECOVERY ........................................  Page 37

SECTION 24.0 INFORMATION TECHNOLOGIES SERVICES (I/T) SYSTEMS ........  Page 37

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              IBM/MSL Outsourcing Base Agreement Statement of Work

SECTION 1.0 DEFINITIONS

      For purposes of this Attachment, the following capitalized terms shall       have the following meaning All other capitalized terms not otherwise       defined herein shall have the meaning assigned in the Agreement:

1.1   AP shall mean Asia and Pacific geographies.

1.2   Bulk Shipment shall mean a fulfillment sub process for Products       identified by part numbers, by which aggregate IBM Customer Orders are       delivered together to the IBM Customer.





1.3   Code A shall mean a service available from MSL to IBM 6:00am to Midnight       local Work Center time, and seven (7) days a week for the delivery of       emergency Parts requested by IBM, IBM Document VFM043.

1.4   Delivery Point shall mean the location where IBM is to take delivery of       Products, excluding Products which are Drop Shipments, from MSL as       described in the Product Attachments. This may be an MSL site, an IBM site       or such location as required by the Product Attachment. If no Delivery       Point is stated for a particular Product, it shall be the location       described in a separate IBM notice.

1.5   Drop Shipment shall mean a fulfillment sub process by which Products are       directly delivered from the IBM supplier to an IBM Subsidiary or IBM       customer. These Products do not pass physically through any MSL facility.

1.6   EMEA shall mean the Europe, Middle East and Africa geographies.

1.7   End of Life (EOL) shall mean the date after which IBM does not require       MSL to provide Products and/or Services for specific Products.

1.8   Engineering Change (EC) shall mean a mechanical or electrical design       and/or specification changes which, if made, would in the good faith       opinion of IBM, affect the schedule, performance, reliability,       availability, serviceability, appearance, dimensions, tolerance, safety or       cost of Products, and which, in IBM's good faith opinion, would eventually       require additional approval tests.

1.9   Failure Analysis shall mean first pass failure analysis investigation       and testing performed by MSL to identify the failing Parts. The Part level       to which MSL will conduct Failure Analysis is described in the Quality       Section 17.0.

1.10  Field Bill of Materials (FBM) shall mean a set of Parts for machine       upgrade.

1.11  Follow on Product shall mean a new IBM Product which has similar       functional characteristics to current Products and that is intended to       replace such current Products in the marketplace.

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1.12  Hot line shall mean a service available from 7:30 am to Midnight local       Work Center time, Mondays through Fridays for emergency problem resolution       requested from IBM customers, IBM Document VFM045.

1.13  IBM Classified Part(s) shall mean a Part subject to be managed by MSL       according to IBM asset control rule, IBM Document CP10.13.

1.14  IBM Nominated Supplier shall mean a supplier from which MSL is       specifically required by IBM to purchase specific Parts.

1.15  NIC shall mean MSL's out of pocket costs for freight, duty, customs,       clearance, and appropriate insurance, and any other costs it incurs to       bring Product into a Work Center.

1.16  Order Fulfillment shall mean MSL's disbursement of Products, including       Pick & Pack, any Integration, shipment and delivery in order to satisfy an       IBM Customer Order.

1.17  Order Desk shall mean the function consisting of 1) receiving IBM       Customer Orders, 2) communicating with the requesting IBM party to ensure       the fulfillment commitments satisfy the request, 3) scheduling delivery of       the order and 4) communicating with the necessary goods processing       organizations to ensure the order is delivered at the committed date and       place.

1.18  Pick & Pack shall mean fulfillment a sub process for individual IBM       Customer Orders, by which all items of an IBM Customer Order are       consolidated into an over pack. Pick & Pack ensures that all items of the       IBM Customer Order arrive together at the customer location.

1.19  Product Recall shall mean a systematic effort to locate all Products in       the field in order to repair or replace such Products.

1.20  Relationship Managers shall mean the primary contact of the Parties with       respect to this Agreement. The Relationship Managers or their delegates       are solely authorized to make commitments between the parties. Each Party       shall designate a Relationship Manager.

1.21  Request Price Quotation (RPQ), shall mean a customized Product       configuration.

1.22  Wedge Products shall mean Products as described in a specific Product       Attachment, which are fulfilled by MSL from IBM Consigned Parts from the       Effective Date of this Agreement through December 31, 1998.

SECTION 2.0 TERM





      This Attachment and its Product Attachments shall become effective on the       Effective Date and shall continue for a period of three (3) years unless       terminated as provided in Section 5.0 of the Base Agreement. This       Attachment will automatically be renewed for periods of six (6) months       unless either party gives twelve (12) months written notice of its intent       to terminate this Agreement. Such renewals shall continue for successive       periods under the same terms and conditions, unless otherwise agreed in       writing by both Parties.

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SECTION 3.0 MSL RESPONSIBILITIES

      The following is a list of responsibilities that will be required of MSL       in order to fulfill the requirements of this Agreement. This list may not       be all inclusive.

      MSL shall:

            1)    provide suitable installations, common tools and equipment,                   skilled human resources, and adequate warehousing facilities                   at all delivery points listed in the Product Attachments as                   MSL may need for execution of this Agreement,             2)    manage, control, and execute EC's,             3)    qualify processes in accordance with IBM specified criteria,             4)    review and update product inventory profiles semiannually,             5)    purchase from IBM Nominated Suppliers based on IBM specified                   terms and conditions,             6)    utilize product forecasts to determine requirements and plans                   to fulfill such requirement,             7)    manage requirements generation for materials for Products,                   plan the procurement of materials from suppliers, and identify                   the Work Center where materials must be delivered,             8)    commit sufficient supply for IBM business units for Products                   with Product Attachments hereto and subject to the parameters                   of Appendix 4 Supply Flexibility,             9)    inspect incoming materials and supplies for compliance with                   IBM specified criteria,             10)   maintain appropriate stock to satisfy IBM Customer Orders                   within the parameters of Appendix 4 Supply Flexibility,             11)   manage inventory and associated liabilities,             12)   manage inbound transportation and cost for all Part and                   Products excluding those Parts considered IBM Consigned Parts,             13)   handle the reception and management of worldwide IBM Customer                   Orders, including new orders, alteration, reschedules,                   Integration as per customer requirements and cancellations,             14)   handle order processing, fulfillment and delivery for Products                   and Bulk Shipments at defined Delivery Points,             15)   provide account management, technical support and interface to                   IBM customers for Integration,             16)   provide packing and packaging for all Products and Parts,             17)   deliver complete assembled, inspected and tested Products that                   meet the requirements defined by the engineering documentation                   and specifications as defined in the Product Attachments,             18)   fulfill all obligations as outlined in the Integration Section                   14.0,

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            19)   manage Drop Shipments of Products to designated IBM                   Subsidiaries and/or foreign companies and prepare invoice for                   the corresponding IBM country unit,             20)   perform all distribution and shipping for Products from the US                   Work Center, arrange for carriers for all outbound shipments                   of Products to IBM customer destinations per the IBM Customer                   Order,             21)   perform kitting of parts as required for IBM,             22)   provide machine level control when required by Product                   specifications,             23)   process returned Products in accordance with IBM criteria for                   the same,             24)   perform first pass Failure Analysis on returned Products,             25)   manage and control of Consigned Products and equipment,             26)   provide detailed reporting as defined in the Performance                   Appendix,             27)   fulfill obligations as outlined in the Transition Services                   Supplement from the Effective Date of the Agreement to                   12/31/98,             28)   manage all Products to EOL dates as defined by IBM,             29)   provide Code A and Hot Line support for all Products as                   requested by IBM,





            30)   perform all forecasting for features,             31)   supply spare Parts until EOL,             32)   fulfill duties of Order Desk,             33)   provide timely estimates of any new Product activity, and             34)   support new Product introduction activities such as prototype                   build, sourcing, test and manufacturing process development.

SECTION 4.0 IBM RESPONSIBILITIES

      The following is a list of responsibilities that will be required of IBM       in order to fulfill the requirements of this Agreement. This list may not       be all inclusive.

      IBM shall

            1)    negotiate and manage contracts and technical support with IBM                   Nominated Suppliers,             2)    supply to MSL required IBM Parts and needed IBM Consigned                   Parts,             3)    define allocation of IBM Customer Order deliveries if total                   demand cannot be supported for a period of time,             4)    approve all EC's for Products prior to MSL's implementation of                   any change,             5)    provide technical and business interface through the IBM                   Relationship Manager,             6)    fulfill obligations as outlined in the Transition Services                   Supplement from the Effective Date to 12/31/98,             7)    process qualification approval of all processes utilized by                   MSL,             8)    provide engineering documentation and specifications as needed                   by MSL to manufacture and test Products as defined in the                   Product Attachments,             9)    execute approve tooling agreements as needed,             10)   provide maintenance for IBM IT systems that IBM requires MSL                   to use,

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            11)   provide a forecast to MSL on a monthly basis for all machine                   types and models by geography,             12)   approve/reject all requests for premium expenditures for                   materials, labor and other extraordinary items,             13)   provide EOL dates for all Products, at least [*] months prior                   to desired EOL date, and             14)   provide new product information required for estimates and new                   product introduction activities which are requested of MSL.

SECTION 5.0 MUTUAL RESPONSIBILITIES

5.1   Delivery/Quality/Cost Performance Process

      a)    MSL and IBM will communicate weekly on measurements and reports for:

            i)    Weekly shipments

            ii)   On-time shipments

            iii)  Responsiveness as defined in Appendix 3

            iv)   Order-to-ship lead-time, Pick and Pack

            v)    Order-to-ship lead-time, Bulk Shipments

            vi)   Product invoice information

      b)    MSL and IBM will communicate monthly on measurements and reports for

            i)    Monthly shipments

            ii)   Inventory

            iii)  Product quality

            iv)   Serviceability to IBM plants as defined in Appendix 3

            v)    Serviceability to IBM services as defined in Appendix 3

      c)    MSL and IBM will perform monthly reconciliation of invoices for             Product shipments and will determine payment adjustments as defined             in Section 7.3 ,Payment Adjustments. Payments of credits and debits             that may result from reconciliation and payment adjustments will             take place within the month following the reconciled month.

      d)    MSL and IBM will meet [*] at the US Work Center and/or the             Valencia Work Center or a place to be mutually agreed to.:

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            i)    define prices for the coming [*] based upon procedures                   defined in Section 7.5 e)i) below,

            ii)   determine credits and debits to material costs and NIC for the                   previous [*] caused by [*] to the material costs from those                   estimated at the prior [*] meeting, and

            iii)  determine Requirements Accuracy liabilities for the previous                   [*] as defined in Section 13.0 Inventory and Appendix 2.

      e)    Measurements, Targets and Reports to be provided by MSL are             specified in Appendix 3.

5.2   Relationship Management

      a)    MSL expressly recognizes that only commitments made to MSL by the             IBM Relationship Managers or their delegates are IBM commitments to             MSL with respect to this Agreement. The following are some, but not             all of, the communications that MSL can validly receive from the             Relationship Managers or their delegates: requirements forecasts,             price approval, orders for Products or Services, approval of EC             applications, approval of premium expenses, and approval of price             reconciliation. These communications must be in writing by IBM.

      b)    In the event of a necessary or desired change in any material aspect             of the Agreement, the Parties shall mutually agree to any such             change in writing prior to its implementation. A proposed change             shall be initiated by the proposing Party in a written notice to the             other Party.

      c)    MSL and IBM shall appoint program managers to handle communications             specific to each Product Group related to this Agreement. Names of             the program managers will be listed in each Product Attachment.

      d)    Either Party may change its program manager by written notice.

      e)    Both Parties recognize that efficiency of operation may frequently             require direct communication between program managers, or other             individuals working for the Parties, without the intermediation of             the Relationship Managers. Notwithstanding the above, MSL accepts             that only commitments issued by the IBM Relationship Managers or             their delegates are valid IBM commitments with respect to this             Agreement. Also, IBM accepts that only commitments issued by the MSL             Relationship Managers or their delegates are valid MSL commitments             with respect to this Agreement.

      f)    The Relationship Managers or their delegates will also coordinate             review meetings and will provide each other assessments of the             performance and the business situation of the relationship             throughout the duration of this Agreement.

      g)    Each Party may at any time redesignate a person as Relationship             Manager by written notice to the other.

      Relationship Managers:

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      for US Work Center

      IBM:

      MSL:

      IBM will separately designate a Relationship Manager for EMEA.

SECTION 6.0 PURCHASE OF PRODUCTS

      Subject to the terms and conditions of this Agreement, MSL agrees to       produce and sell, and IBM agrees to purchase Products. This Agreement does       not authorize MSL to produce or deliver any Product.

6.1   Cancellation of Purchase Order

      IBM may cancel any and all Purchase Orders against this Agreement at any       time. In the event IBM cancels Purchase Order as the result of MSL's       default, no cancellation charge shall be applicable. IBM's termination of       Purchase Orders for its convenience shall not relieve IBM of any cost       reimbursements under the Price section.

SECTION 7.0 PRICE

      Pricing for all Products and related services of this Agreement are as





      specified herein unless stated elsewhere in this Agreement. All prices       stated herein are defined in United States dollars, unless otherwise       noted.

7.1   Manufacturing and Fulfillment Pricing

      MSL's price to IBM for the fulfillment of Products for RS and MSL's price       to IBM for the manufacturing and fulfillment of GEPS and Finance Products       will be determined according to the following formula:

      {P=A+B+C+D}, where the following values are assigned to such formula:

      a)    'P' shall mean 'Price' or the price IBM shall pay for Products             under this Agreement.

      b)    'A' shall mean [*] or the cost of all MSL [*] and any [*] as             determined by the [*] described in Section 7.5 e) i) below. For             RS Products, manufactured by MSL, the cost of [*] shall be             consistent with the terms of section 7.2, below.

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      c)    'B' shall mean 'MSL [*]' or a value determined by multiplying the             [*] times the [*]. [*] are listed in Markup Appendix 1.

      d)    'C' shall mean 'MSL [*]' or a value determined by multiplying the             [*] times the [*]. [*] are listed in Markup Appendix 1.

      e)    'D' shall mean [*] or a value determined by multiplying the [*]             times the [*]. [*] are listed in Markup Appendix 1.

7.2   Prices for MSL Manufactured RS Products and RS Integration

      a)    For RS Products, the cost of components manufactured by MSL, and not             sourced from third party suppliers, will be determined by the             following formula: {TMC = [*]}, where the following values are             assigned to such formula:

           i)       TMC shall mean Total Manufacturing Cost.

           ii)      1 shall mean [*] or the cost of all [*] and any [*] as                     determined by the [*] described in Section 7.5 e) i) below

           iii)     2 shall mean [*] to be determined by multiplying MSL's                     [*] by MSL's [*] rate per hour ([*] x MSL [*]). [*] are                     stated in Product Attachment A. MSL's [*] Rate Per Hour                     for [*] is as listed in the Markup Appendix 1.

           iv)      3 shall mean [*] to be determined by multiplying the [*]                     by the [*]. The [*] are as listed in the Markup Appendix 1.

           v)      4 shall mean the [*] to be determined by multiplying the                    [*]. The [*] are as listed in the Markup Appendix 1.

      b)    For RS orders that include Integration, MSL will invoice IBM the             Integration charges separately from the fulfillment price defined in             this Section 7.1. The price for integration will be determined by             multiplying the [*] times the [*] performed for the [*] services.             [*]. [*] are listed in the Markup Appendix 1. [*] are the direct  .

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            [*] needed to integrate a unit for a specific Integration project.             [*] will be agreed to between MSL and IBM prior to the start of             each Integration project.

7.3   Payment Adjustment for Delinquent Shipments and MSL not Achieving       Responsiveness Objective.

      a)    For any calendar month, if a Work Center fails to ship any machine             type on at least a [*]% on time shipment rate to all committed             Delivery Points, and such failure is not a result of Force Majeure





            activity under Section 16.17 of the Base Agreement, or a delay             caused substantially by IBM, the Profit Rates defined in Section             7.1(d) and Appendix 1, shall be based on the following table for all             delinquent shipments of such machine types, from that Work Center.

SHIPMENT                                      PROFIT RATE

                           RS            GEPS and Finance   GEPS and Finance                            Fulfillment   A-Sourced          Mfg. and Fulfillment

On Time                    [*]           [*]                [*]

1 Day delinquent           [*]           [*]                [*]

2 or more Days delinquent  [*]           [*]                [*]

      b)    For any calendar month, if MSL fails to achieve a responsiveness, as             defined in Appendix 3, of at least [*]% for any machine type, in a             Work Center, a penalty of [*]% will be applied to that Work Center's             monthly total material cost of that machine type multiplied by             ([*]% minus actual responsiveness %). This penalty shall not apply             if requirements accuracy for that machine type, as defined in             Appendix 2, exceeds [*]% and demand, for that machine type, exceeds             Supply Flexibility as defined in Section 13.2 and Appendix 4. The             first month for which this penalty shall be effective is June 1998.

      c)    Any price adjustments that are due per Sections 7.3 a) or 7.3 b)             will be invoiced by IBM to MSL in the following calendar month.

7.4   [*]

      Notwithstanding anything in this Agreement to the contrary, MSL represents       and warrants that

      a)    If MSL [*] to another [*] under similar terms and conditions             including without limitation, [*], to those [*] to IBM and in [*]

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            or [*] during the same period, those [*] shall be made known and             available to IBM at the time of their availability to that [*].

      b)    In the event IBM reasonably questions whether it is receiving [*]             treatment as described in Section 7.4 a), and MSL cannot otherwise             provide IBM with proof of its compliance due to third party             restrictions, both parties agree to have an independent party             evaluate IBM's inquiry to determine whether IBM has received proper             treatment under this Section. IBM and MSL agree that the information             disclosed by MSL to the independent party pursuant to this Section             7.4 b), will be subject to the Confidentiality Agreement described             in the Agreement.

      c)    For purposes of this Section a [*] shall mean a [*] from a qualified             third party [*] that contains an ongoing sustainable [*], which is             more [*] than MSL's [*] and which is subject to comparable terms and             conditions and for substantially similar [*], to build Product(s)             as opposed to provide [*] services for the Products(s).

            i)    If IBM gets a [*] from an [*] resulting in a [*] which                   demonstrates MSL [*], IBM will notify MSL. MSL shall have [*]                   Days after written notice of such [*] to [*] or [*] such [*].                   If MSL is unable to [*] the [*] subject to the conditions set                   forth in ii) below, then IBM may [*] the Product to the [*],                   and IBM and MSL shall mutually agree on a [*] plan for such                   Product(s). In this case MSL shall have all remedies for [*]                   in accordance with [*] of the Agreement.

            ii)   If MSL is unable or unwilling to [*] the [*] because IBM's [*]                   for the Product has been below the minimum [*] parameter for                   the prior [*] months, MSL shall have a grace period [*] months                   from written notice of the [*] to make adjustments it deems                   necessary to [*] the [*]. This grace period is contingent upon                   MSL making, within [*] Days of notice of the [*], a commitment                   to [*] the [*] at the end of the grace period.

      d)    In the event, IBM Latin America or IBM Asian Pacific were to receive             an [*] from a [*] that contains an ongoing [*], which is more [*]             than MSL's [*] and which is subject to comparable terms and             conditions and for substantially similar [*], to provide [*]             services for the Product(s), IBM will notify MSL.  MSL shall have             [*] Days after written notice of such [*] to [*] or [*] such [*].             MSL shall have a grace period of [*] months from written notice of





            the [*] to make adjustments it deems necessary to [*] the [*] quote             at the end of the grace period.  If MSL is unable to [*] the [*]             then IBM may [*] the [*] to the [*] and IBM and MSL shall mutually             agree on a [*] plan for the Product(s).

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         e)       In the event, IBM were to receive an [*] from a [*] that                   contains an ongoing [*], which is more [*] than MSL's [*] and                   which is subject to comparable terms and conditions and for                   substantially similar [*], to provide Integration for the                   Product(s), IBM will notify MSL. MSL shall have [*] Days                   after written notice of such [*] to [*] or [*] such [*]. If                   MSL is unable to [*] the [*] then IBM may [*] the [*] to the                   [*] and IBM and MSL shall mutually agree on a [*] plan for                   the Product(s).

7.5      [*] of Product [*]. The unit [*] and elemental [*], i.e., [*], and [*],          listed in the Markup Appendix 1 and Product Attachments shall [*]          during the term of this Agreement subject to the following:

         a)       If [*] and/or elemental [*] are reduced by MSL or lower [*]                   are [*] by MSL to other [*] for a [*] that is similar to [*]                   under similar terms and conditions, including without                   limitation [*], MSL will reduce the [*], or reduce the [*] to                   IBM to the [*] as those [*] to other [*]. The [*] and [*] will                   apply to all [*] IBM [*] and to all [*] Product deliveries                   during the term of this Agreement.

         b)       If IBM or MSL negotiate or schedule a [*] for [*], the                   corresponding [*] will be effective when MSL begins using and                   shipping the [*].

         c)       A negotiated [*] could result if there is a significant                   increase or decrease in the Product [*] from those assumed                   for [*] definition. If this occurs, the parties shall                   negotiate in good faith an appropriate adjustment to MSL's                   [*]. The revised [*] will apply to all [*] which have been                   [*] but not [*] and to all [*] releases during the term of                   this Agreement.

         d)       A [*] increase or decrease may result if IBM makes an [*] to a                   Product. Any [*] change will be per the terms of [*] and the                   [*] of the changed Product will carry the same inherent [*]                   as the original Product.

         e)       Proposals for updates to the initial [*] will be reviewed each                   [*] on a [*] day cycle. The schedule will be as follows:

                  T shall be the date that MSL [*] and IBM [*] are ready for                   table load; it is the last day of a calendar [*] end [*].

                  [*] Days before T, MSL shall initiate an update proposal.

                  [*] Days before T, MSL shall answer all IBM questions and                   issues and revise its proposal.

                  Update reviews shall include:

                  i)       Updates of [*] costs, including [*] costs, with                            latest [*] of IBM [*] and MSL [*]. IBM [*] costs                            will

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                           be updated to the latest IBM [*]. For Parts with a                            low annual [*], the [*] costs will be updated to                            the latest [*] costs.

                  ii)      Update of MSL [*] for MSL [*] Product(s).

                  iii)     Changes in MSL [*] and [*], in accordance with the                            [*] and Product [*] conditions of Sections 7.4 and                            7.5 a), b), c), and d).

                  iv)      Changes in [*] for specific Integration projects                            based on the latest IBM agreed to [*].

         f)       Any [*] or [*] necessary to update MSL [*] will be paid                   through a specific purchase order and an acceptable invoice.





                  MSL [*] to be used will be the [*] costs used for [*] in the                   previous quarter.

         g)       Any differences between [*] costs, as defined in Section 7.1,                   assumptions used in determining [*] at the beginning of a [*]                   and actual [*] by MSL during the [*] will be determined and                   agreed in the first month of the following [*]. NIC will be                   applied to [*] costs differences at the [*] defined in                   Appendix 1 to this SOW. No other components of [*] will be                   applied to [*] costs differences. Differences will be                   invoiced separately to MSL or to IBM as the case may be.

SECTION 8.0 PURCHASE OF PARTS BY MSL

8.1   IBM Parts, IBM Strategic Parts, and IBM Designated Parts

      MSL will purchase IBM Parts, IBM Strategic Parts, and IBM Designated Parts       solely for use in IBM Products. MSL will provide IBM Strategic Parts and       IBM Designated Parts as follows:

      a)    IBM procurement may sell IBM Strategic Parts to MSL by specifying             price, lead time and other terms with mutually agreed to ordering             processes such as;

            i)    MSL may order IBM Strategic Parts from IBM procurement through                   standard purchase orders, and/or

            ii)   MSL may issue periodic blanket purchase orders to IBM                   procurement for lineside stocking and pull logistics                   requirements for IBM Strategic Parts.

      b)    MSL may purchase IBM Designated Parts through IBM nominated             suppliers, as agreed to by IBM. IBM will disclose, as confidential             to MSL, terms and conditions contained in the subject IBM nominated             supplier/IBM contract, which IBM determines are relevant to MSL's             performance under the Agreement. MSL shall be responsible for all             liabilities to IBM nominated suppliers for IBM Designated Parts             ordered by MSL. If an IBM nominated supplier objects, MSL shall             immediately inform IBM. IBM agrees to provide reasonable assistance             to MSL in resolving the situation. If such IBM nominated supplier             refuses to [*] to MSL at IBM's [*], IBM cannot use [*] from such             supplier to determine MSL [*] described in Section 7.5 e) i) above,             and upon written notice to IBM, MSL will be entitled to increase             the [*] of the [*] to

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            reflect MSL's actual increase in IBM [*]. The corresponding [*]             increase will be effective when MSL begins using and shipping the             higher [*] IBM [*].

