Document:

ex103-manufacturingservi

Manufacturing Services Agreement  CONFIDENTIAL  1 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15 i l  55BCCA66-CB83-4DB8-9C1D- 5EEF1EBCB43B          MANUFACTURING SERVICES AGREEMENT    THIS MANUFACTURING SERVICES AGREEMENT (the "Agreement") is effective as of the  date of last signing of the Parties below (the “Effective Date”), by and between FARO  Technologies, Inc. a Florida corporation having a principal place of business at 250 Technology  Park, Lake Mary, 32746, on behalf of itself and its affiliates or subsidiaries (collectively  “CUSTOMER”)  and  SANMINA  CORPORATION,  a  Delaware  corporation  having  its  principal place of business at 2700 North First Street, San Jose, California 95134, on behalf of itself  and its affiliates or subsidiaries (collectively “SANMINA”).  CUSTOMER and SANMINA are  sometimes referred to herein as a “Party” and the “Parties.”    1.          TERM    The initial term of this Agreement shall commence on the  Effective Date and shall  continue through the third anniversary of the Effective Date unless sooner terminated by mutual  agreement or in accordance with this Agreement (“Initial Term”).  Upon the expiry of the Initial  Term, this Agreement shall continue from year to year until one Party terminates the Agreement  by giving at least twelve (12) months’ prior written notice to the other Party (each, a “Renewal  Term”).   The Initial Term together with any Renewal Term(s) is referred to as the “Term”.  Notwithstanding the foregoing, the term of this Agreement shall automatically extend to include  the term of any purchase order (“Order”) issued hereunder. This agreement is not exclusive.  For  the   initial   transition   from   CUSTOMER   performing   as   CUSTOMER’s   manufacturer   to  SANMINA  performing  as  CUSTOMER’s  manufacturer,  SANMINA  shall  make  reasonable  efforts to meet the obligations and timeline as set forth in the Transition Timeline, with the  understanding that SANMINA’s ability to meet such obligations and timeline is dependent on  CUSTOMER’s  participation  and  timely provision of  deliverables,  expertise, and  answers  to  questions.  The Transition Timeline is attached herein as Exhibit D.  The manufacturing will be  primarily established and maintained at SANMINA’s facility in Thailand, and will also include  its  facility  in  Texas,  unless  otherwise  agreed  by  CUSTOMER  (“Sanmina Facilities”).  The  facility in the Czech Republic will be utilized by the Parties for fulfillment as further described in  Section 4.2(i) and a separate services agreement.  Any change in the facilities used by SANMINA  to perform under this Agreement is subject to prior written approval of CUSTOMER.    2.          PRICING    2.1         Pricing.   During the term, CUSTOMER may purchase from SANMINA the  products specified by the Parties, as amended from time to time (the "Products") at the prices set  forth in Exhibit A (the “Prices”).  Prices (a) are in U.S. Dollars, (b) include SANMINA standard  packaging, (c) exclude the items set forth in Section 2.2, and (d) are based on (i) the configuration  set forth in the specifications provided to SANMINA by CUSTOMER (the “Specifications”) on  which the pricing in Exhibit A is based and (ii) the projected volumes, minimum run rates, the  projected inventory turns and other pricing assumptions expressly provided in Exhibit A.  The  Prices will remain fixed for each quarter.  The Prices shall be reviewed quarterly, and may be  revised (x) to account for any material variations on the market prices of components, parts and raw  material (collectively “Components”), including any such variations resulting from allocations or  shortages or tariffs levied on the Components; (y) to account for any changes in the exchange rate  between the currency in which the pricing is calculated and the currency in which SANMINA pays  for its labor, overhead and Components or (z) to account for the price adjustments set forth in  Section 2.3 and cost reductions set forth in Section 2.4.  Revisions to the Prices in the quarterly  reviews will reflect any changes in costs of Components or resulting from change in exchange rate  or pricing assumptions set forth in Exhibit A or from any additional costs NOTE: Certain portions of this Exhibit have been redacted pursuant to  Item 601(b)(10) of Regulation S-K because they are both (i) not  material and (ii) would likely cause competitive harm to the registrant  if publicly disclosed. The registrant agrees to furnish supplementally an  unredacted copy of this Exhibit to the SEC upon request.  

 

Manufacturing Services Agreement  CONFIDENTIAL  2 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            savings per Section 2.4.  Prices will not be increased in any quarterly review unless (and only to  the extent) those costs actually increase above the quoted BOM costs, assembly or test times or  labor rates that had been used to establish the then-current Pricing.  Adjustments to Prices will be  determined using proper cost allocation methodologies consistently applied and agreed margin  percentages and rates as set forth in Exhibit A, and will apply to Orders placed on or after the agreed  date the new Pricing is to be implemented and to any existing Orders impacted by such Pricing  changes; however, Pricing changes due to changes in Component cost will only apply once  existing Components have been consumed or if the existing inventory of such Component has  been revalued and paid for accordingly.  Cost reductions from initial localization activities will  be implemented as the changes are implemented and passed through in full to CUSTOMER minus  applicable recovery of costs related to such implementation; Localization cost reductions shall be  any cost improvement heralded from changing Vendors.  Vendors may be proposed or  recommended by SANMINA, and all Vendors shall be approved by CUSTOMER and become  part of the CUSTOMER’s AVL prior to SANMINA purchasing from them.   Such shall be reported  in the quarterly business reviews.  On the last Monday of the third month of any calendar quarter   prior  to  the  quarter  of  application,  the  Parties  shall  establish  the  exchange  rates  (“Contract Rates”) to be applied to the following quarter’s costs (for those costs denominated in  currencies different from the currency in which the Price is denominated).   The source of the  Contract Rates will be the spot rates published by the Wall Street Journal or the Financial Times  of London (CUSTOMER’s option) reflecting the previous day’s closing rates.   To the extent  Pricing changes are due to changes in Component cost, on hand inventory of those Components  will be consumed at the previous pricing (to be reconciled quarterly at quarter end), or may be  revalued by CUSTOMER placing a purchase order for the difference.    2.2         Exclusions from Price.   Prices specifically exclude (a) export licensing of the  Product and payment of broker’s fees, duties, tariffs and other similar charges; (b) taxes or  charges (other than those based on net income of SANMINA) imposed by any taxing authority  upon the manufacture, sale, shipment, storage, “value add” or use of the Product; and (c) setup,  tooling, or non-recurring engineering activities (collectively “NRE Charges”), which are charged  and/or paid separately, as applicable.   Any NRE Charges or other amounts excluded from the  Prices may only be charged to CUSTOMER as expressly set forth in this Agreement or otherwise  approved in advance in writing by CUSTOMER.    2.3         Other Price Adjustments:    (a)        CUSTOMER acknowledges that the Prices set forth in Exhibit A are  based on the forecasted volumes provided by CUSTOMER to SANMINA and the projected  inventory turns as provided in Exhibit A.  In the event CUSTOMER fails to purchase Product in  sufficient volumes consistent with the quoted prices, Prices will be subject to adjustment in the  quarterly pricing review as described in Section 2.1 above.    (b)        CUSTOMER   acknowledges   that   the   Prices   are   based   on   the  Specifications and the assumptions set forth in Exhibit A.  In the event SANMINA experiences  an increase in cost as a result of changes in the pricing assumptions or the Specifications, Prices  will be subject to adjustment in the quarterly pricing review as set forth in Section 2.1.    (c)        CUSTOMER   may  request   a   price   review   meeting  for   particular  transactions where cost savings may be realized (e.g., large order from end-customer) outside of  the quarterly review meetings under Section 2.1.  In such event, the Parties will review and agree  on a credit amount to be provided after the conditions of the transaction are met including volume 

 

Manufacturing Services Agreement  CONFIDENTIAL  3 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            and any other criteria on which the price reduction was based.  Pricing for other transactions will  remain unchanged until the next quarterly review meeting unless otherwise agreed by the Parties.    2.4        Cost   Reductions.   Cost   reductions   from   transition   and   localization   of  manufacturing to SANMINA will be passed through in full to CUSTOMER, after the costs of  implementing such cost reductions are recovered. After transition and localization, the Parties agree  to seek ways to further reduce the cost of manufacturing the Products by methods such as  elimination of Components via an engineering change order or Value Add Value Engineering  activity, obtaining alternate sources of materials for CUSTOMER to add to its AVL, redefinition  of specifications, and improved assembly or test methods (“Cost Reductions”).  CUSTOMER shall   have  the  benefit of any  Cost  Reductions identified  by CUSTOMER,  which would be  implemented at the next quarterly price update after SANMINA has recovered the cost to  implement the Cost Reduction.   For Cost Reductions identified by SANMINA related to production  released Products, any savings would be split with fifty percent (50%) to each Party after  SANMINA has recovered the cost to implement the Cost Reduction for a period of six (6) months,  after which one hundred percent (100%) of the savings would be passed on to CUSTOMER at the  next pricing adjustment.  SANMINA shall measure and report on pricing and productivity  improvements, accomplishments, and initiatives at quarterly business reviews.    3.          PAYMENT TERMS/SETOFFS/CREDIT LIMIT    3.1        Payment Terms.  Payment terms are net [redacted] days after the date of the  invoice, subject to continuing credit approval.  CUSTOMER will use reasonable efforts to bring  any apparent pricing or quantity discrepancies to SANMINA’s attention within ten (10) days after  receiving an invoice.   On any invoice not paid by the maturity date, CUSTOMER shall pay  interest from maturity to date of payment at the rate of 1% per month.  Unless otherwise stated,  payment  shall  be  made  in  U.S.  Dollars.    In  the  event  CUSTOMER  has  any  undisputed  outstanding invoice  beyond  the  payment  term,  CUSTOMER will be  given  at  least  five  (5)  business days notification, and SANMINA will escalate per Section 17.4, prior to any stop  shipments occurring.    3.2        Setoffs.   Each Party shall be entitled at all times to set-off any amount owing  from the other Party to such Party against any amount payable to the other Party from such Party,  arising out of this or any other transaction.  For purposes hereof, (i) the term "Party" shall include  the Parties to this transaction and each Party's Affiliates and (ii) a Party's "Affiliate" shall mean any  entity that, directly or through one or more intermediaries, controls, is controlled by or is under  common control by such Party, including but not limited to a Party's subsidiaries.    3.3      Credit Limit.   CUSTOMER shall provide completed credit application to  SANMINA’s Credit Department.  SANMINA shall provide CUSTOMER with an initial credit  limit based upon available financial information, which shall be reviewed (and, if necessary,  adjusted) from time to time based upon financial updates in order to maintain a credit limit.  SANMINA shall have the right to reduce the credit limit upon five (5) days’ prior written notice  to CUSTOMER, provided that credit approval will be provided to CUSTOMER on a consistent  and  non-discriminatory  basis  no  less  favorable  than  provided  to  other  similarly  situated  customers.  In the event CUSTOMER exceeds this credit limit, SANMINA shall have the right to  stop shipments of Product to CUSTOMER and stop loading new Orders and Forecasts until  CUSTOMER makes a sufficient payment to bring its account within the credit limit provided.    3.4        Affiliates.   CUSTOMER’s Affiliates may place Orders for Product under this  Agreement.  CUSTOMER will either guarantee the obligations of each of its Affiliates that places 

 

Manufacturing Services Agreement  CONFIDENTIAL  4 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            Orders  or  Forecasts  pursuant  to  this  Agreement  and  agrees  to  be  jointly  liable  for  such  obligations, or CUSTOMER’s Affiliates may be required to submit credit applications and may  be subject to differing credit terms, depending on the evaluation.    3.5        Reporting.  CUSTOMER shall provide SANMINA with the initial test and labor  times used in relation to the Products.  SANMINA will provide to CUSTOMER throughout the  Term, as applicable, reporting including quoted BOMs, labor times, inbound freight, test times  and labor rates, including operations reporting (including testing per Specifications, traceability and  product/warranty history) and SANMINA’s cost model and margin used to determine Pricing and  adjustments under this Agreement.  If SANMINA has inaccurately stated any change in cost used  to establish pricing adjustments for any quarter, SANMINA will [redacted].  For any Component  price increases, SANMINA will share quotes from Vendors to document such increases that  accurately reflect the increased cost actually being paid by SANMINA.  SANMINA will provide  reasonable documentation for any other types of cost increases.  With respect to cost information  relating to pricing adjustments, upon request of CUSTOMER, SANMINA will [redacted].   SANMINA will also provide CUSTOMER reports in conformance with the Reporting  Requirements, attached as Exhibit J, Reporting Requirements.    3.6        Right of Audit/Investigation.  At CUSTOMER’s sole discretion, in compliance  with  SANMINA’s  confidentiality  and  security  requirements,  and  on  an  escorted  basis,  SANMINA agrees that CUSTOMER shall have the right to investigate and/or audit SANMINA  to determine whether or not any SANMINA actions or failures may subject CUSTOMER to liability  under any law, governmental rule, or regulation and/or compliance with the terms herein.  CUSTOMER shall provide five (5) days’ notice for routine audits, and forty-eight (48) hours’ notice  for an emergency audit.  SANMINA agrees to cooperate fully with such investigation, the scope,  method, nature, and duration of which shall be at the sole reasonable discretion of CUSTOMER.    If SANMINA fails to reasonably cooperate with CUSTOMER’s investigation and/or  audit,   CUSTOMER  may  immediately  terminate  this  Agreement  in  accordance  with Section 11.1 of  this Agreement.    3.7        Compliance.  SANMINA shall comply with, in accordance with the exceptions  listed  in  the  applicable  Exhibits,  the  FARO  Supplier  Code  of  Conduct  (Exhibit  F),  FARO  Conflict Minerals Policy (Exhibit G), FARO Third-Party Anti-Corruption Policy (Exhibit H) and  ILO International Labor Standards and shall ensure that all subcontractors (which for the avoidance  of doubt does not include Vendors except for any Vendors that are SANMINA Affiliates) follow  policies at least as strict.    3.8        Information Security.   SANMINA warrants that (i) it will, at all times, strictly  comply with NIST SP 800-171 requirements, with third party verification by a reputable security  company of NIST SP 800-171 or other SOC-2 or equivalent audit reasonably acceptable to  CUSTOMER, at CUSTOMER’s expense  as approved  by CUSTOMER in  advance; and (ii)  SANMINA does and will regularly conduct security testing on its information systems including  penetration testing.  In addition, the Parties will endeavor to understand the requirements of the  U.S. Department of Defense Cyber Maturity Model Certification Model (2020), how such  requirements apply to the manufacturing of CUSTOMER Products and develop any plans the  Parties mutually agree are required.   SANMINA will maintain security measures at its facility  reasonably  acceptable  to  CUSTOMER,  including  sign-in/badges,  escorts,  security  cameras,  alarms and other reasonable security measures.  For the avoidance of doubt, security measures apply  to the facility, not to any particular customer area unless otherwise agreed. 

 

Manufacturing Services Agreement  CONFIDENTIAL  5 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            3.9        Non-Solicit.  Neither Party will directly or indirectly employ any personnel of the  other Party who have been directly involved in the provision or receipt of the services of this  Agreement during the term of their involvement and for a minimum of 12 months thereafter.  This restriction does not apply to personnel who are hired by a Party in response to a bona fide  advertisement  to  the  public  at  large,  so  long  as  the  personnel  was  not  directed  to  the  advertisement or was otherwise invited to apply.    4.          PURCHASE ORDERS/FORECAST/RESCHEDULE    4.1        Purchase Orders.    (a)        CUSTOMER  will  issue  to  SANMINA  specific  Orders  for  Product  covered by this Agreement.   Each Order shall be in the form of a written or electronic  communication and shall contain the following information: (i) the part number of the Product; (ii)  the quantity of the Product; (iii) the delivery date or shipping schedule; (iv) the location to which the  Product is to be shipped; and (v) transportation instructions.  Each Order shall contain a number for  billing purposes, and may include other instructions and terms (provided that such terms do not  conflict with this Agreement) as may be appropriate under the circumstances.    (b)        All Orders shall be confirmed by SANMINA within five (5) business  days of receipt.  SANMINA will accept all Orders consistent with Forecast and this Agreement  and will use reasonable efforts to accept Orders for upside.   If SANMINA does not accept or  reject the Order within the five-day period, the Order will be deemed accepted if consistent with  Forecast and for upside shall be deemed rejected by SANMINA unless SANMINA has notified  CUSTOMER that is has commenced performance, in which case the Order shall be deemed  accepted to the extent of such performance.   CUSTOMER shall provide a weekly open order  report so that SANMINA can verify it is aware of all Orders that have been placed.  SANMINA  shall have a target of meeting the delivery schedule for all accepted Orders.  The success rate for  on-time delivery will be measured and reviewed by the Parties on a monthly basis.  A Late Order  shall be an Order that ships at least the day after specified as the commit to ship date agreed upon  by the Parties.   If the success rate drops below ninety-five percent (95%) for any month, then  SANMINA will implement remedial actions reasonably acceptable to CUSTOMER to maintain a  success rate above ninety-five percent (95%), which may include expedited shipping and/or  safety stock as appropriate, subject to Section 10.   Remedial actions will be at SANMINA’s  expense to the extent due to issues for which SANMINA is responsible under this Agreement.  In  no event will SANMINA divert resources or reduce capacity available to CUSTOMER in any  manner that adversely impacts the success rate as required for CUSTOMER’s volumes (e.g., in  favor of another SANMINA customer).    4.2        Forecast; Minimum Buys; Excess and Obsolete Inventory.    (a)       Initial Forecast.   Once Sanmina Facilities have been qualified by  CUSTOMER, CUSTOMER shall provide SANMINA with (i) an initial ninety (90) day firm  Order and (ii) a forecast for Product requirements (in monthly buckets) for an additional nine (9)  months  (“Forecast”).     Until  Sanmina  Facilities  are  qualified  or  CUSTOMER  otherwise  authorizes Sanmina to procure Components to meet CUSTOMER’s Forecast, Sanmina is not  responsible for MRP process per Section 4.2(c) and CUSTOMER will not have any Component  Liability. All Orders shall be binding and may be rescheduled only in accordance with Section  4.2(d) or cancelled upon payment of (1) the purchase price of the Product (if the cancellation is  made within 30 days of the scheduled delivery date) or (2) the amounts set forth in Section 4.2(f)  (if cancellation is made outside of such 30-day period).  Any Products or Components for which 

 

Manufacturing Services Agreement  CONFIDENTIAL  6 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            CUSTOMER is charged will at CUSTOMER’s option be (i) delivered to CUSTOMER, or (ii) the  payment shall be credited to Offset Inventory Reserve Account and handled as set forth in  Sections 4.2(e) and (f). SANMINA shall make purchase commitments (including purchase  commitments  for  Long Lead-time  Components)  to its  Component  suppliers (“Vendors”)  as  reasonably required based upon the Order and Forecast, and CUSTOMER shall be responsible for  all such Components purchased in support of CUSTOMER’s then-current Forecast in accordance  with this Agreement as set forth in Section 4.2 (f) and the Inventory Turns Section of Exhibit A  or, upon termination of this Agreement, in accordance with Section 11.5.  For all other purposes,  however, the Forecast shall be non-binding.    (b)        Subsequent Forecasts.  On the first business day of each calendar month  after   the   initial   Order  and   Forecast,   CUSTOMER  shall   provide   an   updated   Forecast.  CUSTOMER  may  adjust  volumes  subject  to  lead  times  required  for  Long  Lead-time  Components.  SANMINA will use reasonable efforts to accommodate any upside requests.  The  first month of the updated Forecast shall automatically become part of the Order, a new Forecast  month shall be added, and a new firm Order issued, so that a rolling Order of ninety (90) days is  always maintained.    (c)        MRP Process.    (1)        SANMINA shall take the Order and Forecast and generate a  Master Production Schedule (“MPS”) for a twelve-month period in accordance with the process  described in this Section.  The MPS shall define the master plan on which SANMINA shall base  its procurement, internal capacity projections and commitments.   SANMINA shall use  CUSTOMER’s Order to generate the first three (3) months of the MPS and shall use CUSTOMER’s  Forecast to generate the subsequent nine (9) months of the MPS.    (2)       SANMINA shall process the MPS through industry-standard  software   that   will   break   down   CUSTOMER’s   Product   requirements   into   Component  requirements.   When no Product testing (in-circuit or functional testing) is required by  CUSTOMER, SANMINA will use commercially reasonable efforts to schedule delivery of all  Components to SANMINA eleven (11) business days before the Products are scheduled to ship to  CUSTOMER; in the event Product testing is required, SANMINA will use commercially reasonable  efforts to schedule delivery of all Components to SANMINA sixteen (16) business days before  the Products are scheduled to ship to CUSTOMER.    (3)       SANMINA will release (launch) purchase orders to Vendors  (including other SANMINA facilities) prior to the anticipated date that the Components are  needed at SANMINA.  The date on which these orders are launched will depend on the lead time  determined between the Vendor and SANMINA and SANMINA’s manufacturing or materials  planning systems.    (4)        A list of all Components with lead times greater than ninety days  (or the Order period, if the Order period is less than ninety days) (“Long Lead-time Components”)  is set forth in Exhibit B to this Agreement and/or has previously been provided to CUSTOMER.    SANMINA shall use reasonable efforts to update the list of Long Lead-time Components every  quarter and present an updated list of Long Lead-time Components to CUSTOMER  at  the  time   SANMINA  presents  the  CUSTOMER  with  the  Excess  List  and Obsolete List described in  Exhibit A.  Each revised Long Lead-time Item list shall be deemed an amendment to Exhibit B,  whether or not it has been formally designated as such.  In the event SANMINA fails to present  an updated list of Long Lead-time Components, (i) the Parties shall 

 

Manufacturing Services Agreement  CONFIDENTIAL  7 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            continue to rely on the preceding list (as updated in writing by the Parties) and (ii) CUSTOMER  will accept responsibility for Long Lead-time Components ordered outside the lead-times set  forth in the list provided that SANMINA can demonstrate to CUSTOMER’s reasonable satisfaction  that such Components were ordered in accordance with the then-current Vendor lead- times.   (CUSTOMER acknowledges that lead-times constantly change and that SANMINA might not  always be able to present CUSTOMER with a current Long Leadtime Component List).    (5)        CUSTOMER    acknowledges    that    SANMINA    will    order  Components in quantities sufficient to support CUSTOMER’s Forecast.    (6)        CUSTOMER acknowledges that SANMINA may be required to  order Components in accordance with the various minimum buy quantities, tape and reel quantities,  and multiples of packaging quantities required by the Vendor.   In addition, CUSTOMER  acknowledges that there may be a lag time between any CUSTOMER cancellation and the  cancellation of the Components required to support production.    (7)        CUSTOMER acknowledges that the Vendor lead times can be  significant  and  understands  that  it  is  possible  for  SANMINA  to  have  Long  Lead-time  Components on order which would support the last week of CUSTOMER’s Forecast.    (8)        SANMINA will review the above with CUSTOMER on at least  a monthly basis and coordinate with CUSTOMER regarding appropriate order placement, inventory   management  and  safety  stock  to  address  any  CUSTOMER  concerns  regarding continuity of  supply and/or mitigation of inventory risk, in view of then-current supply chain conditions.    (d)        Reschedule.  CUSTOMER may reschedule out all or part of a scheduled  delivery (per Order or Forecast) for a period not to exceed ninety (90) days in accordance with  the table below.  At the end of this ninety day period, CUSTOMER shall either accept delivery of  rescheduled finished units and/or pay SANMINA’s Delivered Cost (as defined in Section 4.2(e))  associated  with  rescheduled  units  not  yet  built  (to  be  credited  to  Offset  Inventory  Reserve  Account and handled as set forth in Sections 4.2(e) and (f)).    Days Before P.O. Delivery Date Percentage Reschedule Out Allowance  0 – 30 [redacted]  31 – 60   [redacted]  61-90 [redacted]  > 90 [redacted]    SANMINA shall use reasonable commercial efforts to accommodate any upside schedule  changes beyond the firm Order periods based on Component availability and equipment capacity.    (e)        Excess and Obsolete Inventory, Inventory Turns.  (i)                      For the purpose of this Agreement,  a.        “Delivered Cost” shall mean SANMINA’s quoted cost of  Components as stated on the bill of materials, plus a materials margin and incoming freight equal  to [redacted].  Quoted costs to be updated at quarterly review meetings based on actual costs used  for Pricing adjustments as contemplated in Sections 2 and 3.5.  Delivered Cost will be 

 

