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                                                                     EXHIBIT 4.1

                              WSI INDUSTRIES, INC.
                                 2005 STOCK PLAN

SECTION 1. GENERAL PURPOSE OF PLAN; DEFINITIONS

     The name of this plan is the WSI Industries, Inc. 2005 Stock Plan (the
"Plan"). The purpose of the Plan is to enable WSI Industries, Inc. (the
"Company") and its Subsidiaries to retain and attract executives and other key
employees, consultants and directors who contribute to the Company's success by
their ability, ingenuity and industry, and to enable such individuals to
participate in the long-term success and growth of the Company by giving them a
proprietary interest in the Company.

     For purposes of the Plan, the following terms shall be defined as set forth
below:

     a.   "Board" means the Board of Directors of the Company.

     b.   "Cause" means a felony conviction of a participant or the failure of a
          participant to contest prosecution for a felony, or a participant's
          willful misconduct or dishonesty, any of which is directly and
          materially harmful to the business or reputation of the Company.

     c.   "Code" means the Internal Revenue Code of 1986, as amended.

     d.   "Committee" means the Committee referred to in Section 2 of the Plan.
          If at any time no Committee shall be in office, then the Board shall
          exercise the functions of the Committee specified in the Plan, unless
          the Plan specifically states otherwise.

     e.   "Company" means WSI Industries, Inc., a corporation organized under
          the laws of the State of Minnesota (or any successor corporation).

     f.   "Deferred Stock" means an award made pursuant to Section 8 below of
          the right to receive Stock at the end of a specified deferral period.

     g.   "Disability" means permanent and total disability as determined by the
          Committee.

     h.   "Early Retirement" means retirement, with consent of the Committee at
          the time of retirement, from active employment with the Company and
          any Subsidiary or Parent Corporation of the Company.

     i.   "Fair Market Value" means the value of the Stock on a given date as
          determined by the Committee in accordance with Section 422(c)(7) of
          the Code and any applicable Treasury Department regulations
          promulgated thereunder.

     j.   "Incentive Stock Option" means any Stock Option intended to be and
          designated as an "Incentive Stock Option" within the meaning of
          Section 422 of the Code.

     k.   "Non-Employee Director" shall have the meaning set forth in Rule
          16b-3(g)(3) as promulgated by the Securities and Exchange Commission
          under the Securities Exchange Act of 1934, or any successor definition
          adopted by the Commission.

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     l.   "Non-Qualified Stock Option" means any Stock Option that is not an
          Incentive Stock Option, and is intended to be and is designated as a
          "Non-Qualified Stock Option."

     m.   "Normal Retirement" means retirement from active employment with the
          Company and any Subsidiary or Parent Corporation of the Company on or
          after age 65.

     n.   "Parent Corporation" means any corporation (other than the Company) in
          an unbroken chain of corporations ending with the Company if, at the
          time of the granting of a Stock Option, each of the corporations
          (other than the Company) owns stock possessing 50% or more of the
          total combined voting power of all classes of stock in one of the
          other corporations in the chain as provided in Section 424(e) of the
          Code.

     o.   "Restricted Stock" means an award of shares of Stock that are subject
          to restrictions under Section 7 below.

     p.   "Retirement" means Normal Retirement or Early Retirement.

     q.   "Stock" means the Common Stock, $.10 par value per share, of the
          Company.

     r.   "Stock Appreciation Right" means the right pursuant to an award
          granted under Section 6 below to surrender to the Company all or a
          portion of a Stock Option in exchange for an amount equal to the
          difference between (i) the Fair Market Value, as of the date such
          Stock Option or such portion thereof is surrendered, of the shares of
          Stock covered by such Stock Option or such portion thereof, and (ii)
          the aggregate exercise price of such Stock Option or such portion
          thereof.

     s.   "Stock Option" means any option to purchase shares of Stock granted
          pursuant to Section 5 below.

     t.   "Subsidiary" means any corporation (other than the Company) in an
          unbroken chain of corporations beginning with the Company if, at the
          time of the granting of a Stock Option, each of the corporations
          (other than the last corporation in the unbroken chain) owns stock
          possessing 50% or more of the total combined voting power of all
          classes of stock in one of the other corporations in the chain as
          provided in Section 424(f) of the Code.

SECTION 2. ADMINISTRATION

     The Plan shall be administered by the Board of Directors or by a Committee
of not less than two Outside, Non-Employee Directors, who shall be appointed by
the Board of Directors of the Company and who shall serve at the pleasure of the
Board.

     The Committee shall have the power and authority to grant to eligible
persons, pursuant to the terms of the Plan: (i) Stock Options; (ii) Stock
Appreciation Rights; (iii) Restricted Stock; or (iv) Deferred Stock awards.

     In particular, the Committee shall have the authority:

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     (i)  to select the officers and other key employees of the Company and its
          Subsidiaries, members of the Board of Directors and consultants and
          other persons having a contractual relationship with the Company or
          its Subsidiaries, to whom Stock Options, Stock Appreciation Rights,
          Restricted Stock and/or Deferred Stock awards may from time to time be
          granted hereunder;

     (ii) to determine whether and to what extent Incentive Stock Options,
          Non-Qualified Stock Options, Stock Appreciation Rights, Restricted
          Stock or Deferred Stock awards, or a combination of the foregoing, are
          to be granted hereunder;

     (iii) to determine the number of shares to be covered by each such award
          granted hereunder;

     (iv) to determine the terms and conditions, not inconsistent with the terms
          of the Plan, of any award granted hereunder (including, but not
          limited to, any restriction on any Stock Option or other award and/or
          the shares of Stock relating thereto), and to amend such terms and
          conditions (including, but not limited to, any amendment which
          accelerates the vesting of any award); and

     (v)  to determine whether, to what extent and under what circumstances
          Stock and other amounts payable with respect to an award under this
          Plan shall be deferred either automatically or at the election of the
          participant.

     The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and provisions of the
Plan and any award issued under the Plan (and any agreements relating thereto);
and to otherwise supervise the administration of the Plan. The Committee may
delegate its authority to officers of the Company for the purpose of selecting
employees who are not officers of the Company for purposes of (i) above.

     All decisions made by the Committee pursuant to the provisions of the Plan
shall be final and binding on all persons, including the Company and Plan
participants.

SECTION 3. STOCK SUBJECT TO PLAN

     The total number of shares of Stock reserved and available for distribution
under the Plan shall be 200,000. Such shares shall consist, in whole or in part,
of authorized and unissued shares.

     Subject to paragraph (b)(iv) of Section 6 below, if any shares that have
been optioned ceased to be subject to Options, or if any shares subject to any
Restricted Stock or Deferred Stock award granted hereunder are forfeited or such
award otherwise terminates without a payment being made to the participant, such
shares shall again be available for distribution in connection with future
awards under the Plan.

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     In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, other change in corporate structure affecting
the Stock, or spin-off or other distribution of assets to shareholders, such
substitution or adjustment shall be made in the aggregate number of shares
reserved for issuance under the Plan, in the number and option price of shares
subject to outstanding options granted under the Plan, and in the number of
shares subject to Restricted Stock or Deferred Stock awards granted under the
Plan as may be determined to be appropriate by the Committee, in its sole
discretion, provided that the number of shares subject to any award shall always
be a whole number. Such adjusted option price shall also be used to determine
the amount payable by the Company upon the exercise of any Stock Appreciation
Right associated with any Option.

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SECTION 4. ELIGIBILITY

     Officers, other key employees of the Company or its Subsidiaries, members
of the Board of Directors and consultants and other persons having a contractual
relationship with the Company or its Subsidiaries who are responsible for or
contribute to the management, growth and/or profitability of the business of the
Company and its Subsidiaries are eligible to be granted Stock Options, Stock
Appreciation Rights, Restricted Stock or Deferred Stock awards under the Plan.
The optionees and participants under the Plan shall be selected from time to
time by the Committee, in its sole discretion, from among those eligible, and
the Committee shall determine, in its sole discretion, the number of shares
covered by each award.

     Notwithstanding the foregoing, no person may, during any fiscal year of the
Company, receive grants of Stock Options or Stock Appreciation Rights under this
Plan which, in the aggregate, exceed 100,000 shares.

SECTION 5. STOCK OPTIONS

     Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.

     The Stock Options granted under the Plan may be of two types: (i) Incentive
Stock Options and (ii) Non-Qualified Stock Options. No Incentive Stock Options
shall be granted under the Plan after October 28, 2015.

     The Committee shall have the authority to grant any optionee Incentive
Stock Options, Non-Qualified Stock Options, or both types of options (in each
case with or without Stock Appreciation Rights). To the extent that any option
does not qualify as an Incentive Stock Option, it shall constitute a separate
Non-Qualified Stock Option.

     Anything in the Plan to the contrary notwithstanding, no term of this Plan
relating to Incentive Stock Options shall be interpreted, amended or altered,
nor shall any discretion or authority granted under the Plan be so exercised, so
as to disqualify either the Plan or any Incentive Stock Option under Section 422
of the Code. The preceding sentence shall not preclude any modification or
amendment to an outstanding Incentive Stock Option, whether or not such
modification or amendment results in disqualification of such Option as an
Incentive Stock Option, provided the optionee consents in writing to the
modification or amendment.

     Options granted under the Plan shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable.

     (a) Option Price. The Committee shall determine the option price per share
of Stock purchasable under a Stock Option at the time of grant. In no event
shall the option price per share of Stock purchasable under an Incentive Stock
Option be less than 100% of the Fair Market Value of the Stock on the date of
the grant of the option. If an employee owns or is deemed to own (by reason of
the attribution rules applicable under Section 424(d) of the Code) more than 10%
of the combined voting power of all classes of stock of the Company or any
Parent Corporation or Subsidiary and an Incentive Stock Option is granted to
such employee, the option price shall be no less than 110% of the Fair Market
Value of the Stock on the date the option is granted.

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     (b) Option Term. The Committee shall fix the term of each Stock Option, but
no Incentive Stock Option shall be exercisable more than ten years after the
date the option is granted. If an employee owns or is deemed to own (by reason
of the attribution rules of Section 424(d) of the Code) more than 10% of the
combined voting power of all classes of stock of the Company or any Parent
Corporation or Subsidiary and an Incentive Stock Option is granted to such
employee, the term of such option shall be no more than five years from the date
of grant.

     (c) Exercisability. Stock Options shall be exercisable at such time or
times as determined by the Committee at or after grant. If the Committee
provides, in its sole discretion, that any option is exercisable only in
installments, the Committee may waive such installment exercise provisions at
any time. Notwithstanding the foregoing, unless the Stock Option Agreement
provides otherwise, any Stock Option granted under this Plan shall be
exercisable in full, without regard to any installment exercise provisions, for
a period specified by the Company, but not to exceed sixty (60) days, prior to
the occurrence of any of the following events: (i) dissolution or liquidation of
the Company other than in conjunction with a bankruptcy of the Company or any
similar occurrence, (ii) any merger, consolidation, acquisition, separation,
reorganization, or similar occurrence, where the Company will not be the
surviving entity or (iii) the transfer of substantially all of the assets of the
Company or 75% or more of the outstanding Stock of the Company.

     (d) Method of Exercise. Stock Options may be exercised in whole or in part
at any time during the option period by giving written notice of exercise to the
Company specifying the number of shares to be purchased. Such notice shall be
accompanied by payment in full of the purchase price, either by certified or
bank check, or by any other form of legal consideration deemed sufficient by the
Committee and consistent with the Plan's purpose and applicable law, including a
properly executed exercise notice together with irrevocable instructions to a
broker acceptable to the Company to promptly deliver to the Company the amount
of sale proceeds to pay the exercise price. As determined by the Committee, in
its sole discretion, payment in full or in part may also be made in the form of
unrestricted Stock already owned by the optionee or, in the case of the exercise
of a Non-Qualified Stock Option, Restricted Stock or Deferred Stock subject to
an award hereunder (based, in each case, on the Fair Market Value of the Stock
on the date the option is exercised, as determined by the Committee), provided,
however, that in the event payment is made in the form of shares of Restricted
Stock or a Deferred Stock award, the optionee will receive a portion of the
option shares in the form of, and in an amount equal to, the Restricted Stock or
Deferred Stock award tendered as payment by the optionee. If the terms of the
option so permit, an optionee may elect to pay all or part of the option
exercise price by having the Company withhold from the shares of Stock that
would otherwise be issued upon exercise that number of shares of Stock having a
Fair Market Value equal to the aggregate option exercise price for the shares
with respect to which such election is made. No shares of Stock shall be issued
until full payment therefor has been made. An optionee shall generally have the
rights to dividends and other rights of a shareholder with respect to shares
subject to the option when the optionee has given written notice of exercise,
has paid in full for such shares, and, if requested, has given the
representation described in paragraph (a) of Section 12.

     (e) Non-transferability of Options. No Stock Option shall be transferable
by the optionee otherwise than by will or by the laws of descent and
distribution, and all Stock Options shall be exercisable, during the optionee's
lifetime, only by the optionee.

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     (f) Termination by Death. If an optionee's employment by the Company and
any Subsidiary or Parent Corporation terminates by reason of death, the Stock
Option may thereafter be immediately exercised, to the extent then exercisable
(or on such accelerated basis as the Committee shall determine at or after
grant), by the legal representative of the estate or by the legatee of the
optionee under the will of the optionee, for a period of one year (or such
shorter period as the Committee shall specify at grant) from the date of such
death or until the expiration of the stated term of the option, whichever period
is shorter.

     (g) Termination by Reason of Disability. If an optionee's employment by the
Company and any Subsidiary or Parent Corporation terminates by reason of
Disability, any Stock Option held by such optionee may thereafter be exercised,
to the extent it was exercisable at the time of termination due to Disability
(or on such accelerated basis as the Committee shall determine at or after
grant), but may not be exercised after one year (or such shorter period as the
Committee shall specify at grant) from the date of such termination of
employment or the expiration of the stated term of the option, whichever period
is the shorter. In the event of termination of employment by reason of
Disability, if an Incentive Stock Option is exercised after the expiration of
the exercise periods that apply for purposes of Section 422 of the Code, the
option will thereafter be treated as a Non-Qualified Stock Option.

     (h) Termination by Reason of Retirement. If an optionee's employment by the
Company and any Subsidiary or Parent Corporation terminates by reason of
Retirement, any Stock Option held by such optionee may thereafter be exercised
to the extent it was exercisable at the time of such Retirement, but may not be
exercised after three months (or such longer period as the Committee shall
specify at Retirement) from the date of such termination of employment or the
expiration of the stated term of the option, whichever period is the shorter. In
the event of termination of employment by reason of Retirement, if an Incentive
Stock Option is exercised after the expiration of the exercise periods that
apply for purposes of Section 422 of the Code, the option will thereafter be
treated as a Non-Qualified Stock Option.

     (i) Other Termination. Unless otherwise determined by the Committee, if an
optionee's employment by the Company and any Subsidiary or Parent Corporation
terminates for any reason other than death, Disability or Retirement, the Stock
Option shall thereupon terminate, except that the option may be exercised to the
extent it was exercisable at such termination for the lesser of three months (or
such shorter period as the Committee shall specify at grant) or the balance of
the option's term, provided, however, that if the optionee's employment is
terminated for Cause, all rights under the Stock Option shall terminate and
expire upon such termination.

     (j) Annual Limit on Incentive Stock Options. The aggregate Fair Market
Value (determined as of the time the Option is granted) of the Stock with
respect to which an Incentive Stock Option under this Plan or any other plan of
the Company and any Subsidiary or Parent Corporation is exercisable for the
first time by an optionee during any calendar year shall not exceed $100,000.

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     (k) Directors who are not Employees. Each Non-Employee Director of the
Company or any Subsidiary who, on or after the date this Plan is approved by the
shareholders of the Company, (A) is elected or re-elected as a director of the
Company at any annual meeting of the shareholders of the Company, or (B) is
elected as a director of the Company at any special meeting of the shareholders
of the Company, shall as of the date of such election or re-election
automatically be granted a Stock Option to purchase 2,000 shares of Stock at the
option price per share equal to 100% of the Fair Market Value of a share of
Stock on such date. In the case of a special meeting, the action of the
shareholders in electing such director shall constitute the granting of the
Stock Option to such director, and, in the case of an annual meeting, the action
of the shareholders in electing or re-electing such director shall constitute
the granting of a Stock Option to such director; and the date when the
shareholders take such action shall be the date of grant of the Stock Option.
All such Stock Options shall be designated as Non-Qualified Stock Options and
shall be subject to the same terms and provisions as are then in effect with
respect to the granting of Non-Qualified Stock Options to officers and key
employees of the Company, except that (i) the term of each such Stock Option
shall be equal to five (5) years, unless such director ceases to be a member of
the Board, in which case the Stock Option shall expire 30 days after such
director's departure from the Board; (ii) the Stock Option shall be exercisable
as to 25% of the shares subject to the Stock Option six months after the date
the Stock Option is granted and as to an additional 25% each of the three
subsequent anniversary dates of the grant of such options; and (iii) no Stock
Appreciation Rights may be granted to any director under this paragraph (k) or
in any other manner under this Plan. Subject to the foregoing, all provisions of
this Plan not inconsistent with the foregoing shall apply to Stock Options
granted to directors.

SECTION 6. STOCK APPRECIATION RIGHTS

     (a) Grant and Exercise. Except as set forth in paragraph (k) of Section 5,
Stock Appreciation Rights may be granted in conjunction with all or part of any
Stock Option granted under the Plan. In the case of a Non-Qualified Stock
Option, such rights may be granted either at or after the time of the grant of
such Option. In the case of an Incentive Stock Option, such rights may be
granted only at the time of the grant of the option.

     A Stock Appreciation Right or applicable portion thereof granted with
respect to a given Stock Option shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option, except that a
Stock Appreciation Right granted with respect to less than the full number of
shares covered by a related stock Option shall not be reduced until the exercise
or termination of the related Stock Option exceeds the number of shares not
covered by the Stock Appreciation Right.

     An optionee may exercise a Stock Appreciation Right by surrendering the
applicable portion of the related Stock Option in accordance with paragraph (b)
of this Section 6. Upon such exercise and surrender, the optionee shall be
entitled to receive an amount determined in the manner prescribed in paragraph
(b) of this Section 6. Stock Options that have been so surrendered, in whole or
in part, shall no longer be exercisable to the extent the related Stock
Appreciation Rights have been exercised.

     (b) Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Committee, including the following:

          (i) Stock Appreciation Rights shall be exercisable only at such time
     or times and to the extent that the Stock Options to which they relate
     shall be exercisable in accordance with the provisions of Section 5 and
     this Section 6 of the Plan.

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          (ii) Upon the exercise of a Stock Appreciation Right, an optionee
     shall be entitled to receive up to, but not more than, an amount in cash or
     shares of Stock equal in value to the excess of the Fair Market Value of
     one share of Stock over the option price per share specified in the related
     option multiplied by the number of shares in respect of which the Stock
     Appreciation Right shall have been exercised, with the Committee having the
     right to determine the form of payment.

          (iii) Stock Appreciation Rights shall be transferable only when and to
     the extent that the underlying Stock Option would be transferable under
     Section 5 of the Plan.

          (iv) Upon the exercise of a Stock Appreciation Right, the Stock Option
     or part thereof to which such Stock Appreciation Right is related shall be
     deemed to have been exercised for the purpose of the limitation set forth
     in Section 3 of the Plan on the number of shares of Stock to be issued
     under the Plan, but only to the extent of the number of shares issued or
     issuable under the Stock Appreciation Right at the time of exercise based
     on the value of the Stock Appreciation Right at such time.

          (v) A Stock Appreciation Right granted in connection with an Incentive
     Stock Option may be exercised only if and when the market price of the
     Stock subject to the Incentive Stock Option exceeds the exercise price of
     such Option.

SECTION 7. RESTRICTED STOCK

     (a) Administration. Shares of Restricted Stock may be issued either alone
or in addition to other awards granted under the Plan. The Committee shall
determine the officers and key employees of the Company and Subsidiaries to
whom, and the time or times at which, grants of Restricted Stock will be made,
the number of shares to be awarded, the time or times within which such awards
may be subject to forfeiture, and all other conditions of the awards. The
Committee may also condition the grant of Restricted Stock upon the attainment
of specified performance goals. The provisions of Restricted Stock awards need
not be the same with respect to each recipient.

     (b) Awards and Certificates. The prospective recipient of an award of
shares of Restricted Stock shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the award
and has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the then applicable terms and conditions.

          (i) Each participant shall be issued a stock certificate in respect of
     shares of Restricted Stock awarded under the Plan. Such certificate shall
     be registered in the name of the participant, and shall bear an appropriate
     legend referring to the terms, conditions, and restrictions applicable to
     such award, substantially in the following form:

          "The transferability of this certificate and the shares of stock
          represented hereby are subject to the terms and conditions (including
          forfeiture) of the WSI Industries, Inc. 2005 Stock Plan and an
          Agreement entered into between the registered owner and WSI
          Industries, Inc. Copies of such Plan and Agreement are on file in the
          offices of WSI Industries, Inc., 213 Chelsea Road, Monticello,
          Minnesota 55362."

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          (ii) The Committee shall require that the stock certificates
     evidencing such shares be held in custody by the Company until the
     restrictions thereon shall have lapsed, and that, as a condition of any
     Restricted Stock award, the participant shall have delivered a stock power,
     endorsed in blank, relating to the Stock covered by such award.

     (c) Restrictions and Conditions. The shares of Restricted Stock awarded
pursuant to the Plan shall be subject to the following restrictions and
conditions:

          (i) Subject to the provisions of this Plan and the award agreement,
     during a period set by the Committee commencing with the date of such award
     (the "Restriction Period"), the participant shall not be permitted to sell,
     transfer, pledge or assign shares of Restricted Stock awarded under the
     Plan. In no event shall the Restriction Period be less than one (1) year.
     Within these limits, the Committee may provide for the lapse of such
     restrictions in installments where deemed appropriate.

          (ii) Except as provided in paragraph (c)(i) of this Section 7, the
     participant shall have, with respect to the shares of Restricted Stock, all
     of the rights of a shareholder of the Company, including the right to vote
     the shares and the right to receive any cash dividends. The Committee, in
     its sole discretion, may permit or require the payment of cash dividends to
     be deferred and, if the Committee so determines, reinvested in additional
     shares of Restricted Stock (to the extent shares are available under
     Section 3). Certificates for shares of unrestricted Stock shall be
     delivered to the grantee promptly after, and only after, the period of
     forfeiture shall have expired without forfeiture in respect of such shares
     of Restricted Stock.

          (iii) Subject to the provisions of the award agreement and paragraph
     (c)(iv) of this Section 7, upon termination of employment for any reason
     during the Restriction Period, all shares still subject to restriction
     shall be forfeited by the participant.

          (iv) In the event of special hardship circumstances of a participant
     whose employment is terminated (other than for Cause), including death,
     Disability or Retirement, or in the event of an unforeseeable emergency of
     a participant still in service, the Committee may, in its sole discretion,
     when it finds that a waiver would be in the best interest of the Company,
     waive in whole or in part any or all remaining restrictions with respect to
     such participant's shares of Restricted Stock.

          (v) Notwithstanding the foregoing, all restrictions with respect to
     any participant's shares of Restricted Stock shall lapse, on the date
     determined by the Committee, prior to, but in no event more than sixty (60)
     days prior to, the occurrence of any of the following events: (i)
     dissolution or liquidation of the Company, other than in conjunction with a
     bankruptcy of the Company or any similar occurrence; (ii) any merger,
     consolidation, acquisition, separation, reorganization, or similar
     occurrence, where the Company will not be the surviving entity; or (iii)
     the transfer of substantially all of the assets of the Company or 75% or
     more of the outstanding Stock of the Company.

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SECTION 8. DEFERRED STOCK AWARDS

     (a) Administration. Deferred Stock may be awarded either alone or in
addition to other awards granted under the Plan. The Committee shall determine
the officers and key employees of the Company and Subsidiaries to whom and the
time or times at which Deferred Stock shall be awarded, the number of shares of
Deferred Stock to be awarded to any participant or group of participants, the
duration of the period (the "Deferral Period") during which, and the conditions
under which, receipt of the Stock will be deferred, and the terms and conditions
of the award in addition to those contained in paragraph (b) of this Section 8.
The Committee may also condition the grant of Deferred Stock upon the attainment
of specified performance goals. The provisions of Deferred Stock awards need not
be the same with respect to each recipient.

     (b) Terms and Conditions.

          (i) Subject to the provisions of this Plan and the award agreement,
     Deferred Stock awards may not be sold, assigned, transferred, pledged or
     otherwise encumbered during the Deferral Period. In no event shall the
     Deferral Period be less than one (1) year. At the expiration of the
     Deferral Period (or Elective Deferral Period, where applicable), share
     certificates shall be delivered to the participant, or his legal
     representative, in a number equal to the shares covered by the Deferred
     Stock award.

          (ii) Amounts equal to any dividends declared during the Deferral
     Period with respect to the number of shares covered by a Deferred Stock
     award will be paid to the participant currently or deferred and deemed to
     be reinvested in additional Deferred Stock or otherwise reinvested, all as
     determined at the time of the award by the Committee, in its sole
     discretion.

          (iii) Subject to the provisions of the award agreement and paragraph
     (b)(iv) of this Section 8, upon termination of employment for any reason
     during the Deferral Period for a given award, the Deferred Stock in
     question shall be forfeited by the participant.

          (iv) In the event of special hardship circumstances of a participant
     whose employment is terminated (other than for Cause) including death,
     Disability or Retirement, or in the event of an unforeseeable emergency of
     a participant still in service, the Committee may, in its sole discretion,
     when it finds that a waiver would be in the best interest of the Company,
     waive in whole or in part any or all of the remaining deferral limitations
     imposed hereunder with respect to any or all of the participant's Deferred
     Stock.

          (v) A participant may elect to further defer receipt of the award for
     a specified period or until a specified event (the "Elective Deferral
     Period"), subject in each case to the Committee's approval and to such
     terms as are determined by the Committee, all in its sole discretion.
     Subject to any exceptions adopted by the Committee, such election must
     generally be made prior to completion of one half of the Deferral Period
     for a Deferred Stock award (or for an installment of such an award).

          (vi) Each award shall be confirmed by, and subject to the terms of, a
     Deferred Stock agreement executed by the Company and the participant.

                                      A-11

<PAGE>

SECTION 9. TRANSFER, LEAVE OF ABSENCE, ETC.

     For purposes of the Plan, the following events shall not be deemed a
termination of employment:

          (a) a transfer of an employee from the Company to a Parent Corporation
     or Subsidiary, or from a Parent Corporation or Subsidiary to the Company,
     or from one Subsidiary to another;

          (b) a leave of absence, approved in writing by the Committee, for
     military service or sickness, or for any other purpose approved by the
     Company if the period of such leave does not exceed ninety (90) days (or
     such longer period as the Committee may approve, in its sole discretion);
     and

          (c) a leave of absence in excess of ninety (90) days, approved in
     writing by the Committee, but only if the employee's right to reemployment
     is guaranteed either by a statute or by contract, and provided that, in the
     case of any leave of absence, the employee returns to work within 30 days
     after the end of such leave.

SECTION 10. AMENDMENTS AND TERMINATION

     The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made (i) which would impair the rights
of an optionee or participant under a Stock Option, Stock Appreciation Right,
Restricted Stock, Deferred Stock or other Stock-based award theretofore granted,
without the optionee's or participant's consent; or (ii) which without the
approval of the stockholders of the Company would cause the Plan to no longer
comply with Rule 16b-3 under the Securities Exchange Act of 1934, Section 422 of
the Code or any other regulatory requirements.

     The Committee may amend the terms of any award or option theretofore
granted, prospectively or retroactively, but, subject to Section 3 above, no
such amendment shall impair the rights of any holder without his consent. The
Committee may also substitute new Stock Options for previously granted options,
including previously granted options having higher option prices.

SECTION 11. UNFUNDED STATUS OF PLAN

     The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Stock or payments in lieu of or with respect to awards
hereunder, provided, however, that the existence of such trusts or other
arrangements is consistent with the unfunded status of the Plan.

SECTION 12. GENERAL PROVISIONS

     (a) The Committee may require each person purchasing shares pursuant to a
Stock Option under the Plan to represent to and agree with the Company in
writing that the optionee is acquiring the shares without a view to distribution
thereof. The certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer.

                                      A-12

<PAGE>

     All certificates for shares of Stock delivered under the Plan pursuant to
any Restricted Stock, Deferred Stock or other Stock-based awards shall be
subject to such stock-transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Stock is
then listed, and any applicable Federal or state securities laws, and the
Committee may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.

     (b) Subject to paragraph (d) below, recipients of Restricted Stock,
Deferred Stock and other Stock-based awards under the Plan (other than Stock
Options) are not required to make any payment or provide consideration other
than the rendering of services.

     (c) Nothing contained in this Plan shall prevent the Board of Directors
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases. The adoption
of the Plan shall not confer upon any employee of the Company or any Subsidiary
any right to continued employment with the Company or a Subsidiary, as the case
may be, nor shall it interfere in any way with the right of the Company or a
Subsidiary to terminate the employment of any of its employees at any time.

     (d) Each participant shall, no later than the date as of which any part of
the value of an award first becomes includible as compensation in the gross
income of the participant for Federal income tax purposes, pay to the Company,
or make arrangements satisfactory to the Committee regarding payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
respect to the award. The obligations of the Company under the Plan shall be
conditional on such payment or arrangements and the Company and Subsidiaries
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the participant. With respect to
any award under the Plan, if the terms of such award so permit, a participant
may elect by written notice to the Company to satisfy part or all of the
withholding tax requirements associated with the award by (i) authorizing the
Company to retain from the number of shares of Stock that would otherwise be
deliverable to the participant; or (ii) delivering to the Company from shares of
Stock already owned by the participant, that number of shares having an
aggregate Fair Market Value equal to part or all of the tax payable by the
participant under this Section 12(d). Any such election shall be in accordance
with, and subject to, applicable tax and securities laws, regulations and
rulings.

SECTION 13. EFFECTIVE DATE OF PLAN

     The Plan shall be effective on October 28, 2005 (the date of approval by
the Board of Directors), subject to approval by a vote of the holders of a
majority of the Stock present and entitled to vote at the Annual Meeting of the
Company's Shareholders on January 4, 2006, and shall expire (unless terminated
earlier) as of October 28, 2015. Awards may be granted under the Plan prior to
Shareholder approval, provided such awards are made subject to Shareholder
approval.

                                      A-13exv10w1

 

Exhibit 10.1

Solectron/IBM Confidential

INDIRECT SOURCING SERVICES AGREEMENT

(U.S. Master Agreement)

Between

Solectron USA, Inc.

And

International Business Machines Corporation

 

Effective Date: March 16, 2006

			
	Indirect Sourcing Services Agreement

EXECUTION COPY
	 	Binder Cover Page

 

 

Solectron/IBM Confidential

Indirect Sourcing Services Agreement

Between

Solectron USA, Inc. (“Solectron”)

A Delaware corporation, with a place of business at 847 Gibraltar Drive, Milpitas, California
95035

And

International Business Machines Corporation (“IBM”)

A company organized under the laws of the state of New York with offices at Armonk, NY.

Effective Date: March 16, 2006

Term: Five (5) Years

This Indirect Sourcing Services Agreement (the “Agreement”) consists of this signature page
plus the attached GENERAL TERMS AND CONDITIONS and Schedules A through N.
Exhibits attached to the Agreement are provided for convenience of reference only and do not form
part of the Agreement.

Intending to be legally bound, each of the undersigned parties has caused its duly authorized
representative to execute the Agreement as of the Effective Date.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	Solectron USA, Inc.	 	 	 	 	 	International Business Machines

Corporation	 	 	 
	 	By:

	 	 	 	 	 	 	 	By:	 	 	 	 	 
	 	 

	 
	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Printed:

	 	 	 	 	 	Printed:	 	 	 
	 	 

	 	 

	 	 	 	 	 	 	 	 
	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Title:

	 	 	 	 	 	 	Title:	 	 	 	 
	 	 

	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Date: 

	 	 	 	 	 	 	Date: 	 	 	 	 
	 	 

	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	By:
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 

	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Printed:
	 	 	 	 	 	 	 	 	 	 	 
	 	 

	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Title:
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Date:
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 

			
	 	 	 
	Indirect Sourcing Services Agreement

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	Indirect Sourcing Services Agreement

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TABLE OF CONTENTS

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

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

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

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

			
	 	 	 
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TABLE OF CONTENTS

SCHEDULES AND ANNEXES

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

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

			
	 	 	 
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GENERAL TERMS AND CONDITIONS

	 	1.	 	PREAMBLE

1.1 Background and Purpose

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

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

1.2 Objectives

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

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

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

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

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

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

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

1.3 Construction of Preamble

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

1.4 Local Adoption Agreements

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

1.5 Defined Terms

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

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

	 	2.	 	THE SERVICES

2.1 Obligation to Provide the Services, Generally

Starting on the Effective Date, or any later date that may be specified in the Agreement
for any specific Services or location(s) (a “Service Commencement Date”), and continuing
during the Term, IBM will perform and deliver the Services to Solectron, for use by
Solectron and its Service Recipients.

2.2 Scope of the Services

The “Services” consist of the following, as they may evolve and be supplemented, modified
or replaced during the Term:

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

2.3 Recipients of the Services

The Services may be received and used by Solectron and any of its Affiliates and other
persons and entities authorized by Solectron in the ordinary course of business to receive
and/or use the Services for the benefit of Solectron’s global enterprise (each such
authorized recipient of the Services a “Service Recipient”). To the extent that the
introduction of any new Service Recipient(s) has a material impact on the scope or volume
of the Services, such introduction shall be subject to the Change Management Process. For
purposes of the Agreement, Services provided to Service Recipients will be deemed to be
Services provided to Solectron. If Solectron divests a Service Recipient and requests
that IBM continue to provide Services to the divested entity, the parties will negotiate
separate arrangements for that entity and shall use Commercially Reasonable Efforts to
give the divested entity the benefit of the same terms and conditions (including pricing)
for at least a transitional period of up to twelve (12) months.

2.4 Services Not Exclusive

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

2.5 Cooperation and Coordination with Other Parties

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

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

2.6 Maximizing Value of Services

IBM will seek to maximize the quality, efficiency and value of the Services to Solectron
including supporting Solectron’s efforts to maintain competitiveness in the markets in
which it competes. IBM will do this by (i) subject to security and confidentiality
obligations, utilizing market information, price benchmarks and savings opportunities
acquired by IBM in the course of providing services to its customer base (including IBM’s
internal customers), wherever practicable, so as to maximize speed-to-value in the form of
savings and other benefits delivered to Solectron under this Agreement; (ii) identifying
and applying ‘best practice’ techniques and methods in performing and delivering the
Services, including keeping current with market conditions and industry trends and
providing information and training that are relevant to the Services.

2.7 Technological Currency.

IBM will make investments to keep reasonably current the network, systems, equipment,
systems software and other technologies provided by IBM in performing the Services for
Solectron, so that Solectron will receive the benefits of upgrades in technology through
improved performance, functionality and recoverability. IBM will be proactive in
identifying opportunities to implement new technologies that will improve service and
support. IBM will use Commercially Reasonable Efforts to maintain the Software within one
generation of the most current release levels unless otherwise agreed in writing by the
Parties, but in no event will IBM allow the Software to fall behind the levels supported
by the relevant supplier. If Solectron requires that any other third party system
software products be maintained at particular release levels, such requirement (and any
associated pricing) shall be set forth in a mutually agreed amendment to this Agreement.

2.8 New Services

	 	(a)	 	“New Services” means Functions Solectron requests IBM to perform under the
Agreement that are (i) materially dif
ferent from the Services, or (ii) in addition to the Services and for which no
charging methodology exist.
	 
	 	(b)	 	IBM will not perform any additional Functions that would constitute New
Services prior to informing Solectron what the additional charges would be for
performing them and receiving Solectron’s authorization to proceed. If IBM performs
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authorization, they will be deemed to
have been performed as part of the Services at no charge.

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

2.9 Changes to the Services or the Service Delivery Environment

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

2.10 Compliance with Laws, Regulations and Solectron Policies

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

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

	 	3.	 	PERFORMANCE

3.1 Performance, Generally

IBM is responsible for managing and performing, completing, and delivering the Services,
subject to the overall direction of Solectron and with the cooperation and support of
Solectron as specified in the Agreement.

3.2 Place of Performance

IBM will perform the Services primarily at the Solectron Facilities and IBM Facilities
listed or described in Annex A5 (IBM Solution). Prior to any IBM-initiated
relocation of an operations facility from which the Services are provided, IBM will notify
Solectron. IBM will manage any relocations in accordance with the Agreement and a
migration plan to be prepared by IBM . Prior to
any proposed relocation, IBM will fully examine and evaluate the effects of the
contemplated relocation on the Services and Solectron, including the operational,
technical, security, regulatory, and other effects, and will prepare and submit to
Solectron an analysis of the effects. The Party initiating any relocation will have
financial responsibility for all incremental costs, taxes and other expenses related to
any such relocation. Notwithstanding the foregoing, IBM shall obtain Solectron’s written
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creases
the cost of the
Services to Solectron or has a non-trivial adverse impact on Solectron.

3.3 Time of Performance

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

3.4 Manner of Performance

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

	 	(a)	 	The Procedures Manual (as further described in Section 12.4 (Procedures
Manual);
	 
	 	(b)	 	Applicable standards, policies and procedures of Solectron (and its
Affiliates) communicated to IBM in accordance with the Agreement;
	 
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	 	(d)	 	In cases where the Agreement does not prescribe or otherwise regulate the
manner of IBM’s performance of the Services, proven best practices followed by the
well-managed providers of services similar to the Services provided hereunder.

3.5 Acceptance of Deliverables

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

3.6 Quality Assurance and Continuous Improvement

In performing the Services, IBM will (a) participate in and support Solectron’s continuous
improvement programs, including its “Six Sigma” and “Lean” programs, to the extent they
are dependant upon or related to the Services and (b) follow the quality assurance
procedures set forth in Schedule G (IBM Delivery Excellence) and the
Procedures Manual to help ensure, prior to delivery, that the
Services have been performed with a high degree of professional quality and reliability.
Such procedures shall include checkpoint reviews, testing, acceptance, and other
procedures for Solectron to confirm the quality of IBM’s performance. IBM, as part of its
total quality management process, will provide continuous quality assurance and quality
improvement through: (i) the identification and application of proven techniques and
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process; and (ii) the implementation of concrete programs,
practices and measures designed to improve performance. IBM will utilize project
management tools, including productivity aids and project management systems, as
appropriate in performing the Services.

3.7 User Satisfaction

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

	 	4.	 	IBM PERSONNEL

4.1 Provision of Suitable Personnel

“IBM Personnel” means any and all personnel furnished or engaged by IBM to perform any
part of the Services, including employees and independent contractors of (i) IBM, (ii) its
Affiliates and (iii) other Subcontractors. IBM will assign an adequate number of IBM
Personnel to perform the Services who are properly educated, trained and familiar with and
fully qualified for the Services they are assigned to perform. IBM is responsible for
ensuring that IBM Personnel assigned to perform Services have the legal right to work in
the country(ies) in which they are assigned to work.