8.2   Parts Cost Reductions

      a)    In the event MSL can purchase the same parts as available through             IBM Procurement or IBM Designated Suppliers at lower costs, MSL will             identify those reduction opportunities to IBM on a monthly basis.

      b)    The Parties agree that [*]% of all Parts price reductions will be             [*] to IBM when MSL begins using and shipping the lower costs             Parts. However, if a specific price reduction is the direct result             of a previously IBM approved substantial engineering, design, or             resourcing change by MSL, that price reduction will be [*] for a             period of [*] months, then [*]% of the Parts price reduction will             be [*] to IBM.

SECTION 9.0 PREMIUM COST

      Premium costs may be incurred in order to meet Delivery Dates.

      a)    MSL may submit premium costs to IBM for reimbursement that are in             addition to prices defined in Sections 7.1, and 7.2. Premium costs             include materials, labor and other extraordinary items.

      b)    The Parties agree that [*] of all Parts price reductions will be [*]             to IBM when MSL begins using and shipping the lower costs Parts.             However, if a specific price reduction is the direct result of a             previously IBM approved substantial engineering, design, or             resourcing change by MSL, that price reduction will be [*] for a             period of [*] months, then [*] of the Parts price reduction will be             [*] to IBM.

      b)    If Requirements Accuracy, as defined in Appendix 2, exceeds [*]%             and if demand is beyond Supply Flexibility as defined in Section             13.2 and Appendix 4, premium costs resulting solely from unplanned





            demand shall be subject to reimbursement.

      c)    Total premium costs for any single event which are equal to or             exceed [*] must be pre-approved in writing by IBM prior to MSL             authorizing or expending the premium. Total premium costs for any             single event which are less than [*] may be incurred by MSL without             IBM authorization to later be negotiated with IBM in good faith.

      d)    MSL will use the following process for requesting authorization             and/or reimbursement of premium costs from IBM:

      e)    Premium Price

            i)    Material

                  MSL agrees to use commercially reasonable efforts to purchase                   materials at the lowest possible cost within the lead times                   required or authorized by IBM. However, when materials are not                   available with IBM's lead times, premium cost for materials                   may apply. Premium cost for Parts is the [*] (which will not                   exceed MSL's actual cost paid to it's suppliers to be paid                   by IBM when the

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                  Parts are required earlier than on the stated and mutually                   agreed upon lead time. MSL's request for authorization                   and/or reimbursement must state:

                  (a)    Cost variance due to [*].

                  (b)    Product(s) part number affected.

                  (c)    Product(s) quantity affect.

                  (d)    Justification for Premium.

            ii)   Labor

                  MSL shall have sole responsibility for setting the                   compensation rates for its staff. MSL staff shall in no way be                   deemed to be employees of IBM.

                  [*] rate is the rate at which [*] are charged to IBM (as                   required by IBM), and will be in accordance with the [*]                   basis. The [*] rate shall not exceed [*]([*]%) of [*] rate.                   The actual [*] will be negotiated on a case-by-case basis by                   IBM and MSL and will not exceed MSL's actual [*] paid to its                   [*] and [*]. MSL's request for authorization and/or                   reimbursement must state:

                  (a)    Purchase price variance due to [*] or [*].

                  (b)    Quantity of [*] by Product(s) part number.

                  (c)    Quantity of units to be shipped due to [*].

                  (d)    [*] Rate: US dollars/hour.

                  (e)    Justification for [*].

                  MSL agrees that it will invoice quoted Direct Labor Hours for                   actual Products Delivered.

            iii)  Extraordinary Items

                  MSL may propose premium rates for expedited tooling orders,                   premium transportation, and other extraordinary requirements.                   If IBM agrees that the resources are required, MSL and IBM                   will negotiate in good faith the price for such resources.

                  MSL will report all open premium costs, which are subject to                   request for reimbursement by IBM as a part of monthly                   Measurements.

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              IBM/MSL Outsourcing Base Agreement Statement of Work

SECTION 10.0 ORDER MANAGEMENT, DELIVERY, AND SHIPMENT





10.1  Order Management

      a)    IBM Customer Orders will be placed from IBM to MSL. MSL will fulfill             these orders according to the Performance Appendix 3 unless IBM             gives MSL specific written instruction otherwise. MSL will ship and             deliver these Products in accordance with the ship and delivery             dates stated on the order. In the case of Integration, shipments and             deliveries will be made in accordance to the customer roll out             schedules provided by IBM. MSL will conform to the stated lead times             agreed to and published by IBM to the Delivery Point as long as the             requested Delivery Date on the IBM Customer Order falls within MSL's             commitment to the forecast. Product lead times are published in the             Product Attachments.

      b)    MSL will manage the applicable IBM Customer Order back logs. These             include but are not limited to AAS, EOSE, GEMS, IPRs, Q-Ship, MES             and others as defined by IBM. In conjunction with these IBM ordering             channels MSL will perform Order Desk responsibilities. MSL will             review all orders requesting delivery improvements, improving these             order to satisfy the customer required delivery dates given supply             continuity and available capacity. At [*] to IBM, MSL will accept             [*]. Deferments will be requested of MSL through the IBM ordering             systems mentioned above, or in writing from IBM. MSL will             reschedule the deferred orders to meet the requested ship dates.             In addition MSL will accept request to alter order content if Parts             and capacity are available. MSL will respond to all request to             improve, defer and/or alter orders in [*] Days. MSL agrees to             maintain the above mentioned IBM Customer Order backlogs keeping             these back logs up to date. MSL agrees to maintain local Order             Desk support in the geography specific Work Center.

      c)    MSL agrees to perform materials requirement planning (MRP) on top             level requirements input and acquire the appropriate Parts to             support Delivery Dates and IBM Customer Orders. This includes the             placing of purchase orders and/or IPRs on suppliers, some of which             may be IBM locations.

      d)    Due to the high commonality of Parts in IBM's Products, MSL will             allow IBM to revise Product model mix as required. MSL will             acknowledge IBM's Product mix changes within [*] Days after receipt             of IBM's change notice.

10.2  Schedule / On Time Delivery

      a)    MSL will maintain [*] ([*]%) on time shipment. Specifically             Product(s) are to arrive in full at the Delivery Points on the             Delivery Date.

      b)    MSL agrees to track and report on shipments/deliveries to IBM             customers per the IBM Customer Orders at the request of IBM.

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10.3  Delivery

      a)    Title and risk of loss to Products shall pass to IBM at the time of             shipment from the Delivery Point unless otherwise stated in Section             15.0.

      b)    If Product shipments are made prior to the Delivery Date without             IBM's prior written approval, IBM may elect to delay passage of the             title until the Delivery Date. If the delivery is late then transfer             of Product title will be made on the later date. In addition MSL             will not deliver Products in quantities in excess of those set forth             in on the IBM Customer Order, without IBM's prior written approval.

10.4  Delays in Shipment

      MSL shall notify IBM immediately of any anticipated late deliveries and       any impending plant or facility shut downs for any reasons. If MSL fails       to ship Product to the Delivery Point on schedule for any reason other       than Force Majeure or delays caused substantially by IBM, MSL shall ship       Product to the Delivery Point by air or in the most expeditious manner       possible. After MSL delivers Product to the Delivery Point, MSL will ship       Product to the designation stated on the IBM Customer Order by air or in       the most expeditious manner possible. MSL will be responsible for any       additional premium costs associated with the late shipment of Product       not only to the [*] but also to the [*] stated on the IBM Customer       Order.

10.5  Shipment Terms





      a)    The prices set forth in Section 7.0 Product Price include MSL's out             of pocket costs for freight, duty, customs, clearance, and             appropriate insurance, and any other costs related to the shipment,             export, or import of the Products before delivery to IBM. The cost             are the responsibility of MSL. The method of transportation shall be             suitable surface or air transport to the Delivery Point, Customer             location, or point of entry sufficient to meet IBM's Delivery Date.             The Product Attachment(s) shall state the Delivery Points.

      b)    MSL shall arrange shipment with IBM carriers that will deliver             product to the destination on the IBM Customer Order in time for the             product to arrive on the committed arrival date which is stated on             the Customer Order. MSL shall utilize IBM carriers for all outbound             shipments, unless prior written approval from IBM to do otherwise.             IBM's approval will not be unreasonably withheld. Contractual             conflict with IBM carriers, or added IBM cost are some, but not all,             reasonable causes for denial of IBM approval.

SECTION 11.0 PRODUCT FORECAST

11.1  MSL agrees to participate in the IBM supply and demand process adhering to       the IBM EMLS corporate calendar. MSL will utilize the EMLS regen and or       provide the input into EMLS to insure a successful supply and demand       interlock. The EMLS regen must include all part numbers consumed in the       Charlotte Work Center.

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11.2  Each month IBM will provide MSL, one rolling [*] month forecast by machine       type, model, and by geography. This forecast will be MSL's authorization       to order/purchase Parts only for the fulfillment of orders, in accordance       to the IBM published lead-times for such materials. Products shall be       produced and delivered according to actual intake of IBM Customer Orders.       MSL will participate in the process of requirements planning by giving the       best Product supply projection and participating in cross functional       meetings when required.

      The following will apply:

      a)    The forecast will contain anticipated Delivery Dates for specified             quantities of machine types, models and geographies and lead-time             profile updates, as required, for specific Parts.

      b)    MSL will notify IBM within [*] Days of receipt of a forecast if MSL             is unable to meet the quantities and Delivery Dates. If MSL fails to             notify IBM within the [*] Days, MSL will be deemed to have accepted             the quantities and Delivery Dates and will be bound by them;             provided, however, that MSL's actual or deemed acceptance of any             forecast shall be subject to the availability of IBM Parts and IBM             Designated Parts as needed, and MSL shall not be subject to any             penalties (and IBM shall not be able to reject any proposed             rescheduling of Delivery Dates) under this Agreement for failure to             meet Delivery Dates due to the unavailability of such Parts at the             times necessary to meet Delivery Dates, provided further however             that such unavailability of IBM Parts or IBM Designated Parts is not             due to MSL's failure to properly order such Parts or otherwise             properly manage its relationship with the provider of such Parts.

      c)    If MSL notifies IBM that it cannot meet the quantities and Delivery             Dates in IBM's forecast, MSL's notification will include the             quantities MSL can deliver within the forecast's Delivery Dates and             proposed schedule of Delivery Dates for delivering the quantities             MSL cannot deliver within the forecast. IBM shall notify MSL in             writing, within [*] Days of receipt of MSL's notification, of its             decision either, in its sole discretion to:

            i)    agree to the quantities and Delivery Dates in MSL's                   notification, which will then become binding upon both                   parties; or

            ii)   agree to the quantities that will meet the forecast's Delivery                   Dates, which will then become binding on both parties, and                   either begin good faith negotiations with MSL to resolve any                   shortfall or reject MSL's proposed schedule for the remaining                   quantities; or provided, however that IBM may not reject MSL's                   proposed schedules if the reason for MSL's inability to meet                   the Delivery Dates is directly attributable to a breach of                   this Agreement by IBM. MSL may, with IBM's prior written                   approval and at MSL's expense, employ another manufacturer for                   the quantities that MSL cannot deliver within the forecast for                   the affected products. Notwithstanding any other term of this                   Agreement, if IBM rejects all or any part of MSL's proposal,                   IBM shall also be free to seek





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                  another manufacturer (internally or externally) for the                   quantities MSL can not deliver within the forecast for the                   affected Products.

            iii)  If good faith negotiations fail to resolve the shortfall                   within [*] Days, IBM shall have the option to reject MSL's                   whole proposal.

      d)    The forecasts provided by IBM, or agreed to by IBM hereunder, do not             obligate IBM to purchase any Product.

11.3  Feature Forecast

      a)    MSL agrees to perform all feature forecasting as part of their             responsibilities. MSL agrees to forecast features in full support of             the requirements forecast that IBM passes at a machine type level             per Section 11.1 above.

      b)    MSL will notify IBM within [*] Days of receipt of the monthly             requirements forecast, at the machine type level, if MSL is unable             to support the features necessary to meet the Delivery Dates of the             machine types per Section 11.1 above of this Agreement.

SECTION 12.0 ENGINEERING CHANGE

      a)    MSL is required to inform IBM of any necessary or required EC which             would be applicable to the Products in general. In no event shall             MSL make any changes or incorporate any modification to Products             without the prior written agreement of IBM.

      b)    IBM may, at its option, propose ECs to the Products to be delivered,             in which event MSL will be notified in writing. MSL agrees that IBM             shall have the right to require the incorporation of such ECs and             MSL shall, within [*] Days of such notification, give to IBM a             written evaluation of EC stating the cost increase or cost decrease             to the Products. In addition, this evaluation should include, but is             not limited to, MSL's evaluation of the ECs effect on the inventory,             delivery schedules and impact effect on function, reliability and             performance of Products. If such evaluation cannot be completed             within such period, notice to this effect shall be given by MSL as             soon as MSL learns that such evaluation cannot be completed and in             no event later than the [*] Days following notification. MSL will             give IBM a future completion date and reason for delay in such             notice.

      c)    Upon completion of MSL's evaluation, IBM and MSL agree that 1) MSL             will implement the EC after MSL has received IBM's consent in             writing to the mutually agreed upon cost and delivery schedule, 2)             MSL will provide additional information that IBM may reasonably             require to further evaluate the EC, or 3) IBM will cancel the             specific EC.

      d)    ECs will be brought to the attention of MSL via Engineering Change             Notifications (ECNs), that may have various forms, and may come from             IBM or IBM designated parties. However, the ECN is not an             authorization to execute the change. Upon receipt of an ECN, MSL             will respond by quoting the cost of that EC to IBM. MSL will not             implement any EC without an explicit authorization from IBM to             implement it. The

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            ECN will contain information such as priority of change (routine,             expedited, emergency), description of change, machines effected,             requested implementation date, marked up prints, marked up bill of             materials, dispositions and recommended/specified sourcing. Appendix             5 contains requirements for EC process flow and EC cycle times.

      e)    MSL will process ECs according to IBM rules and specific IBM             requirements, and will enter corresponding data in EC application             systems. MSL will need to have the capability to receive IBM             development released ECs in both the Charlotte Work Center and the             Valencia Work Center.

      f)    EC administration cost are included in the prices as defined in             Section 7.0.





SECTION 13.0 INVENTORY

      a)    MSL is fully responsible for inventory ownership, excluding             consigned inventory, however MSL agrees to manage all inventories.             MSL will manage the material in the supply pipeline, as well as own             and manage work in process and finished goods until shipment of the             Product to the IBM Customer Order. On the Effective Date, MSL will             accept responsibility and liability for all open purchase orders and             IPRs for Parts, excluding Consigned Parts, which are required by             Products listed in the Product Attachments. MSL owns inventory,             excluding consignment, until title transfer at the time of shipment.             IBM will not be responsible for any associated carrying costs,             warehousing costs, excess and or scrap of MSL owned inventory. If             requested by IBM, MSL will subcontract to IBM the scrapping of Parts             owned by MSL. Actual costs charged to IBM by certified scrap             suppliers for the scrapping of Parts owned by MSL will be invoiced             by IBM to MSL.

      b)    MSL will control all inventories in support of this Agreement per             IBM's guidelines concerning value classified parts, IBM Document             CP10.13.

      c)    MSL will also be responsible for the data management necessary to             separate IBM consigned inventory from MSL inventory within the same             facility and systems.

      d)    MSL will perform Rotating Inventory Audits and Counts (RIA/RIC) on             IBM consigned inventory in compliance to IBM's instructions.

      e)    MSL and IBM will review inventory monthly, during this review MSL             will provide a written report that includes the items detailed under             Inventory in the Performance Appendix.

      f)    MSL prices include charges for MSL inventory management and             ownership. Both parties agree that IBM has no liability for             inventories that MSL purchases for the purposes of this contract,             providing that forecast (requirements) accuracy is equal to or             greater than the level defined in Appendix 2. If Requirements             Accuracy falls below [*]% liabilities for any machine type for any             quarter, IBM will compensate MSL according to the method describe in             Appendix 2.

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13.1  Consigned Products

      a)    MSL acknowledges that it will manage inventory consigned to MSL by             IBM. As it relates to Integration, MSL will manage not only IBM             consigned inventory but also inventory consigned to MSL by IBM's             customers.

      b)    MSL will be [*]% for inventory accuracy within the logistics             systems and related financial liability for all consigned             Products under MSL's control. MSL will be responsible for all lost,             damaged, or destroyed Parts. MSL will provide replacement value             insurance coverage for consigned Products. IBM will be named as a             joint insured with respect to consigned Products for its interest.             IBM shall have the right at all reasonable times to audit and             inspect the consigned Products. MSL will take no actions that             might encumber IBM's consigned Products.

      c)    MSL will also provide the following services as it pertains to             managing IBM consigned Products; receiving, storage, disbursement,             handling, order management, order fulfillment, packaging, light             manufacturing, and shipping.

      d)    MSL will provide inventory reports on all consigned Parts. These             reports will contain at least the information required in the             Performance Appendix 3. In case of Integration consigned inventory             will be reported by customer account.

      e)    MSL agrees to furnish resources, at no additional cost, as part of             this agreement to assist in the annual physical inventory audit of             consigned inventory that MSL is managing on IBM behalf.

      f)    MSL must assist IBM in processing any scrap for consigned Products             without additional charge to IBM.

      g)    If IBM and MSL mutually agree to change a Part from a non-consigned             Products to a consigned Products, the Parties agree that IBM will             purchase MSL's inventory of affected Parts on the date of the change             at MSL actual cost that was paid to the supplier plus NIC.

      h)    MSL shall store all consigned Products in separate locations from             all other Parts and or Products belonging to any other person or





            company so as to clearly identify the consigned Products as property             of IBM. In the case of Integration consigned inventory will be             stored and identified in logistics and physically by customer             account.

      i)    Work labor and materials applied to the management of the consigned             inventory by MSL in the course of the performance of this Agreement             shall be paid for by IBM, as defined in Section 7.0, in accordance             with the terms of this Agreement and shall not at any time give rise             to any claim over the consigned Products. MSL hereby waives any             rights it may have to claim any liens against consigned Products.

      j)    MSL will handle the scrapping of IBM consigned inventory per IBM's             guidelines concerning scrap.

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13.2  Supply Flexibility

      a)    MSL will ensure flexibility for volumes, as specified in the Supply             Flexibility Appendix 4.

      b)    Quarterly, MSL will update IBM on progress in improving Supplier             Flexibility.

      c)    IBM will use commercially reasonable efforts to transfer LSS and SSS             arrangements with IBM suppliers to MSL.

      d)    [*] months before EOL, MSL and IBM will agree on a transition plan             to regulate the flexibility.

      e)    Cost of the Supply Flexibility as defined in Appendix 4 is included             in Product pricing per Section 7.0. IBM will have no liability for             unused flexibility.

13.3  End of Life (EOL) Inventory

      a)    IBM agrees to share an annual plan with quarterly updates on product             EOL activity. Included will be the following scheduled events:             product withdrawal, end of manufacture, and transfer to IBM, if             applicable.

      b)    MSL agrees to provide inventory planning support and squared set             analysis on these inventories participating in EOL activities prior             to any transfer to IBM. Any inventories not transferred to IBM will             remain the sole responsibility of MSL.

13.4  Sale of Inventory

      MSL agrees not to sell excess or surplus inventory purchased by MSL in       support of this Agreement without the prior written approval of IBM which       shall not be unreasonably withheld.

SECTION 14.0 INTEGRATION

14.1  Overview

      The typical Integration consists of: assembly, unit testing, code load,       system test, personalization, repackaging and distribution.

14.2  Customer Integration Statement of Work (Integration SOW)

      IBM will provide MSL with a work scope for Integration for each       Integration project. Based on the work scope, MSL will provide IBM with a       SOW and the associated direct labor hours. This will be the base from       which future modification to the individual SOW will be based.

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14.3  MSL Account Coordinator

      The account coordinator is the primary interface with IBM project managers       and/or customers for the delivery of Integration Products. This person       will be responsible for insuring that the necessary IBM Products which are       delivered by MSL are on order, that a roll out schedule is received by       MSL, the necessary consigned Products are received in sufficient time       prior to their need in the Integration process and/or delivery to the       customer, the required software is received, the line processes are in       place, the necessary pilots have been performed and the work is properly       scheduled on the line to insure an on time delivery. They are the prime





      contact for problem resolution, issues, concerns, delivery tracking and       all other issues which affect customer satisfaction.

14.4  Responsibilities

      a)    IBM will be responsible for defining the process to be used on the             Integration line, for the assembly and test of those Products being             customized, tested or passed through the process. MSL will be             responsible for defining the process to be used on the Integration             line, for the code load and system test of units requiring this             work.

      b)    MSL will be responsible for the implementation and execution of             these processes. MSL will be responsible for maintaining the             necessary technical support to implement these processes and             identify problems in the integration process. Process deficiencies             will be brought to the attention of the IBM Integration program             manager staff for resolution. Deficiencies realized due to customer             provided items will be resolved directly with the customer through             the MSL account coordinator or by the technical staff, whichever is             appropriate.

      c)    MSL will own the entire manufacturing and delivery process and be             the sole interface with the customer (IBM and/or end user) through             the account coordinators.

14.5  Inventory Management

      a)    Provide a secure environment for the management and control of             consigned Products. This area should be fenced, with limited access             and within a reasonable distance from the manufacturing area and the             receiving docks.

      b)    An automated inventory management system must be used to track             receipts, disposition and balance on hand at any point in time.             Information required by IBM personnel performing project management             activities for customers will be provided on an 'as required' basis             and will be readily available to such personnel. This inventory must             be labeled (bar coded) and separated by customer.

      c)    Physical inventory counts are to be performed as needed for all             consigned inventory, for each customer, counted at least every [*]             Days with a accuracy target of [*]. This target is based on the             delta between the actual inventory count and the inventory             management system. Discrepancies are to identified, root cause             analysis performed, results reported (quarterly) and corrective             actions initiated. MSL is responsible for the cost associated with             the replacement of IBM and/or IBM customer

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              IBM/MSL Outsourcing Base Agreement Statement of Work

            consigned Products which have been received by MSL and need to be             replaced as the result of theft or negligence.

      d)    All consigned inventory is the responsibility of MSL until Delivery.

14.6  Manufacturing

      a)    The integration line should use a line control system that ties to             an automated ordering system that provides order accuracy, tracking,             disposition and history. The work environment should be kept             presentable and organized and available for customer tours.

      b)    Incomplete shipments, with the customer approval, should use a             deviation process and be documented with the customer authorization.

      c)    The manufacturing process must continue to use the line break in,             pilot and certification process currently in use unless mutually             agreed to in writing.

14.7  On Site Repairs

      a)    The consigned Product set may include both IBM and non-IBM Products,             new as well as used which may or may not be covered by a new product             warranty, IBM maintenance or another maintenance provider. In the             case of IBM logo Products, MSL will initiate repair of these             Products in the most cost effective and efficient manner. In the             case of repairs required to be performed by the third party             maintainers, MSL will provide a suitable work area for these repairs             and ensure that the necessary security requirements are met when             visited by non IBM personnel. When consigned Product defects are to             be returned to the manufacturer for either repair/replacement, MSL             will control this process.

      b)    Out of box failures of RS Products will be replaced from inventory             or repaired as directed by IBM. These replacements are to be given             priority over new orders during times of product constraints.





14.8  Packaging

      Integrated machines may require unique packaging based on their       configuration and the individual customers requirement. MSL will design       these boxes in accordance with IBM design criteria to insure that they       provide maximum protection against in route damage. All shipping       containers must be labeled in accordance with the guidelines outlined in       the Section 16.0 Packaging and in addition to any unique labeling customer       requirements.