Manufacturing Services Agreement  CONFIDENTIAL  8 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            based on the current valuation of the Components.  Incoming freight will be reconciled quarterly  until localization is complete.    b.          “Excess Components” means inventory that is in excess of the  quantity required to maintain the agreed to inventory turns per Exhibit A.    c.          ”Obsolete Components” means: the quantity of Components  that SANMINA has on hand, which have been ordered, manufactured, or acquired (in accordance  with the requirements of this Section 4) based on CUSTOMER’s then-current Forecast or Order,  but which SANMINA no longer requires as a result of   (i) CUSTOMER’s announcement or  notification that the Product into which such Component is incorporated has reached its end of  life, or (ii) a change in the specification for the Product into which the Component was incorporated  as a result of an Engineering Change Notice.    (ii)        The management of Excess Components and Obsolete Components shall  be handled in accordance with the Inventory Turns Section of Exhibit A.    (f)         Customer Component Liability.  CUSTOMER acknowledges that it shall  be financially liable for all Components ordered in accordance with this Section as set forth in the  Inventory Turns Section of Exhibit A or, upon termination of this Agreement, in accordance with  Section 11.5.  Specifically, CUSTOMER’s Component Liability shall be equal to SANMINA’s  Delivered Cost of all Components reasonably ordered in support of any Order or Forecast in  accordance with process above, including any Excess Components resulting from any minimum  buy quantities, tape and reel quantities, and multiples of packaging quantities required by the  Vendor less the actual cost (per the bill of materials) of those Components which are returnable to  Vendor (less any cancellation or restocking charges), in each case, as offset by the amount in the  Offset Inventory Reserve Account.    At CUSTOMER’s request, SANMINA shall use commercially  reasonable efforts to minimize CUSTOMER’s Component Liability by attempting to return  Components to the Vendor; provided, however, that SANMINA shall not be obligated to attempt to  return to Vendor Components which are, in the aggregate, worth less than $1,000.    (g)        Supplier Managed Inventory Program.  CUSTOMER acknowledges that  the concept of "purchase commitments to a Vendor” (as used in Section 4.2(a) and elsewhere in  this  Agreement) includes  not  only  SANMINA  purchase  orders  issued  to  Vendors,  but  also  forecasts (which are based on CUSTOMER’s Forecasts) provided to Vendors in accordance with  SANMINA's Supplier Managed Inventory Program ("SMI Program").  Under the SMI Program,  SANMINA provides Vendors with forecasts of anticipated Component requirements, and the  Vendor is obligated to supply SANMINA with all forecasted Components, but SANMINA does not  issue Vendor a purchase order until the Component is actually required by SANMINA for  production.  However, under the SMI Program, SANMINA is obligated to either consume a  sufficient level of the forecasted Components or pay the Vendor for a certain level of unused  Components.  For the purpose of this Agreement, CUSTOMER's Component Liability (pursuant  to 4.2(f) above) shall include the cost of any required Vendor payments under the SMI Program  as well as any Components actually ordered from the Vendors based on CUSTOMER's Forecast.    (h)        Subcontractors.     SANMINA  shall  not  subcontract  any  material  or  substantive  obligation  or  performance  herein  without  CUSTOMER’s  prior  authorization  in  writing, which shall not be unreasonably withheld or delayed.  SANMINA shall be responsible  for any subcontractors used by SANMINA as if such were SANMINA directly, and SANMINA  shall defend, hold harmless, and indemnify CUSTOMER for any damages, costs, or expenses  suffered by CUSTOMER due to SANMINA’s subcontractor’s acts or omissions.   With the 

 

Manufacturing Services Agreement  CONFIDENTIAL  9 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            exceptions noted in the applicable Exhibits, SANMINA shall comply with Sections 3.7  (Compliance) and 3.8 (Information Security), including the requirements of NIST SP 800-171,  FARO’s Supplier Code of Conduct (Exhibit F), and FARO’s Conflict Minerals Policy (Exhibit  G), and FARO’s Third-Party Anti-Corruption Policy (Exhibit H), and shall ensure that all  subcontractors follow policies at least as strict.   For the avoidance of doubt, Vendors are not  considered  subcontractors  except  as  follows.    SANMINA  is  responsible  for  compliance  of  Vendors if SANMINA uses any Vendor that is an Affiliate of SANMINA or that is not on the  CUSTOMER AVL or otherwise approved by CUSTOMER.  For Vendors referred by SANMINA  (e.g.,  on  SANMINA’s  preferred  supplier  list),  the Parties  will  cooperate  and  coordinate  on  process to qualify those Vendors, including with respect to anti-corruption and ethical business  conduct.  In addition, SANMINA will obtain and keep copies of all applicable (recognizing some  Vendors  do  not  provide certificates  of  conformance)  certificates  of  conformance  to Vendor  specifications for the Components (and will verify that it receives the identical part number and  revision as what is specified on CUSTOMER’s AVL) required to be provided by Vendors for  incoming Components  and results  of  required  inspections  of  incoming Components  per the  Specifications and make the same available to CUSTOMER on request.    (i)         Service  Agreement.    Any  agreement  between  the  Parties  related  to  out  of  warranty repairs shall be via a separate written agreement.  If requested by Customer, SANMINA  will make available out of warranty services, calibration, upgrades and re-certification (including  related  logistics  and  shipping)  at  the  rates  quoted by  SANMINA  as  of  the Effective  Date,  consistent with the margin percentages and rates set forth in Exhibit A as applicable.  Future rate  changes shall be addressed via SOWs or addendums to SOWs.  The services will include at least  the final assembly and re-calibration required by CUSTOMER for SANMINA to deliver Product  from the SANMINA Facilities outside of Thailand when specified by CUSTOMER, at rates  consistent with Exhibit A, or as otherwise agreed.    5.          DELIVERY AND ACCEPTANCE    5.1        Delivery.   The Parties agree to continue discussing how all Product shipments  (including shipments made in accordance with Section 7 “Warranty”) shall be made, including  title transfer, risk of loss, taxes, shipping charges and importer of record/exporter of record  responsibilities (“Delivery Terms”).   Until such time as other arrangements are agreed, the  default arrangement shall be FCA SANMINA’s facility of manufacture or repair (Incoterms  2020) as indicated by CUSTOMER (e.g., Thailand, Texas or Czech Republic).  Title to and risk  of loss or damage to the Product shall pass to CUSTOMER upon SANMINA’s tender of the  Product to the common carrier.   Except for warranty returns per Section 7, any such costs for  shipping by the common carrier paid by SANMINA shall be billed back to CUSTOMER on a  separate invoice line item. [redacted].  SANMINA shall mark, pack, package, crate, transport, ship  and store Product to ensure (a) delivery of the Product to its ultimate destination in safe condition,  (b) compliance with all requirements of the carrier and destination  authorities,  and  (c)  compliance   with  any  special  instructions  of  CUSTOMER. SANMINA shall use commercially reasonable  efforts to deliver the Products on the agreed-upon delivery dates and shall promptly notify  CUSTOMER of any anticipated delays.  SANMINA shall be  responsible  for  expedited  shipping   costs  for  any  delays  solely  due  to  reasons  within SANMINA’s control (which for the  avoidance of doubt, does not include late deliveries from Vendors if SANMINA properly places  orders in the appropriate time frames, properly performs payment  and  other  obligations  to   Vendors,  performs  applicable  incoming  inspections,  and properly manages forecasting and  handling of returns with Vendors). 

 

Manufacturing Services Agreement  CONFIDENTIAL  10 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            5.2        Acceptance.  Acceptance of the Product shall occur no later than fifteen (15) days  after shipment of Product and shall be based solely on whether the Product passes the mutually  agreed specified acceptance test procedure or inspection designed to demonstrate compliance  with the Specifications.   Product cannot be rejected based on criteria that were unknown to  SANMINA or based on test procedures that SANMINA has not approved or does not conduct.  The acceptance test procedures and inspection requirements in the Specifications referenced in  Exhibit M as of the Effective Date have been approved by SANMINA, and further changes will  be approved per the process set forth in Section 6 (Changes).  Notwithstanding anything to the  contrary, Product shall be deemed accepted if not rejected within this fifteen-day period.  Once a  Product is accepted, all Product returns shall be handled in accordance with Section 7 (Warranty).  Prior to returning any rejected Product, CUSTOMER shall obtain and Return Material  Authorization (“RMA”) number from SANMINA, and shall return such Product in accordance with  SANMINA’s instructions; CUSTOMER shall specify the reason for such rejection in all RMA’s.   In the event a Product is rejected, SANMINA shall have a reasonable opportunity to cure any  defect which led to such rejection.    6.          CHANGES    6.1        General.   CUSTOMER may upon sufficient notice make changes within the  general scope of this Agreement.  Such changes may include, but are not limited to, changes in  (1) drawings, plans, designs, procedures, Specifications, test specifications or bill of material  (“BOM”), (2) methods of packaging and shipment, (3) quantities or versions of Product to be  furnished, (4) delivery schedule, or (5) Customer-Furnished Equipment.  All changes other than  changes in quantity of Products to be furnished shall be requested pursuant to an Engineering  Change Notice (“ECN”) and finalized in an Engineering Change Order (“ECO”).  If any such  change  causes  either  an  increase  or  decrease  in  SANMINA's  cost  or  the  time  required  for  performance of any part of the work under this Agreement (whether changed or not changed by any  ECO) the Prices and/or delivery schedules shall be adjusted in a manner which would  adequately compensate the Parties for such change, consistent with this Agreement.    6.2         ECN’s  .  SANMINA will respond to [redacted] ECN requests per Product per  month without a non-recurring administrative fee [redacted]; responses to additional ECN's  will  incur an administrative fee of [redacted] each except as follows.   SANMINA will also  respond to  [redacted] ECN requests per Product per month for test software and Product software  without an administrative fee [redacted]; responses to additional ECN’s will incur an  administrative fee of [redacted] each.  Within five (5) business days after an ECN is received (or  48 hours in a line down situation an initial response can be given), SANMINA shall advise  CUSTOMER in  writing (a) of any change in Prices or delivery schedules resulting from the  ECN, (b) any  new tooling needed, which will be paid for by CUSTOMER, and (c) the  purchase price of  any Finished Product, Work-in-Process (including value-add and applicable  mark-ups), and the Delivered Cost of any Component rendered excess or obsolete as a result of  the ECN (collectively the “ECN Charge”). SANMINA shall update CUSTOMER on such ECN  requests at least every two (2) business days. Unless otherwise stated, ECN Charges are valid from  thirty (30) days from the date of the ECN Charge.    6.3         ECO’s.    In the event CUSTOMER desires to proceed with the change  after  receiving the ECN Charge pursuant to Section 6.2, CUSTOMER shall advise  SANMINA in  writing and shall immediately pay the portion of the ECN Charge set forth in Section 6.2(b).  In  the event CUSTOMER does not desire to proceed with the Change after  receiving the ECN  Charge,  it  shall  so  notify  SANMINA.    In  the  event  SANMINA  does  not  receive  written 

 

Manufacturing Services Agreement  CONFIDENTIAL  11 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            confirmation  of  CUSTOMER’s  desire  to  proceed  with  the  change  within  thirty  days  after  SANMINA provides CUSTOMER with the ECN Charge, the ECN shall be deemed cancelled.    6.4        Acceptance.      Changes   specified   in   the   ECN   will   become   part   of   the  Specifications for the applicable Product.   Acceptance under Section 5.2 (Acceptance) and warranty  under Section 7 (Warranty) will apply in accordance with the updated Specifications reflecting the  change.    7.          WARRANTY    7.1        SANMINA Warranty.   SANMINA warrants that, for a period of thirteen (13)  months from the date of  shipping of the Product, the Product will be free from defects in  workmanship.   Products shall be considered free from defects in workmanship if they are  manufactured in accordance with the latest version of IPC-A-600 or IPC-A-610, conform to  CUSTOMER’s  provided,  and  mutually  agreed,  Specifications,  and  successfully  complete  specified product acceptance tests.  The Specifications referenced in Exhibit M as of the Effective  Date have been mutually agreed and changes will be approved per the process set forth in Section  6 (Changes).  SANMINA shall, at its option and at its expense (and as CUSTOMER’s sole and  exclusive remedy for breach of such warranty), repair, replace or issue a credit for Product found  defective during the warranty period.  In addition, SANMINA will pass on to CUSTOMER all  Vendors’ (and manufacturers’) Component warranties to the extent that they are transferable, as  well as manage such warranties on CUSTOMER’s behalf, but does not independently warrant  Components.    All  warranty obligations  will  cease  upon  the  earlier of the  expiration  of  the  warranty period set forth above or the return (at CUSTOMER’s request) of any test equipment or  test fixtures required for performance of warranty obligations.  ALL CLAIMS FOR BREACH  OF WARRANTY MUST BE RECEIVED BY SANMINA NO LATER THAN THIRTY (30)  DAYS AFTER THE EXPIRATION OF THE WARRANTY PERIOD.    7.2        RMA Process.  SANMINA shall concur in advance on all Products to be returned  for repair or rework.  All returned Products should be shipped in the packaging that the Products  were originally shipped in.  CUSTOMER shall obtain a RMA number from SANMINA prior to  return shipment.  All returns shall state the specific reason for such return and will be processed  in accordance with SANMINA's RMA process.   SANMINA shall pay or reimburse all  transportation costs for valid returns of the Products to SANMINA and for the shipment of the  repaired or replacement Products to CUSTOMER’s end customer, and shall bear all risk of loss or  damage to such Products while in transit; CUSTOMER shall pay these charges, plus a handling  charge, for invalid or “no defect found” returns.    Any repaired or replaced Product shall be  warranted as set forth in this Section for a period equal to the greater of (i) the balance of the applicable  warranty period relating to such Product or (ii) ninety (90) days after it is received by CUSTOMER.    7.3        Exclusions from Warranty.  This warranty does not cover defects or failures in  Products to the extent due to (a) CUSTOMER's design of Products including, but not limited to,  design functionality failures, specification inadequacies, failures relating to the functioning of  Products in the manner for the intended purpose or in the specific CUSTOMER's environment  (but SANMINA’s failure to comply with the Specifications is not considered to be a failure or defect  due to CUSTOMER’s design); (b) accident, disaster, neglect, abuse, misuse, improper handling,  testing, storage or installation by CUSTOMER (or its end customer) including improper handling  in accordance with static sensitive electronic device handling requirements; (c) alterations,  modifications or repairs by CUSTOMER or third parties (not at the direction of SANMINA)   or    (d)   defective   CUSTOMER-provided   test   equipment   or   test   software. 

 

Manufacturing Services Agreement  CONFIDENTIAL  12 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            CUSTOMER bears all design responsibility for the Product.  SANMINA remains responsible for  any failure to manufacture and test in accordance with Specifications and for any  accident,  disaster,  neglect,  abuse,  misuse,  improper  handling,  testing,  storage  or  installation  or  other  damage while in SANMINA’s possession or control.    7.4        Remedy.  THE SOLE REMEDY UNDER THIS WARRANTY SHALL BE THE  REPAIR, REPLACEMENT OR CREDIT FOR DEFECTS AS STATED ABOVE.   THE  WARRANTIES IN THIS SECTION 7 (WARRANTY) ARE IN LIEU OF ANY OTHER  WARRANTIES EITHER EXPRESS OR IMPLIED.   SANMINA DOES NOT MAKE ANY  WARRANTIES REGARDING MERCHANTABILITY, NONINFRINGEMENT, OR FITNESS  FOR A PARTICULAR PURPOSE, AND SPECIFICALLY DISCLAIMS ANY SUCH  WARRANTY, EXPRESS OR IMPLIED.   SANMINA SHALL COMPLY WITH “ROHS”,  “WEEE”, “REACH” AND OTHER APPLICABLE ENVIRONMENTAL LEGISLATION  WORLDWIDE WITH RESPECT TO IT’S MANUFACTURING PROCESS (INCLUDING  PROCESS MATERIALS).    CUSTOMER SHALL COMPLY WITH “ROHS”, “WEE”, “REACH”  AND OTHER APPLICABLE ENVIRONMENTAL LEGISLATION WORLDWIDE WITH  RESPECT TO ITS PRODUCT DESIGN AND CHOICE OF COMPONENTS CONTAINED  WITHIN THE PRODUCT (NOT INCLUDING PROCESS MATERIALS).    7.5        SANMINA  further  represents  and  warrants  that  all  Products  will  be  new,  provided with good and marketable title, free and clear of any liens or encumbrances.    8.          CUSTOMER FURNISHED EQUIPMENT AND COMPONENTS    8.1        Customer-Furnished Equipment.   CUSTOMER shall provide SANMINA with  the equipment, tooling, and fixtures (“Customer-Furnished Equipment”) set forth in Exhibit C  (collectively the “Customer-Furnished Equipment”).  Any equipment, tooling, and fixtures for  which Customer pays NRE will also be treated as Customer Furnished Equipment and will be  owned by Customer unless otherwise agreed.  SANMINA will assume all risk of loss or damage  to the Customer Furnished Equipment upon delivery to the Sanmina Facility and until such  Customer Furnished Equipment is removed.   The Parties will cooperate to address any issues  with the Customer Furnished Equipment.    8.2        Care of Customer-Furnished Equipment.   All Customer-Furnished Equipment  shall remain the property of CUSTOMER.   SANMINA will keep the Customer Furnished  Equipment  at  the  Sanmina  Facility  and  not  move  it  without  CUSTOMER’s  consent.    The  Customer Furnished Equipment and related documentation will be protected as the Confidential  Information of CUSTOMER or its equipment vendor, as applicable.   The Customer Furnished  Equipment (and all parts and components thereof) are and shall at all times be and remain the sole  and exclusive personal property of CUSTOMER.  SANMINA shall have no right, title or interest  therein or thereto, and shall not create, incur, assume or suffer to exist any claim, mortgage, lien,  pledge or other encumbrance or attachment of any kind whatsoever upon, affecting or with  respect to the Customer Furnished Equipment once any applicable NREs have been paid for the  Customer Furnished Equipment if procured by SANMINA for CUSTOMER.  SANMINA shall  clearly identify all Customer-Furnished Equipment by an appropriate tag and shall utilize such  Customer-Furnished Equipment solely in connection with the manufacture of CUSTOMER’s  Product.  SANMINA shall not make or allow modifications to be made to Customer-Furnished  Equipment without CUSTOMER’s prior written consent.   SANMINA shall be responsible for  reasonable diligence and care in the use and protection of any Customer-Furnished Equipment  and routine maintenance of any Customer-Furnished Equipment but shall not be responsible for  repairs  or  replacements  (including  servicing  and  CUSTOMER-specific  calibration  (unless 

 

Manufacturing Services Agreement  CONFIDENTIAL  13 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            managed on behalf of CUSTOMER and paid for with NRE) to the equipment) unless such failure  was caused by SANMINA’s negligence or willful misconduct.   If requested by CUSTOMER,  SANMINA will arrange for servicing and CUSTOMER-specific calibration of Customer-  Furnished Equipment on cost plus agreed margin basis consistent with this Agreement.    8.3        Removal   of   Customer   Furnished   Equipment.       All   Customer-Furnished  Equipment shall be returned to CUSTOMER at CUSTOMER's expense upon request. SANMINA’s  production and warranty obligations which require the utilization of the returned Customer- Furnished Equipment will cease upon SANMINA’s fulfillment of CUSTOMER’s request.   SANMINA agrees to provide access to CUSTOMER and its employees and agents in order to  remove the Customer Furnished Equipment from the Sanmina Facility.  SANMINA shall cooperate   with  and  assist  CUSTOMER,  as  reasonably  requested  by  CUSTOMER,  in  the takedown,  disassembly, packing and shipping logistics for the Customer Furnished Equipment. In addition,  SANMINA will provide CUSTOMER with copies of all equipment logs and documentation.    8.4        Customer-Furnished Components.   During transition and thereafter as may be  mutually agreed, SANMINA will purchase certain Components for the Products from  CUSTOMER.   The cost, availability and lead time for those Components will be specified by  CUSTOMER.  SANMINA will issue purchase orders to CUSTOMER consistent with the cost,  availability  and  lead  time  specified  by  CUSTOMER.    It  is  expected  that  SANMINA  will  transition to direct purchases from approved Vendors after Components made available by  CUSTOMER have been purchased.  However, while Components continue to be made available  by CUSTOMER, SANMINA will purchase from CUSTOMER as first choice for those components  unless otherwise agreed by CUSTOMER.  Any Vendor warranty or date code related issues for  Customer-Furnished Components shall be resolved between CUSTOMER and the Vendor, as  applicable.    9.          INDEMNIFICATION    9.1         SANMINA’ s  Indemnification –  Intellectual Property.  SANMINA shall defend  CUSTOMER and CUSTOMER's affiliates, directors, officers, employees, contract  employees,  agents and other representatives (the “Customer-Indemnified Parties”) against, and indemnify  and hold harmless the Customer Indemnified Parties from damages finally awarded or agreed in  settlement for, third party demands, claims, actions, causes of action,  proceedings, and suits  (“Claim(s)”) alleging actual or alleged infringement or misappropriation of any patent, trademark,  mask work, copyright, trade secret, or any actual or alleged violation of any other intellectual property  rights arising from or in connection with SANMINA’s manufacturing processes (including, process  materials, systems and facilities) or materials or Components that originate from SANMINA or an  Affiliate of SANMINA (collectively “SANMINA-Furnished Items”).    9.2         CUST OMER’s   Inde mni f i cat ion   –   Intellectual  Property.    CUSTOMER   shall defend  SANMINA  and  SANMINA's  affiliates,  directors,  officers,     employees,    contract employees, agents and other representatives (the “SANMINA-Indemnified Parties”)   against, and  indemnify and  hold harmless  the  SANMINA-Indemnified  Parties  from damages   finally awarded   or   agreed   in   settlement   for,   all   third  party   Claims   alleging   infringement    or misappropriation of any patent, trademark, mask work, copyright, trade secret or any actual  or alleged violation of any other intellectual property rights arising from or in connection with  the Products, except to the extent that the alleged infringement arises from or  in connection  with SANMINA-Furnished  Items.    For  purposes  of  this  Section  9,  SANMINA’s   manufacturing processes include the facilities, equipment, processes and services  provided by  SANMINA that 

 

Manufacturing Services Agreement  CONFIDENTIAL  14 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            are not uniquely required by CUSTOMER’s Product Specifications, including manufacturing  processes, technology and services that SANMINA makes commonly or generally available to other  customers.    9.3        Other Indemnification.    (a)        CUSTOMER shall indemnify, defend, and hold SANMINA-Indemnified  Parties harmless from all third party Claims (i) based upon personal injury or death or injury to  tangible property to the extent caused by a defective Product that has been manufactured in  accordance with the Specifications or by the negligence or willful misconduct of CUSTOMER or  its officers, employees, subcontractors or agents, and in each case not due to the negligence or  willful misconduct of any of the SANMINA-Indemnified Parties and (ii) by any employee of  CUSTOMER or its affiliates who alleges or asserts that such employee should have been transferred  to and become employed by SANMINA or its affiliates pursuant to any contract, law, rule or  undertaking relating to a party’s obligations upon transfer of an undertaking, including the Acquired    Rights   Directive   (Council   Directive   2001/23/EC)   and   its   local   counterparts. SANMINA  shall indemnify, defend and hold Customer-Indemnified Parties harmless from all Claims based  upon personal injury or death or injury to tangible property to the extent caused by the negligence  or willful misconduct of SANMINA or its officers, employees, subcontractors or agents, and in each  case not due to the negligence or willful misconduct of any of the CUSTOMER- Indemnified Parties.  For avoidance of doubt, with respect to “injury to tangible property” referenced above, delivery of  Product by SANMINA that does not conform to the warranties set forth in Section  7 is not considered “injury” to the Product itself, and is handled in accordance with Section 7  (“Warranty”).    (b)        If CUSTOMER requires third party marking to be placed on the Products  by SANMINA, CUSTOMER shall indemnify, defend, and hold SANMINA-Indemnified Parties  harmless from any Claims by the third party that Products manufactured in accordance with the  Specifications do not comply with the third party’s requirements for use of such marks. SANMINA  shall indemnify, defend, and hold CUSTOMER-Indemnified Parties harmless from any Claims by  the third party for non-compliance with such requirements due to failure by SANMINA to  manufacture the Products in accordance with the Specifications that relate to such Product labeling  and mark usage requirements.    9.4       Procedure. A Party entitled to indemnification pursuant to this Section (the  "Indemnitee") shall (i) promptly notify the other Party (the "Indemnitor") in writing of any Claims  covered by this indemnity, (ii) provide the Indemnitor with sole control over the defense and  settlement of the Claim, and (iii) provide all cooperation and assistance in the defense and  settlement of the Claim as reasonably requested by Indemnitor at the Indemnitor’s  expense.  Notwithstanding the foregoing, if the Indemnitee in its sole judgment so elects, the Indemnitee  may also participate in the defense of such action by employing counsel at its expense, without  waiving the Indemnitor's obligation to indemnify and defend.   The Indemnitor shall not  compromise any Claim (or portions thereof) or consent to the entry of any judgment without an  unconditional release of all liability of the Indemnitee as to each claimant or plaintiff, except with  consent of the Indemnitee, not to be unreasonably withheld or delayed.    10.        LIMITATION OF LIABILITY    10.1      WITH THE EXCEPTION OF INDEMNITY OBLIGATIONS UNDER SECTION 9, OR  BREACHES OF SECTION 14 (CONFIDENTIALITY), IN NO EVENT SHALL EITHER PARTY    BE   LIABLE   TO   THE   OTHER   FOR   ANY   INDIRECT,   CONSEQUENTIAL, 

 