4.2 Screening and Background Checks

IBM will be responsible for causing all IBM Personnel assigned to provide the Services to
be vetted through IBM’s standard employment (or subcontracting, as applicable) and
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4.3 Responsibility for IBM Personnel, Generally

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

4.4 Key IBM Positions

	 	(a)	 	“Key IBM Positions” means those positions designated as Key IBM Positions in
Schedule E (Key IBM Positions). IBM’s Global Project Executive will
be one of the Key IBM Positions. IBM Personnel filling the Key IBM Positions will
devote substantially full time and effort to the provision of the Services except as
Schedule E expressly provides otherwise. IBM Personnel approved as of the
Effective Date to fill the Key IBM Positions are listed in Schedule E.
	 
	 	(b)	 	Before the initial and each subsequent assignment of an individual to a Key
IBM Position, IBM will notify Solectron of the proposed assignment, introduce the
individual to appropriate Solectron representatives and, consistent with IBM’s
personnel practices, provide Solectron a curriculum vitae and other information about
the individual reasonably requested by Solectron. Upon request, IBM will provide
Solectron representatives an opportunity to interview the individual. If Solectron
in good faith objects to the proposed assignment, the Parties will attempt to resolve
Solectron’s concerns on a mutually agreeable basis. If the Parties have not been
able to resolve Solectron’s concerns within five (5) business days, IBM may not
assign the individual to that position and must propose the assignment of another
suitably qualified individual.
	 
	 	(c)	 	Solectron may from time to time change the positions designated as Key IBM
Positions under the Agreement with the consent of IBM, which consent shall not be
unreasonably withheld.
	 
	 	(d)	 	IBM will give Solectron, where reasonably possible, at least thirty (30)
days’ advance notice of a proposed change in personnel filling a Key IBM Position,
and will discuss with Solectron any objections Solectron may have. Where reasonably
possible, IBM will arrange, at no charge, for the proposed replacement to work
side-by-side with the individual being replaced during the notice period to
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of knowledge prior to the incumbent leaving his or her
position. IBM will not reassign or replace any person assigned to a Key IBM Position
during the first year of his or her assignment to the Solectron service team unless
Solectron consents to such reassignment or replacement, or the IBM employee
voluntarily resigns from IBM, is terminated by IBM or is unable to work due to his or
her death or disability, or reassignment as a result of an employee request that IBM
in good faith believes will result in the employee’s resignation if not accommodated.
Individuals filling Key IBM Positions may not be transferred or re-assigned until a
suitable replacement has been approved by Solectron, and no such re-assignment or
transfer may occur at a time or in a manner that would have an adverse impact on
delivery of the Services or Solectron’s (or its Affiliate’s) operations. IBM will
establish and maintain an up-to-date succession plan for the individuals serving in
Key IBM Positions.

	4.5	 	Removal and Replacement of IBM Personnel
	 
	 	 	Solectron may immediately remove any IBM Personnel from any Solectron Facilities if the
person is threatening or abusive, commits a crime or engages in an act of dishonesty while
performing Services for Solectron or violates Solectron’s policies and procedures
pertaining to use of Solectron Facilities. If Solectron in good faith finds any IBM
Personnel to be unsatisfactory and so notifies IBM, IBM will, unless instructed otherwise
by Solectron, remove said IBM Personnel promptly and will use Commercially Reasonable
Efforts to provide a replacement, provided that if such removal would result in a material
adverse impact to IBM’s ability to perform the Services, IBM will so notify Solectron and
the Parties will use Commercially Reasonable Efforts to develop a plan to mitigate such
adverse impact, which may include delaying the removal of such IBM Personnel until the
mitigation plan is completed. This provision does not in any way require, endorse or
approve (expressly or impliedly) the termination of employment by IBM of any employee
removed under the terms of this paragraph.
	 
	4.6	 	Controlling Turnover of IBM Personnel
	 
	 	 	Solectron and IBM agree that it is in their mutual best interests to keep the turnover of
IBM Personnel to a reasonably low level and IBM will use Commercially Reasonable Efforts
to do so. Accordingly, if Solectron believes that IBM’s turnover is excessive and so
notifies IBM, IBM will provide data concerning its turnover and meet with Solectron to
discuss the reasons for, and impact of, the turnover. If appropriate, IBM will submit to
Solectron its proposals for reducing the turnover and the Parties will mutually agree on a
program to bring the turnover down to an acceptable level. Notwithstanding any turnover
of IBM Personnel, IBM remains obligated to perform the Services in compliance with the
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	4.7	 	Subcontracting
	 
	 	 	"Subcontractor” means a third party engaged by IBM to provide products and/or services
used by IBM in rendering the Services, as well as any entity to whom a Subcontractor
further subcontracts (or otherwise sub-delegates) any of its subcontracted duties or
obligations, but does not include individual independent contractors IBM may subcontract
the performance of Services only in accordance with the following:

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

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

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

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

     5.2 Retained Functions and Cooperation

	 	(a)	 	In support of IBM’s performance of the Services, Solectron will (i) perform
the Functions identified in the Agreement as Solectron Retained Functions (for
purposes of this Section 5.2(a), the “Enumerated Retained Functions"); (ii) perform
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cifically described in the Agreement but are
nevertheless reasonably required and appropriate for the proper performance and
provision of the Enumerated Retained Functions in compliance with the requirements of
the Agreement; and (iii) provide or make available to IBM the equipment, Software,
facilities and other resources that the Agreement specifies are to be provided by
Solectron.

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

	5.3	 	Savings Clause

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

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

	 	(b)	 	Notwithstanding anything to the contrary in the Agreement, IBM shall have no
duty to incur additional costs in performing a Workaround. Solectron shall reimburse
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other expenses reasonably incurred by IBM
to meet the Service Levels and perform its other responsibilities under this
Agreement through a Workaround; provided that (i) to the extent practicable, IBM
notifies Solectron of such additional incremental charges and expenses and obtains
Solectron’s approval prior to incurring such costs; and (ii) IBM uses Commercially
Reasonable Efforts to minimize such costs (if and to the extent Solectron declines to
approve certain reasonable additional costs, IBM shall not be obligated to proceed
with the efforts associated therewith.)

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

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

	7.2	 	Required Consents

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

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

	 	(a)	 	To the extent required to provide the Services, and subject to IBM’s
compliance with relevant Solectron policies, IBM will be permitted access to
Solectron Facilities at no charge.
	 
	 	(b)	 	“On-site Solectron Resources” means (to the extent that Schedule A or an
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space, furniture, fixtures, desktop computers, software, telephones, fax machines, VPN, office
supplies, and other resources to be provided or made available by Solectron (or its
Affiliates) to IBM Personnel assigned by mutual agreement of the Parties to work
on-site at facilities of Solectron (or its Affiliates).

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

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

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

	8.2	 	IBM Solution Description and Transition Plan

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

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

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

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

	 	(a)	 	Solectron reserves the right to monitor, test and otherwise observe and
participate in the Transition. IBM will notify Solectron promptly if any Solectron
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* Omitted and filed separately with the SEC pursuant to a confidential treatment request

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

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

	 	(i)	 	If the delays, whether or not material, to the Transition are due
to the fault of IBM and constitute a material breach, Solectron shall have
the right, subject to IBM’s right to cure such delay within 15 days of
notice from Solectron, to terminate this Agreement pursuant to Section
11.3(c).
	 
	 	(ii)	 	If the material delays to the Transition are due to the actions or
failures of Solectron, its Affiliates or their contractors, as described in
Section 5.3 (Savings Clause), Solectron shall have the right to terminate
this Agreement pursuant to Section 11.3(c). Solectron shall be responsible
for the applicable Wind Down Costs, Unamortized Costs [*], if any, as set
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	  9.	 	DATA SECURITY AND PROTECTION
	 
	9.1	 	“Solectron Data” Defined
	 
	 	 	“Solectron Data” means all data in any form entered in or processed through any IBM
Systems or Software, to the extent pertaining to Solectron or a Service Recipient that is
furnished, disclosed or otherwise made available to IBM Personnel, directly or indirectly,
by or on behalf of Solectron or a Service Recipient, in connection with this Agreement,
including data of or pertaining to Solectron’s or its Affiliates’ customers or suppliers
of products and services; Solectron’s, it’s Affiliates or their suppliers’ products,
marketing strategies, financial affairs or employees, and any Derivative Works of such
data. Solectron Data shall not include any IBM confidential or proprietary information.
For the avoidance of doubt and subject to the foregoing, the Parties agree that:

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

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

	 	(a)	 	The Parties’ respective responsibilities for data and systems security are
as set forth in Schedule A (IBM Services and Solution(s)).
	 
	 	(b)	 	When present at Solectron Facilities or accessing Solectron Data or
Solectron systems, IBM will observe and comply with Solectron’s written security
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with an opportunity for review. A copy of Solectron’s current security procedures is set forth in
Schedule I (Security).

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

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

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

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

	9.6	 	Import/Export Controls

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

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

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

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

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

	10.2	 	Solectron Independent IP

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

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

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

	10.3	 	IBM Independent IP

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

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

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

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

	 	(a)	 	During performance of the Services, IBM Personnel may produce Deliverables.
One or more Schedules to this Agreement will identify the Deliverables as being “Type
I Materials,” “Type II Materials,” “Type III Materials” or otherwise as the Parties
may agree. If not so identified, Deliverables will be deemed to be Type I Materials.
Deliverables that are modifications or enhancements to IBM Independent IP will be
treated as Type II Materials.
	 
	 	(b)	 	“Type I Materials” are those Deliverables in which Solectron will own all
right, title and interest (including ownership of copyright), and IBM hereby grants
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(including ownership of copyright). IBM will retain one copy of the Type I Materials. Solectron hereby
grants IBM (1) an irrevocable, nonexclusive, worldwide, paid-up license to use,
execute, reproduce, display, perform, distribute (internally and externally) copies
of, maintain, modify and enhance, and prepare Derivative Works based on, Type I
Materials, and (2) the right to authorize others to do any of the former. IBM’s
license rights to Type I Materials will be subject to any and all obligations of
confidentiality with respect to any Solectron Confidential Information that may be
contained therein. Modifications to, enhancements of and Derivative Works from any
such Type I Materials will be, and be treated as Type I Materials.

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

	10.6	 	Rights in Inventions

	 	(a)	 	Inventions will be jointly owned by Solectron and IBM without regard to the
relative contributions of Solectron personnel (and contractors) and IBM Personnel in
creating the Invention. Title to all patents issued thereon will be joint and equal.
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restricted right to grant licenses (including
the right for any licensees to grant sublicenses) to third parties thereunder without
the consent of or accounting to the other Party.

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

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

	 	(a)	 	The Parties will meet periodically to discuss the creation of and relevant
details regarding any Work Product being developed with respect to which any
Intellectual Property Rights will be owned by Solectron. In addition, such Work
Product will not be marked with any IBM confidentiality or proprietary rights notices
for any portions that do not comprise confidential or proprietary intellectual
property.
	 
	 	(b)	 	Each Party will remain free to develop, commercialize, use, publish and
distribute materials that may be similar to or competitive with Work Product provided
such activities are effected without breach of the Party’s obligations under the
Agreement and do not infringe or constitute a misappropriation of any Intellectual
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	 	(c)	 	All licenses and rights of Use granted under or pursuant to the Agreement
shall be deemed to be, for the purposes of Section 365(n) of the United States
Bankruptcy Code (the “Bankruptcy Code”), licenses to rights in “intellectual
property” as defined under the Bankruptcy Code. Accordingly, the licensee of such
rights shall retain and may fully exercise all of its rights and elections under the
Bankruptcy Code. Upon the commencement of bankruptcy proceedings by or against
either Party under the Bankruptcy Code, the other Party shall be entitled to retain
all of its license rights and Use rights granted under the Agreement.

	10.9	 	Mental Impressions

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

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

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

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

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

  11.  TERM AND TERMINATION

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

	11.2	 	Termination, Generally

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

	 	 	 

	 	 	 

			
	 
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	11.3	 	Termination By Solectron

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

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

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

Any such cancellation or removal will be without prejudice to any other
rights available to Solectron with respect to the breach or breaches entitling
Solectron to terminate the Agreement.

	 	(c)	 	Termination for Convenience.

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

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

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

	11.4	 	Termination By IBM

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

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

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

	11.6	 	Partial Termination

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

	11.7	 	Disengagement Assistance

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

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

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

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

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

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

	12.4	 	Procedures Manual

	 	(a)	 	The “Procedures Manual” is a document (or set of documents) to be prepared
by IBM describing how IBM will perform and deliver the Services under the Agreement,
the Equipment and Software used, and the documentation (e.g., operations manuals,
user guides, specifications) that provide further details of the activities. The
Procedures Manual will describe the activities IBM proposes to undertake in order to
provide the Services, including those direction, supervision, monitoring, staffing,
reporting, planning and oversight activities normally undertaken to provide services
of the type IBM is to provide under the Agreement. The Procedures Manual will
include any Interaction Models developed to document specific processes or
interactions between the Parties. The Procedures Manual also will include
descriptions of the acceptance testing procedures approved by Solectron, IBM’s
problem management and escalation procedures, and the other standards and procedures
of IBM pertinent to Solectron’s interactions with IBM in obtaining the Services. The
Procedures Manual must be suitable for use by Solectron to understand the Services.
	 
	 	(b)	 	Attached as Annex F5 (Draft Procedures Manual Table of Contents) is
a draft table of contents for the Procedures Manual. Working in consulta-

			
	 
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tion with Solectron, IBM will deliver a draft Procedures Manual to Solectron within thirty (30)
days after the Effective Date for review and comment. The draft Procedures Manual
must be comprehensive (addressing all relevant components of the Services) and
customized to the Solectron engagement (i.e., neither generic nor high level), and
must include drafts of the Interaction Models. The Procedure Manual will be
organized generally in accordance with Annex F5 (Draft Procedures Manual Table of
Contents), but may include additional sections or provisions as appropriate. IBM
will incorporate or address reasonable comments or suggestions of Solectron and will
finalize the Procedures Manual within ninety (90) days after the Effective Date. The
final Procedures Manual will be subject to the approval of Solectron. The initial
and final versions of the Procedures Manual will be Deliverables under the Agreement.

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

	  13.	 	AUDITS AND RECORDS

	13.1	 	Audit Rights

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

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

	 	(b)	 	Audits will be conducted during business hours and upon reasonable written
advance notice to IBM, which notice may be in the form of an email to the IBM Global
PE, but in any event not less than ten (10) busi-

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

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

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

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

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

	13.2	 	Audit Follow-up

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

	13.3	 	Records Retention

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

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

	13.4	 	IBM Audits and Other Internal Reviews

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

	  14.	 	REPRESENTATIONS, WARRANTIES AND COVENANTS OF IBM
	 
	14.1	 	Work Standards
	 
	 	 	IBM warrants and covenants that the Services will be rendered with promptness and
diligence and be executed in a professional and workmanlike manner in accordance with the
practices and standards observed by the leading companies in IBM’s industry when
performing similar services and in accordance with their current description (including
any completion criteria) contained in the Agreement. IBM warrants and covenants that it
will use adequate numbers of qualified IBM Personnel with suitable training, education,
experience and skill to perform the Services in accordance with timing and other
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	14.2	 	Maintenance
	 
	 	 	IBM warrants and covenants that it will maintain the Equipment and Software used in
performance of the Services and for which it has financial responsibility, so that they
operate in accordance with their specifications, including (i) maintaining equipment in
good operating condition, subject to normal wear and tear; (ii) undertaking repairs and
preventive maintenance on equipment in accordance with the applicable Equipment
manufacturer’s recommendations; and (iii) performing Software maintenance in accordance
with the applicable Software vendor’s documentation and recommendations.
	 
	14.3	 	Efficiency and Cost-Effectiveness
	 
	 	 	IBM warrants and covenants that it will use Commercially Reasonable Efforts to use
efficiently the resources or services necessary to provide the Services to the extent that
the same are charged to Solectron on a resource consumption basis. IBM warrants and
covenants that it will use Commercially Reasonable Efforts to perform the Services in a
manner that is the most cost-effective for Solectron consistent with the required level of
quality and performance.
	 
	14.4	 	Technology
	 
	 	 	IBM warrants and covenants that it will provide the Services using, consistent with the
Change Management Process, proven, current technology in an effort to enable Solectron to
take advantage of technological advancements applicable to its and its Affiliates’
businesses and support Solectron’s efforts to maintain competitiveness in the markets in
which it competes.
	 
	14.5	 	Non-Infringement

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

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

	(iii)	 	that no Deliverables, Work Products or other materials provided
to Solectron or other Service Recipients by or on behalf of IBM, nor their
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	 	 	 	fringe or constitute an infringement or misappropriation of any Intellectual Property Rights of any
third party.

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

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

	 	(c)	 	Without limiting IBM’s obligations pursuant to the indemnities in Section
18.2(e), IBM shall not be considered in breach of the warranty and covenant set forth
in Section 14.5(a) if and to the extent that a claimed infringement or
misappropriation is attributable to any software or material owned by a third party
(other than an Affiliate of IBM) that is used by IBM or provided by IBM to Solectron
or Service Recipients under license from the third party licensor (a “Third Party
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	14.6	 	Compliance with Confidentiality Obligation
	 
	 	 	IBM warrants and covenants that IBM and IBM Personnel will not misappropriate or disclose
any confidential or proprietary information of a third party in contravention of any
contractual obligation owed to such third party (i) by IBM in connection with
transactions, agreements and competitive bidding processes conducted or negotiated by IBM
as part of the Services; or (ii) by Solectron, to the extent IBM is aware (or ought
reasonably to be aware) of such obligations, in connection with transactions, agreements
and competitive bidding processes conducted or negotiated by IBM as part of the Services.
The foregoing warranty and covenant does not limit IBM’s express obligations pursuant to
Section 16.
	 
	14.7	 	Viruses
	 
	 	 	“Virus” means (i) program code or programming instruction(s) or set(s) of instructions
intentionally designed to disrupt, disable, harm, interfere with or otherwise adversely
affect computer programs, data files or operations; or (ii) other code typically described
as a virus, Trojan horse, worm, back door or other similar type of harmful code. IBM
warrants and covenants that IBM Personnel will not intentionally introduce a Virus or
allow a Virus to be introduced into Solectron’s or other Service Recipients’ systems or the systems used to provide the
Services. In addition, IBM will use Commercially Reasonable Efforts to prevent IBM
Personnel from unknowingly introducing a Virus or allowing a Virus to be introduced into
Solectron’s or other Service Recipients’ systems or the systems used to provide the
Services. If a Virus is found to have been introduced into Solectron’s or other Service
Recipients’ systems or the systems used to provide the Services as a result of a breach of
the foregoing warranty and covenant, IBM will use Commercially Reasonable Efforts, at no
additional charge, to assist Solectron in eradicating the Virus and reversing its effects
and, if the Virus causes a loss of data or operational efficiency, to assist Solectron in
mitigating and reversing such losses utilizing generally accepted data restoration
techniques and other applicable best practices.
	 
	14.8	 	No Improper Inducements
	 
	 	 	IBM represents and warrants to Solectron that it has not violated any applicable laws or
regulations or any Solectron policies of which IBM has been given advance written notice
regarding the offering of unlawful or improper inducements in connection with the
Agreement. If at any time during the Term, the foregoing representation and warranty is
inaccurate, then, in addition to any other rights Solectron may have at law or in equity
and notwithstanding any other provision of this Agreement to the contrary, Solectron may
terminate the Agreement for cause without affording IBM an opportunity to cure.
	 
	14.9	 	Information Security
	 
	 	 	Without limiting IBM’s obligations under Section 2.10(Compliance with Laws,
Regulations and Solectron Policies) with regard to compliance with Solectron‘s

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

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

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

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

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

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

	16.2	 	Obligations of Confidentiality

	 	(a)	 	Each Party acknowledges that it may be furnished, receive or otherwise have
access to Confidential Information of the other Party in connection with the
Agreement.
	 
	 	(b)	 	The Receiving Party will not reproduce Confidential Information of the
Furnishing Party except as reasonably required to accomplish the purposes and
objectives of the Agreement. The Receiving Party will not disclose the Confidential
Information of the Furnishing Party to any person, or appropriate it, for the
Receiving Party’s own use or for any other person’s use or benefit except as
specifically permitted by the Agreement or approved in writing by the Furnishing
Party.
	 
	 	(c)	 	The Receiving Party will keep the Confidential Information of the Furnishing
Party confidential and secure and will protect it from unauthorized use or disclosure
by using at least the same degree of care as the Receiving Party employs to avoid
unauthorized use or disclosure of its own Confidential Information, but in no event
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	 	(d)	 	As necessary to accomplish the purposes of the Agreement, the Receiving
Party may disclose Confidential Information of the Furnishing Party to any employee,
officer, director, contractor, Service Recipient, agent or representative of the
Receiving Party who has a legitimate need to know the information in question and who
is bound to the Receiving Party to protect the confidentiality of the information in
a manner substantially equivalent to that required of the Receiving Party under the
Agreement. The preceding sentence notwithstanding, each Party will limit disclosure
of any of the other Party’s information to the receiving Party’s Personnel (in the
case of IBM providing the Services, and in the case Solectron, receiving the
Services) who have a need to know such information.

	 	(e)	 	Special Restrictions Regarding Certain Solectron Data.

	 	(i)	 	Without limiting the foregoing, IBM acknowledges that certain
Solectron Data comprising (i) cost savings and related financial benefits
achieved for Solectron in the course of providing the
Services (ii) the terms and conditions (including pricing) of any third
party contracts entered into by Solectron in connection with the
Services provided under this Agreement, contains commercially sensitive
information that is relevant to Solectron’s business dealings as a
supplier of products and services to Solectron’s customers including IBM
and IBM’s Affiliates. Accordingly, IBM agrees that it will limit the
disclosure of such Solectron Data to IBM Personnel within IBM’s
procurement services group on a need to know basis, and certain other
IBM Personnel outside of the procurement services group as specifically
necessary for the performance of the Services, and will not permit such
Solectron Data to be disclosed (directly or indirectly) to other groups
within IBM or its Affiliates including groups responsible for the
negotiation of agreements with Solectron in Solectron’s capacity as a
supplier to IBM. The Parties specifically agree that the unauthorized
disclosure of such Solectron Data to other groups within IBM or its
Affiliates shall constitute a material breach for the purposes of
Section 11.3(a) in the event such Solectron Data is used to the material
detriment of Solectron. For purposes of this Section 16.2(e)(i),
“material detriment” shall include the use of such Solectron Data in
connection with any negotiations regarding the purchase of products or
services by IBM from Solectron.
	 
	 	(ii)	 	Subject to Section 16.2(e)(i), IBM may use market information (prices,
terms, etc.) derived from agreements negotiated by IBM as part of the
Services for internal benchmarking and comparison with other IBM customers
transaction data, but solely for the purposes of providing business process
outsourcing services to IBM’s customers and subject to any obligations of
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	 	(f)	 	The Receiving Party may also disclose Confidential Information of the
Furnishing Party to the Receiving Party’s regulatory agencies and Auditors provided
they are made aware of the Receiving Party’s obligations of confidentiality with
respect to the Furnishing Party’s Confidential Information, and in the case of
Auditors are, subject to any statutory or regulatory reporting or disclosure
obligations to a governmental authority under applicable law, bound by terms no less
restrictive then those governing Receiving Party with respect to Confidential
Information.
	 
	 	(g)	 	If any unauthorized disclosure, loss of, or inability to account for any
Confidential Information of the Furnishing Party occurs, the Receiving Party will
promptly so notify the Furnishing Party and will cooperate with the Furnishing Party
and take such actions as may be necessary or reasonably requested by the Furnishing
Party to minimize the violation and any damage resulting from it.

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

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

	 	(a)	 	The Receiving Party’s obligations under Section 16.7 (Return or
Destruction) will continue in effect until fully performed;
	 
	 	(b)	 	As to any portion of the Furnishing Party’s Confidential Information that
constitutes a trade secret under applicable law, the obligations will continue for as
long as the information continues to constitute a trade secret under applicable law;
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	 	(c)	 	As to all other Confidential Information of the Furnishing Party, the
obligations will survive for three (3) years after termination or expiration of the
Agreement.

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

	 	(a)	 	Any Claim alleging unlawful discrimination, sexual harassment or wrongful
termination by IBM, its Affiliates or Subcontractors, or any of their respective
employees, based upon any protected class characteristic and occurring in connection
with performance under this Agreement;
	 
	 	(b)	 	Any Claim by, on behalf of a Subcontractor or IBM Personnel arising in
connection with this Agreement, or IBM’s performance or non-performance hereunder,
except to the extent, if any, that Solectron is required under Section 18.4
(Indemnification By Solectron) to indemnify IBM in respect of the Claim. In the case
of a Claim by employees of IBM, IBM’s indemnification of Solectron Indemnitees will
be to the same extent as if the Claim was made by a person who is not an employee of
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	 	(c)	 	Any Claim relating to an alleged breach of IBM’s obligations under Section 16(CONFIDENTIALITY) to not disclose the Confidential Information of the Furnishing
Party to any person, or appropriate it, for the Receiving Party’s own use or for any
other person’s use or benefit except as specifically permitted by the Agreement, or
any Claim relating to an alleged breach of IBM’s obligations under Section 14.6 (Compliance with Confidentiality Obligation).
	 
	 	(d)	 	Any Claim of alleged infringement relating to IBM’s failure to secure
appropriate rights to the applicable patents held by Ronald A. Katz or Ronald A.
Katz Technology Licensing, L.P., to the extent relating to automated transaction
processing utilizing communication facilities and/or computer telephony integration
with respect to the operation of any service desk or call center in a facility owned
or leased by IBM (or any of its Subcontractors) and used on or after the Effective
Date to process calls related to the Services;
	 
	 	(e)	 	Any Claim relating to:

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

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

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

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

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

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

	18.3	 	Infringement Claims
	 
	 	 	If any item used by IBM to provide the Services becomes, or in IBM’s reasonable opinion is
likely to become, the subject of an infringement or misappropriation Claim that would be
the subject of an indemnity from IBM pursuant to Section 18.2(e), IBM will, in addition to
indemnifying Solectron Indemnitees as provided in this Section 18(INDEMNIFICATION) and
to the other rights Solectron may have under the Agreement, (i) promptly at IBM’s expense
secure the right to continue using the item, or (ii) if this cannot be accomplished with
Commercially Reasonable Efforts, then at IBM’s expense, replace or modify the item to make
it non-infringing or without misappropriation, provided that any such replacement or
modification will not degrade the performance or quality of the affected components of the
Services or disrupt Solectron’s business operations, or (iii) if both of the foregoing
are commercially impracticable, and only in such event, then upon at least sixty (60)
days’ notice to Solectron, unless otherwise compelled by a court or governmental order or
agreed in writing by the parties, IBM may remove the item from the Services, in which case
IBM’s charges will be equitably adjusted to reflect such removal. If removal of the item
from Services causes the loss or material degradation of the Services or any portion of
the Services, or disruption of Solectron’s business operations, Solectron may assert such
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	 	 	 	radation or disruption constitutes a material breach of the Agreement by IBM in
respect of which Solectron may exercise its termination rights under Section 11.3(a) with only
15 days for IBM to cure, and pursue its available remedies under the Agreement, at law or
in equity.

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

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

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

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

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

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

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

	19.	 	LIABILITY
	 
	19.1	 	General Intent
	 
	 	 	Subject to the specific provisions of this Section 19 (LIABILITY), it is the intent of the Parties that if a Party fails to perform its
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* Omitted and filed separately with the SEC pursuant to a confidential treatment request

other Party for any actual dam-ages suffered or incurred by the other Party as a result.

	19.2	 	Limitations of Liability

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

	 	(i)	 	Costs and expenses of restoring or reloading any lost, stolen,
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	 	 	 	make backups as required under the Agreement (including failure to accurately or
completely make such backups) or fails to maintain and store such backups;

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

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

	19.3	 	Force Majeure

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

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

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

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

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

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

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

	20.10	 	Schedule References
	 
	 	 	Unless otherwise indicated, references to Schedules to the Agreement also refer to and
include all Annexes and other attachments to the referenced Schedule.
	 
	20.11	 	Use of Certain Words
	 
	 	 	Unless the context requires otherwise, (i) “including” (and any of its derivative forms)
means including but not limited to, (ii) “may” means has the right, but not the obligation
to do something and “may not” means does not have the right to do something, (iii) “will”
and “shall” are expressions of command, not merely expressions of future intent or
expectation, (iv) “written” or “in writing” is used for emphasis in certain circumstances,
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	 	 	 	application of the notice requirements setforth in Section 22.2(Notices) in those and other circumstances, (v) use of the
singular imports the plural and vice versa, (vi) use of a specific gender imports the
other gender(s), (vii) where “and/or” is used, the overall condition is satisfied if any
or all of the referenced sub-conditions are satisfied; and (viii) references to “days”
means calendar days unless otherwise indicated.

	20.12	 	Order of Precedence

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

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

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

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

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

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

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

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

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

	21.2	 	Litigation
	 
	 	 	For any litigation arising out of or relating to the Agreement or the transactions and
relationships contemplated by the Agreement, regardless of the form of action or the Party
that initiates it, the Parties irrevocably and unconditionally submit to the non-exclusive
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	 	 	 	Court for the Northern District of California or, if that court does not have jurisdiction, in the Superior Court of the
State of California, Santa Clara County. The Parties irrevocably and unconditionally
waive any objection to the laying of venue of any proceeding arising out of or relating to
the Agreement in the United States District Court for the Northern District of California
or the Superior Court of the State of California, Santa Clara County. The Parties further consent to the
jurisdiction of any state court located within a district that encompasses assets of a
Party against whom a judgment (or award) has been rendered for the enforcement of the
judgment (or award) against the assets of such Party.

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

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

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

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

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

	 	 	 
	In the case of Solectron:

	 	With a copy to:
	Solectron Corporation

	 	Solectron Corporation
	847 Gibraltar Drive

	 	847 Gibraltar Drive, Bldg 5
	Milpitas, CA 95035

	 	Milpitas, CA 95035
	 
	 	 
	Attn: Chief Procurement Officer.

	 	Attn: Chief Legal Officer
	Fax:  
                                                                              

	 	Fax:                                                                                

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

	 	 	 	 	 	Attn:	 	 	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 
	Fax:

	 	 	 	 	 	Fax:	 	 	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 

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

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

	 	 	 
	Defined Term	 	Meaning
	“Affiliate”

	 	With respect to an entity, any other entity or
person Controlling, Controlled by or under common
Control with

			
	 	 	 
	 	 	 
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	Defined Term	 	Meaning
	 

	 	such entity.
	 
	 	 
	“Best Practice”

	 	Whether or not capitalized shall mean, with respect
to IBM’s performance of the Services, proven
practices followed by the well-managed providers of
services similar to the Services.
	 
	 	 
	“Commercially

Reasonable Efforts”

	 	Taking all such steps and performing in such a
manner as a well managed company would undertake
where it was acting in a determined, prudent and
reasonable manner to achieve a particular desired
result for its own benefit.
	 
	 	 
	“Contract Year”

	 	Each one-year period during the Term, starting on
the Effective Date.
	 
	 	 
	“Control”

	 	Possessing, directly or indirectly, the power to
direct or cause the direction of the management
policies or operations of an entity or person,
whether through ownership of voting securities, by
contract or other objective criteria.
	 
	 	 
	“Country Locations”

	 	Countries in which Solectron and its Affiliates
receive the Services.
	 
	 	 
	“Solectron Retained

Functions”

	 	The specific Functions set forth in the Agreement
as Functions for which Solectron retains
responsibility during the Term.
	 
	 	 
	“Effective Date”

	 	The date on which the Agreement first takes effect,
which is set forth on the signature page.
	 
	 	 
	“End Users”

	 	Direct users of the Services provided under the
Agreement.
	 
	 	 
	“Equipment”

	 	All machines and other hardware used in the
provision of the Services, including all associated
attachments, features, accessories and peripheral
devices.
	 
	 	 
	“Local Adoption

Agreement”

	 	An agreement in substantially the form attached as
Exhibit 1 (Form of Local Adoption Agreement),
pursuant to which Affiliates of the Parties in a
country subscribe to and incorporate by reference
the Agreement in relation to their home country.
	 
	 	 
	“Local IBM Party”

	 	The entity signing a Local Adoption Agreement as
IBM.
	 
	 	 

			
	 	 	 
	 	 	 
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	Defined Term	 	Meaning
	“Local Parties”

	 	The Local IBM Party and the Local Solectron Party,
collectively, who are signatories to the same Local
Adoption Agreement.
	 
	 	 
	“Local Solectron

Party”

	 	The entity signing a Local Adoption Agreement as
Solectron.
	 
	 	 
	“Out-of-Pocket

Expenses”

	 	Reasonable, demonstrable and actual out-of-pocket
expenses incurred by IBM for Equipment, materials,
supplies or services provided to or for Solectron
(or its Affiliates) that are specified in the
Agreement as reimbursable. Out-of-Pocket Expenses
are to be determined net of all rebates, discounts
and allowances received by IBM, and shall not
include IBM’s actual or allocated overhead costs or
other mark-ups.
	 
	 	 
	“Performance

Standards”

	 	Individually and collectively, the quantitative and
qualitative performance standards and commitments
for the Services contained in this Agreement,
including Service Levels specified in Schedule B
(Performance Management).
	 
	 	 
	“Project”

	 	A group of related Functions or activities that
spans multiple days, weeks, or months and builds
cumulatively toward the achievement of defined
target outcomes or objectives. A Project typically
has multiple phases or life-cycle stages and
involves written project plans with defined interim
milestones and Deliverables to measure progress
toward the achievement of its target outcomes or
objectives.
	 
	 	 
	“Service Levels”

	 	The quantitative standards of performance IBM is
required to meet or exceed in providing the
Services. The Service Levels are set forth in
Schedule B (Performance Management).
	 
	 	 
	“Service Delivery

Environment”

	 	Collectively, the Equipment, Software,
communications networks and connectivity,
facilities and other infrastructure components
owned, controlled or operated by IBM (or its
Affiliates or Subcontractors) and used by IBM
Personnel in performing and delivering the
Services.
	 
	 	 
	“Software”

	 	Program code (in both object code and source code
forms to the extent generally provided to the end
user of the subject code) and all supporting
documentation, me-

			
	 	 	 
	 	 	 
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	Defined Term	 	Meaning
	 

	 	dia, on-line help facilities and
tutorials, including updates, enhancements,
modifications, releases and Derivative Works of any
of them. Software shall not include commercially
available software products of either party.
	 
	 	 
	“Use”

	 	The right to use, execute, copy, perform,
distribute copies of, maintain, modify, enhance,
and create derivative works of Software or other
copyrighted or copyrightable works.
	 
	 	 
	“Wind Down Costs”

	 	Has the meaning specified in
Schedule C (Charges).

(End of General Terms and Conditions)

			
	 	 	 
	 	 	 
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INDEX OF DEFINED TERMS

	 	 	 	 	 
	Defined Term	 	Page
	“Acceptance Period”

	 	 	9	 
	“Affected Personnel”

	 	 	16	 
	“Affiliate”

	 	 	66	 
	“Approved Subcontractors”

	 	 	13	 
	“Audit Finding”

	 	 	39	 
	“Auditors”

“Audits”

	 	 	37

37	 
	“Bankruptcy Code”

	 	 	29	 
	“Claim

	 	 	49	 
	“Commercially Reasonable Efforts”

	 	 	66	 
	“Confidential Information”

	 	 	45	 
	“Contract Year”

	 	 	66	 
	“Control”

	 	 	66	 
	“Country Locations”

	 	 	66	 
	“Customer Data”

	 	 	21	 
	“Customer Retained Functions”

	 	 	66	 
	“Deliverable”

	 	 	9	 
	“Derivative Work”

	 	 	24	 
	“Disengagement Assistance”

	 	 	33	 
	“Dispute Date”

	 	 	61	 
	“Effective Date”

	 	 	66	 
	“End Users”

	 	 	66	 
	“Equipment”

	 	 	66	 
	“Force Majeure Event”

	 	 	56	 
	“Functions”

	 	 	3	 
	“Furnishing Party”

	 	 	45	 
	“in writing”

	 	 	60	 
	“including”

	 	 	60	 
	“Independent IP”

	 	 	24	 
	“In-flight Projects”

	 	 	19	 
	“Intellectual Property Rights”

	 	 	23	 
	“Key Supplier Positions”

	 	 	11	 
	“Local Adoption Agreement”

	 	 	66	 
	“Losses”

	 	 	49	 
	“may not”

	 	 	60	 
	“may”

	 	 	60	 
	“Mental Impressions”

	 	 	29	 
	“New Services”

	 	 	5	 
	“New Work”

	 	 	24	 
	“Notice of Election”

	 	 	54	 
	“On-site Customer Resources”

	 	 	17	 
	“Out-of-Pocket Expenses”

	 	 	67	 

			
	 	 	 
	 	 	 
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INDEX OF DEFINED TERMS

	 	 	 	 	 
	Defined Term	 	Page
	“Procedures Manual”

	 	 	35	 
	“Project”

	 	 	67	 
	“Receiving Party”

	 	 	45	 
	“Service Commencement Date”

	 	 	3	 
	“Service Levels”

	 	 	67	 
	“Service Recipient”

	 	 	4	 
	“Services”

	 	 	3	 
	“shall”

	 	 	60	 
	“Software”

	 	 	68	 
	“Subcontractor”

	 	 	13	 
	“Supplier Indemnitees”

	 	 	52	 
	“Supplier Personnel”

	 	 	10	 
	“Transfer Date”

	 	 	17	 
	“Transition Plan”

	 	 	19	 
	“Transition”

	 	 	18	 
	“Transitioned Personnel”

	 	 	16	 
	“Use”

	 	 	68	 
	“Virus”

	 	 	43	 
	“will”

	 	 	60	 
	“Work Product”

	 	 	24	 
	“written”

	 	 	60	 

			
	 	 	 
	 	 	 
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Local Adoption Agreement (COUNTRY)

with reference to the

Indirect Sourcing Services Agreement

between

Solectron USA, Inc.

and

International Business Machines Corporation

			
	 	 	 
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Local Adoption Agreement – [COUNTRY]

This Local Adoption Agreement for [COUNTRY] (the “Local Country”) is dated as of the Effective Date
and is between the Local Parties (“Local IBM Party” and “Local Solectron Party”) set forth below.

This Local Adoption Agreement, together with the Master Agreement (as defined below), was written
and negotiated in English, is the complete and exclusive agreement between the Local Parties
regarding its subject matter, and replaces any prior oral or written communications between the
Local Parties with respect to that subject matter.

By signing below, the Local Parties agree to be bound by the terms of this Local Adoption
Agreement. Once this Local Adoption Agreement is executed by the Local Parties, all Services
provided by and to them on or after the Effective Date shall be deemed to have been provided under
this Local Adoption Agreement and subject to its terms.