14.9  Security

      a)    Sufficient security must be provided for work in process items,             customer and MSL/IBM provided. In addition, secured spaces will be             required from time to time for individual customers depending on the             nature of the work. Currently there is a contractual requirement for             secured space to perform the US Postal Service, hard drive, code             load program.

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              IBM/MSL Outsourcing Base Agreement Statement of Work

      b)    All reasonable precautions must be exercised to prevent unauthorized             access, use, modification, tampering or theft of software and             hardware consigned to MSL for the execution of Integration. Also,             these precautions must prevent unauthorized access to a customer's             remote system used in the performance of Integration.

14.10 Scheduling

      Product orders placed on MSL by IBM, in most cases, the CRAD (Customer       Required Arrival Date) will tie to the Integration roll out delivery date.       In those cases where there is a difference, MSL will validate the correct       delivery date with the IBM project manager. If an improvement or deferral       is required in the Product build schedule and based on Product       availability, MSL will schedule the Product build to insure arrival by the       required CRAD.

14.11 Delivery

      MSL will maintain [*] percent ([*]%) on time delivery, measured against       the CRAD date in the integration roll out schedule. Due to the nature of       the integration orders, there is no [*] option, unless agreed to prior to       shipment by the IBM project manager and/or the customer.

14.12 Customer Satisfaction

      Customer satisfaction is the responsibility of MSL. IBM will measure the       customer satisfaction via surveys. MSL commits to a customer satisfaction       target of [*]. This will be a reflection of MSLs on time deliveries,       flexibility in meeting the customers unplanned requirements, the quality       of the services performed and MSL's relationship, in general with IBM's       customers. The customer set will include the IBM Global Services project       managers and IBM's customers.

14.13 Integration Quality

      The service being performed is to be of high quality and free from process       defects. The target objective will be [*]%, measured monthly. MSL will be       responsible for the repair and/or replacement of Parts and Products which       have been damaged during the performance of the Integration. MSL will be       responsible for cost incurred by IBM as a direct result of MSL's failure       to follow the Integration procedures subject to the limitations contained       in Section 15.3 of the Base Agreement.

14.14 Price

      a)    IBM will establish a list of those items which are standard             components of the Integration process. IBM and MSL will agree upon             an execution time and a price, as stated in Section 7.2 b), for each             standard item. Integration requirements outside of these standard             items will be individually determined. Once these prices for these             standard items are established they will remain in effect during             the entire term of this Agreement.

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              IBM/MSL Outsourcing Base Agreement Statement of Work

      b)    MSL will be responsible to track items which are beyond the             individual Integration SOW being executed when performed at IBM's             request and provide sufficient documentation to support the price             along with IBM's authorization of the added cost. MSL will invoice             IBM weekly for these costs. In those cases when a specific request             becomes standard, or a change in effort is requested by a customer,             a revision to the Integration SOW will be made and the contracted             price between IBM and MSL will be updated.

      c)    MSL will be responsible for any cost beyond the agreed to [*] if             these costs were within the control of MSL.

14.15 Transportation

      a)    Premium outbound transportation may be used when requested by a             customer. In these cases, MSL must provide sufficient documentation             of the customer approval, and to support the cost.

      b)    If premium outbound transportation is necessary due to MSL's             failure to ship on time, this cost is the responsibility of MSL             and IBM will invoice MSL for these costs.

14.16 Integration SOW Completion

      At the completion of an individual Integration SOW, a complete       reconciliation will be completed within 60 Days. This reconciliation will       be between MSL and the IBM project manager/customer and will include, but       not limited to, an inventory reconciliation, any outstanding cost and       disposition of all customer software and hardware in MSL's possession.

14.17 Equipment

      IBM will identify the current equipment, owned by IBM, needed to perform       Integration and it will be made available to MSL at an agreed to price per       Attachment 3 of the Base Agreement. If, at any time, MSL chooses to       replace Integration support equipment and the associated programs, IBM's       written concurrence will be required.

14.18 Restrictions and Limitations

      Nothing in this Agreement authorizes MSL to use any of IBM's tangible,       real or intangible property for the performance of any services       contemplated hereunder on IBM Logo products or for Integration services of       non-IBM Logo products related to a customer for whom Integration is being       provided by IBM. In any event, MSL will ensure that the IBM customer       delivery schedules will not be impacted based on other performance       obligations it may have during the term of the Agreement.

14.19 Measurements/Reports

      a)    MSL will be required to provide IBM with monthly reports detailing             their performance in relation to these Integration.

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              IBM/MSL Outsourcing Base Agreement Statement of Work

            These monthly report should provide at a minimum:

            i)    On time delivery

            ii)   Quality

            iii)  Inventory management

      b)    The specific targets are covered in this document under their             appropriate sections. These measurements should include a root cause             analysis, MSL actions to resolve and an action plan to achieve the             targeted objectives when there are deficiencies.

SECTION 15.0 DROP SHIPMENTS

      MSL will complete processes required to meet the following obligations       within [*] Days following the Effective Date.

      a)    For Drop Shipments to IBM, MSL will be responsible for all             activities required to deliver the Products to the destination port             of the IBM company in the destination country. MSL will issue an IBM             invoice to the destination IBM company on behalf of the IBM business             area invoiced by MSL for these deliveries. MSL will ensure that             invoices and other required documentation are ready at the             destination port for timely importation into the country, but, MSL             will not be responsible for importation into the destination





            country.

      b)    For Drop Shipments in AP, MSL will transfer title to IBM when             Products are in highseas and after MSL has exported them through             the customs of the country of origin of the goods.

      c)    For Drop Shipments to IBM customers, MSL will be responsible for all             activities required to deliver products to the customer in the             destination country, independently of when MSL transfers title of             property to IBM. MSL will be responsible for importation into the             destination country and delivery of Products to the customer after             clearing customs in that country. MSL will provide information to             IBM to allow IBM to issue an invoice to the final customer.

      d)    For Drop Shipments to IBM US or IBM CANADA customers, MSL will             transfer title to IBM at the port of entry at USA or CANADA after             MSL has imported them through USA or CANADA customs.

      e)    MSL will ensure timely distribution operations, irrespective of             whether MSL or another subcontractor is selected for outbound             distribution.

      f)    MSL will comply with the IBM Import/Export Operation Application and             Instructions.

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              IBM/MSL Outsourcing Base Agreement Statement of Work

SECTION 16.0 PACKAGING

      MSL must meet requirements of IBM specification GA219261. MSL must also       package all Products according to packaging Specifications listed in the       Product Attachments. Each delivered container must be labeled and marked       so that the contents of the package can be identified without opening and       all boxes and packages must contain packing sheets listing contents. IBM's       part number, quantity and appropriate purchase order number must appear on       all packing sheets and bills of lading. In addition to standard IBM       packaging requirements, MSL must meet packaging, labeling and packing       sheet requirements of OEM customers.

SECTION 17.0 QUALITY

17.1  Commitment

      MSL commits to provide all Products and related processes and material in       conformance in all material respects with the requirements of all       applicable IBM and MSL specifications. MSL shall ensure that with respect       to assembly and workmanship, all material requirements, IBM's quality       requirements and all applicable industry standards are met.

17.2  Quality Requirements

      a)    MSL's target is [*]% defect free production. MSL shall follow an             established continuous improvement program directed toward zero             defect production. MSL will report progress quarterly to IBM. MSL             will provide quality reports monthly as defined in the Product             Attachments.

      b)    MSL shall at all times maintain ISO 9001 or 9002 registration. MSL             will achieve ISO 14001 Environmental Management Certified, by             12/31/98, for all Work Centers that are active in the execution of             this contract. Other specific standard compliance requirements are             defined in the Product Attachments.

      c)    For MSL's programs described in 17.2 a above, MSL will maintain             pertinent control charts in fundamental variables or attributes that             affect IBM's specifications. These charts will be updated on a             periodic basis, and provided to IBM upon request. Exceptions to the             limits will be highlighted to IBM along with corrective action             plans.

      d)    A philosophy of continuous improvement shall be stated and             practiced. This means that effort will be expended to improved             processes by reducing or eliminating causes of variability, even             after the process is in control to meet specifications.

      e)    Modifications, adds or deletions, to process steps by MSL must be             done with concurrence by IBM.

      f)    MSL will take demonstrable action whenever a process goes out of             control parameters. The record of what was done and what results             were achieved shall be clearly documented and related directly on             the control charts.

IBM Confidential                                                   Page 31 of 39 sow0501.lwp





                                  ATTACHMENT 1

              IBM/MSL Outsourcing Base Agreement Statement of Work

      g)    MSL will maintain an ongoing reliability test program for Products             requested by IBM (quality plan attachments) and will submit reports             as specified in the appropriate specification(s) listed in the             Product Attachment(s).

      h)    MSL shall supply a Failure Analysis report for rejected material             within [*] weeks after receipt. After the Failure Analysis plan is             completed, MSL shall forward a corrective action plan for MSL             Procured Parts that is acceptable to IBM. MSL is responsible for             first pass Failure Analysis (i.e. identification of the failure to             the level of material provided to MSL by IBM) on IBM provided             materials. IBM may provide engineering support to investigate any             IBM Nominated Supplier components which are confirmed defective by             MSL failure analysis, but which are reported NDF (No defect found)             by the IBM Nominated Supplier.

      i)    IBM and MSL will conduct regular meetings together to cover open             issues. Both parties will share openly their problems relevant to             the relationship.

      j)    MSL shall follow the quality specifications identified in the             Product Attachments.

17.3  MSL Support for IBM Customer Warranty

      MSL agrees to:

      a)    provide IBM a monthly shipment list by machine type and serial             number, as listed in the attached Performance Appendix,

      b)    identify at product level all units to facilitate recall or             notification,

      c)    obtain supplier support to implement needed changes,

      d)    support IBM services planning groups on warranty cost reduction task             forces as needed,

      e)    receive warranty and quality claims from the field, including OEM             customers, perform first pass failure analysis when needed, and             forward data and materials to their sources, or to IBM under IBM             instruction,

      f)    provide warranty replacement support to OEM customers to include             receiving, tracking; and fulfillment of parts replacement to OEM             customers and,

      g)    provide Part traceability to machine serial number as defined in             Product Attachments.

SECTION 18.0 ACCEPTANCE TEST

      a)    IBM may conduct, at its own expense, source inspection, , and/or             acceptance tests to assure that Products furnished by MSL conform to             specification, samples and/or descriptions as set forth in this             Agreement and the Product Attachment(s). IBM may reject any units of             Product which it finds in good faith not to meet the specifications             of this Agreement in any material respects. IBM should perform             incoming inspection within [*] Days after receipt of goods by IBM.             If IBM has not notified MSL of any defects in a unit of Product             within [*] Days of receipt, such unit shall

IBM Confidential                                                   Page 32 of 39 sow0501.lwp

                                  ATTACHMENT 1

              IBM/MSL Outsourcing Base Agreement Statement of Work

            be deemed to be accepted. Acceptance by IBM of Product shall not             relieve MSL of any responsibility for latent non-conformance with             IBM specifications, fraud, negligence, title defects, or             infringement or warranty. Failure by IBM to perform testing shall             not be construed as a waiver to later asserting claims based on such             above mentioned defects.

      b)    Acceptance of new Products by IBM shall not occur until a letter             documenting acceptance and any conditions of acceptance has been             issued to MSL by IBM. New Products are not subject to the [*] Day             from receipt requirement defined in the preceding paragraph.

18.1  Nonconforming Acceptance

      a)    IBM may choose to accept Products which fail to conform to the





            specifications established in a Product Attachment without prejudice             to its right to reject nonconforming items in the future. If IBM so             chooses, IBM will notify MSL of its intent to accept nonconforming             items. MSL agrees to negotiate in good faith a price reduction for             such items based upon IBM's reasonable added expense to correct and             otherwise deal with such deficiencies. After the parties agree on a             price, IBM will notify MSL that IBM has accepted the nonconforming             items. No items for which IBM has issued a notice of nonconformance             shall be deemed accepted, except as provided in the first sentence             of this Section.

      b)    IBM's payments for Products shall not signify that IBM has accepted             Product.

SECTION 19.0 WARRANTY

19.1  Scope of Warranty

      a)    MSL expressly warrants that all Products, MSL supplied materials and             Parts, and work prepared for IBM will conform in all material             respects to the specifications, drawings, or other descriptions             furnished or adopted by IBM, and will be of specified quality, good             workmanship, and free from defect subject to the following terms:

            i)    MSL's warranty for IBM Designated Parts will be as long as,                   and will be on the same terms and conditions as the Parts                   supplier's warranty stated in the relevant purchasing                   contract.

            ii)   MSL will not provide a warranty for IBM Parts. However, MSL                   will provide Failure Analysis for such parts. MSL will process                   such failed Parts as Return to MSL for credit to IBM in a                   timely manner.

            iii)  MSL will not provide a warranty for consigned Products.                   However, MSL will provide failure analysis for such Products.                   MSL will process such failed Products per IBM's instruction in                   a timely manor.

            iv)   MSL will warrant all MSL Procured Parts for [*] months unless                   otherwise stated in the applicable Product Attachment, or                   agreed to by IBM in writing.

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                                  ATTACHMENT 1

              IBM/MSL Outsourcing Base Agreement Statement of Work

            v)    MSL will warrant its workmanship for [*] months unless other                   stated in the applicable Product Attachment.

      b)    All of the above described warranty periods will commence on the             date that the Products containing the above Parts are delivered to             IBM. The above warranties shall survive acceptance test, and IBM's             Product test procedure. MSL's warranty described above also covers             latent defects resulting from MSL's specification, workmanship,             process, and/or Parts purchased from MSL's suppliers and IBM's             Nominated Suppliers.

19.2  Defective Field Replaceable Units

      a)    A defective FRU shall be a FRU that does not conform in all material             respects to that Product's particular specifications.

      b)    IBM will return defective FRUs that are under warranty to MSL             freight collect. MSL will perform Failure Analysis and incoming             inspection and testing as described in the applicable Product             Attachment for FRU's rejected or returned to MSL which are still             under warranty. If the rejected FRU passes all inspection and test             criteria, the FRU shall be classified as NDF and such FRU shall be             returned to IBM freight collect.

19.3  Exclusions

      The warranty set forth above specifically excludes and does not apply to       defects caused by a) the use or operation of the Product in an application       or environment other than as described in or contemplated by the       specifications issued by IBM or b) IBM or the end user through misuse,       excessive shock or improper maintenance procedures.

19.4  Title

      MSL warrants that the title to all Products purchased by and delivered to       a Delivery Point under this Agreement shall be free and clear of all       liens, encumbrances, security interests or other adverse interests or       claims. Title and risk of loss shall pass from MSL to IBM at time of       shipment per the IBM Customer Order, unless otherwise stated in Section       10.0.





19.5  Returned Product Turn Around Time

      MSL shall set an objective to complete Failure Analysis, repair or       replacement of defective Products, within [*] Days after receipt from IBM.       Upon or before the [*] Day, MSL will ship the repaired or replaced       Product, to IBM at MSL's expense. If repair or replacement is not       possible, MSL will refund to IBM, MSL's price associated with the failed       Product, that is under warranty and the price paid by IBM to MSL or any       third parties or the intercompany transfer price for IBM Parts, for all       Parts, if the price of such Parts were not included in MSL's price.

19.6  Implied Warranties

      a)    MSL'S WARRANTY OBLIGATIONS DESCRIBED IN THIS SECTION 19 ARE IN LIEU             OF AND ENTIRELY REPLACE ALL OTHER TERMS AND CONDITIONS RELATING TO             THE QUALITY, MERCHANTABILITY, CONFORMANCE TO

IBM Confidential                                                   Page 34 of 39 sow0501.lwp

                                  ATTACHMENT 1

              IBM/MSL Outsourcing Base Agreement Statement of Work

            SPECIFICATION AND/OR FITNESS FOR PURPOSE OF THE PRODUCTS, WHETHER             EXPRESS OR IMPLIED, WHICH OTHER TERMS AND CONDITIONS ARE HEREBY             EXPRESSLY EXCLUDED.

      b)    IBM'S WARRANTIES CONTAINED HEREIN AND ANY PRODUCT ATTACHMENT WITH             RESPECT TO PARTS, IF ANY, ARE IN LIEU OF AND ENTIRELY REPLACE ALL             OTHER TERMS AND CONDITIONS RELATING TO THE QUALITY, MERCHANTABILITY,             CONFORMANCE TO SPECIFICATIONS AND/OR FITNESS FOR PURPOSE WHETHER             EXPRESS OR IMPLIED, WHICH OTHER TERMS AND CONDITIONS ARE HEREBY             EXPRESSLY EXCLUDED.

19.7  Epidemic Failure

      In the case where any specific Product, shipped to IBM from MSL within any       [*] month experiences a defect rate of [*]% or greater, resulting from a       common cause due to MSL's non-conformance to specifications, drawings,       other descriptions furnished or adopted by IBM, or due to workmanship, MSL       will accept the cost of a Product Recall.

SECTION 20.0 COMMON TOOLING

      Tools commonly used in production and/or Integration will be owned and       managed by MSL.

SECTION 21.0 TOOLING TO BE ACQUIRED

21.1  Purchase

      a)    MSL will submit requests for additional tooling, if any, quarterly             for inclusion in IBM's capital request process.

      b)    MSL shall not purchase any tooling or other capital equipment on             IBM's account without IBM's prior written approval.

            i)    If specifically required in a Product Attachment, IBM will                   supply tooling for Products to MSL. It shall be IBM's option                   whether the tooling will be consigned by IBM to MSL or                   purchased by MSL.

            ii)   If IBM elects to have MSL purchase tooling, MSL shall be                   responsible for the design, cost and build of all new or                   replacement tooling which shall be capable of producing                   Product in accordance with the IBM specification in the                   Product Attachment. MSL warrants that the tooling used under                   this Agreement shall be capable of producing the quantity of                   Product as specified by IBM.

            iii)  If IBM elects to have MSL purchase the tooling, MSL shall                   invoice IBM for the cost of such tooling at such time as the                   tooling is placed into service. The cost of such tooling                   includes, but is not limited to, the cost of any purchased                   components (including parts and complete items), fully                   burdened MSL engineering and/or manufacturing labor use in the                   design and/or construction of such tools, duties, insurance,                   transportation, installation, costs and costs of

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                                  ATTACHMENT 1

              IBM/MSL Outsourcing Base Agreement Statement of Work

                  money, if any. MSL agrees that MSL engineering will be priced                   to IBM on a most favored customer basis.





            iv)   Both parties may agree to amortize the tooling and shall put                   such agreement in writing and any terms and conditions                   associated with such amortization. If IBM and MSL agree to                   amortize the tooling, IBM agrees to pay for the tooling and                   any associated carrying cost agreed to between the Parties via                   an amortization charge in addition to the respective Product                   price as defined in Section 7.0. The amortization period for                   each tool will be stated in the applicable Product Attachment                   and shall be triggered by the initial delivery of the                   Product(s) for which the tooling expenses are incurred.

                  IBM will state the estimated ship quantity and maximum monthly                   ship rate for the amortization period. MSL will define the                   total tooling cost to support the maximum ship rate. The total                   tooling cost will be divided by the estimated ship quantity                   provided by IBM. This unit amortization cost will be itemized                   in MSL's quotes as tooling adder.

            v)    The tooling cost recovery, via the tooling adder, will be                   analyzed during each quarterly review meeting between IBM and                   MSL. The intent is to adjust the tooling adder based upon                   volume changes, such that the total tooling cost will be                   recovered by the end of the amortization period. If at the end                   of the amortization period the tooling cost have been over or                   under recovered, an adjustment invoice will be processed                   accordingly.

      c)    MSL acknowledges and agrees that its utilization of any tooling for             other customers will not impact IBM's product requirements. MSL will             obtain IBM's written approval prior to entering into a contract with             a third party involving tooling for Products listed in the Product             Attachment.

      d)    In the event that MSL owns the tooling and has received a bona fide             third party offer to purchase any or all of the tooling, before MSL             may accept such offer, MSL shall notify IBM in writing, and IBM             shall have [*] Days after such notice to agree to purchase such             tooling on the same terms and conditions as such third party offer.

      e)    All tools, dies, jigs, patterns, equipment or Parts purchased,             furnished, charged to or paid for by IBM and any replacement thereof             shall become and remain the property of IBM. IBM agrees to provide             MSL appropriate technical support for IBM owned tooling at no charge             to MSL. IBM shall have the option of removing IBM owned tooling from             MSL directly, depending upon Product strategy and production.

21.2  Care

      MSL is responsible for protection, calibration, maintenance and care of       all tooling owned by IBM and shall be liable for loss or damage of such       tooling while in MSL's possession or control. IBM agrees to insure tooling       it owns. Where possible, MSL will be jointly insured with respect to the       IBM owned tooling for its interest. This tooling shall be subject to       inspection by IBM upon notice and shall be returned in an acceptable       condition, reasonable wear and tear excepted, upon demand or notice by       IBM. MSL will be responsible for

IBM Confidential                                                   Page 36 of 39 sow0501.lwp

                                  ATTACHMENT 1

              IBM/MSL Outsourcing Base Agreement Statement of Work

      removing and shipping IBM owned tooling from MSL's plant. IBM shall be       responsible for transportation cost for the return of tooling to IBM's       facility as designed by IBM.

21.3  Inspection

      MSL will identify the location of tooling and at any reasonable time allow       IBM or IBM's designee to inspect the equipment and to purchase related       parts. MSL shall not mortgage, pledge, or take any other action that might       encumber IBM owned tooling in any way.

SECTION 22.0 RETURN OF PRODUCT - US AND VALENCIA WORK CENTER.

22.1  Return to MSL by IBM

      a)    MSL agrees to manage Products and Parts that can be returned to the             US and Valencia Work Centers through the following, but not limited             to, IBM processes, IBM Document PC 2801:

            i)    shipped and uninstalled,

            ii)   returns per IBM contracts with IBM Business Partners, and

            iii)  new defective

      b)    MSL will accept the return of all shipped Products returned to MSL             within [*] Days from the Delivery Date.





            i)    Products returned to the US Work Center will be shipped                   freight [*] to MSL.

            ii)   For Products returned to the Valencia Work Center, MSL will                   pay IBM the NIC for the returned Products (NIC is the [*]                   multiplied by the NIC rates defined in Section 1.b)ii) of                   Appendix 1.)

            iii)  MSL will buy back the returned Product at [*]% of the amount                   invoiced to IBM for such Product within [*] Days of receipt of                   the return by MSL.

            iv)   MSL's price for the acceptance of returned non-warranty                   Products shall be [*]% of the amount invoiced to IBM for such                   Product [*] NIC (NIC is the [*] multiplied by the NIC rates                   defined in Section 1.b) ii) of Appendix 1).

            v)    For the Valencia Work Center, 22.1 b) iii) and iv) will be                   processed as MSL buying back the returned Product at [*]% of                   the amount invoiced to IBM [*] NIC within [*] Days of                   receipt of the return by MSL.

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                                  ATTACHMENT 1

              IBM/MSL Outsourcing Base Agreement Statement of Work

            vi)   IBM may use payments due IBM per 22.1 b) iii) and iv) to                   offset amounts owed to MSL or request reimbursement from                   MSL at IBM's sole discretion.

            vii)  Any defective Product returned to MSL will be returned with a                   copy of any applicable IBM inspection report and will                   reference MSL's Return Material Authorization (RMA).

            viii) When replacement or repaired Products are shipped, MSL must                   submit a new invoice.

SECTION 23.0 DISASTER RECOVERY

      MSL will have a documented disaster recovery program which would allow MSL       to resume all responsibilities under the terms and conditions of this       Agreement within [*] Days of a disaster. A copy of the MSL documented       disaster recovery program will be submitted to IBM for IBM's approval       within sixty (60) Days after the Effective Date.