Manufacturing Services Agreement  CONFIDENTIAL  15 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            INCIDENTAL, PUNITIVE OR SPECIAL DAMAGES, OR ANY DAMAGES WHATSOEVER  RESULTING FROM LOSS OF USE, DATA OR PROFITS, EVEN IF SUCH OTHER PARTY  HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.  FOR THE PURPOSE  OF THIS SECTION, BOTH LOST PROFITS AND DAMAGES RESULTING FROM VALUE  ADDED TO THE PRODUCT BY CUSTOMER AFTER DELIVERY BY SANMINA SHALL  BE CONSIDERED CONSEQUENTIAL DAMAGES.   IN NO EVENT WILL SANMINA BE  LIABLE FOR COSTS OF PROCUREMNET OF SUBSTITUTE PRODUCT BY CUSTOMER  FROM A THIRD PARTY.  IN NO EVENT SHALL EITHER PARTY’S LIABILITY FOR ALL  CLAIMS ARISING OUT OF OR RELATING TO THIS AGREEMENT EXCEED [redacted] U.S.  DOLLARS [redacted]  OR (ii)  [redacted]  PERCENT  [redacted]  OF  TOTAL  PAYMENT   AMOUNTS  FOR PRODUCTS AND SERVICES PROVIDED (OR REQUIRED TO BE  PROVIDED) UNDER THIS AGREEMENT DURING THE 12 MONTH PERIOD PRECEDING  THE DATE THAT THE CLAIM FIRST ACCRUES (THE “CAP”). THESE LIMITATIONS  SHALL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY  LIMITED REMEDY.  NOTWITHSTANDING THE FOREGOING, THE CAP SHALL NOT  APPLY TO LIMIT: (i) CUSTOMER’S PAYMENT OBLIGATIONS UNDER SECTIONS 3.1,  4.2(a) OR (d) (FOR CANCELLED ORDERS) OR 11.5; OR (ii) EITHER PARTY’S PAYMENT  OBLIGATIONS UNDER EXHIBIT A; OR (iii) EITHER PARTY’S LIABILITIES DUE TO  BREACH OF SECTION 14 (CONFIDENTIALITY); OR (iv) SANMINA’S LIABILITY FOR  WARRANTY REMEDIES IN ACCORDANCE WITH SECTION 7 (WARRANTY); OR (v)  SANMINA’S LIABILITY UNDER SECTION 11.5(d) WHICH IS SUBJECT TO A CAP AS  SET FORTH IN SECTION 11.5(d) AND SUCH CAP SHALL BE CONSIDERED A SUB-CAP  INCLUDED WITHIN THE CAP DESCRIBED IN THIS SECTION 10.1 IF THE CAP  DESCRIBED IN THIS SECTION 10.1 IS ABOVE [redacted] BY MEASURE OF [redacted]  OF THE 12 MONTH PERIOD IMMEDIATELY PRECEDING THE DATE OF THE CLAIM,  AND OTHERWISE THE CAP IN SECTION  11.5(d) SHALL BE A SEPARATE CAP AND THE CAP IN THIS SECTION 10.1 WILL NOT  APPLY.  THE LIMITATIONS SET FORTH IN THIS SECTION SHALL APPLY WHERE THE  DAMAGES ARISE OUT OF OR RELATE TO THIS AGREEMENT.  THE CAP WILL NOT  BE CONSTRUED AS LIMITING SANMINA’S LIABILITY TO BE LESS THAN (i) WITH  RESPECT  TO  CUSTOMER  FURNISHED  EQUIPMENT,  COMPONENTS  AND  OTHER  ITEMS PROVIDED OR PAID FOR BY CUSTOMER, THE FULL CURRENT VALUE OF  THOSE ITEMS (INCLUDING AMOUNTS PAID BY CUSTOMER INTO THE OFFSET  INVENTORY   RESERVE   ACCOUNT),   OR   (ii)   WITH   RESPECT   TO   A   LIABILITY  COVERED BY BUSINESS INTERRUPTION/CYBER RISK INSURANCE THE MINIMUM  INSURANCE COVERAGE REQUIRED UNDER SECTION 15, [redacted].  THE  LIMITATIONS IN THIS SECTION WILL NOT APPLY TO GROSS NEGLIGENCE OR  WILLFUL MISCONDUCT BY EITHER PARTY.    10.2      Intentional Failure to Supply. If SANMINA has the ability to supply sufficient quantities  of Products to CUSTOMER, but intentionally does not supply such Products for any reasons that  are in SANMINA’s control (except for a proper termination pursuant to Section 11.2, i.e., without  cause, late payment per Section 3.1, exceeding a credit limit per Section 3.3 or other material breach  of the Agreement by CUSTOMER), either: (a) as communicated by a c-level executive of  SANMINA to CUSTOMER; or (b) as communicated by CUSTOMER to a c-level executive of  SANMINA that it reasonably believes that SANMINA has breached its supply obligations as  described in this Section 10.2, and providing SANMINA ten (10) business days to reply by either  acknowledging and accepting the factual conclusion that SANMINA has intentionally breached  its  supply  obligations,  or  curing  and  substantially  rectifying  the  failure  to  supply;  then, 

 

Manufacturing Services Agreement  CONFIDENTIAL  16 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            CUSTOMER shall be entitled to seek CUSTOMER’s [redacted].    11.        TERMINATION    11.1      Termination for Cause.  Subject to Section 11.5, either Party may terminate this  Agreement for default if the other Party materially breaches this Agreement; provided, however,  no termination right shall accrue until thirty (30) days after the defaulting Party is notified in writing  of the material breach and has failed to cure or give adequate assurances of performance within the  thirty (30) day period after notice of material breach.  The Parties agree that it is not the intent of the  cure period to leverage any extension of the agreed payment terms.    11.2      Termination  for  Convenience.    Subject  to  Section  11.5,  CUSTOMER  may  terminate this Agreement for any reason upon twelve (12) months’ prior written notice and may  terminate any Order hereunder for any reason upon ninety (90) days’ (before scheduled shipment)  prior written notice.  Subject to Section 11.5, SANMINA may terminate this Agreement for any  reason upon twelve (12) months’ notice.  Neither Party will provide notice of termination of this  Agreement for convenience during the Initial Term, unless such notice applies to termination of  the Initial Term at the end of the Initial Term, except as provided for in Section 11.3.  11.3      Supplemental Termination Rights by CUSTOMER.  After the Effective Date, if:  (i) SANMINA is not able to initially meet the Specifications at the SANMINA Facilities  (e.g. vibration testing requirements, delivering conforming Products), the Parties agree to  review and consider alternatives for a period of thirty (30) days, and if they are unable to  reasonably agree upon another SANMINA Facility that meets such requirements, then  CUSTOMER may terminate this Agreement upon written notice to SANMINA; or    (ii) the Parties are not able to agree on Delivery Terms per Section 5.1 (e.g.  importer of  record/exporter of record arrangements for delivery to end customers reasonably acceptable  to CUSTOMER), then CUSTOMER may terminate this Agreement upon written notice to  SANMINA.  A termination under this Sections 11.3 (i) or  (ii) shall be considered a  termination for convenience and shall not be considered a termination for cause due to  breach by Sanmina, and in such case the transfer of manufacturing responsibilities to  SANMINA shall be halted, and the Parties agree that any services related to the transfer  that have already been provided by SANMINA will be paid pro rata in accordance with  the agreed transition plan to SANMINA, along with any costs as described in Section 11.5  a.    After the Effective Date, if:    (iii) SANMINA is not able to maintain the ability to meet Specifications that will meet  the CUSTOMER’s requirements over a period of thirty (30) days at the SANMINA  Facilities, the Parties agree to review and consider alternatives for a period of thirty (30)  days, and if they are not able to agree on a viable solution, then CUSTOMER may terminate  this Agreement upon written notice to SANMINA.   If a termination is made under this  Section 11.3 (iii), and the cause of SANMINA’s inability to meet the Specifications is  within SANMINA’s reasonable control, CUSTOMER may terminate for cause in  accordance with Section 11.1. If the cause for termination is not within SANMINA’s  control, a termination under this Section 11.3 will be considered a termination for  convenience and shall not be considered a termination for cause due to 

 

Manufacturing Services Agreement  CONFIDENTIAL  17 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            breach by Sanmina, and the Parties shall share the costs of transition in accordance with  Section 11. (d), except that SANMINA’s liability shall be capped at no more [redacted] by  SANMINA for bringing CUSTOMER to SANMINA at the beginning of the Agreement.          11.4      Termination by Operation of Law.   Subject to Section 11.5, either Party shall  have the right to terminate this Agreement upon written notice to the other Party should the other  Party (a) become insolvent; (b) enter into or file a petition, arrangement or proceeding seeking an  order  for  relief  under  the  bankruptcy  laws  of  its  respective  jurisdiction;  (c)  enter  into  a  receivership of any of its assets or (d) enter into a dissolution or liquidation of its assets or an  assignment for the benefit of its creditors.    11.5      Consequences of Termination.    a.           Termination for  Reasons  other  than SANMINA’s Breach.   In the  event this Agreement is terminated for any reason other than a breach by SANMINA (including but  not limited to a force majeure or termination for convenience), CUSTOMER shall pay  SANMINA charges equal to (1) the contract price for all finished Product existing at the time of  termination (whether or not delivered at the time of termination) that are  subsequently delivered  to and accepted by CUSTOMER per CUSTOMER’s Orders; (2)  SANMINA’s quoted cost  (including labor, Components and applicable mark-ups per the pricing model) for all work in  process for unfinished Product that has been commenced per CUSTOMER’s Orders (however,  such shall be mitigated as reasonably possible, by avoidance, return or use on other projects and  CUSTOMER will have the option to have the work  completed and delivered per Section  11.5(c)); and (3) CUSTOMER’s Component Liability pursuant to Section 4.2(f) and subject to  Section 11.5(c).    b.          Termination Resulting from SANMINA’s Breach. In the event CUSTOMER  terminates this Agreement as a result of a breach by SANMINA,  CUSTOMER shall pay  SANMINA charges equal to (1) the contract price for all finished Product existing at the time of  termination (whether or not delivered at the time of termination) that are subsequently delivered  to and accepted by CUSTOMER per CUSTOMER’s Orders; (2) SANMINA’s quoted cost   (including  labor,  Components  but  excluding  any  markup)  for  all  work  in  process  for  unfinished Product that has been commenced per CUSTOMER’s Orders (however, such shall be  mitigated as reasonably possible, by avoidance, return or use on other projects and CUSTOMER  will have the option to have the work completed and delivered per  Section 11.5(c)); and (3)  CUSTOMER’s Component Liability pursuant to Section 4.2(f) and  subject to Section 11.5(c);  provided, however, that for the purposes of this subsection only,  CUSTOMER’s Component  Liability shall be calculated exclusive of any markup.  SANMINA remains liable to CUSTOMER  for damages pursuant to this Agreement.    c.          Wind Down Period.   CUSTOMER shall have the right to continue to  place Orders and purchase Products under this Agreement for a period of twelve (12) months  after notice of any termination of this Agreement (“Wind Down Period”), subject to continued  payment of undisputed amounts for such Products.  Any amounts subject to good faith dispute  will be resolved per Section 17.5.  SANMINA will reasonably cooperate with CUSTOMER to  provide continuity of supply and smooth transition during the Wind Down Period and to work  with Customer to mitigate any termination costs.  CUSTOMER shall have the right to (i) have  SANMINA continue  to manage  inventory in  accordance  with the  Offset  Inventory Reserve  Account and the Inventory Turns Section of Exhibit A while CUSTOMER continues to purchase 

 

Manufacturing Services Agreement  CONFIDENTIAL  18 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            Products in accordance with quarterly pricing reviews and any applicable changes in Price during  the Wind Down Period (with any termination fees for remaining Component Liability only paid  at the end of the wind down), (ii) take delivery and ownership of all Product and Components for  which it pays termination fees, including to  have existing  Components  shipped to  alternate  manufacturer, (iii) have work in process completed or Components allocated to Orders placed  during the Wind Down Period, and/or (iv) have Components returned or re-allocated where possible  to mitigate costs.    d.          Transition Costs.   SANMINA will be responsible to Customer for  [redacted] suffered by Customer arising from Customer’s termination for cause due to  SANMINA’s breach in accordance with Section 11.1 that results in a transition away from  SANMINA, capped at no more than [redacted] charged by SANMINA for bringing CUSTOMER  to SANMINA at the beginning of the Agreement. SANMINA will cooperate with CUSTOMER  and its second-generation provider until Customer is satisfactorily transitioned, including  cooperation and assistance on wind down/transition plans to minimize disruption and transfer of  Customer Furnished Equipment, components, test data and other materials and information  required for CUSTOMER to establish alternate manufacturing for  the  Products,  not  including   SANMINA’s  Background  Intellectual  Property  (except  per Section  16.3).     SANMINA’s   warranty  obligations  will  survive  until  transitioned  and,  if transitioned before end of applicable  warranty period, CUSTOMER will receive credit for remaining portion of warranty period based  on historical warranty return rate over prior 12 month period.   SANMINA will provide traceability,  Product and warranty history and other data as reasonably requested by CUSTOMER.   In the  event of termination not resulting from SANMINA’s breach, the costs for such transition shall be  made available to CUSTOMER at the time and materials rates in the pricing sheet (Exhibit A) as of  the Effective Date.    12.        QUALITY, PROGRAM MANAGEMENT AND CONTINUITY OF SUPPLY    12.1      Specifications.  Product shall be manufactured by SANMINA in accordance with  the Specifications, as may be modified via written ECO’s in accordance with this Agreement.  SANMINA is not responsible for inaccuracies or deficiencies in Specifications provided by  CUSTOMER; however, SANMINA will promptly notify CUSTOMER of any known inaccuracies  or deficiencies and the Parties will correct as needed via written ECO’s in accordance with this  Agreement.    Neither  Party  shall  make any change to the Specifications, to any Components  described therein, or to the Products (including, without limitation, changes in form, fit, function,  design, appearance or place of manufacture of the Products or changes which would affect the  reliability of any of the Products) unless such change is made in accordance with Section 6.1.  Notwithstanding the foregoing, SANMINA shall be permitted to make changes in its manufacturing  process within the limits of the approved process and its upper and lower control limits at any time,  so long as such changes do not affect the form, fit, or function of the Products.    12.2      Content of Specifications.   The Specifications shall include, but shall not be  limited to, (i) detailed electrical, mechanical, performance and appearance specifications for each  model of Product, (ii) the BOM; (iii) tooling specifications, along with a detailed description of the  operation  thereof,  (iv)  art  work  drawings,  (v)  Component  specifications,  (vi)  Vendor  cross  references, and (vii) acceptance tests.    12.3      Components.     SANMINA  shall  use  in  its  production  of  Products  such  Components of a type, quality, and grade specified by CUSTOMER to the extent CUSTOMER  chooses to so specify, and shall purchase Components only from Vendors appearing on  CUSTOMER’s approved vendor list (“AVL”); provided, however, that in the event SANMINA 

 

Manufacturing Services Agreement  CONFIDENTIAL  19 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            cannot  purchase  a  Component  from  a  Vendor  on  CUSTOMER’s  AVL  for  any  reason,  SANMINA shall be able to purchase such Component from an alternate Vendor, subject to  CUSTOMER’s prior written approval, which approval shall not be unreasonably withheld or  delayed.  SANMINA shall use commercially reasonable efforts to manage all Vendors, but shall  not be responsible for any Component (including the failure of any Component to comply with  the  Specifications)  except  from  Vendors  that  are  SANMINA  Affiliates.     SANMINA  is  responsible for obtaining and maintaining any applicable (recognizing some Vendors do not provide  certificates of conformance) certificates of conformance to Vendor specifications from Vendors for  incoming Components (and will verify that it receives the identical part number and revision as that  specified on the CUSTOMER’s AVL), inspection and testing in accordance with the Specifications,  warranty claims and returns for Components that do not meet applicable inspection and testing  requirements, proper handling, managing inventory, and any Components to the extent originating  from SANMINA or its Affiliates.  SANMINA shall recommend Vendors when appropriate, and the  Parties will cooperate and coordinate on process to qualify those Vendors, but Vendor approval and  selection shall be CUSTOMER’s sole responsibility.  Within the first year of this Agreement,  CUSTOMER will use reasonable efforts to approve SANMINA as  an  AVL  Vendor  for  all   Components  manufactured  by  SANMINA.     SANMINA  may recommend a change in a  Component or Vendor, but no change shall be made except at the written approval of the  CUSTOMER and the addition of any new Vendor to the CUSTOMER’s AVL.   CUSTOMER may  reasonably require SANMINA to change Vendors.   CUSTOMER retains the right to continuously  investigate and seek improved Vendor products and terms and can unilaterally update the AVL  with written notice to SANMINA.    12.4      Quality Specifications.  SANMINA shall comply with the quality specifications  set forth in its Quality Manual, incorporated by reference herein, a copy of which is available  from SANMINA upon request.    12.5      Compliance.   SANMINA has and will maintain certification and compliance  with the following at the Sanmina Facilities and with respect to the manufacture of the Products:  ISO 9001-2015, ISO 140001, and ISO 17025-2017.  SANMINA will maintain compliance with  the Specifications as agreed with CUSTOMER as of the Effective Date and as changed per  Section 6 (Changes).    12.6    Inspection of Facility.   Upon reasonable advance written notice and, upon  SANMINA’s request the execution of an appropriate nondisclosure agreement consistent with  this Agreement, in compliance with SANMINA’s security policies and on an escorted basis,  CUSTOMER and its representatives may inspect the Products and Components held by SANMINA  for CUSTOMER at SANMINA’s facilities during SANMINA’s regular business hours at the  Sanmina Facility used to manufacture the Products, provided that such inspection does not unduly  affect SANMINA’s operations.  CUSTOMER’s regulators and customers who have inspection  rights may participate in such inspections.  CUSTOMER and its representatives shall observe all  security and handling measures of SANMINA while on SANMINA’s premises. CUSTOMER and  its representatives, regulators, customers and any CUSTOMER employees acknowledge that their  presence on SANMINA’s property is at their sole risk.  The Parties accept and acknowledge that  CUSTOMER will co-locate several, full-time CUSTOMER employees on SANMINA’s site (i)  during the on-boarding phase of the Transition Timeline, and (ii) subject to reasonable availability  of office space, as reasonably required by CUSTOMER thereafter during the Term for purposes of  this Agreement.  For the avoidance of doubt, CUSTOMER employees shall not be permitted to  give direction to SANMINA staff on work requirements; all direction must come through  SANMINA appointed contacts.   Any long-term co-location would be via separate  agreement  on   reasonable  terms,  and  in  no  case  would  access  by  CUSTOMER’s 

 

Manufacturing Services Agreement  CONFIDENTIAL  20 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            employees to the SANMINA Facilities be unrestricted.   SANMINA shall cooperate fully with  CUSTOMER’s employees and provide reasonable office space, Internet connectivity and other  resources as reasonably requested for such employees, and CUSTOMER shall reimburse  SANMINA nominal, reasonable expenses due to CUSTOMER’s co-location and facility use, which  such shall be reasonably agreed upon by the Parties.    12.7      Compliance with Environmental Regulations.  CUSTOMER shall ensure that the  Specifications comply with applicable law, including environmental regulations.   SANMINA  shall comply with all applicable laws, including environmental requirements in relation to its  manufacturing location and manufacturing process and any other SANMINA-Furnished Items.  As between SANMINA and CUSTOMER, Component compliance with applicable RoHS laws and   regulations,  including  their  components,  subassemblies  or  materials  of  or  used  in Components,   shall  be  the  responsibility  of  CUSTOMER.   Unless  waived  by  CUSTOMER, Vendors will be  required to certify compliance of Components with Vendors’ specifications for applicable  (recognizing some Vendors do not provide certificates of conformance) Components . SANMINA  shall verify it receives the identical part number and revision as that specified on CUSTOMER’s  AVL).  Upon request, SANMINA will certify it procured Components only from CUSTOMER’s  AVL, unless a waiver is signed by the CUSTOMER accepting non-compliant Components.    12.8      Key Personnel.  Each Party shall designate Key Personnel to facilitate day to day  communications and cooperation.  The Key Personnel shall be as designated in Exhibit L.  Key  Personnel shall not change without notification to the other Party.  The Key Personnel shall be  responsible for resolving minor disputes and ensuring smooth business operations.  SANMINA  will use reasonable efforts to maintain a consistent team of Key Personnel for CUSTOMER.  In  any event, SANMINA will provide qualified personnel with sufficient staffing and expertise to  meet its obligations to maintain continuity of supply for CUSTOMER.    12.9    Program  Management.      SANMINA  will  support  and  participate  in  CUSTOMER’s quarterly business reviews and weekly functional reviews, including attendance  by Key Personnel as applicable.   SANMINA will provide all mutually agreed reports and  information reasonably requested by CUSTOMER for such purposes and will take actions  reasonably requested by CUSTOMER to address any issues identified in such reviews.    12.10    Manufacturing and Test Data.  SANMINA will provide all test data and results  through secure Internet connection to CUSTOMER’s designated data repository in manner and  format specified by CUSTOMER.  In addition, SANMINA will provide traceability, product and  warranty history and other information and reports to CUSTOMER relating to manufacturing and  quality as reasonably requested by CUSTOMER from time to time.    12.11    Business Continuity Plan.  SANMINA will maintain and implement a Business  Continuity Plan (“BCP”) to protect against disaster or disruption in its performance or supply and  take all reasonable measures to maintain continuity of supply to CUSTOMER as contemplated  under this Agreement.  SANMINA will meet and review its BCP with CUSTOMER as may be  requested by CUSTOMER from time to time.   SANMINA will not reduce the protections for  CUSTOMER under its BCP in any material respect during the Term without prior consent of  CUSTOMER.    13.        FORCE MAJEURE 

 

Manufacturing Services Agreement  CONFIDENTIAL  21 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            13.1      Force Majeure Event.  For purposes of this Agreement, a “Force Majeure Event"  shall mean the occurrence of unforeseen circumstances such as act by governmental authority, act  of war, natural disaster, epidemic, strike, boycott, embargo, a Vendor’s Force Majeure Event,  shortage,  riot,  lockout,  labor  dispute,  civil  commotion  or  similar  cause  beyond  a  Party’s  reasonable control that could not have been prevented through reasonable efforts and is not due to  such Party’s negligence or intentional misconduct, and in the case of SANMINA notwithstanding  SANMINA’s  compliance  with  its  BCP  (which  is  understood  to  address  longer  term  Force  Majeure Events) and other measure to be taken by SANMINA under this Agreement to maintain  continuity of supply.    13.2      Notice of Force Majeure Event.  Neither Party shall be responsible for any failure  to perform due to a Force Majeure Event provided that such Party gives notice to the other Party of  the Force Majeure Event as soon as reasonably practicable, but not later than five (5) days after the  date on which such Party knew or should reasonably have known of the commencement of the Force  Majeure Event, specifying the nature and particulars thereof and the expected duration thereof;  provided, however, that the failure of a Party to give notice of a Force Majeure Event shall not prevent  such Party from relying on this Section except to the extent that the other Party has been prejudiced  thereby.    13.3      Termination of Force Majeure Event.  The Party claiming a Force Majeure Event  shall use reasonable efforts to mitigate the effect of any such Force Majeure Event and to cooperate  to develop and implement a plan of remedial and reasonable alternative measure to remove the Force  Majeure Event; provided, however, that neither Party shall be required under this provision to settle  any strike or other labor dispute on terms it considers to be unfavorable to it.  Upon the cessation of  the Force Majeure Event, the Party affected thereby shall immediately notify the other Party of such  fact, and use its best efforts to resume normal performance of its obligations under the Agreement as  soon as possible.    13.4      Limitations.   Notwithstanding that a Force Majeure Event otherwise exists, the  provisions of this Section shall not excuse (i) any obligation of either Party, including the obligation  to pay money in a timely manner for Product actually delivered or other liabilities actually incurred,  that arose before the occurrence of the Force Majeure Event causing the suspension of performance;  or (ii) any late delivery of Product, equipment, materials, supplies, tools, or other items to the extent  caused by negligent acts or omissions on the part of such Party.    13.5      Termination of Affected Orders.  CUSTOMER may terminate affected Orders, in  accordance with Section 4, if any Force Majeure continues for more than sixty days.    14.        CONFIDENTIALITY    14.1      Definitions. For the purpose of this Agreement:    (a)        "Confidential Information" means (technical or non-technical) information (in  any form or media) regarding a Party’s customers, prospective customers (including lists of  customers and prospective customers), methods of operation, engineering  and processes (include any   information  which  may  be  obtained  by  a  Party  by  reverse  engineering,  decompiling  or  examining any software or hardware provided by the other Party under this Agreement), programs  and databases, patents and designs and   billing rates, billing procedures, vendors and suppliers,  business methods, finances, management, business plans, business forecasts, research, financial  information, procurement requirements, purchasing requirements, manufacturing, customer lists,  sales and merchandising efforts, marketing plans, experimental work, development, design details, 

 