	 	 	 
	Agreed to:

	 	Agreed to:
	[SOLECTRON LOCAL PARTY]

	 	[IBM LOCAL PARTY]
	 
	 	 
	By:

	 	By:
	 
	 	 
	 	 	 
	 
	 	 
	Authorized Signature

	 	Authorized Signature
	 
	 	 
	 	 	 
	Name and Title (Type or Print)

	 	Name and Title (Type or Print)
	Address:

	 	Address:
	 
	 	 
	Date:

	 	Date:
	 

	 	 

			
	 	 	 
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	1.	 	Incorporation of Master Agreement terms.

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

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

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

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

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

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

	5.	 	Notices and Enforcement Rights.

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

In the case of Local IBM Party:

	 	 	 
	To:
	 	 
	 
	 	 
	Attn:

	 	Attn: Senior Counsel
	Fax:

	 	Fax:      416-478-5155

In the case of Local Solectron Party:

	 	 	 
	To:

	 	With a copy to:
	 
	 	 
	 	 	 
	 
	 	 
	 	 	 
	 
	 	 
	 	 	 
	 
	 	 
	Attn:

	 	Attn:
	Fax:

	 	Fax:

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

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

	6.	 	Dispute Resolution.

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

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

			
	 	 	 
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	 	Exhibit 1

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

			
	 	 	 
	Indirect Sourcing Services Agreement

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	 	Exhibit 1

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Annex A

			
	 	 	 
	Indirect Sourcing Services Agreement

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	 	Exhibit 1

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Confidential to Solectron and IBM

INDIRECT SOURCING SERVICES AGREEMENT

Between

Solectron and IBM

Exhibit 2

Work Order Template

			
	 	 	 
	Indirect Sourcing Services Agreement

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	 	Exhibit 2

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Confidential to Solectron and IBM

Exhibit 2

Work Order Template

[Not for Execution]

                                                                                

Solectron/IBM MASTER SERVICES AGREEMENT

WORK ORDER NO. ___

This Work Order No ___(this “Work Order”) is issued under and pursuant to the Indirect Sourcing
Services Agreement with an Effective Date of February [ ], 2006 (the “Agreement”) between
Solectron USA, Inc. (“Solectron”) and International Business Machines Corporation (“IBM”).

Work Order Name:1

initiative Name(s):2                                                             

Start Date:                                                             
 End Date/Event:3                                                             

Solectron Purchase Order No.: 4                                                             

Maximum Authorized Work Order Expenditure:5                                                             

Work Order Contacts:

	 	 	 	 	 	 	 
	IBM	 	 	 	Solectron
	 
	 	 	 	 	 	 
	Name:

	 	 	 	Name:	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Address:	 	Address:
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 
	Email:

	 	 	 	Email:	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Tel:

	 	 	 	Tel:	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Mob:

	 	 	 	Mob:	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 

 

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

			
	 	 	 
	Indirect Sourcing Services Agreement

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	 	Exhibit 2

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Confidential to Solectron and IBM

	 	 	 
	Fax:                                                             

	 	Fax:      
                                                                           

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

	 	 	 	 	 	 	 
	Solectron	 	 	 	IBM
	 
	 	 	 	 	 	 
	By:

	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Printed:	 	Printed:
	 
	 	 	 	 	 	 
	Title:	 	Title:
	 
	 	 	 	 	 	 
	Date:	 	Date:	 	 

LIST OF ATTACHMENTS

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

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

			
	 	 	 
	Indirect Sourcing Services Agreement

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	 	Exhibit 2

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	1.	 	BACKGROUND AND CONTEXT

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

	2.	 	OVERVIEW OF THE INITIATIVE

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

	3.	 	THE SERVICES

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

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

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

IBM shall, in a timely manner:

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

Solectron shall, in a timely manner:

			
	 	 	 
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	 	Exhibit 2

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Confidential to Solectron and IBM

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

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

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

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

	 	A.	 	Activities and Deliverables

Activity
Name
                     Activity Description                     Deliverable(s)                     Acceptance Criteria
Name

	 	B.	 	Schedule

The initiative activities will be performed according to the following schedule:

[Insert here, or refer to an attachment containing, an initiative schedule and timeline.]

			
	 	 	 
	Indirect Sourcing Services Agreement

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	 	Exhibit 2

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Confidential to Solectron and IBM

	 	C.	 	Milestones

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

The initiative will include the following key delivery Milestones:

Milestone Name                     Milestone Description                               Achieve By

	 	D.	 	Key Interdependencies

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

	 	E.	 	Initiative Specific Assumptions

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

	 	F.	 	Acceptance Criteria

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

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

Position / Role                               Source                                         Days

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

			
	 	 	 
	Indirect Sourcing Services Agreement

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	 	Exhibit 2

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Confidential to Solectron and IBM

The following are the Key Positions and associated Key Personnel for this Work Order:

Key Position                                          Name of IBM Personnel

Key Position                                          Name of Solectron Personnel

	3.5	 	Subcontractors

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

	3.6	 	Managed Third Parties

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

	3.7	 	Service Locations

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

	3.8	 	Use of Solectron Facilities and Resources

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

	3.9	 	IBM Facilities and Resources

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

	3.10	 	General Assumptions

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

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

			
	 	 	 
	Indirect Sourcing Services Agreement

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	 	Exhibit 2

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Confidential to Solectron and IBM

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

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

	4.	 	PERFORMANCE ASSESSMENT

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

	5.	 	COMPENSATION

	5.1	 	Billing Method [check one]

	 	 	 	 	 
	 

	 	o
	 	T&M Services. The Project Services described in this Work Order are T&M
Services as described in Schedule C (Charges).
	 
	 	 	 	 
	 

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

	 	o
	 	Other Basis. [Specify method of compensation.]

	6.	 	WORK ORDER TERMINATION

	6.1	 	Early [*] and De-mobilization Costs

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

			
	 	 	 
	Indirect Sourcing Services Agreement

EXECUTION COPY
	 	Exhibit 2

Page 8

 

 

Confidential to Solectron and IBM

	7.	 	SPECIAL TERMS

	7.1	 	IP Designations

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

	7.2	 	Warranty Period

[Insert the warranty period for any operational Deliverables.]

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

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

	7.4	 	Agreement Overrides

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

	7.5	 	Other Terms

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

	8.	 	DEFINED TERMS USED IN THIS WORK ORDER

Capitalized terms used in this Work Order and not defined shall have the meaning ascribed to
those terms in the Agreement.

This Work Order has received legal review and approval by Solectron and IBM, as evidenced below.

	 	 	 	 	 	 	 
	Solectron USA, Inc.	 	International Business Machines Corporation
	 
	 	 	 	 	 	 
	By:

	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 

	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Printed:	 	 	Printed:	 	 
	 

	 	 
	 	 	 	 

	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Title:	 	 	 	Title:	 	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Date:	 	Date:	 	 
	 

	 	 
	 	 	 	 

	 	 	 
	 
	 	 
	Indirect Sourcing Services Agreement

EXECUTION COPY

	 	Exhibit 2
Page 9

 

 

Confidential to Solectron and IBM

(End of Main Body of Work Order)

			
	 	 	 
	Indirect Sourcing Services Agreement

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	 	Exhibit 2

Page 8

 

 

INDIRECT SOURCING SERVICES AGREEMENT

Between

Solectron and Emptoris

Exhibit 3 (Part 1 of 2)

Emptoris License & Support Agreement (the “Agreement”)

1. License to Use. Emptoris, Inc. (“Emptoris”) grants Solectron Corporation, for itself and for
the benefit of its subsidiaries and Affiliates (“You,” “Your” and “Yours”) a non-exclusive,
non-transferable (except as permitted herein), fully paid, royalty-free, worldwide and irrevocable
license (the “License”) to use, for Your internal business purposes, copy, execute, install,
archive, maintain and operate, the Emptoris’ software, known as Emptoris (further detailed in
Exhibit X) (the “Software”) and Documentation (defined hereinafter) and any tools necessary to
load and implement the Software, in machine-readable form (the “Product”). Emptoris agrees to
provide the Product to Solectron upon Solectron’s request; provided that any delivery of the
Product will be made by electronically through FTP. “Documentation” means Emptoris’ then current
electronic published guides, marketing or promotional material user guides, manuals, product
descriptions, on-line help and training materials for the Software produced by or on behalf of
Emptoris. The term of the license shall be perpetual. The license to use the Software permits You
to, without limitation, to use the Software in the same manner as You are permitted for indirect
spend only and includes the right to use and access the Software throughout the world without
limitation on the number of simultaneous or cumulative users or installations and without
limitation on the number or location of simultaneous or cumulative sites of Yours. The license to
use the Software permits You to allow to independent contractors acting in the stead of employees
and third party contractors to use the Software to the same extent as You, but solely in support of
Your internal business purposes and provided each has a confidentiality agreement with You that
obligates them to maintain and protect the confidentiality of third party materials to the same
extent as required herein. For the purposes of this Agreement, Solectron’s Affiliates shall mean
any entity which directly or indirectly: (i) controls Solectron; (ii) is controlled by Solectron;
or (iii) is under common control with Solectron. “Control” hereunder means the direct or
beneficial ownership of a voting interest of at least fifty percent (50%) (or less in a foreign
jurisdiction where majority ownership is prohibited by law) or the right or power, directly or
indirectly, to elect a majority of the board of directors, or the right or power to control
management. Third Party Software: The term “Software” includes certain third party software
required to operate the Emptoris developed software. The License Fee includes the right to operate
the third party software only when hosted by Emptoris. In the event that You move the software to
any system not hosted by Emptoris you will be required to sublicense the third party software from
Emptoris and to pay the associated fees therefore for each instance of the Software not hosted by
Emptoris.

1A. Support and Maintenance. Provided that Support and Maintenance has been ordered, You will
receive the Emptoris Support that IBM has ordered during the outsourcing term, or that You have
selected after the Outsourcing term is over. Following termination of the Outsourcing Agreement,
any Support and future Revisions of the Product, along with any maintenance and support that You
desire to receive shall be provided according to these terms, provided that You pay a Support and
Maintenance Fee stated in Exhibit 3 (Part 2 of 2). Support, as used herein, shall include the
services described in Exhibit 3 (Part 2 of 2), at the Supplier Support levels, in accordance with
the performance level described therein. In the event of any discontinuation or lapse by You in
paying for the services described herein, when required, You may reinstate these services at the
pro-rated annual Support and Maintenance Fee for the time during which You actually receive the
services, at the yearly rates set forth in Exhibit 3 (Part 2 of 2), and You shall pay the unpaid
Maintenance and Support Fees for the time You were off Maintenance and Support before You are
reinstated, however, you will not owe any additional reinstatement charges or penalties. In the
event Emptoris fails to meet the requirements for these services described herein and such failure
remains uncured 30 days following written notice by You, You, at Your sole option may cancel these
services and Emptoris shall immediately return a pro rata refund of Support and Maintenance Fees
previously paid by You for the balance of the then-current term. For each Revision of the
Software, Emptoris shall offer these services for at least 2 years from each applicable Revision’s
release date for that Revision.

2. Proprietary Rights and Restrictions. Emptoris and/or its licensors retains all right, title, and
interest in the Product and in all copies thereof, and no title to the Product or any intellectual
property or other rights therein, are transferred to You by virtue of this Agreement other than as
specified herein. No right, title or interest to any trademarks, service marks or trade names of
Emptoris or its licensors is granted by this Agreement. The Product is

			
	 	 	 
	Indirect Sourcing Services Agreement

EXECUTION COPY
	 	Exhibit 3.1

Page 1

 

 

copyrighted and contains proprietary information and trade secrets belonging to Emptoris and/or its
licensors. You will not use Product except as permitted herein and for any purpose other than for
Your own internal business purposes. You shall ensure that all proprietary rights notices on
Product are reproduced and applied to any copies. You agree not to cause or permit the reverse
engineering, reverse assembly, or reverse compilation of the Product or otherwise attempt to derive
source code from the Product. You may not create derivative works based upon all or part of
Product. You may not transfer, lend, lease, assign, sublicense, and/or make available through
timesharing or through managed services Product, in whole or in part.

3. Confidentiality. You agree that Product is and contains confidential property of Emptoris
(“Proprietary Information”). You will not use or disclose any Proprietary Information except as
permitted herein or to the extent You can demonstrate that any such Proprietary Information: is in
the public domain through no fault of Your own and generally available for use and disclosure by
the general public without any charge, restriction or license, is required to be disclosed by any
authority having jurisdiction so long as You provide Emptoris reasonable notice of such disclosure
prior to its release, has been released by Emptoris to third parties without restriction, was
received by You without restriction from a third party who is under no lawful obligation to
provide it under any restriction, was independently developed by You without breach of this
Agreement or was already in Your possession without restriction at the time You received it under
this Agreement . You recognize and agree that there may be no adequate remedy at law for a breach
of this Section, that such a breach could irreparably harm Emptoris and that Emptoris may be
entitled to equitable relief (including, without limitation, injunctive relief) with respect to any
such breach or potential breach, in addition to any other remedies available at law. Emptoris
will protect any confidential information of Yours on these same terms. Confidential information
of Yours is any that you so designate, any that should be known to Emptoris using reasonable
business judgment as confidential information and includes this Agreement, Your identity and the
fact that we have an Agreement with You. The parties’ obligations of confidentiality under this
Agreement shall not be construed to limit either party’s right to independently develop or acquire
products without use of the other party’s confidential information. Further, except as otherwise
provided herein, either party shall be free to use, for any purpose, the residuals resulting from
access to or work with such confidential information, provided that such party shall maintain the
confidentiality of the confidential information as provided herein. The term “residuals” means
information in non-tangible form, which may be retained by persons who have had access to the
confidential information, including ideas, concepts, know-how or techniques contained therein.
Neither party shall have any obligation to limit or restrict the assignment of such persons or to
pay royalties for any work resulting from the use of residuals. However, the foregoing shall not be
deemed to grant to either party a license under the other party’s copyrights or patents.

4. Indemnification. Emptoris agrees to defend You, Your and Your affiliates, and each of Your and
their employees, directors and shareholders (the “Indemnities”) from and against any third party
claim or action based on any alleged infringement of any patent, copyright, trade secret, or other
proprietary right as a result of the use of the Product according to the terms and conditions of
this Agreement, and Emptoris agrees to indemnify the Indemnitees from any costs and/or damages
awarded against them in any such infringement claim or action or settlement thereof, provided that
(i) Emptoris is promptly notified in writing of such claim, (ii) the Indemnitees grant Emptoris
sole control of the defense and any related settlement negotiations; provided that such settlements
do not result in an admission of wrong-doing by the Indemnitee or payment by the Indemnitee of any
monies, and (iii) You cooperate with Emptoris in defense of such claim. Notwithstanding the
foregoing, Emptoris shall have no liability to You if the infringement results from use of the
Product in combination with software not provided, known or approved by Emptoris that causes the
infringement or modifications to the Product not made, known or approved by Emptoris. In the event
of a likelihood of an injunction requiring the discontinued use of the Product, Emptoris shall
provide (i) a substitute with same or similar functionality or (ii) obtain at not charge to You, a
license to continue use of the Product in accordance with the terms herein. or if neither (i) or
(ii) are reasonably available, refund the License Fees paid for the infringing module pro-rated on
a straight-line basis over the license term for such module and any paid but unamortized
Maintenance Fees (based on straight-line amortization of the annual Maintenance Fee.) The foregoing
states the entire liability of Emptoris with respect to infringement of any patents, copyrights,
trade secrets, or other proprietary rights by the Product or any part thereof.

5. Warranties and Limitations.
A. Emptoris warrants and represents the following the following:
Emptoris warrants for a period of 90 days from delivery that the media of any software provided
under this Agreement, if any, shall be new and shall be free from defects in manufacture,
materials, and manufactured in a good and workmanlike manner; any software provided under this
Agreement shall: conform to the functional features described in, and perform in accordance with,
the Documentation; accurately manipulate, process, compare, display and calculate date or time data
including leap years; not be interrupted or adversely affected by

			
	 	 	 
	Indirect Sourcing Services Agreement

EXECUTION COPY
	 	Exhibit 3.1

Page 2

 

 

the manipulation, processing, comparison, display or calculation of dates, including leap years;
not contain any program routine, device, code or instructions (including any code or instructions
provided by third parties) or other undisclosed feature, including, without limitation, a time
bomb, virus, software lock, drop-dead device, malicious logic, worm, Trojan horse, bug, error,
defect or trap door (including year 2000), that is capable of accessing, modifying, deleting,
damaging, disabling, deactivating, interfering with or otherwise harming the Software, any
computers, networks, data or other electronically stored information, or computer programs or
systems.

B. EMPTORIS AND ITS THIRD PARTY LICENSORS MAKE NO OTHER WARRANTIES TO YOU, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE. EXCEPT FOR ITS OBLIGATIONS PURSUANT TO SECTION 4 ABOVE, EMPTORIS’ AGGREGATE LIABILITY FOR
ANY AND ALL CLAIMS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, THE PERFORMANCE OF PRODUCT
PROVIDED HEREUNDER, AND/OR EMPTORIS’ PERFORMANCE OF SERVICES, SHALL NOT EXCEED $500,000 WITHOUT
REGARD TO WHETHER A CLAIM IS BASED ON CONTRACT OR TORT, INCLUDING NEGLIGENCE. EXCEPT FOR DAMAGES
RESULTING FROM UNAUTHORIZED USE OR DISCLOSURE OF CONFIDENTIAL INFORMATION (INCLUDING THE SOFTWARE)
RESULTING FROM FAILURES TO PROTECT THE CONFIDENTIAL INFORMATION OF THE OTHER PARTY WITH THE SAME
DEGREE OF CARE AND SECURITY PRECAUTIONS THAT A PARTY USES TO PROTECT ITS OWN INFORMATION (WHICH
CANNOT BE LESS THAN REASONABLE PRECAUTIONS) IN NO EVENT SHALL EMPTORIS OR ITS LICENSORS, OR YOU BE
LIABLE TO THE OTHER FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES,
INCLUDING, WITHOUT LIMITATION, DAMAGES RESULTING FROM LOSS OF PROFITS, DATA, OR BUSINESS ARISING
OUT OF OR IN CONNECTION WITH THIS AGREEMENT, EVEN IF A PARTY HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES.

6. Delivery. Any delivery required hereunder shall be made electronically through FTP.

7. Fees. No other fees are due and payable under this Agreement, except for any Support and
Maintenance Fees due after the termination of the Outsourcing Agreement and then only provided You
have issued a purchase order and purchase order number for same for the services.

8. Term and Termination. Either party may suspend performance and/or terminate (with the exception
of the license and the rights and obligations thereunder) this Agreement immediately upon written
notice at any time if the other party is in material breach of any material warranty, term,
condition or covenant of this Agreement, and fails to cure that breach within 30 days after written
notice thereof. In the event that You are in breach of Your obligations under Section 1, 2 or 3
and fail to cure such breach within 30 days after written notice thereof, then Emptoris may
terminate the license in addition to the Agreement.

In the event of termination or expiration of this Agreement for any reason, all Section which by
their nature should survive shall, but specifically including Sections 2,3 4, and 5 shall survive
termination. Neither party shall be liable to the other for damages of any sort resulting solely
from terminating this Agreement in accordance with its terms. Emptoris agrees that upon termination
of this Agreement, it will promptly return all material provided by You, including, but not limited
to drawings, blueprints, notes, memoranda, specifications, designs, devices, documents and any
other material containing or disclosing any confidential or proprietary information. An officer of
Emptoris shall certify in writing that all such materials have been returned at the time that such
return of materials occurs.

9. Insurance. Emptoris shall maintain insurance covering its liability to its employees and to You
in amounts and with companies satisfactory to You, admitted to do business in the state or country
(as applicable) in which the Agreement will be performed and holding a current Best’s rating of “A
minus” or better. The insurance coverage required by the Agreement shall not be less than the
following: (i) Workers’ Compensation Insurance in accordance with the laws of the state or country,
as applicable, in which the Agreement is performed and Employer’s Liability Insurance, in the
amount required by such laws or $1,000,000 per accident for bodily injury and $1,000,000 per
employee/aggregate for disease, whichever is greater; (ii) Commercial General Liability Insurance,
including contractual liability, with a $1,000,000 combined single limit per occurrence and
$2,000,000 annual aggregate; and (iii) Professional Liability and Errors & Omissions Liability
Insurance with policy limits of not less than US $2,000,000.00 for each claim.. The Professional
Liability and Errors & Omissions Liability Insurance retroactive coverage date will be no later
than the date of the last to execute this Agreement, as between Emptoris and You.

10. Installation and Support. All installation and support will be provided to You by IBM during
the term of the Outsourcing Agreement.

			
	 	 	 
	Indirect Sourcing Services Agreement

EXECUTION COPY
	 	Exhibit 3.1

Page 3

 

 

11. Export Regulation and US Government Restricted Rights. Both parties shall comply strictly with
all US export control laws, including the US Export Administration Act and its associated
regulations.

12. General. This Agreement is made under the laws of the State of Delaware, USA, excluding the
choice of law and conflict of law provisions. This Agreement is the entire agreement between You
and Emptoris relating to Product and supersedes all prior or contemporaneous or other oral or
written communications, proposals, and representations with respect to its subject matter, as well
as without limitation terms and conditions of any purchase order. No modification to this Agreement
is binding unless in writing and signed by a duly authorized representative of each party. The
waiver or failure of either party to exercise any right provided for herein shall not be deemed a
waiver of any further right hereunder. If any provision of this Agreement is held invalid, all
other provisions shall remain valid unless such validity would frustrate the purpose of this
Agreement, and this Agreement shall be enforced to the full extent allowable under applicable law.
Except in the event of a merger or sale of substantially all of its assets provided that it is not
to a competitor of the other party, neither party may assign its rights, duties or obligations
under this Agreement without the prior written consent of the other party and any attempt to do so
shall be void and of no effect. All of Emptoris’ licensors and subsidiaries are direct and
intended third-party beneficiaries of this Agreement and may enforce it against You. Unless
otherwise stated, all remedies provided herein are cumulative of those at law or in equity. All
notices required by this Agreement shall be in writing and delivered by certified mail, return
receipt requested and all postage paid to the addresses set forth below or at such other address as
either party may furnish to the other in writing. Notwithstanding any applicable “shrink wrap”
license agreement or EULA (end user license agreement) that may be imbedded as a part of the
Product or packaged with the Product and which You or a licensee is required to accept as a
condition to the installation and use of the Software, the parties agree that any such “shrink
wrap” license agreement(s) or EULA will have no legal effect and that this Agreement supersedes any
such “shrink wrap” license agreement, EULA or other licensing terms and conditions. Any and all
schedules, exhibits, and attachments that are annexed to this Agreement are expressly made a part
of this Agreement and are incorporated herein by this reference. Any and all references to this
Agreement shall be deemed to refer to and include this Agreement and all such schedules, exhibits
and attachments, as amended from time to time. This Agreement may be executed in any number of
counterparts each of which shall be deemed an original and as executed shall constitute one
agreement, binding on both parties even though both parties do not sign the same counterpart

13. Taxes. The amounts to be paid by You, if any do not include any foreign, U.S. federal, state,
local, municipal or other governmental taxes, duties, levies, fees, excises or tariffs, arising as
a result of or in connection with the transactions contemplated under this Agreement. The only
taxes You are required to pay under or pursuant to this Agreement are those owed by You solely as a
result of entering into this Agreement and the payment of the fees hereunder, that are required to
be collected from You under applicable law, and that are based solely upon the amounts payable
under this Agreement (such taxes the “Collected Taxes”). Collected Taxes shall be stated
separately as applicable on Emptoris invoices and shall be remitted by You to Emptoris, unless You
have provided a valid exemption certificate.

14. Escrow.

A.Contemporaneous with the execution of this Agreement, Emptoris agrees that IBM, without
further permission or action, may provide Solectron with continued use and access to the Software
as long a the Indirect Sourcing Services Agreement between IBM and Solectron remains in effect or
IBM otherwise provides access and use of the Software to Solectron.

B. Upon the termination of Indirect Sourcing Services Agreement or when IBM ceases to provide
Solectron with use or access to the Software as contemplated by the Indirect Sourcing Services
Agreement, Emptoris and Solectron will, execute an Escrowed Source Code Agreement (the “Source Code
Agreement”), substantially in the form as Exhibit E, pursuant to which GRM Information Management
Services or other reputable escrow agent selected by Solectron will be designated as the escrow
agent. Provided that, (i) upon the termination of the Indirect Sourcing Services Agreement or
Solectron otherwise determines to use the Software independent of IBM or the Indirect Sourcing
Services Agreement, Emptoris agrees to pay the cost for the escrow under the Source Code Agreement
if Solectron enters into a maintenance agreement with Emptoris for the Software or (ii) upon the
termination of the Indirect Sourcing Services Agreement or Solectron otherwise determines to use
the Software independent of IBM or the Indirect Sourcing Services Agreement and does not enter into
a maintenance agreement with Emptoris for the Software, Solectron will pay the cost for the escrow
under the Source Code Agreement.. In no event shall Emptoris have the right or option, stated or
otherwise, to unilaterally terminate the Source Code Agreement. Emptoris acknowledges and agrees
that the governing license for the Software set forth in this Agreement includes the right to use
the Source Code received under this Section as necessary to maintain the

			
	 	 	 
	Indirect Sourcing Services Agreement

EXECUTION COPY
	 	Exhibit 3.1

Page 4

 

 

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

	 	 	 	 	 	 	 
	Solectron Corporation	 	Emptoris
	 
	 	 	 	 	 	 
	By: 

 

	 	By: 
 

	 

	 	 	 	 
	 
	 	 	 	 	 	 
	Printed: 
 

	 	Printed: Bob Kellegrew
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Title: 
 

	 	Title: VP and General Counsel
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Date: 
 

	 	Date: 
 

	 

	 	 
	 	 	 	 
	 
	Address: 847 Gibraltar Drive,	 	Address: 200 Wheeler Road, 2nd Floor
	Milpitas, CA, 95035	 	Burlington, MA 01803Milpitas, CA, 95035

			
	 	 	 
	Indirect Sourcing Services Agreement

EXECUTION COPY
	 	Exhibit 3.1

Page 5

 

 

Exhibit X

Emptoris Software Modules Included for Solectron License:

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

Emptoris Software Modules Excluded for Solectron License:

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

			
	 	 	 
	Indirect Sourcing Services Agreement

EXECUTION COPY
	 	Exhibit 3.1

Page 6

 

 

INDIRECT SOURCING SERVICES AGREEMENT

Between

Solectron and Emptoris

Exhibit 3 (Part 2 of 2)

Support Services

1.0 TECHNICAL SUPPORT

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

	 	 	 	 	 	 	 
	Level

	 	Available to Participate
	 	Language Support
	 	Hours of Service Availability
	Standard

	 	One Primary Contact

Multiple Alternate

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

	 	One Primary Contact

Multiple Alternate

Contact
	 	English-only
	 	24x5, Monday through Friday,

in the US, Eastern Time
	 
	 	 	 	 	 	 
	Premium

	 	Primary Contact

Multiple Alternate

Contacts

All Trained Client Buyers
	 	English-only
	 	24x5, Monday through Friday,

in the US, Eastern Time

(24x7 pager service with 1

hour response)
	 
	 	 	 	 	 	 
	Supplier Support

	 	Primary Contact

Unlimited Alternate
	 	English

Spanish
	 	24x5, Monday through Friday,
WHERE? English,
9am-5pm CET
	 

	 	Contacts
	 	Italian
	 	for Spanish, Italian,
German, Portuguese, and
French, 9am-
	 

	 	All Trained Client Buyers
	 	 	 	 

			
	 	 	 
	Indirect Sourcing Services Agreement

EXECUTION COPY
	 	Exhibit 3-2

Page 3-2-1

 

 

	 	 	 	 	 	 	 
	Level

	 	Available to Participate
	 	Language Support
	 	Hours of Service Availability
	 

	 	All Trained Suppliers
	 	German

Portuguese

 Japanese

Chinese

 French
	 	5pm JST for Japanese, and 9am-5pm AWST for Hong
 Kong/Beijing

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

Extended Support: If Client has paid for Extended Support, Client will receive all the services of
Standard Support, 24 hours a day, 5 days a week.

Premium Support: If Client has paid for Premium Support, Client will receive all the services of
Extended Support and will additionally:

	 	 	 	 	 
	 

	 	i.
	 	Be entitled to have unlimited
Alternate Contacts
	 
	 	 	 	 
	 

	 	ii.
	 	Be entitled to have unlimited
trained client buyers receive support from the Emptoris help
desk
	 
	 	 	 	 
	 

	 	iii.
	 	Have access to a support
consultant, available by electronic pager, 24 hours each day, 7
days a week for severity 1 issues DURING LIVE AUCTIONS AND
SOURCING EVENTS.

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

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

Service Support Documentation

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

Key Performance Indicators

			
	 	 	 
	Indirect Sourcing Services Agreement

EXECUTION COPY
	 	Exhibit 3-2

Page 3-2-2

 

 

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

	 	 	 	 	 	 	 
	Standard-KPI

	 	Formula / Targets
within the Hours of
Service Availability,
unless noted to the
contrary below
	 	interval of measure
	 	Interval for reporting
	Help Desk Service

	 	5 minute response time
for phone call.

2 hour response time
for e-mail.
	 	Minute / Hour
	 	monthly
	 
	 	 	 	 	 	 
	24x7 Pager Service for

Premium Support

	 	60 minute response
time from initial call.
Effective 10pm Atlantic
time each Friday
through 3pm Atlantic
time each Sunday
5 minute response time
for phone call to help
desk 3pm Sunday
through 10pm Friday
each week.

2 hour response time
for e-mail.
	 	Minute / Hour
	 	monthly
	 
	 	 	 	 	 	 
	Resolution Efficiency

Targets (for product

usage inquiries)

	 	60% of product usage
inquiries handled by
first
level support engineers
	 	Support tickets by

month
	 	monthly
	 
	 	 	 	 	 	 
	Resolution Timeframe

Targets (for product

usage inquiries)

	 	Level 1 escalation to
level 2 engineer for all
cases not resolved
within 8 hours	 	 	 	 
	 
	 	 	 	 	 	 
	Response Time ( Error

diagnostic targets

	 	Severity Error 1 within

1 hour

Severity Error 2 within

4 hours

Severity Error 3 within

24 hours
	 	 	 	monthly
	 
	 	 	 	 	 	 
	Resolution Time

Targets

	 	Severity Error 1 within
48 hours

Severity Error 2 within
20 calendar days

Severity Error 3 to be
determined on a case
by case basis	 	 	 	 

Definition of the KPI

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

			
	 	 	 
	Indirect Sourcing Services Agreement

EXECUTION COPY
	 	Exhibit 3-2

Page 3-2-3

 

 

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

2.0 SERVICE LEVEL COMMITMENTS. Emptoris will expend commercially reasonable efforts to provide an
Error Correction designed to solve or bypass a reported Error. Emptoris shall reasonably determine
the priority level of Errors. Emptoris uses the following protocols (All times shown reflect
regular business hours)..:

“Response Time” means the period by which Emptoris must initially respond to any Errors. The
periods (for each of the severity levels) are set forth below and are measured from when Supplier
becomes aware of the problem and are based on business hours and the level of service contracted
for:

	 	 	 
	Severity 1 Errors

	 	within 1 hour
	 
	Severity 2 Errors

	 	within 4 hours
	 
	Severity 3 Errors

	 	within 24 hours

Error Correction targets:

Severity 1 Errors: Emptoris promptly initiates the following procedures: (1) assigns
specialists to correct the Error on an expedited basis; (2) provides ongoing communication
on the status of an Error Correction; and (3) commences efforts to provide a temporary
workaround or fix.

Severity 2 Errors: Emptoris assigns a specialist to commence an Error Correction and
provides additional, escalated procedures as reasonably determined necessary by Emptoris
support staff. Emptoris exercises all commercially reasonable efforts to provide a
workaround or include a fix in the next Maintenance Release.

Severity 3 Errors: Emptoris will generally make commercially reasonable efforts to include
an Error Correction in the next Maintenance Release.

“Resolution Targets” means the time periods by which Emptoris will endeavour, using
commercially reasonable efforts, to resolve problems using an Error Correction or
Maintenance Release. The Resolution Targets, by severity of the error, are as follows:

	 	 	 
	Severity 1 Errors

	 	48 hours
	 
	Severity 2 Errors

	 	20 calendar days
	 
	Severity 3 Errors

	 	To be determined on a case by case basis

The times set forth above shall commence at the conclusion of the Response Time for the severity
level.

Error” means a failure of the Product to conform to the specifications as set forth
in the Documentation resulting in the inability to use the Product as described in
the Documentation or a considerable restriction in use of the Products. Errors are
classed Severity 1, 2 or 3, as follows:

“Severity 1 Error”:

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

			
	 	 	 
	Indirect Sourcing Services Agreement

EXECUTION COPY
	 	Exhibit 3-2

Page 3-2-4

 

 

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

“Error Correction” means either a Product modification or addition that, when
made or added to the Product, corrects the Error, or a procedure or routine that,
when observed in the regular operation of the Product, eliminates the practical
adverse effect of the Error on End User.

“Error Corrections” means all upgrades, updates, and fixes, workarounds, and
other modifications to the Product or to the Third-Party Products, other than
Enhancements, which are made in order to correct Errors in the Products as defined
herein.

Maintenance and Support Fees:

Solectron is not required to pay any Maintenance and Support Fees to Emptoris during the
term of the Outsourcing Agreement.

The Annual Maintenance & Support Fees will be, at maximum, as follows. Solectron is not
contracting in advance for these services and reserves the right to negotiate a lower price
for these services with Emptoris.

Current Year Annual Maintenance & Support pricing including escrow management:

Standard: $170,000

Extended: $199,840

Premium: $228,100

Solectron may contract with Emptoris for annual Maintenance & Support during the next five
years at an annual fee equivalent to the above prices adjusted according to the US
Employment Cost Index (ECI) as follows:

1. The Employment Cost Index (ECI) is a measure of the change in the cost of labor, free
from the influence of employment shifts among occupations and industries. The compensation
series includes changes in wages and salaries and employer costs for employee
benefits.http://www.bls.gov/news.release/eci.toc.htm

2. Example- If Solectron agrees to pay the annual Maintenance & Support fee quoted above
adjusted for the annual price increases as measured by the ECI index. Thus, for purposes of
illustration, if Solectron elects to contract with Emptoris for Standard Maintenance &
Support 5 years after the signing of this agreement and the ECI increase is 3% in each of
the next five years, then Solectron’s price for annual Maintenance & Support for year 6 will
be $197,077 based on the following calculation: $170,000 Base Price * (1 + .03)^5

Invoicing for the Maintenance and Support Fees will be done annually, in advance, on the
first day of each annual period. Payment will be made net 30 days after the receipt of
acceptable invoice:

Hosting Services Fees:

Solectron is not required to pay any Hosting Services Fees to Emptoris during the term of
the Outsourcing Agreement. Should Solectron elect to use Emptoris Hosting Services after
the termination of the IBM Outsourcing Agreement, the Annual Hosting Services Fees will be,
at maximum, listed below: Solectron is not contracting in advance for these services and
reserves the right to negotiate a lower price for these services with Emptoris.

			
	 	 	 
	Indirect Sourcing Services Agreement

EXECUTION COPY
	 	Exhibit 3-2

Page 3-2-5

 

 

The Current Year pricing is $155,000 per year to support the usage requirements described
below and including all required hardware, third-party software, infrastructure, and hosting
services. Solectron agrees to pay this annual Hosting fee adjusted for annual price
increases as measured by the ECI index described above.

The hosting pricing is based on the current usage requirement in the IBM Outsourcing
Agreement and is as follows: Emptoris will support, on a per month basis, 100 simultaneous
users, 30 standard auctions with 50 items and 20 suppliers each having 15 bids per item, 30
advanced auctions with 50 items and 20 suppliers each having 15 bids per item, 30 RFQ’s or
RFP’s with 100 line items and 50 suppliers each having up to 5 bids per item, 30 RFI’s with
20 questionairres each with 20 questions and 50 suppliers responding. In any event, the
support will not be less than the current IBM Outsourcing Agreement. In the event, the
current usage requirements change in the IBM Outsourcing Agreement, Emptoris will provide
pricing for the increases and we agree to negotiate a fair price for these Services.

Invoicing for the Hosting Fees will be done annually, in advance on the first day of each
annual period. Payment will be made net 30 days after the receipt of acceptable invoice:

			
	 	 	 
	Indirect Sourcing Services Agreement

EXECUTION COPY
	 	Exhibit 3-2

Page 3-2-6

 

EXHIBIT 4

TO

INDIRECT SOURCING SERVICES AGREEMENT

IBM Supplier Conduct Principles

Forced or Involuntary Labor

IBM Suppliers will not use forced or involuntary labor of any type (e.g., forced, bonded,
indentured or involuntary prison labor); employment is voluntary.

Child Labor

IBM Suppliers will not use child labor. The term “child” refers to any person employed under
the age of 15 (or 14 where the law of the country permits), or under the age for completing
compulsory education, or under the minimum age for employment in the country, whichever is
greatest.We support the use of legitimate workplace apprenticeship programs which comply with all
laws and regulations applicable to such apprenticeship programs.

Wages and Benefits

IBM Suppliers will, at a minimum, comply with all applicable wage and hour laws and
regulations, including those relating to minimum wages, overtime hours, piece rates and other
elements of compensation, and provide legally mandated benefits.

Working Hours

IBM Suppliers will not exceed prevailing local work hours and will appropriately compensate
overtime. Workers shall not be required to work more than 60 hours per week, including overtime,
except in extraordinary business circumstances with their consent. In countries where the maximum
work week is less, that standard shall apply. Employees should be allowed at least one day off per
seven-day week.

Nondiscrimination

IBM Suppliers will not discriminate in hiring and employment practices on grounds of race,
religion, age, nationality, social or ethnic origin, sexual orientation, gender, gender identity or
expression, marital status, pregnancy, political affiliation, or disability.

Respect
and Dignity

IBM Suppliers will treat all employees with respect and will not use corporal punishment,
threats of violence or other forms of physical coercion or harassment.

Freedom
of Association

Suppliers shall respect the legal rights of employees to join or to refrain from joining
worker organizations, including trade unions. Suppliers have the right to establish favorable
employment conditions and to maintain effective employee communication programs as a means of
promoting positive employee relations that make employees view third-party representation as
unnecessary.

Health
and Safety 

Suppliers will provide their employees with a safe and healthy workplace in compliance with
all applicable laws and regulations. Consistent with these obligations, IBM Suppliers must have and
implement effective programs that encompass life safety, incident investigation, chemical
safety, ergonomics, etc., and provide the same standard of health and safety in any housing that is
provided for employees. Suppliers should strive to implement management systems to meet these
requirements.