SECTION 24.0 INFORMATION TECHNOLOGIES SERVICES (I/T) SYSTEMS

24.1  System Access

      a)    MSL's access to IBM applications, tools, licenses, networks, and             equipment will be based upon business need determined by IBM. IBM             shall grant MSL, under a separate written agreement, the right to             use certain versions of IBM owned software resident on the             workstations to be transferred from IBM to MSL during the Transition             Period. MSL must obtain a license from the software owner of any             nontransferable third party or IBM software identified by IBM. IBM             retains the right to audit. IBM conveys to MSL no software title or             license under the intellectual property rights of IBM or of any             third party except as may be otherwise provided herein. MSL is             responsible for obtaining all licenses for third party software. MSL             conveys to IBM no software title or license under the intellectual             property rights of MSL or of any third party.

      b)    Neither IBM or MSL will be provided any license rights and/or source             code to any software subject to this Agreement unless approved by             the owning Party.

      c)    No software may be installed on either IBM or MSL systems by its             employees or contractors without the prior written consent of the             owning Party. MSL may install software on MSL-owned or provided I/T             assets which are isolated from and not a part of the networks. MSL             will not install software that adversely impacts IBM systems or             networks.

24.2  General I/T

      a)    MSL must provide the required information and interfaces to IBM's             systems, as needed for execution of this Agreement. MSL must             participate in any upgrade and testing of local and corporate             applications, interfaces, and tools during its use of IBM owned

IBM Confidential                                                   Page 38 of 39 sow0501.lwp

                                  ATTACHMENT 1





              IBM/MSL Outsourcing Base Agreement Statement of Work

            applications or environments and insure continuous application             operation as changes are made. IBM agrees to participate in the             testing of IBM interfaces changed as a result of any upgrade             activity. IBM will provide visibility and the necessary technical             details on IBM system changes to ensure MSL is able to update their             systems and processes.

      b)    MSL prices for I/T costs are included in the prices as defined in             Section 7.0 and Appendix 1 Markup. Costs for implementing any change             requested by IBM after the Transition Period that substantially             impact MSL's systems and processes will be sized separately.

      c)    MSL will support IBM's EPRG/ECPS using a separate location code for             Charlotte.

      d)    MSL SLA (Service Level Agreement) requirements for local or remote             systems availability and performance will be negotiated in             compliance with IBM's service level expectation for a manufacturing             process within sixty (60) Days of the Effective Date.

      e)    MSL will be responsible for the service and support of any asset             transferred from IBM ownership to MSL. System or end user software             or requests for version upgrades will be under separate agreement.

      f)    MSL will transmit reports and data files as IBM requires for             history, audit, validation, and measurements as defined in Appendix             3.

      g)    MSL will provide the necessary capability to accommodate non             AAS/GEMS orders and provide confirmation/status information as             required.

      h)    Except as otherwise provided herein, MSL will obtain the systems ,             applications, and licenses they deem necessary by their own means.

      i)    MSL agrees to have all MSL applications Year 2000 compliant prior to             migrating any IBM data into it's applications or data bases.

      j)    MSL must obtain IBM's Global Services' written permission prior to             making any connection to any IBM network or system other than the             networks and systems subject to the Agreement.

IBM Confidential                                                   Page 39 of 39 sow0501.lwp

APPENDIX 1: MARK UP

1. Prices for manufacturing and fulfillment of Products will be per the formula of section 7.1 with the following rates:

a) Value Add and Profit Rates are per the following table:

                                                 VALUE ADD RATES   PROFIT RATES(*)                                                  ---------------   ---------------                                                               RS Fulfillment (US & VALENCIA Work Centers                         [*]   GEPS, Finance, and Security Mfg & Fulfillment                    [*]

  Spares to Mechanicsburg and Amsterdam      US Work Center

     Valencia Work Center         (Through September 30, 1998)      Valencia Work Center          (After September 30, 1998)

     *Profit Rates are subject to the adjustments of Section 7.3,       Attachment 1, SOW

b) Other Cost Provision rate is equal to the Scrap Rate plus the NIC Rate where:

     i) The Scrap Rate is equal to [*] except no scrap provision will be applied to OEM Products

     ii) The following NIC rates will be multiplied by the material costs by geographical source to derive an average NIC Rate for each Product

                                                         NIC RATE                                                          --------                                                             US WORK CENTER:                                        [*]

     Valencia to US work Center      Far East to US Work Center





     US Suppliers to US Work Center      Mexico/Canada to US Work Center      South America to US Work Center      Line Side Stocked Products to US Work Center      Mfg to Fulf./Integration within US Work Center

IBM Confidential                                                   Page 1 of 7 appls.lwp

                                                         NIC RATE                                                          --------                                                             VALENCIA WORK CENTER:                                  [*]

     Far East to Valencia Work Center      US to Valencia Work Center      European (non-Spanish) Suppliers to VALENCIA Work Center      Spanish Suppliers to Valencia Work Center      Line Side Stocked Products to Valencia Work Center      Mfg to Fulf./Integration within Valencia Work Center

     ** No NIC will be applied to the final assembly cost of a Product         manufactured by MSL that is subsequently shipped against a Customer         Order within the same Work Center (ie, fulfillment and/or Integration         is within the same Work Center). NIC for the Parts used in a Product         Manufactured by MSL will be calculated using the above NIC rates.

2. For RS Products with components manufactured by MSL, the price for MSL manufacturing services will be per the formula of Section 7.2 with the following rates:

     a) Asm/Test/Handling, Unburden Labor Rate:

                                                    US Work Center:                            [*]          Valencia Work Center

     b) MBA burden absorption rate of [*]

        MBA will be reviewed by IBM and MSL if the annual volume of         manufactured Products is less than [*] or greater than [*]. Adjustments         shall be mutually agreed upon by IBM and MSL, and shall be based on         but not limited to volumes, mix of Products, and costs.

     c) Component NIC rate is per Appendix 1, b) ii

3. RS Integration prices will be per the formula of Section 7.2.b with the following rates:

                                               US Work Center                      [*]          Valencia Work Center

     *Without MSL account coordinator.

4. All prices are effective for the US Work Center on the Effective Date.    All prices for Valencia Work Center manufactured Products and their fulfillment are effective on the Effective Date. All other prices excluding spares (see 1 a) above) are effective for the Valencia Work Center on June 1, 1998.

IBM Confidential                                                   Page 2 of 7 appls.lwp

APPENDIX 2: REQUIREMENTS ACCURACY

The formula for measuring the accuracy of requirements placed on MSL for a given quarter accompanied with an explanation, is the following:

Requirements Accuracy % = [*]

Where [*] represents the performance [*] months prior to the last month of the quarter in which you are measuring the Requirements Accuracy. The Forecast represents the requirements that was passed by IBM [*] months prior, for the total volume by machine type for the quarter that is being measured. Actual Order Load represents the final amount of orders scheduled for the quarter being measured. For example when measuring the [*] for the first quarter in 1998 you would calculate [*] by taking the [*] that was passed [*] for the first [*] in [*] and subtract the actual [*] for that [*]. Then divide by the forcast and multiply by [*]. You follow the same methodology for [*] looking at the forecast [*] months prior to the last month of the quarter being measured. Once [*] through [*] is calculated you apply these results to the formula above.

                                       [*]





The formula measures the accuracy of requirements placed on MSL for a given quarter, each month, starting [*] months prior to the end of the quarter, using a [*] weighted calculation.

The following percentages will be multiplied by the material cost of the volume of the machine type shipped in the quarter that fell below [*]% of the Requirements Accuracy calculation.

            REQUIREMENTS ACCURACY          INCREMENTAL %             AS DEFINED ABOVE               APPLIED TO MATERIAL COST                                                         [*] and Greater                  [*]%                Less than [*]%                   [*]%

Payments for these liabilities will be made via a separate invoice.

IBM and MSL Confidential                                           Page 3 of 7

APPENDIX 3: PERFORMANCE SPECIFICATIONS

The following SPECIFICATIONS apply to MSL services at each work center:

Measurement                              Period           Target ------------------------                 ------           ------                                                      On-time shipment (a)(c)                             [*] Responsiveness (b)(c) Order to ship leadtime (Pick&Pack) (d) Order to ship leadtime (Bulk) (d) Product quality Serviceability to IBM Plants Serviceability to IBM Services

(a) Percentage of finished orders that are shipped from MSL and delivered to     IBM on the committed Delivery Date. (b) Percentage of finished orders that are shipped from MSL and delivered to     IBM in line with the requested supply ship date, and according to the IBM     Customer Order requested arrival date and the published IBM distribution     lead times. (c) With IBM's approval, MSL may normalize this measurement for errors that     are beyond MSL's control. Errors must be in the categories of: integration     orders, IBM system errors, system updates that are IBM's responsibility,     orders requesting delivery dates which exceed Requirements Accuracy, as     defined in Appendix 2, of [*] and are not within Supply Flexibility as     defined in Section 13.2 and Appendix 4. (d) These are IBM Customer Orders. Order to ship leadtime is the number of     Days from MSL receipt of a valid IBM Customer Order to planned and     committed MSL ship date.

MSL will also provide to IBM the following information reports:

REPORTS                              PERIOD ---------------------                ------                                    Weekly shipments (1)                   [*] Monthly shipments (2) Inventory (3)(4)(5) Product Invoice Information (6) Product quality (7) Requirements accuracy (8) Consigned tooling MSL Procured Parts (9) Planning Parameters (10)

(1) List of shipments by machine type, serial number and delivery program     (COATS, Q Ship, IPR, industry standard, integration, other). (2) List of shipments by machine type and serial number, to requesting IBM     organizations.

IBM and MSL Confidential                                           Page 4 of 7

(3) MSL will report, by business area, MSL owned inventory by machine type     and/or part number, with detail of item quantity and value including Parts,     work in process and finished goods. IBM Parts, IBM Designated Parts and MSL     Procured Parts will be reported separately, IBM document CAI 97-11. MSL will     report how each inventory price is formed monthly upon request. MSL will     identify separately the inventory of all street value parts and IBM     classified parts by using IBM's guidelines.

(4) MSL will report, by business area, the inventory of IBM Consigned Parts by     machine type and/or part number, with detail of item quantity and value     including Parts, work in process and finished goods.     MSL will report how each inventory price is formed monthly and upon request.     All IBM Consigned Parts in Integration will be reported separately and by





    customer monthly and upon request.     MSL will identify the location of IBM Consigned Parts by location within the     MSL Work Center.     MSL will identify separately the inventory of all street value parts and IBM     classified parts by class using IBM's guidelines.

(5) MSL will identify the volume and value in the LS, S, SSS, and MSL owned     inventory buffers and additional information that would define MSL's     inventory posture as it relates to product availability.     This information will be reported for [*] months after the Effective Date.

(6) For shipment invoices, MSL will provide validation information as follows:     Invoice number     Currency and currency rate     Order type, order label     IFC, Division, ITC, date, invoice type, ST., STALL     MSL value of goods, MSL emergency, MSL special casing     IBM value of goods, IBM emergency, IBM special casing     This information will be supplied at invoice level, detail (S/A or P/N) and     also at feature level. (7) As per the Product Attachments. (8) Formula for requirements accuracy is as per Requirements Accuracy Appendix. (9) At the beginning of each year of operation, MSL will identify to IBM the MSL     sources from which MSL buys MSL Procured Parts and will provide latest     source quotes for each one. At the beginning of each quarter, MSL will     report to IBM any changes in MSL sources and any changes in their costs. (10) This note applies only to the Valencia Work Center. A report of the type     regularly produced by the MSL Valencia Work Center as EPRG parameters     Exxx. The report contains values for parameters associated with a REGEN:

        a)  Parameters defined at plant level, i.e. currency, value class start             month, value class length, inventory carrying rate, box explosion             offset, stock to dock time, effective code date, excess, surplus and             scrap at start of month, unit price, % add value, dollar rate,             etc.         b)  Parameters defined at source level, for each source, i.e. MS, FZI,             FZO, FZC, MI, MO, CH, OAT, DTS, DEL COST, DEL R.OUT, NTT, ETT, LCT,             AI, AC, etc.         c)  Parameters defined at Value-class level, for each value class, i.e.             flags, PPS, PS, MIC, FDS, MAC, Min D Val, Max Del Val, FZI, FZO, ZC,             MRI, MRO, CH, High Val Limit, DN, OH, etc.         d)  Parameters defined at P/N family level *(management group level),             for each family/group, i.e. OPC, FDS, CII, NSI, PS, AI, mdq, Mdq,             OAT, DI, OC, SED, description, etc.

IBM and MSL Confidential                                            Page 5 of 7

(11) In addition MSL will provide on demand a history of all shipments for a given period of time by order, configuration, ship to address, and date of shipment.

MSL will report to IBM the measurements separately for each Work Center.

REPORTING

MSL will transmit the reports described in the Appendix 3, the Product Attachment and those agreed upon by the Parties by facsimile, electronic data interchange, or otherwise, as IBM reasonably requires. MSL also agrees to establish, maintain and link the related complete and accurate data base system to IBM's specified systems and other electronic communication links as are deemed necessary and agreed to by both parties.

IBM and MSL Confidential                                            Page 6 of 7

APPENDIX 4: SUPPLY FLEXIBILITY

MSL agrees to maintain Supply Flexibility to meet requirements increase on forecasted volumes as follows:

MONTH                      M(CURRENT MO.)    M+1    M+2   M+3   M+4   M+5                                                      Additional % on plan          [*]

The Supply Flexibility will be available at model and feature level.

IBM and MSL Confidential                                           Page 7 of 7

                      ATTACHMENT 4 - EXPENSE PARTICIPATION

1.    Valencia Product Engineering and New Program Management Support





      Commencing on the Effective Date of the Agreement, but not before July 1,       1998, IBM shall pay MSL [*] pesetas on the first day of each calendar       month during the term of the Agreement for MSL's completion of the product       engineering and new program management responsibilities defined in Product       Attachment A of the Statement of Work. For any period of less that one       month, the above amount shall be apportioned based on the number of days       in that month.

2.    MVS License for the Valencia Work Center

      The terms and conditions, including pricing, governing the use of IBM's       MVS software shall be granted under a separate licensing agreement between       IBM Spain and MSL. For MVS software modules (including additions and       upgrades) that IBM agrees in writing, before fees are incurred, are       required by MSL to fulfill this Agreement, IBM shall reimburse MSL the       actual MVS license charges through separate invoices and payments. MSL       agrees that these payments will not take place before MSL has made the       corresponding payment for the license fees.

3.    Startup and Investment Expenses for the US Work Center

      a) IBM shall pay MSL up to [*] U.S. dollars [*] for 1998 startup and       investment expenses related to the US Work Center. MSL may submit invoices       to IBM commencing on the Effective Date of the Agreement through       December 31, 1998 for the following actual startup and investment expenses       for the US Work Center: I/T application set up including related travel       and consultant fees, AS 400 hardware and software, application software       and licenses, network infrastructure, line servers and user workstations,       training, radio frequency equipment, tooling, material handling equipment,       shelving, furniture, line fitup and facilities fitup expenses.

      b) IBM has budgeted a total of [*] to relocate manufacturing lines from       Building 103 to Building 002; and for non-manufacturing fit up. Relocation       of the manufacturing lines is budgeted at [*], and non-manufacturing fit       up is budgeted at [*]. MSL will be responsible for any overruns of these       budgets incurred as a result of MSL's requests.

      c) MSL acknowledges and agrees that its utilization of any tooling and/or       I/T systems for other customers shall not impact IBM's product       requirements. MSL shall obtain IBM's written approval prior to entering       into a contract with a third party involving tooling and/or I/T systems       charged to IBM as part of the US Work Center startup.

      d) IBM reserves the right of first refusal to purchase any tooling and       equipment, that was reimbursed by IBM as part of the US Work Center       startup, at any time for MSL's [*] or [*], whichever is less.

IBM Confidential                                                     Page 1 of 3 att4016.lwp

                      ATTACHMENT 4 - EXPENSE PARTICIPATION

      e) MSL shall report all open startup and investment expenses, which are       subject to request for reimbursement by IBM, as part of the monthly       measurement reviews in 1998.

4.    Personnel Expense Participation

4.1   Salary Participation

      a) Commencing on the Effective Date of the Agreement, IBM shall compensate       MSL for the salaries of Transferred Employees, as defined in Attachment 2       of the Base Agreement, that are actually retained by the US Work Center       and supporting this Agreement. IBM's payment to MSL shall be determined by       the following formula: {Salary Payment = A x B}, where the following       values are assigned to such formula:

            i)    A shall mean actual Transferred Employees, as defined in                   Attachment 2 of the Base Agreement, that are retained by MSL                   at the US Work Center and supporting this Agreement as of the                   last day of a quarter.

            ii)   B shall mean the IBM's salary participation rate as defined                   in Attachment 4,4.1 b).

      b) IBM's quarterly salary participation rates shall be:

                  Year 1            Year 2            Year 3                   ------            ------            ------

                  [*]               [*]               [*]

      c) For any period of less than [*], the amount determined by (a) above,       shall be apportioned based on the actual number of days in that quarter.

      d) Payment for these liabilities shall be made via a separate invoice       quarterly.





      e) IBM shall make no payments for any extension periods to the       Agreement.

4.2   Medical and Vision Plan Participation

      a) Commencing on the Effective Date of the Agreement, MSL shall offer to       Transferred Employees medical and vision plans that have employee       contribution rates equal to the IBM contribution rates that IBM offers to       its employees for that calendar year.

      b) IBM shall pay MSL [*] dollars [*] on the Effective Date of the       Agreement for IBM's participation in the medical and vision plans       for Transferred Employees for the term of the Agreement. IBM shall make       no payments for any extension periods to the Agreement.

IBM Confidential                                                     Page 2 of 3 att4016.lwp

                      ATTACHMENT 4 - EXPENSE PARTICIPATION

4.3   401K Plan Participation

      a) Commencing on the Effective Date of the Agreement, MSL shall offer to       Transferred Employees a 401K plan that reflects a [*] percent employer       matching contribution.

      b) IBM's payment to MSL for a quarter shall be MSL's actual employer       matching contributions for the Transferred Employees minus MSL       participation as defined by Attachment 4, 4.3 c). IBM shall make no       payments for Transferred Employees that are not retained by MSL at the US       Work Center and supporting this Agreement as of the last day of the       quarter.

      c) MSL's 401K Plan participation for the Transferred Employees shall be       based on the following percentages of salary:

                  Year 1            Year 2            Year 3                   ------            ------            ------

                  [*]               [*]               [*]

      d) For any period of less than [*] months, the amount determined by (a)       above, shall be apportioned based on the actual number of days in that       quarter.

      e) Payment for these liabilities shall be made via a separate invoice       quarterly.

      f) IBM shall make no payments for any extension periods to the Agreement.

IBM Confidential                                                     Page 3 of 3 att4016.lwp

ATTACHMENT 5: EQUIPMENT AND PROGRAM LOAN LIST                      July 20, 1999

HARDWARE

ASSET IDENTIFIER OR SERIAL NUMBER       DESCRIPTION            QUANTITY      COMMENT     VERIFIED

                                                             [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99





[*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1                      verified Wayne Cato, 07/08/99 [*]                    [*]                       1            [*]       verified Wayne Cato, 07/08/99 [*]                    [*]                       1            [*]       verified Wayne Cato, 07/08/99

ATTACHMENT 5: EQUIPMENT AND PROGRAM LOAN LIST                      July 20, 1999

[*]                    [*]                       1          [*]         verified Wayne Cato, 07/08/99 [*]                    [*]                       1          [*]         verified Wayne Cato, 07/08/99 [*]                    [*]                       1          [*]         verified Wayne Cato, 07/08/99 [*]                    [*]                       1          [*]         verified Wayne Cato, 07/08/99 [*]                    [*]                       1          [*]         verified Wayne Cato, 07/08/99 [*]                    [*]                       1          [*]         verified Wayne Cato, 07/08/99 [*]                    [*]                       1          [*]         verified Wayne Cato, 07/08/99 [*]                    [*]                       1          [*]         verified Wayne Cato, 07/08/99 [*]                    [*]                       1          [*]         verified Wayne Cato, 07/08/99 [*]                    [*]                       1          [*]         verified Wayne Cato, 07/08/99 [*]                    [*]                       1          [*]         verified Wayne Cato, 07/08/99 [*]                    [*]                       1          [*]         verified Wayne Cato, 07/08/99 [*]                    [*]                       1          [*]         verified Gary Holman, 07/19/99 [*]                    [*]                       1          [*]         verified Gary Holman, 07/19/99 [*]                    [*]                       1          [*]         verified Gary Holman, 07/19/99

One (1) item is located in the Bldg. 002 structure but cannot be individually identified as a unit

ASSET IDENTIFIER OR SERIAL NUMBER       DESCRIPTION            QUANTITY      COMMENT     VERIFIED

[*]                    [*]                       1          [*]         verified Wayne Cato, 07/08/99

ATTACHMENT 5: EQUIPMENT AND PROGRAM LOAN LIST                      July 20, 1999

SOFTWARE

ASSET IDENTIFIER OR SERIAL NUMBER       DESCRIPTION            QUANTITY      COMMENT     VERIFIED

[*]                    [*]                       1          [*]         verified Donovan Dandurand, 6/16/99 [*]                                              1          [*]         verified Donovan Dandurand, 6/16/99 [*]                                              1          [*]         verified Donovan Dandurand, 6/16/99 [*]                                              1          [*]         verified Donovan Dandurand, 6/16/99 [*]                                              1          [*]         verified Donovan Dandurand, 6/16/99 [*]                                              1          [*]         verified Donovan Dandurand, 6/16/99 [*]                                              1          [*]         verified Donovan Dandurand, 6/16/99 [*]                                              1          [*]         verified Donovan Dandurand, 6/16/99 [*]                                              1          [*]         verified Donovan Dandurand, 6/16/99 [*]                                              1          [*]         verified Donovan Dandurand, 6/16/99 [*]                                              1          [*]         verified Donovan Dandurand, 6/16/99 [*]                                              1          [*]         verified Donovan Dandurand, 6/16/99 [*]                                              1          [*]         verified Donovan Dandurand, 6/16/99 [*]                                              1          [*]         verified Donovan Dandurand, 6/16/99 [*]                                              1          [*]         verified Donovan Dandurand, 6/16/99 [*]                                              1          [*]         verified Donovan Dandurand, 6/16/99





[*]                                              1          [*]         verified Donovan Dandurand, 6/16/99 [*]                                              1          [*]         verified Donovan Dandurand, 6/16/99 [*]                                              1          [*]         verified Donovan Dandurand, 6/16/99 [*]                                              1          [*]         verified Donovan Dandurand, 6/16/99 [*]                                              1          [*]         verified Donovan Dandurand, 6/16/99 [*]                                              1          [*]         verified Donovan Dandurand, 6/16/99

                                  ATTACHMENT 6                    SOFTWARE INSTALLATION TERMS AND CONDITIONS

The purpose of this Attachment 6 is to provide terms and conditions under which MSL may install IBM Software Packages on Products. MSL shall not prepare a preload image of an IBM Software Package or install any IBM Software Packages, unless authorized by IBM in writing or expressly instructed under this Attachment 6. All Appendices and Exhibits referred to in this Attachment 6 are incorporated herein by reference. If there is a conflict between the Agreement and this Attachment 6, the terms of this Attachment 6 will prevail.

1.0. DEFINITIONS. For purposes of this Attachment 6 only, the following definitions shall apply:

1.1 Approved Location is a location at which IBM has expressly authorized MSL     in writing to perform its IBM Software Package installation responsibilities     under the Agreement, and which has also been so authorized by Microsoft     Corporation (MS);

1.2 Code shall mean statements or instructions, whether in a human readable     source form or machine readable object form of programming code,     intended to bring about a certain result in the operation of a computer.     Code shall include (a) all supporting documentation, including but not     limited to all documentation needed to assist each Party in understanding     all technical aspects of the Code and all applicable end user documents and     materials, and (b) all corrections, modifications and enhancements to     Code.

1-3 Customers shall mean IBM, IBM subsidiaries, distributors, retailers, IBM     authorized resellers, end users and others as may be specified by IBM.

1.4 Derivative Work shall mean a work that is based upon one or more     pre-existing copyrighted or patented works, such as a revision, enhancement,     modification, translation, abridgment, condensation, expansion,     compilation or any other form in which such pre-existing work may be recast     transformed or adapted.

1.5 End User is any one who acquires Products for its own use and not for     resale.

1.6 Harmful Code shall mean any computer code, programming instruction, or set     of instructions that is constructed with the ability to damage, interfere     with, or otherwise adversely affect computer programs, data, files, or     hardware, without the consent or intent of the computer user. This     definitions includes, but is not limited to, self-replicating and self     propagating programming instructions commonly called viruses and worms.