Manufacturing Services Agreement  CONFIDENTIAL  22 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            specifications, engineering, intellectual property (patents, copyrights, trade secrets, proprietary  information, etc.), methodologies, techniques, sketches, drawings, models, inventions, know-how,  processes, apparatus, equipment, algorithms, software programs, software source documents, and  formulae,  in any way related to the current, future and proposed business, products and services of  either of the Parties or any other business information relating to such Party (whether constituting a  trade secret or proprietary or otherwise) which has value to such Party and is indicated by such Party  as being confidential or is confidential due to its nature; provided, however, that Confidential  Information does not include information that (i) is known to the other Party prior to receipt from the  Disclosing Party hereunder, which knowledge shall be evidenced by written records, (ii) is  independently developed as evidenced by written records, (iii) is or becomes in the public domain  through no breach of this Agreement, or (iv) is received from a third party without breach of any  obligation of confidentiality.    (b)        "Person"   shall   mean   and   include   any   individual,   partnership,   association,  corporation, trust, unincorporated organization, limited liability company or any other business entity  or enterprise.    (c)       “Representative” shall mean a Party’s employees, agents, or representatives,  including, without limitation, financial advisors, lawyers, accountants, experts, and consultants.    14.2      Nondisclosure Covenants.    (a)        In connection with this Agreement, each Party (the “Disclosing Party”) may  furnish to the other Party (the “Receiving Party”) or its Representatives certain Confidential  Information.  For a period of five (5) years from the end of the Term of this Agreement and any  Wind Down Period, the Receiving Party (a) shall maintain as confidential all Confidential Information  disclosed to it by the Disclosing Party, (b) shall not, directly or indirectly, disclose any such  Confidential Information to any Person other than, on a strictly need-to-know basis (i) those  Representatives of the Receiving Party whose duties justify the need to know such Confidential  Information and then only after each Representative has agreed to be bound by this Confidentiality  Agreement and clearly understands the obligation to protect the confidentiality of such Confidential  Information and to restrict the use of such Confidential Information or (ii) if SANMINA is the  Receiving Party, a third party Vendor for the purpose of obtaining price quotations, and (c) shall treat  such  Confidential  Information  with  the  same  degree  of  care  as  it  treats its  own  Confidential  Information (but in no case with less than a reasonable degree of care), including in the case of  SANMINA, compliance with Section 3.8 (Information Security) with respect to CUSTOMER’s  Confidential Information.    (b)        The disclosure of any Confidential Information is solely for the purpose of  enabling each Party to perform under this Agreement, and the Receiving Party shall not use any  Confidential Information disclosed by the Disclosing Party for any other purpose.    (c)        Except  as  otherwise  set  forth  in  this  Agreement,  all  Confidential  Information supplied by the Disclosing Party shall remain the property of the Disclosing Party  and will be promptly returned by the Receiving Party upon written request except return of  electronic copies retained for backup, disaster recovery, or business continuity and in such case  the obligations hereunder shall survive until such copies are destroyed pursuant to retention policies.    (d)        If the Receiving Party or its Representative is requested or becomes legally  compelled to disclose any of the Confidential Information, it will provide the Disclosing Party with 

 

Manufacturing Services Agreement  CONFIDENTIAL  23 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            prompt written notice.  If a protective order or other remedy is not obtained, then only that part of  the  Confidential  Information  that  is  legally  required  to  be  furnished  will  be  furnished,  and  reasonable efforts will be made to obtain reliable assurances of confidentiality.    (e)        Notwithstanding the foregoing, it is understood that the  data, reports and  other information provided by SANMINA to CUSTOMER regarding the design, test, warranty and  servicing of CUSTOMER’s Products will be considered Confidential Information of CUSTOMER  and not SANMINA.   The Specifications provided by CUSTOMER to SANMINA shall also be  considered the Confidential Information of CUSTOMER and not SANMINA.  CUSTOMER shall  be free to use and disclose such information in connection with its business as well as data and  information owned by or licensed to CUSTOMER under Section 16 below.    14.3      Injunctive Relief Authorized.  Any material breach of this Section by a Party or its  Representatives may cause irreparable injury and the non-breaching Party may be entitled to  equitable relief, including injunctive relief and specific performance, in the event of a breach.  The  above will not be construed to limit the remedies available to a Party.  In addition, the prevailing  Party will be entitled to be reimbursed for all of its reasonable attorneys' fees and expenses at all  levels of proceedings and for investigations, from the non-prevailing Party.    14.4      No Publicity.   Each Party agrees not to publicize or disclose the existence or  terms of this Agreement to any third party without the prior consent of the other Party except as  required by law or stock exchange requirement including relevant securities or stock market filing  (in which case, the Party seeking to disclose the information shall give reasonable notice to the  other Party of its intent to make such a disclosure and CUSTOMER hereby provides such notice  with respect to its Form 8-K securities filing regarding this Agreement). With respect to  CUSTOMER’s filing of redacted copy of this Agreement in connection with its securities filing,  CUSTOMER does not intend to disclose, or will seek confidential treatment for, specific pricing  and rates in Exhibit A (but may disclose its component liability obligations) and specific caps on  liability and exception in Section 10, unless required by applicable stock exchange or regulatory  body requirements or as otherwise advised by its securities counsel, in which case SANMINA  will be provided with an opportunity to review and suggest reasonable comments and proposed  redactions. Neither Party shall make any press release or similar public statement without the  prior consent of the other Party, not to be unreasonably withheld or delayed.   CUSTOMER’s  press release regarding this Agreement has been approved by SANMINA as of the Effective  Date.  Notwithstanding the foregoing, CUSTOMER may disclose the existence of this Agreement  and that SANMINA is a manufacturer of the Products under this Agreement.    14.5      Privacy.  Each Party shall comply with their obligations under applicable Data  Protection Laws relating to the collection, use, processing, protection or disclosure of Personal Data  relating to individuals in the course of carrying out their respective obligations under this  Agreement, including without limitation, obtaining and maintaining all necessary and valid data  subject consents, providing all necessary privacy or fair information processing notices, term and  authorizations with the competent data protection authorities.  Nothing in this Agreement shall be  deemed to prevent the Parties from taking steps it reasonably deems necessary to comply with  Data  Protection  Laws.    “Personal  Data”  includes,  without  limitation,  any  data  that  could  potentially be used to identify a person, either directly or indirectly.   "Data Protection Laws"  means all laws, codes, statutes, rules, and regulations with which each Party is legally obliged to  comply in performing hereunder during the Term of this Agreement.    15.        INSURANCE 

 

Manufacturing Services Agreement  CONFIDENTIAL  24 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            SANMINA agrees to maintain during the term of this Agreement   (a) Workers’  Compensation insurance as prescribed by the law of the state in which SANMINA’s services are  performed; (b) Employer’s Liability insurance with limits of at least $500,000 per occurrence; (c)  Commercial Automobile Liability insurance if the use of motor vehicles is required, with limits of at  least $1,000,000 for bodily injury and property damage for each occurrence; (d) Commercial General  Liability insurance, including blanket contractual liability and broad form property damage, with  limits of at least $1,000,000 combined single limit for personal injury and property damage for each  occurrence; (e) Commercial General Liability insurance endorsed to include Products Liability and  Completed Operations coverage in the amount of $1,000,000 for each occurrence; (f) Business  Interruption/Cyber Risk insurance with limits of no less than $5,000,000 for each occurrence; and (g)  Umbrella Liability insurance with limits of no less than $5,000,000 for each occurrence.   The  insurance policies shall be issued by companies with rating of at least A VIII in Best’s Key Rating  Guide or Standard & Poor’s A rating.   SANMINA shall furnish to CUSTOMER upon request  certificates or evidence of the foregoing insurance indicating the amount and nature of such  coverage and the expiration date of each policy.  Each Party agrees that it, its insurer(s) and anyone  claiming by, through, or under or in its behalf shall have no claim, right of action or right of  subrogation against the other Party and the other Party’s affiliates, directors, officers, employees and  customers  based  on  any loss  or  liability insured against  under  the insurance required  by this  Agreement.    16.        INTELLECTUAL PROPERTY    16.1      “Intellectual Property Rights” means all worldwide common law and statutory  rights associated with (a) patents and patent applications; (b) copyrights and all other literary  property and author rights, including without limitation, copyright applications, copyright  registrations, certificates of copyrights and copyrighted interests, and “moral” rights; (c) all rights,  title and interest in and to inventions (whether patentable or not in any country) and invention  disclosures; (d) trade secrets, know-how, or the protection of confidential information; (e) other  proprietary rights related to intangible intellectual property; (f) analogous rights to the rights set  forth in (a)-(e), and (g) all divisions, continuations, renewals, reissuances, and extensions of the  foregoing (as applicable) now existing or hereafter filed, issued or acquired; such includes for  inventions,  concepts,  techniques,  designs,  processes,  improvements,  discoveries  and  ideas  (whether patentable or not), trade secrets, know-how, specifications, drawings, technical  information, process engineering information, computer software and the like.    16.2      Ownership. Except as otherwise expressly set forth below, each Party retains  ownership of its Intellectual Property Rights created, authored or invented by such Party prior  to the Effective Date or independently outside the scope of this Agreement (“Background IP”)  and any enhancements or derivatives of the foregoing, as applicable.   Intellectual Property Rights  relating to the Products or their design, Specifications, testing, servicing or associated software and   all  test  and  performance  data  with  respect  thereto,  including  any  feedback, suggestions,  modifications, improvements, enhancements or derivatives with respect to any of the foregoing  (not including any SANMINA Background IP) (collectively, “Product IP”), shall be owned  exclusively by CUSTOMER, without any obligation to SANMINA or compensation of any kind  under any circumstances, at the time of development or in the future, and (b) shall be Confidential  Information of CUSTOMER and not SANMINA.   Any development  of  Product  IP  by  SANMINA would  be  done  under  a  separate development agreement and related statement  of work, and would be owned by CUSTOMER once quoted, provided, accepted and paid for.   To the extent that SANMINA has or obtains any rights in or to any Product IP under this  Agreement, SANMINA hereby assigns all right, title and interest in and to the Product IP to  CUSTOMER.  SANMINA will promptly disclose to CUSTOMER 

 

Manufacturing Services Agreement  CONFIDENTIAL  25 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            any such Product IP created, authored or invented by SANMINA and take such further actions  reasonably requested by CUSTOMER to fully perfect the assignment and transfer the Product  IP to CUSTOMER.  SANMINA may not use any Intellectual Property from CUSTOMER for  the benefit of other customers or for any purposes not contemplated by this Agreement or  applicable Order.    16.3     License to Customer.   If, in connection with its performance under this  Agreement,   SANMINA   incorporates   into   any   Product   or   Product   Requirements   any  SANMINA Intellectual Property Rights, SANMINA hereby grants to CUSTOMER a non-  exclusive, irrevocable, perpetual, worldwide, royalty-free, sublicensable right and license to  make, use, sell, distribute, modify, support, incorporate, and otherwise exploit SANMINA  Intellectual Property Rights incorporated into such Product or Product Requirements solely in  connection with the manufacture, use, sale, distribution, modification or support thereof (or of  any derivatives, new versions or follow-on products or product requirements).  As used above,  “Product or Product Requirements” means (i) the Products and Product IP, (ii) the manufacturing  processes and requirements for the Products provided or specified by CUSTOMER, and (iii) any  feedback, suggestions, modifications, improvements, enhancements and derivatives thereof made  during the course of this Agreement that are changes to the items in (i) and (ii) above.   For  avoidance of doubt, “Product or Product Requirements” does not include SANMINA’s  Background IP for implementing an underlying manufacturing process step (e.g., particular  SANMINA recipe) but does include the requirements for each step as outlined in the  Specifications (e.g., results, tolerances) and sequence of steps as outlined in the Specifications  (e.g., process flow) to manufacture the Products that are set forth in the Specifications, as will be  updated throughout the course of this Agreement.  As an example of the above, if visual  inspection were replaced by automated visual inspection, the underlying process for automated  visual inspection would not be part of the Specifications, but the fact that automated visual  inspection was being used would be noted in the Specifications.    16.4      Licenses to Sanmina.    (a)  Embedded Intellectual Property.  For CUSTOMER Intellectual Property embedded  in  the  Products,  CUSTOMER  grants  to  SANMINA  a  non-exclusive,  non-transferable,  revocable, royalty free license for the Term of this Agreement for SANMINA’s internal use of  the same as required to perform hereunder, as part of the Product in which they are embedded.  Nothing contained in this Agreement shall be construed to grant SANMINA any right to use or  exploit such Intellectual Property in its stand-alone form separate and apart from the Product.    (b)   Freestanding Intellectual Property.   In the event CUSTOMER’s Intellectual  Property is not embedded in the Products but used by SANMINA for CUSTOMER to receive  the benefit of the Agreement, CUSTOMER grants to SANMINA a non-exclusive, non-  transferable, revocable, royalty free license for the Term of this Agreement for SANMINA’s  internal use as required to perform hereunder.  Nothing contained in this Agreement shall be  construed to grant SANMINA any right to use or exploit such Intellectual Property in its stand-  alone form separate and apart from the Product.    (c) The Products may include third party materials or marks, including marks  indicating Product certifications.  It shall be the sole responsibility of CUSTOMER to obtain  the requisite licenses for any third party materials or marks it specifies to be used in relation to  the Products.  If CUSTOMER requires the use of third party materials or marks, CUSTOMER  warrants it has provided written instructions on the use or application of such items and  warrants (i) it has all applicable rights, licenses and permissions from the applicable third 

 

Manufacturing Services Agreement  CONFIDENTIAL  26 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            parties to grant permission or sublicense SANMINA to use or apply such third party materials  or marks; and (ii) will ensure its Products remain in compliance with any requirements from third  parties related to the use of their materials or marks, at CUSTOMER’s expense, for as long  as CUSTOMER requires SANMINA to use such materials or marks; in each case of (i) and  (ii), subject to SANMINA complying with the applicable Specifications and purchasing the  respective third party materials from the approved Vendors.    17.        MISCELLANEOUS    17.1      Integration Clause. This Agreement (including the Exhibits and Schedules to this  Agreement) constitutes the entire agreement of the Parties, superseding all previous Agreements  covering the subject matter.  This Agreement shall not be changed or modified except by written  agreement, specifically amending, modifying and changing this Agreement, signed by authorized  representatives of CUSTOMER and SANMINA.    17.2      Order of Precedence.  All quotations, Orders, acknowledgments and invoices issued  pursuant to this Agreement are issued for convenience of the Parties only and shall be subject to the  provisions of this Agreement and the Exhibits hereto.  The Parties expressly reject any pre-printed  terms and conditions of any Order, acknowledgment, or any other form document of either Party  other than the specific terms set forth in Section 4.1(a)(i)-(v) shall be deemed deleted and such pre-  printed terms and conditions shall be of no effect whatsoever.  No modification to this Agreement,  the Exhibits or any Order shall be valid without the prior written consent of the authorized  representatives of SANMINA and CUSTOMER.  In the event of any inconsistency or conflicting  provisions between any parts of this Agreement and an Order, this Agreement shall prevail.  Should SANMINA fail to contact CUSTOMER to resolve these conflicts or inconsistencies,  SANMINA will be solely responsible for errors resulting from interpretation conflicts or  inconsistencies.    17.3      Assignment. Neither this Agreement nor any rights or obligations hereunder shall  be transferred or assigned by either Party without the written consent of the other Party, which  consent shall not be unreasonably withheld or delayed.   This Agreement may be assigned in  whole or in part by either Party to any Affiliate of such Party provided that such Party remains  secondarily liable under this Agreement.  Notwithstanding the foregoing, either Party may assign  this Agreement in connection with the transfer of all or substantially all of the business or assets  of such Party to which this Agreement relates (whether by sale of stock or assets, merger, change  of control, operation of law or otherwise), provided that (i) the assignee agrees in writing to assume  the obligations of such Party under this Agreement, (ii) notice of such assignment is provided to  the other Party, and (iii) the assignee reasonably can perform its duties and responsibilities herein  (and, in particular, in the case of SANMINA without any disruption or adverse impact on the  manufacture and supply of the Products for Customer under this Agreement).   Notwithstanding  the foregoing, either Party may assign its right to payment to a third party without the need for  consent from the other Party, unless payment to a third party potentially violates laws or  regulations of the Unites States of America or of the European Union and its members states.    17.4      Notices.  Wherever one Party is required or permitted or required to give written  notice to the other under this Agreement, such notice will be given by hand, by certified U.S.  mail, return receipt requested, or by overnight courier and addressed as follows:    If to CUSTOMER:                                  with a copy to:  Keith Brooks                                            Legal Department 

 

Manufacturing Services Agreement  CONFIDENTIAL  27 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            Sr. Director Global MFG                        Legal@FARO.com  & Process Engineering  Keith.Brooks@FARO.com                     and  508-851-5674  Allen Muhich  Jason Pollock                                           Chief Financial Officer  Vice President, Global Operations          Allen.Muhich@faro.com  Jason.Pollock@FARO.com  832-473-9972    All at  250 Technology Park  Lake Mary, Florida  32746  407-333-9911  If to SANMINA:                                     with a copy to:  SANMINA Corporation                          SANMINA Corporation  2700 N. First Street                                 2700 N. First Street  San Jose, California 95134                     San Jose, California  95134  Att’n:   EVP, Sales                                   Att’n:   Legal Department  Phone: (408) 964-3500                           Phone: (408) 964-3500  Fax: (408) 964-3636                                Fax: (408) 964-3636    All such notices shall be effective upon receipt.   Either Party may designate a different notice  address from time to time upon giving ten (10) days’ prior written notice thereof to the other  Party.   Throughout this Agreement, “notice” with respect to operational matters shall require  simultaneous posting to SANMINA’s online portal shared with CUSTOMER.  Any “notice” with  respect to any stop shipment or non-routine supply disruption must also be escalated to senior  executives designated by each Party at the VP level or above, who must promptly discuss the matter  (which may be telephonically) and reasonably cooperate to resolve the matter to avoid any  disruption of supply for CUSTOMER.    17.5      Disputes/Choice of Law/Attorneys Fees.  The Parties shall attempt to resolve any  disputes between them arising out of this Agreement through good faith negotiations.  Where the  Parties are unable to resolve a dispute arising out of or in connection with this Agreement by means   of  negotiation,  the  dispute  shall  be  first  referred  to  mediation  administered  by  the American  Arbitration Association’s (“AAA”) under its Commercial Mediation Rules.  Where the Parties are  unable to resolve a dispute by means of mediation, which shall also be the case where one Party  declares the mediation to have failed, the Parties acknowledge and agree that disputes shall be  referred to arbitration under the rules and procedures of the American Arbitration Association in  accordance with its Commercial Arbitration Rules then in effect.  The decision of said arbitrators  shall be final, binding, and conclusive upon the Parties.  The arbitrators will have the power to grant  any provisional measure deemed appropriate, including, but not limited to, provisional injunctive  relief.  Notwithstanding the foregoing, a Party may apply to any court of competent jurisdiction for  a temporary restraining order, preliminary injunction, or other interim or conservatory relief, as  necessary.   Given the unique nature of this transaction, each Party agrees that monetary damages  may not be a sufficient remedy and that, in addition to all other remedies, a Party is entitled to seek  specific performance and injunctive and other equitable relief (without the need to post a bond) for  breach or threatened breach of this Agreement.  If any state 

 

Manufacturing Services Agreement  CONFIDENTIAL  28 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            or federal court obtains jurisdiction despite this arbitration clause, the Parties to this agreement agree   that  the  federal  courts  within  the  State  of  Delaware  shall  have  exclusive  and  sole jurisdiction.    Exclusive place of jurisdiction and exclusive venue shall be within the State of Delaware.   This  Agreement shall be construed in accordance with the substantive laws of the State of Delaware  (excluding its conflicts of laws principles).   The provisions of the United Nations Conventions on  Contracts for the International Sale of Goods shall not apply to this Agreement.  The prevailing  Party shall be entitled to recover its costs and reasonable attorney’s fees from the non-prevailing  Party in any action brought to enforce this Agreement.  During the resolution of any dispute,  SANMINA will continue to perform its obligations under this Agreement and maintain continuity  of supply for CUSTOMER and CUSTOMER will continue to pay any undisputed amounts.    17.6      Relationship of the Parties.  The relationship of the Parties is that of independent  contractors and is non-exclusive.  There is no relationship of agency, partnership, joint venture,  employment, or franchise between the Parties.   Each Party will act in its own name.   Neither  Party has the authority to bind the other Party or to incur obligations on behalf of the other Party.  This Agreement is not a requirements contract and there is no obligation to order any particular  Products or volumes under this Agreement.  Each Party reserves the right to engage with other third  parties in similar transactions.    17.7      Severability.   Should any of these terms and conditions be held by a court of  competent jurisdiction to be contrary to law, that term or condition will be enforced to the maximum  extent permissible and the remaining terms and conditions will remain in full force and effect.    17.8      Waiver.  No failure to exercise and no delay in exercising any right, remedy or  power hereunder will operate as a waiver thereof, nor will any single or partial exercise of any right,  remedy or power hereunder preclude any other or further exercise thereof or the exercise of any  other right, remedy or power provided herein or by law or in equity.    17.9    Construction.   The captions or headings in this Agreement are strictly for  convenience and will not be considered in interpreting this Agreement.   For purposes of interpreting  this Agreement, (a) unless the context otherwise requires, the singular includes the plural, and the  plural includes the singular; (b) unless otherwise specifically stated, the words "herein," "hereof,"  and "hereunder" and other words of similar import refer to this Agreement as a whole and not to  any particular section or paragraph; (c) the word "or" has, except where otherwise indicated,  the inclusive meaning represented by the phrase "and/or"; and (d) the words "include" and  "including" will not be construed as terms of limitation, and will therefore mean "including but not  limited to" and "including without limitation".    17.10    Counterparts.   This  Agreement  may be  executed in any number  of separate  counterparts, including facsimile, PDF or other electronic copies, and each counterpart will be  considered an original and together will comprise the same agreement.  This Agreement may be  executed by facsimile or digital signatures and such signatures will be deemed to bind each Party  as if they were original signatures.    IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed as of  the Effective Date, by their officers, duly authorized. 

 

Manufacturing Services Agreement  CONFIDENTIAL  29 of 48  Sanmina and FARO          _________________  DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15      ___________________________            SANMINA CORPORATION                              CUSTOMER      By: By:   Michael Landy                                                      Michael Burger Allen Muhich Chief Operating Officer                                        Chief Executive Officer CFO   7/14/2021 7/15/2021   Date                                                                      Date 

 

Manufacturing Services Agreement  CONFIDENTIAL  30 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15                  EXHIBITS    A.   PRICING AND INVENTORY TURNS  B.   LONG LEAD-TIME COMPONENTS  C.   CUSTOMER FURNISHED EQUIPMENT  D.   TRANSITION TIMELINE  E.    CALIFORNIA TRANSPARENCY IN SUPPLY CHAINS ACT DISCLOSURE  F     FARO SUPPLIER CODE OF CONDUCT  G    FARO CONFLICT MINERALS POLICY  H    FARO THIRD PARTY ANTI CORRUPTION POLICY  I    INTENTIONALLY LEFT BLANK  J     REPORTING REQUIREMENTS  K    FORECAST SPREADSHEET  L    KEY PERSONNEL  M   INITIAL SPECIFICATIONS 

 

Manufacturing Services Agreement  CONFIDENTIAL  31 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15          EXHIBIT A   PRICING AND INVENTORY TURNS         Term Rate  Material Overhead [redacted]  Labor Rate (Thailand) [redacted]  Labor Rate (Texas) [redacted]  Labor Rate (Czech Republic) [redacted]  SG&A [redacted]  Profit [redacted]  Inbound Freight [redacted]    * Labor rate for Carrolton Texas reflects final assembly and fulfillment activities  * Labor rate for Czech Republic reflects final assembly and fulfillment activities  Prior to placement of initial Order and Forecast per Section 4.2(a), the Parties will hold an initial quarterly  pricing review per Section 2.1 to reflect any adjustment to pricing based on changes in cost from the  Effective Date until such time, as described in Section 2 (Pricing) of the Agreement (consistent with the  margin rates set forth in the table above).    The initial pricing and pricing assumptions are as is agreed via electronic documents at the time of  signature.      INVENTORY TURNS:    Excess Components and Reconciliation using Inventory Reserve Account  Under this Agreement SANMINA shall purchase, order or acquire Components in accordance with the  requirements of this Agreement based on CUSTOMER’s then-current Forecast or Orders and shall hold  certain Component inventory (“Component Inventory”) as set forth below.    1. Component Inventory and Excess Components  1.1         It is expressly acknowledged and agreed that SANMINA’s pricing for the manufacture of  the Products is based on SANMINA maintaining an inventory turns model of [redacted] as described  below. Components that SANMINA purchases to meet the requirements set forth under this Agreement  will be financed by SANMINA, except for purchased Initial Component Inventory, which will be financed  by CUSTOMER through the below described IRA to the extent exceeding the amount of inventory needed  to operate at [redacted]. Any Excess Components will, unless otherwise agreed, be managed through an  Offset Inventory Reserve Account (“IRA”) established for this purpose.   The IRA will be used going  forward to maintain the agreed inventory turns.  Alternatively, any Excess Components shall be purchased  by Customer by issuing purchase orders.  1.2         The Parties agree SANMINA shall purchase the Initial Component Inventory (which will  not include any Obsolete Components) from CUSTOMER. In relation to the purchased Initial Component  Inventory, CUSTOMER will prepay to SANMINA a deposit against future consumption for the amount of  inventory that is anticipated to be in excess of the amount of inventory needed to operate at [redacted],  which creates the initial balance for the IRA.  SANMINA will book all Components in SANMINA’s ERP  system which means the Components will be visible in the SANMINA ERP system as existing and on-  hand.    2. IRA Adjustment Based On Inventory Turns 

 