Protection
of the Environment

IBM Suppliers will operate in a manner that is protective of the environment. At a minimum,
suppliers must comply with all applicable environmental laws, regulations and standards, such as
requirements

			
	 	 	 
	Indirect Sourcing Services Agreement

EXECUTION COPY
	 	Exhibit 4

Page 1

 

 

EXHIBIT 4

TO

INDIRECT SOURCING SERVICES AGREEMENT

regarding chemical and waste management and disposal, recycling, industrial wastewater treatment
and discharge, air emissions controls, environmental permits and environmental reporting.
Suppliers must also comply with any additional environmental requirements specific to the products
or services being provided to IBM as called for in design and product specifications, and contract
documents. Suppliers should strive to implement management systems to meet these requirements.

Laws, Including Regulations and Other Legal Requirements

IBM Suppliers will comply with all applicable laws and regulations in all locations where
they conduct business.

Ethical Dealings

IBM expects our suppliers to conduct their business in accordance with the highest ethical
standards. Suppliers must strictly comply with all laws and regulations on bribery, corruption and
prohibited business practices.

Communications

Suppliers must make the IBM Supplier Conduct Principles and other relevant information
available to employees in the native language(s) of the employees and supervisors.

Monitoring/Record Keeping

Suppliers must maintain documentation necessary to demonstrate compliance with IBM’s Supplier
Conduct Principles and must provide IBM with access to that documentation upon IBM’s request.

			
	 	 	 
	Indirect Sourcing Services Agreement

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	 	Exhibit 4

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Confidential to Solectron and IBM

INDIRECT SOURCING SERVICES AGREEMENT

Between

Solectron and IBM

SCHEDULE A

SERVICES

			
	 	 	 
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SCHEDULE A

Services

Table of Contents

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

			
	 	 	 
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SCHEDULE A

Services

	1.	 	INTRODUCTION

	1.1	 	General Approach.

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

	1.2	 	Manner of Performance.

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

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

	2.	 	ORGANIZATION

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

	2.2	 	Components.
	 
	 	 	The components of this Schedule A are:

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

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

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

	4.	 	SERVICES
	 
	4.1	 	General.

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

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

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

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

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

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

			
	 	 	 
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Annex A-1

STATEMENT OF WORK/ SCOPE MODELS

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PROCESSES DEFINITIONS

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INTERACTION MODEL(S)

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Annex A-1

Matrix A1 — 1

PROCESS — SERVICE GROUPING

	 
	 

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Matrix A1 - 2-a

SERVICE GROUPING — ELEMENT

PASS THROUGH

	 
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Matrix A1 - 2-b

SERVICE GROUPING — ELEMENT

P2P

	 
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Matrix A1 - 2 — d

SERVICE GROUPING — ELEMENT

SOURCE

	 
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Matrix A1 - 2-e

SERVICE GROUPING — ELEMENT

OCM

	 
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GL CODE — CATEGORY — GEO SPEND

	 
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	 	 	PROCESS	 	DEFINITION
	1.

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

	 	 	 	The Strategic Sourcing process includes the following activities:
	 
	 	 	 	 
	1.1.

	 	Spend Visibility
	 	The purpose of the Spend Visibility process is to gain a complete
understanding of spend in a Category for strategic sourcing.

The “Spend Visibility” process includes the following activities:
	 
	 	 	 	 
	1.1.1.

	 	Aggregate historical spend data and consumption data
	 	For the applicable commodity, category or category segment and
geography, gathering historical spend data (currency based) and
consumption (unit based) data and to the extent it is applicable,
information on the activities that drive consumption.
	 
	 	 	 	 
	1.2.

	 	Analyze
	 	The purpose of the “Analyze” process is to analyze data related to
consumption of specific goods and services, characteristics of the
market for such goods and services and any identified restrictions
or issues related to the selection or performance of specific
suppliers providing such goods and services.
	 
	 	 	 	 
	 

	 	 	 	The “Analyze” process includes the following activities:
	 
	 	 	 	 
	1.2.1.

	 	Analyze historical and/or projected spend data and consumption data
	 	Analyzing historical and projected spend and consumption data to
identify category segments for sourcing activities;

			
	 	 	 
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	 	 	PROCESS	 	DEFINITION
	1.2.2.

	 	Project spend data and consumption data
	 	Estimating the future consumption and spend within a category or
category segment or geography based on identified driver activity
and growth. This includes holding discussions with business units to
identify projects and activities that can cause changes in
consumption. [IBM Note: Suggest to include in Analyze section]
	 
	 	 	 	 
	1.2.3.

	 	Investigate and evaluate market place for strategic sourcing
	 	Evaluating the market for a category or category segment to
determine its size, growth, price, constraints and the Receiving
Entity’s (and, if different from the Receiving Entity, the Procuring
Entity’s) position in it. This includes the identification of the
number of suppliers required to adequately cover the category as
well as possible suppliers of the category or category segment to
the Receiving Entity.
	 
	 	 	 	 
	1.2.4.

	 	Current supplier performance and constraints review
	 	Conducting an in-depth review of (a) the Receiving Entity’s current
category suppliers and the adequacy of their performance (including
taking into account, for example, such suppliers’ performance,
technical ability and relationship with the Receiving Entity); (b)
the constraints or special considerations to be used going forward
in continuing to utilize then-existing suppliers and/or entering
into contracts with new or additional suppliers for the category
(taking into account, for example, prices, unique requirements, and
potential supply and delivery considerations) and (c) the expiration
of the Receiving Entity’s current contract.
	 
	 	 	 	 
	1.3.

	 	Opportunity Identification
	 	The purpose of the “Opportunity Identification” process is to use
the information developed from the Analyze process to identify
opportunities for strategic sourcing that address the Receiving
Entity’s business needs related to indirect spend (including
savings) and to prioritize the identified sourcing projects. The
Opportunity Identification process includes the following
activities:
	 
	 	 	 	 
	1.3.1.

	 	Identify strategic sourcing opportunity
	 	Identifying and documenting commercially reasonable strategic
sourcing opportunities for a Category irrespective of the cost and
benefit to the Actor to pursue such opportunity were the Receiving
Entity to elect to have the Actor pursue it .. This includes
identifying, with respect to the pursuit of each such opportunity,
the cost to the Receiving Entity, business needs of the Receiving
Entity satisfied, resources of the Receiving Entity required and
potential benefits to the Receiving Entity.

			
	 	 	 
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	 	 	PROCESS	 	DEFINITION
	1.3.2.

	 	Prioritize sourcing projects
	 	Present to Receiving Party all identified opportunities and priorite
such identified opportunities to maximize the benefits to and
minimize the consumption of limited resources of the Receiving
Entity while gaining the acceptance of stakeholders. Actor shall
prioritize opportunities in accordance with the standard of those
opportunities that a well managed company would undertake where it
was acting in a determined, prudent and reasonable manner to achieve
a particular desired result for its own benefit.
	 
	 	 	 	 
	1.4.

	 	Category Strategy Development
	 	The purpose of the “Category Strategy Development” process is to
develop a strategy for a specific strategic sourcing exercise,
including developing criteria for proposal evaluation,
gathering/documenting product specifications; creating and
maintaining a category-specific sourcing strategy. The Strategy
Development process includes the following activities:
	 
	 	 	 	 
	1.4.1.

	 	Develop, commodity strategy for category
	 	The purpose of the Commodity (a segment of a Category) Strategy is
to balance, manage and implement the Receiving Entity’s needs goals
and objectives for the commodities.
	 
	 	 	 	 
	 

	 	 	 	Develop, gain approval, maintain and promulgate a strategy that
reflects and balances the Receiving Entity’s needs, goals and
objectives for the commodity
	 
	 	 	 	 
	 

	 	 	 	As an example, commodity strategy would address the efforts
necessary to use and acquire only one type of solder paste in the
Receiving Entity’s production.
	 
	 	 	 	 
	1.4.2.

	 	Create Strategic Sourcing evaluation rules
	 	Creating the method and criteria for evaluating the proposals for
the supply of the goods and services covered by the category.
	 
	 	 	 	 
	1.4.3.

	 	Gather product specifications
	 	Gathering existing product specifications including but not limited
to those related to form, fit and function in the Receiving Entity’s
business environment as well as normal and emergency lead times or
availability, probable life expectancy, warranty considerations,
maintenance terms, and quality requirements. Identify special
features of the goods or services required. Gather relevant trends
(for example, new technology, specialized products, price

			
	 	 	 
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	 	 	PROCESS	 	DEFINITION
	 

	 	 	 	changes);
and recommend for the Receiving Entity’s approval changes to
existing product specifications to further decrease procurement
costs and/or improve services provided by the suppliers.
	 
	 	 	 	 
	1.4.4.

	 	Gather applicable business unit plans and objectives
	 	Gathering and reviewing the plans and objectives of the business
units impacted by the Strategic Sourcing effort. This includes the
analysis of the impact these plans and objective may have on the
Sourcing Strategy and vice versa and reconciling these impacts.
	 
	 	 	 	 
	1.4.5.

	 	Develop supplier strategy for each category
	 	The purpose of the Supplier Strategy is to balance, manage and
implement the Receiving Entity’s needs goals and objectives for the
supply base contracted to provide the Category to the Receiving
Entity.
	 
	 	 	 	 
	 

	 	 	 	The Supplier Strategy process includes the following activities:
	 
	 	 	 	 
	 

	 	 	 	Develop, gain approval, maintain and promulgate a Supplier Strategy
for the Category. As an example, the supplier strategy would address
the efforts necessary to use and no more than one software reseller
in each country.
	 
	 	 	 	 
	1.4.6.

	 	Develop community impact strategy for category
	 	The purpose of the Community Impact Strategy is to balance, manage
and implement the Receiving Entity’s needs goals and objectives for
the its procurement activities’ impact on the community.
	 
	 	 	 	 
	 

	 	 	 	The Develop Community Impact Strategy process for the category includes the following activities:
	 
	 	 	 	 
	 

	 	 	 	Develop, gain approval, maintain and promulgate a Community Impact
Strategy. As an example, the Community Impact strategy would address
the efforts necessary to achieve X% spend with minority and
disadvantage business owners.
	 
	 	 	 	 
	1.4.7.

	 	Create Category-Specific Sourcing Strategy
	 	Distilling the results of the analysis, requirements, goals and
objectives into a single Category-Specific Sourcing Strategy for a
category or category segment, and promulgating it for the Receiving
Entity’s review and comment.

			
	 	 	 
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	 	 	PROCESS	 	DEFINITION
	1.4.8.

	 	Obtain stakeholder buy-in to Category-Specific Sourcing Strategy
	 	Soliciting and resolving comments and issues from the stakeholders
and submitting the Category-Specific Sourcing Strategy for the
Receiving Entity’s approval.
	 
	 	 	 	 
	1.4.9.

	 	Load, and maintain sourcing strategy
	 	Physically publishing, filing and loading (to the extent applicable
for the sourcing tools employed) of the strategy documentation.
Including the process of keeping the strategy documentation current
during the strategy’s execution.
	 
	 	 	 	 
	1.4.10.

	 	Approve Category-Specific Sourcing Strategy
	 	Approving the Category-Specific Sourcing Strategy.
	 
	 	 	 	 
	1.5.

	 	Sourcing
	 	The purpose of the Sourcing process is to perform the functions
necessary to identify potential suppliers and solicit and evaluate
“proposals” from the potential suppliers.

The Sourcing process includes the following activities:
	 
	 	 	 	 
	1.5.1.

	 	Identify potential suppliers for Category-Specific Strategic Sourcing
	 	Developing, updating and maintaining a listing of and information on
potential vendors for the Category-Specific Strategic Sourcing
developed in accordance with the Category-Specific Sourcing Strategy
from the listing of qualified suppliers.
	 
	 	 	 	 
	1.5.2.

	 	Gather bidding rules for Category-Specific Strategic Sourcing
	 	Gathering, reviewing and analyzing business rules for bidding for
Category-Specific Strategic Sourcing. This includes the efforts to
recommend exceptions to the bidding rules and obtaining the
Requiring Entity’s approval should specific requirements of the
category warrant the exceptions.
	 
	 	 	 	 
	1.5.3.

	 	Gather standard forms of agreements for Category-Specific Strategic Sourcing
	 	Gathering, reviewing and analyzing approved standard forms of
agreement applicable to the category. This includes the efforts to
recommend exceptions to the standard forms of agreement and
obtaining the Receiving Entity’s approval should specific
requirements of the category warrant the exceptions.
	 
	 	 	 	 
	1.5.4.

	 	Issue strategic sourcing RFx to potential suppliers
	 	Creating and issuing category specific RFI’s, RFQ’s and RFP’s (as
applicable to the Category-Specific Sourcing Strategy) and in
accordance with approved business rules for bidding to the list of
potential suppliers. This includes the effort necessary to obtain
the acceptance of stakeholders, as appropriate for the RFI, RFQ or
RFP.
	 
	 	 	 	 
	1.5.5.

	 	Evaluate strategic sourcing proposals
	 	Analyzing the potential suppliers’ responses to the RFI/RFP/RFQ (as
applicable) against each other and against

			
	 	 	 
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	 	 	 	the requirements, goals
and objectives of the Category-Specific Sourcing Strategy and
publishing the results of the analysis. This includes soliciting and
coordinating stakeholder participation the analysis.
	 
	 	 	 	 
	1.5.6.

	 	Recommend Category-Specific Strategic Sourcing supplier
	 	Recommending the selection of a supplier(s) with which to negotiate
a contract(s) based on the results of the analysis of the suppliers’
responses to the RFI/RFP/RFQ (as applicable).
	 
	 	 	 	 
	1.5.7.

	 	Obtain stakeholders approval of selected strategic sourcing vendor
	 	Creating and publishing the rationale for selecting the supplier(s)
with which to negotiate a contract(s) and soliciting and resolving
comments and issues of stakeholders.
	 
	 	 	 	 
	1.6.

	 	Approve selected supplier
	 	Approving the supplier(s) with which the Procuring Entity will
negotiate a contract(s).
	 
	 	 	 	 
	1.7.

	 	Negotiate
	 	The purpose of the “Negotiate” process is to bring to bear the
skills and experience of the Procuring Entity, as well as the
leverage provided by the status of the Procuring Entity and the
Requiring Entity in the relevant marketplace to create a deal that
allocates risk appropriate for the transaction between the Requiring
Party and the Supplier and provides benefit to the Requiring Entity
while providing an appropriate rate of return for the Supplier.
	 
	 	 	 	 
	 

	 	 	 	The Negotiate process includes the following activities:
	 
	 	 	 	 
	1.7.1.

	 	Negotiate price, delivery, terms, contracts for strategic sourcing
	 	Developing and executing the appropriate negotiation strategy to
establish (including objectives for) the final price and terms for
the contract(s) for the goods or services covered by the category.
	 
	 	 	 	 
	1.7.2.

	 	Obtain legal review as necessary for strategic sourcing
	 	Soliciting and resolving comments and issues of Receiving Entity’s
Law Department in accordance with Receiving Entity’s rules for legal
review and for deviation from Receiving Entity’s standard forms of
agreement.
	 
	 	 	 	 
	1.7.3.

	 	Execute contract
	 	Preparing the requisite number of copies of the final document and
obtaining Receiving Entity’s and the Supplier’s approval of the
contract.
	 
	 	 	 	 
	1.7.4.

	 	Load and Maintain the record of the strategic sourcing execution
	 	Physically publishing, filing, archiving and loading (to the extent
applicable for the tools employed) all documentation and reports
used and in developed during the execution of the Category Specific
Sourcing Strategy. This includes the process of keeping the files
current during Category Specific

			
	 	 	 
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	 	 	 	Sourcing Strategy’s execution.
Documentation and reports includes the results of all analysis, the
selection criteria for Suppliers used and the process and
documentations used in selecting a Supplier,
	 
	 	 	 	 
	1.8.

	 	New Supplier Implementation
	 	The purpose of the “New Supplier Implementation” process is to
communicate, implement and manage the implementation of new supplier
relationships and contracts so as to achieve the greatest acceptance
by the Receiving Entity’s organization.

The New Supplier Implementations process includes the following
activities:
	 
	 	 	 	 
	1.8.1.

	 	Develop and implement communication strategy
	 	Developing a strategy to communicate as appropriate for the
transaction the results of the sourcing within the Receiving Entity
and with Suppliers who participated in the bidding or negotiations
process but were not selected. The latter is to include an
explanation of the key reasons for non-selection and inform such
Suppliers whether future opportunities will be available to them.
	 
	 	 	 	 
	1.8.2.

	 	New Contract Implementation
	 	Implementing a new contract and Supplier including all steps to
communicate the change to the Receiving Entity’s organization, all
changes to reflect change in the P2P platform (e.g., loading hosted
catalogues, linking with punch out catalogues) all steps to train
the Supplier in conducting business with, Receiving Entity (e.g.,
training suppliers in invoicing processes etc.) and all other
supplier on boarding activities.
	 
	 	 	 	 
	1.8.3.

	 	Project manage implementation
	 	Managing the entire implementation of a new contract and Supplier.
This includes defining and providing the problem management
procedures to Suppliers, the wind down of expired and replaced
contracts, and implementation of a new contract and supplier
(introductions, catalogue deployment etc.)
	 
	 	 	 	 
	1.9.

	 	Performance Measurement
	 	The purpose of the “Performance Measurement” process is to establish
the rules, standards and methods for judging the supplier’s
performance in meeting the requirements of the Receiving Entity.

			
	 	 	 
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	 	 	 	The Performance Measurement process includes the following
activities:
	 
	 	 	 	 
	1.9.1.

	 	Create strategic vendor performance measuring rules
	 	Creating and securing the supplier’s agreement to rules to measure
the suppliers’ performance under the contract. This includes
establishing the “Measure” itself (e.g. the average time in days
between the purchase order’s receipt by the supplier and Receiving
Entity’s receipt of the goods ordered.) and the standard to which
the supplier’s actual performance will be compared (e.g. in any one
quarter 95% delivered within 5 days.)
	 
	 	 	 	 
	1.9.2.

	 	Create process to measure performance of strategic vendors
	 	Creating, securing the supplier’s agreement to the method of
measuring performance (e.g., the time between the issuance of the PO
in the P2P tool and the notice of receipt by Receiving Entity as
registered in the P2P tools), measuring performance and then
reporting the performance to the supplier and resolving any issues
with the supplier
	 
	 	 	 	 
	1.10.

	 	Ongoing Category Management.
	 	The purpose of the Ongoing Category Management process is to
routinely monitor changes in the market, the Receiving Entity’s
business, its goals and objects and the supplier’s performance, and
maintain, keep current and make changes to contracts and strategies
to insure their effectiveness.
The Ongoing Category Management process includes the following
activities:
	 
	 	 	 	 
	1.10.1.

	 	Monitor contracts and keep current
	 	Monitor the Contracts and take action, as appropriate, for
modification (for example, with respect to Receiving Entity or
Supplier initiated technical or commercial changes), renewal,
expiration, termination, or renegotiation as agreed by the Receiving
Entity. Review then-standard forms of agreement and actual terms and
conditions in the then-current Contracts and make recommendations
for improvements for Receiving Entity’s review and approval.
	 
	 	 	 	 
	1.10.2.

	 	Measure strategic sourcing project results to objectives
	 	Measuring and reporting on the actual results of a strategic
sourcing against the goals established for the sourcing.
	 
	 	 	 	 
	1.10.3.

	 	Maintain Sourcing Strategy
	 	Review, update and implement changes to the Sourcing Strategies for
each Commodity to determine whether the Sourcing Strategy continues
to meet Receiving Entity’s need for the products and goals for cost
and performance and using the results of such review (and other
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	 	 	 	recommend changes to the Receiving Entity.
	 
	 	 	 	 
	1.10.4.

	 	Measure strategic vendor performance
	 	Measuring the performance of the strategically sourced suppliers
using the measurement process and measurement standard determined
during the sourcing effort.
	 
	 	 	 	 
	1.10.5.

	 	Measure tactical buying vendor’s performance
	 	Measuring the performance of the tactically sourced supplier using
the measurement process and measurement standard determined during
the sourcing effort.
	 
	 	 	 	 
	1.10.6.

	 	Manage dispute resolutions with supplier
	 	Manage and resolve disputes with suppliers, including any decision
to pursue, initiate, and/or conduct (and for pursuing, initiating
and/or conducting) legal proceedings to resolve supplier contract or
agreement issues.
	 
	 	 	 	 
	2.

	 	Tactical Buying
	 	The purpose of the “Tactical Buying” process is to use reasonable
commercial efforts (including leveraging Receiving Entity’s current
and, as applicable, future purchasing volumes) to secure a contract,
for the acquisition of a single or irregularly (non-repetitively)
purchased item, which contain optimum pricing and the quality and
measurable service levels to meet Receiving Entity’s requirements.
The Category Sourcing Strategy will establish criteria for when
Tactical Buying processes will be used and when the rigors of
Strategic Sourcing will be applied to the purchases which otherwise
will be tactically purchased.
	 
	 	 	 	 
	 

	 	 	 	The Tactical Buying process includes the following activities:
	 
	2.1.

	 	Sourcing for Tactical Purchases
	 	The purpose of the Sourcing for Tactical Purchases process is to
perform the functions necessary to identify potential suppliers and
solicit and evaluate “proposals” from the potential suppliers for
Tactical Purchases.
	 
	 	 	 	 
	 

	 	 	 	The Sourcing for Tactical Purchases process includes the following
activities
	 
	 	 	 	 
	2.1.1.

	 	Confirm product and service specifications
	 	Confirming the product and service specification called for in the
originating requisition. This includes expanding the details of the
specification to a level required for Tactical Buying and as
necessary including the goals and objectives(business requirements)
of the Receiving Entity for the good and services acquired.

			
	 	 	 
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	2.1.2.

	 	Identify potential source for Tactical Purchase
	 	Identifying a potential supplier for the scope of the tactical
purchase
	 
	 	 	 	 
	2.1.3.

	 	Issue RFx to potential tactical buying vendors
	 	Creating and issuing specific RFI’s, RFQ’s and RFP’s (as applicable
to the strategy) and in accordance with Receiving Entity’s business
rules for bidding to the list of potential suppliers. This includes
the effort necessary to obtain the acceptance of Receiving Entity’s
stakeholders.
	 
	 	 	 	 
	2.1.4.

	 	Evaluate tactical buying proposals
	 	Analyzing the suppliers’ responses to the RFI’s, RFP’s and RFQ’s (as
applicable) against each other and the requirements, goals and
objectives of the applicable category sourcing strategy and
publishing the results of the analysis.
	 
	2.1.5.

	 	Select tactical buying vendor
	 	Selecting a supplier(s) with which to negotiate a contract(s) based
on the results of the analysis of the suppliers’ responses.
	 
	 	 	 	 
	2.1.6.

	 	Confirm recommended tactical buying vendor with stakeholders
	 	Creating and publishing the rationale for selecting the supplier(s)
with which to negotiate a contract(s) and soliciting and resolving
comments and issues of the stakeholders.
	 
	 	 	 	 
	2.1.7.

	 	Negotiate price, delivery, terms, contract of tactical buying
	 	Developing and executing the appropriate negotiation strategy to
establish (including objectives for the final price and terms for
the contract(s) for the tactically sourced product.
	 
	 	 	 	 
	2.1.8.

	 	Obtain legal review as necessary for tactical sourcing
	 	Soliciting and resolving comments and issues of Receiving Entity’s
Law Department in accordance with Receiving Entity’s rules for legal
review and for deviation from Receiving Entity’s standard forms of
agreement.
	 
	 	 	 	 
	2.1.9.

	 	Execute contract
	 	Preparing the requisite number of copies of the final document and
obtaining Receiving Entity’s and the supplier’s approval of the
contract.
	 
	 	 	 	 
	2.1.10.

	 	Communicate specifics of tactical buying contract
	 	Communicate the results of the sourcing internally within the
Receiving Entity and with suppliers who participated in the bidding
or negotiations process but were not selected. The latter is to
include an explanation of the key reasons for non-selection and
inform such suppliers whether future opportunities will be available
to them.
	 
	 	 	 	 
	2.2.

	 	Performance Measurement on Tactical Purchase
	 	The purpose of the “Performance Measurement on Tactical Purchases”
process is to establish the rules, standards and methods for judging
the supplier’s performance in meeting

			
	 	 	 
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	 	 	 	the requirements of the
Receiving Entity.
	 

	 	 	 	The Performance Measurement on Tactical Purchases process includes
the following activities:
	 
	 	 	 	 
	2.2.1.

	 	Measure tactical project results to objectives
	 	Compare the results of the tactical buying with the goals and
objectives identified in the requisition and the respective product
specification.
	 
	 	 	 	 
	2.2.2.

	 	Create tactical vendor performance measuring rules
	 	Creating and securing the supplier’s agreement to the rules to
measure the suppliers’ performance under the contract. This includes
establishing the “Measure” itself (e.g. the average time in days
between the purchase order’s receipt by the supplier and Receiving
Entity’s receipt of the goods ordered.) and the standard to which
the supplier’s actual performance will be compared (e.g. in any one
quarter 95% delivered within 5 days.)
	 
	 	 	 	 
	2.2.3.

	 	Create process to measure performance of tactically sourced vendor
	 	Creating, securing the supplier’s agreement to the method of
measuring performance. measuring performance and then reporting the
performance to the supplier and resolving any issues with the
supplier
	 
	 	 	 	 
	2.2.4.

	 	Issue tactical buying PO (Purchase Order)
	 	Issuing the purchase order to the tactically sourced supplier.
	 
	 	 	 	 
	3.

	 	Stakeholder
	 	The purpose of the Stakeholder process is to gain the insight,
participation and approval of the appropriate individuals from the
Receiving Entity.
	 
	 	 	 	 
	 

	 	 	 	The “Stakeholder” process includes the following activities:
	 
	 	 	 	 
	3.1.

	 	Stakeholder requirements
	 	Specify the skills, knowledge, and authority levels required and the
required commitment for the category activity.
	 
	 	 	 	 
	3.2.

	 	Stakeholder Participation
	 	Identify the appropriate individuals from the Receiving Entity and
provide stakeholder input.
	 
	 	 	 	 
	4.

	 	Contract and Catalogue Management
	 	The purpose of the Contract and Catalogue Management process is to
assure that Contracts and Catalogues are available for future use
and are accurate when used.

			
	 	 	 
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	 	 	 	The Contract and Catalogue Management process includes the following
activities:
	 
	 	 	 	 
	4.1.

	 	Contract Management
	 	The purpose of the Contract Management process is to assure that
Contracts are available for future use and are accurate when used.
	 
	 	 	 	 
	 

	 	 	 	The Contract Management process includes the following activities:
	 
	 	 	 	 
	4.1.1.

	 	Create contract files/documents
	 	Gathering the contracts and the supporting documentation (RFx’s
proposals, negotiating notes)
	 
	 	 	 	 
	4.1.2.

	 	Load and maintain contract files
	 	File and load (as appropriate for the tools employed) contract files
and keeping file current.
	 
	 	 	 	 
	4.1.3.

	 	Maintain repository of all original contracts
	 	Maintain a repository for all original contract documents in
accordance with Receiving Entity’s record retention business rules.
	 
	 	 	 	 
	4.2.

	 	Catalog Management
	 	The purpose of the Catalogue Management process is to assure that
catalogs are available for future use and are accurate when used.
	 
	 	 	 	 
	 

	 	 	 	The Catalogue Management process includes the following activities:
	 
	 	 	 	 
	4.2.1.

	 	Create catalog of pre-negotiated items, source, price, delivery
	 	Create and maintain in the P2P Platform a commodity catalog database
customized for the Receiving Entity containing products and their
pre-negotiated prices.
	 
	 	 	 	 
	 

	 	 	 	Two types of catalogues are anticipated. The Punch-Out Catalogue is
typically used when the supplier’s catalogue of products is too
large to be hosted in the P2P platform or when it is more
commercially reasonable to make use of the supplier’s catalogue and
still provide the required functionality and performance. The Hosted
Catalogue is a supplier’s catalogue hosted in the P2P platform.
	 
	 	 	 	 
	 

	 	 	 	For Hosted Catalogues , this is the process of gathering, from
suppliers with which a contract has been made, product and commodity
data, pricing and other pre-negotiated terms and conditions (and
updates thereto) for the products covered by the contract.

			
	 	 	 
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	 	 	 	For Punch-Out Catalogues, this is the process for gathering all the
required information necessary to enable access to the supplier’s
catalogue.
	 
	 	 	 	 
	4.2.2.

	 	Load catalog of pre-negotiated items, source, price, delivery
	 	Load a commodity catalog database customized for the Receiving
Entity containing products and their pre-negotiated prices in the
P2P Platform.
	 
	 	 	 	 
	 

	 	 	 	For Hosted Catalogues, the process includes loading the catalogue
content (and updates thereto) into the P2P platform and enabling its
use including managing the testing and cutover of required changes
to existing catalogs in production or the promotion of new catalogs
into production.
	 
	 	 	 	 
	 

	 	 	 	For Punch-Out Catalogues, the process of enabling access to the
supplier’s catalogue by the P2P and make use of the functionality,
(including managing the testing and cutover of required changes to
existing catalogs in production or the promotion of new catalogs
into production).
	 
	 	 	 	 
	4.2.3.

	 	Maintain catalog of pre-negotiated items, source, price, delivery
	 	Update (and recommending updates to) catalogues and links already
loaded in the P2P including managing the testing and cutover of
required changes to existing catalogs in production or the promotion
of new catalogs into production. With respect to Hosted Catalogues
this includes cleansing data and maintaining data integrity.
	 
	 	 	 	 
	5.

	 	Procurement
	 	The purpose of the Procurement process is to transform the
transactional needs of the Receiving Entity into actionable
documentation for the acquisition of goods and services.

The Procurement process includes the following activities:
	 
	 	 	 	 
	5.1.

	 	Scoping
	 	The purpose of the Scoping process is to gather the needs for goods
and services.

The Scoping process includes the following activities:
	 
	 	 	 	 
	5.1.1.

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

			
	 	 	 
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	 	 	 	determining and managing the
required inventory items and inventory levels as well as developing
and specifying delivery requirements.
	 
	 	 	 	 
	5.2.

	 	Requisitioning
	 	The purpose of the Requisitioning process is to reduce the scope of
supply for a purchase and to associate accounting requirements into
an actionable instrument and to gain the requisite approvals to the
requisition.
	 
	 	 	 	 
	 

	 	 	 	The Requisitioning process includes the following activities:
	 
	5.2.1.

	 	Create requisition
	 	Reducing scope and schedule requirements to an actionable document,
the requisition. This includes the specification of accounting and
financial information to assure proper handling of costs. This may
include identification of a suggest supplier of the product.
	 
	 	 	 	 
	5.2.2.

	 	Approve or reject requisition
	 	Approving or rejecting a requisition of goods and services and
specification of accounting and financial information.
	 
	 	 	 	 
	5.3.

	 	Ordering
	 	The purpose of the Ordering process is to place an order for a scope
of supply and associate schedule with a supplier.
	 
	 	 	 	 
	 

	 	 	 	The Ordering process includes the following activities:
	 
	5.3.1.

	 	Validate content of approved requisitions with vendors
	 	Comparing the scope and schedule contained in the requisition with
what is available from the suppliers. This includes reconciling
discrepancies with the supplier and the requester and correcting
data to maintain data integrity. For orders covered by contracts and
catalogues this includes comparing the requisition with the contract
and catalogue and making corrections. For non-contract orders this
includes interaction with the vendors and the requestors to confirm
and then to make corrections.
	 
	 	 	 	 
	5.3.2.

	 	Re-direct orders to preferred vendors and catalogues
	 	Directing requisitions to preferred suppliers and catalogues. For
requisitions that include a suggested supplier but not a preferred
supplier or an existing contract, this may include communications
with the requester and/or the approver directly.
	 
	 	 	 	 
	5.3.3.

	 	Report nonconforming requisitions
	 	Reporting nonconforming requisitions to the Receiving Entity for
follow up to increase compliance. Nonconforming requisitions are
requisitions which request order placement with non-preferred
suppliers or requisitions which request non standard products or
services and which when pressed the requester insists on placement
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	 	 	 	or the non-standard product.
	 
	 	 	 	 
	5.3.4.

	 	Identify requisitions for tactical buying
	 	Identifying a requisition in accordance with the Receiving Entity’s
business rules for the increased rigors of tactical buying. The
business rule may include cost and/or category criteria.
	 
	 	 	 	 
	5.3.5.

	 	Identify potential source
	 	Identifying a potential supplier in accordance with when a
requisition does not specify a suggested vendor and where a
preferred supplier is not available and where the business rules for
tactical sourcing have not been met.
	 
	 	 	 	 
	5.3.6.

	 	Manage resolution of requisition inconsistencies
	 	Managing the resolution of inconsistencies between the approved
requisitions and supplier’s catalogues.
	 
	 	 	 	 
	5.3.7.

	 	Gather business rules for import/export, tax, freight and duty requirements.
	 	Gathering and reviewing Receiving Entity’s business rules regarding
import/export, tax, freight and duty and analyzing their impact on
the requisition.
	 
	 	 	 	 
	5.3.8.

	 	Confirm import/export, tax, freight and duty with vendor.
	 	Reviewing Receiving Entity’s business rules regarding import/export,
tax, freight and duty with the supplier (or the contract) and
confirming the supplier’s acceptance.
	 
	 	 	 	 
	5.3.9.

	 	Issue PO
	 	Issue the purchase order to the supplier. This may be done in paper
or via electronic means.
	 
	 	 	 	 
	5.3.10.

	 	Confirm vendor receipt of PO and acknowledgement of delivery
	 	Confirming the supplier’s receipt of the purchase order and
receiving the supplier’s acceptance or acknowledgement of the
purchase order. This may be done in paper or via electronic means.
	 
	 	 	 	 
	5.3.11.

	 	Adjusting delivery/expedite
	 	Expediting delivery to meet the needs of the Receiving Entity. This
includes working with the requester to determine the actual schedule
needs, negotiating schedule improvement and expediting charges with
the supplier and maintaining a record the transaction for future
improvement. This also includes escalating the issue to increasing
levels within the supplier organization to meet the Receiving
Entity’s needs.
	 
	 	 	 	 
	5.3.12.

	 	Monitor ordering activity to identify strategic sourcing opportunities
	 	Monitoring ordering activities to identify strategic sourcing
opportunities. Typical examples include consumption which greatly
exceeds the projected use for the sourcing and repetitive purchases
of a product that was not previously sourced.
	 
	 	 	 	 
	6.

	 	Receiving
	 	The purpose of the Receiving process is to physically take
possession of the goods or services ordered and to advise the
appropriate parties.

			
	 	 	 
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	 	 	 	The Receiving process includes the following activities:
	 
	 	 	 	 
	6.1.

	 	Receiving	 	 
	 
	 	 	 	 
	6.1.1.

	 	Receive delivered materials
	 	Receiving the goods ordered from the supplier. This includes the
receipt and any and all receiving inspections, verification of
compliance to specification and certification requirements, and the
placement of the goods into inventory as necessary.
	 
	 	 	 	 
	6.1.2.

	 	Manage delivery of ordered services
	 	Managing and monitoring the delivery of services ordered from the
supplier. This includes the receipt and all receiving inspections,
verification of compliance to specification and certification of the
deliverables, tracking time, resolving corrective action
requirements, monitoring the quality of the service, receiving all
insurance and quality documentations and final inspections of work.
	 
	 	 	 	 
	6.1.3.

	 	Load receipt of materials and services
	 	Loading the receipt of materials and services into the P2P solution.
	 
	 	 	 	 
	6.1.4.

	 	Reconcile data integrity
	 	Updating data sources for consistency to reflect product and
quantities actually received and accepted.
	 
	 	 	 	 
	7.

	 	Accounts Payable
	 	The purpose of the Accounts Payable process is to take possession
of the supplier’s invoice for goods or services ordered and
received, to verify its correctness and make payment, as applicable.
	 
	 	 	 	 
	 

	 	 	 	The Accounts Payable process includes the following activities:
	 
	7.1.

	 	PO related Invoice
	 	A “PO Invoice” is a supplier’s invoice that is related to an issued
PO.
	 
	 	 	 	 
	7.1.1.

	 	Receive PO Invoice
	 	Taking receipt of the supplier’s PO Invoice.
	 
	 	 	 	 
	7.1.2.

	 	Load PO invoice
	 	Loading the supplier’s PO Invoice into the P2P platform. This may
include scanning a paper PO Invoice and loading appropriate data
into the P2P platform.
	 
	 	 	 	 
	7.1.3.

	 	Match PO invoice,
	 	Matching the PO Invoice to the notice of receipt of the goods or
services and to the PO
	 
	 	 	 	 
	7.1.4.

	 	Approve PO invoice
	 	Providing final approval of the PO Invoice. This can be in the form
of a positive confirmation approving the invoice (e.g., “I approve
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	 	 	 	approving the
invoice (e.g., “Unless you advise otherwise by mm/dd/yy the invoice
will be paid on MM/DD/YY.” NEG CON) or if applicable, a record of
the goods receipt depending on the business rules.
	 
	 	 	 	 
	7.1.5.

	 	Resolve PO invoice discrepancies
	 	Resolving discrepancies among the PO Invoice, the PO and the
products actually received.
	 
	 	 	 	 
	7.1.6.

	 	Archive PO invoice
	 	Placing the PO Invoice in long term retention consistent with the
business rules.
	 
	 	 	 	 
	7.2.

	 	Non PO related Invoice
	 	A “non-PO Invoice” is a supplier’s invoice that is not related to an
issued PO.
	 
	 	 	 	 
	7.2.1.

	 	Receive non-PO invoice
	 	Taking receipt of a supplier’s non-PO Invoice.
	 
	 	 	 	 
	7.2.2.

	 	Load non-PO invoice
	 	Loading the supplier’s non-PO Invoice into the P2P platform.
	 
	 	 	 	 
	7.2.3.

	 	Approve non-PO invoice
	 	Providing final approval of the non-PO Invoice.
	 
	 	 	 	 
	7.2.4.

	 	Resolve non-PO invoice issues
	 	Resolving issues regarding the non PO Invoice.
	 
	 	 	 	 
	7.2.5.

	 	Archive non -PO invoice
	 	Placing the non-PO Invoice in long term retention consistent with
the business rules.
	 
	 	 	 	 
	7.3.

	 	Pay
	 	The purpose of the Pay process is to pay the approved invoices
presented to the Receiving Entity.
	 
	 	 	 	 
	 

	 	 	 	The Pay process includes the following activities:
	 
	 	 	 	 
	7.3.1.

	 	Create and transmit the payment proposal file
	 	Creating an electronic file that provides the Receiving Entity the
data reasonably necessary to pay and account for all approved PO and
non-PO Invoices (payment proposal file) and transmitting the file to
the Receiving Entity for review and comment. The format of the file
and the number of file will be as provided for in business rules.
	 
	 	 	 	 
	7.3.2.

	 	Revise the payment proposal file
	 	As applicable, revise the payment proposal file as required by the
comments of the Receiving Entity.
	 
	 	 	 	 
	7.3.3.