1.7 IBM Software Package shall mean a software package that is owned by or     licensed to IBM, and is provided to MSL only for purposes of this Attachment     6 and the Agreement.

IBM Confidential                                                  June 2, 1999 ATT6.1wp                                                          Page 1 of 19

                                  ATTACHMENT 6                    SOFTWARE INSTALLATION TERMS AND CONDITIONS

1.8 Preload, Preloading, and Preloaded refer to the process by which MSL     is authorized, subject to the terms and conditions of the Agreement, to load     a single copy of the IBM Software Package only onto the hard drive of a     Product;

1.9 Products shall mean IBM and OEM machine types as defined in Product     Attachments to the IBM/MSL Outsourcing Base Agreement Statement of Work.

2.0. SOFTWARE PACKAGE REQUIREMENTS

2.1. When authorized by IBM in writing or expressly instructed under this     Attachment 6, MSL agrees to prepare the IBM Software Package Preload image     in support of Products.

2.2. MSL agrees to Preload IBM Software Packages (only at Approved Locations) on     Products as set forth in this Attachment 6.

2.3. MSL shall establish and maintain electronic installation records (as     described in Exhibits 2, 3, and 4 of Appendix A to this Attachment 6) of all     IBM Software Packages installed, and maintain adequate business controls to     prevent unauthorized use or copies of any IBM Software Package.

2.4. MSL shall establish, maintain and report to IBM the number of individual     software programs (including operating systems and program applications)     included in IBM Software Packages that are (a) installed on Products, (b)     shipped with Products, and (c) shipped without Products for purposes of     Product support. MSL shall secure IBM's prior written permission regarding





    any IBM Software Package shipped without the Product to ensure that all     licenses to IBM are adhered to by MSL.

2.5. MSL acknowledges that MS requires additional restrictions on its operating     system Code and other Code and documentation from MS, and therefore, MSL     agrees to also comply with the additional obligations set forth in Exhibit 5     of Appendix A of this Attachment 6 for all Code and documentation from MS.

IBM Confidential                                                  June 2, 1999 ATT6.1wp                                                          Page 2 of 19

                                  ATTACHMENT 6                    SOFTWARE INSTALLATION TERMS AND CONDITIONS

3.0. ADDITIONAL WARRANTIES

MSL represents and warrants that at all times:

3.1. MSL will not copy or permit the copying (including back-up copies) of all     or any part of the IBM Software Packages, except to the extent required for     MSL to perform its obligations hereunder for IBM's benefit;

3.2. MSL will not sublicense, rent, lease, distribute, assign or otherwise     transfer (including distributing back-up copies of) all or any part of the     IBM Software Packages, except as expressly authorized by IBM in writing;

3.3. MSL will not reverse engineer, disassemble, or decompile all or any part of     the IBM Software Packages;

3.4. MSL will not remove any intellectual property marking or identification     code that may be in the IBM Software Packages;

3.5. MSL will not add to, delete from, or otherwise modify any Code included in     the IBM Software Packages, or create any Derivative Work therefrom, except     as expressly authorized by IBM in this Attachment 6 or otherwise authorized     herein.

3.6. MSL will comply with the additional requirements set forth in this     Attachment 6 and its Appendix A (including its Exhibits);

3.7. MSL will not export any IBM Software Package to any country without IBM's     prior express written permission (such permission, if any, shall not relieve     MSL of its obligations hereunder, and MSL shall remain fully responsible for     all such exporting).

IBM Confidential                                                  June 2, 1999 ATT6.1wp                                                          Page 3 of 19

                                  ATTACHMENT 6                    SOFTWARE INSTALLATION TERMS AND CONDITIONS

4.0. ADDITIONAL AUDIT RIGHTS

IBM may regularly monitor, inspect and/or audit any software installation location utilized or planned to be utilized hereunder pursuant to Section 7.0 of the Outsourcing Base Agreement.

MSL will not utilize any location in performance of this Attachment 6 which is not an Approved Location. MSL agrees to provide IBM at least ninety (90) calendar days advanced written notice for any MSL facility planned to be used (including the intended activity for each such facility) in the performance of work hereunder, to allow IBM, and/or MS, to inspect each such facility. MSL agrees to promptly correct any deficiencies discovered in such inspections. Such IBM inspections, approvals and deficiency corrections shall not in any way relieve MSL of its ongoing obligations under the Agreement.

IBM shall have the option to monitor, inspect, audit and take other necessary actions in order to comply with IBM's requirements to MS regarding any of MS's Code, or documentation, used hereunder.

IBM's right to audit hereunder shall continue for a period up to [*] years following expiration or termination of the Agreement.

Any audit provided for herein shall be conducted during MSL's normal business hours, after reasonable advance notice, and shall not unreasonably interfere with MSL's normal operations.

IBM Confidential                                                  June 2, 1999 ATT6.1wp                                                          Page 4 of 19

                                  ATTACHMENT 6                    SOFTWARE INSTALLATION TERMS AND CONDITIONS

                                   APPENDIX A





           ADDITIONAL OBLIGATIONS FOR MICROSOFT CODE AND DOCUMENTATION

1. AUTHORIZATION.

1.1. ATTACHMENT 6. The terms and conditions of this Attachment 6 are in addition     to, and not in lieu of, the terms and conditions of the Agreement.

1.2. SCOPE. The additional restrictions in this Appendix A shall apply to the MS     Code referenced in Exhibit 1 of this Appendix A, including any and all     revisions, enhancements, supplements or releases thereto (collectively, MS     Software Images) and related MS documentation, if such MS Software Images     are made available by IBM to MSL. If required by MS, IBM has the right,     without limitation, to include additional Code as MS Software Images and     documentation by notifying MSL in writing. Provided that MSL complies fully     with the terms and conditions of this Attachment 6 pursuant to the terms of     the MS License to IBM (MS License), IBM hereby authorizes MSL at Approved     Locations only to Preload MS Software Images on Products and to distribute     Preloaded Products as otherwise permitted in the Agreement. IBM may revoke     these authorizations in whole or in part at any time in its sole discretion.

1.3. MSL'S AUTHORIZED SUBSIDIARIES. With prior written approval from IBM, which     approval may be withheld in IBM's sole discretion, MSL may authorize its     Subsidiaries that are authorized to assemble and test Products pursuant to     the Agreement to Preload MS Software Images only at Approved Locations in     accordance with the terms, and conditions of the Agreement, including     Attachment 6, PROVIDED THAT MSL hereby unconditionally guarantees each of     its authorized SUBSIDIARIES' full and complete compliance with the terms and     conditions of the Agreement, including Attachment 6. Pursuant to this     guarantee, IBM shall not be required to make demand upon MSL's Subsidiary as     a condition to making demand upon MSL. Each authorized Subsidiary shall     execute an agreement with MSL sufficient to COMPLY with MSL's obligations to     IBM under this Attachment 6, and the term MSL as used elsewhere herein     shall include any authorized Subsidiaries who execute such an agreement and     are approved in writing by IBM to Preload MS Software Images as provided     herein.

IBM Confidential                                                  June 2, 1999 ATT6.1wp                                                          Page 5 of 19

                                  ATTACHMENT 6                    SOFTWARE INSTALLATION TERMS AND CONDITIONS

                                   APPENDIX A            ADDITIONAL OBLIGATIONS FOR MICROSOFT CODE AND DOCUMENTATION

1.4. MS APPROVAL. Notwithstanding anything herein to the contrary, MSL,     Subsidiaries of MSL, and Approved Locations, are subject to approval or     immediate revocation in writing by MS as provided in the MS License. MSL is     prohibited from Preloading the MS Software Image at any Preload location not     approved by MS. MSL shall provide IBM with the addresses of its     headquarters, the proposed Preload location(s) for which approval is     requested, the business profiles in the English language (including years in     business, ownership profile, nature of principal business activities,     general description of site security procedures, any nonstandard reporting     procedures from MSL site to IBM, and a summary of any prior experiences with     installation or replication of MS products), and such other relevant     information as MS or IBM may request, at least ninety (90) calendar days in     advance of the anticipated first installation date for such location

2. MSL'S RESPONSIBILITIES. MSL represents, warrants and agrees that it shall:

         (a) Comply full), and completely with all of the terms and conditions          of this Attachment 6 and the MS License, including, but not limited to,          all terms regarding Preloading MS Software Images and related MS          documentation. Further, MSL represents, warrants and agrees:

                  (i) to create an electronic assembly record for each Product                   in the format prescribed by IBM and transmit it to IBM prior                   to shipment of Product, via electronic data transmission after                   completion of assembly;

                  (ii) to include, in unmodified form, all publications, license                   agreements, certificates of authenticity, labels and ship                   groups with each Product as set forth in the Product's Bill of                   Materials;

                  (iii) to use the master media, and the MS Software Images                   obtained therefrom, only at an Approved Location and only to                   Preload, in a manner expressly permitted by IBM, a single copy                   of the Software Image designated for each Product in the Bill                   of Materials onto the approved Product, and for no other                   purpose whatsoever;

                  (iv) to maintain adequate business controls for the master                   media, and the MS Software Images and supporting MS                   documentation obtained therefrom, to prevent unauthorized use                   or copies of any MS Software Image and supporting MS                   documentation;

IBM Confidential                                                  June 2, 1999 ATT6.1wp                                                          Page 6 of 19





                                  ATTACHMENT 6                    SOFTWARE INSTALLATION TERMS AND CONDITIONS

                                   APPENDIX A            ADDITIONAL OBLIGATIONS FOR MICROSOFT CODE AND DOCUMENTATION

                  (v) not to copy or permit the copying (including back-up                   copies) of all or any part of any MS Software Image and MS                   supporting documentation, except as expressly authorized by                   this Attachment 6; and

                  (vi) not to sublicense, rent, lease, distribute, assign or                   otherwise transfer (including distributing back-up copies of)                   all or any part of any MS Software Image including supporting                   documentation, except as expressly authorized by this                   Attachment 6;

         (b) When expressly authorized by IBM in writing, implement one, or          more, of the following separate processes, which are described more          fully in Exhibits 2, 3 and 4 of this Appendix A, at each Approved          Location to ensure protection of the MS Software Image during the          Preload process:

                  (i) PROCESS ONE. An IBM or IBM contractor employee (who is not                   an employee of MSL) shall periodically monitor the Preload                   process, and the IBM or IBM contractor employee or an employee                   of MSL shall ensure that the master media containing the MS                   Software Image used for the Preload process is retained in a                   secure area accessible only to such IBM or IBM contractor                   employee or by MSL when not in use by the MSL (any oversight                   on the part of IBM shall not relieve MSL of any of its                   obligations hereunder); and/or

                  (ii) PROCESS TWO. MSL may use the recovery CD for the product                   (if any) that ships with, or is designated by IBM for, the                   Product to Preload Software Images onto each such Product. MSL                   will maintain the recovery CD in a secure area until it is                   used for installation and returned to a secure place or                   packaged with the Product or its accompanying ship group. MSL                   shall run image verification testing on all Products Preloaded                   using a recovery CD; and/or

                  (iii) PROCESS THREE. The master media containing the MS                   Software Image used for the Preload process shall be located                   exclusively on a server system where it will be accessible                   only by an IBM or IBM contractor employee or by MSL,                   replication of the MS Software Image shall be performed only                   under the authorization of IBM or MSL, and all copies shall be                   monitored and tracked to an individual Product serial number.

IBM Confidential                                                  June 2, 1999 ATT6.1wp                                                          Page 7 of 19

                                  ATTACHMENT 6                    SOFTWARE INSTALLATION TERMS AND CONDITIONS

                                   APPENDIX A            ADDITIONAL OBLIGATIONS FOR MICROSOFT CODE AND DOCUMENTATION

         If Process One or Process Two is selected, MSL shall take all necessary          steps to ensure that only IBM and IBM contractor employees and          designated MSL employees shall have access to such secured area where          the master image or recovery CDs are maintained when not in use,          including, without limitation, installing locks and ensuring no other          possible access through doors, ceilings, walls, or floors. If Process          Three is selected, MSL shall designate a dedicated server system for          such purpose, and access to the data and master images stored on such          server shall be limited to IBM and IBM contractor employees and          designated MSL employees through passwords, keyboard lock, and a locked          cover over all diskette drives and CD drives. Further, MSL shall take          all necessary steps to protect such server system from unauthorized          use. MSL's compliance with such processes will be subject to audit by          IBM and/or MS as provided herein in this Attachment 6 and in the          Agreement;

         (c) Comply fully and completely with the obligations of the MS License,          including, but not limited to, those specifically set forth in Exhibit          5 of Appendix A, the Additional MS Provision: MS License Obligations          Imposed On MSL hereto, in the same manner and to the same extent that          IBM is required to comply with such obligations; provided, however,          that, except as expressly provided in this Attachment 6 (including, but          not limited to, any Appendices and Exhibits), this provision is not a          sublicense or assignment of any rights of IBM under the MS License, and          MSL shall not have any right or license to use, reproduce or distribute          any MS Software Images. Copies of the MS License are available for          review upon request, subject to the requirements of Subsection (d)          below;

         (d) Prior to the receipt of any confidential information obtained from





         MS, execute a non-disclosure agreement sufficient to comply with IBM's          confidentiality obligations to MS;

         (e) Provide access to MSL's premises during normal business hours (with          prior notice of at least 48 hours) to inspection teams sent on behalf          of MS and/or IBM if MS or IBM has reason to believe that MSL may be in          violation of this Attachment 6, in order that such team may perform an          inspection of the MSL'S procedures to determine compliance with the          terms of this Attachment 6;

         (f) Immediately stop Preloading of all MS Software Images upon notice          from IBM or MS of termination, as set forth in Section 7 of this          Appendix A of this Attachment 6, the MS License, or the Agreement;

IBM Confidential                                                  June 2, 1999 ATT6.1wp                                                          Page 8 of 19

                                  ATTACHMENT 6                    SOFTWARE INSTALLATION TERMS AND CONDITIONS

                                   APPENDIX A            ADDITIONAL OBLIGATIONS FOR MICROSOFT CODE AND DOCUMENTATION

         (g) Distribute Products Preloaded with MS Software Images only to IBM          or IBM Subsidiaries, or on behalf of IBM or IBM Subsidiaries to the          extent permitted in the Agreement;

         (h) Reimburse MS's and IBM's reasonable attorney's fees and costs if MS          or IBM employs attorneys to enforce any rights arising out of this          Attachment 6;

         (i) Record, track and report to IBM (for consolidated reporting to MS)          in the form, manner and at intervals required by IBM, information          concerning MS Software Images Preloaded and supporting MS          documentation, including without limitation, the number of units, the          model number, the configuration, the name or part number of the MS          Software Image Preloaded, and the unique serial number of the Products          Preloaded and distributed with an MS Software Image.

3. ADDITIONAL WARRANTY BY MSL. MSL further represents, warrants and agrees to notify IBM immediately in writing of any suspected or actual noncompliance with the terms and conditions of this Attachment 6 or the MS License by MSL, its employees, Subsidiaries, or agents.

4. THIRD PARTY BENEFICIARY. Notwithstanding Section 16.18 of the Outsourcing Base Agreement, MS is an intended third party beneficiary of this Attachment 6 only, with full rights to enforce the terms of this Attachment 6 on its own behalf, but only to the extent that the terms of this Attachment 6 pertains to the MS Software Images and related MS documentation.

5. ADDITIONAL INDEMNIFICATION. MSL agrees to indemnify and hold harmless MS and IBM, its Subsidiaries, employees, and directors, from all fines, claims and expenses of any kind (including reasonable attorneys' fees and expenses) incurred by IBM or MS arising from or connected with (a) any breach, default or noncompliance by MSL of its representations, warranties or obligations under this Attachment 6, (b) alteration or modification by MSL of any MS Software Image, (c) installation on a Product of an image or Code other than the IBM Software Package, and (d) any unauthorized use, reproduction or distribution of MS Software Images or related documentation by MSL, or its employees or agents, whether or not authorized by MSL; provided, however, that MSL shall not be liable only to the extent that any such fines, claims or expenses are attributable to IBM's gross negligence or willful misconduct or to written instructions provided by an authorized representative of IBM to MSL.

IBM Confidential                                                  June 2, 1999 ATT6.1wp                                                          Page 9 of 19

                                  ATTACHMENT 6                    SOFTWARE INSTALLATION TERMS AND CONDITIONS

                                   APPENDIX A            ADDITIONAL OBLIGATIONS FOR MICROSOFT CODE AND DOCUMENTATION

6. ADDITIONAL MODIFICATION AND AMENDMENT RIGHTS. IBM may modify, add or delete terms or conditions of this Attachment 6 (including its Appendices and Exhibits) in response to a modification or amendment of the MS License by providing MSL thirty (30) calendar days advance written notice or the same period of time MS gives IBM to comply with a modification or amendment, if such period is less than thirty (30) calendar days. MSL agrees to comply with such modifications, additions, or deletions to this Attachment 6 if it continues to Preload MS Software Images on Products after such notice period.

7. ADDITIONAL TERMINATION RIGHTS. In addition to the termination provisions provided in Section 5.0 of the Outsourcing Base Agreement, IBM may terminate this Attachment 6, in whole or in part (in part including any or all provisions regarding MS Software Images), without liability, due to: (a) the expiration or termination of the MS License; or (b) the expiration or termination of the Agreement, including without limitation, termination of this Attachment 6 as specified below:





         (i) IBM may, at IBM's sole discretion, terminate all rights granted to          MSL under this Attachment 6 (and its associated Exhibits and          Appendices), with cause immediately upon written notice to MSL;

         (ii) MS may terminate this Attachment 6 in part (i.e., to the extent MS          Software Images are included in this Attachment 6) immediately upon          written notice to MSL and IBM in the event that MS learns of any          unauthorized use, reproduction or distribution of MS Intellectual          property by MSL, or its employees or agents;

IBM Confidential                                                  June 2, 1999 ATT6.1wp                                                          Page 10 of 19

                                  ATTACHMENT 6                    SOFTWARE INSTALLATION TERMS AND CONDITIONS

                             EXHIBIT I OF APPENDIX A                                MS SOFTWARE IMAGES

The term MS Software Images consists of the following Microsoft Corporation products:

A. [*]

B. [*]

IBM Confidential                                                  June 2, 1999 ATT6.1wp                                                          Page 11 of 19

                                  ATTACHMENT 6                    SOFTWARE INSTALLATION TERMS AND CONDITIONS

                             EXHIBIT 2 OF APPENDIX A                             EXTERNAL DOWNLOAD PROCESS

EXTERNAL DOWNLOAD PROCESS. The following process shall comply with the requirements set forth in Subsection 2(c)(i) of Appendix A, Attachment 6:

(a) download tools (which are off the shelf products) used to perform installation process are not required to be in a secured area (1,2);

(b) the master image is retained in a secured area (which is either a locked room or cabinet) when not in use;

(c) the installation process is periodically monitored by an IBM employee or IBM contractor employee (who is not an employee of MSL);

(d) if the image is installed on a hardfile prior to installation of the hardfile on the Product, such installed hardfile serial numbers will be separately tracked and any such hardfiles that are not installed in a Product by the end of the work session will be secured in the secured area;

(e) the hardfile on which the image is installed is electronically verified and associated to the Product unit serial number;

(f) MSL electronically tracks the system unit serial number, hardfile serial number, and designated model number;

(g) access to the secured area where the master image is retained when not in use is limited to an IBM employee, IBM contractor employee, or MSL;

(h) the MS Certificate of Authenticity (COA) serial number is electronically associated by MSL to the Product serial number;

Notes: 1. Customer Product model and serial number electronically captured via the vital product data. 2. IBM proprietary software, maintained and accessible only by IBM or MSL, shall be used for the download process.

IBM Confidential                                                  June 2, 1999 ATT6.1wp                                                          Page 12 of 19

                                  ATTACHMENT 6                    SOFTWARE INSTALLATION TERMS AND CONDITIONS

                             EXHIBIT 3 OF APPENDIX A                             RECOVERY CD INSTALLATION

RECOVERY CD INSTALLATION. The following process shall comply with the requirements set forth in subsection 2(c)(ii) of Appendix A, Attachment 6:

(a) download tools (which are off the shelf products) used to perform the installation process are not required to be in a secured area;

(b) the recovery CDs are retained in a secured area when not in use;





(c) the installation process is periodically monitored by an IBM employee or IBM contractor employee (who is not an employee of MSL);

(d) the hardfile on which the image is installed is electronically verified and associated to the Product serial number;

(e) MSL electronically tracks the Product serial number, hardfile serial number, and designated model number;

(f) access to the secured area where the recovery CDs are retained when not in use is limited to an IBM employee, IBM contractor employee or MSL;

(g) the MS Certificate of Authenticity (COA) serial number is electronically associated to the Product serial number by the MSL.

IBM Confidential                                                  June 2, 1999 ATT6.1wp                                                          Page 13 of 19

                                  ATTACHMENT 6                    SOFTWARE INSTALLATION TERMS AND CONDITIONS

                             EXHIBIT 4 OF APPENDIX A                          SECURED SERVER DOWNLOAD PROCESS

SECURED SERVER DOWNLOAD PROCESS. The following process shall comply with the requirements set forth in Subsection 2(c)(iii) of Appendix A, Attachment 6:

(a) the master image shall be maintained on a secured server with access limited to an IBM employee, an IBM contractor employee, or MSL;

(b) the server shall be accessible only to an IBM employee, an IBM contractor employee, or MSL through keyboard locks and power-on passwords;

(c) only operators with valid user ids and passwords are authorized to initiate download. The IBM employee or IBM contractor employee need not be present for installation process;

(d) the server electronically logs the model number, serial number, user id, and image part number when the installation process is initiated;

(e) MSL electronically tracks the Product serial number, hardfile serial number and designated model number;

(f) the MS COA serial number is electronically associated by MSL to the Product serial number

IBM Confidential                                                  June 2, 1999 ATT6.1wp                                                          Page 14 of 19

                                  ATTACHMENT 6                    SOFTWARE INSTALLATION TERMS AND CONDITIONS

                             EXHIBIT 5 OF APPENDIX A                             ADDITIONAL MS PROVISIONS:                       MS LICENSE OBLIGATIONS IMPOSED ON MSL

1. INSTALLATION OBLIGATIONS. MSL represents, warrants and agrees that when performing work pursuant to this Attachment 6, it shall:

        (a) install no more than one (1) copy of the MS Software Image on each     Product system hard disk (Preinstalled MS Software);

        (b) unless expressly authorized by IBM in writing to perform otherwise,     pre-install the MS Software Image as the default operating system on each     Product distributed with the MS Software Image (i.e., the MS Software Image     will set up and execute unless the End User Customer configures the Approved     Product otherwise). MSL shall preinstall the MS Software Image solely in     accordance with the installation instructions set forth in this Attachment 6     and as further directed by IBM in Appendices. MSL may use the tangible forms     of the programming code (tools and software) provided by IBM solely to     preinstall the MS Software Image in accordance with this Attachment 6 and     for no other purpose;

        (c) distribute, to IBM and IBM's subsidiaries, Products with only one     (1) copy each of the Preloaded MS Software and related documentation as     directed by IBM in writing; PROVIDED, HOWEVER, that if IBM provides MSL     with a recovery CD of the MS Software Image (Recovery CD) or back-up copy     of the MS Software Image on CD (Back-up Copy) in a Product's ship group,     MSL shall distribute one copy of such Recovery CD or Back-up CD along with     the Product, if so directed by IBM in writing;

        (d) distribute MS Software Image(s) and MS Software Image documentation     only with Product(s) and only inside the Product package;

        (e) except as expressly authorized by IBM in writing, not modify, in any     way, or delete any aspects of the MS Software Image and MS related     documentation provided by IBM to MSL;

        (f) except as provided in this Attachment 6 or expressly authorized by     IBM in writing, not remove or modify the package contents of any MS Software





    Image package or modify or translate any related End User documentation;

IBM Confidential                                                  June 2, 1999 ATT6.1wp                                                          Page 15 of 19

                                  ATTACHMENT 6                    SOFTWARE INSTALLATION TERMS AND CONDITIONS

                             EXHIBIT 5 OF APPENDIX A                             ADDITIONAL MS PROVISIONS:                       MS LICENSE OBLIGATIONS IMPOSED ON MSL

        (g) include an IBM-specified MS Software Image package with each Product     distributed with an MS Software Image; A COA must be affixed to or accompany     each copy of the MS Software Image documentation, and the COA serial number     must be registered with the Product during the assembly process as provided     in Exhibits 2, 3, and 4 of Appendix A of this Attachment 6.