Manufacturing Services Agreement  CONFIDENTIAL  32 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            2.1            The IRA shall mean a (contra asset) account established by SANMINA to offset the  change in asset value for Excess Components, by debiting and crediting this account ensuring that the cost  impact associated with such Excess Component Inventory is reflected accurately in the financial records.  The Excess Components will be reviewed and determined as set forth below.  2.2            SANMINA shall provide CUSTOMER with an inventory report of the inventory that  SANMINA has on hand during the month prior to quarter end which shall include a listing of the  following; (i) Component inventory that SANMINA has on-hand for CUSTOMER, and (ii) any work in  process.  2.3            The quarter end inventory report will not include any finished Products or any  SANMINA induced Component inventory not purchased according to the terms of the Agreement. The  quarter end inventory report shall include inventory on hand and Cost of Goods Sold (“COGS”), with a  calculation of the inventory turns for the then current calendar quarter and identification of any Excess  Components difference required to achieve the agreed inventory turns.  2.4            SANMINA shall provide CUSTOMER a list of Components which represents the  Components and quantities financed by CUSTOMER through the IRA. The underlying list of Components  covered by the IRA amount shall be approved in writing by the CUSTOMER (“Excess List”) prior to  balancing the account as set forth below.    3. Calculation of Inventory Turns  3.1            SANMINA will book all Components in SANMINA’s MRP system which means all  Components (SANMINA financed and any CUSTOMER financed) will be visible in the SANMINA MRP  system as existing and on hand. As SANMINA runs weekly MRP based upon loaded Forecasts from  CUSTOMER, any on hand Components will be consumed before new purchases will be executed, and if  SANMINA will use CUSTOMER financed Components, it will be considered in the inventory reserve  mechanism and be credited to CUSTOMER as set forth below. The Parties agree that after netting the  quarter ending inventory in relation to the IRA inventory, the Parties shall determine the inventory turns by  dividing the annualized quarters COGS (as quarter end COGS multiplied by four (4)), by the net inventory  (“Inventory Turns”).  3.2            If the Inventory Turns is calculated at less than the agreed turns as set forth above or as  otherwise agreed to in writing, CUSTOMER shall provide an additional payment to the Inventory Reserve  Account to reduce the net inventory value to an amount, that when calculated, will bring the Inventory  Turns equal to the agreed turns. CUSTOMER shall provide a purchase order prior to quarter end for any  applicable payments, and such payment shall be made within thirty (30) days of invoice. Parties shall place  purchase orders to either credit or debit the Inventory Reserve Account to reduce the net inventory value to  an amount that when calculated, will bring it to the agreed number of inventory turns. The Excess  Component inventory, or Inventory Reserve amount, to be credited or debited from the IRA is calculated  by subtracting the total SANMINA inventory at the agreed turns from the total inventory.  If the Excess  Inventory value is greater than the amount in the IRA, then CUSTOMER shall issue a purchase order for  the difference to SANMINA, who shall then credit the funds to the IRA. If the Excess Inventory value is  less than the amount in the IRA, SANMINA shall issue a purchase order and refund the difference to  CUSTOMER. However, for the avoidance of doubt, SANMINA can only refund amounts paid by  CUSTOMER into and held in the Inventory Reserve Account.  3.3            Excess Components shall be kept in the Inventory Reserve Account for a maximum  period of twelve (12) months, at which time such Excess Components will be deemed to be Obsolete  Components. The Parties shall use the calculation during each calendar quarter to determine the new  Inventory Reserve Account. The payment term is thirty (30) calendar days from the date of the respective  CUSTOMER or SANMINA invoice.  3.4            Obsolete Components. Within five (5) business days after receiving CUSTOMER’s first  Forecast or Order of the first month following the end of each calendar quarter (but no later than the  fifteenth business day following the end of each of SANMINA’s calendar quarters), SANMINA shall  advise CUSTOMER in writing of any Obsolete Components and their Delivered Cost (the “Obsolete  List”). The Obsolete List shall include all former Excess Components which have been deemed Obsolete  Components in accordance with Section 2.6 above. Notwithstanding the foregoing, SANMINA’s failure to  timely provide the Obsolete List to CUSTOMER shall not affect CUSTOMER’s obligations hereunder.  3.5            To the extent that any of the amount in the CUSTOMER’s Offset Inventory Reserve  Account relates to any Obsolete Component (e.g., the Obsolete Component was formerly included in the 

 

Manufacturing Services Agreement  CONFIDENTIAL  33 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            Excess List, and CUSTOMER included that Component in its funding of the Offset Inventory Reserve  Account), SANMINA shall debit the Offset Inventory Reserve Account in the amount of the Delivered  Cost of such Component. In the event the CUSTOMER’s Offset Inventory Reserve Account does not  include funding for any Obsolete Component (e.g., the Component was recently rendered obsolete as a  result of a design change), SANMINA shall invoice CUSTOMER for the Delivered Cost of the Obsolete  Component, CUSTOMER shall pay SANMINA’s invoice within thirty (30) days after the date of invoice.  SANMINA will ship or dispose of the Obsolete Component in accordance with the CUSTOMER’s  instructions.    4. Example – Calculation of Turns and the IRA adjustment amount (quarterly)  [redacted]    4.1            Calculate annualized cost of goods sold (“COGS”).    After netting quarter end inventory of all Reserves, the Parties shall determine the inventory turns by  dividing the annualized quarters COGS (Quarter end COGS x 4) by the net inventory (“Inventory on  Hand”).  4.2            Prepaid Reserve; Adjustments.  4.2.1         If the Turns Target is less than [redacted], CUSTOMER shall provide an additional  payment to SANMINA to the Inventory Reserve Account to reduce the net inventory value to an amount,  that when calculated, will bring the Inventory Turns equal to [redacted].  4.2.2      If the Turns Target is greater than [redacted] SANMINA shall pay CUSTOMER an amount, that  when calculated will bring the Inventory Turns equal to [redacted]. SANMINA can only refund amounts  paid by CUSTOMER into and held in the Inventory Reserve Account. 

 

Manufacturing Services Agreement  CONFIDENTIAL  34 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15              EXHIBIT B    LONG LEAD-TIME COMPONENTS    Long lead-time Components will be identified and reported on monthly. 

 

Manufacturing Services Agreement  CONFIDENTIAL  35 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            EXHIBIT C    CUSTOMER FURNISHED EQUIPMENT    The list of Customer furnished equipment can be found at:  [redacted] 

 

Manufacturing Services Agreement  CONFIDENTIAL  36 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            EXHIBIT D    TRANSITION TIMELINE    The transition timeline is subject to change upon mutual written agreement of the parties. At the  time of execution, the agreed transition timeline was sent as an electronic attachment. 

 

Manufacturing Services Agreement  CONFIDENTIAL  37 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            EXHIBIT E    CALIFORNIA TRANSPARENCY IN SUPPLY CHAINS ACT DISCLOSURE    SANMINA agrees to comply with the following except:  - As is agreed in this MSA, either Party’s pre-printed terms stated on purchase orders,  acknowledgements or otherwise are to be of no effect, and the terms of this Agreement shall  apply.                  At the time of execution, this disclosure was sent as an electronic attachment. 

 

Manufacturing Services Agreement  CONFIDENTIAL  38 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            EXHIBIT F    FARO SUPPLIER CODE OF CONDUCT    SANMINA agrees to comply with the Faro Supplier Code of Conduct with the following  exceptions:    1) In relation to Section A 1, the sentence stating “Additionally, Supplier will ensure that the  products, services and shipments for FARO adhere to all applicable international trade  compliance, antitrust and import/export laws (including, without limitation, the antidumping laws  under the U.S. Tariff Act of 1930), rules and regulations” is revised and agreed as follows:  “Additionally, Supplier will ensure that its manufacturing process and SANMINA-Furnished  Items adhere to all applicable international trade compliance, antitrust and import/export laws  (including, without limitation, the antidumping laws under the U.S. Tariff Act of 1930), rules and  regulations.  2) In relation to Section 4 (e), the Parties agree that Sections 7.4 and 12.7 in the Agreement  describes each Party’s responsibilities related to hazardous substances, as opposed to this section  4 (e).  3) In relation to Section 5 (g), the Parties acknowledge that SANMINA is responsible for buying  Components only from FARO’s AVL unless otherwise approved by FARO, and is not  responsible for whether such Components are counterfeit.  4) In relation to Section 5 (h), the Parties agree SANMINA is responsible for ensuring it’s  process materials do not include any conflict minerals, and FARO is responsible for ensuring it’s  Products do not use any Components containing conflict minerals.    The FARO Supplier code of conduct was supplied as an electronic document at the time of  Execution.          

 

Manufacturing Services Agreement  CONFIDENTIAL  39 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            EXHIBIT G    FARO CONFLICT MINERALS POLICY        SANMINA agrees to comply with the Faro Conflict Minerals Policy with the following  exceptions:    It is agreed that SANMINA is not responsible for Components from third parties.            The Faro Conflict Minerals document was supplied as an electronic document at time of  execution. 

 

Manufacturing Services Agreement  CONFIDENTIAL  40 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            EXHIBIT H    FARO THIRD PARTY ANTI CORRUPTION POLICY          Anti-Corruption  Policy for Third Partie    The Faro Third Party Antitrust document was supplied as an electronic document at time of  execution. 

 

Manufacturing Services Agreement  CONFIDENTIAL  41 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            EXHIBIT I – INTENTIONALLY OMITTED 

 

Manufacturing Services Agreement  CONFIDENTIAL  42 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            EXHIBIT J    REPORTING REQUIREMENTS    All reports shall be posted to SANMINA’s online portal shared with CUSTOMER.        Exhibit (J) Operational and QBR Reporting Requirements    KPI / Report Definition  Update Cadence    Backlog Reports  Total daily backlog by $$,  based on commitment, aging,  part number     Weekly        Manufacturing  Cycle Time  Total cycle time for sub-  assembly process and top-  level assembly process.  Derived from MES system  with break down by stage in  the process. Used for  continuous improvement  efforts.           Monthly    On Time Delivery  Average weekly % delivered  to committed last 12 weeks     Weekly / Daily if below goal      First Pass Yield  First pass yield all test stages  AOI, AXI, ICT, FCT, System  Test rolling 12 weeks control  chart       Weekly  Material Shortages Clear to build report  Weekly/Monthly  Cost Reviews for  materials,  assembly, and test    Review against goals set     Quarterly  Select Supplier  Quality Reviews  (can be tied to Cost  Reviews)    Review Partner’s key  supplier’s Quality KPI’s       Quarterly  Audit reports ISO, 17025, etc.  Once performed  (Quality)Out of Box  Audit Results  Conducted by Sanmina,  control chart   Based on AQL sampling plan for OBA  reported weekly    (Quality)Stability  (drop test) yield  Control chart, current sample  available with rules for  notification and alert     Part of first pass yield data.  Will distribute as  agreed.  (Quality) ISO  Internal audit  results    Nonconformities on FARO  lines     As dictated by internal audit plan  (Quality) List of  17025 certified  operators    By product listed in ANAB  scope documents     Initial list, then updated as additions or  removals are made  (Quality) 17025  Operator re-  certification testing  results      By Operator     Initial list then as re – certifications are  conducted    (Quality) 17025 as  received out of  compliance  condition  Customer notification process  when the as received  conditions of 17025 certified  products fail to meet accuracy  requirements       Daily, time constraints on our response to  our customers  

 

Manufacturing Services Agreement  CONFIDENTIAL  43 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15                (Quality) 17025  If a tool or fixture is found to  be out of spec in its normal  calibration cycle, a list of all  serial numbers and dates built  with that device since its last  verified in specification state  is required to perform an  impact analysis         Daily, time constraints on our response to  our customers  impact analysis for  out of calibration  tooling    Scrap reports with  Aging  Total scrap parts by $$, part  numbers, and cycle time     Monthly  Safety Reports Days without    Monthly (For FARO cell only) accidents/incidents     FARO Production  % of units complete relative  to committed production  schedule     Weekly Status       DPPM  Calculate the number of  defective supplier rejects /  total direct material receipts  monthly       Report monthly      DPPM  Calculate the number of  defective supplier rejects /  total direct material receipts  monthly       8D requests on key issues opened.      Corrective actions    Report on # of 8Ds issued and  closed / month.  8D issued for  any issues  impacting  manufacturing      Review 8D reports with FARO SQE monthly  Corrective actions Past due 8Ds  Review 8D reports with FARO SQE monthly      FAI acceptance rate  Suppliers passing FAIs /  Divided by total submitted.  (Monthly / yearly) (select  suppliers)      100%      Monthly      FAI acceptance rate  FAI NC management. (Review  8Ds / Corrective actions  issued for each failing FAI  submittal.      As needed      Quarterly  SPC / CPK data on  machined  components  produced by  Sanmina  (Machining Group)      Report # of parts running  Cpks ?<1.33 on critical  characteristics.         Quarterly  PCBAs (Sanmina Board testing (Flying probe,  ICT, etc.) pass rates.     Quarterly produced only)             Freight Spend  Broken into Freight In, Freight  Out, Warranty, Non-  Warranty, or SG&A Other,  and broken down by  Destination Country - Heat  Map, Charts and raw data             Monthly 1st Monday      Duty Spend  Broken down by Destination  Country - Heat Map, Charts  and raw data       Monthly 1st Monday    Count of Total  Broken down by Destination  Country - Heat Map and raw  data       Monthly 1st Monday Shipments   

 

Manufacturing Services Agreement  CONFIDENTIAL  44 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15              Count of Shipment  Pieces  Broken down by Destination  Country - Heat Map and raw  data       Monthly 1st Monday      Shipment Weights  totals  Report both Actual Weights  and Billable Weights - Charts  and raw data by mutual  agreement         Monthly 1st Monday            FARO Shipment  Data Integrity  Errors  Defined as: Wrong,  incomplete, or missing data  sent over from FARO and  prevents Sanmina from  shipping. How many  occurrences and what type of  error to be reported- raw  data                   Monthly 1st Monday  Expedites: Order  processing and  Shipping requests  Quantity of requests and  costs for requests - Charts and  raw data       Monthly 1st Monday        Packaging  Consumable Costs  Costs of packaging used that  is not on any BOM, including  void fills, corrugated, non-  standard labels, etc. - Charts  and raw data         Quarterly (or Faro can add to the Thailand  BOM for tracking)                Inventory Accuracy  100% target, <98% triggers  corrective action: Total items  counted with cost /extended  cost and items out of  tolerance with cost /  extended cost and Accuracy  as a % - Charts and raw data                 Monthly 1st Monday      Inventory Scrap  Report cost, item numbers,  quantities - charts and raw  data       Monthly 1st Monday  

 

Manufacturing Services Agreement  CONFIDENTIAL  45 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            EXHIBIT K    FORECAST SPREADSHEET  The Faro forecast document was supplied as an electronic document at time of execution. 

 

Manufacturing Services Agreement  CONFIDENTIAL  46 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            EXHIBIT L    INITIAL KEY PERSONNEL    [redacted] 

 

Manufacturing Services Agreement  CONFIDENTIAL  47 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15             [redacted] 

 

Manufacturing Services Agreement  CONFIDENTIAL  48 of 48  Sanmina and FARO      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            EXHIBIT M    INITIAL SPECIFICATIONS        [redacted] 

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B     i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15        [redacted] 

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B      i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15             [redacted] 

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B      i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15       [redacted]                                

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B      i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15     [redacted]    

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B      i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15           [redacted]                        

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B      i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15         [redacted] 

 

    DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15    DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D 5EEF1EBCB43B         [redacted] 

 

    DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15 i l  55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B        [redacted] 

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B      i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15       [redacted]                  

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B      i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15         [redacted] 

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B      i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15         [redacted]                

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B      i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15         [redacted] 

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B      i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15         [redacted]                  

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B      i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15         [redacted] 

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B      i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15         California Transparency in Supply Chains Act Disclosure      As of January 1, 2012, the California Transparency in Supply Chains Act of 2010 (SB 657) is effective in  the State of California. As a result, many companies manufacturing or selling products in California are  required to disclose their efforts (if any) to address the issues of human trafficking and slavery, thereby  allowing consumers to make better, more informed choices regarding the products they buy and the  companies they choose to support.    FARO Technologies, Inc. and its subsidiaries (collectively, “FARO”) strive to achieve and maintain the  highest possible standards of corporate integrity and ethical behavior. FARO expects that its suppliers will  conduct their businesses not only in a lawful manner but also in compliance with the same high standards  of integrity and ethics. In order to establish guidelines for such standards, FARO has established a  Supplier Code of Conduct. The Supplier Code of Conduct sets forth and highlights important legal,  ethical, behavioral and other requirements for parties who wish to be FARO suppliers. Specifically, the  Supplier Code of Conduct states that suppliers must not traffic persons or use any form of slave, forced,  bonded, indentured or prison labor, and it requires suppliers to comply with the laws regarding slavery  and human trafficking of the country or countries in which they are doing business. FARO suppliers are  further expected to take reasonable and necessary steps to help ensure that their sub-contractors and  sub-suppliers conduct business in compliance with the Supplier Code of Conduct. FARO currently  requires its suppliers to certify both by acceptance of the “FARO Technologies, Inc. Purchase Order  Terms and Conditions” and by a separate written certification that they will abide by the Supplier Code of  Conduct. Suppliers are expected to promptly take corrective action to address any deficiencies identified  with respect to compliance with FARO's Supplier Code of Conduct. If a supplier is found to be in violation  of the Supplier Code of Conduct, FARO will take prompt, remedial measures to address the violation.  FARO reserves the right to terminate its relationship with any supplier for failure to comply with the  Supplier Code of Conduct. While FARO has no current intention of utilizing an independent third party to  verify suppliers’ compliance with the Supplier Code of Conduct, FARO audits its suppliers on an as-  needed basis using FARO personnel and has incorporated compliance with the Supplier Code of  Conduct into its audit program for suppliers.    FARO also has an established Global Ethics Policy, which applies to all FARO personnel, including  employees, officers and board members (collectively, "Employees"). FARO expects its business partners  and contractors to share the general principles stated in the Global Ethics Policy. The Global Ethics  Policy requires FARO Employees to comply with all applicable laws and regulations, including but not  limited to those relating to human trafficking and slavery. While FARO does not provide specific training  on human trafficking and slavery, it conducts regular training on the Global Ethics Policy generally. All  reports of alleged violations will be investigated by FARO. If the results of an investigation indicate that  corrective action is required, the Company will decide the appropriate steps to take, including discipline,  dismissal, and possible legal proceedings. If appropriate, the investigation may be turned over to the  applicable outside authorities, and outside investigators may assist in the inquiry. Disregard or deliberate  ignorance of the law is not tolerated and may lead to disciplinary action.    FARO takes the issues of slavery and human trafficking very seriously and will continue doing its part by  responsibly managing its supply chains in an effort to eradicate slavery and human trafficking. 

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B  Revised: 20 Apr. 2017 | © 2017 FARO | EU-02FRM671-EN Page  1 of 4      i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15        Supplier Code of  Conduct    The FARO Technologies, Inc. Supplier Code of Conduct sets forth minimum workplace standards and  business practices that are expected of any third-party supplier (“Supplier”) doing business with FARO  Technologies Inc. or any of its affiliates or subsidiaries (collectively “FARO”), consistent with our  Company’s values. These requirements are applicable to Suppliers of FARO globally.    A. Code of Conduct    1. Compliance with Laws.  Supplier’s personnel and operations shall operate in full compliance with  the laws of their respective countries and with all other applicable laws, rules and regulations.  Additionally, Supplier will ensure that products, services and shipments for  FARO adhere to all  applicable international trade compliance, antitrust and import/export laws (including, without limitation,  the antidumping laws under the U.S. Tariff Act of 1930), rules and regulations.    2. Labor. Supplier shall uphold the human rights of workers and treat them with dignity and respect.    (a)  Supplier  shall  employ  only  workers  who  meet  the  applicable  minimum  legal  age  requirement, except that in no event shall Supplier employ any person under the age of 15, even  if local law permits otherwise. Supplier shall also comply with all other applicable child labor laws  according to local regulations.    (b) Supplier shall ensure that all work is voluntary. Supplier shall not traffic persons or use any  form of slave, forced, bonded, indentured or prison labor. Involuntary labor includes the  transportation, harboring, recruitment, transfer, receipt or employment of persons by means of  threat, force, coercion, abduction, fraud or payments to any person having control over another  person for the purpose of exploitation.    (c) Supplier’s plants shall set working hours, wages and over-time pay in compliance with all  applicable laws. Workers shall be paid at least the minimum legal wage or a wage that meets  local industry standards, whichever is greater.    (d) Supplier shall treat employees with dignity and respect and will not engage in or permit corporal  punishment, threats of violence, or other forms of harassment whether based on gender, race, color,  religion, ethnicity, age, sexual orientation, national origin, disability, or any other legally protected  characteristic.    (e) Supplier shall employ workers on the basis of their ability to do the job, not on the basis of their  personal characteristics or beliefs (including race, color, gender, nationality, religion, age, maternity  or marital status).    (f) Supplier shall respect employees’ right to join or not join any lawful organization, including  trade unions and works councils, and shall comply with all applicable local and national laws  pertaining to freedom of association and collective bargaining.      3. Health & Safety. FARO is committed to being a global leader in safeguarding the health and safety  of our employees.      (a) While engaged in any activities supporting FARO, whether Supplier is on-site at any FARO  location, at any FARO customer location on behalf of FARO or elsewhere, Supplier shall comply  with FARO’s Global Ethics Policy and any site-specific requirements. 

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B  Revised: 20 Apr. 2017 | © 2017 FARO | EU-02FRM671-EN Page  2 of 4      i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15          (b)  Supplier shall  ensure  a  safe  work  environment  and  minimize  physical and  chemical  hazards  through   proper   design,   engineering   and   administrative   controls,   preventative  maintenance and safe work procedures as well as ongoing safety training.    (c)  Supplier  shall  provide  workers  with  appropriate  personal  protective  equipment  where  hazards cannot be adequately controlled by other means.    (d) Supplier shall provide and properly maintain physical guards, interlocks and barriers where  machinery presents an injury hazard to workers.    (e) Supplier shall minimize the impact of emergency situations through the implementation of  emergency plans and response procedures.    4.  Environment.    At  FARO,  environmental  considerations  are  an  integral  part  of  our  business  practices and our production of world-class products. Supplier shall comply with all applicable  environmental laws and regulations.    (a) Supplier shall maintain all required environmental permits and registrations and follow the  operational and reporting requirements of such permits.    (b) Supplier shall comply with regulated substance specifications and with any applicable laws  and regulations prohibiting or restricting the use or handling of specific substances.    (c) Supplier shall endeavor to reduce or eliminate solid waste, wastewater and air emissions by  implementing appropriate conservation measures in their production, maintenance and facility  processes.    (d)  Supplier  shall  manage,  control,  treat  and/or  dispose  of  non-hazardous  solid  waste,  wastewater and/or air emissions generated from operations as required by applicable laws and  regulations, before discharge.    (e) Supplier shall comply with the European Union’s Restriction of Hazardous Substances  (RoHS) Directive (2011/65/EU) for all goods it manufactures for and provides to FARO.  Supplier shall also comply with the European Union’s regulation regarding Registration,  Evaluation, Authorisation and Restriction of Chemicals (REACH) (EC 1907/2006). Supplier  agrees to comply with both RoHS and REACH even if Supplier is located outside of the  European Union.    5. Ethics.    Supplier shall commit to the highest standards of ethical conduct when dealing with its  employees, suppliers and customers.    (a) Supplier shall prohibit any and all forms of corruption, extortion and embezzlement by its  employees, officers, directors or agents.    (b)  Supplier  shall  adhere  to  standards  of  fair  business,  advertising  and  competition.            (c) Supplier shall not offer or accept (i) bribes or (ii) other means to obtain an undue or improper    advantage.  (d) Supplier shall accurately record and disclose information regarding their business activities,  structure,  financial  situation   and   performance  in  accordance   with  applicable  laws  and  regulations as well as prevailing industry business practices. 