	 	Approve payment proposal file
	 	Approve the revised or original payment proposal file (as
appropriate).
	 
	 	 	 	 
	7.3.4.

	 	Create and Send “OK to
Pay” file
	 	Based up on the approved payment proposal file, creating and sending
an electronic file (or files) that provides the Receiving Entity all
of the data reasonably necessary to pay and account for all approved
PO and non-PO Invoices (the “OK to Pay” file). The format of the
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	 	 	 	and the mode of transmittal will be as
provided for in business rules.
	 
	 	 	 	 
	7.3.5.

	 	Pay invoices
	 	Receive “OK to Pay” file, account for and pay the approved PO and
non-PO Invoices in accordance with business rules.
	 
	 	 	 	 
	7.3.6.

	 	Provide payment confirmation
	 	Create and transmit confirmation of payment (includes providing
payment status, as necessary).
	 
	 	 	 	 
	7.3.7.

	 	Provide accounting data
	 	Creating an electronic file that provides the Receiving Entity the
data reasonably necessary to account for all received but not yet
approved PO and non-PO Invoices and all paid invoices. The format of
the file, the number of files and the accounting rules by which the
data are develop will be as provided for in the business rules.
	 
	 	 	 	 
	8.

	 	Return
	 	The purpose of the Return process is to identify non-conforming and
excess goods, return them to the supplier and obtain payment or
credit in exchange.

The Return process includes the following activities:
	 
	8.1.

	 	Identify
	 	The purpose of the Identify process is to identify non-conforming
and excess goods and determine whether actions should put into place
to return the goods and obtain payment or credit.
	 
	 	 	 	 
	 

	 	 	 	The Identify process includes the following activities:
	 
	 	 	 	 
	8.1.1.

	 	Identify non conforming and excess material
	 	Identify material that does not conform to the PO, material that
fails to meet supplier’s warranty obligations and material which is
excess of actual requirements.
	 
	 	 	 	 
	8.1.2.

	 	Determine Return requirements
	 	Gather and review business rules regarding the return of good,
analyzing the rules impact on previously identified excess,
non-conforming and warranty claim material to determine the actual
products and quantities to be returned to the supplier and other
follow up activities. Other follow up activities may include
tracking supplier nonconformance and other performance.
	 
	 	 	 	 
	8.2.

	 	Obtain Authorization
	 	The purpose of the Obtain Authorization process is to obtain the
supplier’s authorization to return goods.
	 
	 	 	 	 
	 

	 	 	 	The Obtain Authorization process includes the following activities:

			
	 	 	 
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	8.2.1.

	 	Obtain authorization for returns from vendor
	 	Communicating with the suppliers to arrange for and gaining
authorization to return products. This may include obtaining
necessary return authorization numbers, negotiating the terms of the
return and the credits afforded the Receiving Entity.
	 
	 	 	 	 
	8.2.2.

	 	Communicate return requirements to requestor
	 	Informing the Receiving Entity of the terms and specific rudiments
of the return.
	 
	 	 	 	 
	8.3.

	 	Returning
	 	The purpose of the Returning process is to physically return goods
to the supplier.

The Returning process includes the following activities:
	 
	 	 	 	 
	8.3.1.

	 	Return of materials to supplier
	 	Physically return material to the supplier in accordance with the
terms and specific rudiments of the return authorization. This
includes packing, affixing appropriate package identification, and
arranging for and shipping product.
	 
	 	 	 	 
	8.4.

	 	Return Follow up and Closure
	 	The purpose of the Return Follow up and Closure process is to assure
that the supplier has taken possession of the return goods and that
all follow up actions are completed.
	 
	 	 	 	 
	 

	 	 	 	The Return Follow up and Closure process includes the following
activities:
	 
	 	 	 	 
	8.4.1.

	 	Manage and Resolve Manage return corrective actions
	 	Resolve issues and track completion of the return process with the
supplier. This includes following up with the supplier’s to confirm
their receipt of the goods and that credits are approved and project
managing the activities of the Receiving Entity and the supplier to
resolve disputes and complete the return or disposition.
	 
	 	 	 	 
	8.4.2.

	 	Return Closure
	 	Ensure payment, credit or replacement has been received from the
supplier and create a complete record of the return. This latter
step includes changes, as appropriate, to the requisition, PO, and
PO invoice that return occurred as well as other steps to insure
data integrity thought out the P2P platform.
	 
	 	 	 	 
	9.

	 	Supply Base Management	 	 
	 
	 	 	 	 
	9.1.

	 	Vendor Qualification
	 	The purpose of the Vendor Qualification process is to provide
assurance the entities that serve as suppliers meet the financial
and community goals of the Receiving Entity.
	 
	 	 	 	 
	 

	 	 	 	The Vendor Qualification process includes the following

			
	 	 	 
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	 	 	 	activities:
	 
	 	 	 	 
	9.1.1.

	 	Supplier qualification/disqualification process
	 	Qualifying or disqualify an entity to serve as a supplier in
accordance with the business rules
	 
	 	 	 	 
	9.1.2.

	 	Qualify new vendors
	 	Obtain and review supplier information about themselves and their
products and compare it to the business rules. Perform any other
investigations required by the business rules.
	 
	 	 	 	 
	9.2.

	 	Create Load and Maintain data
	 	The purpose of the Create Load and Maintain data process is to
assure that required data is created, filed and maintained current
for future use and reporting.
	 
	 	 	 	 
	 

	 	 	 	The Create Load and Maintain data process includes the following
activities:
	 
	 	 	 	 
	9.2.1.

	 	Create, load and maintain Spend data
	 	Create, load (as appropriate for the tools employed) and maintain as
current data on Receiving Entity’s spend in order to support
Receiving Entity’s Finance and Accounting requirements and to
support the needs of Strategic and Tactical buying activities.
	 
	 	 	 	 
	9.2.2.

	 	Create, load and maintain Vendor data
	 	Gather, create, load (as appropriate for the tool employed), and
maintain as current supplier data that is necessary to conduct
business to ensure accuracy.
	 
	 	 	 	 
	9.2.3.

	 	Create, load and maintain Vendor performance data
	 	Gather, create, load (as appropriate for the tool employed), and
maintain as current data as acquired from the Vendor Performance
Measurement Process, supplier management needs and to support the
needs of the Strategic and Tactical Buying activities.
	 
	 	 	 	 
	9.2.4.

	 	Create, load and maintain Consumption Data
	 	Gather, create, load (as appropriate for the tool employed), and
maintain as current data on consumption in order to support business
management needs and to support the needs of Strategic and Tactical
Buying activities.
	 
	 	 	 	 
	9.2.5.

	 	Create, load and maintain Market data
	 	Gather, create, load (as appropriate for the tool employed), and
maintain as current category market data to support the needs of
Strategic and Tactical Buying activities.
	 
	 	 	 	 
	9.2.6.

	 	Create and update requisitioner and approver data
	 	Gather, create and update, requisitioner and approver data
(including identification of persons authorized to create or approve
requisitions including approval levels), as required for the P2P
tool.
	 
	 	 	 	 
	9.2.7.

	 	Load and maintain requisitioner and approver data
	 	Load (as appropriate for the tool employed), and maintain as current
requisitioner and approver data, (including updates) required for
the P2P tool.

			
	 	 	 
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	9.3.

	 	Reporting
	 	The purpose of the Reporting process is to provide timely and
accurate reports for managing the supply chain activities. This
includes finance, accounting, performance monitoring and strategic
and Tactical Buying.
	 
	 	 	 	 
	 

	 	 	 	The Reporting process includes the following activities:
	 
	 	 	 	 
	9.3.1.

	 	Create report generating facility
	 	Loading all data into a reporting facility. Create standard report
templates for all Procurement, Receiving, Accounts Payable Returns
and Performance activities.
	 
	 	 	 	 
	9.3.2.

	 	Provide agreed up on reports
	 	Provide agreed upon reports on all Procurement, Receiving, Accounts
Payable Returns and Performance activities.
	 
	 	 	 	 
	9.3.3.

	 	Issue ad hoc reports
	 	Generate ad hoc (or, one time or irregularly generated) reports as
required on all Procurement, Receiving, Accounts Payable Returns and
Performance activities.
	 
	 	 	 	 
	9.4.

	 	Create Load and Maintain Plans and Files
	 	The purpose of the Create, Load and Maintain Plans and Files process
is to assure that required plans and files are created, filed and
maintained current for future use and reporting.
	 
	 	 	 	 
	 

	 	 	 	The Create Load and Maintain Plans and Files process includes the
following activities:
	 
	 	 	 	 
	9.4.1.

	 	Load and maintain Strategic Sourcing Plans
	 	File and load (as appropriate for the tools employed) all strategic
sourcing plans developed and to keep the sourcing files current.
	 
	 	 	 	 
	9.4.2.

	 	Create, load and maintain business unit plans
	 	Create and publish business plans as needed to conduct strategic and
tactical buying. File and load (as appropriate for the tools
employed) and keep the files current.
	 
	 	 	 	 
	9.4.3.

	 	Create, load and maintain contract files
	 	Create and publish the executed contracts as needed to allow them to
be used to conduct business. File, load (as appropriate for the
tools employed) and keep the files current.
	 
	 	 	 	 
	9.4.4.

	 	Create product specifications
	 	Create and update specifications for the form, fit and functions and
the performance and quality requirements for the products required
by the Receiving Entity.
	 
	 	 	 	 
	9.4.5.

	 	Load and maintain product specifications
	 	File and load (as appropriate for the tool employed), specifications
for the form, fit and functions and the performance and quality
requirements for the products required by Receiving Entity and for
maintain the files current.

			
	 	 	 
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	10.

	 	Supply Chain Management	 	 
	 
	 	 	 	 
	10.1.

	 	Create Standard RFx instruments
	 	The process of creating, maintaining and periodically updating, as
required for each Commodity, electronic RFx templates (for example,
RFI, RFP and RFQ forms) that include, for example, Customer’s
standard procurement terms and conditions, contact information,
Commodity specifications, financing and payment terms and
preferences, if applicable, delivery tolerances and required service
levels;
	 
	 	 	 	 
	10.2.

	 	Create and Update Business Rules
	 	The purpose of the Create Business Rules process is to assure
required business rules are in place, current for conducting all
supply chain activities.
	 
	 	 	 	 
	 

	 	 	 	The Create Load and Maintain Business Rules process includes the
following activities:
	 
	10.2.1.1

	 	Strategic sourcing rules
	 	Establish, document and update the business rules that guide the
Strategic Sourcing. These rules may be specific to specific
categories including rules associated with efforts by Customer to
maintain other business relationships.
	 
	 	 	 	 
	10.2.1.2

	 	Bidding rules
	 	Establish, document and update the business rules that guide the
competitive bidding process, rules for exemptions from the
competitive bidding process and rules for assuring the acquisition
of competitive pricing when bidding is not possible.
	 
	 	 	 	 
	10.2.1.3

	 	Tactical buying rules
	 	Establish, document and update the business rules that initiate
tactical buying and that guide the tactical buying process.
	 
	 	 	 	 
	10.2.1.4

	 	“Qualified Vendor” business rules
	 	Establish, document and update the business rules that establish the
minimum acceptance criteria for becoming a supplier. Including
Certification requirements for Hazardous materials and the such
	 
	 	 	 	 
	10.2.1.5

	 	Logistic rules
	 	Establish, document and update the business rules that establish the
logistic channels used by supplier providing products.
	 
	 	 	 	 
	10.2.1.6

	 	Standard forms of agreement
	 	Establish, document and update the standard forms of agreements for
the acquisition of goods and services.
	 
	 	 	 	 
	10.2.1.7

	 	Contracting/deviation from of standard forms of agreement rules
	 	Establish, document and update the business rules that outline the
allowed flexibility in negotiation of terms and conditions which
deviate those identified in the Standard forms of Agreement. The
rules also include the criteria (price,

			
	 	 	 
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	 	 	 	commodity, etc.) where
separate legal review by Receiving Entity is required.
	 
	 	 	 	 
	10.2.1.8

	 	Import/export tax freight and duty rules
	 	Establish, document and update the business rules that guide the
handling of import and export tax, freight and duty.
	 
	 	 	 	 
	10.2.1.9

	 	Returns rules
	 	Establish, document and update the business rules that guide the
return of excess or non-conforming goods. These may include minimum
value of returns and the steps to be taken when a products value is
small when compared with the cost of returning.
	 
	 	 	 	 
	10.2.2.

	 	Load, File and Maintain Business Rules
	 	The purpose of the Load, File and Maintain Business Rules process is
to assure that the required business rules are in current and
available for future use in conducting all supply chain
activities.

The Load, File and Maintain Business Rules process includes the
following activities:
	 
	 	 	 	 
	10.2.2.1

	 	Strategic Sourcing rule
	 	Load (as appropriate for the tool employed) File and Maintain the
business rules that guide the Strategic Sourcing. These rules may be
specific to specific categories including rules associated with
efforts by Customer to maintain other business relationships.
	 
	 	 	 	 
	10.2.2.2

	 	Bidding rules
	 	Load (as appropriate for the tool employed) File and Maintain the
business rules that guide the competitive bidding process, rules for
exemptions from the competitive bidding process and rules for
assuring the acquisition of competitive pricing when bidding is not
possible.
	 
	 	 	 	 
	10.2.2.3

	 	Tactical buying rules
	 	Load (as appropriate for the tool employed) File and Maintain the
business rules that initiate tactical buying and that guide the
tactical buying process.
	 
	 	 	 	 
	10.2.2.4

	 	“Qualified Vendor” business rules
	 	Load (as appropriate for the tool employed) File and Maintain the
business rules that establish the minimum acceptance criteria for
becoming a supplier.
	 
	 	 	 	 
	10.2.2.5

	 	Logistic rules
	 	Load (as appropriate for the tool employed) File and Maintain the
business rules that establish the logistic channels used by supplier
providing products.
	 
	 	 	 	 
	10.2.2.6

	 	Standard forms of agreement
	 	Establish, document and update the standard forms of agreements for
the acquisition of goods and services.
	 
	 	 	 	 
	10.2.2.7

	 	Contracting/deviation from of standard forms of agreement rules
	 	Load (as appropriate for the tool employed) File and Maintain the
business rules that outline the allowed flexibility in

      

			
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	 	 	 	negotiation
of terms and conditions which deviate those identified in the
Standard forms of Agreement. The rules also include the criteria
(price, commodity, etc.) where separate legal review by Receiving
Entity is required.
	 
	 	 	 	 
	10.2.2.8

	 	Import/export tax freight and duty rules
	 	Load (as appropriate for the tool employed) File and Maintain the
business rules that guide the handling of import and export tax,
freight and duty.
	 
	 	 	 	 
	10.2.2.9

	 	Returns rules
	 	Load (as appropriate for the tool employed) File and Maintain the
business rules that guide the return of excess or non-conforming
goods. These may include minimum value of returns and the steps to
be taken when a products value is small when compared with the cost
of returning.
	 
	 	 	 	 
	10.3.

	 	Enforce Business Rules
	 	The purpose of the Enforce Business Rules is to assure compliance
with the business rules.

The Enforce Business Rules process includes the following activities:
	 
	 	 	 	 
	10.3.1.

	 	Monitor compliance with business rules
	 	Monitor all of the processes’ compliance to the business rules by
continuous observation or by periodic audit in accordance with
pre-established routine or by cause.
	 
	 	 	 	 
	10.3.2.

	 	Enforce compliance with business rules
	 	Enforce compliance with to the business rules by requiring actions
to correct and prevent recurrence.
	 
	 	 	 	 
	10.4.

	 	Legal
	 	The purpose of the Legal process is to provide assurance that the
contracts developed meet the required legal standards.

The Legal process includes the following activities:
	 
	 	 	 	 
	10.4.1.

	 	Conduct legal review
	 	Conducting the legal review of contracts which terms and conditions
deviate from the Standard forms of Agreement beyond the flexibility
afforded in the applicable business rules or where established
criteria have been met which initiate separate legal review.
	 
	 	 	 	 
	10.5.

	 	Tax
	 	The purpose of the Tax process is to assure that the Receiving
Entity’s tax liability is adequately addressed.
	 
	 	 	 	 
	10.5.1.

	 	Administration
	 	Identify which taxes and amounts are included in the invoices for
the goods and services acquired. Track taxes as presented and paid.
	 
	 	 	 	 
	10.5.2.

	 	Pay Taxes
	 	Pay taxes imposed by applicable legislative bodies.

      

			
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	10.5.3.

	 	Compliance
	 	Assuring compliance to laws and regulations for taxes on the goods
and services acquired and for paying taxes due but not collected and
for recovering taxes paid but not due.
	 
	 	 	 	 
	10.5.4.

	 	Audit
	 	Auditing compliance to the laws and regulations for taxes on the
goods and services acquired on a routine pre-established schedule or
on an ad hoc for cause basis.
	 
	 	 	 	 
	10.5.5.

	 	Planning strategy
	 	Creating the strategy for minimizing the taxes paid by Receiving
Entity on the goods and services acquired.
	 
	 	 	 	 
	11.

	 	Other	 	 
	 
	 	 	 	 
	11.1.

	 	Call Center
	 	Operating a call center to respond to inquiries about and requests
for assistance with all aspects of the Services and the platforms
provided by the outsourcer.
	 
	 	 	 	 
	11.2.

	 	Platform and Security
	 	The platform (functionality and availability as mutually agreed) and
all platform security in accordance with Customer’s requirements.
	 
	 	 	 	 
	11.2.1.

	 	Requisitioning, ordering, receiving, return and accounts payable platform
	 	Provide the platform (functionality and availability) and all
security in accordance with Receiving Entity’s Requirements for the
Requisitioning, ordering, receiving, returns and accounts payable
platform.
	 
	 	 	 	 
	11.2.2.

	 	Sourcing platform
	 	Provide the platform (functionality and availability) and all
security in accordance with Receiving Entity’s Requirements for the
Sourcing platform
	 
	 	 	 	 
	11.2.3.

	 	Data exchange platform
	 	Providing the platform (functionality and availability) and all
security in accordance with Receiving Entity’s Requirements. for the
Data exchange platform
	 
	 	 	 	 
	11.2.4.

	 	File transfer
	 	Receiving and sending data files in accordance with the agreed upon
protocol.
	 
	 	 	 	 
	11.2.5.

	 	Internet access
	 	Providing the platform (functionality and availability) and all
security in accordance with Receiving Entity’s Requirements for
internet access (including for e-mail access, as necessary).

      

			
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Between

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Annex A-3

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Between

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INDIRECT SOURCING SERVICES AGREEMENT

Between

Solectron and IBM

Schedule A-5

IBM Solution

      

			
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Table of Contents

1. Overview and General Approach

2. Strategic Sourcing and P2P Operations Services

2.1 Strategic Sourcing

2.2 P2P Operations

3. Technical Solution

4. Customer Assistance Center (CAC)

5. IBM Delivery Organization Model

6. Solectron Facilities

APPENDIX A — Strategic Sourcing Methodology

APPENDIX B — Data/File Transfers

      

			
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1. Overview and General Approach

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

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

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

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

      

			
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	Description	 	Language
	Enterprise Buyer / BW User Interface

	 	English
	 
	 	 
	Hosted Catalogs within EBP

	 	English
	 
	 	 
	Punch-out Catalogs

	 	Language of the existing catalog
	 
	 	 
	Output Documents to Suppliers

	 	English unless other legal requirements
	 
	 	 
	IBM Buyer Interactions (with both Solectron
stakeholders/requesters

	 	North America — English
	 and with Suppliers)

	 	Latin America — English, Portuguese, Spanish
	 

	 	Europe — English (with limited German & French support)
		 	AsiaPac — English (with support in
Japanese, Chinese)
	 
	 	 
	Call Center (for both Solectron end-users and Suppliers)

	 	Multi-lingual as per Section 4.4 below.
	 
	 	 
	Solectron end-user documentation (including procedures
manual, training documentation, etc.)

	 	English
	 
	 	 
	Web Order Invoice (Supplier Portal)

	 	English, French, German, Hungarian,

Portuguese, Spanish, Swedish

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

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

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

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

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

      

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

2. Strategic Sourcing and P2P Operations Services

	 	2.1.	 	Strategic Sourcing

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

      

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

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

	 	2.2	 	P2P Operations

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

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

      

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

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

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

      

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

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

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

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

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

      

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

      

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

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

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

      

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

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

	 	2.2.7.1	 	A single chart of accounts will be implemented globally.

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

      

			
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	 	 	 	The following diagram depicts the accounts payable General Process Overview.

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

	 	 	 	 	 
	Countries in scope	 	Scanning Location	 	Comment
	France

	 	Bratislava — Iron Mountain
	 	Supplier Mails to Scanning Location
	Germany

	 	Bratislava — Iron Mountain
	 	Supplier Mails to Scanning Location
	Hungary

	 	Bratislava— Iron Mountain
	 	Supplier Mails to Scanning Location
	UK

	 	Bratislava — Iron Mountain
	 	Supplier Mails to Scanning Location
	Sweden

	 	Bratislava — Iron Mountain
	 	Supplier Mails to Scanning Location
	Romania

	 	Bratislava — Iron Mountain
	 	Supplier Mails to Scanning Location
	Singapore

	 	Singapore— IBM
	 	Supplier Mails to Scanning Location
	Taiwan

	 	Singapore— IBM
	 	Solectron Taiwan Mailroom send to IBM Singapore
	Malaysia

	 	Singapore— IBM
	 	Solectron Malaysia Mailroom send to IBM Singapore
	Japan

	 	Japan —IBM
	 	Scan thru Supplier Mail
	China

	 	China —IBM
	 	Scan thru Supplier Mail
	Brazil

	 	Brazil —IBM
	 	Scan thru Supplier Mail
	Mexico

	 	Endicott —IBM
	 	Solectron Mexico Mailroom to send to IBM Endicott
	US/Canada

	 	Endicott —IBM
	 	Scan thru Supplier Mail
	Corp

	 	Endicott —IBM
	 	Scan thru Supplier Mail

      

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

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

	 	2.2.8.1.1	 	Electronic Invoice Processing

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

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

      

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

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

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

      

			
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The following diagram depicts the P2P Platform.

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

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

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

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

      

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

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

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

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

      

			
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	Geography	 	Hours of Support
	United States and Canada

Languages: English, French

	 	8:00 AM to 6:00 PM EST
	 
	 	 
	Europe (France, Germany, Hungary, Romania, Sweden,

United Kingdom)
	 	9:00 AM to 6:00 PM CET
	Languages: French, German, Hungarian, English,

Swedish

	 	
	 
	 	 
	Latin America (Brazil, Mexico)
	 	9:00 AM to 6:00 PM EST
	Languages: Brazilian Portuguese, Spanish

	 	
	 
	 	 
	Asia (China, Japan, Malaysia, Singapore, Taiwan)

	 	9:00 AM to 6:00 PM Local Country Time
	Languages: Chinese, Japanese, English

	 	

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

	5	 	IBM Delivery Organization Model

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

	6	 	Solectron Facilities

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

	 	 	 	 	 	 	 
	Ref.#	 	Country	 	Facility	 	Address
	1.

	 	Brazil
	 	Solectron Brasil Ltda
	 	Rodovia Campinas Mogi Mirim km
133 — Roseira Jaguariuna, Sao
Paulo
	 
	 	 	 	 	 	 
	2.

	 	Canada
	 	Solectron Corporation
— Systems Solutions
Group
	 	1455 Mountain Avenue, Winnipeg,

Manitoba R2X 2Y9
	 
	 	 	 	 	 	 
	3.

	 	Canada
	 	Solectron Kanata
	 	425 Legget Drive, Kanata, Ontario

K2K 2W2
	 
	 	 	 	 	 	 
	4.

	 	Canada
	 	Solectron Global
Services Canada
	 	213 Harry Walker Parkway, South

Newmarket, Ontario L3Y 8T3

      

			
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	Ref.#	 	Country	 	Facility	 	Address
	5.

	 	Canada
	 	Solectron Invotronics
	 	365 Passmore Avenue, Scarborough,

Ontario L3Y 8T3
	 
	 	 	 	 	 	 
	6.

	 	Canada
	 	Solectron Saint-Laurent
	 	5005 Levy Street, Saint-Laurent,

Quebec H4R 2N9
	 
	 	 	 	 	 	 
	7.

	 	Canada
	 	Solectron Sherbrooke
	 	4025 Letellier Street,

Sherbrooke, Quebec J1E 1K2
	 
	 	 	 	 	 	 
	8.

	 	Canada
	 	Solectron — Metaltek
(Canada)
	 	12 Hotel de Ville

Dollard des Ormeaux, Quebec
	 
	 	 	 	 	 	 
	9.

	 	China
	 	Solectron (Shanghai)
Technology Co., Ltd.
	 	3F Building 5, 258 Jinzang Road,

Jinqiao Export Processing Zone,

Pudong, Shanghai
	 
	 	 	 	 	 	 
	10.

	 	China
	 	Solectron Global
Services Shanghai
	 	No. 78 Ying Run Road, Wai Gao
Qiao Free Trade Zone, Pudong,
Shanghai
	 
	 	 	 	 	 	 
	11.

	 	China
	 	Solectron (Shenzhen)
Technology Co., Ltd.
	 	3, Tian Fu Road, Tong Fu Yu

Industrial Park, Fu Yong Town,

Vao An District, Shenzhen
	 
	 	 	 	 	 	 
	12.

	 	China
	 	Solectron (Suzhou)
Technology Co., Ltd.
	 	No. 9, Suqian Road,
China-Singapore Suzhou Industrial
Park, Suzhou, Jiangsu
	 
	 	 	 	 	 	 
	13.

	 	France
	 	Solectron Bordeaux
	 	Chemin Departemental 109E,

Canejan, BP6, 33611 Cestas Cedex
	 
	 	 	 	 	 	 
	14.

	 	France
	 	Solectron Paris
	 	4 Place de la Defense, La Defense

4, 92974 Paris La Defense Cedex
	 
	 	 	 	 	 	 
	15.

	 	Germany
	 	Solectron GmbH
	 	Solectronstrasse 2, D-71083

Herrenberg
	 
	 	 	 	 	 	 
	16.

	 	Germany
	 	Solectron GmbH —
European Customer Center
	 	Theresieanhohe 13, D-80339 Munich
	 
	 	 	 	 	 	 
	17.

	 	Hungary
	 	Solectron Hungary
	 	H-1183 Budapest, Hangar Utca 5-37
	 
	 	 	 	 	 	 
	18.

	 	Japan
	 	Solectron K.K. —
Japan Headquarters
	 	Yaesu guchi Kaikan 6F, 1-7-20

Yaesu, Chuo-ku, Tokyo 103-0028

      

			
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	Ref.#	 	Country	 	Facility	 	Address
	19.

	 	Japan
	 	Solectron K.K. —
SLR-Ibaraki
	 	367-2 Sekitate, Chikusei-shi,

Ibaraki 308-0193
	 
	 	 	 	 	 	 
	20.

	 	Japan
	 	Solectron K.K. —
Shonan NPI Center
	 	1-14-1 Midorigaoka,

Ninomiay-machi Naka-gun, Kanagawa

259-0132
	 
	 	 	 	 	 	 
	21.

	 	Japan
	 	Solectron K.K. —
SGS-Japan
	 	1-17 Machiikedai, Koriyama,

Fukushima 963-0215
	 
	 	 	 	 	 	 
	22.

	 	Malaysia
	 	Solectron Technology
Sdn Bhd
	 	Plot 13, Phase IV, Prai

Industrial Estate, 13600 Prai,

Penang
	 
	 	 	 	 	 	 
	23.

	 	Mexico
	 	Solectron Chihuahua
	 	Rudyard Kipling # 11530, Complejo
Ind. Chih., Chihuahua
	 
	 	 	 	 	 	 
	24.

	 	Mexico
	 	Solectron de Mexico,
S.A. de C.V.
	 	Prol. Av. Lopez Mateos Sur No.
2915 Km. 6.5 Tlajomulco de
Zuniga, Jalisco C.P. 45640
	 
	 	 	 	 	 	 
	25.

	 	Romania
	 	Solectron Romania S.R.L.
	 	Calea Torontalului, km 6.5, 1900
Timisoara
	 
	 	 	 	 	 	 
	26.

	 	Singapore
	 	Solectron Global
Services Singapore
	 	31 Joo Koon Circle

Jurong Town, Singapore 629108
	 
	 	 	 	 	 	 
	27.

	 	Singapore
	 	Solectron Technology
Singapore Pte. Ltd.
	 	12 Kallang Way

Singapore 349216
	 
	 	 	 	 	 	 
	28.

	 	Singapore
	 	Solectron Technology
Singapore Pte. Ltd.
(Chai Chee)
	 	Block 750B Chai Chee Road #01-01

TechnoPark @ Chai Chee

Singapore 469002
	 
	 	 	 	 	 	 
	29.

	 	Sweden
	 	Solectron Sweden AB
(Kista)
	 	Farogatan 33 — Kista Science
Tower, SE-164 51 Kista
	 
	 	 	 	 	 	 
	30.

	 	Sweden
	 	Solectron Sweden AB
	 	Odenskogsvagen 27-29, Box 370,

SE-831 25 Ostersund
	 
	 	 	 	 	 	 
	31.

	 	Taiwan
	 	Solectron Taiwan
	 	7F-2, No. 51, Sec. 2, Keelung Road
Taipei 110

      

			
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	Ref.#	 	Country	 	Facility	 	Address
	32.

	 	U.K.
	 	Solectron England
	 	Shinei UK Arisdale Avenue, South

Ockendon, Essex, RM15 5NR,

England
	 
	 	 	 	 	 	 
	33.

	 	U.K.
	 	Solectron ServiceSource

Streetton Green

Distribution Center
	 	Langford Way, Appleton,

Warrington, Cheshire, WA4 4TQ
	 
	 	 	 	 	 	 
	34.

	 	U.K.
	 	Solectron Scotland, Ltd.
	 	Queensferry Road, Dunfermline,

Fife, KY11 8PX, Scotland
	 
	 	 	 	 	 	 
	35.

	 	U.K.
	 	Solectron Wales
	 	Chapel Farm Industrial Estate,

Cwmcam, Crosskeys, Newport, Gwent

NP11 7ZB
	 
	 	 	 	 	 	 
	36.

	 	USA
	 	Solectron Corporate
	 	647 Gibraltar Drive

Milpitas, CA 95035
	 
	 	 	 	 	 	 
	37.

	 	USA
	 	FinePitch Technology
	 	44300 Christy Street

Freemont, CA 94538
	 
	 	 	 	 	 	 
	38.

	 	USA
	 	Solecton Global

Services Kentucky
	 	4500 Commerce Crossing

Louisville, KY 40229
	 
	 	 	 	 	 	 
	39.

	 	USA
	 	Solectron Invotronics
	 	26525 American Drive

Southfield, MI 48034
	 
	 	 	 	 	 	 
	40.

	 	USA
	 	Solectron Lumberton
	 	100 Mount Holly By-Pass

Lumberton, NJ 08048
	 
	 	 	 	 	 	 
	41.

	 	USA
	 	Solectron Technology,
Inc. (North Carolina)
	 	6800 Solectron Drive

Charlotte, NC 28256
	 
	 	 	 	 	 	 
	42.

	 	USA
	 	Solectron Systems
Solutions — Creedmoor
	 	1187 Telecom Drive

Creedmoor, NC 27522
	 
	 	 	 	 	 	 
	43.

	 	USA
	 	Solectron Global
Services – Raleigh
	 	1000 Innovation Avenue

Morrisville, NC 27560
	 
	 	 	 	 	 	 
	44.

	 	USA
	 	Solectron South

Carolina Corporation
	 	1000 Technology Drive

West Columbia, SC 29170

      

			
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	Ref.#	 	Country	 	Facility	 	Address
	45.

	 	USA
	 	Solectron Global
Services — Tennessee
	 	6269 East Shelby Drive

Memphis, TN 38141
	 
	 	 	 	 	 	 
	46.

	 	USA
	 	Solectron Texas, Inc.
	 	12455 Research Boulevard

Austin, TX 78759

      

			
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APPENDIX A — Strategic Sourcing Methodology

	A)	 	Sourcing Opportunity Assessment

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

      

			
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	B)	 	Determine Business Requirements

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

	C)	 	Conduct RFP and Shortlist Suppliers

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

      

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

	D)	 	Negotiate and Select

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

	E)	 	Institute Monitoring and Control Process & Ongoing Continuous Improvement

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

      

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

      

			
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APPENDIX B — Data/File Transfers

	 	 	 	 	 	 	 	 	 
	 	 	Type (From/	 	 	 	 	 	 
	 	 	To	 	 	 	 	 	 
	Data Type	 	Solectron	 	Oracle	 	SAP	 	Other
	Accounting Validation

	 	From
	 	Yes	 	 	 	 
	Payment File

	 	To
	 	 	 	 	 	Harbor
	Ledger

	 	To
	 	Yes	 	 	 	 
	User master data (name, ID, roles, etc.)

	 	From
	 	 	 	Yes	 	 
	Payment status

	 	From
	 	 	 	 	 	Harbor
	Cashed Check

	 	From
	 	 	 	 	 	Bank
	Batch Files

	 	From
	 	 	 	 	 	P-Card

Bank &
3rd
party
	Organizational structure for approval	 	From	 	Manual maintenance on P2P Utility by IBM

	Mass Accounting Update	 	From	 	Manual file transfer to IBM

      

			
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INDIRECT SOURCING SERVICES AGREEMENT

Between

Solectron and IBM

Annex A6

In-Flight Projects

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

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Description of the	 	 	 	 	 	Expected	 	Expected Completion
	Ref.#	 	Category	 	Opportunity	 	Vendors involved	 	Status	 	Completion Date	 	QTR
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INDIRECT SOURCING SERVICES AGREEMENT

Between

Solectron and IBM

Annex A7

Transition Plan

      

			
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Table of Contents

	 	 	 	 	 	 	 	 	 	 	 
	1.	 	Introduction	 	 	3	 
	 

	 	 	1.1	 	 	Transition Overview
	 	 	3	 
	 

	 	 	 	1.1.1	 	IBM will:
	 	 	4	 
	 

	 	 	 	1.1.2	 	Solectron will:
	 	 	4	 
	 

	 	 	1.2	 	 	Overall Implementation Timeline
	 	 	4	 
	2	 	Governance: Roles and Responsibilities	 	 	5	 
	 

	 	 	2.1	 	 	IBM will:
	 	 	5	 
	 

	 	 	2.2	 	 	Solectron will:
	 	 	5	 
	 

	 	 	2.3	 	 	Transition Management
	 	 	6	 
	 

	 	 	 	2.3.1	 	IBM will:
	 	 	6	 
	 

	 	 	 	2.3.2	 	Solectron will:
	 	 	7	 
	 

	 	 	2.4	 	 	Change Management
	 	 	7	 
	 

	 	 	 	2.4.1	 	IBM will:
	 	 	7	 
	 

	 	 	 	2.4.2 	 	Solectron will:
	 	 	7	 
	 

	 	 	2.5	 	 	Training
	 	 	8	 
	 

	 	 	2.6	 	 	Solectron HR Management
	 	 	8	 
	 

	 	 	2.7	 	 	Business Requirements
	 	 	8	 
	 

	 	 	2.8	 	 	IT Delivery
	 	 	8	 
	 

	 	 	 	2.8.1 	 	IBM will:
	 	 	8	 
	 

	 	 	 	2.8.2 	 	Solectron will:
	 	 	9	 
	 

	 	 	2.9	 	 	Region / Country Roles & Responsibilities
	 	 	9	 
	 

	 	 	 	2.9.1	 	Region / Country Transition Managers (IBM and
Solectron) (each a “Region / Country Transition
Managers”)
	 	 	9	 
	 

	 	 	 	2.9.2 	 	Solectron Region/Country Change Management
	 	 	10	 
	 

	 	 	 	2.9.3	 	Solectron Region/Country Business Process
	 	 	10	 
	 

	 	 	 	2.9.4	 	Solectron Power Users
	 	 	10	 
	3	 	Transition Workstreams	 	 	11	 
	 

	 	 	3.1	 	 	Workstream Detailed Transition Plans
	 	 	11	 
	 

	 	 	3.2	 	 	Project Management Workstream
	 	 	11	 
	 

	 	 	 	3.2.1 	 	IBM will:
	 	 	11	 
	 

	 	 	 	3.2.2 	 	Solectron will:
	 	 	12	 
	 

	 	 	3.3	 	 	Change Management Workstream
	 	 	12	 
	 

	 	 	 	3.3.1 	 	Solectron’s Stakeholder Management
	 	 	12	 
	 

	 	 	 	3.3.2 	 	Communication
	 	 	13	 
	 

	 	 	 	3.3.3 	 	Go Live Readiness
	 	 	14	 
	 

	 	 	 	3.3.4 	 	Solectron Train-the-Trainer and End-User Training
	 	 	15	 
	 

	 	 	 	3.3.5 	 	Solectron Human Resources (HR)
	 	 	17	 
	 

	 	 	3.4	 	 	Business Process / IT Workstream (P2P Platform)
	 	 	17	 
	 

	 	 	 	3.4.1 	 	Project Organization
	 	 	17	 
	 

	 	 	 	3.4.2 	 	Concept Phase
	 	 	18	 
	 

	 	 	 	3.4.3 	 	Plan Phase
	 	 	20	 
	 

	 	 	 	3.4.4 	 	Develop Phase
	 	 	21	 
	 

	 	 	 	3.4.5 	 	Qualify Phase
	 	 	23	 
	 

	 	 	 	3.4.6 	 	Rollout Phase
	 	 	24	 
	 

	 	 	 	3.4.7 	 	Catalogue Customization and Supplier Adoption
	 	 	25	 
	 

	 	 	3.5	 	 	Customer Assistance Center Workstream
	 	 	25	 
	 

	 	 	 	3.5.1 	 	IBM will:
	 	 	25	 
	 

	 	 	 	3.5.2 	 	Solectron will:
	 	 	25	 
	Appendix A7-1	 	 	26	 

      

			
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          1. Introduction

This Annex 7 (Transition Plan) to Schedule A (Services) outlines the activities and
describes the specific objectives of the work necessary to implement the P2P Platform and
complete the initial sourcing (the work is referred to as the “Transition” and this outline is
referred to as the “Transition Plan”)) including Solectron’s and IBM’s respective
responsibilities, the required time frames, and people responsible for individual tasks necessary
for the migration of the Services from Solectron to IBM. Within 30 days after the Effective Date,
IBM will draft the detailed Transition Plan for Solectron’s review and approval. The detailed
Transition Plan will be consistent in all respects with this Annex 7, including the activities
and deliverables described herein.

1.1 Transition Overview

Transition activities will commence as of the Effective Date and shall include certain sourcing
activities performed under the LOA (signed January 9, 2006). From the start of the Transition
activities through the completion of the Wave 2 P2P implementation (the “Transition Period”), IBM
will migrate the Services from Solectron to IBM. The graph below depicts the transition overview.

[*]

Within the Transition Plan, the following applies:

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

      

			
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     1.1.1 IBM will:

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

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

     1.1.2 Solectron will:

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

1.2 Overall Implementation Timeline

The overall Transition Services implementation timeline is depicted in the graph below.