        (h) if expressly authorized by IBM to distribute the MS Software     Images(s) on media other than installed on the Product hard disk, distribute     the MS Software Image(s) on separate media (e.g., separate diskettes,     CD-ROM disc, etc.) from other software, except for distribution of a     Recovery CD approved by IBM and MS;

        (i) Preload MS Software Images on Products, and place MS Software Image     packages in Product packages, only at an Approved Location and solely by     MSL's employees or contractors;

        (j) not reverse engineer any MS Software Image provided by IBM to MSL,     except as permitted by applicable law without the possibility of contractual     waiver. Except as necessary to Preload MS Software Images or as otherwise     permitted in Attachment 6, MSL shall not reproduce the MS Software Image or     any part of the related documentation. MSL shall make no use of the tangible     MS Software Image and related documentation except as expressly described in     this Attachment 6;

        (k) not distribute MS Software Images or any part of the related     documentation in encrypted form, unless provided by IBM in such form and     expressly directed by IBM to distribute in such form;

        (l) where MSL distributes Preinstalled MS Software within the Products,     place a notice over either the Product power switch in the OFF position or     the power inlet connector which informs the End User that turning on the     Product system indicates acceptance of the terms of the End User License     Agreement (EULA), or comply with such other procedure authorized by IBM     to ensure EULA acceptance;

IBM Confidential                                                  June 2, 1999 ATT6.1wp                                                          Page 16 of 19

                                  ATTACHMENT 6                     SOFTWARE INSTALLATION TERM AND CONDITIONS

                             EXHIBIT 5 OF APPENDIX A                             ADDITIONAL MS PROVISIONS:                       MS LICENSE OBLIGATIONS IMPOSED ON MSL

        (m) if IBM expressly authorizes MSL in writing to enter End User     information on behalf of End Users in the boxes provided for the on-screen     End User registration process for the MS Software Image, not to enter     Supplier's own name or make any other false or fictional registrations. MSL     shall not (A) relieve End Users of their obligations to enter COA     registration numbers in the on-screen End User registration process and to     reply to on-screen EULA inquiries or (B) insert COA registration numbers or     reply to EULA inquiries for or on behalf of End Users;

        (n) unless expressly authorized by IBM in writing, not install multiple     versions of MS Software Images;

        (o) except as expressly authorized by IBM in writing, not distribute     more than one MS Windows operating system (i.e., [*]) with the same     Product.

2. INTELLECTUAL PROPERTY NOTICES. MSL will not remove, modify or obscure any copyright, trademark, patent, or mask work notices that appear on the MS Software Image or related documentation as delivered to MSL.

3. OBLIGATIONS UPON TERMINATION.

        (a) Except as otherwise provided in Subsection 3(b) below, within [*]     calendar days after termination or expiration of the Agreement (or this     Attachment 6, in the event of termination in part) for any reason,     MSL shall return to IBM all MS Software Image(s) master media and all MS     Software Image documentation which has not been placed in a Product package     prior to such termination or expiration, and MSL shall provide written     notice to IBM signed by a representative certifying that MSL has fulfilled     such requirements.

        (b) Except as otherwise provided in this Subsection 3(b), upon     termination or expiration of the Agreement (or this Attachment 6, in the





    event of termination in part) for any reason, MSL's authority to Preload MS     Software Images and to place MS Software Image documentation in Product     packages shall immediately cease.

IBM Confidential                                                  June 2, 1999 ATT6.1wp                                                          Page 17 of 19

                                  ATTACHMENT 6                    SOFTWARE INSTALLATION TERMS AND CONDITIONS

                             EXHIBIT 5 OF APPENDIX A                             ADDITIONAL MS PROVISIONS:                       MS LICENSE OBLIGATIONS IMPOSED ON MSL

4. ADDITIONAL AUDITS AND INSPECTIONS.

        (a) During the Term of the Agreement, and for [*] years thereafter,     MSL agrees to keep all usual and proper records and books of account and     all usual and proper entries relating to each MS Software Image sufficient     to substantiate the number of copies of MS Software Image packages acquired     and placed into Product packages, the number of copies of MS Software Images     installed, and the number of Products distributed by MSL. MSL shall maintain     on MSL's premises (or commercial archive facility) such records, and all     other records required to be kept by this Attachment 6, for itself and for     each Subsidiary of MSL that exercises rights under this Attachment 6. Any     audit must be initiated within [*] years after termination or expiration of     this Attachment 6, the Agreement, or of the MS License, whichever occurs     last.

        (b) In order to verify statements issued by MSL and Subsidiaries of MSL     and compliance with the terms and conditions of this Attachment 6, IBM or MS     may, at IBM's or MS's sole discretion, cause (i) an audit to be made of     MSL's and/or MSL's Subsidiaries' books and records and/or (ii) an inspection     to be made of those portions of MSL's and/or MSL's Subsidiaries' facilities     and procedures reasonably necessary to verify such compliance. Except as     otherwise provided in the Agreement, any audit and/or inspection shall be     conducted during regular business hours at MSL's and/or MSL's Subsidiaries'     facilities, with at least forty-five (45) calendar days prior written     notice. Any audit and/or inspection shall be conducted (other than on a     contingent fee basis) by an independent certified public accountant which is     either (1) jointly selected by MSL and IBM (or MS, as applicable), (2) has     been agreed to by the Parties for any prior audit of any MSL/IBM (or MS, as     applicable) license or agreement, or (3) has been agreed to by IBM and MS     for any prior audit of any IBM/MS license or agreement.

        (c) MSL agrees to provide the audit or inspection team reasonable access     to the relevant MSL's and/or MSL's Subsidiaries' records and facilities for     the purpose of performing the audit.

IBM Confidential                                                  June 2, 1999 ATT6.1wp                                                          Page 18 of 19

                                  ATTACHMENT 6                    SOFTWARE INSTALLATION TERMS AND CONDITIONS

                             EXHIBIT 5 OF APPENDIX A                            ADDITIONAL MS PROVISIONS:                       MS LICENSE OBLIGATIONS IMPOSED ON MSL

        (d) Prompt adjustment shall be made to compensate for any errors or     omissions disclosed by such audit. Any such audit shall be paid for by IBM     (or MS, as applicable) unless material discrepancies are disclosed.     Material shall mean an underaccounting of installed MS Software Images     valued at more than [*]. If material discrepancies are disclosed, MSL     agrees to pay IBM or MS for the costs associated with the audit. Further,     MSL agrees to indemnify IBM and its subsidiaries for any additional costs     incurred by IBM as a result of any unauthorized copies or copies which were     not reported to IBM. In no event shall audits be made more frequently than     semiannually unless the immediately preceding audit disclosed a material     discrepancy.

5.  EXPORT OR RE-EXPORT. MSL agrees that it will not export or re-export an MS     Software Image to any country to which such export is restricted by export     administration regulations, without prior written consent, if required, of     the Office of Export Administration of the U.S. Department of Commerce, or     such other governmental entity as may have jurisdiction over such export.     Restricted countries currently include, but are not necessarily limited to,     Cuba, Sudan, Iran, Iraq, Libya, North Korea, and Syria. MSL warrants and     represents that neither the U.S.A. Bureau of Export Administration nor any     other federal agency has suspended, revoked or denied MSL's export     privileges. MSL further agrees that it shall not export or re-export an MS     Software Image in violation of applicable laws or regulations to (i) any End     User who MSL knows will utilize an MS Software Image in the design,     development or production of nuclear, chemical or biological weapons; or     (ii) any End User who has been prohibited from participating in U.S.A.     export transactions by any federal agency of the U.S.A. government.

6. CONFIDENTIALITY. As provided in the Agreement, the terms and conditions of this Attachment 6 (including this Exhibit 5 of Appendix A of Attachment 6) are confidential, and MSL shall not disclose the terms or conditions to any third





party without the prior written approval of IBM.

IBM Confidential                                                  June 2, 1999 ATT6.1wp                                                          Page 19 of 19

                           IBM AGREEMENT FOR EXCHANGE                           OF CONFIDENTIAL INFORMATION

                           Document Number: 4998S60076

                   International Business Machines Corporation                              Armonk, New York 10504

                                                                     Page 1 of 5

                                                               [GRAPHIC OMITTED]

               Agreement for Exchange of Confidential Information

IBM ============================================================================

      Our mutual objective under this Agreement is to provide appropriate       protection for Confidential Information (Information) while maintaining       our ability to conduct respective business activities. Each of us agree       that the following terms apply when one of us (Disclose) discloses       Information to the other (Recipient) under this Agreement.

SECTION 1 ASSOCIATED CONTRACT DOCUMENTS

      Each time one of the parties wishes to disclose specific Information to       the other, the Discloser will issue a Supplement to this Agreement       (Supplement) before disclosure.

      The Supplement will identify the Recipient's person designated to be its       Point of Contact for the disclosure and will contain the Initial and Final       Disclosure Dates. If either of these dates is omitted from the Supplement,       such date will be deemed to be the actual date of disclosure. Information       becomes subject to this Agreement on the Initial Disclosure Date. The       Supplement will also contain a non-confidential description of the       specific Information to be disclosed and any additional terms for that       Information.

      The only time Recipient and Discloser are required to sign the Supplement       is when it contains additional terms. When signatures are not required,       the Recipient indicates acceptance of Information under the terms of this       Agreement by participating in the disclosure, after receipt of the       Supplement.

SECTION 2 DISCLOSURE

      The Discloser and Recipient's Point of Contact will coordinate and control       the disclosure. Information will be disclosed either:

            1)    In writing;             2)    By delivery of items;             3)    By initiation of access to information, such as may be                   contained in a data base; or             4)    By oral and/or visual presentation.

      Information should be marked with a restrictive legend of the Discloser.       If Information is not marked with such legend or is disclosed orally:

            1)    The Information will be identified as confidential at the time                   of disclosure, and             2)    The Discloser will promptly provide the Recipient with written                   summary.

SECTION 3 OBLIGATION

      The Recipient agrees to:

            1)    use the same care and discretion to avoid disclosure,                   publication or dissemination of the Discloser's Information as                   it uses with its own similar Information that it does not wish                   to disclose, publish or disseminate; and             2)    use the Discloser's Information for the purpose for which it                   was disclosed or otherwise for the benefit of the Discloser.

      The Recipient may disclose Information to:

                                                                     Page 2 of 5

            1)    its employees and employees of its parent and subsidiary                   companies who have a need to know; and             2)    any other party with the Discloser's prior written consent.





      Before disclosure to any of the above parties, the Recipient will have a       written agreement with such party sufficient to require that party to       treat information in accordance with this Agreement.

      The Recipient may disclose Information to the extent required bylaw.       However, the Recipient must give the Discloser prompt notice to allow the       Discloser a reasonable opportunity to obtain a protective order.

SECTION 4 CONFIDENTIALITY PERIOD

      Information disclosed pursuant to this Agreement will be subject to the       terms of this Agreement for [*] years following the Final Disclosure Date.

SECTION 5 EXCEPTIONS TO OBLIGATIONS

      The Recipient may disclose, publish, disseminate, and use Information that       is:

            1)    already in its possession without obligation of                   confidentiality;             2)    developed independently;             3)    obtained from a source other than the Discloser without                   obligation of confidentially;             4)    publicly available when received, or thereafter becomes                   publicly available through no fault of the Recipient; or             5)    disclosed by the Discloser to another party without obligation                   of confidentially.

SECTION 6 RESIDUAL INFORMATION

      The recipient may disclose, publish, disseminate, and use the ideas,       concepts, know-how and techniques, related to the Recipient's business       activities, which are contained in the Discloser's information and       retained in the memories of Recipient's employees who have had access to       the Information pursuant to this Agreement (Residual Information).

      Nothing contained in this Section gives the Recipient the right to       disclose, publish, or disseminate, except as set forth elsewhere in this       Agreement:

            1)    the source of Residual Information;             2)    any financial, statistical or personnel data of the                   Discloser; or             3)    the business plans of the Discloser.

SECTION 7. DISCLAIMERS

      THE DISCLOSER PROVIDES INFORMATION ON AN AS IS BASIS.

      The discloser will not be liable for any damages arising out of use of       Information disclosed hereunder.

      Neither this Agreement nor any disclosure of Information hereunder grants       the Recipient any right or license under any trademark, copyright or       patent now or hereafter owned or controlled by the Discloser.

      Disclosure of Information containing business plans is for planning       purposes only. The Discloser may change or cancel its plans at any time.       Use of such Information is at the Recipient's own risk.

      The receipt of Information pursuant to this Agreement will not preclude,       or in any way limit, the Recipient from:

                                                                     Page 3 of 5

            1)    providing to others products or services which may be                   competitive with products or services of the Discloser;             2)    providing products or services to others who compete with the                   Discloser; or             3)    assigning its employees in any way it may choose.

SECTION 8 GENERAL

      This Agreement does not require either party to disclose or to receive       Information.

      Neither party may assign, or otherwise transfer, its rights or delegate       its duties or obligations under this Agreement without prior written       consent. Any attempt to do so is void.

      The Recipient will comply with all applicable United States and foreign       export laws and regulations.

      Only a written agreement signed by both of us can modify this Agreement.

      Either party may terminate this Agreement by providing [*] month's written       notice to the other. Any provisions of this Agreement which by their       nature extend beyond its termination remain in effect until fulfilled,       and apply to respective successors and assignees.





      If there is a conflict between the terms of this Agreement and a       Supplement, those of the Supplement prevail. Except as modified by a       Supplement, the terms of this Agreement remain in full force and effect.

      The laws of the State of New York govern this Agreement.

                                                                     Page 4 of 5

      This Agreement and its Supplements are the complete and exclusive       agreement regarding our disclosures of Information, and replace any prior       oral written communications between us. By signing below for our       respective enterprises, each of us agrees to the terms of this Agreement.       Once signed, any reproduction of this Agreement made by reliable means       (for example, photocopy or facsimile) is considered an original.

      International Business Machines     Manufacturer Services Limited       Corporation                         200 Baker Avenue       Armonk, New York                    Concord, Massachusetts

By: /s/ Craig Bloszinsky                  By: ----------------------------------        ----------------------------------     Authorized Signature                      Authorized Signature

Name: Craig Bloszinsky                    Name: ----------------------------------        ----------------------------------

Date: 3/10/98                             Date: ----------------------------------        ----------------------------------

Agreement Number 4998S60076 International Business Machines Corporation Armonk, New York 10504

                                                                     Page 5 of 5

                      EQUIPMENT AND PROGRAM LOAN AGREEMENT

                                     between

                                 IBM Corporation

                                       and

               Manufacturers' Services Western US Operations, Inc.

                                                               [GRAPHIC OMITTED]

IBM Equipment and Program Loan Agreement     ============================================================================

This is an Equipment and Program Loan Agreement (EPLA) between International Business Machines Corporation (hereinafter called IBM), a New York corporation, with an address for the purpose of this Agreement at 8501 IBM Drive, Charlotte, NC 28262, and Manufacturers' Services Western US Operations, Inc. (hereinafter called MSL), with an address at 5600 Mowry School Road, Newark, CA 94560.

IBM and MSL agree that the following terms and conditions apply when IBM loans MSL equipment and programs including associated user manuals and similar documentation (Loaned Items). Loaned Items may also be referred to as Loaned Equipment or Loaned Programs, as applicable.

SECTION 1 ASSOCIATED CONTRACT DOCUMENTS

      Attachment 5 of the Outsourcing Agreement lists the Loaned Items. A       revised Attachment 5 sets forth any additions or deletions to the listed       Loaned Items. MSL's continued use of the Loaned Items or acceptance of       additional Loaned Items after its receipt of a revised Attachment 5 will       constitute its acceptance of such Attachment.

      The loan of Loaned Items is made in conjunction with the IBM and MSL       Outsourcing Agreement dated _____________________ (Referenced       Agreement) for the purpose of MSL fulfilling its responsibilities and       obligation as stated in the Reference Agreement.

SECTION 2 TERM AND TERMINATION

      Unless otherwise mutually agreed, the EPLA will be in effect for as long       as the Referenced Agreement is effective.

SECTION 3 LOANED PERIOD

      IBM will provide the Loaned Items to MSL on or about the Effective Date of       the Referenced Agreement. The Loan Period for each Loaned Item will extend       from the actual date IBM delivers the Loaned Items(s) to MSL, until the





      earliest of:

      a)    the applicable return date specified in the Attachment or revised             return date specified in a revised Attachment;

      b)    the date MSL acquires i) title to the Loaned Equipment or ii) a             continuing license to the Loaned Program, should such acquisition or             licensing be available to MSL under Section 12: or

      c)    on the Referenced Agreement expiration date.

SECTION 4 AUTHORIZED USE

      IBM provides Loaned Items to MSL solely for use in accordance with the       terms of this Agreement and for the Purpose of the loan described either       in this Agreement or in the Referenced Agreement (Authorized Use). There       are no charges for Authorized Use of the Loaned Items. MSL may not use the       Loaned Items for any other purposes.

EPL00L(CLT-EPL 1.1-02/93)                                            Page 2 of 7

SECTION 5 OWNERSHIP AND LICENSE

      IBM or another party retains title to all Loaned Items. MSL may not       transfer Loaned Items to anyone else. For Loaned Programs which are not       subject to IBM's or another supplier's or publisher's license agreement,       IBM grants MSL a license to use, store, modify and make sufficient copies       to support MSL's Authorized Use under this Agreement. Such copies will be       deemed to be Loaned Items. For Loaned Programs which are subject to       another supplier's or publisher's license agreement, however, the terms       and conditions of that supplier or publisher are passed to MSL through       IBM. Such terms and conditions will be shipped with the Loaned Program.       For Loaned Programs which IBM licenses to others under an IBM license, the       terms of the applicable IBM license which are not inconsistent with this       Agreement apply. IBM will provide such terms to MSL upon request Any       authorized copies made by MSL will be deemed to be Loaned Items.

SECTION 6 LICENSED INTERNAL CODE

      If the Loaned Equipment contains Licensed Internal Code (Code), so       identified by IBM, IBM grants MSL a license only to execute such Code to       enable the Loaned Equipment to perform in accordance with IBM's official       published specifications. MSL may not reverse assemble, reverse compile,       decode, translate, or make any other copies of the Code. MSL must return       the original copy of the Code to IBM at the conclusion of the Loan Period.

SECTION 7 DELIVERY AND INSTALLATION

      IBM will deliver the Loaned Items to 8501 IBM Drive, Charlotte, NC 28262.

      MSL will:

            1)    set-up all Loaned Equipment, and

            2)    install all Loaned Programs

SECTION 8 RISK OF LOSS OR DAMAGE

      IBM relieves MSL of the risk of loss of, or damage to, all Loaned Items,       except for loss or damage resulting from MSL's breach of this Agreement       including use other than Authorized Use.

SECTION 9 SECURITY

      MSL will provide, at no cost to IBM, adequate security to protect the       Loaned Items from theft, damage or misuse.

      MSL will use reasonable care in the use of all Loaned Items. MSL will       provide an operating environment for the Loaned Items consistent with the       related user documentation.

      MSL will keep the Loaned Items at the Installation Address specified in       the Attachment. MSL will not move the Loaned Items to another location       without IBM's prior written approval.

SECTION 10 SERVICE AND SUPPORT

      During the time the Loaned Items are in MSL's possession, MSL shall, at       its own expense:

      a)    Develop and maintain the expertise to operate the Equipment             independent of IBM and ensure that the Equipment complies at all             times with all federal, state, and local governmental safety and             other requirement (including OSHA regulations). If MSL determines             that any of the Loaned Items received from IBM fails to comply with             any such requirements, MSL shall promptly notify IBM, and IBM shall

EPL00L(CLT-EPL 1.1-02/93)                                            Page 3 of 7

            either replace the Loaned Item or instruct MSL to modify the Loaned             Item so that it compiles, at IBM's expense.





      b)    Service the Loaned Items and maintain them in good operating             condition at all times.

      c)    Replace or repair all items lost, damaged or destroyed except to the             extent MSL proves to IBM that such loss, damage or destruction is             caused by circumstances beyond MSL's control. All replacement of             Loaned Items Shall become IBM property and shall be Subject to all             the terms and conditions of this Agreement.

      MSL will permit IBM personnel full, free and safe access to MSL's       facilities, during normal business hours, after reasonable notice, for the       purpose of inspection and inventory as IBM deems necessary.

SECTION 11 ALTERATIONS AND ATTACHMENTS

      MSL may make an alteration to Loaned Equipment (e.g., a change in the       structure of the equipment) only upon IBM's prior written approval. MSL       may make an attachment to Loaned Equipment (e.g., coupling a printer to a       loaned personal computer) without notice to IBM.

      MSL will remove any alteration or attachment and restore Loaned Equipment       to its unaltered condition before its return to IBM or upon IBM's notice       to MSL that the alteration or attachment creates a safety hazard or       renders maintenance of the Loaned Equipment impractical.

SECTION 12 DISPOSITION OF LOANED ITEMS

12.1  Return to IBM

      MSL will return the Loaned Equipment to IBM at the end of the Loan Period,       except as may be provided for in this Section. MSL will return the Loaned       Equipment to IBM in the same condition as when delivered to MSL,       reasonable wear and tear excepted.

      MSL will return the original and all copies of the Loaned Programs at the       end of the Loaned Period, except as may be provided in this Section.

      MSL will permit IBM personnel access during IBM's normal business hours to       allow IBM to remove the Loaned Items.

12.2  Acquisition and Continued Licensing

      IBM will determine the availability of Loaned Equipment for MSL's       acquisition and Loaned Programs for MSL's continued licensing beyond the       applicable Loan Period. MSL must inform IBM, prior to the end of the       applicable Loan Period, of MSL's interest in the acquisition of specific       Loaned Equipment or the continued licensing of specific Loaned Programs.       IBM will then notify MSL in writing either;

            1)    of the terms and conditions under which MSL may acquire such                   Loaned Equipment or continue to license such Loaned Programs,                   or

            2)    that the Loaned Items are not available for acquisition or                   continued licensing.

      Continued Licensing of Loaned Programs will be governed by the provisions       of the applicable IBM license agreement or another supplier's or       publisher's license agreement. IBM will identify to MSL the applicable       agreement which governs such licensing.

EPL00L(CLT-EPL 1.1-02/93)                                            Page 4 of 7

SECTION 13 DISCLAIMER OF WARRANTY

      IBM PROVIDES LOANED ITEMS ON AN AS IS BASIS. IBM MAKES NO WARRANTY,       EXPRESS OR IMPLIED, WITH RESPECT TO SUCH ITEMS, INCLUDING THE IMPLIED       WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

SECTION 14 PATENTS AND COPYRIGHTS

      If the operation of a Loaned Item becomes, or IBM believes is likely to       become, the subject of a claim that it infringes a patent or copyright in       the United States or Puerto Rico, MSL will permit IBM, at its option and       expense, either to secure the right for MSL to continue using the Loaned       Item or to replace or modify it so that it becomes noninfringing. However,       if neither of the foregoing alternatives is available on terms which are       reasonable in IBM's judgment, MSL will return the Loaned Item upon IBM's       written request.

      IBM will have no obligation with respect to any such claim based upon       MSL's modification of IBM equipment, programs or programming or their       combination, operation or use with any non-IBM apparatus, data or       programs.

      IBM will not have any liability regarding patent or copyright infringement       for non-IBM Loaned Items.

      This Section states IBM's entire obligations to MSL regarding infringement       or the like.

SECTION 15 LIMITATION OF REMEDIES





      IBM's entire liability and MSL's exclusive remedy for actual damages from       cause whatsoever relating to the subject matter of this Agreement will be       limited to the amount of $25,000. This limitation will apply, except as       otherwise stated in this Section, regardless of the form of action,       whether in contract or in tort, including negligence. This limitation will       not apply to claims by MSL for bodily injury or damage to real property or       tangible personal property for which IBM is legally liable.