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B  Revised: 20 Apr. 2017 | © 2017 FARO | EU-02FRM671-EN Page  3 of 4      i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15          (e) Supplier shall respect intellectual property rights and safeguard customer information. Transfer  of technology and know-how shall be done in a manner that protects intellectual property rights.    (f) Supplier shall incorporate international Supply Chain Security (SCS) measures into its business  processes as described by the World Trade Organization’s SAFE framework or similar SCS  guidelines (e.g., Business Anti-Smuggling Coalition (BASC) Security Program; Customs-Trade  Partnership Against Terrorism (C-TPAT); Authorized Economic Operator (AEO), and Partners in  Protections (PIP)).    (g) Supplier shall implement appropriate processes and procedures and exercise due diligence to  detect and avoid counterfeit parts.    (h)  FARO  is  committed  to  ensuring that  the  products  it  sells  do  not  incorporate  “conflict  minerals” (tin, tantalum, tungsten and/or gold, commonly referred to as “3TG”) sourced from  entities which directly or indirectly finance conflict in the Democratic Republic of Congo or  adjoining countries. FARO requires its Suppliers to:    • Perform sufficient due diligence into their respective supply chains to determine whether  products sold to us contain 3TG, and, if so, whether and to what extent those metals are  sourced from conflict-free smelters;  • Report to FARO the results of such due diligence to enable FARO to comply with its  legal obligations and policy goals; and  • Commit to being or becoming “conflict-free”, so that any such metals are sourced only  from conflict-free smelters.    (i) Supplier shall implement a comprehensive business continuity plan throughout its operations  and supply chain to preserve the safety of workers, protect physical property from loss and damage,  safeguard intellectual property, prevent interruptions in the manufacturing process and ensure the  integrity of shipments at the point of origin.   Supplier shall provide this business continuity plan  to FARO upon request.    (j)  Supplier  shall  implement  processes  to  address  the  confidentiality  and  protection  of  an  employee who in good faith raises a concern, makes a report, or assists with an investigation related  to potential ethical or criminal violations.    (k) Supplier shall only accept an approved FARO purchase order or executed supply agreement (or  equivalent) as a means for confirming business commitments.   Supplier shall make no deliveries  of products or services and claim payments based on verbal, email or other correspondence from  FARO.    6. Anti-Corruption.   FARO is committed to complying with all applicable anti-corruption laws,  including those that prohibit bribes, kickbacks or other corrupt actions to obtain or retain business  or obtain any improper advantage. Supplier is expected to comply with all applicable anti-corruption  laws while conducting business with or on behalf of FARO. Supplier is prohibited from directly or  indirectly receiving or offering any form of bribe, kickback or other corrupt payment, to or from  any person or organization, including government agencies or officials, private companies or  employees of those private companies. Supplier affirms that Supplier is fully aware of and understands  the provisions of the U.S. Foreign Corrupt Practices Act of 1977 as amended, the U.K. Bribery Act and  any other applicable anti-corruption laws, including those of the country or countries in which Supplier  is to manufacture, sell, or provide goods or services to FARO, and Supplier has not violated and will  not violate, nor caused FARO to violate, any applicable anti-corruption laws in connection with 

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B  Revised: 20 Apr. 2017 | © 2017 FARO | EU-02FRM671-EN Page  4 of 4      i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15        providing goods or services to FARO.    7. Gifts and Entertainment.   FARO recognizes that it is customary for some of its Suppliers,  customers and other business associates to occasionally give small gifts or offer modest business  entertainment to those with whom they do business. It is important, however, that these gifts and  entertainment events do not affect any FARO employee’s business judgment, or give the appearance  that judgment may be affected.      B. Compliance Monitoring    Supplier will allow FARO and/or any of its representatives or agents access to its facilities and  all relevant records associated with the products and services provided to FARO. Supplier and FARO  will establish a mutually agreeable date and time for access. However, risks to FARO’s business may  require immediate access to the products, services and associated records and Supplier will  accommodate FARO’s access as required. Supplier also agrees to cooperate with FARO to investigate  any allegations of wrongdoing, misconduct or corruption.      C. Application to Sub-Contractors    This  Code  also  applies  to  any  sub-contractor(s)  to  Supplier  that  provides  goods  or  services  to  Supplier. The Supplier Code of Conduct shall be cascaded down to all sub-tier subcontractors. Each  Supplier is fully responsible for ensuring compliance by any such sub-contractor(s) as if it were  Supplier itself. FARO reserves the right to audit Supplier’s sub-contractors for compliance to FARO’s  Supplier Code of Conduct and Supplier will accommodate FARO’s audit as required.      D. Event of Violation    Supplier shall promptly report to FARO notice of known breach of this Code and implement a corrective  action plan to cure the non-compliance within a specified time period (furnished to FARO in writing).  If Supplier fails to meet the corrective action plan commitment, FARO may terminate the business  relationship, including suspending placement of future orders and potentially terminating current  production immediately and with no further obligations of payment to Supplier, including payment  obligations relating to goods already shipped to FARO. FARO reserves the right to hold Supplier  responsible for reasonable costs of investigating non-compliance.    Adopted March 30, 2017 

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B     i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15        Conflict Minerals Policy      In August 2012, the U.S. Securities and Exchange Commission (“SEC”) adopted final rules to implement  reporting and disclosure requirements related to “conflict minerals,” as directed by the Dodd-Frank Wall  Street Reform and Consumer Protection Act of 2010. The rules require manufacturers such as FARO  Technologies, Inc. (“FARO” or the “Company”) who file certain reports with the SEC to disclose whether  the products they manufacture contain “conflict minerals necessary to the functionality or production” of  those products, that directly or indirectly finance or benefit armed groups in the Democratic Republic of  the Congo or an adjoining country (the “Covered Countries”).    The term “conflict minerals” refers to tantalum, tin, tungsten and gold (collectively and commonly referred  to as “3TG”),as well as any other mineral or derivatives determined by the U.S. Secretary of State to be  financing conflict in the Covered Countries.    To demonstrate FARO’s commitment to eliminating the use of any conflict minerals in our products, we  have adopted the following policy statement.    It is a policy of FARO:      1. To make reasonable efforts: a) to know, and to require each FARO supplier to disclose to the  Company, the sources of 3TG used in its products; and b) to eliminate procurement, as soon as  commercially practicable, of products containing 3TG obtained from sources that fund or support  armed conflict in the Covered Countries.    2. To require FARO suppliers to assist the Company to comply with the disclosure requirements  of Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and  the rules of the U.S. Securities and Exchange Commission promulgated pursuant to that law, as  well as any related laws and rules.    FARO strives to achieve and maintain the highest possible standards of corporate integrity and ethical  behavior. FARO expects that its suppliers will conduct their businesses not only in a lawful manner but  also in compliance with the same high standards of integrity and ethics.    FARO is committed to eliminating the use of any conflict minerals in our products. In our Supplier Code of  Conduct, FARO requires its suppliers to certify that they will only source 3TG from “conflict free” smelters  identified at http:www.conflictfreesourcing.org/. 

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B     i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15                            Anti-Corruption Policy for Third Parties          January 2021                                            FARO TECHNOLOGIES, INC.  250 Technology Park  Lake Mary, Florida 32746  +1-407-333-9911  http://www.faro.com/ 

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B  2      i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            INTRODUCTION    FARO is excited to partner with your organization and looks forward to a strong  working relationship. At FARO, we are committed to upholding the highest standards of  ethical business conduct. Obeying the law, both in letter and in spirit, is the foundation of  FARO’s ethical standards. We recognize the importance of and highly value our network  of well-qualified business partners, and we go to great lengths to ensure that all of our  partners are aware of and fully committed to the ethical way we insist on conducting  business in all countries and markets.    For this purpose, we are providing your organization (also, the “Third Party”) with  this  Anti-Corruption Policy  for  Third  Parties.  Section  A  presents  some  background  definitions regarding anti-corruption laws and details the requirements that your  organization must adhere to while working with FARO. Section B is comprised by FARO’s  Anti-Corruption Policy, which all FARO employees must abide by. It provides your  organization with background on how FARO employees must conduct themselves when  interacting with Third Parties such as your organization. Exhibit A is the Global Meal  Business Record, used for FARO employees to record all expenditures relating to third  party business meals. Exhibit B is the Pre-Approval Request Form, used for FARO  employees to request pre-approval for gifts, meals, or items of value to be provided to third  parties. Exhibit C is a Statement of Compliance with FARO’s Anti-Corruption policy,  which is executed by FARO employees to confirm their compliance with FARO’s Anti-  Corruption Policy. Exhibit D is a Statement of Compliance with FARO’s Anti-Corruption  Policy for Third Parties. Your organization will be required to execute this statement of  compliance to confirm your compliance with this Anti-Corruption Policy for Third Parties.    For questions or comments, please feel free to contact FARO’s Global Compliance  Department at compliance@faro.com. 

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B  3      i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            SECTION A: Anti-Corruption Laws and Third Party Commitments    Anti-Corruption Laws    The U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and various other  codes or national or international conventions relating to bribery (collectively the “Anti-  Corruption Laws”) make it unlawful for a company, citizens, or anyone acting on a  company's behalf, to either directly or indirectly, offer, promise, give, or authorize another  to offer, promise, or give anything to any Government Official in order to influence official  action, or to anyone to obtain an unfair or improper business advantage for or on behalf of  the company, or cause that person otherwise to perform his/her work duties disloyally or  improperly. A Government Official means any officer or employee of any government or  government-controlled entity or of a public international organization, or any person acting  in an official capacity for or on behalf of any such government, entity or organization, or  any political party or official thereof, or any candidate for public office.    In addition, the Anti-Corruption Laws contain record-keeping and accounting  provisions which require companies, including all of their divisions and subsidiaries, both  to maintain detailed and accurate books and records and to maintain a system of internal  accounting controls in order to accurately and completely reflect all transactions and  dispositions of such companies' assets.  These record-keeping and accounting provisions  apply to all payments, regardless of the amount or form of the payment.    Your organization confirms its understanding of such provisions of the Anti-  Corruption Laws and agrees to comply with those provisions and not to take or fail to take  any  action  that  might  in  any  way  cause  FARO Technologies, Inc.,  its  affiliates  or  subsidiaries to be in violation of the Anti-Corruption Laws.    Third Party Commitments    Your organization makes the following commitments to FARO and agrees as follows:    No Improper Payment or Transfer - Your organization represents, warrants and  covenants to FARO that your organization has not, and covenants and agrees that it will  not,  in  connection with  the  transactions  during  the  course  of  the  partnership  or  in  connection with any other business transactions involving FARO, directly or indirectly,  offer, promise, give, or authorize another to offer, promise, or give anything to any  Government Official in order to influence official action, or to anyone to obtain an unfair  or improper business advantage for or on behalf of the company, or cause that person  otherwise to perform his/her work duties disloyally or improperly. “Government Official”  means any officer or employee of any government or government-controlled entity or of a  public international organization, or any person acting in an official capacity for or on  behalf of any such government, entity or organization, or any political party or official  thereof, or any candidate for political office    No Governmental Ownership of Third Party – Your organization represents and  warrants to FARO that there is no current or prospective ownership interest, direct or 

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B  4      i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            indirect, in your organization or in the contractual relationship established with FARO that  is held or controlled by any Government Official.    Third Party’s Continuing Obligation to Disclose Governmental Ownership - If,  during the term of this partnership, a Government Official acquires an interest of any sort  or nature, direct or indirect, in your organization, your organization agrees to make  immediate, complete and accurate written disclosure to FARO. Following such disclosure,  the partnership (including underlying agreements) shall immediately become terminable  by FARO, at its discretion, upon FARO’s written notice to your organization.    Third Party Anti-Corruption Compliance Procedures – Your organization agrees (i)  that any payments to your organization by FARO shall be made by check or wire transfer  only, directly to your organization or to a bank account in your organization’s name, and  no requests for cash payments or other payments in non-bearer form shall be accepted; (ii)  that any payments to your organization by FARO shall be made in the agreed-upon territory  of operation or in the United States; (iii) that books and records showing expenses shall  reflect the purpose of each expenditure made and for whose benefit the expenditure was  made and that there will be written records of each and every service that your organization  performs for FARO or on FARO’s behalf; (iv) that your organization shall retain accurate,  detailed records of, and permit FARO to review at its discretion, any expenses or costs of  your organization which FARO is required to reimburse during the partnership; and (v) the  terms of the partnership (including underlying agreements) may be disclosed to  government agencies and other persons with a legitimate need for such information,  including, but not limited to, the U.S. Department of Justice, the U.S. Department of State  or the U.S. Securities and Exchange Commission.    Third Party Anti-Corruption Certifications – Your organization agrees that it will  provide FARO, or on request by FARO, with a Statement of Compliance with FARO’s  Anti-Corruption Policy for Third Parties in the form hereto attached as Exhibit D that is  signed by an authorized officer or director of your organization.    Third Party’s Continuing Obligation to Advise – Your organization agrees that  should it learn or have reason to know of (i) any violation, suspected violation, or imminent  violation of the Anti-Corruption Laws, or (ii) any other development during the term of the  partnership that in any way makes inaccurate or incomplete the commitments and  agreements of your organization relating to anti-corruption, your organization will  immediately advise FARO’s Global Compliance Department at compliance@faro.com, in  writing, of such knowledge or suspicion and the entire basis known to your organization.    FARO’s Right of Audit/Investigation - At FARO’s sole discretion, your  organization agrees that FARO shall have the right, upon written notice to your  organization, to conduct an investigation and/or audit of your organization to determine  whether or not any actions or failures to act on behalf of your organization may subject  FARO to liability under any law, governmental rule, or regulation.   Your organization  agrees to cooperate fully with such investigation, the scope, method, nature and duration  of which shall be at the sole reasonable discretion of FARO.  If your organization fails to  reasonably cooperate with FARO’s investigation and/or audit, FARO may immediately 

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B  5      i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            terminate the partnership (including underlying agreements,) without liability to FARO.  In addition, in the event that FARO has a reasonable basis to believe that your organization  has commingled personal assets of any officers, directors, employees, agents or  representatives of your organization with your organization’s corporate assets in engaging  in the partnership, your organization agrees to use its best efforts to secure the cooperation  of any such individual or entity in FARO’s investigation and/or audit of the individual’s or  entity’s books and records.    FARO’s Rights upon any Law Default - In the event FARO reasonably believes  that your organization has violated any law, governmental rule, or regulation, that a  violation of any law, governmental rule, or regulation is imminent, or that your  organization has acted in any way that may subject FARO to liability under any law,  governmental rule,  or  regulation, FARO may  immediately terminate  the  partnership  (including underlying agreements,) without liability to FARO. FARO may disclose  information relating to the violation or suspected violation of any law to any appropriate  governmental authority, including, but not limited to, the U.S. Department of Justice, the  U.S. Department of State or the U.S. Securities and Exchange Commission. 

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B  6      i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            SECTION B: FARO’s Anti-Corruption Policy    All officers, directors, full and part-time employees, and contract workers of FARO  (“FARO Personnel”) are prohibited from, either directly or indirectly, offering, promising,  giving, or authorizing another to offer, promise, or give anything to any government  official1  in order to influence official action, or to anyone to obtain an unfair or improper  business advantage for or on behalf of FARO, or cause that person otherwise to perform  his/her work duties disloyally or improperly.   This Policy also applies to FARO’s agents,  representatives, distributors, resellers, referral agents, joint venture partners, business  partners, and anyone else who conducts business on behalf of FARO or in furtherance of  FARO’s interests, including third party service providers that interact with government  officials on FARO’s behalf, such as customs brokers, freight forwarders, tax consultants,  and lawyers (“Third Party Representatives”).    It is FARO’s policy to comply fully with all applicable anti-corruption laws,  including local laws and the U.S. Foreign Corrupt Practices Act (FCPA) and the U.K.  Bribery Act (the “Anti-Corruption Laws”). The purpose of this Anti-Corruption Policy  (the “Policy”) is to help ensure compliance with all such laws. In many respects, this Policy  is more restrictive than the Anti-Corruption Laws.   This is intentional, and serves to  promote legal and ethical behavior by FARO Personnel and all of FARO’s Third Party  Representatives at all times.  If there is any instance in which the Anti-Corruption Laws  are more strict, the stricter requirements apply.    The only things that are permitted to be offered, promised, or given in connection  with FARO’s business are specifically set forth below.    FARO Personnel and Third Party Representatives have an individual responsibility  to establish and maintain a high standard of ethical business conduct in compliance with  this Policy.   Each manager has a duty to aid FARO Personnel and Third Party  Representatives in understanding the content, scope, and importance of this Policy and to  illustrate by his or her own behavior, the spirit and practice of ethical business conduct.  FARO Personnel and Third Party Representatives must read and understand this entire  Policy.    Integrity, FARO’s first core value, provides the foundation for the Company’s  policies, procedures and guidelines.  As such, FARO expects and demands compliance  with this Policy and all applicable laws.  FARO’s ethics and reputation must never be  compromised. Your continued commitment to FARO’s high ethical standards is expected  and appreciated.            1  Certain anti-corruption laws criminalize corruption as it relates to government officials while others  criminalize corruption as it relates to commercial parties as well as government officials. For reference, and  because it is used in this Policy, the term “government official” means any officer or employee of any  government or government-controlled entity or of a public international organization, or any person acting  in an official capacity for or on behalf of any such government, entity or organization, or any political party  or official thereof, or any candidate for political office. 

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B  7      i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            Meals, Entertainment and Gifts of Other Similar Things of Value    Before giving anything to anyone for or on behalf of FARO, it must (1) be  reasonable in value given the circumstances and the position of the recipient, (2) be  permitted under local laws, (3) not be given to influence official action or obtain an unfair  or improper business advantage or cause any person to perform his/her work duties  disloyally or improperly, and (4) not be likely to reflect negatively on FARO or the  recipient.     Without pre-approval, FARO Personnel may offer, promise, or give (i) a business  meal of up to $40 per person ($20 in China) and for no more than 10 people at any  one meal; and/or (ii) a FARO-logoed promotional item of up to $25 per person.     Anything else offered, promised, or given requires prior written pre-approval,  using the attached Pre-Approval Request Form, of the FARO Regional Manager,  Area Vice President or District Manager AND the Chief Compliance Officer  (“CCO”), or, in the case of travel or donations, the approval of the Chief Executive  Officer. Examples include the following:    o any gift (including a seasonal or holiday gift) other than a $25 or less  FARO-logoed promotional item;  o any business meal costing more than $40 per person ($20 in China);  o any entertainment;  o any FARO-logoed promotional item if a FARO-logoed promotional item  has been provided to the same person during the previous 3 month period;  o any business meal costing less than $40 per person ($20 in China) if  provided to the same person more than once in any 3 month period;  o travel  paid  to  or  on  behalf  of  any  customer,  potential  customer  or  government official; and  o anything  contributed/given  on  behalf  of  FARO  to  any  charities  or  foundations.     FARO Personnel are prohibited from making a cash or in-kind contribution or  incurring an expenditure using a FARO account, to any political campaign, political  party, political candidate, elected official or any of their affiliated organizations.     Facilitation payments (i.e., payments to expedite or secure a routine governmental  action) are prohibited.     No Third Party Representative may offer, promise, give or authorize the giving of  any gift, meal, entertainment, travel, donation, facilitation payment, gratuity or  anything else of value, directly or indirectly, to anyone on behalf of, or in an effort  to obtain a benefit for, FARO, or to cause any person to perform his/her work duties  disloyally or improperly. 

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B  8      i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            Recordkeeping and Documentation Requirements    FARO Personnel and Third Party Representatives (in connection with their services on  behalf of FARO) are required to maintain books, records and accounts that, in reasonable  detail, accurately and fairly reflect all payments, expenses and transactions.   No  undisclosed or unrecorded FARO fund or asset is to be established for any purpose, and no  false or misleading entries, such as an entry calling an extravagant dinner a “consulting  fee,” are to be made in FARO’s books or records. Reports of all kinds, including expense  reports and those forms listed below, are to be completed accurately and honestly.  No  payment on FARO’s behalf is to be made without adequate supporting documentation, or  made for any purpose other than as described in such documents.  FARO Personnel are to  comply with FARO’s internal control policies at all times.    The required documentation is as follows:    o A Global Business Meal Record form (attached to this Policy as Exhibit A)  must be completed and submitted to Accounting for all business meals -  regardless of whether pre-approval is required under this Policy.  o The Pre-Approval Request Form (attached to this Policy as Exhibit B) as  required based on the guidance above.  o A Statement of Compliance with FARO’s Anti-Corruption Policy (attached  to this Policy as Exhibit C) must be completed annually by relevant FARO  Personnel and, unless the requirement is waived or modified by the CCO,  by each Third Party Representative.    Third Parties    FARO’s Global Third Party Representative Policy outlines the specific due  diligence and compliance verification processes when using and working with Third Party  Representatives and must be read and understood by all FARO Personnel who have  responsibility for the engagement, management and/or monitoring of Third Party  Representatives.    If a Third Party Representative is a prospective Joint Venture Partner or co-investor,  the CCO must be consulted at the outset of the relationship and on an ongoing basis so that  protective steps can be tailored to the circumstances.    Questions and Reporting Suspected Violations    Any questions about this Policy should be addressed to your designated Regional  Manager, Area Vice President, District Manager or the CCO.    Any suspected violations of this Policy must be disclosed immediately to your  Regional Manager, Area Vice President or District Manager AND to FARO’s CCO.  Alternatively, you may confidentially report violations, or suspicions of violations, through  the EthicsPoint website (www.ethicspoint.com). 

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B  9      i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15  LEVEL OF EXAMPLE(S) OF CONDUCT POSSIBLE DISCIPLINARY  VIOLATION ACTION(S)    Minor violation     Not reporting a business meal under $40 per person  ($20 in China);     Failing to fully complete documentation required  by this Policy; or     Not attending a required training session on the  Policy.     Verbal Counseling     Written Warning    Medium violation       Spending an amount on meals, gifts, or  entertainment that is significantly greater than was  pre-approved;     Not obtaining prior authorization when required;     Approving any action by another that violates this  Policy;     Not reporting a reasonable suspicion of a violation  by another; or     Repeated minor violations of the Policy.     Written Warning     Probation     Suspension from Work  (with or without pay)    Major violation      Giving anything of value as an inducement to  arrange a product demonstration;  Giving anything of value to a government official to  influence official action such as the grant of a  license/authorization, or to expedite or secure a         Suspension from Work  (with or without pay)       Giving anything on behalf of FARO to politicians,  Termination               office;  Approving any action by another that violates  applicable Anti-Corruption Laws;  Approving or making false entries to FARO’s  books, records or reports; or  Repeated medium violations of the Policy.     Reporting to government  authorities            Potential Disciplinary Actions    FARO Personnel who violate the spirit or letter of this Policy are subject to  disciplinary actions.  Below is an illustrative list of disciplinary actions that could result  upon the occurrence of a violation. The approach FARO takes to discipline in connection  with such infractions may vary from the examples set forth below depending on, among  other things, local country laws regarding labor and employment or other obligations of  the Company relating to  employment, the circumstances under which  the infraction  occurred, the nature of an employee’s duties, and an employee’s overall work record,  including any prior misconduct.                                                                routine governmental action;    political parties, or candidates for any political 

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B  10      i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15                    Global Business Meal Record  Exhibit A   This form should be used to document all business meals provided by FARO Personnel to any  third party regardless of whether pre-approval is required.    FARO Personnel Name, Title and Region:                                                           _                    _    Business Purpose of Meal:                                                                                   _                    _  Date: Per Person Cost of Meal:                                                    _ Location of Meal: _                                          _                    _   Name, Job Title, Company Name and Location, of each Person Present:  Name of each Person  Present  Company Name  and Location  Job Title Government  Official (yes or no)                             To the best of my knowledge the Meal paid for by FARO did [   ] OR did not [   ] involve a  Government Official.    I hereby confirm that the information above is accurate and complete, and I have a reasonable  basis for making this confirmation.    I confirm that the business meal was/is (1) reasonable in value, given the circumstances and the  position of the attendee/recipient, (2) to the best of my knowledge permitted under local laws, (3)  not given to influence official action or obtain an unfair or improper business advantage or cause  a person to perform his/her work duties disloyally or improperly, and (4) not likely to reflect  negatively on FARO or the attendee/recipient.  Name: _ Signature: _     _ Date:   =========================================================================  APPROVAL:  Manager: Signature: _     _ Date:     **** Please attach the completed and approved form to your expense report when  submitting to your regional Accounting Department **** 

 

11      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15 i l  55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B                    PRE-APPROVAL REQUEST FORM    Your Name, Title, and Region:    Exhibit B   Description of proposed gift/activity (including proposed date of gift or activity and, if activity,  proposed location):          What is the business purpose of the gift/activity?          Explain whether the proposed gift/activity is necessary, and if so, why?          Name, Job Title, Company Name and Location, of each Person Proposed to be  Present:  Name of each Person  Proposed to be Present  Company Name  and Location  Job Title Government  Official (yes or no)                           Value of Proposed Gift/Activity   Per Person Total  Value (USD)    Value (Local Currency)      To your knowledge, have any of the non-FARO attendees/recipients received or been promised,  offered or given anything else of value from or on behalf of FARO during the last 3 months?  Yes                 No         If Yes, please describe what else has been promised, offered or given:          1.  Are any of the proposed non-FARO recipients/attendees (e.g., government officials or employees  of customers or potential customers) in a position to take or influence action for or against FARO?  Yes                No         

 

12      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            If Yes, please explain:        If the answer to Question 1 is yes, please answer Questions 1.a – 1.c:  1.a.  Was the proposed gift/activity suggested by the recipient/attendee?  Yes                No         If Yes, please explain:          1.b.  Do you know that each recipient/attendee is permitted to accept the thing of value (e.g.,  gift, meal, etc.) under the rules or policies that apply to them?  Yes                No         If No, please explain what you have done to try to determine this:          1.c.  To your knowledge, is there an action or FARO-related business decision pending before  any of the recipients/attendees?  Yes                No         If Yes, what action or decision and when is it expected to happen?        2.  If a gift has been proposed to anyone, will the gift benefit someone who is in a position to take or  influence action that would benefit FARO?  Yes                No         If Yes, please explain:        *           *           *    I confirm that the subject of the request proposed herein is (1) reasonable in value, given the  circumstances and the position of the attendee/recipient, (2) to the best of my knowledge permitted  under local laws, (3) not given to influence official action or otherwise obtain an unfair or improper  business advantage or cause a person to perform his/her work duties disloyally or improperly, and (4)  not likely to reflect negatively on FARO or the attendee/recipient.  Name:   Signature:                                    Date:     APPROVALS:  *           *           * Regional/District Manager or Area Vice President  Name:   Signature: Date:     Chief Compliance Officer  Name:   Signature: Date:   

 

13      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15                  STATEMENT OF COMPLIANCE WITH  FARO’S ANTI-CORRUPTION POLICY  Exhibit C   I,                                                                        _, confirm that I am fully aware of and understand the  provisions of FARO’s Anti-Corruption Policy and am fully aware of and understand the provisions of  the U.S. Foreign Corrupt Practices Act of 1977 as amended (the “FCPA”), the U.K. Bribery Act and  any other applicable anti-corruption laws, including those of the country or countries in which I am to  provide services (the “Applicable Anti-Corruption Laws”) and that I have not violated, nor caused  FARO to violate, FARO’s Anti-Corruption Policy or any Applicable Anti-Corruption Laws in  connection with my services for, or representation of, FARO in any country.    Specifically, I have not offered, promised, given or authorized, and will not promise, give or authorize  the giving of any gift, meal, entertainment, travel, donation, facilitation payment, gratuity or anything  else of value, directly or indirectly, to anyone – whether a “government official” or any other person –  in order to influence official action, obtain an unfair or improper business advantage for or on behalf  of FARO, or cause that person otherwise to perform his/her work duties disloyally or improperly.    I confirm that I understand that the term “government official” means any officer or employee of any  government or government-controlled entity or of a public international organization, or any person  acting in an official capacity for or on behalf of any such government, entity or organization, or any  political party or official thereof, or any candidate for political office.    I confirm that I will continue to fully comply with FARO’s Anti-Corruption Policy and with all  Applicable Anti-Corruption Laws.    I confirm that the representations and undertakings set forth in this Statement of Compliance apply to  me and to any person or entity that I represent (including any company identified below) in connection  with the services to be provided to or on behalf of FARO by a third party, and that I have been duly  authorized to execute this Statement of Compliance on behalf of such entity.    I confirm that if, in connection with my work for FARO, I learn of or suspect a possible violation of  any Applicable Anti-Corruption Law or of FARO’s Anti-Corruption Policy, I will immediately advise  FARO’s Internal Audit Department or its Chief Executive Officer at:    250 Technology Park  Lake Mary, FL 32746 USA  +1-407-333-9911        Signature                                                                   Job Title        Date                                                                           Company 