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          2 Governance: Roles and Responsibilities

2.1 IBM will:

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

2.2 Solectron will:

designate resources (such as staff, equipment, facilities, IT infrastructure, applications,
software, and connectivity) to perform the roles set forth in this Annex 7;

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

      

			
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2.3 Transition Management

The Parties’ Transition Managers are responsible for the day-to-day oversight of the P2P Transition
Plan, without limiting IBM’s responsibility to provide Transition Services. The respective team
will coordinate the services of the respective Party during the Transition Period. The Parties’
country and regional teams shall support the rollout within a given in-scope country;

Global Transition Managers will be in place from the Effective Date and until such times as
Steady-State has begun for all in-scope countries.

     2.3.1 IBM will:

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

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

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

      

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

     2.3.2 Solectron will:

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

2.4 Change Management

     2.4.1 IBM will:

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

     2.4.2 Solectron will:

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

      

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

2.5 Training

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

Solectron will:

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

2.6 Solectron HR Management

Solectron will work with country HR leads to address in-country specific requirements.

2.7 Business Requirements

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

2.8 IT Delivery

     2.8.1 IBM will:

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

      

			
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     2.8.2 Solectron will:

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

2.9 Region / Country Roles & Responsibilities

     2.9.1 Region / Country Transition Managers (IBM and Solectron) (each a “Region / Country
Transition Managers”)

     For each country or cluster of Countries the Parties will perform the following activities.

2.9.1.1 IBM will:

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

2.9.1.2 Solectron will:

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

      

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

2.9.2 Solectron Region/Country Change Management

Solectron will:

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

2.9.3 Solectron Region/Country Business Process

Solectron will:

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

2.9.4 Solectron Power Users

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

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

      

			
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          3 Transition Workstreams

3.1 Workstream Detailed Transition Plans

IBM shall draft, and Solectron review, comment upon and if acceptable shall approve the
detailed Transition Plan for each Wave. The detailed Transition Plan will include Workstream
Detailed Transition Plans for each Transition Workstream.

The Workstream Detailed Transition Plans shall be consistent in all respects with the
mutually approved Detailed Transition Plan, which shall include the activities and
Transition Deliverables described therein. The Workstream Detailed Transition Plans shall
become integral parts of the Detailed Transition Plan, and any amendments to the Detailed
Transition Plan will be made in accordance with the Change Management Process.

3.2 Project Management Workstream

3.2.1 IBM will:

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

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

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

      

			
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3.2.2 Solectron will:

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

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

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

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

3.3 Change Management Workstream

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

The Change Management Workstream includes the following activities:

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

     3.3.1 Solectron’s Stakeholder Management

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

3.3.1.1 IBM will:

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

      

			
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3.3.1.2 Solectron will:

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

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

Deliverables for Solectron’s Stakeholder Management

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

     3.3.2 Communication

3.3.2.1 IBM will:

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

3.3.2.2 Solectron will:

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

      

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

     Deliverables for Communication

	 	 	 	 	 	 	 	 	 
	 	 	 	 	Short Description of	 	Responsible	 	Completion
	#	 	Deliverables	 	Content of Document	 	Party	 	Criteria
	1

	 	Communication Plan
	 	Project plan of all
communication
activities on a
schedule linked to
key events
identified in the
Transition Plan
	 	IBM
	 	Plan sent to
Solectron for
discussion
	 
	 	 	 	 	 	 	 	 
	2

	 	Project

communication

template
	 	Template for
project
communication
	 	IBM
	 	Sent for Solectron

approval
	 
	 	 	 	 	 	 	 	 
	3

	 	Template for End

User Go Live Date

communication
	 	e-mail campaign to
announce Training
and Go Live
activities
	 	IBM
	 	Sent for Solectron

approval
	 
	 	 	 	 	 	 	 	 
	4

	 	Global

Communication /Change

Management
Tool kit
	 	Centrally developed
set of
communication and
change management
activities
	 	IBM
	 	Tool kit provided
to local
Communication
Managers

     3.3.3 Go Live Readiness

3.3.3.1 IBM will:

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

3.3.3.2 Solectron will:

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

      

			
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Deliverables for Go Live Readiness

	 	 	 	 	 	 	 	 	 
	 	 	 	 	Short Description	 	 	 	 
	#	 	Deliverables	 	of Content	 	Responsible Party	 	Completion Criteria
	1

	 	Roles and
Responsibilities
Document
	 	List of impacts to
roles and
responsibilities to
Solectron
employees
	 	IBM
	 	Provided to
Solectron
	 
	 	 	 	 	 	 	 	 
	2

	 	Site Readiness

Questionnaire
	 	Checklist to
evaluate if the
sites are prepared
for the Go Live
Dates
	 	IBM
	 	Provided to
Solectron
	 
	 	 	 	 	 	 	 	 
	3

	 	Site Readiness

Assessment
	 	Go through check
list with the
Solectron sites and
evaluate status
	 	IBM
	 	Assessment conducted
	 
	 	 	 	 	 	 	 	 
	4

	 	Supplier Readiness

Survey
	 	Assess if suppliers
are ready for Go
Live Dates
	 	IBM
	 	Assessment conducted
	 
	 	 	 	 	 	 	 	 

     3.3.4 Solectron Train-the-Trainer and End-User Training

3.3.4.1 IBM will:

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

      

			
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3.3.4.2 Solectron will:

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

     Deliverables for Training

	 	 	 	 	 	 	 	 	 
	 	 	 	 	Short	 	 	 	 
	 	 	 	 	Description	 	Responsible	 	Completion
	#	 	Deliverable	 	of Content	 	Party	 	Criteria
	1

	 	Training approach
and plan Document
	 	List of Solectron
employees to be
trained, (how, when
and by whom)
	 	IBM
	 	Provided to
Solectron
	 
	 	 	 	 	 	 	 	 
	2

	 	End User Training

Material
	 	‘How to’ guide to
P2P platform and
processes
	 	IBM
	 	Provide to Solectron
	 
	 	 	 	 	 	 	 	 
	3

	 	Train the trainer

training material

(PowerPoint)
	 	Train the trainer

material
	 	IBM
	 	Provide to Solectron
	 
	 	 	 	 	 	 	 	 
	4

	 	Training plan for

End Users (not

trained by IBM)

(Document)
	 	List of who will be
trained, and when
by Power Users
	 	Solectron
	 	Plan completed

      

			
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     3.3.5 Solectron Human Resources (HR)

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

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

3.4 Business Process / IT Workstream (P2P Platform)

Dates in this section are relative to the Go Live Date for each in-scope country. Within thirty
(30) Days after the Effective Date, the appropriate IBM representatives will draft, for Solectron
review and approval a detailed P2P Platform Deployment Plan (the “P2P Platform Deployment Plan”),
which will be incorporated into the Transition Plan. The P2P Platform Deployment Plan comprises
several phases, as set forth below. The beginning of a specific phase will be executed pursuant to
successful completion of the previous phase, as determined by the exit criteria for the previous
phase.

     3.4.1 Project Organization

IBM will organize, in coordination with Solectron, a “Procurement Solution Mapping Workshop” with
Solectron and IBM Business Process Leads and IT Workstream Leads. There will be one workshop per
Wave where the Solectron local country representatives will provide such input and information as
is reasonably required by IBM.

3.4.1.1 Entry Criteria

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

3.4.1.2 IBM Responsibilities & Deliverables

	 	 	 	 	 	 	 
	Key Task	 	Deliverable
	§

	 	Conduct Solectron & IBM

Procurement Solution

Mapping Workshop
	 	§
	 	P2P Requirements Document

3.4.1.3 Solectron Responsibilities & Deliverables

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

      

			
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3.4.1.4 Exit Criteria

	 	•	 	Approved P2P Requirements Document

     3.4.2 Concept Phase

During this phase, the Parties will validate the standard P2P processes to be implemented and any
unique Solectron requirement which might have to be taken into account.

3.4.2.1 IBM Responsibilities and Deliverables

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

      

			
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3.4.2.2 Solectron Responsibilities and Activities

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

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

      

			
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3.4.2.3 Exit Criteria

	•	 	Completed Business Requirements Review

	 	o	 	Solectron approved business requirements
	 
	 	o	 	completed Systems Requirements Review

	•	 	Documented and Agreed Project Plan

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

     3.4.3 Plan Phase

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

3.4.3.1 IBM Responsibilities

	 	 	 	 	 
	Key Task	 	Deliverable
	Conduct Detailed Data Files Definition Workshops

	 	§

§

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

           o   Vendor Master – Creation & Update

           o   GL Bookings (invoices, payments)

           o   Payment File

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

	Conduct Plan Design Review (PDR)

Prepare Final Requirements

Conduct Test Strategy Workshop

Prepare Updated Project Plan

	 	§

§

§

§
	 	PDR Meeting Minutes

Final Requirements Document

Test Strategy Document

Updated Project Plan

      

			
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3.4.3.2 Solectron Responsibilities

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

Data Files (Inbound to IBM) Design

	 	§

§
	 	Completed Commodity Mapping Document

Agreed Data Files Feed Design including:

	 

	 	 	 	          o   HR Feed/Org Structure
	 

	 	 	 	          o   User Master Data
	 

	 	 	 	          o   Single Cleansed supplier file
	 

	 	 	 	          o   Accounting Validation file
	 

	 	 	 	          o   Pay Status file

	Review, Comment upon and if Acceptable, Approve Key Transition

	 	§
	 	Approved Final Data Files Specifications
	Deliverables from Detailed Data Files Workshops

	 	§
	 	Approved Detailed Data Files Mappings (Field Values)

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

 

	 	§
	 	Approved PDR Meeting minutes

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

 

	 	§
	 	Approved Final Requirements Document

	Participate in Test Strategy Workshop

	 	§
	 	Approved Test Strategy Document

	Review, Comment upon & if Acceptable Approve Updated Project

Plan

 

	 	§
	 	Approved Updated Project Plan

	Prepare Supplier Memo

	 	§
	 	Completed Supplier Memo

3.4.3.3 Exit Criteria

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

     3.4.4 Develop Phase

Develop Phase is the phase during which IBM configures the P2P Platform and both IBM and Solectron
teams work separately and together to develop all required data files based upon the Approved
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data files specifications documents. Detailed Testing Plans (such as,
Test Scripts) will be developed, reviewed and approved. Qualify and Rollout project plans will be detailed and mutually agreed upon. This will
be accomplished through physical and remote (such as telephonic or videoconference) meetings
between the technical and process teams.

3.4.4.1 IBM Responsibilities

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

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

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

3.4.4.2 Solectron Responsibilities

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

      

			
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3.4.4.3 Exit Criteria

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

     3.4.5 Qualify Phase

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

3.4.5.1 IBM Responsibilities

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

3.4.5.2 Solectron Responsibilities

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

      

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

3.4.5.3 Exit Criteria

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

     3.4.6 Rollout Phase

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

3.4.6.1 IBM Responsibilities

	 	 	 	 	 
	Key Task	 	Deliverable
	Deploy IBM Applications /Data Files
to Production

	 	§
	 	Production System Ready for
Use & Capable of Producing Data
Files in Specified Format

3.4.6.2 Solectron Responsibilities

	 	 	 	 	 
	Key Task	 	Deliverable
	Deploy Solectron Application / Data
Files to Production

	 	§
	 	Solectron Legacy Systems
Capable of Producing Data Files in
Specified Format

3.4.6.3 Exit Criteria

Deployment completed in accordance with the Overall Implementation Timeline.

      

			
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     3.4.7 Catalogue Customization and Supplier Adoption

3.4.7.1 IBM will:

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

3.4.7.2 Solectron will

provide IBM with catalogues for the Solectron legacy contracts to be migrated to the P2P
Platform. The catalogues will be in softcopy standard format, to allow migration to the P2P
Platform.

3.5 Customer Assistance Center Workstream

The Customer Assistance Center will be enabled by completing the following activities for each
Wave.

     3.5.1 IBM will:

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

     3.5.2 Solectron will:

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

      

			
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Appendix A7-1

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

Solectron Employee Requirements

IBM acknowledges and agrees that certain Solectron individuals may have more than one role during
the Transition, and Solectron shall determine how and when Solectron employees shall discharge
Solectron’s obligations. The following table sets forth IBM’s estimate of and recommendation for
the resources to be provided by Solectron in order to fulfill Solectron’s responsibilities as
described in this Annex 7.

IBM Estimated Solectron Global Resource Requirements

[*]

Solectron Region/ Country Resources

Solectron will assess the needs for each region//country role, which may vary from country to
country. The role is to facilitate the execution of Solectron’s responsibilities the in-scope
region/country Transition. The following table contains IBM’s estimates of the resources to be
provided by Solectron.

[*]

IBM Projected Resources

The following tables represent IBM’s anticipated staffing in meeting IBM’s obligations to execute
the Transition.

[*]

[*]

[*]

[*]

      

			
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INDIRECT SOURCING SERVICES AGREEMENT

Between

Solectron and IBM

Schedule A9

IBM Competitive Content

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

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

			
	 	 	 
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INDIRECT SOURCING SERVICES AGREEMENT

Between

Solectron and IBM

SCHEDULE B

PERFORMANCE MEASUREMENT AND INCENTIVES

for

ACTUAL SAVINGS

and

OPERATIONAL SERVICE LEVELS

			
	 	 	 
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Table of Contents

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

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

Annexes

B-1       Savings Measurement Rules

B-2       Service Level Metrics and Weightings

B-3       Summary of Performance Management Methods

B-4       Form Template of AP Data Pulled

			
	 	 	 
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	1.	 	INTRODUCTION

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

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

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

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

	 	1.2	 	Definitions

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

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

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

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

	 	1.3	 	Reporting

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

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

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

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

	2.	 	ACTUAL SAVINGS

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

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

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

			
	 	 	 
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	 	(ii)	 	the first and second adjustments to the Committed Strategic
Sourcing Savings described in Section 7.5. of Annex B-1, plus
	 
	 	(iii)	 	the adjustment of the Committed Tactical Sourcing Savings
contained in Section 7.5. of Annex B-1.

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

	3.	 	OPERATIONAL SERVICE LEVELS AND CUSTOMER SATISFACTION

	 	3.1	 	Critical Service Levels

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

	 	3.2	 	Failure to Perform.

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

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

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

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

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

	 	(b)	 	[*]

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

			
	 	 	 
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	 	(iii)	 	During the Steady State Period, the [*] for a particular month
means [*] IBM charges to Solectron for the Services for that month as
identified in Schedule C (Charges).

	 	(c)	 	Weighting Factors

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

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

	 	3.4	 	Solectron Management Customer Satisfaction Survey

	 	(a)	 	General

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

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

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

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

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

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

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

	 	(i)	 	Continuous improvement activities;

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

	 	(e)	 	[*]

	 	3.5	 	End-User Customer Satisfaction Survey

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

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

	 	 	 	across a selection of performance criteria.

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

	 	3.6	 	Right of Access to Operational Service Level Information

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

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

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

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

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

	4.	 	IMPROVEMENT OF OPERATIONAL SERVICE LEVELS

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

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

	5.	 	NEW OPERATIONAL SERVICE LEVELS

	 	5.1	 	Specification by Solectron

	 	(a)	 	Solectron shall have the right to have new Operational Service Levels
established in response to changes in Solectron’s business or technology needs, changes
in the Services, and similar circumstances. Solectron shall exercise such right by
providing written notice to IBM, via the Change Management Process, identifying the new
Operational Service Levels to be established.
	 
	 	(b)	 	Not later than fifteen (15) days after the receipt of Solectron’s notice, IBM
and Solectron shall meet to discuss (i) the new Operational Service Level, (ii) the
tool, software, or other method to be used to measure the new Operational Service
Level, (iii) whether such new Operational Service Levels is eligible is to be a
Critical Service Level, and (iv) such other matters as are necessary to establish the
new Operational Service Level. Solectron shall, based on historical attainment,
information provided by IBM or another process, specify the performance level (the
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	 	(c)	 	If IBM agrees with the Initial Service Level proposed by Solectron, such new
Operational Service Level will become effective on the first day of the third month
following the month in which the new Operational Service Level is agreed, or such other
date as the Parties agree. If IBM does not agree with the Initial Service Level, then
the Initial Service Level will be revised based on the process specified in Section
5.2, below.

	 	5.2	 	Baselining Process

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

	 	5.3	 	Designation as Critical Service Level

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

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

	 	Draft Procedures Manual

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

	 	Final Procedures

Manual

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

	 	Revised Procedures Manual

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

			
	 	 	 
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	 	 	 	 	Description/	 	 	 	 
	Ref. #	 	Critical Deliverable	 	IBM Responsibility	 	Acceptance criteria	 	Due Date
	 	 	 	 	 	 	 	 	* Omitted and 
	 	 	 	 	 	 	 	 	filed separately
	 	 	 	 	 	 	 	 	with the SEC
	 	 	 	 	 	 	 	 	pursuant to a 
	 	 	 	 	 	 	 	 	confidential
	 	 	 	 	 	 	 	 	treatment
	 	 	 	 	 	 	 	 	request
	4.

	 	First use of Emptoris
	 	Emptoris is available for use for strategic sourcing
activities.
	 	First use of Emptoris suite by IBM in
performing services for Solectron.
Emptoris suite is operating
substantially in accordance with its
specifications.
	 	[*]
	 
	 	 	 	 	 	 	 	 
	5.

	 	Wave 1:

Detailed Transition Plan

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

	 	Wave 2:

Detailed Transition Plan

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

	 	Communication Plan

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

	 	Wave1:

Training Plan

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

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

	 	Wave 2:

Training Plan

(Output in MS Project file)
	 	For Wave 2: Develop detailed Training Plan and Training
approach as set forth Annex A7
	 	A reasonably thorough and reasonable
well written Training plan delivered
via email or other means as mutually
agreed, to Solectron in electronic
format.
	 	[*]
	 
	 	 	 	 	 	 	 	 
	10.

	 	Wave 1: Complete P2P Platform

implementation
	 	Implement P2P Platform in each in-scope country for
Wave 1 in accordance with the timeline as set forth
Annex A7
	 	P2P user data completely loaded, P2P
Platform is fully capable for all
applicable countries and P2P is
accepting requisitions and issuing
Purchase Orders.
	 	[*]
	 
	 	 	 	 	 	 	 	 
	11.

	 	Wave 2:

Complete P2P Platform implementation
	 	Implement P2P Platform in each in-scope country for
Wave 2 in accordance with the timeline as set forth
Schedule A7
	 	P2P user data completely loaded, P2P
Platform is fully capable for all
applicable countries and P2P is
accepting requisitions and issuing
Purchase Orders.
	 	[*]
	 
	 	 	 	 	 	 	 	 
	12.

	 	Wave 1: 

IBM Customer Assistance Center

Readiness 

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

	 	Wave 2: 

IBM Customer Assistance Center

Readiness 

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

	 	Wave 1:

Complete Power User training

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

	 	Wave 2: Complete Power User training
	 	Completion of training on processes, tool and trainer
skills for Wave 2 Power Users
	 	Power user training courses completed,

training evaluation
	 	[*]

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

	 	(Output in MS Word file)
	 	 	 	forms received and
compiled by IBM and delivered to
Solectron	 	 

			
	 	 	 
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Annex B1

Savings Measurement Methodology

1. INTRODUCTION

This Annex B1 (Savings Measurement Methodology) describes the method by which Actual and
Committed Savings will be calculated.

2. DEFINITIONS

Unless otherwise defined in the Agreement, the following capitalized terms used in this Annex
B2 shall have the meanings specified below:

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

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

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

3. RESPONSIBILITIES

     3.1 IBM Responsibilities

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

	 	 	 	[*]

     3.2 Solectron Responsibilities

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

4. SAVINGS CALCULATION

     4.1 Actual Strategic Sourcing Savings Calculation.

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

	 	(i)	 	[*]

	 	(b)	 	Notwithstanding the foregoing:

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

			 
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     4.2 Actual Tactical Savings Calculation

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

	 	(i)	 	[*]

	 	(b)	 	Notwithstanding the foregoing:

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

	 		
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limitation of Section 4.2(b)(i) shall be the price paid during the previous
period, assuming the then-current market price for the product remains above
the price paid during the previous period.

[*]

     4.3 Actual P2P Savings

The parties intend to maximize Actual P2P Savings. IBM will use commercially reasonable
efforts to identify, quantify and report Actual P2P Savings in a manner consistent with the
methods underlying the representations of similar savings made in IBM’s various proposals
leading up to this agreement. IBM will formulate the calculation and submit it for Solectron
review within 30 days following the execution of this Agreement. Once acceptable IBM will
begin to quantify and report on Actual P2P Savings.

5. GENERAL ITEMS RELATED TO SAVINGS CALCULATIONS

     5.1 Timing

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

     5.2 Specific Item Calculation.

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

	 	 	 	[*]

     5.3 Alternative Methods of Savings Calculations

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

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

6. BASELINE

Baselines will be calculated by IBM, reviewed by Solectron and agreed during the sourcing
process for the good or service in question. The methods of determining and adjusting the
Baseline appear below. Except for adjustments for TCO Elements the Baseline may never at any
time exceed the then current market price for the good or service in question.

     6.1 Prior Period Price

Prior period actual price is the preferred method for determining the Baseline for indirect
goods and services. In this case, for any new contract, the Prior Year Price Baseline is
the volume weighted average price paid for the good or service purchased during the lesser
of (a) the 12 months prior to the point of interest (i.e. effective date of supplier
contract) or (b) for purchases made against agreements that have been in place for less than
12 months, the duration of such agreement to be replaced by the new contract. This Baseline
can be developed from various data (e.g., from invoice level detail, purchase order detail
(if utilized), or by requesting the information from the Supplier).

     6.2
New Item Purchases —Acceptable Bid

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

     For Example: IBM requests bids from three Suppliers for a piece of capital
equipment that has not been purchased before:

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

Thus Supplier B has the second-lowest acceptable bid that meets the required specifications.
Therefore $9,000 will be the Baseline. In the case where only two satisfactory bids are
obtained the Baseline will be the average of the two bids. In cases where only one bid is
obtained, this single bid will serve as a Baseline.

     6.3 Indexing Adjustment.

IBM may propose to adjust the otherwise determined Baseline by use of an industry trend
indicator that can be identified that reasonably reflects the market trend for that
category.

Example: Weighted average historical hotel room rate is $100 per night (the
otherwise determined Baseline); representative market index for hotel rates
indicates a 5% price increase in the marketplace; and the adjusted Baseline
(assuming Solectron concurs with the correctness of the index) is $105 ($100 time
1.05).

     6.4 Incremental Discounts

For a number of indirect purchases (for example, airlines and vehicles), negotiations are
typically focused around discounts off of list price. The Baseline in this case would be the
(weighted average list price) times (1 minus the previously negotiated discount).

     6.5 Baseline adjustments for TCO Elements

The Baseline for goods and services may be adjusted to reflect the TCO Elements listed below
when it is anticipated that sourcing activities may uncover improvements which can
contribute to savings. While this list represents the elements with the highest probability
of occurrence, other elements may become relevant to Solectron’s business, or Category
requirements in the future may be included subject to mutual agreement to adjustment of the
Baseline.

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

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

		 	
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7. SAVINGS TRACKING

     7.1 Responsibility

IBM and Solectron will manage the Savings tracking process in accordance with Schedule F
(Governance), with both parties identifying a person to act as Finance Manager in their
respective project offices. These roles will serve as the primary point of contact between
Solectron and IBM for analysis of Savings achievement, discussion of issues related to
Savings achievement, and initial efforts to resolve any disputes arising between the parties
associated with Savings initiatives.

     7.2 Measurement

Using the calculation methods identified in Section 4 (Savings Calculation), on a monthly
and annual basis IBM shall measure, track, report on and forecast Actual Savings for each
category and/or subcategory for which IBM has Strategic Sourcing responsibility and shall
compare such Actual Savings to the Committed Savings and prior year Actual Savings (the
“Savings Contribution Report”).

     7.3 Review & Agreement

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

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

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

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

     7.4 Addressable Spend and Compliant Spend

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

     7.5 Adjustment of Committed Savings

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

	 		
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     7.6 Savings Opportunities Rejected by Solectron

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

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

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

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

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

     7.7 Committed Savings Quarterly Adjustment and Annual True Up

	 	(a)	 	Adjustments to Committed Savings provided for in this Section 7.7 will be
determined quarterly with an overall annual true-up to occur as part of the fourth
quarter analysis.
	 
	 	(b)	 	Actual Savings will be compared with the Committed Savings (as adjusted) on a
quarterly basis to calculate any credit or bonus to be provided to or paid by
Solectron, respectively, for that quarter in accordance with Schedule B. Any quarterly
credit/bonus will be credited/invoiced to Solectron on the next monthly invoice
following the completion of the quarter.
	 
	 	(c)	 	At year-end, annual Actual Savings will be compared with annual Committed
Savings to calculate any adjustments to the quarterly credits/bonuses provided to or
paid by Solectron necessary to reflect Actual Savings for the entire year (the “True Up
Amount”).
	 
	 	(d)	 	Upon Solectron’s reasonable request, IBM will make data available to support
Solectron’s year-end accrual process
	 
	 	(e)	 	The True-Up Amount will be invoiced (or credited) to Solectron within thirty
(30) days after the completion of the process specified in Section (b) (the “True Up
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	 	(f)	 	The True Up Process shall be completed within two weeks of the date that
Solectron receives the Savings Contribution Report applying to the third month of each
calendar quarter. If agreement on the Committed Savings, the Actual Savings and True
Up Amount is not achieved by the IBM and Solectron Responsible Executives by the end of
such period, then the Dispute Resolution Process shall be invoked to complete the
True-Up Process.
	 
	 	(g)	 	Invoices for the True Up Amount shall be paid or credited in accordance with
the payment terms set forth in Schedule C (Charges).
	 
	 	(h)	 	Notwithstanding the above, the Parties agree as follows with respect to
Contract Year 1: (a) there will be no annual True-Up; and (b) adjustments to Committed
Savings will be determined for quarter 3 and quarter 4.

     7.8 Solectron Timeliness Responsibility

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

		 	
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Annex B-2

Service Level Metrics and Weightings

1. P2P PLATFORM

     1.1 System Availability

	 	 	 	 	 	 	 
	Definitions	 	Available for Use	 	A system is considered to be
"Available for Use” when the hardware
and systems software making up the
system’s hardware/system software
platform are properly running so as to
enable the proper execution of all
applications software scheduled to run
on such system.
	 
	 	 	 	 	 	 
	 	 	Availability	 	The percentage of Scheduled Uptime
that a given service or system is
Available for Use. Availability is
calculated as the aggregate minutes
during the periods of Scheduled Uptime
for such system that such system is
Available for Use during such month,
divided by the total aggregate minutes
of Scheduled Uptime for such system
during such month, with the result
expressed as a percentage.
	 
	 	 	 	 	 	 
	 

	 	 	 	AvailForUse 	X [100%] 
	 

	 	 	 	 
	 

	 	 	 	SchedUptime
	 
	 	 	 	 	 	 
	 

	 	 	 	Where;
	 	SchedUptime = the total number
of minutes the System is scheduled to
be available for use.
	 

	 	 	 	 	 	AvailForUse = the total number of
minutes the System is actually
available for use.
	 
	 	 	 	 	 	 
	 	 	Maintenance Window	 	A pre-scheduled maintenance period
when a system is not scheduled to be
Available for Use.
	 
	 	 	 	 	 	 
	 	 	Scheduled Uptime	 	The period of time when a system is
scheduled to be Available for Use.
Scheduled Uptime does not include
Maintenance Windows.

P2P Platform Availability —

	 	 	 	 	 
	 	 	Performance Requirement	 	Weighting Factor %
	P2P System Availability

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     1.2 % of Hand-free Orders

	 	 	 
	Definition

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

% Hands-Free Orders

	 	 	 	 	 	 	 
	 	 	Performance Requirement	 	Weighting Factor %
	% Hands-Free Orders	 	On a quarterly basis during Contract Years 1
through 5, [*] of all POs issued will be placed
through a Hosted Catalogue or a Punchout Catalogue
or a Contract.	 	N/A
	 
	 	 	 	 	 	 
	 

	 	HFPOs	X [100%] 	 	 
	 

	 	 	 	 
	 

	 	POs	 	 
	 
	 	 	 	 	 	 
	 

	 	Where;
	 	HFPOs = the number of
hands free PO’s issued	 	 
	 

	 	 	 	POs = the number POs issued	 	 

     1.3 PO Cycle time (Approved requisition to PO)

	 	 	 
	Definition

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

	 	 	 
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PO Cycle Time

	 	 	 	 	 	 	 
	 	 	Performance Requirement	 	Weighting Factor %
	PO Cycle Time

(Tactical Sourcing)	 	On a monthly basis, at
least [*] of all POs
issued following Tactical
Sourcing will be
completed by IBM within 7
business days of IBM
receipt of an approved
requisition.	 	 
	 
	 	 	 	 	 	 
	 

	 	POs 	X [100%] 	 	 
	 

	 	 	 	 
	 

	 	Reqs	 	 
	 
	 	 	 	 	 	 
	 

	 	Where;
	 	Reqs = the number
of Approved Requisitions
routed for Tactical
Sourcing
	 	 
	 

	 	 	 	POs = the number of
resulting POs issued in
the specified time (7
business days)
	 	 
	 
	 	 	 	 	 	 
	PO Cycle Time

(Buyer involved)	 	On a monthly basis, at
least [*] of all POs
issued as a result of the
requisition being routed
to a buyer for PO
placement but not
Tactical Sourcing will be
completed by IBM within 2
business days of IBM
receipt of an approved
requisition.	 	 
	 
	 	 	 	 	 	 
	 

	 	POs 	X [100%] 	 	 
	 

	 	 	 	 
	 

	 	Reqs	 	 
	 
	 	 	 	 	 	 
	 

	 	Where;
	 	Reqs = the number
of Approved Requisitions
that are routed to a
buyer for PO placement
but not Tactical Sourcing
	 	 
	 

	 	 	 	POs = the number of
resulting POs issued in
the specified time (2
business days)
	 	 
	 
	 	 	 	 	 	 
	PO Cycle Time

(Automated Catalog

Purchase)	 	On a monthly basis, at
least [*] of all POs
issued without any buyer
involvement will be
issued by IBM within 1
business day of IBM
receipt of an approved
requisition.	 	 
	 
	 	 	 	 	 	 
	 

	 	POs 	X [100%] 	 	 
	 

	 	 	 	 
	 

	 	Reqs	 	 
	 
	 	 	 	 	 	 
	 

	 	Where;
	 	Reqs = the number
of Approved Requisitions
that are not routed to a
buyer for PO placement.

	 

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

     1.4 PO Accuracy

	 	 	 
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	Definition

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

PO Accuracy

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

	 	PORs 	X [100%] 	 	 
	 

	 	 	 	 
	 

	 	POs	 	 
	 
	 	 	 	 	 	 
	 

	 	Where;
	 	PORs = number of PO returned by the supplier or
require modification because of erroneous part
numbers, descriptions or pricing
	 	 
	 

	 	 	 	POs = the number of POs issued	 	 

     1.5 Supplier Profile Set Up / Modification Time

	 	 	 
	Definition

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

	 	 	 
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Supplier Profile Set Up / Modification Time

	 	 	 	 	 	 	 
	 	 	Performance Requirement	 	Weighting Factor %
	Supplier Profile Set

Up / Modification Time	 	On a monthly basis, at
least [*] of all requests
to create/modify a
supplier profile in the
P2P Platform will be
completed by IBM within 2
business days of IBM
receipt of an approved
request. Note: There is
a special process for
expediting the creation
or modification of a
supplier record.	 	 
	 
	 	 	 	 	 	 
	 

	 	Comp 	X [100%] 	 	 
	 

	 	 	 	 
	 

	 	Reqst	 	 	 
	 
	 	 	 	 	 
	 

	 	Where;
	 	Reqst = the number
of Supplier Profile
creation/Modification
Requests made
	 	 
	 

	 	 	 	Comp = the number of
Supplier Profile
creation/Modification
Requests completed within
the specified time (2
business days)
	 	 

     1.6 % Electronic PO

	 	 	 
	Definition

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

% Electronic PO

	 	 	 	 	 
	 	 	Performance Requirement	 	Weighting Factor %
	% Electronic PO

	 	On a monthly basis, at least [*]
of all purchased orders issued
shall be issued in electronic form
	 	N/A

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

	 	 	 
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	Definitions

	 	Abandonment
	 	A Call is considered abandoned if, more
than [*] after a caller selects the
option in the IVR to speak to a CAC
agent, the Call is terminated (including
by caller hangup) prior to pickup of the
Call by a CAC agent.
	 
	 	 	 	 
	 

	 	Call
	 	A telephone call to the CAC where the
caller makes the selection using the
automated call distribution system to
speak to a member of the CAC staff.
	 
	 	 	 	 
	 

	 	Call Answer
	 	A Call is considered answered when the
caller is interacting with a CAC agent.
	 
	 	 	 	 
	 

	 	Call Back
	 	Defined as a follow-up Call from IBM CAC
to a user regarding a previous call
ticket.
	 
	 	 	 	 
	 

	 	CAC Ticket
	 	Refers to a unique logical electronic
record that IBM will create, update,
maintain and archive for each incident. A
CAC Ticket is used to record all user/IBM
interaction pertaining to an incident and
all IBM-related actions, and
corresponding date/time, taken to resolve
an incident, from the time it is first
reported to the CAC until Incident
Resolution and closure by the CAC.
	 
	 	 	 	 
	 

	 	Speed-To-Answer
	 	Total elapsed time from the point that
the CAC automated call director (ACD)
call-circuitry places a Call into queue
until a human operator picks up the Call.

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

	 	(a)	 	Response Time SLA

	 	 	 
	Definition

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

CAC Response Time

	 	 	 	 	 
	CAC

Responsiveness

	 	Performance Requirement
	 	Weighting Factor %

	 	 	 
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	CAC	 	 	 	 
	Responsiveness	 	Performance Requirement	 	Weighting Factor %
	Speed-to-Answer	 	At least [*] of all Calls to the CAC in a given month will be
answered in [*] or less.	 	 
	 
	 	 	 	 	 	 
	 

	 	Answered 	 	X [100%] 	 	 
	 

	 	 	 	 	 
	 

	 	Made	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Where;
	 	Made = the number of calls made to the CAC	 	 
	 

	 	 	 	Answered = the number of calls answered by
the CAC within the
specified time (30 seconds)
	 	 
	 
	 	 	 	 	 	 
	Call Abandonment

Rate	 	On a monthly basis, not more than [*] of all Calls to the CAC will
be Abandoned.	 	 
	 
	 	 	 	 	 	 
	 

	 	Abandoned 	 	X [100%] 	 	 
	 

	 	 	 	 	 
	 

	 	Made	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Where;
	 	Made = the number of calls made to the CAC	 	 
	 

	 	 	 	Abandoned = the number of calls abandoned by
the caller	 	 
	 
	 	 	 	 	 	 
	Recurring Problem	 	Repeat Calls
On a monthly basis, not more than [*] of all Calls to the CAC
shall be regarding the same problem for the same user as described
in a CAC Ticket within [*] of the closure of that CAC Ticket.	 	 
	 
	 	 	 	 	 	 
	 

	 	Re peats 	 	X [100%] 	 	 
	 

	 	 	 	 	 
	 

	 	Made	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Where;
	 	Repeats = the number of calls to the CAC that are
regarding the same problem for the same user as
described in a CAC Ticket within [*] of the closure
of the CAC Ticket.
	 	 
	 

	 	 	 	Made = the number of calls made to the CAC	 	 

     (b) Incident Resolution SLA

	 	 	 
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	Definition

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

Incident Resolution Table

	 	 	 	 	 	 	 
	CAC Incident Resolution	 	Performance Requirement	 	 	 	Weighting Factor %
	1st Call

Resolution Rate

	 	In a given month, IBM
will resolve at least [*]
of all Level 1 Calls that
are technically capable
of being resolved on the
first Call.	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Calls Resolved 	X [100%] 	 	 
	 

	 	 	 	 
	 

	 	Calls Capable	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Where;
	 	CallsCapable = the
number of calls to the
CAC that are capable of
being resolved on the
first call to the CAC
	 	 
	 

	 	 	 	CallsResolved = the
number of calls to the
CAC that are capable of
being resolved on the
first call to the CAC
that are actually
resolved during the first
call.
	 	 

     2.2 Accounts Payable

     Invoice Payment Errors

	 	 	 
	Definition

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

Invoice Payment Errors

	 	 	 	 	 
	 

	 	Performance Requirement
	 	Weighting Factor %

	 	 	 
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Invoice Payment Errors

	 	 	 	 	 	 
	 	 	Performance Requirement	 	 	Weighting Factor %
	Invoice Payment Errors

	 	On a yearly basis, not
more than [*] of all
payments proposed by IBM
will have an invoice
payment error.	 	 	 
	 
	 	 	 	 	 
	 

	 	InvpayErrors	X [100%] 	 	 
	 

	 	 	 	 
	 

	 	InvPaid	 	 
	 
	 	 	 	 	 
	 

	 	Where;
	InvPayErrors =
using a sample size
appropriate for six sigma
confidence, the number of
invoice payment errors
(any error causing
Solectron to have paid
more than was rightfully
due, e.g., double
payments, overpayments)
in the sample of invoices
proposed by IBM for
payment
	 	 
	 

	 	 	InvPaid = the number of
invoices proposed by IBM
for payment in the sample
(sized appropriate for
six sigma confidence).
	 	 