      In no event will IBM be liable for any lost profits, lost savings,       incidental damages, or other economic consequential damages, even if IBM       has been advised of the possibility of such damages. In addition, IBM will       not be liable for any damages claimed by IBM based on any third party       claim.

      In no event will IBM be liable for any damages caused by MSL's failure to       perform MSL's responsibilities.

SECTION 16 GENERAL

      MSL may not assign this Agreement without IBM's prior written consent. Any       attempted assignment without such consent is void.

      Loaned Items are to be installed only in the United States or Puerto Rico.

      IBM will pay destination charges, both from and to IBM-designated       locations, for each Loaned Item shipped in accordance with IBM's then       current shipping practice. MSL will pay any rigging charges. MSL will       furnish all labor for unpacking and packing except as IBM otherwise       specifies or when performed at an IBM-designated location.

      IBM may provide services described in this Agreement by using IBM-selected       independent contractors.

      Neither party is responsible for failure to fulfill its obligations under       this Agreement due to causes beyond its control.

EPL00L(CLT-EPL 1.1-02/93)                                            Page 5 of 7

      Neither party may bring an action, regardless of form, arising out of this       Agreement more than [*] years after the cause of action arose.

      In the event of termination or expiration of this Agreement, the       provisions of this Agreement which, by their nature, extend beyond the       expiration or termination of this Agreement shall remain in effect beyond       such expiration or termination until fulfilled.

      If there is a conflict between this Agreement and an Attachment, the terms       and conditions of the Attachment will prevail. Except as modified by an       Attachment the terms of this Agreement remain in full force and effect.       The terms of any Attachment not inconsistent with a subsequent Attachment       remain in full force and effect.

      This Agreement and the rights and obligations of the parties hereto shall       be construed in accordance with the substantive laws of the State of New       York.

EPL00L(CLT-EPL 1.1-02/93)                                            Page 6 of 7

      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be       executed by their respective authorized representatives.

      ACCEPTED AND AGREED TO:               ACCEPTED AND AGREED TO:

      IBM Corporation                       Manufacturers' Services Western                                             US Operations, Inc.       --------------------------------------------------------------------------

      By: /s/ Craig A. Bloszinsky           By: /s/ Kevin C. Melia       --------------------------------------------------------------------------

      CRAIG A. BLOSZINSKY                   KEVIN C. MELIA       --------------------------------------------------------------------------       Print Name                            Print Name

      PURCHASING PROGRAM DIRECTOR           PRESIDENT, CEO       --------------------------------------------------------------------------       Title                                 Title

      5/1/98                                MAY 5, 1998       --------------------------------------------------------------------------       Date                                  Date





EPL00L(CLT-EPL 1.1-02/93)                                            Page 7 of 7 
Question: Highlight the parts (if any) of this contract related to Third Party Beneficiary that should be reviewed by a lawyer. Details: Is there a non-contracting party who is a beneficiary to some or all of the clauses in the contract and therefore can enforce its rights against a contracting party?

Answer: Notwithstanding Section 16.18 of the Outsourcing Base Agreement, MS is an intended third party beneficiary of this Attachment 6 only, with full rights to enforce the terms of this Attachment 6 on its own behalf, but only to the extent that the terms of this Attachment 6 pertains to the MS Software Images and related MS documentation.


Question: SECOND AMENDMENT TO SERVICES AGREEMENT This SECOND AMENDMENT TO SERVICES AGREEMENT, dated and effective as of March 1, 2016, (this Second Amendment), is made between FEDERATED INVESTMENT MANAGEMENT COMPANY, a Delaware statutory trust (the Adviser), and FEDERATED ADVISORY SERVICES COMPANY, a Delaware statutory trust (FASC). Capitalized terms used, but not defined, in this Amendment have the meanings given to such terms in the Services Agreement (as defined below). RECITALS WHEREAS, the Adviser and FASC have entered into that certain Services Agreement dated as of January 1, 2004 (as amended, the Services Agreement), pursuant to which FASC provides certain performance attribution and administration and risk management services to Adviser in connection with Adviser providing investment advisory or sub-advisory services to investment companies registered under the Investment Company Act of 1940 (1940 Act) and/or separate accounts not required to be so registered (collectively, Accounts); WHEREAS, the Adviser and FASC have entered into the Amendment to Services Agreement dated as of March 30, 2009 (the Amendment), pursuant to which the Services indicated in Exhibit A to the Services Agreement were amended solely with respect to Accounts that are not investment companies registered under the 1940 Act, to provide that, as part of the administration and risk management services provided by FASC, FASC may provide certain coordination of client portfolios and related fixed income trade execution implementation and administration services to Adviser when Adviser is acting as adviser or sub-adviser with respect to such Accounts; and WHEREAS, the Adviser and FASC desire to amend the Services indicated in Exhibit A to the Services Agreement, as amended, solely with respect to Accounts for which the Adviser trades in equity securities, equity derivatives and other related equity investments as part of the investment strategy for the Account, to provide that FASC may provide equity trading and transaction settlement, fundamental analysis and quantitative analysis services to Adviser when Adviser is acting as adviser or sub-adviser with respect to such Accounts. NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as follows: 1. Second Amendment to Exhibit A to Services Agreement. Exhibit A to the Services Agreement shall be, and here by is, supplemented with the following: 3. Equity Trading and Transaction Settlement. The equity trading desks execute buy and sell order based on instructions provided by affiliated advisers. The trading staff either places orders electronically or contacts brokers to place orders, find liquidity and seek price levels. Upon completion of a transaction, the transaction settlement group works with the broker and the account custodian to ensure timely and accurate exchange of securities and monies. 4. Fundamental Analysis. The equity investment analysts provide independent research and analysis of specific companies within a sector. Typically, analysis includes review of published reports, interviews of company management, on-site observation of company operations, and the use of various financial models. In addition, analysts read trade journals, attend industry conferences, and focus on trends within the sector and industry. Based on this proprietary analysis, the analyst makes buy, sell or hold recommendations to the Adviser. 5. Quantitative Analysis. Quantitative analysts develop and apply financial models designed to enable equity portfolio managers and fundamental analysts to screen potential and current investments, assess relative risk and enhance performance relative to benchmarks and peers. To the extent that such services are to be provided with respect to any Account which is a registered investment company, Categories 3, 4 and 5 above shall be treated as investment advisory services for purposes of Section 5(b) of the Agreement. 2. Miscellaneous. This Second Amendment shall be effective as of the date first above written upon its execution and delivery by each of the parties hereto. The Services Agreement, as amended by the Amendment and this Second Amendment with respect to Accounts for which the Adviser trades in equity securities, equity derivatives and other related equity investments as part of the investment strategy for the Account, shall remain in full force and effect. The Services Agreement, as amended by the Amendment, also shall remain in full force and effect without this Second Amendment with respect to Accounts for which the Adviser does not trade in equity securities, equity derivatives and other related equity investments as part of the investment strategy for the Account. This Second Amendment shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. This Second Amendment may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Second Amendment and all of which, when taken together, will be deemed to constitute one and the same agreement. IN WITNESS WHEREOF, the parties hereto, through their duly authorized officers, have executed this Second Amendment as of the date first above written. FEDERATED INVESTMENT MANAGEMENT FEDERATED ADVISORY SERVICES COMPANY COMPANY By: /s/ John B. Fisher By: /s/ J. Christopher Donahue Name: John B. Fisher Name: J. Christopher Donahue Title: President Title: Chairman 
Question: Highlight the parts (if any) of this contract related to Governing Law that should be reviewed by a lawyer. Details: Which state/country's law governs the interpretation of the contract?

Answer: This Second Amendment shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania.


Question: Exhibit 99.1   DISTRIBUTOR AGREEMENT   THIS AGREEMENT, dated as of October 24, 2005 is between JOHNSON MATTHEY CATALOG COMPANY, INC., a Delaware corporation, d/b/a ALFA AESAR (hereinafter referred to as ALFA AESAR), having a mailing address of 30 Bond Street, Ward Hill, MA 01835-8099 and Nanophase Technologies Corporation, a Delaware corporation (NTC), having its principal offices at 1319 Marquette Drive, Romeoville, IL 60446.   Whereas NTC is in the business of manufacturing and selling nanoparticles and nanoparticle dispersions (collectively nanomaterials) and wishes to expand the availability and marketing of nanomaterials for research purposes, and   Whereas ALFA AESAR is in the business of efficiently packaging, marketing, selling and distributing research materials, and   NTC desires to appoint and name ALFA AESAR, and ALFA AESAR desires to be appointed and named, exclusive distributor of the Products (as defined below) on a worldwide basis in research quantities for research purposes.   NOW, THEREFORE, in consideration of the mutual promises herein contained, the parties hereto, each intending to be legally bound hereby, agree as follows:   1. Definitions:   1.1 Product or Products mean those nanomaterials, coated nanomaterials and dispersions of nanomaterials listed in Schedule A, as amended from time to time by mutual written agreement signed by the parties.     1.2 Product Price means the price for Products listed in Schedule A sold by NTC to ALFA AESAR.   1.3 Research Quantities means, in the case of nanomaterials and coated nanomaterials, quantities purchased and distributed in individual orders of 54 kilograms or less, and, in the case of dispersions of nanomaterials, quantities purchased and distributed in individual orders of 60 kilograms or less.   1.4 Commercial Quantities means in the case of nanomaterials and coated nanomaterials, quantities purchased and distributed in individual orders greater than 54 kilograms, and, in the case of dispersions of nanomaterials, quantities purchased and distributed in individual orders greater than 60 kilograms.   1.5 Custom Services is any program or product offered by NTC other than the manufacture of Products as listed in Schedule A.   1.6 Territory is all areas in which ALFA AESAR markets, sells or distributes chemicals or other materials through its various sales channels, including but not limited to its present and future catalog distribution networks, Internet web sites, and other distribution channels.   1





1.7 Trademark means all common law, registered and unregistered state, federal and foreign trade names, trademarks, and service marks, including without limitation any logos and slogans.   1.8 Net Sales means the cost charged to a customer for goods and services less the costs for shipping, handling, taxes, duties and credits.   2. Appointment; Reservation of Rights; Referrals.   2.1 NTC hereby grants to ALFA AESAR, and its subsidiaries and affiliates, the exclusive right to market, sell and distribute Research Quantities of the Products within the Territory, ALFA AESAR hereby accepts such right and agrees to use its reasonable efforts to promote the marketing, sale and distribution of Research Quantities of the Products throughout the Territory in accordance with the terms and conditions of this Agreement using normal and standard practices. ALFA AESAR shall have the right, in its sole discretion, to sell Products outside of the Territory. ALFA AESAR agrees that, so long as NTC provides ALFA AESAR with Products for ALFA AESAR' S marketing, sale and distribution of Research Quantities of the Products within the Territory, ALFA AESAR shall purchase all its requirements of the Products (including nanomaterials with physical or chemical properties substantially the same as the Products) exclusively from NTC during the term of this Agreement, ALFA AESAR shall:   i) buy the Products in quantities listed in Schedule A and repackage into the research sample quantities as it deems reasonable and appropriate for distribution and sale on a worldwide basis at such resale prices it shall determine from time to time, provided that any such repackaging shall comply with applicable safety laws and regulations;   ii) attempt to keep reasonably sufficient stocks of the Products to meet customer orders and to store such stocks in such conditions as NTC may recommend from time to time to prevent deterioration or damage.   2.2 NTC reserves for itself the right (i) to sell Commercial Quantities of the Products in individual order quantities of single commercial packages or greater, subject to Section 6; and (ii) to provide samples of the Products in any quantity, free of charge, to its commercial partners or potential partners.   3. Pricing, Exclusions and Purchase Orders.   3.1 Subject to Section 2.2, NTC shall sell Products to ALFA AESAR, at the Product Price as amended from time to time pursuant to this Section 3.1. NTC agrees that the Product Prices, benefits and allowances offered to ALFA AESAR shall not be less favorable than those offered on Products provided to agents, distributors or marketed directly by NTC to any customers, other than the Product Prices existing as of the date of this Agreement with NTC's commercial partners. Subject to the preceding sentence, NTC may increase the Product Price set forth in Schedule A at the end of the first full calendar year of this Agreement and from year to year thereafter, by providing ALFA AESAR with 90 days prior written notice of the changes to the   2





Product Prices. Any such increase in the Product Price shall not be effective for any unshipped portion of an order previously placed by ALFA AESAR prior to the end of the calendar year in which such notice is provided. NTC may decrease the Product Price at any time by providing ALFA AESAR with 30 days prior written notice.   3.2 NTC's prices do not include sales, use, excise, or similar taxes. The amount of any valid present or future sales, use, excise, or other similar tax that is attributable to ALFA AESAR shall be paid by ALFA AESAR; or in lieu thereof, ALFA AESAR shall provide NTC with a tax exemption certificate acceptable to the taxing authorities. Product Prices do not include any transportation or shipping expenses. NTC shall ship Products at ALFA AESAR's expense FOB/FCA (Incoterms 2000) NTC's facilities.   3.3 Subject to Section 2.2, NTC agrees to sell to ALFA AESAR such quantities of Products ordered by ALFA AESAR by written purchase orders. Purchase orders for Products shall be initiated by facsimile transmission, electronic mail or other written communication and shall be binding upon the parties upon acceptance by NTC. NTC shall be deemed to have accepted a purchase order unless NTC provides written notice of rejection to ALFA AESAR within three (3) days of NTC's receipt of such order, not including weekends and nationally recognized holidays.   4. Payment and Delivery.   4.1 Subject to Section 2.2, NTC shall use all reasonable commercial efforts to fill orders placed by ALFA AESAR with all reasonable promptness provided, however, that NTC shall have no obligation to furnish any Products hereunder which have been discontinued. In the event any order is not filled within thirty (30) days of receipt by NTC, ALFA AESAR has the right, but not the obligation, to seek alternative sourcing from a third- party without liability to NTC.   4.2 NTC shall ship Products FOB/FCA its facilities and will arrange delivery of the Products to ALFA AESAR using a nationally recognized carrier. Title to the Products, and the risk of loss or damage to the Products, each will pass to ALFA AESAR upon shipment from NTC's dock in compliance with United States D.O.T. requirements and all applicable laws and regulations.   4.3 NTC shall invoice ALFA AESAR for payment of Products delivered to ALFA AESAR on a Net 30 day basis. Excepting any amounts disputed in good faith, balances unpaid after such period will be subject to a finance charge of 1% per month or may be offset against any balances owed by NTC to ALFA AESAR. The parties agree to work in good faith to resolve any disputed invoice. In the event such efforts do not resolve the dispute within sixty (60) days, either party may initiate Arbitration proceedings pursuant to Section 16.   5. Returns; Discontinued Products.   5.1 Return Rights. Subject to the protocol described below, ALFA AESAR shall have the right to return at NTC's expense, and for full credit of ALFA AESAR's cost, any Products (i.) for which a legitimate and credible allegation is made that the use of such Products infringes on any patent, trademark, trade secret, copyright, right of privacy or publicity, or any other tangible or   3





intangible proprietary or intellectual property right; (b) that are not manufactured, packaged, or labeled in accordance with specifications or industry standards; (c) that are shipped in error or in non-conformance with ALFA AESAR's purchase order; or (d) that are damaged or defective. In the event that ALFA AESAR believes that it is entitled to return any Products delivered under this Agreement, the parties will adhere to the following protocol: (w) ALFA AESAR will contact NTC's Quality Director and then forward to the Quality Director, via a carrier selected by and at NTC's expense, a sample of the Product that ALFA AESAR believes is non-conforming; (x) upon receipt of the sample, NTC will test it and then notify ALFA AESAR of the test results; (y) where the test results confirm that the sample is non-conforming, NTC will provide ALFA AESAR with NTC's Return Authorization Number (RAN); and (z) any returned non-conforming Product must be in its original container, with original labels in act, and all paperwork concerning the returned Product must include NTC's RAN.   5.2 NTC may discontinue offering any Product for any reason by providing six (6) months advance written notice to ALFA AESAR, provided however, NTC shall continue supplying ALFA AESAR with such discontinued Product until the expiration of such six (6) month notice period. Notwithstanding the foregoing, NTC may discontinue any Product immediately upon written notice to ALFA AESAR if such discontinuation is due to any actual or alleged Product defect which may actually or allegedly cause damage to person, property rights or property, With respect to ALFA AESAR's existing inventory of discontinued Product, ALFA AESAR may, its sole discretion, return such Product at any time to NTC for full credit or refund.   6. ALFA AESAR Referrals.   6.1 The following shall be deemed referral sales for which NTC shall pay a commission in accordance with Section 6.2.     a. ALFA AESAR shall refer to NTC the following sales requests either directly or by navigation on ALFA AESAR's Web site:   i) any sales for single Product orders in excess of Research Quantities; or   ii) any sales inquiries for Custom Services.   6.2 NTC shall pay ALFA AESAR a commission for all sales under Section 6.1 as follows. The terms of this Section 6.2 shall survive any expiration or termination of this Agreement.



a) For all referrals under Section 6.1, except where NTC has evidence that it referral the customer (including its affiliates) to ALFA AESAR to purchase a prior sample of the Product in question, or where NTC has made sales to the customer (including its affiliates) referred to NTC by ALFA AESAR within a period of twelve (12) months before ALFA AESAR's referral under Section 6.1, NTC shall pay ALFA AESAR a commission at the rate of [***] on the Net Sales made to each such customer so referred to NTC under Section 6.1. NTC shall pay ALFA AESAR on a monthly basis for all such commissions for a period of three (3) years from the date of such referred customer's first order of Products or Custom Services from NTC.

*** CONFIDENTIAL TREATMENT REQUESTED—This confidential portion has been omitted from this document and filed separately with the Commission.   4





6.3 NTC shall maintain adequate records of its invoices and accounting records reflecting all such sales in accordance with standard accounting principles. Within twelve (12) months after the date this Agreement has been terminated by the parties, ALFA AESAR may engage an independent certified public accounting firm reasonably acceptable to NTC to audit the NTC invoices and accounting records pertaining to those customers identified as referrals under Section 6.1 at NTC's offices during normal business hours by providing thirty (30) days advance notice of such audit for the purpose of determining the accuracy of the commissions paid or payable to ALFA AESAR hereunder. NTC shall promptly pay ALFA AESAR for any deficiencies between the commission earned and the commission paid to ALFA AESAR.   7. Trademarks.    7.1 Each party hereby covenants and agrees that the Trademarks, copyrights and other proprietary rights of the other party are and shall remain the sole and exclusive property of that party and neither party shall hold itself out as having any ownership rights with respect to or, except as specifically granted hereunder, in any other rights therein. Any and all goodwill associated with any such rights shall inure directly and exclusively to the benefit of the owner thereof.   7.2 ALFA AESAR hereby grants to NTC a limited non-exclusive license to use the ALFA AESAR Trademarks in the form provided by ALFA AESAR during the Term of this Agreement in accordance with the terms set forth herein. Such license is granted solely in connection with NTC's rights and obligations under this Agreement and, in particular, for the purpose of licensing NTC to use the ALFA AESAR Trademark on the NTC web site as expressly contemplated herein for referral of customers of Research Quantities to ALFA AESAR and is a link/navigational button to the ALFA AESAR Site. All such uses will be subject to ALFA AESAR's approval as to the manner and/or form of use. NTC will not be allowed to use or reproduce the ALFA AESAR Trademark for any other purpose, including the general promotion of the NTC Site, without the prior written approval of ALFA AESAR.   7.3 NTC hereby grants ALFA AESAR a limited non-exclusive license to use, exhibit, excerpt, reproduce, publish, publicly perform and transmit via the Internet and otherwise use the NTC Trademarks in substantially the form as NTC may provide to ALFA AESAR from time to time during the Term of this Agreement in accordance with the terms set forth herein. Such license is granted solely in connection with ALFA AESAR's rights and obligations under this Agreement and, in particular, for the purpose of licensing ALFA AESAR to use the NTC Trademarks in ALFA AESAR's marketing, sales and distribution materials relative to the Products, including without limitation on the ALFA AESAR's Web site as a link/navigational button to the NTC Web site as posted by NTC. All such uses shall be subject to NTC's prior written approval as to manner and/or form of use.   7.4 Except as provided for in this Agreement, each party understands that the Web site links contemplated above to the other party's site may not be used in any manner to provide viewers access to the other party's Site via any caching, framing, layering or other techniques that cause   5





intermediate copying of the other party's Site (or elements thereof) or display of the other party's site or portions thereof in any manner unintended by the owner of the Site.   7.5 Upon termination of this Agreement, ALFA AESAR may continue to advertise and promote the Products, using the NTC's Trademarks and NTC content until ALFA AESAR's inventory depletion.   8. Training; Product Material.    8.1 NTC will provide training to ALFA AESAR's personnel on ALFA AESAR's premises as reasonably necessary, but no less than once annually, at mutually agreed upon times and dates to provide ALFA AESAR's sales and service personnel with adequate knowledge with respect to the Products.   8.2 NTC will provide to ALFA AESAR marketing and technical support for products as reasonably necessary and requested by ALFA AESAR, including providing Product materials which shall include, without limitation, Product specifications, images, and other textual, graphical and/or multimedia content regarding the Products for use in preparing advertising and promotional material. Subject to any limitations which NTC communicates to ALFA AESAR in writing, NTC hereby grants ALFA AESAR a license to use, exhibit, excerpt, reformat, modify, reproduce, publish, publicly perform and transmit via the Internet and otherwise use such NTC content for the purpose of marketing, advertising and promoting the Products, provided that ALFA AESAR obtains NTC's prior written approval for NTC content to be included in such literature.   9. Representations; Limited Warranty; Remedies.    9.1 NTC represents and warrants that i) the execution and delivery of this Agreement has been authorized by all requisite corporate action, ii) subject to Section 2.2, it in under no contractual or other obligation or restriction that is inconsistent with its execution or performance of this Agreement, iii) subject to Section 2.2, NTC will not enter into any agreement, either written or oral, that would conflict with NTC's responsibilities under this Agreement, iv) the Products do not infringe the intellectual property rights of any third party and NTC is not aware of any infringement claims relating to the Products, v) it will comply with all applicable laws, rules, regulations of any US or foreign laws, rules, or regulations in the manufacture and supply of Product, and vi) Products sold hereunder will be in compliance with the current Product description set forth in Schedule A, as amended from time to time by agreement of the parties. NTC shall further grant to ALFA AESAR the same warranty, as set forth in NTC's General Terms and Conditions of Sale for its products set forth in Schedule B. The foregoing warranties shall apply only to, and is intended for the benefit of, ALFA AESAR's customers.   9.2. Subject to the protocol in Section 5.1, ALFA AESAR may return to NTC any Product that is defective or that fails to comply with the purchase order provided by ALFA AESAR. NTC shall return to ALFA AESAR as promptly as possible, a working replacement or, in the event such replacement is not possible or at ALFA AESAR's election, it shall credit ALFA AESAR's account for the invoiced price and shipping charges of the defective Product. The   6





correction of such defective Product shall be at no cost to ALFA AESAR. The cost of shipping the replacement Product back to ALFA AESAR shall be paid by NTC. THE CORRECTION OF SUCH DEFECT BY REPAIR OR CREDITING ALFA AESAR'S ACCOUNT FOR THE COST OF THE PRODUCT IN THE MANNER SET FORTH ABOVE SHALL CONSTITUTE THE SOLE AND EXCLUSIVE REMEDY OF DISTRIBUTOR WITH RESPECT TO ANY WARRANTY GIVEN HEREIN RELATING TO ANY PRODUCT SOLD OR DELIVERED HEREUNDER.   9.3 ALFA AESAR represents and warrants that i) the execution and delivery of this Agreement has been authorized by all requisite corporate action, ii) it is under no contractual or other obligation or restriction that is inconsistent with its execution or performance of this Agreement, iii) ALFA AESAR will not enter into any agreement, either written or oral, that would conflict with ALFA AESAR's responsibilities under this Agreement, iv) it will comply with applicable safety laws and regulations for the repackaging and storage of Products, and v) excepting such warranties provided by NTC herein, it will make no warranties or other representations of any kind about the merchantability or fitness for any particular purpose of any Products, whether used alone or in connection with any other substance.   10. Indemnification.    10.1 NTC shall protect, defend, indemnify and hold ALFA AESAR, its directors, officers, employees, and agents harmless from any and all claims, actions, causes of action, liabilities, losses, damages, costs or expenses, including reasonable attorneys' fees, which directly or indirectly arise out of or relate to i) NTC's breach of warranties in Section 9.1, or ii) NTC's gross negligence or willful misconduct arising out of its manufacture, sale or transfer of the Products to ALFA AESAR, excepting indemnification for which ALFA AESAR is obligated under 10.3.   10.2 ALFA AESAR agrees to give NTC (i) prompt written notice of any claims made for which NTC might be liable under the foregoing indemnification, and (ii) the opportunity to defend, negotiate, and settle such claims. ALFA AESAR shall provide NTC with all information in its possession, all authority, and all assistance reasonably necessary to enable the indemnifying party to carry on the defense of such suit; provided, however, that each party shall have the right, at its own expense, to retain its own counsel to defend itself in such suit.   10.3 ALFA AESAR shall protect, defend, indemnify and hold NTC, its directors, officers, employees, and agents harmless from any and all claims, actions, causes of action, liabilities, losses, damages, costs or expenses, including reasonable attorneys' fees, which directly or indirectly arise out of or relate to i) ALFA AESAR's breach of warranties in Section 9.3, (iii) ALFA AESAR's gross negligence or willful misconduct arising out of its sale or transfer of the Products to ALFA AESAR's customers, excepting indemnification for which NTC is obligated under 10.1.   10.4 NTC agrees to give ALFA AESAR (i) prompt written notice of any claims made for which ALFA AESAR might be liable under the foregoing indemnification, and (ii) the opportunity to defend, negotiate and settle such claims. NTC shall provide ALFA AESAR with all information in its possession, all authority, and all assistance reasonably necessary to enable the indemnifying party to carry on the defense of such suit; provided, however, that each party shall have the right, at its own expense, to retain its own counsel to defend itself in such suit.   7