 

14      DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            Exhibit D            STATEMENT OF COMPLIANCE WITH  FARO’S ANTI-CORRUPTION POLICY FOR THIRD PARTIES    Third Party confirms full awareness of, understanding of, and compliance with the provisions of the  Anti-Corruption Policy for Third Parties, which includes the FARO’s Anti-Corruption Policy, and  confirms full awareness of, understanding of, and compliance with the U.S. Foreign Corrupt Practices  Act of 1977 as amended (the “FCPA,”) the U.K. Bribery Act, and any other applicable anti-corruption  laws, including those of the country or countries in which Third Party provides services (the “Applicable  Anti-Corruption Laws”) and that Third Party has not violated, nor caused FARO to violate, FARO’s Anti- Corruption Policy or any Applicable Anti-Corruption Laws in connection with Third Party’s services  for, or representation of, FARO in any country.    Specifically, Third Party has not offered, promised, given or authorized, and will not promise, give or  authorize the giving of any gift, meal, entertainment, travel, donation, facilitation payment, gratuity or  anything else of value, directly or indirectly, to anyone – whether a “government official” or any other  person – in order to influence official action, obtain an unfair or improper business advantage for or on  behalf of FARO, or cause that person otherwise to perform his/her work duties disloyally or improperly.    Third Party confirms understanding that the term “government official” means any officer or employee  of any government or government-controlled entity or of a public international organization, or any  person acting in an official capacity for or on behalf of any such government, entity or organization, or  any political party or official thereof, or any candidate for political office.    Third Party will continue to fully comply with FARO’s Anti-Corruption Policy and with all Applicable  Anti-Corruption Laws.    Third Party confirms that the representations and undertakings set forth in the Anti-Corruption Policy  for Third Parties and this Statement of Compliance bind Third Party and its employees and  representatives, including sub-distributors.    Third Party shall notify FARO immediately of any known or suspected violation of any Applicable  Anti-Corruption Law or of FARO’s Anti-Corruption Policy by contacting FARO’s Global Compliance  Department or its Chief Executive Officer at:    250 Technology Park  Lake Mary, FL 32746 USA  +1-407-333-9911        Signature                                                                   Job Title        Date                                                                           Third Party Name 

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B     i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15            Exhibit (J) Operational and QBR Reporting Requirements          KPI / Report    Definition     Update Cadence    Backlog Reports  Total daily backlog by $$, based on  commitment, aging, part number     Weekly      Manufacturing Cycle Time  Total cycle time for sub-assembly process  and top-level assembly process.  Derived  from MES system with break down by stage  in the process. Used for continuous  improvement efforts.       Monthly    On Time Delivery  Average weekly % delivered to committed  last 12 weeks     Weekly / Daily if below goal    First Pass Yield  First pass yield all test stages AOI, AXI, ICT,  FCT, System Test rolling 12 weeks control  chart     Weekly  Material Shortages Clear to build report  Weekly/Monthly  Cost Reviews for materials,  assembly, and test    Review against goals set    Quarterly  Select Supplier Quality  Reviews (can be tied to Cost  Reviews)    Review Partner’s key supplier’s Quality KPI’s     Quarterly  Audit reports ISO, 17025, etc.  Once performed  (Quality)Out of Box Audit  Results    Conducted by Sanmina, control chart   Based on AQL sampling plan for OBA  reported weekly  (Quality)Stability (drop test)  yield  Control chart, current sample available with  rules for notification and alert   Part of first pass yield data.  Will  distribute as agreed.  (Quality) ISO Internal audit  results    Nonconformities on FARO lines    As dictated by internal audit plan  (Quality) List of 17025  certified operators    By product listed in ANAB scope documents  Initial list, then updated as additions or  removals are made  (Quality) 17025 Operator re-  certification testing results    By Operator  Initial list then as re – certifications are  conducted    (Quality) 17025 as received  out of compliance condition  Customer notification process when the as  received conditions of 17025 certified  products fail to meet accuracy  requirements     Daily, time constraints on our response  to our customers  (Quality) 17025 impact  analysis for out of calibration  tooling  If a tool or fixture is found to be out of spec  in its normal calibration cycle, a list of all  serial numbers and dates built with that     Daily, time constraints on our response  to our customers  

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B      i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15              device since its last verified in specification  state is required to perform an impact  analysis         Scrap reports with Aging    Total scrap parts by $$, part numbers, and  cycle time       Monthly      Safety Reports    (For FARO cell only)        Days without accidents/incidents         Monthly    FARO Production Status  % of units complete relative to committed  production schedule     Weekly    DPPM  Calculate the number of defective supplier  rejects / total direct material receipts  monthly     Report monthly    DPPM  Calculate the number of defective supplier  rejects / total direct material receipts  monthly     8D requests on key issues opened.    Corrective actions    Report on # of 8Ds issued and closed /  month.  8D issued for any  issues impacting  manufacturing    Review 8D reports with FARO SQE  monthly    Corrective actions    Past due 8Ds   Review 8D reports with FARO SQE  monthly    FAI acceptance rate  Suppliers passing FAIs / Divided by total  submitted. (Monthly / yearly) (select  suppliers)    100%    Monthly    FAI acceptance rate  FAI NC management. (Review 8Ds /  Corrective actions issued for each failing FAI  submittal.    As needed    Quarterly  SPC / CPK data on machined  components produced by  Sanmina (Machining Group)    Report # of parts running Cpks ?<1.33 on  critical characteristics.     Quarterly  PCBAs (Sanmina produced  only)  Board testing (Flying probe, ICT, etc.) pass  rates.     Quarterly          Freight Spend  Broken into Freight In, Freight Out,  Warranty, Non-Warranty, or SG&A Other,  and broken down by Destination Country -  Heat Map, Charts and raw data           Monthly 1st Monday      Duty Spend    Broken down by Destination Country - Heat  Map, Charts and raw data       Monthly 1st Monday  

 

    DocuSign Envelope ID: 6A4FAD59-4B55-473C-9D63-26D6D02DAC15                    Count of Total Shipments    Broken down by Destination Country - Heat  Map and raw data       Monthly 1st Monday          Count of Shipment Pieces        Broken down by Destination Country - Heat  Map and raw data           Monthly 1st Monday      Shipment Weights totals  Report both Actual Weights and Billable  Weights - Charts and raw data by mutual  agreement       Monthly 1st Monday          FARO Shipment Data Integrity  Errors  Defined as: Wrong, incomplete, or missing  data sent over from FARO and prevents  Sanmina from shipping. How many  occurrences and what type of error to be  reported- raw data             Monthly 1st Monday  Expedites: Order processing  and Shipping requests  Quantity of requests and costs for requests  - Charts and raw data     Monthly 1st Monday      Packaging Consumable Costs  Costs of packaging used that is not on any  BOM, including void fills, corrugated, non-  standard labels, etc. - Charts and raw data     Quarterly (or Faro can add to the  Thailand BOM for tracking)            Inventory Accuracy  100% target, <98% triggers corrective  action: Total items counted with cost  /extended cost and items out of tolerance  with cost / extended cost and Accuracy as a  % - Charts and raw data             Monthly 1st Monday        Inventory Scrap      Report cost, item numbers, quantities -  charts and raw data         Monthly 1st Monday  

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B      i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15         [redacted] 

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B              [redacted]                                                                         

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B      

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B              [redacted]    

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B                [redacted] 

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B            [redacted] 

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B i l 6A4FAD59-4B55-473C-9D63-26D6D02DAC15  [redacted] 

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B           Certificate Of Completion  Envelope Id: 6A4FAD594B55473C9D6326D6D02DAC15                                                                             Status: Completed  Subject: Please DocuSign: Execution copy of FARO MSA with Exhibits attached  Source Envelope:  Document Pages: 105                                                Signatures: 1                                                               Envelope Originator:  Certificate Pages: 5                                                     Initials: 0                                                                      [redacted]  AutoNav: Enabled                                                                                                                                           30 E. Plumeria Drive  EnvelopeId Stamping: Enabled                                                                                                                       nil  Time Zone: (UTC-08:00) Pacific Time (US & Canada)                                                                                   San Jose, CA  95134  [redacted]  Record Tracking  Status: Original                                                           Holder: [redacted]                                                        Location: DocuSign  7/14/2021 8:38:40 AM                                                  Signer Events                                           Signature                                                  Timestamp  Mike Landy                                                                                                                                                      Sent: 7/14/2021 8:49:40 AM  mike.landy@sanmina.com                                                                                                                              Viewed: 7/14/2021 10:17:34 AM  Security Level: Email, Account Authentication                                                                                                Signed: 7/14/2021 10:19:11 AM  (None)  Signature Adoption: Pre-selected Style  Using IP Address: [redacted]      Electronic Record and Signature Disclosure:  Accepted: 4/26/2021 1:38:42 PM  ID: cfe4a430-357c-49f3-a70f-545d5c0ab21b  In Person Signer Events                          Signature                                                  Timestamp    Editor Delivery Events                             Status                                                        Timestamp    Agent Delivery Events                             Status                                                        Timestamp    Intermediary Delivery Events                  Status                                                        Timestamp    Certified Delivery Events                         Status                                                        Timestamp    Carbon Copy Events                                Status                                                        Timestamp  [redacted]   EVP IMS Sales and Customer Relations  Security Level: Email, Account Authentication  (None)  Electronic Record and Signature Disclosure:  Accepted: 7/5/2021 7:38:56 AM  ID: 9c06065a-ad99-4dd4-9d17-e4525338df15    [redacted]   Security Level: Email, Account Authentication  (None)  Electronic Record and Signature Disclosure:  Not Offered via DocuSign  Sent: 7/14/2021 10:19:14 AM                    Sent: 7/14/2021 10:19:15 AM 

 

DocuSign Envelope ID: 55BCCA66-CB83-4DB8-9C1D-5EEF1EBCB43B         Carbon Copy Events Status Timestamp  [redacted]  Sent: 7/14/2021 10:19:16 AM    Viewed: 7/14/2021 10:28:06 AM  Security Level: Email, Account Authentication  (None)  Electronic Record and Signature Disclosure:  Not Offered via DocuSign                [redacted]        Sent: 7/14/2021 10:19:17 AM      Security Level: Email, Account Authentication  (None)  Electronic Record and Signature Disclosure:  Not Offered via DocuSign              Witness Events Signature Timestamp    Notary Events    Signature    Timestamp    Envelope Summary Events    Status    Timestamps  Envelope Sent Hashed/Encrypted 7/14/2021 8:49:40 AM  Certified Delivered Security Checked 7/14/2021 10:17:34 AM  Signing Complete Security Checked 7/14/2021 10:19:11 AM  Completed Security Checked 7/14/2021 10:19:17 AM  Payment Events Status Timestamps  Electronic Record and Signature Disclosure  

 

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Exhibit 10.1

Lakeland Financial Corporation
Amended and Restated 2017 Equity Incentive Plan
Article 1
Introduction
Section 1.1Purpose, Effective Date and Term. The purpose of this Lakeland Financial Corporation Amended and Restated 2017 Equity Incentive Plan is to: (a) promote the growth, profitability, and long-term financial success of Lakeland Financial Corporation and its Subsidiaries; (b) incentivize officers, other employees, non-employee directors, and other service providers of the Company and its Subsidiaries to achieve long-term corporate objectives; (c) attract and retain officers, other employees, non-employee directors, and other service providers who can and do contribute to such financial success, and to further align their interests with those of the Company’s Shareholders; and (d) provide such individuals with an opportunity to acquire Shares of the Company’s common stock. The “Effective Date” of the Plan is April 11, 2017, the date of the approval of the Plan by the Shareholders. The Plan shall remain in effect as long as any Awards are outstanding; provided, however, that no Awards may be granted after the 10-year anniversary of the Effective Date.
Section 1.2Participation. Each employee and director of, and service provider (with respect to which issuances of securities may be registered under Form S-8) to, the Company and each Subsidiary who is granted, and currently holds, an Award in accordance with the provisions of the Plan shall be a “Participant” in the Plan. Award recipients shall be limited to employees and directors of, and service providers (with respect to which issuances of securities may be registered under Form S-8) to, the Company and its Subsidiaries; provided, however, that an Award (other than an ISO) may be granted to an individual prior to the date on which he or she first performs services as an employee, director or service provider, provided that such Award does not become vested prior to the date such individual commences such services.
Section 1.3Definitions. Capitalized terms in the Plan shall be defined as set forth in the Plan (including the definition provisions of Article 8).
Article 2
Awards
Section 2.1General. Any Award may be granted singularly, in combination with another Award (or Awards), or in tandem whereby the exercise or vesting of one Award held by a Participant cancels another Award held by the Participant. Each Award shall be subject to the provisions of the Plan and such additional provisions as the Committee may provide with respect to such Award and as may be evidenced in the Award Agreement. Subject to the provisions of Section 3.4(b), an Award may be granted as an alternative to or replacement of an existing award under the Plan, any other plan of the Company or a Subsidiary or as the form of payment for grants or rights earned or due under any other compensation plan or arrangement of the Company or a Subsidiary, including the plan of any entity acquired by the Company or a Subsidiary. The types of Awards that may be granted include the following:
(a)Stock Options. A stock option represents the right to purchase Shares at an exercise price established by the Committee. Any stock option may be either an ISO or a nonqualified stock option that is not intended to be an ISO. No ISOs may be (i) granted after the 10-year anniversary of 

the Effective Date or (ii) granted to a non-employee. To the extent the aggregate Fair Market Value (determined at the time of grant) of Shares with respect to which ISOs are exercisable for the first time by any Participant during any calendar year under all plans of the Company and its Subsidiaries exceeds $100,000, the stock options or portions thereof that exceed such limit shall be treated as nonqualified stock options. Unless otherwise specifically provided by the Award Agreement, any stock option granted under the Plan shall be a nonqualified stock option. All or a portion of any ISO granted under the Plan that does not qualify as an ISO for any reason shall be deemed to be a nonqualified stock option. In addition, any ISO granted under the Plan may be unilaterally modified by the Committee to disqualify such stock option from ISO treatment such that it shall become a nonqualified stock option.
(b)Stock Appreciation Rights. A stock appreciation right (an “SAR”) is a right to receive, in cash, Shares or a combination of both (as shall be reflected in the respective Award Agreement), an amount equal to or based upon the excess of (i) the Fair Market Value at the time of exercise of the SAR over (ii) an exercise price established by the Committee.
(c)Stock Awards. A stock award is a grant of Shares or a right to receive Shares (or their cash equivalent or a combination of both, as shall be reflected in the respective Award Agreement) in the future, excluding Awards designated as stock options, SARs or cash incentive awards by the Committee. Such Awards may include bonus shares, performance shares, performance units, restricted stock, restricted stock units or any other equity-based Award as determined by the Committee.
(d)Cash Incentive Awards. A cash incentive award is the grant of a right to receive a payment of cash (or Shares having a value equivalent to the cash otherwise payable, excluding Awards designated as stock options, SARs or stock awards by the Committee, all as shall be reflected in the respective Award Agreement), determined on an individual basis or as an allocation of an incentive pool that is contingent on the achievement of performance objectives established by the Committee.
Section 2.2Exercise of Stock Options and SARs. A stock option or SAR shall be exercisable in accordance with such provisions as may be established by the Committee; provided, however, that a stock option or SAR shall expire no later than 10 years after its grant date (five years in the case of an ISO granted to a 10% Shareholder). The exercise price of each stock option and SAR shall be not less than 100% of the Fair Market Value on the grant date; provided, however, that the exercise price of an ISO shall not be less than 110% of Fair Market Value on the grant date in the case of a 10% Shareholder; and provided, further, that, to the extent permitted under Code Section 409A, and subject to Section 3.4(b), the exercise price may be higher or lower in the case of stock options and SARs granted in replacement of existing awards held by an employee, director or service provider granted by an acquired entity. The payment of the exercise price of a stock option shall be by cash or, subject to limitations imposed by applicable law, by any of the following means unless otherwise determined by the Committee from time to time: (a) by tendering, either actually or by attestation, Shares acceptable to the Committee and valued at Fair Market Value as of the day of exercise; (b) by irrevocably authorizing a third party, acceptable to the Committee, to sell Shares acquired upon exercise of the stock option and to remit to the Company no later than the third business day following exercise of a sufficient portion of the sale proceeds to pay the entire exercise price and any tax withholding resulting from such exercise; (c) by payment through a “net exercise” process such that, without the payment of any funds, the Participant may exercise the option using Award shares as payment of the exercise price and applicable taxes and receive the net number of Shares equal in value to (i) the number of Shares as to which the option is being exercised, multiplied by (ii) a fraction, the numerator of which is the Fair Market Value (on the date of exercise) less the exercise price, and the denominator of which is such Fair Market Value (the number of 
    2