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Annex B-3

Summary of Performance Management Methods

	 	 	 	 	 	 	 	 	 
	Transition Wave 1 Period Performance Management
	 	 	Measurement	 	Measurement	 	 	 	 
	Measurement	 	Period	 	Metric(s)	 	[*]	 	[*]
	Critical

Deliverables

	 	N/A
	 	Based on acceptance
of Critical
Deliverables
	 	[*]
	 	[*]
	 
	 	 	 	 	 	 	 	 
	Savings

	 	Quarterly
	 	As described in
Annex B-1 (Savings
Calculation
Methodology)
	 	[*]
	 	[*]
	 
	 	 	 	 	 	 	 	 
	Customer

Satisfaction

	 	Quarterly
	 	Management Survey
	 	[*]
	 	[*]

			
	 	 	 
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	Transition Wave 2 Period Performance Management
	 	 	Measurement	 	Measurement	 	 	 	 
	Measurement	 	Period	 	Metric(s)	 	[*]	 	[*]
	Critical

Deliverables

	 	N/A
	 	Based on acceptance
of Critical
Deliverables
	 	[*]
	 	[*]
	 
	 	 	 	 	 	 	 	 
	Savings Contract Y1

	 	Quarterly
	 	As described in
Annex B-1 (Savings
Calculation
Methodology)
	 	[*]
	 	[*]
	 
	 	 	 	 	 	 	 	 
	Savings Contract Y2
through end of
Transition Wave 2

	 	Quarterly
	 	As described in
Annex B-1 (Savings
Calculation
Methodology)
	 	[*]
	 	[*]
	 
	 	 	 	 	 	 	 	 
	Customer

Satisfaction

	 	Quarterly
	 	Management Survey
	 	[*]
	 	[*]
	 
	 	 	 	 	 	 	 	 
	Critical SLAs

	 	Monthly
	 	As specified in

Annex B-2

(Operational SLAs)
	 	[*]
	 	[*]

			
	 	 	 
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	Steady State Period Performance Management	 
	 	 	Measurement	 	Measurement	 	 	 	 	 	 	 	 	 
	Measurement	 	Period	 	Metric(s)	 	[*]	 	[*]	 
	Savings
	 	Quarterly	 	As described in Annex B-1 (Savings Calculation Methodology)	 	[*]	 	[*]	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Customer

Satisfaction
	 	Quarterly	 	Management Survey	 	[*]	 	[*]	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Critical SLAs
	 	Monthly	 	As specified in Annex B-2 (Operational SLAs)	 	[*]	 	[*]	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 

			
	 	 	 
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Annex B-4

Form Template of AP Data Pulled

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	ATA_SOURCE	 	CORP_CODE	 	 	DIVISION	 	 	VENDOR_NUM	 	 	VENDOR_NAME	 	 	INVOICE AMT	 	 	INVOICE #	 	 	CHECK_AMT	 	 	DATE_INVOICED	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

			
	 	 	 
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INDIRECT SOURCING SERVICES AGREEMENT

Between

Solectron and IBM

Schedule C

Charges

			
	 	 	 
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TABLE OF CONTENTS

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

			
	 	 	 
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List of Annexes

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	 	 	 	C1 [*]
	 
	 	 	 	C2 Invoicing Process

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

	 	 	 	C3 Economic Change Adjustment (ECA)

			
	 	 	 
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SCHEDULE C

CHARGES

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

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

	2.	 	DEFINITIONS
	 
	 	 	As used in this Schedule C:

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

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

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

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

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

	 	3.2	 	Definitions Specific to Strategic Sourcing.

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

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

	 	3.3	 	OCM Charge.

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

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

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

Example:

	 	•	 	[*]

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

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

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

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

	 	 	 	 	 
	 	 	Covered by	 	 
	 	 	Adjustment	 	 
	Events as applied to	 	Methodology	 	 
	OCM Services	 	(Y/N)	 	Comment
	Change in OCM Spend
(including “Organic”
increase/decrease in
spend) within
in-scope Category

	 	Yes, subject to
Volume Band Limits.
	 	Adjustment calculated
against Volume
Baseline for
applicable Complexity
Level and GEO
	 
	 	 	 	 
	Delay in rolling
Category into scope
(e.g., Category
anticipated in month
13, but not approved
until month 18)

	 	Yes, subject to
Volume Band Limits.
	 	Adjustment calculated
against Volume
Baseline for
applicable Complexity
Level and GEO.
Decision by Solectron
to delay requires 30
days’ notice.

			
	 	 	 
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	 	Yes, subject to
Volume Band Limits.
	 	Parties agree on case
by case
categorization of new
category — H/M/L
Complexity Level and
GEO classification
	 
	 	 	 	 
	Add New Category
(only those
Categories identified
in Annex A-1 as of
the Effective Date)

	 	 	 	Entirely new
categories (i.e., not
identified in Annex
A-1 as of the
Effective Date) will
be subject to
separate negotiation
(the Change
Management Process)
and are not covered
by the Volume
Adjustment Rates.
	 
	 	 	 	 
	Remove Category

	 	Yes, subject to
Volume Band Limits
	 	Decision by Solectron
to remove a Category
from scope requires
30 days’ notice.
	 
	 	 	 	 
	Add New Country

	 	No
	 	Subject to separate
negotiation via the
Change Management
Process. Not covered
by Volume Adjustment
Rates.
	 
	 	 	 	 
	Remove Country

	 	Yes, subject to
Volume Band Limits
	 	Decision by Solectron
to remove a Category
from scope requires
30 days’ notice.

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

			
	 	 	 
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	 	3.6	 	Removal of Strategic Sourcing Services from Scope.

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

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

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

	4.	 	P2P OPERATIONS SERVICES

4.1 P2P Operations Services.

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

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

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

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

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

Example:

	 	•	 	[*]

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

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

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

	 	8.1	 	Credit for LOA Payments. 

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

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

	 	8.2	 	Out of Pocket Expenses.

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

	 	8.3	 	Cost of Compliance with Performance Standards.

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

	 	8.4	 	Software Licenses.

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

	 	8.5	 	Other Adjustments to Service Charges. 

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

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

	9.	 	INVOICING AND PAYMENT.

	 	9.1	 	Invoicing.

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

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

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

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

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

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

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

	 	9.5	 	Disputed Charges.

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

	10.	 	[*]

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

	11.	 	TAXES.

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

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

	 	11.2	 	Service-Related Taxes. 

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

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

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

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

	12.	 	PERFORMANCE OF T&M WORK

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

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

	13.	 	CERTAIN ADJUSTMENTS TO CHARGES

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

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

	14.	 	TERMINATION & TERMINATION ASSISTANCE CHARGES

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

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

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

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

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

	 	14.3	 	[*]
	 
	 	 	 	[*]

			
	 	 	 
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[*]

			
	 	 	 
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[*]

			
	 	 	 
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Solectron: Contract Documents

Reports:

Volume Report (Monthly)  Performance Report (Monthly)   Savings Report (Quarterly)

Global Summary Report (Schedule C2-3)

Charges  (Schedule C1)

Fixed Charges -  Schedule C1-2

Variable Charges -  Schedule C1-2 (Calculated based on actuals)

SLAs - Performance Report

Gainshare - Savings Report (quarterly basis w/ annual true-up)

ECA - will be calculated at a Global Level (annual basis)

Taxes - Import/Export (Schedule C1-2)  Service (actuals)

Allocation Methodology

Allocated based on step 1 (slides 3-7)

Local Country Invoices

15 In-Scope Countries - Invoiced in each country, local currency

 

	

BACKUP SLIDES

 

	

Step 1: Charges Allocation to Countries

P2P Operations "Fixed Charges & Variable Charges"

Global "Fixed Charges" & "Variable Charges" in US$ will be allocated to the countries

Allocation Methodology:

Allocated based on Managed Spend

Year 1 & Year 2 allocations based on P2P allocation table  (slide 4)

Years 3-5  will have an annual adjustment to the allocations based on previous years spend
profile unless the Parties mutually agree on a new allocation  ("TBD")

Strategic Sourcing "Fixed Charges & Ongoing Category Management Charges"

Global "Fixed Charges" & "Ongoing Category Management" in US$ will be allocated to the countries

Allocation Methodology:

Year 1 & Year 2 allocations based on strategic sourcing allocation table (slide 5)

Years 3-5 will have an annual adjustment to the allocations based on previous years spend
profile unless the Parties mutually agree on a new allocation  ("TBD")

Operational SLA Credits:

Global "SLA Credits" in US$ will be allocated to the countries

Allocation Methodology:

Follow the same process as P2P Operations above..

 

	

Step 1: Charges Allocation to Countries

Gainshare Credit / Charges:

Global "Gainshare Credit / Charges" in US$ will be allocated to the countries

Allocation Methodology:

Follow the same process as Strategic Sourcing above..

Import / Export Tax Charges:

Global "Import / Export Charges" in US$ will be allocated to the countries

Allocation Methodology:

Follow the same process as Strategic Sourcing above..

ECA:

ECA will be calculated at a global level and Schedule C2-1 will be updated based on ECA Calculation

Service Taxes:

Invoiced as actuals in local country

 

	

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

[*]

 

	

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

[*]

 

	

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

[*]

 

	 	 	 	 	 	 	 	 	 
	Please direct inquiries	 	Invoice	 	 	 	Page
	and correspondence to:	 	Number	 	Date	 	Number
	IBM Global Services

	 	XXXXXXX
	 	xx/xx/xx
	 	 	1	 
	Name
	 	 	 	 	 	 	 	 
	City, State

	 	Purchase Order	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Phone

	 	Account Number	 	 	 	 	 	 
	(xxx) xxx-xxxx

	 	XXXXXXXX	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Installed At:

	 	Invoice to:	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Solectron
Street
City, State (Country, etc.)	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Terms:

	 	Customer Reference:	 	 	 	 	 	 
	Net xx days
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Please remit payment to:

	 	Comments:	 	 	 	 	 	 
	IBM
xx
City, State, zip (country, etc.)

	 	Please reference the IBM Invoice and

Account Number on your wire transfer.	 	 	 	 	 	 

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

			
	 	 	 
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Annex C-3

Economic Change Adjustment

This Annex outlines the process by which annual adjustments to the Service Charges, Volume
Baselines, Trigger Values and Volume Adjustment Rates may be made to allow for inflation during the
Term (an “Economic Change Adjustment” or “ECA”). Beginning in March 2007 and on each anniversary
thereof during the Term, the Parties will apply the methodology described in this Annex to
determine the ECA for the ensuing Contract Year.

1.0 ECA for Contract Year 2 (beginning 1 March, 2007)

The Parties will determine an ECA for the second Contract Year, beginning March 1st,
2007 (the “2007 ECA”), using the methodology and formulas set forth below.

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

	 	1.	 	United States. The Unadjusted Employment Cost Index (ECI) for Total
Compensation, Private Industry Workers as published by the Bureau of Labor Statistics,
U.S. Department of Labor available on the Internet at
http://data.bls.gov/cgi-bin/surveymost?ec .
	 
	 	2.	 	India. The Consumer Price Index (CPI-IW), as published by the
Government of India, Labor Bureau, available on the Internet at
http://labourbureau.nic.in/indtab.html (CPI-Industrial Workers Index).
	 
	 	3.	 	Hungary. The Consumer Price Index (CPI) by Main Group of Commodities
as published by the Hungarian Central Statistical Office (KSH), available on the
Internet at http://portal.ksh.hu/pls/ksh/docs/eng/stadat/load2_01_06_22.html .
	 
	 	4.	 	China. The Consumer Price Index (CPI) — Province as published by the
National Bureau of Statistics of China available on the internet at
http://www.stats.gov.cn/english/statisticaldata/yearlydata/ .
	 
	 	5.	 	United Kingdom. The Consumer Price Index from The Annual Survey of
Hours and Earning (ASHE) as published by the Office of National Statistics available on
the internet at
http://www.statistics.gov.uk/STATBASE/tsdataset.asp?vlnk=7174&More=N&All=Y.
	 
	 	6.	 	Brazil. The Indice Geral de Preços de Mercado released by Fundação
Getúlio Vargas — IGPM (FGV) on the internet at
http://www.estadao.com.br/ext/economia/financas/historico/hist_aeigpm.htm.
In the event such IGPM (FGV) is no longer published or its content or format is
substantially changed or become illegal, the Parties agree to substitute such Index
with Indice de Preços ao Consumidor released by Fundação Instituto de Pesquisas
Economicas – IPC(FIPE).

	(b)	 	Replacement or Rebaselining of Indices. If an Index is no longer published or its
content and format is substantially changed, Solectron and IBM will substitute another

			
	 	 	 
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	 	 	reasonably comparable index published at least annually by a mutually agreeable source.
If the Index base year is redefined to another year, Solectron and IBM will continue to use
that Index, but will convert the base year Index to the new base year by using an
appropriate conversion formula.
	 
	(c)	 	Index Change. The Parties will determine the change in each of the Indices (“Index
Change”) from December 2006 to December 2007 (or using the nearest available publication date
if the Index is not published in that month). The Index Change may be negative or positive,
resulting in a negative or positive impact on the charges and other items being adjusted
pursuant to this methodology.
	 
	(d)	 	Delivery Allocation: The following table sets out the percentage allocated by
delivery location used to calculate the ECA:

	 	 	 	 	 
	 

	 	[*]
	 	[*]
	 

	 	[*]
	 	[*]
	 

	 	[*]
	 	[*]
	 

	 	[*]
	 	[*]
	 

	 	[*]
	 	[*]
	 

	 	[*]
	 	[*]
	 

	 	[*]
	 	[*]

	(e)	 	New Countries. If any Services are provided from a country (not contemplated as of
the Effective Date) resulting from an IBM initiated move, then the incremental inflation risk
will be borne by IBM unless otherwise approved by Solectron.
	 
	(f)	 	ECA Factor. The ECA Factor will be calculated as follows:

ECA Factor = (U.S Index Change * U.S Delivery Allocation) + (Indian Index Change *
India Delivery Allocation) + (Hungary Index Change * Hungary Delivery Allocation) +
(China Index Change * China Delivery Allocation) + (U.K. Index Change * U.K.
Delivery Allocation) + (Brazil Index Change * Brazil Delivery Allocation)

	(g)	 	Inflation Sensitivity. The inflation sensitivity factor identifies the portion of
the Charges that is inflation-sensitive. The inflation sensitivity is [*].
	 
	(h)	 	Adjustment. The ECA Adjustment equals the ECA Factor multiplied by the Inflation
Sensitivity Factor. Each of the Volume Baselines, Service Charges, Trigger Values and Volume
Adjustment Rates shall be adjusted by the final ECA Adjustment, effective March
1st, 2007.
	 
	(i)	 	Timing and True-Up. If the ECA Adjustment is not finally determined before March
1st, 2007, IBM will invoice for Services rendered on and after that date at the
rates in effect for the first Contract Year. The Parties will true-up for any change in rates
resulting from the ECA once the ECA Adjustment is determined.
	 
	(j)	 	2007 ECA Calculation Example.

[ *]

2.0 ECA for Contract Years 3, 4 and 5

The Parties will determine an ECA for Contract Year 3, beginning March 1st, 2008, and
each subsequent Contract Year, using the process and principles set forth below.

			
	 	 	 
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Prior to the beginning of each of those Contract Years, the Parties will negotiate an appropriate
Economic Change Adjustment that takes account of:

	 	1.	 	The indices, inflation sensitivity factor and methodology set out in Section 1.0 above;
	 
	 	2.	 	Changes in independent published indices of costs and prices that are relevant to the
delivery of the Services;
	 
	 	3.	 	Changes in the compensation paid by IBM to employees located in delivery centers from
which services are delivered to Solectron, during the preceeding twelve month period on a
global basis, as verified by IBM’s VP of the Industrial Sector; and
	 
	 	4.	 	Such other factors as a Party believes relevant, including opportunities to avoid cost
increases (for example, by transferring work to lower-cost locations where such transfers
are commercially reasonable, operationally practicable and Solectron has consented, or is
willing to consent, to the transfers as provided in the Agreement).

If the Parties fail to agree on an ECA for the ensuing Contract Year within 45 days after the
commencement of that Contract Year, the matter will be referred within 15 days to binding
arbitration to be conducted by JAMS/Endispute within 30 days after such referral and in accordance
with that organization’s rules. The arbitrator’s jurisdiction will be limited solely to
determining the ECA to be applied for the upcoming year in dispute, having regard to any or all of
the factors described above, to the extent submitted by the Parties. Pending final determination
of the dispute, IBM will invoice Solectron at the rates applicable to the prior Contract Year and a
true-up will be made once the final determination is made.

			
	 	 	 
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INDIRECT SOURCING SERVICES AGREEMENT

Between

Solectron and IBM

SCHEDULE D

[RESERVED]

			
	 	 	 
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INDIRECT SOURCING SERVICES AGREEMENT

Between

Solectron and IBM

SCHEDULE E

Key IBM Positions

	 	 	 
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Key IBM Positions

	 	 	 
	Position	 	Location
	Project Executive

	 	Milpitas, CA
	Delivery Project Executive
	 	 

	 		
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INDIRECT SOURCING SERVICES AGREEMENT

Between

Solectron and IBM

Schedule F

Governance Structure and Process

	 		
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Table of Contents

	 	 	 	 	 	 	 	 	 
	1.	 	INTRODUCTION	 	 	1	 
	 
	 	 	 	 	 	 	 	 
	2.	 	RELATIONSHIP OBJECTIVES	 	 	1	 
	 
	 	 	 	 	 	 	 	 
	3.	 	ORGANIZATION	 	 	1	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.2	 	Global Project Executive	 	 	2	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.3	 	Steering Committee	 	 	2	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.4	 	Management Board	 	 	4	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.5	 	Operation Review Team	 	 	7	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.6	 	Other Teams/Meetings	 	 	8	 
	 
	 	 	 	 	 	 	 	 
	4.	 	MEETING MAPS AND MINUTES	 	 	8	 
	 
	 	 	 	 	 	 	 	 
	 
	 	4.1	 	Meeting Maps	 	 	8	 
	 
	 	 	 	 	 	 	 	 
	 
	 	4.2	 	Meeting Minutes	 	 	8	 
	 
	 	 	 	 	 	 	 	 
	5.	 	ESCALATION	 	 	8	 
	 
	 	 	 	 	 	 	 	 
	6.	 	PROJECT MANAGEMENT OFFICE	 	 	9	 

ANNEX F1: GOVERNANCE TRANSITION

ANNEX F2: REPORTS

ANNEX F3: TEMPLATE MEETING MAP

ANNEX F4: TEMPLATE MEETING MINUTES

ANNEX F5: PROCEDURES MANUAL CONTENT

	 		
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	1.	 	INTRODUCTION

This Schedule F describes the governance structure and roles and responsibilities of the
various Solectron and IBM management teams responsible for overseeing and managing the
Agreement. The Solectron and IBM management teams consist of the Steering Committee, the
Management Board and any Operation Review Team(s) created by the Steering Committee.

	2.	 	RELATIONSHIP OBJECTIVES

The governance structure is designed to support the achievement of the Agreement’s goals by
adhering to the following principles:

	 	(a)	 	Provide open communications and access between key individuals at Solectron
and IBM;
	 
	 	(b)	 	Be flexible and responsive to the dynamics of Solectron’s and the Service
Recipients’ businesses; and
	 
	 	(c)	 	Achieve the expected commitments and benefits of the relationship.

	3.	 	ORGANIZATION

The major elements of the governance structure shall be as follows:

	 	(a)	 	Lean and efficient structure;
	 
	 	(b)	 	Ability to grow as the relationship evolves;
	 
	 	(c)	 	Delegation of authority to speed up decision making; and
	 
	 	(d)	 	Minimization of bureaucracy.

The table below summarizes the organization structure with the associated timeline for
establishing structure outlined in Appendix F1:

	 		
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	3.2	 	Global Project Executive

IBM shall appoint one of its employees to be its “Global Project Executive” (or “Global
PE”). Such employee shall be full time on this engagement and shall have the authority to
represent and bind IBM in connection with all aspects of the Agreement. The Solectron Global
PM (also known as the Solectron Project Executive) is described in Section 5.1 of the
Agreement.

Before assigning an IBM Employee to serve as its initial Global PE, and before assigning any
successors to this position, IBM shall comply with the obligations set forth in Section
4.4(b) of the Agreement.

	3.3	 	Steering Committee

Promptly following the Effective Date, the Parties will establish a “Steering Committee”
that will be responsible for overseeing the performance of the Services and the strategic
direction of the relationship between Solectron and IBM.

	 	(a)	 	Members

The Steering Committee will be comprised of the following membership:

	 	(i)	 	Solectron’s Executive Sponsor

	 		
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(ii) Solectron’s CFO;

(iii) Solectron’s CPO;

(iv) Solectron’s CIO;

(v) Solectron’s Senior Vice President of Finance;

(vi) Solectron’s Global Materials Controller;

(vii) Solectron’s Project Executive (also known as the Global PM);

(viii) Solectron’s Program Manager;

(ix) IBM’s BTO Executive;

(x) IBM’s Global PE;

(xi) Two of IBM’s Global Procurement BTO Delivery Executives; and

(xii) IBM’s CPO.

	 	(b)	 	Key Responsibilities

The responsibilities of the Steering Committee include:

	 	(i)	 	Directing the strategic relationship between Solectron and
IBM with respect to the Agreement;
	 
	 	(ii)	 	Implementing the strategic direction with respect to the
Services to be provided pursuant to the Agreement;
	 
	 	(iii)	 	Overseeing the management of the Agreement;
	 
	 	(iv)	 	May participate in the Dispute Resolution Process, as set out
in the Agreement
	 
	 	(v)	 	Assessing and monitoring the implementation of the Services,
including:

	 	(1)	 	Provide overall management of
Transition Plan activities;
	 
	 	(2)	 	Resolution of key strategic issues;
	 
	 	(3)	 	Generating senior stakeholder support
within both organizations;
	 
	 	(4)	 	Approving any change to IBM Key
Positions.

	 	(c)	 	Meetings

The Steering Committee shall meet once each month in person or by conference call as
the Parties’ Global PM/PE shall agree during the first six (6) months of the Term
and afterwards on a quarterly basis, unless the Parties’ Global PM/PE shall
otherwise agree. The meetings shall take place on dates mutually agreed to by the
Parties’ Global PM/PE,

	 		
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which agreement shall not to be unreasonably withheld or delayed. IBM shall keep
accurate minutes of all meetings as specified in Section 4.2 (Meeting Minutes) and
a copy of the minutes shall be provided to Solectron within seven (7) days of the
meeting for its approval. If necessary, the Parties shall revise the minutes by
mutual agreement.

	3.4	 	Management Board

A management board (the “Management Board”) shall be established by the Steering Committee
to oversee the provision of Services and management of the Agreement.

	 	(a)	 	Members

	 	(i)	 	The Management Board shall be comprised of representatives of
each Party as indicated in the table, above.
	 
	 	(ii)	 	During the Transition, the Transition Manager for IBM and the
Transition Manager for Solectron will also be members of the Management Board.

	 	(b)	 	Authority

Subject to the Steering Committee, the Management Board shall have general authority
and responsibility for operational, technical, financial, and general management and

	 		
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oversight of the Agreement.

	 	(c)	 	Solectron Commitment

The Solectron personnel occupying the Solectron Global Project Executive and the
Solectron Global Delivery Manager positions will devote substantially full time and
effort to the Functions and activities for which Solectron is responsible.

	 	(d)	 	Key Responsibilities

The Management Board shall manage the Agreement, operations and performance of the
Services and Agreement at an operational level, and shall be the day-to-day
interface between the Parties. The Management Board shall:

	 	(i)	 	Review information and data provided on operational or
performance issues by the service management team;
	 
	 	(ii)	 	Provide a forum for the Parties to discuss potential changes
that either Party may wish to make prior to submitting a proposed change.
This may include discussing initial feasibility and assessment of suitable
process improvements identified by either Party to potentially be made into a
proposed change, in accordance with Change Control;
	 
	 	(iii)	 	Identify and manage proposed changes, draft Change Orders
and Change Orders through the Change Control process in accordance with Change
Control as described in Schedule N (Change Control);
	 
	 	(iv)	 	Identify, review and agree on any major initiative aimed to
improve the Services. For those initiatives already planned within the
business case, the Management Board will review the operational plan prepared
by IBM to verify that no major disruption will affect the Services. The
Management Board will then approve the changes;
	 
	 	(v)	 	Review outstanding proposed changes or draft Change Orders;
	 
	 	(vi)	 	Review changes to, and compliance with, law, as applicable to
IBM’s performance of the Services;
	 
	 	(vii)	 	Consider any changes that IBM would like to make to IBM Key
Positions and other important staff positions;
	 
	 	(viii)	 	Review performance of the Services and Service Level reports;
	 
	 	(ix)	 	Investigate and resolve any failure by IBM to comply with the
Key Transition Milestones, Critical Service Levels and Operational Service
Levels;
	 
	 	(x)	 	Investigate and resolve any failure by Solectron to comply
with its responsibilities for the Retained Functions;
	 
	 	(xi)	 	Review IBM invoices and payments and address any queries
related to them;

	 		
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	 	(xii)	 	Resolve any disputes involving the amount of Service Levels
Credits;
	 
	 	(xiii)	 	Review and propose modifications to the Annual Savings Targets and review
the Savings Credit/Gainshare calculations;
	 
	 	(xiv)	 	Review the results of any Audit or other IBM internal review
that Solectron or IBM may carry out pursuant to Section 13.1 (Audit Rights) or
Section 13.4 (IBM Audits) in the Agreement;
	 
	 	(xv)	 	May participate in the Dispute Resolution Process – clause in
the Agreement
	 
	 	(xvi)	 	Escalate issues through the Dispute Resolution Process, to
the Steering Committee;
	 
	 	(xvii)	 	Review the Disengagement Services Plan pursuant to Section 11.7
(Disengagement Assistance) in the Agreement, if required;
	 
	 	(xviii)	 	During Transition, without limiting IBM’s responsibilities pursuant to the
Agreement the Management Board shall:
	 
	 	(xix)	 	Have an oversight role to monitor the implementation of
IBM’s Transition Plan and Solectron’s performance of its obligations during
the Transition Period;
	 
	 	(xx)	 	Support the Global PM/PE in building and sustaining
relationships with Solectron management teams, including Solectron Country
management teams;
	 
	 	(xxi)	 	Report progress, issues and risks of the Services to the
Steering Committee; and
	 
	 	(xxii)	 	Review information and data provided on any operational or performance
issues with respect to both transitioned and existing Solectron operations
during Transition.
	 
	 	(xxiii)	 	May participate in Resolving/escalating issues, according to the Dispute
Resolution Process as set forth in the Agreement, Dispute Resolution Process.

	 	(e)	 	Reports

	 	(i)	 	The Management Board shall prepare and deliver management
reports pursuant to Section 1 of Schedule F2 (Operational Reports).
	 
	 	(ii)	 	Via the Change Management Process, the Management Board shall
prepare investment proposals to support proposed changes associated with the
improvement in the Services and Solectron’s operations with respect to the
Services.

	 	(f)	 	Meetings

The Management Board will meet initially every month, and at other times as agreed
between the Parties, to review:

	 		
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	 	(i)	 	Service delivery, including the items listed in Section
3.4(c) (Solectron Commitment

The Solectron personnel occupying the Solectron Global Project Executive and the Solectron Global Delivery Manager positions will devote substantially full time and effort to the Functions and activities for which Solectron is responsible.

	 	(ii)	 	Key Responsibilities);
	 
	 	(ii)	 	Transition; and
	 
	 	(iii)	 	Development of investment proposals to support proposed
changes associated with improvement in the Services and Solectron’s operations
with respect to the Services, subject to the Change Control Process.

IBM shall keep accurate minutes of all meetings as specified in Section 4.2
(Meeting Minutes) and a copy of the minutes shall be provided to Solectron within
seven (7) days of the meeting for its approval. If necessary, the Parties shall
revise the minutes by mutual agreement.

	3.5	 	Operation Review Team

	 	(a)	 	The Steering Committee may from time to time establish for any specific
Solectron Country/Region an operational review team (each an “Operational Review Team”)
comprising:

	 	(i)	 	Solectron’s Service Delivery Manager;
	 
	 	(ii)	 	Solectron’s In-Country Buyers;
	 
	 	(iii)	 	IBM’s Sourcing Commodity Manager; and
	 
	 	(iv)	 	IBM’s In-Country Leads.

	 	(b)	 	Authority

An Operational Review Team shall:

	 	(i)	 	Report to the Management Board on Service delivery problems
and resolution in the relevant Solectron Country/Region; and
	 
	 	(ii)	 	Notify the Management Board of all opportunities or issues
that might result in the addition, deletion or modification of the Services or
terms and conditions of the Agreement.

	 	(c)	 	Key Responsibilities

The responsibilities and authority of an Operational Review Team shall be agreed
upon by the Steering Committee from time to time. Its typical responsibilities and
authority would include:

	 		
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	 	(i)	 	Service delivery reviews;
	 
	 	(ii)	 	Standardization and continuous improvement initiatives; and
	 
	 	(iii)	 	Quarterly reporting.

The exact nature of the responsibilities and authority is expected to evolve over
time.

	 	(d)	 	Meetings

The Operational Team Review will meet at the times and at the locations set by the
Management Board. IBM shall keep accurate minutes of all meetings as specified in
Section 4.2 (Meeting Minutes) and a copy of the minutes shall be provided to
Solectron within seven (7) days of the meeting for its approval. If necessary, the
Parties shall revise the minutes by mutual agreement.

	3.6	 	Other Teams/Meetings

The Global PE/PM shall meet once each week in person or by conference call as the Parties’
Global PM/PE shall agree. The meetings shall take place on dates mutually agreed to by the
Parties’ Global PM/PE.

Key responsibilities of the Global PE/PM include:

	 	(a)	 	Provide management and coordination of items as listed in Annex A7 (Transition
Plan), Section 2 (Governace: Roles & Responsibilities) and establish a set of ongoing
activities as appropriate once the Transition Period is completed;
	 
	 	(b)	 	Coordinate activities as described in Section 6 (Project Management Office) of
this Schedule F;
	 
	 	(c)	 	Solectron PM to provide to IBM a list of all current and future Solectron plans
related to the Services known to Solectron with reasonable knowledge that may impact
Services.

	4.	 	MEETING MAPS AND MINUTES
	 
	4.1	 	Meeting Maps

IBM will prepare and maintain, for each regularly scheduled or repeating meeting a meeting
map in the form of Annex F3 (Template Meeting Map).

	4.2	 	Meeting Minutes

IBM will record the minutes for each meeting using the form provided in Annex F4 (Template
Meeting Minutes.

	5.	 	ESCALATION

The escalation path between both parties as of the Effective Date is described below (from
bottom to top).

	 		
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	Solectron Title	 	Solectron Name	 	IBM Title	 	IBM Name
	CTO

	 	Marc Onetto
	 	SVP, Integrated Ops
	 	Bob Moffatt
	CPO

	 	Perry Mulligan
	 	CPO
	 	John Paterson
	Executive Sponsor

	 	Jeff Dixon
	 	BTO Executive
	 	TBD
	Global PM

	 	Dan Bohen
	 	Global PE
	 	Srinivas Cherukumilli

	6.	 	PROJECT MANAGEMENT OFFICE

	 	(a)	 	Within 30 days following the Effective Date, IBM will staff a dedicated Project
Management Office (“IBM PMO”) in support of the Solectron solution. The IBM PMO will
contain skills relevant to financial tracking and invoicing, Gainshare coordination,
management, plans and controls, and general program administration. The IBM PMO will have
global responsibility for the IBM business office services required to support the
Agreement. The IBM PMO shall remain in-place for the duration of the Agreement, and shall
interface directly with the Solectron PMO in regard to the execution of its
responsibilities. The IBM PMO responsibilities, in coordination with the Solectron PMO,
shall include:

	 	(i)	 	Governance processes development
	 
	 	(ii)	 	Contracts change control management
	 
	 	(iii)	 	Business controls, audits, and audit interface
	 
	 	(iv)	 	Procedures and documentation control and management
	 
	 	(v)	 	IBM systems access control
	 
	 	(vi)	 	Financial reporting (to Solectron and IBM)
	 
	 	(vii)	 	Cost accounting
	 
	 	(viii)	 	Performance measurements, reports, tools (to Solectron and IBM)
	 
	 	(ix)	 	Customer satisfaction surveys
	 
	 	(x)	 	Issues management
	 
	 	(xi)	 	Billings, invoicing, tax
	 
	 	(xii)	 	Asset control
	 
	 	(xiii)	 	Staffing
	 
	 	(xiv)	 	Contracts interpretations, reviews
	 
	 	(xv)	 	Corporate policies compliance

	 		
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	 	(xvi)	 	Security — (physical, data, etc.)
	 
	 	(xvii)	 	3rd party contracts management
	 
	 	(xviii)	 	Solectron stakeholder meetings support
	 
	 	(xix)	 	Interface with Solectron PMO
	 
	 	(xx)	 	Risk management plans
	 
	 	(xxi)	 	Emergency, critical situations management
	 
	 	(xxii)	 	Space and infrastructure
	 
	 	(xxiii)	 	Governance boards and committees coordination
	 
	 	(xxiv)	 	Reports, monthly and ad hoc
	 
	 	(xxv)	 	Day-to-day support of the Global Transition Team
	 
	 	(xxvi)	 	Monitoring and updating the Transition Plan with Solectron and IBM approvals;
reporting variances from the baseline as required

	 	(b)	 	Within 30 days following the Effective Date, Solectron shall establish a Program
Management Office (the “Solectron PMO”) to support the Service as provided by IBM as part
the Agreement. The PMO shall coordinate its activities with the IBM PMO function. The
Solectron PMO responsibilities, in coordination with the IBM PMO, shall include:

	 	(i)	 	Governance process development
	 
	 	(ii)	 	Solectron change request submissions, reviews,
approvals and centralized coordination
	 
	 	(iii)	 	Business controls, audits interface
	 
	 	(iv)	 	Financial reporting to Solectron
	 
	 	(v)	 	Performance measurements reviews
	 
	 	(vi)	 	Customer satisfaction surveys interface and centralized coordination
	 
	 	(vii)	 	Issues resolution
	 
	 	(viii)	 	IBM invoice approvals, reconciliations
	 
	 	(ix)	 	Contract interpretations, reviews
	 
	 	(x)	 	Corporate policies communications, interpretations
	 
	 	(xi)	 	Stakeholder meetings interface and support
	 
	 	(xii)	 	Emergency, critical situations interface

	 		
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	 	(xiii)	 	Space and infrastructure support
	 
	 	(xiv)	 	Solectron HR interface; staffing of project teams
	 
	 	(xv)	 	Interface with IBM Transition Manager and IBM PMO
	 
	 	(xvi)	 	Participation in development, review, and approvals of project plans
	 
	 	(xvii)	 	Transition/transformation deliverables reviews, approvals
	 
	 	(xviii)	 	Change management plan execution (including communications plans)
	 
	 	(xix)	 	Training execution
	 
	 	(xx)	 	I/T projects’ requirements inputs and document approvals
	 
	 	(xxi)	 	User acceptance tests coordination
	 
	 	(xxii)	 	“Go-live” readiness reviews and approvals
	 
	 	(xxiii)	 	Day-to-day support of the Global Transition Team

	 		
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ANNEX F1

GOVERNANCE TRANSITION

	 	 	 	 	 	 	 
	 	 	DUE DATE	 	 	 	 
	 	 	(after Agreement	 	 	 	 
	ACTIVITY	 	effective date)	 	KEY DELIVERABLE	 	EXHIBIT F REFERENCE
	Designate the
Solectron
Responsible
Executive

	 	Within 5 calendar days
	 	Solectron
Responsible
Executive Finalized
	 	Section 3.1
	 
	 	 	 	 	 	 
	Designate the IBM
Responsible
Executive

	 	Within 5 calendar days
	 	IBM Responsible
Executive Finalized
	 	Section 3.1
	 
	 	 	 	 	 	 
	Jointly Define
Responsibilities
For Solectron and
IBM Key Governance
Roles

	 	Within 30 calendar
days
	 	Roles and
Responsibilities By
Governance Role
	 	Section 3.2
	 
	 	 	 	 	 	 
	Jointly Establish
Meeting Calendar
for Steering
Committee Meetings

	 	Within 30 calendar
days
	 	Meeting Calendar
	 	Section 3.2.3
	 
	 	 	 	 	 	 
	Jointly Establish
Management Board

	 	Within 30 calendar
days
	 	Named Board Members
	 	Section 3.3.1
	 
	 	 	 	 	 	 
	Jointly Establish
Meeting Calendar
for Management
Board Meetings

	 	Within 30 calendar
days
	 	Meeting Calendar
	 	Section 3.2.3

	 		
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Reports

	 		
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Table of Contents

	 	 	 	 	 	 	 	 	 
	Section	 	 	Title	 	Page #	 
	 	1.	 	 	Monthly Measurements Reports
	 	 	3	 
	 	2.	 	 	Standard Operational Reports available in IBM Platform Business Warehouse
	 	 	4	 

	 		
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This Schedule set outs the standard operational measurement data that IBM will prepare and
present to Solectron as part of the monthly operational review beginning thirty (30) days following
the Effective Date. IBM will provide the monthly measurement reports set forth in the table below,
as specified in Annex A-7 (Transition Plan) or as otherwise agreed. As used in this Schedule,
“Transition” applies to Solectron Countries which have experienced their respective Go-Live Dates.

	1.	 	Monthly Measurements Reports

IBM will provide Solectron the following measurement reports, in soft copy format.

	 	 	 	 	 
	 	 	Description	 	 
	Measurement	 	(for example, Purpose, Data Field Examples)	 	Frequency
	PO and Non-PO

Activity
	 	PO Activity — Purchase order Commitment
(number of purchase orders, total
dollars);
	 	Monthly (after Transition)
	 
	 
	 	Non-PO activity, total dollars	 	 
	 	 	 	 	 
	Procurement Bypass
	 	Bypass incidents in which funds are
committed without IBM Procurement
involvement.
	 	Monthly (after Transition)
	 
	 	Calculated as the number of Bypassed
purchase orders divided by the number of
purchase orders issued for the month.	 	 

	 		
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	2.	 	Standard Operational Reports available in IBM Platform Business Warehouse

This Section sets forth the standard operational reports that Solectron will be able to obtain
from IBM as on demand reports. These reports will be generated through a web- based Table of
Contents that will extract the data from the IBM Platform Business Warehouse.

The reports will be available for each Solectron Country as each Solectron County achieves its
Go-Live Date after Transition.

The reports are standard and will be accessible only to those Solectron employees who have been
issued a license by IBM. Licenses shall be issued at the request of Solectron. IBM has planned
for, and shall issue at the request of Solectron, licenses for one hundred (100) Solectron
employees. Solectron may substitute employees from time to time.

In general, the reports will be made available by Service Beneficiary and Division. All reports
extracted will then allow drill downs on the fields available within the report, according to the
SAP business warehouse extracting capabilities.

	 	 	 
	 	 	Description
	Report Name	 	(for example, Purpose, Data Field Examples)
		 	
	Strategic IBM

Commitments

	 	This report provides an analysis of the purchase order line items which have been
created (sourced) with Strategic Suppliers.
		 	
	 

	 	Strategic Suppliers related purchase orders will be indicated by using the
‘strategic’ sourcing code.
		 	
	IBM Diversity (Commitment

PO)

	 	This report provides purchase order commitment information with all suppliers that
have a minority or otherwise noted diversity supplier indicator.
		 	
	 

	 	This report will enable Solectron to track suppliers denoted in the system as a
supplier that falls into the appropriate designation. The report will provide the
committed purchase order amount with minority or otherwise noted diversity suppliers
		 	
	IBM Diversity (Invoiced)

	 	This report provides supplier invoice information with all suppliers that have a
minority or otherwise noted diversity supplier indicator.
		 	
	 

	 	This report will enable Solectron to track suppliers denoted in the system as a
supplier that falls into the appropriate designation
The report will provide the obligated amount (invoiced amount) with the minority or
otherwise noted diversity suppliers.
		 	
	IBM Diversity (Paid)

	 	This report provides supplier paid information with all suppliers that have a
minority or otherwise noted diversity supplier indicator.
		 	
	 

	 	The report allows Solectron to track suppliers denoted in the system as a supplier
that falls into a specific designation.
		 	