11. Relationship and Conduct of Business.    11.1 ALFA AESAR shall use its reasonable efforts and devote such time as may be reasonably necessary to sell and promote the sale of Products within the Territory.   11.2 ALFA AESAR agrees not to manufacture, buy, sell, distribute, deal in or be the agent for any products with the specifications of any of the Products, excluding any preexisting ALFA AESAR products.   12. No Joint Venture.    12.1 This Agreement does not in any way create the relationship of franchisor and franchisee, joint venture, partnership, employment or principal and agent between ALFA AESAR and NTC. Neither party, nor any person acting on behalf of a party, is or shall be considered an employee of the other party for any reason whatsoever, and does not and shall not have any rights to, or participate in, any pension or welfare plans, or any other benefits which now or hereafter maintains for or provides to its employees. Neither party, or any person acting on behalf of a party, is or shall be deemed to be the legal representative or agent of the other party for any purpose whatsoever, and is not authorized to transact business, incur obligations, express or implied, or otherwise act in any manner, in the name or on behalf of the other party, or to make any promise, warranty or representation with respect to Products (except as provided herein by NTC or as NTC otherwise expressly approves as to its Products) or any other matter in the name of or on behalf of the other party.   13. Term.    13.1 The initial term of this Agreement shall be for a period of five (5) years from the date first set forth above and shall thereafter automatically renew for additional two (2) year terms unless a party provides the other party with notice of non-renewal no less than 6 months prior to the expiration of the initial term or any renewal term unless earlier terminated as follows:   13.1.1 In the event of material breach, the non-breaching party shall give the breaching party sixty (60) days written notice of such breach. If substantial efforts to cure the breach are not taken within the sixty (60) day notice period, the non-breaching party may, at its sole discretion, terminate the agreement.   13.1.2 In the event a party becomes insolvent or if a party is declared bankrupt or makes an assignment for the benefit of creditors or in the event a receiver is appointed or any proceeding is demanded by, for or against a party under any provision of any bankruptcy law which is not withdrawn within sixty (60) days, the other party to this Agreement shall have the sole right to immediately terminate; or   13.1.3 By either party for any reason by providing six (6) months prior written notice expressly terminating this Agreement. Such notice may be by facsimile transmission or other written communication.   8





13.2 Termination of this Agreement shall not affect the rights or obligations of the parties accrued as of the date of termination. The provisions of Sections 6, 9, 10, 15 will survive termination of the Agreement.   13.3 Upon termination of this Agreement for any reason, ALFA AESAR may i) return its current inventory of Products for reimbursement by NTC or ii) keep its current inventory of Products and continue to sell such Products pursuant to the terms hereof until depletion of inventory. Upon termination of this Agreement, NTC shall promptly refund to ALFA AESAR all outstanding credits accrued on ALFA AESAR's account.   14. Insurance. Each party agrees to maintain and provide the other with evidence of insurance coverage for comprehensive general liability in an amount no less than $2,000,000.00 U.S. dollars.   15. Confidentiality. The parties agree as follows; Confidential Information shall mean trade secret, technical, commercial, or financial information and all other nonpublic proprietary or confidential information. Each party receiving Confidential Information from the other party agrees to maintain in confidence and not divulge such Confidential Information, in whole or in part, to any third party, including subsidiaries or affiliates, licensees or clients anywhere, and not make use of such Confidential Information other than in relation to its performance under this Agreement. This obligation shall not apply to: (i) Confidential Information which at the time of disclosure by the disclosing party is in the public domain; or (ii) Confidential Information which, after disclosure by the disclosing party, becomes part of the public domain by publication or otherwise, other than by an unauthorized act or omission by the receiving party; (iii) Confidential Information which receiving party can show by contemporary written records was in its possession at the time of the disclosure and which was not acquired, directly or indirectly from disclosing party; or (iv) Confidential Information which receiving party rightfully receives from a third party and which was not acquired, directly or indirectly, from the disclosing party; (v) information which is developed independently without reference to the Confidential Information of the other party; or (v) Confidential Information which, if disclosed in written or other tangible form, is not marked Confidential, or if disclosed orally is not summarized in a writing identifying the Confidential Information and submitted to the receiving party within thirty (30) days of the oral disclosure; or (vi) Confidential Information which is compelled by law to be disclosed by the receiving party, provided that the receiving party shall use its best efforts to give the disclosing party ten (10) days prior written notice of any such compelled disclosure. Each party agrees that it shall restrict its disclosures of the disclosing party's Confidential Information within its own organization to those persons having a need to know it for the purposes of performance under this Agreement and that such persons shall be advised of the obligations of confidentiality set forth herein and shall be obligated in like fashion. Upon request on termination or expiration of this Agreement, the receiving party shall promptly return to the disclosing party all Confidential Information and shall retain no copies except that one copy may be retained for purposes of determining such receiving party's compliance with the terms of this paragraph.   16. Disputes and Arbitration. The parties shall first seek to resolve any dispute by negotiations between their senior executives. When a party believes there is a dispute under this Agreement, that party will give the other party written notice of the dispute. Failing settlement of the dispute within 60 days of notice, either party may initiate binding arbitration proceeding; by   9





written notice to the other party, provided however, no dispute arising from any actual or threatened breach of any provisions in Sections 10 or 15 of this Agreement shall be subject to Arbitration. However, any other claims or disputes arising hereunder, including the construction or application of this Agreement, shall be settled by arbitration before a single arbitrator in accordance with the Rules for Commercial Arbitration of the American Arbitration Association (AAA) then in force. The place of arbitration shall be the location of the party hereto against whom the claim is made. If the parties cannot agree on an arbitrator within 10 days after demand by either of them, then the arbitrator shall be selected pursuant to the AAA's Commercial Arbitration rules. The decision of the arbitrator shall be final and binding upon the parties and may be submitted to any court of competent jurisdiction for entry of a judgment thereon in accord with the Federal Arbitration Act or the Uniform Arbitration Act. The expense of the arbitration shall be shared equally by both parties. Each party shall bear its own other costs, i.e. fees and costs of its own lawyers and witnesses.   17. Notices. Any notice required or permitted to be given hereunder shall be deemed to have been duly given if delivered by hand, overnight courier delivery or mailed, certified and registered mail, with postage prepaid to the addresses first set forth above or at such other addresses as either party may designate in writing to the other, and if to ALFA AESAR with a copy to Johnson Matthey, 435 Devon Park, Suite 600. Wayne PA 19087, Attention: Vice President & General Counsel. This section is not intended to govern the day-to-day business communications necessary between the parties in performing their duties, in due course, under the terms of this Agreement.   18. Severability. The provisions of this agreement shall be severable, and if any provision of this Agreement is held to be invalid or unenforceable, it shall be construed to have the broadest interpretation which would render it valid and enforceable. Invalidity or unenforceability of one provision shall not affect any other provision of this Agreement.   19. Entire Agreement. This Agreement contains the entire agreement with respect to the subject matter hereof, and there are no other agreements or understandings, express or implied, written or oral, as to the subject matter hereof. This Agreement may not be amended or altered except by a written instrument signed by both parties, expressly stating that it is intended as an amendment hereto. No purchase order or other written order or acknowledgment issued by either party shall serve to vary the terms and conditions of this Agreement, or otherwise alter the obligations of the parties provided herein.   20. Waiver. The waiver by either party of any breach or failure to enforce any of the terms and conditions of this Agreement at any time shall not in any way affect, limit or waive either party's rights thereafter to enforce and compel strict compliance with every term and condition of this Agreement.   21. Counterparts. This Agreement may be executed in one or more counterpart copies, each of which shall be deemed an original and all of which shall together be deemed to constitute one agreement.   22. Governing Law. This Agreement shall be governed by and interpreted under and in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws.   10





23. Public Announcements. Upon execution and at any time during the term of this Agreement, the parties shall cooperate in preparing a joint press release announcing this Agreement and the availability of NTC Products in Research Quantities through ALFA AESAR, provided that no such joint press release shall be issued without both parties' prior approval.   24. Headings. The headings in this Agreement are for convenience only and do not in any way limit or amplify the terms or conditions of this Agreement.   IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first set forth above.   NANOPHASE TECHNOLOGIES CORPORATION       JOHNSON MATTHEY CATALOG COMPANY, INC.

By:     /s/ W. Ian Roberts       By:    /s/ Barry Singelais     W. Ian Roberts           Barry Singelais     V.P. U.S. & International Sales           General Manager

Dated: October 14, 2005       Dated: October 24, 2005   11





Schedule A   List of Products to be offered by ALFA AESAR.   Quantities and NTC pricing to ALFA AESAR are included.   All prices are USD, FOB Romeoville IL, net 30.   Product Specification  Nanopowders:   Name



Product Code



Quantity



Price/kg

NanoTek® Aluminum Oxide   0115   [***]  $[***] NanoDur™ Aluminum Oxide   0119   [***]  $[***] NanoTek® Antimony Tin Oxide   2400   [***]  $[***] NanoArc® Bismuth Oxide   EXP 0250   [***]  $[***] NanoArc® Copper Oxide   EXP 0502   [***]  $[***] NanoTek® Indium Tin Oxide   0600   [***]  $[***] NanoArc® Cosmetic Iron Oxide   EXP 0807   [***]  $[***] NanoArc® Magnetic Iron Oxide   EXP 0806   [***]  $[***] NanoTek® Tin Oxide   1400   [***]  $[***] NanoGard® Zinc Oxide   1700   [***]  $[***] NanoTek® Zinc Oxide   1701   [***]  $[***] NanoTek® Zinc Oxide C1   1716   [***]  $[***] NanoTek® Zinc Oxide C2   EXP 1726   [***]  $[***]

Nanoparticle dispersions:             Name



Product Code



Quantity



Price/kg

NanoDur™ X1121W, 50wt%   EXP 0187   [***]  $[***] NanoDur™ X1130PMA, 50wt%   EXP 0151   [***]  $[***] NanoShield® ZN-2000, 50wt%   EXP 1754   [***]  $[***] NanoShield® ZN-3010, 50wt%   EXP 1769   [***]  $[***] NanoTek® Z1102PMA, 50wt%   EXP 1707   [***]  $[***] NanoTek® AL-6081, 23wt%   EXP 0180   [***]  $[***] NanoTek® AL-6051, 23 wt%   EXP 0142   [***]  $[***] NanoTek® CE-6042, 18wt%   0311   [***]  $[***] NanoTek® CE-6080, 20wt%   0315   [***]  $[***] NanoTek® CE-6082, 18wt%   0314   [***]  $[***] NanoTek® CE-6086, 18wt%   EXP 0333   [***]  $[***]

*** CONFIDENTIAL TREATMENT REQUESTED—This confidential portion has been omitted from this document and filed separately with the Commission.   12





Schedule B NANOPHASE TECHNOLOGIES CORPORATION STANDARD TERMS AND CONDITIONS    1. General Terms: As used in these Terms and Conditions, the terms (a) Seller shall mean Nanophase Technologies Corporation and (b) Buyer shall mean the party ordering shipment of Seller's products under the Order. These Terms and Conditions, including the provisions on the face hereof, constitute the exclusive contract between the parties for the products provided by Seller (Order or Agreement). Seller will be deemed to have accepted this Order when Seller returns an acknowledged copy of this Order, or, at Seller's option, when Seller begins substantial performance under this Order. Buyer accepts this Order by acknowledging a copy of this Order, by confirming this Order by its purchase order, purchase requisition or confirmation, or by accepting for shipment the products hereunder. Notwithstanding the manner in which Buyer accepts, Buyer's acceptance is limited exclusively to the acceptance of Seller's terms and conditions set forth in this Order only. Seller hereby rejects any proposal by Buyer for additional or different terms in connection with the products or services provided. Buyer may acknowledge this Order by purchase order, but any and all terms, conditions and provisions contained in said purchase order, acknowledgment form or other communications with respect to the transaction contemplated by this Order, or subsequent to the date hereof, are agreed to be superfluous and without any force and effect. This Order, which includes all terms and conditions hereof, is intended to be the exclusive and final statement of the terms and understandings relative to the subject matter hereof, merging herein and superseding all negotiations and prior written or oral agreements between the parties as to the subject matter of the purchase of the products hereunder. There are no promises, representations or understandings made in connection with this Order or contemporaneous with the execution hereof, except as set forth herein.   2. Prices and Taxes: All prices are set forth on the face of this Order. Seller is entitled to defer shipment of products in the event all amounts due it under this or any other Agreement are not paid in full. All payments shall be made to Seller at its offices. The failure to make prompt payment shall be a material breach of this Agreement. The price of the products specified in this Order does not include federal taxes, state or local sales taxes, value added taxes, use taxes or occupational taxes. Unless prohibited by law, Buyer is responsible for and shall pay all applicable sales, use, occupational, excise, value added or other similar taxes applicable to the manufacture, sale, price, shipment or use of the products provided by Seller.   3. Delivery and Risk of Loss: All sales are FOB Seller's premises in Burr Ridge or Romeoville, Illinois. Seller shall have no liability or responsibility for the late or non-shipment of products hereunder. Title to, risk of loss, destruction of or damage to the products shall be Seller's until delivery of the products to a carrier at the Seller's premises in Burr Ridge, Illinois. Thereafter, Buyer shall be fully responsible for and assume all ownership, risk of loss, destruction of or damage to the products. Loss or damage to the products after title and risk of loss have passed to Seller will not release or excuse Buyer from its obligations under this Order to Seller, including the obligation to make full payment.   4. Short Shipments/Damage Claims: Seller will endeavor to ship all Orders complete or as complete as reasonably possible. Seller will, however, ship incomplete orders upon written authorization by Buyer. In that event, Seller shall have no liability for short, incomplete or delayed orders. All damage claims shall be made within fourteen (14) days of delivery and shall be in writing.   5. Rejection and Revocation of Acceptance: Any rejection or revocation of acceptance by Buyer (a) must be made within thirty (30) days of the products being made available for shipment to Buyer, (b) any attempted rejection or revocation of acceptance made thereafter shall be null and void, and (c) any rejection or revocation of acceptance shall comply with Seller's return protocol.





6. Compliance with Governing Laws: Buyer warrants that its performance hereunder, including the use of the products hereunder, shall comply with all applicable state, federal and foreign law, regulations, environmental regulations, statutes or requirements, including, but not limited to, FDA approvals or any other approvals or certifications required by law   7. Assignment and Modification: The rights and obligations of the parties under this Agreement shall not be assignable unless consent to the assignment is in writing and signed by the parties. This Order shall not be modified, altered or amended in any respect except by a writing signed by the parties. Any variation, modification, or addition to the terms set forth in this Order shall be considered a material modification and shall not be considered part of this Agreement.   8. Limited Warranty and Disclaimer of All Other Warranties: EXCEPT FOR THE EXPRESS WARRANTY, IF ANY, THAT THE PRODUCTS COMPLY WITH THE SPECIFICATIONS IDENTIFIED IN WRITING ON THE FACE OF OR ACCOMPANYING THIS ORDER, SELLER MAKES NO EXPRESS OR IMPLIED WARRANTIES IN THIS ORDER OR OTHERWISE. TO THE FULLEST EXTENT PERMITTED BY LAW, SELLER DISCLAIMS ALL WARRANTIES, WRITTEN, EXPRESS OR IMPLIED, INCLUDING ALL WARRANTIES OF MERCHANTABILITY AND/OR FITNESS FOR A PARTICULAR PURPOSE. SELLER EXPRESSLY DISCLAIMS ANY AND ALL LIABILITY TO BUYER FOR ANY CONSEQUENTIAL DAMAGES, DAMAGES FOR LOSS OF USE, LOSS OF PROFITS, INCOME, OR REVENUE, LOSS OF TIME OR INCONVENIENCE, LOSS OR DAMAGE TO ASSOCIATED EQUIPMENT, COST OF SUBSTITUTED OR REPLACEMENT EQUIPMENT, LOSS TO FACILITIES, LOSS OF CAPITAL, LOSS OF SERVICES OR ANY OTHER INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGE ARISING OUT OF THIS ORDER OR THE OPERATION, FUNCTION OR CHARACTERISTICS OF THE PRODUCTS PURCHASED HEREUNDER OR OTHERWISE PROVIDED BY SELLER. IN THE EVENT THAT PRODUCTS DO NOT SATISFY SPECIFICATIONS, THEY WILL BE REPLACED, AT SELLER'S OPTION, WITH PRODUCTS THAT DO SATISFY THE SPECIFICATIONS AT SELLER'S SOLE EXPENSE. SAID REPLACEMENT IS THE SOLE AND EXCLUSIVE REMEDY OF BUYER.   9. Limitation of Liability: To the fullest extent permitted by law, the parties waive and relinquish any claims, demands, causes of action or recoveries for punitive damages, exemplary damages, or statutory damages. Seller shall not be liable for indirect, special, incidental or consequential damages arising under this Agreement or otherwise with respect to the sale of the products, including any lost revenues or profits, consequential and/or incidental damages, business interruption or damage to business reputation, regardless of the theory upon which any claim may be based, including any statutory causes of action or claims. In no event will Seller's entire liability to Buyer, including any liability in the event the exclusive remedy set forth in this Agreement fails of its essential purpose, exceed the purchase price actually paid by Buyer for the products hereunder, or any defective portion thereof, whichever is the lesser amount.   10. Force Majeure: Seller shall have no liability or obligation to Buyer of any kind, including but not limited to any obligation to ship products, arising from any delay or failure to perform all or any part of this Order as a result of causes, conduct or occurrences beyond Seller's reasonable control, including, but not limited to, commercial impracticability, fire, flood, act of war, civil disorder or disobedience, act of public enemies, terrorist acts, terrorism generally affecting commerce, problems associated with transportation (including car or truck shortages), acts or failure to act of any state, federal or foreign governmental or regulatory authorities, labor disputes or strikes.   11. Relationship: The relationship between Seller and Buyer shall be that of independent contractors. Seller, its agents and employees, shall under no circumstances be deemed the employees, distributors, franchisees, agents or representatives of Buyer.





12. Default: The failure of Buyer to perform any obligations hereunder, including without limitation, the payment of the purchase price for products and all other amounts due hereunder, the failure to materially perform other agreements between Buyer and Seller, or Buyer's bankruptcy or insolvency, shall constitute a default under this Agreement and shall, in addition to any other remedies, afford Seller all of the remedies of a secured party under the Uniform Commercial Code of the State of Illinois. In the event of default, Seller may, in addition to pursuing any of the remedies provided by law, equity or as set forth in this Agreement, refuse to make available for shipment products under this or any other agreement relating to the products, and may also cancel this Order and any pending orders without liability to Buyer. It is expressly understood that Seller's remedies are cumulative to the fullest extent permitted by law.   13. Attorneys' Fees: In the event it becomes necessary for Seller to enforce the terms and conditions of this Order by litigation or otherwise, or to defend itself in any Controversy (as defined herein), litigation, claim, demand or cause of action arising out of or as a result of this Order or the products or services provided hereunder, and if Seller is the substantially prevailing party in said Controversy, litigation, claim, demand or cause of action, then Seller shall be entitled to recover, in addition to any other relief granted or damages assessed, its reasonable attorneys' fees, expert witness fees, costs, and all expenses of litigation.   14. Waiver: No claim or right arising out of a breach of this Order can be discharged in whole or in part by a waiver or renunciation of the claim or right unless the waiver or renunciation is supported by consideration and is in writing signed by the aggrieved party.   15. Severability: If any term, covenant, warranty or condition of this Order, or the application thereof to any person or circumstance shall, to any extent, be held or deemed invalid or unenforceable, the remainder of this Order or the application of such term, covenant or provision, to persons or circumstances other than those to which it is held invalid or unenforceable, shall not be affected thereby, and each remaining term, covenant or provision of this Order shall be deemed valid and enforced to the fullest extent permitted by law.   16. Indemnification: To the fullest extent permitted by law, Buyer shall defend, indemnify and hold Seller harmless from any and all claims, demands, subrogation claims by Buyer's insurers, causes of action, liabilities, fines, regulatory actions, seizures of product, losses, costs, expenses (including, but not limited to attorneys' fees, expert witness expenses and litigation expenses) (hereinafter Claim), arising from or in connection with any Claim asserted against Seller for any damage, injury, death, loss, property damage, environmental liability, or any other Claim, whether in tort, contract, or otherwise, relating to this Order, the business relationship between the parties or the goods provided hereunder. Notwithstanding the foregoing, Buyer has no indemnity obligation to Seller with respect to any Claims that result solely from the negligence of Seller and this indemnity provision does not purport to indemnify Seller solely for its own negligence, but rather for the negligence or conduct, whether sole or concurrent, of Buyer. Buyer, for itself and its insurers, expressly waives any and all limitations or liability caps, if any, on Buyer's contribution liability to Seller, and any and all statutory or common law lien rights or Claims against Seller arising from any applicable workers compensation or disability acts, which Buyer might or could assert against Seller or Seller's insurers in the event of the personal injury or death of Buyer's employees, representatives or servants. Without limiting the foregoing, Buyer, for itself and its insurers, also waives any liens, claims or other rights it may have as a result of being subrogated to any rights of its employees, representatives or servants.   17. Insurance: Buyer shall obtain comprehensive general liability coverage, including contractual liability coverage, naming Seller as an additional named insured, in amounts sufficient to fully protect Seller under this Agreement from loss, damage or casualty caused by Buyer or incurred by Seller under this Agreement.   18. Governing Law and Forum Selection: This agreement shall be governed by and subject to the internal laws (exclusive of the conflicts of law provisions) and decisions of the courts of the State of Illinois. The parties consent to the exclusive jurisdiction of the federal court in Chicago, Illinois or the state court located in DuPage County, Illinois with respect to all litigation, claims, causes of action, demands, Controversies (as defined





herein) or disputes among the parties. The only exception to this forum selection provision is a claim by Seller seeking the replevin of the products in the event the courts specified in this provision will not or cannot assert jurisdiction. All counterclaims, if any, in connection with the replevin claim, shall be subject to this forum selection provision. 
Question: Highlight the parts (if any) of this contract related to Insurance that should be reviewed by a lawyer. Details: Is there a requirement for insurance that must be maintained by one party for the benefit of the counterparty?

Answer:
Each party agrees to maintain and provide the other with evidence of insurance coverage for comprehensive general liability in an amount no less than $2,000,000.00 U.S. dollars.