net Shares to be received shall be rounded down to the nearest whole number of Shares); (d) by personal, certified or cashiers’ check; (e) by other property deemed acceptable by the Committee or (f) by any combination thereof.
Section 2.3Minimum Vesting Period.  If the right to become vested in an Award granted to an employee Participant is conditioned on the completion of a specified period of service with the Company or its Subsidiaries, without achievement of performance measures or other performance objectives (whether or not related to the performance measures) being required as a condition of vesting, and without it being granted in lieu of, or in exchange for, other compensation, or other Awards, then the required period of service for full vesting shall not be less than one (1) year (subject to acceleration of vesting, to the extent permitted by the Committee, as provided herein); provided, however, that the required period of service for full vesting with respect to such stock awards shall not apply to Awards that do not in the aggregate exceed 5% of the total Share reserve set forth in Section 3.2(a).
Section 2.4Dividends and Dividend Equivalents. Any Award may provide the Participant with the right to receive dividend payments or dividend equivalent payments with respect to Shares subject to the Award, which payments may be made currently or credited to an account for the Participant, may be settled in cash or Shares and may be subject to terms or provisions similar to the underlying Award or such other terms and conditions as the Committee may deem appropriate.
Section 2.5Forfeiture of Awards. Unless specifically provided to the contrary in an Award Agreement, upon notification of Termination of Service for Cause, any outstanding Award held by a Participant, whether vested or unvested, shall terminate immediately, such Award shall be forfeited and the Participant shall have no further rights thereunder.
Section 2.6Deferred Compensation. The Plan is, and all Awards are, intended to be exempt from (or, in the alternative, to comply with) Code Section 409A, and each shall be construed, interpreted and administered accordingly. The Company does not guarantee that any benefits that may be provided under the Plan will satisfy all applicable provisions of Code Section 409A. If any Award would be considered “deferred compensation” under Code Section 409A (“Deferred Compensation”), the Committee reserves the absolute right (including the right to delegate such right) to unilaterally amend the Plan or the applicable Award Agreement, without the consent of the Participant, to avoid the application of, or to maintain compliance with, Code Section 409A. Any amendment by the Committee to the Plan or an Award Agreement pursuant to this Section 2.6 shall maintain, to the extent practicable, the original intent of the applicable provision without violating Code Section 409A. A Participant’s acceptance of any Award shall be deemed to constitute the Participant’s acknowledgment of, and consent to, the rights of the Committee under this Section 2.6, without further consideration or action. Any discretionary authority retained by the Committee pursuant to the terms of the Plan or pursuant to an Award Agreement shall not be applicable to an Award that is determined to constitute Deferred Compensation, if such discretionary authority would contravene Code Section 409A.
Article 3
Shares Subject to Plan
Section 2.1Available Shares. The Shares with respect to which Awards may be granted shall be Shares currently authorized but unissued, currently held or, to the extent permitted by applicable law, subsequently acquired by the Company, including Shares purchased in the open market or in private transactions.
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Section 2.2Share Limitations.
(a)Share Reserve. Subject to the following provisions of this Section 3.2, the maximum number of Shares that may be delivered under the Plan shall be 1,000,000 (all of which may be granted as ISOs and all of which may be granted as full value awards).  The maximum number of Shares available for delivery under the Plan (including the number that may be granted as ISOs) and the number of Shares subject to outstanding Awards shall be subject to adjustment as provided in Section 3.4. Following the Effective Date, no new awards will be granted from a Prior Plan.
(i)To the extent any Shares covered by an Award under the Plan or a Prior Plan are not delivered to a Participant or beneficiary for any reason, including because the Award is forfeited (including unvested stock awards), canceled, or settled in cash, such Shares shall not be deemed to have been delivered for purposes of determining the maximum number of Shares available for delivery under the Plan and shall again become eligible for delivery under the Plan.  
(ii)With respect to SARs or, following the Effective Date, a stock appreciation right under a Prior Plan, that are settled in Shares, the full number of covered Shares set forth in the Award Agreement shall be counted for purposes of determining the maximum number of Shares available for delivery under the Plan.
(iii)If the exercise price of any stock option granted under the Plan or, following the Effective Date, a stock option under a Prior Plan, is satisfied by tendering Shares to the Company (whether by actual delivery or by attestation and whether or not such surrendered Shares were acquired pursuant to an award) or by the net exercise of the award, the full number of covered Shares set forth in the Award Agreement shall be deemed delivered for purposes of determining the maximum number of Shares available for delivery under the Plan.
(b)Reuse of Shares. If the withholding tax liabilities arising from an Award are satisfied by the tendering of Shares to the Company (whether by actual delivery or by attestation and whether or not such tendered Shares were acquired pursuant to an award) or by the withholding of or reduction of Shares by the Company, such Shares shall be deemed to have been delivered for purposes of determining the maximum number of Shares available for delivery under the Plan.
Section 2.3Limitations on Grants to Director Participants. The following limitations shall apply with respect to Awards:
(a)Stock Options and SARs. The maximum number of Shares that may be subject to stock options or SARs granted to any one Director Participant during any calendar year shall be 10,000.
(b)Stock Awards. The maximum number of Shares that may be subject to stock awards that are granted to any one Director Participant during any calendar year shall be 10,000.
(c)Director Election. The foregoing limitations shall not apply to cash-based Director fees that the Director elects to receive in the form of Shares or Share based units equal in value to the cashbased Director fee.
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Section 2.4Corporate Transactions; No Repricing.
(a)Adjustments. To the extent permitted under Code Section 409A, and to the extent applicable, in the event of a corporate transaction involving the Company or the Shares (including any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination or exchange of shares, or other similar event which the Committee determines affects the Shares such that an adjustment pursuant to this Section 3.4(a) is appropriate to prevent the enlargement or dilution of rights), all outstanding Awards, the number of Shares available for delivery under the Plan under Section 3.2 and each of the specified limitations set forth in Section 3.3 shall be adjusted automatically to proportionately and uniformly reflect such transaction; provided, however, that, subject to Section 3.4(b), the Committee may otherwise adjust Awards (or prevent such automatic adjustment) as it deems necessary, in its sole discretion, to preserve the benefits or potential benefits of the Awards and the Plan. Action by the Committee under this Section 3.4(a) may include: (i) adjustment of the number and kind of shares that may be delivered under the Plan; (ii) adjustment of the number and kind of shares subject to outstanding Awards; (iii) adjustment of the exercise price of outstanding stock options and SARs; and (iv) any other adjustments that the Committee determines to be equitable (which may include (A) replacement of an Award with another award that the Committee determines has comparable value and that is based on stock of a company resulting from a corporate transaction, and (B) cancellation of an Award in return for cash payment of the current value of the Award, determined as though the Award were fully vested at the time of payment, provided that in the case of a stock option or SAR, the amount of such payment shall be the excess of the value of the stock subject to the option or SAR at the time of the transaction over the exercise price, and provided, further, that no such payment shall be required in consideration for the cancellation of the Award if the exercise price is greater than or equal to the value of the stock at the time of such corporate transaction).
(b)No Repricing. Notwithstanding any provision of the Plan to the contrary, no adjustment or reduction of the exercise price of any outstanding stock option or SAR in the event of a decline in Stock price shall be permitted without approval by the Shareholders or as otherwise expressly provided under Section 3.4(a). The foregoing prohibition includes (i) reducing the exercise price of outstanding stock options or SARs, (ii) cancelling outstanding stock options or SARs in connection with the granting of stock options or SARs with a lower exercise price to the same individual, (iii) cancelling stock options or SARs with an exercise price in excess of the current Fair Market Value in exchange for a cash or other payment, and (iv) taking any other action that would be treated as a repricing of a stock option or SAR under the rules of the primary securities exchange or similar entity on which the Shares are listed.
Section 2.5Delivery of Shares. Delivery of Shares or other amounts under the Plan shall be subject to the following:
(a)Compliance with Applicable Laws. Notwithstanding any provision of the Plan to the contrary, the Company shall have no obligation to deliver any Shares or make any other distribution of benefits under the Plan unless such delivery or distribution complies with all applicable laws and the applicable requirements of any securities exchange or similar entity.
(b)No Certificates Required. To the extent that the Plan provides for the delivery of Shares, the delivery may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any securities exchange or similar entity.
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Article 4
Change in Control
Section 4.1Consequence of a Change in Control. Subject to the provisions of Section 3.4 (relating to the adjustment of Shares), and except as otherwise provided in the Plan or in any Award Agreement, and subject to any forfeiture and expiration provisions otherwise applicable to the respective Awards, all stock options and SARs under the Plan then held by the Participant at the time of a Change in Control (whether time-vested or performance-vested awards) shall become fully exercisable, and all stock awards and cash incentive awards under the Plan then held by the Participant at the time of a Change in Control shall become fully earned and vested, immediately upon the occurrence of either of the following: 
(a)immediately following a Change in Control the Plan and the respective Award Agreements are not the obligations of the entity, whether the Company, a successor thereto or an assignee thereof, that conducts following a Change in Control substantially all of the business conducted by the Company and its Subsidiaries immediately prior to such Change in Control, or 
(b)the Plan and the respective Award Agreements are the obligations of the entity, whether the Company, a successor thereto or an assignee thereof, that conducts following a Change in Control substantially all of the business conducted by the Company and its Subsidiaries immediately prior to such Change in Control and the Participant incurs a Termination of Service without Cause or the Participant resigns for Good Reason following such Change in Control.
Section 4.2Definition of Change in Control.
(a)If the Participant is subject to an employment agreement (or other similar agreement) with the Company or a Subsidiary that provides a definition of “change in control” (or the like), then, for purposes of the Plan, the term “Change in Control” has the meaning set forth in such agreement; and in the absence of such a definition, “Change in Control” means the first to occur of the following:
(i)The date of the consummation of the acquisition by any “person” (as such term is defined in Section 13(d) and 14(d) of the Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of fifty percent (50%) or more of the combined voting power of the then outstanding securities eligible to vote for the election of the Board (the “Company Voting Securities”); or 
(ii)During any twelve (12) month period, the individuals who are members of the Board cease for any reason to constitute a majority of the Board, unless the election, or nomination for election by the Company shareholders, of a new Company director was approved by a vote of a majority of the Board, and such new director shall, for purposes of the Plan, be considered as a member of the Board; or
(iii)The date of the consummation by the Company of (i) a merger or consolidation of the Company, if the Company shareholders immediately before such merger or consolidation, do not, as a result of such merger or consolidation, own directly or indirectly, more than fifty percent (50%) of the combined voting power of the then outstanding voting securities of the entity resulting from such merger or consolidation, in substantially the same proportion as their ownership of the combined voting power of the Company Voting Securities outstanding immediately before such merger 
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or consolidation or (ii) a complete liquidation or dissolution or an agreement for the sale or other disposition of all or substantially all of the assets of the Company.
(b)Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because fifty percent (50%) or more of the Company Voting Securities is acquired by (i) a trustee or other fiduciary holding securities under one or more employee benefit plans maintained for employees of the entity or (ii) any corporation which, immediately prior to such acquisition, is owned directly or indirectly by the stockholders of the Company in substantially the same proportion as their ownership of stock of the Company immediately prior to such acquisition.
(c)In the event that any benefit under the Plan constitutes deferred compensation under Code Section 409A and the settlement of or distribution of benefits under this Plan is to be triggered by a Change in Control, then such settlement or distribution shall be subject to the event constituting the Change in Control also constituting a “change in control event” under Section 409A.
Article 5
Committee
Section 5.1Administration. The authority to control and manage the operation and administration of the Plan shall be vested in the Committee in accordance with this Article 5. The Committee shall be selected by the Board, provided that the Committee shall consist of two or more members of the Board, each of whom is a “non-employee director” (within the meaning of Rule 16b-3 promulgated under the Exchange Act), and an “independent director” (within the meaning of the rules of the securities exchange which then constitutes the principal listing for the Stock), in each case to the extent required by the Exchange Act or the applicable rules of the securities exchange which then constitutes the principal listing for the Stock, respectively. Subject to the applicable rules of any securities exchange or similar entity, if the Committee does not exist, or for any other reason determined by the Board, the Board may take any action under the Plan that would otherwise be the responsibility of the Committee.
Section 5.2Powers of Committee. The Committee’s administration of the Plan shall be subject to the other provisions of the Plan and the following:
(a)The Committee shall have the authority and discretion to select from among the Company’s and the Subsidiary’s employees, directors and service providers those persons who shall receive Awards, to determine the time or times of receipt, to determine the types of Awards and the number of Shares covered by the Awards, to establish the terms of Awards, to cancel or suspend Awards and to reduce or eliminate any restrictions or vesting requirements applicable to an Award at any time after the grant of the Award.
(b)The Committee shall have the authority and discretion to interpret the Plan, to establish, amend and rescind any rules and regulations relating to the Plan and to make all other determinations that may be necessary or advisable for the administration of the Plan.
(c)The Committee shall have the authority to define terms not otherwise defined in the Plan.
(d)Any interpretation of the Plan by the Committee and any decision made by it under the Plan shall be final and binding on all persons.
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(e)In controlling and managing the operation and administration of the Plan, the Committee shall take action in a manner that conforms to the articles and bylaws of the Company and to all applicable law.
Section 5.3Delegation by Committee. Except to the extent prohibited by applicable law, the applicable rules of any securities exchange or similar entity, the Plan, the charter of the Committee, or as necessary to comply with the exemptive provisions of Rule 16b-3 of the Exchange Act, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers under the Plan to any person or persons selected by it. The acts of such delegates shall be treated under the Plan as acts of the Committee and such delegates shall report regularly to the Committee regarding the delegated duties and responsibilities and any Awards granted. Any such allocation or delegation may be revoked by the Committee at any time.
Section 5.4Information to be Furnished to Committee. As may be permitted by applicable law, the Company and each Subsidiary shall furnish the Committee with such data and information as it determines may be required for it to discharge its duties under the Plan. The records of the Company and each Subsidiary as to an employee’s or Participant’s employment, termination of employment, leave of absence, reemployment and compensation shall be conclusive with respect to all persons unless determined by the Committee to be manifestly incorrect. Subject to applicable law, Participants and other persons entitled to benefits under the Plan shall furnish the Committee such evidence, data or information as the Committee considers desirable to carry out the terms of the Plan.
Section 5.5Expenses and Liabilities. All expenses and liabilities incurred by the Committee in the administration and interpretation of the Plan or any Award Agreement shall be borne by the Company. The Committee may employ attorneys, consultants, accountants or other persons in connection with the administration and interpretation of the Plan, and the Company, and its officers and directors, shall be entitled to rely upon the advice, opinions and valuations of any such persons.
Article 6
Amendment and Termination
Section 6.1General. Unless otherwise determined by the Board, Shareholder approval of any amendment or termination of the Plan will be obtained only to the extent necessary to comply with any applicable laws, regulations or rules of a securities exchange on which the Shares are traded or self-regulatory agency, and subject to the foregoing, the Board may, as permitted by law, at any time, amend or terminate the Plan, and may amend any Award Agreement; provided, however, that no amendment or termination may (except as provided in Section 2.6, Section 3.4 and Section 6.2), in the absence of written consent to the change by the affected Participant (or, if the Participant is not then living, the affected beneficiary), impair the rights of any Participant or beneficiary under any Award granted prior to the date such amendment or termination is adopted by the Board; and provided, further, that no amendment may (a) materially increase the benefits accruing to Participants under the Plan, (b) materially increase the aggregate number of securities that may be delivered under the Plan other than pursuant to Section 3.4, or (c) materially modify the requirements for participation in the Plan, unless the amendment under (a), (b) or (c) immediately above is approved by the Shareholders.
Section 6.2Amendment to Conform to Law. Notwithstanding any provision of the Plan or an Award Agreement to the contrary, the Committee may amend the Plan or any Award Agreement, to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of conforming the Plan or the Award Agreement to any applicable law. By accepting an Award, the Participant shall be 
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deemed to have acknowledged and consented to any amendment to an Award made pursuant to this Section 6.2, Section 2.6 or Section 3.4 without further consideration or action.
Article 7
General Terms
Section 7.1No Implied Rights.
(a)No Rights to Specific Assets. No person shall by reason of participation in the Plan acquire any right in or title to any assets, funds or property of the Company or any Subsidiary, including any specific funds, assets, or other property that the Company or a Subsidiary, in its sole discretion, may set aside in anticipation of a liability under the Plan. A Participant shall have only a contractual right to the Shares or amounts, if any, distributable in accordance with the provisions of the Plan, unsecured by any assets of the Company or any Subsidiary, and nothing contained in the Plan or an Award Agreement shall constitute a guarantee that the assets of the Company or any Subsidiary shall be sufficient to provide any benefits to any person.
(b)No Contractual Right to Employment or Future Awards. The Plan does not constitute a contract of employment, and selection as a Participant shall not give any person the right to be retained in the service of the Company or a Subsidiary or any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the Plan. No individual shall have the right to be selected to receive an Award, or, having been so selected, to receive a future Award.
(c)No Rights as a Shareholder. Except as otherwise provided in the Plan, no Award shall confer upon the holder thereof any rights as a Shareholder prior to the date on which the individual fulfills all conditions for receipt of such rights.
Section 7.2Transferability. Except as otherwise provided by the Committee, Awards are not transferable except as designated by the Participant by will or by the laws of descent and distribution or pursuant to a domestic relations order. The Committee shall have the discretion to permit the transfer of Awards; provided, however, that such transfers shall be limited to immediate family members of Participants, trusts, partnerships, limited liability companies and other entities that are permitted to exercise rights under Awards in accordance with Form S-8 established for the primary benefit of such family members or to charitable organizations; and provided, further, that such transfers shall not be made for value to the Participant and in no event shall any Award be sold, assigned, or transferred to any third-party financial institution.
Section 7.3Designation of Beneficiaries. A Participant hereunder may file with the Company a designation of a beneficiary or beneficiaries under the Plan and may from time to time revoke or amend any such designation. Any designation of beneficiary under the Plan shall be controlling over any other disposition, testamentary or otherwise; provided, however, that if the Committee is in doubt as to the entitlement of any such beneficiary to any Award, the Committee may determine to recognize only the legal representative of the Participant in which case the Company, the Committee and the members thereof shall not have any further liability to anyone.
Section 7.4Non-Exclusivity. Neither the adoption of the Plan by the Board nor the submission of the Plan to the Shareholders for approval shall be construed as creating any limitations on the power of the Board or the Committee to adopt such other incentive arrangements as either may deem desirable.
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Section 7.5Award Agreement. Each Award shall be evidenced by an Award Agreement. A copy of the Award Agreement, in any medium chosen by the Committee, shall be made available to the Participant, and the Committee may require that the Participant sign a copy of the Award Agreement.
Section 7.6Form and Time of Elections. Unless otherwise specified in the Plan, each election required or permitted to be made by any Participant or other person entitled to benefits under the Plan, and any permitted modification, or revocation thereof, shall be filed with the Company at such times, in such form, and subject to such terms or conditions, not inconsistent with the provisions of the Plan, as the Committee may require.
Section 7.7Evidence. Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information that the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties.
Section 7.8Tax Withholding. All distributions under the Plan shall be subject to withholding of all applicable taxes and the Committee may condition the delivery of any Shares or other benefits under the Plan on satisfaction of the applicable withholding obligations. Except as otherwise provided by the Committee, such withholding obligations may be satisfied (a) through cash payment by the Participant; (b) through the surrender of Shares that the Participant already owns or (c) through the surrender of Shares to which the Participant is otherwise entitled under the Plan; provided, however, that except as otherwise specifically provided by the Committee, such Shares under clause (c) may not be used to satisfy more than the maximum individual statutory tax rate for each applicable tax jurisdiction or such lesser amount as established by the Company.
Section 7.9Successors. All obligations of the Company under the Plan shall be binding upon and inure to the benefit of any successor to the Company.
Section 7.10Indemnification. To the fullest extent permitted by law, each person who is or shall have been a member of the Committee or the Board, or an officer of the Company to whom authority was delegated in accordance with Section 5.2, or an employee of the Company shall be indemnified and held harmless by the Company against and from any loss (including amounts paid in settlement), cost, liability or expense (including reasonable attorneys’ fees) that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her (provided that he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf), unless such loss, cost, liability or expense is a result of his or her own willful misconduct or except as expressly provided by statute. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s charter or bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
Section 7.11No Fractional Shares. Unless otherwise permitted by the Committee, no fractional Shares shall be delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, Shares or other property shall be delivered or paid in lieu of fractional Shares or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated.
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Section 7.12Governing Law. The Plan, all Awards, and all actions taken in connection herewith and therewith shall be governed by and construed in accordance with the laws of the State of Indiana without reference to principles of conflict of laws, except as superseded by applicable federal law.
Section 7.13Benefits Under Other Plans. Except as otherwise provided by the Committee, Awards granted to a Participant (including the grant and the receipt of benefits) shall be disregarded for purposes of determining the Participant’s benefits under, or contributions to, any qualified retirement plan, nonqualified plan and any other benefit plan maintained by the Participant’s employer.
Section 7.14Validity. If any provision of the Plan is determined to be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions of the Plan, and the Plan shall be construed and enforced as if such illegal or invalid provision had never been included in the Plan.
Section 7.15Notice. Unless provided otherwise in an Award Agreement or policy adopted from time to time by the Committee, all communications to the Company provided for in the Plan, or any Award Agreement, shall be delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid (provided that international mail shall be sent via overnight or two-day delivery), or prepaid overnight courier to the Company at the address set forth below:
Lakeland Financial Corporation
202 East Center Street
P.O. Box 1387
Warsaw, Indiana 46581-1387

Such communications shall be deemed given:
(a)In the case of delivery by overnight service with guaranteed next day delivery, the next day or the day designated for delivery; and
(b)In the case of certified or registered U.S. mail, five days after deposit in the U.S. mail;
provided, however, that in no event shall any communication be deemed to be given later than the date it is actually received, provided it is actually received. In the event a communication is not received, it shall be deemed received only upon the showing of an original of the applicable receipt, registration or confirmation from the applicable delivery service provider. Communications that are to be delivered by U.S. mail or by overnight service to the Company shall be directed to the attention of the Company’s senior human resources officer and corporate secretary.
Section 7.16Clawback Policy. Any Award, amount or benefit received under the Plan shall be subject to potential cancellation, recoupment, rescission, payback or other similar action in accordance with any applicable Company clawback policy (the “Policy”) or any applicable law. A Participant’s receipt of an Award shall be deemed to constitute the Participant’s acknowledgment of and consent to the Company’s application, implementation and enforcement of (i) the Policy and any similar policy established by the Company that may apply to the Participant, whether adopted prior to or following the making of any Award and (ii) any provision of applicable law relating to cancellation, rescission, payback or recoupment of compensation, as well as the Participant’s express agreement that the Company may take such actions as are necessary to effectuate the Policy, any similar policy and applicable law, without further consideration or action.
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Section 7.17Breach of Restrictive Covenants. Except as otherwise provided by the Committee, notwithstanding any provision of the Plan to the contrary, if the Participant breaches a non-competition, non-solicitation, non-disclosure, non-disparagement or other restrictive covenant set forth in an Award Agreement or any other agreement between the Participant and the Company or a Subsidiary, whether before or after the Participant’s Termination of Service, in addition to and not in limitation of any other rights, remedies, damages, penalties or restrictions available to the Company under the Plan, an Award Agreement, any other agreement between the Participant and the Company or a Subsidiary, or otherwise at law or in equity, the Participant shall forfeit or pay to the Company:
(a)Any and all outstanding Awards granted to the Participant, including Awards that have become vested or exercisable;
(b)Any Shares held by the Participant in connection with the Plan that were acquired by the Participant after the Participant's Termination of Service and within the 12-month period immediately preceding the Participant's Termination of Service;
(c)The profit realized by the Participant from the exercise of any stock options and SARs that the Participant exercised after the Participant's Termination of Service and within the 12-month period immediately preceding the Participant's Termination of Service, which profit is the difference between the exercise price of the stock option or SAR and the Fair Market Value of any Shares or cash acquired by the Participant upon exercise of such stock option or SAR; and
(d)The profit realized by the Participant from the sale, or other disposition for consideration, of any Shares received by the Participant in connection with the Plan after the Participant's Termination of Service and within the 12-month period immediately preceding the Participant's Termination of Service and where such sale or disposition occurs in such similar time period.
Unless the applicable Award Agreement expressly displaces or limits the Company’s rights under this Section 7.17 with a reference to the same, any forfeiture provision contained in an Award Agreement shall be construed as an additional, non-exclusive remedy in the event of the Participant’s breach of a restrictive covenant. 
Article 8
Defined Terms; Construction
Section 8.1Definitions. In addition to the other definitions contained in the Plan, unless otherwise specifically provided in an Award Agreement, the following definitions shall apply:
(a)“10% Shareholder” means an individual who, at the time of grant, owns Company Voting Securities possessing more than 10% of the total combined voting power of the Company Voting Securities.
(b)“Award” means an award under the Plan.
(c)“Award Agreement” means the document that evidences the terms and conditions of an Award. Such document shall be referred to as an agreement regardless of whether a Participant’s signature is required. Each Award Agreement shall be subject to the terms and conditions of the Plan, and, if there is any conflict between the Award Agreement and the Plan, the Plan shall control.
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(d)“Board” means the Board of Directors of the Company.
(e)If the Participant is subject to an employment or change in control agreement (or other similar agreement) with the Company or a Subsidiary that provides a definition of termination for “cause” (or the like), then, for purposes of the Plan, the term “Cause” has the meaning set forth in such agreement; and in the absence of such a definition, “Cause” means (i) any act by the Participant of (A) fraud or intentional misrepresentation or (B) embezzlement, misappropriation, or conversion of assets or opportunities of the Company or a Subsidiary, (ii) willful violation of any law, rule, or regulation in connection with the performance of a Participant’s duties to the Company or a Subsidiary (other than traffic violations or similar offenses), (iii) with respect to any employee of the Company or a Subsidiary, commission of any act of moral turpitude or conviction of a felony, or (iv) the willful or negligent failure of the Participant to perform the Participant’s duties to the Company or a Subsidiary in any material respect. 
Further, the Participant shall be deemed to have terminated for Cause if, after the Participant’s Termination of Service, facts and circumstances arising during the course of the Participant’s employment with the Company are discovered that would have constituted a termination for Cause.
Further, all rights a Participant has or may have under the Plan shall be suspended automatically during the pendency of any investigation by the Board or its designee or during any negotiations between the Board or its designee and the Participant regarding any actual or alleged act or omission by the Participant of the type described in the applicable definition of “Cause.”
(f)“Change in Control” has the meaning ascribed to it in Section 4.2.
(g)“Code” means the Internal Revenue Code of 1986.
(h)“Code Section 409A” means the provisions of Section 409A of the Code and any rules, regulations and guidance promulgated thereunder. 
(i)“Committee” means the Committee acting under Article 5, and in the event a Committee is not currently appointed, the Board.
(j)“Company” means Lakeland Financial Corporation, an Indiana corporation.
(k)“Company Voting Securities” has the meaning ascribed to it in Section 4.2(a).
(l)“Director Participant” means a Participant who is a member of the Board or the board of directors of a Subsidiary who is not otherwise an employee of the Company or a Subsidiary. 
(m)“Disability” means the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or last for a continuous period of not less than 12 months, or is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident or health plan covering the Company’s or a Subsidiary’s employees.
(n)“Effective Date” has the meaning ascribed to it in Section 1.1.
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(o)“Exchange Act” means the Securities Exchange Act of 1934.
(p)“Fair Market Value” means, as of any date, the officially-quoted closing selling price of the Shares on such date on the principal national securities exchange on which Shares are listed or admitted to trading or, if there have been no sales with respect to Shares on such date, such price on the most immediately preceding date on which there have been such sales, or if the Shares are not so listed or admitted to trading, the Fair Market Value shall be the value established by the Committee in good faith and, to the extent required, in accordance with Code Section 409A and Section 422 of the Code.
(q)“Form S-8” means a Registration Statement on Form S-8 promulgated by the U.S. Securities and Exchange Commission or any successor thereto.
(r)If the Participant is subject to an employment or change in control agreement (or other similar agreement) with the Company or a Subsidiary that provides a definition of termination for “good reason” (or the like), then, for purposes of the Plan, the term “Good Reason” has the meaning set forth in such agreement; and in the absence of such a definition, “Good Reason” means the occurrence of any one of the following events, unless the Participant agrees in writing that such event shall not constitute Good Reason:
(i)A material, adverse change in the nature, scope or status of the Participant’s position, authorities or duties from those in effect immediately prior to the applicable Change in Control;
(ii)A material reduction in the Participant’s aggregate compensation or benefits in effect immediately prior to the applicable Change in Control; or
(iii)Relocation of the Participant’s primary place of employment of more than 50 miles from the Participant’s primary place of employment immediately prior to the applicable Change in Control, or a requirement that the Participant engage in travel that is materially greater than prior to the applicable Change in Control.
Notwithstanding any provision of this definition to the contrary, prior to the Participant’s Termination of Service for Good Reason, the Participant must give the Company written notice of the existence of any condition set forth in clause (i) – (iii) immediately above within 90 days of its initial existence and the Company shall have 30 days from the date of such notice in which to cure the condition giving rise to Good Reason, if curable. If, during such 30-day period, the Company cures the condition giving rise to Good Reason, the condition shall not constitute Good Reason. Further notwithstanding any provision of this definition to the contrary, in order to constitute a termination for Good Reason, such termination must occur within 12 months of the initial existence of the applicable condition.
(s)“ISO” means a stock option that is intended to satisfy the requirements applicable to an “incentive stock option” described in Section 422(b) of the Code.
(t)“Participant” has the meaning ascribed to it in Section 1.2.
(u)“Plan” means the Lakeland Financial Corporation 2017 Equity Incentive Plan.
(v)“Policy” has the meaning ascribed to it in Section 7.16.
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(w)“Prior Plans” means the Lakeland Financial Corporation 2008 Equity Incentive Plan and the Lakeland Financial Corporation 2013 Equity Incentive Plan.
(x)“SAR” has the meaning ascribed to it in Section 2.1(b).
(y)“Securities Act” means the Securities Act of 1933.
(z)“Share” means a share of Stock.
(aa)“Shareholders” means the shareholders of the Company.
(ab)“Stock” means the common stock of the Company, no par value per share.
(ac)“Subsidiary” means any corporation or other entity that would be a “subsidiary corporation” as defined in Section 424(f) of the Code with respect to the Company.
(ad)“Termination of Service” means the first day occurring on or after a grant date on which the Participant ceases to be an employee and director of, and service provider to, the Company and each Subsidiary, regardless of the reason for such cessation, subject to the following:
(i)The Participant’s cessation as an employee or service provider shall not be deemed to occur by reason of the Participant’s being on a leave of absence from the Company or a Subsidiary approved by the Company or Subsidiary otherwise receiving the Participant’s services.
(ii)If, as a result of a sale or other transaction, the Subsidiary for whom the Participant is employed (or to whom the Participant is providing services) ceases to be a Subsidiary, and the Participant is not, following the transaction, an employee or director of, or service provider to, the Company or an entity that is then a Subsidiary, then the occurrence of such transaction shall be treated as the Participant’s Termination of Service caused by the Participant being discharged by the entity for whom the Participant is employed or to whom the Participant is providing services.
(iii)A service provider, other than an employee or director, whose services to the Company or a Subsidiary are governed by a written agreement with such service provider shall cease to be a service provider at the time the provision of services under such written agreement ends (without renewal); and such a service provider whose services to the Company or a Subsidiary are not governed by a written agreement with the service provider shall cease to be a service provider on the date that is 90 days after the date the service provider last provides services requested by the Company or a Subsidiary.
(iv)Notwithstanding the foregoing, in the event that any Award constitutes Deferred Compensation, the term Termination of Service shall be interpreted by the Committee in a manner consistent with the definition of “separation from service” as defined under Code Section 409A.
Section 8.2Construction. In the Plan, unless otherwise stated, the following uses apply:
(a)Actions permitted under the Plan may be taken at any time in the actor’s reasonable discretion;
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(b)References to a statute shall refer to the statute and any amendments and any successor statutes, and to all regulations promulgated under or implementing the statute, as amended, or its successors, as in effect at the relevant time;
(c)In computing periods from a specified date to a later specified date, the words “from” and “commencing on” (and the like) mean “from and including,” and the words “to,” “until” and “ending on” (and the like) mean “to and including”;
(d)References to a governmental or quasi-governmental agency, authority or instrumentality shall also refer to a regulatory body that succeeds to the functions of the agency, authority or instrumentality; 
(e)Indications of time of day shall be based upon the time applicable to the location of the principal headquarters of the Company;
(f)The words “include,” “includes” and “including” mean “include, without limitation,” “includes, without limitation” and “including, without limitation,” respectively;
(g)All references to articles and sections are to articles and sections in the Plan unless otherwise specified;
(h)All words used shall be construed to be of such gender or number as the circumstances and context require;
(i)The captions and headings of articles and sections appearing in the Plan have been inserted solely for convenience of reference and shall not be considered a part of the Plan, nor shall any of them affect the meaning or interpretation of the Plan or any of its provisions; 
(j)Any reference to an agreement, plan, policy, form, document or set of documents, and the rights and obligations of the parties under any such agreement, plan, policy, form, document or set of documents, shall mean such agreement, plan, policy, form, document or set of documents as amended from time to time, and any and all modifications, extensions, renewals, substitutions or replacements thereof; and
(k)All accounting terms not specifically defined in the Plan shall be construed in accordance with GAAP.
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