	Shopping Cart Cycle-time

	 	This report tracks the cycle time of the Shopping Cart. Cycle time starts when a
Shopping Cart has been created and is placed into the “submit’ mode to start the
approval process. The cycle time ends once the Shopping cart is fully approved and
transferred to IBM’s SAP R3. The cycle time is measured in days.
		 	
	 

	 	The report will be used to track Solectron internal requisition approval process
cycle time.
		 	
	PO Commitment

	 	Solectron PO Commitment – This report provides purchase order commitment (value of
commitments) for all purchase orders that have been placed.

			
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	 	 	Description
	Report Name	 	(for example, Purpose, Data Field Examples)
	Shopping Cart Details

	 	Details of Shopping Cart – This report will provide Solectron the ability to run
reports based on the shopping cart information that is contained in EBP, prior to
purchase order placement (requisition).
	 
	Vendor Details

	 	This report provides vendor detail information from the Vendor Master Data. This
will be a generic report that will have the capability to drill down and provide
general information. This is to provide information to the client for their Vendor
detail so the client will have the ability to drill down to different information
	 
	Spend by Supplier

	 	This report provides information on invoices which have been cleared within a
specified clearing date range. The report calculates the applicable freight and
shipping charges using Commodity Categories and subtracts all taxes. The report
calculates the applicable paid amount as the amount paid to the supplier minus the
tax and minus the freight.
	 
	Good Receipt Accrual

	 	This report provides information when receipts have been posted against a purchase
order line item where no corresponding invoice has been posted. The receipt will be
done on EBP from the requester/by on behalf of/receiving department. The receipt
will then be sent to and posted in SAP against the PO.
This report provides information to Solectron to prepare accruals at month end. The
report can also be used on demand to forecast what may be coming during a month.
	 
	PO Details

	 	This report provides procurement detail information. This is a generic report with
drill down functionality which can be used to provide detailed purchase order line
item information at a Solectron determined level (for example, by country, cost
center, etc.).
	 
	SAP Contract Details

	 	This report provides detailed supplier contract information. This is a generic
report with drill down functionality which can be used to provide detailed contract
information at a Solectron determined level (for example, by country, cost center,
etc.).

	 
	 
	 	If information relating to the use of the contract (e.g. purchase order releases and
invoiced amounts) is required, a “Report to Report “ link will be provided to
contract value.
	 
	Receipt Details

	 	This report provides receipt detail information, as entered in EBP. This is a
generic report with drill down functionality which can provide detailed EBP receipt
information at a Solectron determined level (for example, by country, cost center,
etc.).
	 
	Requisiton Details

	 	This report provides requisition detail information. This will be a generic report
that has the ability to drill down and provide general information. This is to
provide information to the client for their requisition detail so the client will
have the ability to drill down to different information.
	 
	Non-PO Commitment

	 	This reports provides a list of all accounting documents (invoice related) posted to
SAP during a given time period which are not related to a purchase order.
	 
	Invoice Detail

	 	This report provides detailed invoice information. This is a generic report with
drill down functionality which can be used to provide detailed Invoice item
information at a Solectron determined level (for example, by country, cost center,
etc.).
	 
	 

	 	This report is designed to provide information on invoice detail behind posting
information.
	 
	Invoice History

	 	This report shows a list of all accounting documents (invoice related) posted to SAP
during a designated time period. This report has the capability to identify all
invoice related activity with a vendor during a selected time period.

			
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	 	 	Description
	Report Name	 	(for example, Purpose, Data Field Examples)
	Accounting Header

	 	This report provides Accounting Header document information, for example invoices.
This is a generic report with drill down functionality which has the capability to
provide detailed information at a Solectron determined level (for example, by
country, cost center, etc.).
	 
	Payment Details

	 	This report provides detailed payment information. This is a generic report with
drill down functionality which has the ability to provide detailed information at a
Solectron determined level (for example, by country, cost center, etc.).
	 
	 

	 	This report is designed to provide detailed information on all P2P Platform payments.

			
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MEETING MAP

	 	 	 	 	 	 	 
	Meeting Name
	 	 	 	 	 	 
	 	 	Meeting Name	 	 
	Purpose
	 	 	 	 	 	 
	 	 	Meeting Purpose	 	 
	Frequency
	 	 	 	 	 	 
	 	 	Dates/Times (ex. Daily — 1:00pm EST - 2:00pm EST)
	Chair
	 	 	 	 	 	 
	 	 	Chair person’s name and title or role
	Participants
	 	 	 	 	 	 
	 	 	Vendor	 	 
	 	 	 	 	Titles or Roles with individual names
	 	 	Governance	 	 
	 	 	 	 	Titles or Roles with individual names and respective organizations
	 	 	Customer	 	 
	 	 	 	 	Titles or Roles with individual names and respective organizations
	 
	 	 	 	 	 	 
	Agenda
	 	 	 	 	 	 
	 	 	Example:	 	 
	 	 	 	 	1 Status Review
	 	 	 	 	2 Review vendor or process issues
	 	 	 	 	3 Discuss Process Issues and Actions
	 
	 	 	 	 	 	 
	Inputs/Outputs
	 	 	 	 	 	 
	 

	 	Inputs	 	 	 	 
	 

	 	 	 	Customer	 	 
	 

	 	 	 	 	 	SLA Concerns
	 

	 	 	 	 	 	Process Issue Concerns
	 

	 	 	 	 	 	Escalation Items
	 

	 	 	 	Vendor	 	 
	 

	 	 	 	 	 	Status & Action Reporting
	 

	 	 	 	 	 	Process Issue Concerns
	 

	 	 	 	 	 	Escalation Items
	 

	 	 	 	IT	 	 
	 

	 	 	 	 	 	Action Reporting
	 

	 	 	 	 	 	SLA Reporting
	 

	 	 	 	 	 	Process Issue Concerns
	 

	 	 	 	 	 	Escalation Items
	 	 	Outputs	 	 
	 	 	 	 	Action Items (i.e. updated previous list, new)
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Meeting Minutes

	 	 	 	 	 
	Meeting Info	 	 
	 

	 	Name:	 	 
	 

	 	Date / Time:	 	 
	 

	 	Location:
	 	(TC or Face-to-Face)
	 

	 	Purpose:	 	 
	 

	 	Participants:	 	 
	 

	 	Attendees:	 	 
	 
	 	 	 	 
	 

	 	Chair Person:	 	 

Summary

     Summary section should describe in paragraph format a summary of the meeting outcome and relevant events.

Agenda

     This section should list the agenda in order of topic importance

Discussion Details

     This section should list discussion details in paragraph format

Issues

     This section should list all relavent issues (i.e. past, new, possible future issues) presented at the meeting. Issues need to be clearly
stated, prioritized, and accompanied with possible resolution options.

Action Items

     In this section list an updated action item list including new ones that resulted from the meeting

Legend

			
	Task	 	Completed

			
		 	Time line is impacted

			
		 	Time line may be impacted

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Item Type	 	Action / Issue Item	 	Lead	 	Status	 	Importance	 	Due Date	 	Close Date	 	Comments	 	Solution
	Issue
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

Miscellaneous Notes

     This section is for general notes of interest which may or may not have direct relation to the specific topic.

	 	 	 
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POLICIES AND PROCEDURES MANUAL CONTENT

	 	 	 
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	1.	 	INTRODUCTION

This document describes the general content and organization of the Policies and Procedures Manual
that will be developed to support governance of the Agreement.

	2.	 	GENERAL CONTENT AND ORGANIZATION

The table below provides the general organization and content of the Policies and Procedures Manual
to be developed by IBM with reasonable assistance from Solectron. The Policies and Procedures
Manual is intended to complement the Agreement and will provide comprehensive documentation of the
procedures that will be followed to implement and manage the Agreement and the overall
relationship. Specific references to detailed text or requirements in the Agreement may be
incorporated within the Policies and Procedures Manual.

The Policies and Procedures Manual will document how IBM and Solectron will perform the
responsibilities assigned to each Party in Schedule A (Services), and, where relevant, may provide
additional detail regarding the Functions to be performed. The Functions and activities to be
performed by each Party should be clearly indicated within the document (including specific
Functions and activities by job title or function). The manual will be used jointly by the Parties
to assist with overall coordination and communication regarding the Agreement.

	 	 	 	 	 	 	 
	Content	 	 	 	Brief Description
	1.1	 	Organizational Overview	 	 
	 
	 	 	 	 	 	 
	 

	 	(a)
	 	Solectron Governance
Organization.
	 	Include organization charts, description of functions
performed, contact information.
	 
	 	 	 	 	 	 
	 

	 	(b)
	 	IBM Management and
Delivery Organization
	 	Include organization charts, description of functions
performed, contact information.
	 
	 	 	 	 	 	 
	 

	 	(c)
	 	Key Contacts — Solectron
	 	A list of contacts within Solectron that are key users
of the Services and/or perform a liaison function in
regard to the Services (by business unit, by
geography).
	 
	 	 	 	 	 	 
	 

	 	(d)
	 	Key Contacts — Third
Parties
	 	A list of key Third Parties (maintenance providers,
software providers, telecom carriers, etc).
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Transition procedures and policies, consistent with
Annex A-7 (Transition Plan) and the Detailed Transition
	1.2	 	Transition Activities and
Responsibilities	 	Plan; content below will include information on
coordination activities, responsibilities of each Party
(by title/function)
	 
	 	 	 	 	 	 
	 

	 	(a)
	 	Overall Management and
Reporting Process (To be
	 	A description of Solectron and IBM management
structure, reporting, and review process associated
with Transition.

	 	 	 
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	Content	 	 	 	Brief Description
	 

	 	 	 	included in As-Is Operations
Procedures Manual.)	 	 
	 
	 	 	 	 	 	 
	 

	 	(b)
	 	Critical Deliverables
(To be included in As-Is
Operations Procedures
Manual).
	 	A list of Critical Deliverables, which will include the
Critical Deliverables listed in Schedule B (Performance
Measurement), acceptance criteria and timeline for the
Transition period.
	 
	 	 	 	 	 	 
	 

	 	(c)
	 	As-Is Operations

Procedures Manual
	 	A description of interim procedures to monitor and
coordinate Service delivery, including problem
management, change management, Service Level monitoring
and reporting, physical and logical security, project
management, work authorization, etc.

A description of the Functions and activities to be
performed by both Parties.
	 
	 	 	 	 	 	 
	 

	 	(d)
	 	Transition Financial
Management (To be included
in As-Is Operations
Procedures Manual.)
	 	A description of interim procedures for invoicing,
invoice verification, etc.

A description of the Functions and activities to be
performed by both Parties.
	 
	 	 	 	 	 	 
	 

	 	(e)
	 	Transition Contract
Management (To be included
in As-Is Operations
Procedures Manual.)
	 	A description of interim procedures for managing and
administering the contract including proposed changes
to the Agreement, interpretation procedures, issue
escalation process, and disputes.

A description of the Functions and activities to be
performed by of both Parties.
	 
	 	 	 	 	 	 
	 

	 	(f)
	 	Interim Relationship
Management Procedures (To be
included in As-Is Operations
Procedures Manual.)
	 	The procedures and responsibility for communication and
coordination with Solectron employees, third party
vendors, etc.

A description of the Functions and activities to be
performed by of both Parties.
	 
	 	 	 	 	 	 
	 

	 	(g)
	 	Other Transition
Procedures and
Responsibilities (To be
included in As-Is Operations
Procedures Manual.)
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	Content	 	 	 	Brief Description
	 

	 	 	 	 	 	Ongoing, “steady state” procedures and policies;
	1.3	 	Performance Management

Procedures	 	content below will include information on coordination
Functions and activities to be performed by each Party
(by title/function)
	 
	 	 	 	 	 	 
	 

	 	(a)
	 	Performance Monitoring
and Reporting Procedures
	 	IBM will describe procedures it will use to verify
proper Service delivery on a day-to-day basis,
including internal reporting and reporting to
Solectron.
	 
	 	 	 	 	 	 
	 

	 	(b)
	 	Problem Management and
Escalation Procedures
	 	IBM will describe procedures it will use to identify
problems, report and resolve problems, and escalate as
necessary within IBM’s organization and/or Solectron.
	 
	 	 	 	 	 	 
	 

	 	(c)
	 	Root Cause Analysis

Procedures
	 	IBM will describe procedures it will use to determine
root cause of problems, including involvement of
(and/or support to) applicable third parties or
Solectron.
	 
	 	 	 	 	 	 
	 

	 	(d)
	 	Service Level
Measurement and Reporting
Procedures
	 	IBM will describe procedures it will use to measure and
report Service Levels to Solectron.
	 
	 	 	 	 	 	 
	 

	 	(e)
	 	Project Management

Procedures
	 	IBM will describe the methodology and procedures it
will use to manage and report on projects.
	 
	 	 	 	 	 	 
	 

	 	(f)
	 	Change Management -
Operational and Technical
Procedures
	 	IBM will describe the procedures it will use (including
the notification process, timing, planning,
authorization, and implementation) regarding changes to
the operational and technical environment.
IBM will include Functions and activities to be
performed by Solectron, including any necessary
Solectron approvals.
	 
	 	 	 	 	 	 
	 

	 	(g)
	 	Physical Access &

Security Procedures
	 	IBM will describe the physical access and security
procedures it will use (at both Solectron Sites and IBM
locations) as necessary and appropriate to comply with
Solectron security policies that are relevant and
appropriate to the Services.
	 
	 	 	 	 	 	 
	 

	 	(h)
	 	Network Access &

Security Procedures
	 	IBM will describe the network access and security
procedures it will use as necessary and appropriate to
comply with Solectron security policies that are
relevant and appropriate to the Services.
	 
	 	 	 	 	 	 
	 

	 	(i)
	 	Disaster Recovery and
Business Continuity
Procedures
	 	IBM will describe the procedures it will use in regard
to disaster recovery and business continuity, which
will be consistent with those described in Schedule J
(Disaster Recovery). (IBM may reference other
documents containing comprehensive procedures, but will
at least provide general

	 	 	 
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	 	 	 	 	 	overview within the Policies
and Procedures Manual).
	 
	 	 	 	 	 	 
	 

	 	(j)
	 	Other relevant procedures
	 	IBM will describe any other procedures required to
deliver the Services as agreed to by the Parties
	 
	 	 	 	 	 	 
	1.4	 	Financial Management Procedures	 	Ongoing, “steady state” procedures and policies;
content below will include information on Functions and activities, including coordination activities to be
performed by each Party (by title/function).
	 
	 	 	 	 	 	 
	 

	 	(a)
	 	Invoicing
	 	IBM will describe procedures for invoicing (and
verification of invoice by Solectron), including
processes for invoicing base charges and Gain Share,
together with processes for true-up reconciliation and
allocating to local entities.
The content will include procedures regarding disputed
invoice amounts.
	 
	 	 	 	 	 	 
	 

	 	(b)
	 	Forecasting
	 	IBM will describe procedures for forecasting Savings
vs. plan.
	 
	 	 	 	 	 	 
	 

	 	(c)
	 	Performance Credits
	 	IBM will describe procedures for calculating
Performance Credits on invoices and calculations.
	 
	 	 	 	 	 	 
	 

	 	(d)
	 	Other relevant procedures
	 	IBM will describe any other procedures required to
deliver the Services as mutually agreed to by the
Parties.
	 
	 	 	 	 	 	 
	1.5	 	Contract Management Procedures	 	Ongoing, “steady state” procedures and policies;
content below will include information on Functions and activities, including coordination activities to be
performed by each Party (by title/function)
	 
	 	 	 	 	 	 
	 

	 	(a)
	 	Contract Change Control
	 	IBM will describe procedures regarding changes to the
Agreement, including changes to any Exhibit or
Attachment.

Content will include procedures to classify services as
a New Service, and resulting process to change the
Agreement (including pricing).

Content will include notification period and process,
authority levels, and escalation procedures for changes
to Agreement.
	 
	 	 	 	 	 	 
	 

	 	(b)
	 	Reporting
	 	IBM will describe procedures and activities regarding
key standard reports and requests for ad-hoc reports
from Solectron.
	 
	 	 	 	 	 	 
	 

	 	(c)
	 	New Service Levels
	 	IBM will describe procedures for determining new
Service Levels (based on continuous improvement and/or
Solectron request).

	 	 	 
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	Content	 	 	 	Brief Description
	 

	 	(d)
	 	Benchmarking
	 	IBM will describe procedures for benchmarking
exercises, including determination and agreement of
benchmark firm, sample peer group and process used for
benchmark, payment for benchmark, review of results,
and potential outcome.

Content will include dispute resolution process.
	 
	 	 	 	 	 	 
	 

	 	(e)
	 	Auditing
	 	IBM will describe procedures for operational and/or
financial audits (as required by Solectron auditing
and/or regulatory agencies).

IBM will describe notification process and procedures
to resolve audit findings.
	 
	 	 	 	 	 	 
	 

	 	(f)
	 	IBM Key Personnel
	 	IBM will describe procedures for Solectron approval
regarding replacement or removal of IBM Key Personnel.
	 
	 	 	 	 	 	 
	 

	 	(g)
	 	Dispute Resolution
	 	IBM will describe procedures regarding formal dispute
resolution process.
	 
	 	 	 	 	 	 
	 

	 	(h)
	 	Other relevant procedures
	 	IBM will describe any other procedures required to
deliver the Services as mutually agreed to by the
Parties.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Ongoing, “steady state” procedures and policies;
	1.6	 	Relationship Management

Procedures	 	content below will include information on Functions an
activities, including coordination activities to be
performed by each Party (by title/function).
	 
	 	 	 	 	 	 
	 

	 	(a)
	 	Customer Satisfaction

Surveys
	 	IBM will describe the process to be used for conducting
customer satisfaction surveys.
Content will include procedures regarding action items
and attempts to resolve customer issues.
	 
	 	 	 	 	 	 
	 

	 	(b)
	 	Authorized Users
	 	IBM will describe procedures and responsibilities
regarding responding to authorized users problems,
requests, and questions.
	 
	 	 	 	 	 	 
	 

	 	(c)
	 	Third Party Vendors
	 	IBM to describe procedures for relationship regarding
third party vendors which may provide services or
products that are ancillary to (or support) the overall
delivery of Services.

Procedures and coordination with key third party
vendors will be documented.
	 
	 	 	 	 	 	 
	 

	 	(d)
	 	 Other Third Parties
	 	IBM will describe procedures for any other contact or
requests from other third parties in regard to the
Agreement.
	 
	 	 	 	 	 	 
	 

	 	(e)
	 	 Other relevant procedures
	 	IBM will describe any other procedures required to
deliver the Services as mutually agreed to by the
Parties.

 
	 	 	 
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	Content	 	 	 	Brief Description
	1.7	 	IBM Operational Procedures	 	Ongoing, “steady state” procedures and policies;
content below will include information on Functions and activities, including coordination activities to be
performed by each Party (by title/function)
	 

	 	 	 	 	 	
	 	 	Operational Procedures (by

function, as applicable)	 	IBM will describe the activities that IBM will
undertake in order to provide the Services, including
those directions, supervision, monitoring, staffing,
reporting, planning and oversight activities normally undertaken by IBM which shall be consistent with those
IBM activities used to provide services similar to the
Services.

	 	 	 
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INDIRECT SOURCING SERVICES AGREEMENT

Between

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SCHEDULE G

IBM DELIVERY EXCELLENCE

	 	 	 
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1. QUALITY MANAGEMENT

1.1 Delivery Excellence Defined

Delivery Excellence is the measurable level of work quality delivered by our client teams
across all phases of a project lifecycle in order to satisfy our clients and be the leader in
the marketplace.

Delivery excellence consists of two distinct and important elements when it comes to successful
completion of any major project: “Starting it right, and executing it right .” Supporting
these two elements is the structural framework embodied in our proprietory Seven Keys to
Success project health evaluation tool. Before we examine these delivery excellence elements,
let’s explore the details associated with the Seven Keys to Success health indicators. This
will provide an understanding of how the Seven Keys to Success is used to support “Starting it
right and Executing it right.”

Each of the Seven Keys represents a single dimension or view of a project’s health for a
particular category, for example, risk mitigation or project team performance. We have learned
that the comprehensive health of any significant project at any point in time can be
represented by analyzing each of these dimensions. As a result of the
health analysis of each dimension, a color code (Green, Yellow, or Red) is assigned with the
following indicated actions:

			
	 	 	 
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	l	 	Stay the course — no corrective action required
	 
	l	 	WARNING- Corrective action required in the Near Term
	 
	l	 	URGENT- Indicates significant problems that are likely to impact the ability to maintain
scope and deliver the project on time and within budget

Corrective actions are then planned and executed to address those dimensions that have a
“yellow” or “Red” status health indicator. By examining past projects, we know that delivery
failures do not happen “overnight,” but by failing to recognize warning signs along the way and
take appropriate corrective actions before recovery is too late.

Stakeholders are committed — Identifying, evaluating, informing, and influencing the
individuals and groups who are affected by or who influence the program or project.

Partial list of attributes:

	 	¡	 	Effective project steering committee
	 
	 	¡	 	Active project sponsorship
	 
	 	¡	 	Organizational readiness to accept new systems and processes
	 
	 	¡	 	Affected business users are actively involved

Business Benefits are Realized — Estimating, measuring, and monitoring the benefits the
business will gain from the program or project. Benefit includes expected result and the
associated cost, both financial and non-financial, of achieving that result.

Partial list of attributes:

	 	¡	 	Business case for the project has been defined; project otherwise
justified
	 
	 	¡	 	A monitoring and measurement process is in place to gauge
project’s continuing focus on the end benefit
	 
	 	¡	 	Project budget is monitored against actual expenditures and cash
flow expectations

Work and Schedule are Predictable — Controlling the production and acceptance of
program or project services and deliverables, and ensuring they meet specified performance and
acceptance requirements.

Partial list of attributes:

	 	¡	 	The project schedule is being used to manage the activities of
participants and accurately reflects progress planned versus progress achieved
	 
	 	¡	 	Milestones and associated achievement dates are actively monitored

			
	 	 	 
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	 	¡	 	Deliverables are identified with sufficient criteria to judge
quality and completeness; deliverable acceptance process in place and being
executed

Scope is Realistic and Managed — Agreeing, maintaining, and amending the boundaries of
the program or project.

Partial list of attributes:

	 	¡	 	Project scope is explicitly defined and understood by project
participants
	 
	 	¡	 	“Scope creep” is actively monitored
	 
	 	¡	 	A well defined scope change process is in place and being followed

Team is High Performing — Identifying, mobilizing, and developing the people required
for the program or project team. Obtaining and maintaining appropriate space, equipment, and
other resources required to successfully complete the project.

Partial list of attributes:

	 	¡	 	Resource needs, roles and responsibilities are clearly identified
	 
	 	¡	 	Staffing plan consistent with project schedule
	 
	 	¡	 	Skills of participants meet expectations for assigned roles
	 
	 	¡	 	Team morale and teamwork is evident

Risks are Mitigated — Identifying and evaluating risks and issues. Developing
avoidance, mitigation, and resolution activities to counteract those risks and issues.

Partial list of attributes:

	 	¡	 	Risk management plan and process is in place and being monitored
	 
	 	¡	 	Each identified risk is evaluated as to potential impact,
potential for realization and risk mitigation strategy/actions
	 
	 	¡	 	Issues are recorded, tracked and resolved to meet project
timeline and budget constraints

Delivery organization benefits are being realized — Establishing, agreeing, and
monitoring the benefits that we will gain from the project. Maintaining and protecting the
delivery organization’s interests in relation to the project.

Partial list of attributes:

	 	¡	 	Knowledge transfer is planned and being monitored for
effectiveness consistent with project objectives

			
	 	 	 
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	 	¡	 	Actual expenditures are aligned with budget expectations
	 
	 	¡	 	Favorable project citations are expected
	 
	 	¡	 	Project is expected to enhance personnel skills and depth of
experience

1.2 Delivery Excellence “Starting it right”

All major projects begin with common project initiation activities—clarify scope
boundaries, confirm staffing assignments, develop detailed work schedules, etc.—as a necessary
requirement for launching the project. IBM has established a formal Project Launch process
that each major project must execute during the first 45 days of the start of the project.
This process is designed to help all projects benefit from a common launch process.

There are two internal IBM actions generated from this process, (1) Pre-launch Seven Keys
Assessment (to be completed within the first 10 business days of project start, and (2) Work
Products and Tools Assessment (to be completed within the total 45 day period).

1.2.1 Pre-launch Seven Keys Assessment

This assessment, based upon the Seven Keys mentioned above, is intended to document the
“as-is” condition of the project so that early indicators of potential issues can be acted upon
promptly. Accordingly, the evaluation criteria are slightly different in each category, for
example:

Stakeholders are Committed -

	 	¡	 	Have key client stakeholders been identified?
	 
	 	¡	 	Has a steering committee for the project been identified?

Scope is realistic and managed –

	 	¡	 	Has the delivery contract/Statement of Work (SOW) been reviewed
with the client sponsor?
	 
	 	¡	 	Are client/IBM expectations regarding scope in agreement?

Team is high performing -

	 	¡	 	Is the required infrastructure to support the project team in
place or being fulfilled?

			
	 	 	 
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	 	¡	 	Are key project start-up personnel (both IBM and client) identified and
available as required?

These are just a few of the questions to be answered. Although early in the project life
cycle, the assessment does identify potential problem areas that can be quickly resolved.

1.2.2 Work Products & Tools Assessment

This second action of the Project Launch process is intended to confirm that the key
project control tools and processes are in place to support the project until completion.
Project managers are allowed to introduce additional tools/templates and processes, but at a
minimum, the Project Manager is required to establish the following components within the 45
day launch period:

	 	¡	 	Communications Management Plan – The plan describes the key
reporting relationships and meeting requirements between the client and IBM
management teams.
	 
	 	¡	 	Detailed Project Schedule and Work Breakdown Structure (WBS) –
work activities and dependencies, key milestones, task assignments.
	 
	 	¡	 	Deliverable Definition Process – Describes the deliverables and
the associated delivery and acceptance process. This information is typically
provided in the SOW, and is discussed with the client as part of the SOW
review process in the Project Launch activities.
	 
	 	¡	 	Seven Keys to Success Status Report – The Project manager is
expected to establish a monthly process for completing this internal IBM
project status report. This report is made available to IBM Sector leadership
and the Risk management person assigned to this project for the entire project
life cycle.
	 
	 	¡	 	Change Management Process – This process is established to help
manage project scope. IBM employ’s a rigorous approach to the change control
process to prevent unauthorized changes in scope and the potential
cost/schedule impacts.
	 
	 	¡	 	Human Resource Plan – This is a staffing plan for both client and
IBM resources, including project organization chart with identified roles and
responsibilities.
	 
	 	¡	 	Issue Management Process – This process is established to provide
a comprehensive approach to managing the identification, recording, tracking
and resolution of project issues that will occur throughout the project life
cycle.
	 
	 	¡	 	Conditions of Satisfaction – It is important that the IBM team
understands what the client expects from IBM in this project. Once
established with the client, the conditions of satisfaction attendant IBM
actions are periodically reviewed by the project partner/manager as

			
	 	 	 
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	 	 	 	well as in independent discussions with the client conducted by the assigned
Risk manager (RM)1.
	 
	 	¡	 	Risk Management Plan – This plan identifies the initial project
risks that might occur and is periodically updated throughout the project life
cycle. The plan identifies the risk, probability of occurrence, potential
impacts and risk mitigating actions.

As stated above, the IBM project manager will establish additional project controls or project
support tools and processes including those desired by the client where applicable.

Once these two deliverables are complete, the assigned Risk Manager will review the assessments
with the project manager and project partner to determine if additional support is needed to
complete the Project Launch process or the review indicates that the launch is completed. Once
completed, the assigned Risk Manager reviews the Seven Keys Status Report each month to stay
informed regarding project progress and to monitor action plans associated with any identified
“yellow” or “red” health indicators.

1.3 Delivery Excellence “Executing it right”

Following the completion of the Project launch, the project status is identified as “in
delivery” and will continue that way until the project is officially closed by obtaining, if
necessary, final client sign-off that the project is complete, deliverable materials (subject
to the SOW or IBM Customer Agreement) are complete and signed-off, and financial obligations
between IBM and the client have been completed.

During the “in delivery” period, the assigned Risk Manager will conduct periodic on-site
Project Management Reviews (PMR) to meet with IBM project management, client project management
and client project sponsor to perform a project health check based upon the Seven Keys
framework discussed earlier. The frequency and duration of the on-site PMRs will vary based
upon project size/complexity, and is typically linked to key milestone delivery dates. The PMR
schedule will be discussed with IBM project management upon completion of the Project Launch
process, but may be adjusted as needed during the project.

 

			
	1	 	The assigned Risk Manager is an experienced
project manager with many years of hands-on project management for
large/complex projects. The RM understands the challenges inherent in projects
and this knowledge enables the RM to evaluate the impacts of project dynamics
and offer help and recommendations when needed.

			
	 	 	 
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The PMR process routinely includes the following activities:

	 	¡	 	Conducting a general status overview with the project manager and
partner
	 
	 	¡	 	Conducting one-on-one interviews with IBM and client team leads
(if client resources are assigned in this role) to understand their
perspective on the project; issues or concerns; the project control process
they support and their role in supporting them; project risks and recommended
actions.
	 
	 	¡	 	Conducting one-on-one interviews with the client sponsor to
understand the sponsor’s view of the project; concerns and issues; IBM
performance to date; what IBM is doing well, areas where IBM needs to improve;
Conditions of Satisfaction, etc.
	 
	 	¡	 	Reviewing the various project control processes including project
schedule status and maintenance procedures; issues/risks; change control; key
deliverables and the agreed approval process; project status reports, etc.
	 
	 	¡	 	The RM analyzes the information gathered in the interviews and
document reviews, and then records key findings, recommended actions and
health indicators in a draft report to the project manager and partner. They
are expected to provide feedback, including correcting misunderstandings and
errors. Recommendations and health indicator decisions remain in the purview
of the RM as an independent reviewer.
	 
	 	¡	 	Once approved, the report is issued in a final status to
designated IBM Sector executives for follow-up action if required.
	 
	 	¡	 	Recommended actions are reviewed in the next scheduled on-site
PMR to insure that recommendations are implemented.

The project partner or manager may share selected summary results from the report with the
client depending upon arrangements between IBM project management and the client.

Summary

The Delivery Excellence process as described herein is followed by all IBM sectors under the
Business Consulting Services (BCS) umbrella. We have realized substantial benefits from this
process in areas of:

	 	¡	 	project portfolio management
	 
	 	¡	 	project performance “dashboard” reporting
	 
	 	¡	 	better controlled and managed projects
	 
	 	¡	 	improved client satisfaction
	 
	 	¡	 	consistency across projects
	 
	 	¡	 	improvements in project management processes and controls
	 
	 	¡	 	tool/template improvements

			
	 	 	 
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Each of the processes and actions described above work together to achieve Delivery
Excellence. IBM continually evaluates our delivery processes for improvement opportunities to
achieve the ultimate indicator of success—satisfied clients.

			
	 	 	 
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INDIRECT SOURCING SERVICES AGREEMENT

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SCHEDULE H

DATA PRIVACY

			
	 	 	 
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IBM will comply with Solectron’s written data privacy policies provided to IBM in advance
to the extent such policies are relevant and appropriate to the Services. The procedures for
implementing and complying with such policies will be specified in the Policies and Procedures
Manual.

			
	 	 	 
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SCHEDULE I

SECURITY

			
	 	 	 
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IBM will comply with Solectron’s written data privacy policies provided to IBM in advance
to the extent such policies are relevant and appropriate to the Services. The procedures for
implementing and complying with such policies will be specified in the Policies and Procedures
Manual.

			
	 	 	 
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Schedule J

Disaster Recovery

			
	 	 	 
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1.0 Introduction

Terms with initial capitalization have the meanings set forth in the Agreement unless
otherwise defined in this Schedule J. IBM will be responsible for the provision of disaster
recovery services and capabilities in support of the Services to Solectron as set forth in this
Schedule J and the Disaster Recovery Plan (“DRP”). The Disaster Recovery Plan for the Services
shall be effective no later than the first Go Live Date (as such term is defined in the
Agreement).

Within ninety (90) days after the Effective Date, IBM will develop and submit to Solectron the
Disaster Recovery Plan for the Services covering the items summarized in Section 2.0 of this
Schedule.

The Disaster Recovery Plan will serve IBM’s clients using the P2P Platform, including
Solectron, which are hosted in the IBM Platform and the shared facilities from which IBM will
deliver the Services (“P2P Platform Clients”) .

2.0 Disaster Recovery Plan (DRP)

2.1 DRP components

The Disaster Recovery Plan shall include:

	1.	 	a brief description of the services and functions covered by the DRP;
	 
	2.	 	the recovery times after the occurrence of a declared Disaster agreed upon by the Parties for
each critical service, which will be subject to the DRP recovery commitments set out in
Section 2.7 of this Schedule J;
	 
	3.	 	hardware and software comprising the Configurations used for disaster recovery by IBM;
	 
	4.	 	contact listings of Solectron and IBM key employees with respect to the DRP;
	 
	5.	 	identification of IBM and Solectron recovery teams;
	 
	6.	 	criteria for Disaster declaration, recovery and testing;
	 
	7.	 	names and titles of those individuals who are authorized by Solectron and IBM to declare a
Disaster;
	 
	8.	 	backup process and components of IBM supplied Configuration and personnel;
	 
	9.	 	the location and schedule for the periodic tape backup made by IBM of the Services;
	 
	10.	 	the location and schedule for off-site storage of the tape backups made by IBM;
	 
	11.	 	notification procedures;
	 
	12.	 	recovery information, procedures, and schedules;
	 
	13.	 	testing results and any required corrective action plans;
	 
	14.	 	procedures for maintaining the DRP.

2.2 IBM Responsibilities

IBM shall:

	1.	 	provide an IBM Employee as its representative who is knowledgeable in disaster recovery and
business continuity planning and the DRP for the Services to serve as a single point of
contact for Solectron’s business continuity related communications and activities. The IBM
representative will be responsible for the development and maintenance of the DRP and will
provide safe storage and distribution of copies as follows:

	 	•	 	one copy to the DRP Alternative Site
	 
	 	•	 	one copy to the IBM P2P Platform disaster recovery coordinator

	2.	 	review and update the DRP in accordance with the Agreement;
	 
	3.	 	test the DRP one (1) month prior to the first Go Live Date and annually thereafter as agreed
by the Parties to validate that the DRP remains practicable and current;
	 
	4.	 	provide Solectron with a report of the test results within thirty (30) days of each DRP
test; and
	 
	5.	 	make available to Solectron the IBM recovery and emergency processes and commitments set
forth herein.

			
	 	 	 
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2.3 Solectron Responsibilities

Solectron shall designate a Solectron employee who is knowledgeable in disaster recovery
and business continuity planning and the existing Solectron disaster recovery plan to serve as
a single point of contact for Solectron and who shall:

	1.	 	act as the primary interface to IBM’s representative;
	 
	2.	 	be available on a continuous basis in the event a Disaster is declared;
	 
	3.	 	have knowledge of the contents and procedures of the DRP;
	 
	4.	 	participate in the testing of the DRP when reasonably needed;
	 
	5.	 	review the results of IBM tests;
	 
	6.	 	communicate internally any updates made by IBM to the DRP, to ensure that the DRP remains
current; and
	 
	7.	 	develop and maintain the Solectron disaster recovery plan for network connectivity and
recovery in the event of a Disaster subject to this Schedule J and the DRP.

2.4 IBM Changes to the DRP

IBM will periodically review the DRP and may at any time, upon notification to Solectron,
modify the DRP to reflect and implement the general requirements of the IBM Platform.

Any proposed modifications shall be communicated in writing by IBM to Solectron and IBM shall
implement those changes which aim to maintain the stability of, or improve the overall DRP and
recovery times; provided, however, that IBM shall first notify Solectron of modifications which
might result in a decreased level of coverage, or protection by, the DRP for Solectron.

2.5 Solectron Requested Changes to the DRP

As the DRP provided by IBM will be made available to IBM P2P Platform Clients on a
standard basis, Solectron might require IBM to implement some specific changes. Such updates to
the DRP that are necessary as a result of actions by or changes requested by Solectron which
materially change the scope of the DRP will be considered out-of-scope Services and will be
handled as Change Requests within the Change Control Process as set forth in Schedule F
(Governance). IBM will evaluate if the Change request will be compatible with the DRP for the
IBM Platform and will submit to Solectron the results of the analysis and its proposal for
implementing the same (which proposal shall include the cost, if any, to Solectron).

2.6 Services to Be Provided under the DRP.

In the event a Disaster is declared pursuant to the terms of this Schedule J, which
interrupts the Services, IBM shall implement the DRP and provide the disaster recovery services
described in the DRP at a level of performance that will allow Solectron to use and receive the
Services.

In the event the point of origin of any Disaster occurs on the IBM Platform or at any point
from the IBM Platform to any IBM or IBM-subcontracted facility or network used to provide
Services (an “IBM  Disaster”), IBM will remain responsible for meeting the Service Levels during such IBM
Disaster unless such IBM Disaster constitutes a Force Majeure Event.

In the event the origin of any Disaster occurs at a point from within any Solectron facility or
from a Solectron facility to the IBM Platform (a “Solectron Disaster”), IBM will make
commercially reasonable efforts to meet the Service Levels during such Solectron Disaster;
provided, however, that IBM will be relieved of any Service Level Credits to the extent that
because of such Solectron Disaster IBM does not achieve the applicable Service Levels using
commercially reasonable efforts during a Solectron Disaster. Solectron shall be responsible
for business continuity services with respect to the Solectron facilities.

			
	 	 	 
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The Parties agree that the DRP will allocate responsibility as follows:

Network Recovery

	•	 	Solectron will be responsible for all
network services for which Solectron has control,
including any costs associated with connectivity
and support.

	•	 	IBM will be responsible for all network
services of which IBM has control (including those
services contracted with Third Parties), including
any costs associated with connectivity and support.

2.7 DRP Recovery Committments

IBM commits to recover the Services within fifty-six (56) hours from the Disaster
declaration (which is the RTO – Recovery Time Objective), as follows:

	•	 	Within twenty-four (24) hours from the declaration of a Disaster,
IBM will make available the DRP Alternative Site;

	•	 	Within thirty-two (32) hours from access to the DRP Alternative
Site, IBM will restore the functional environment and the
Services.

IBM will backup the IBM Platform and Solectron data and information used in the provision of
the Services on a twenty-four (24) hour basis and transfer those backups to the DRP Alternative
Site, accordingly, Solectron data will be recovered as of the point of the most recent backup.

			
	 	 	 
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	3.0	 	Non-Disaster Situations: Severity Standards and Service Restoration Objectives for P2P
Platform

Continuous efforts to address any Services interruption, including those for which IBM is
responsible or are under its control, shall be undertaken in non-disaster situations as well. The
severity of a problem is based on the initial impact of the problem and can be determined by the
criteria set forth in the table below. The Service Restoration Objectives indicate the expected
resolution time for such Services interrruptions (“Service Restoration Objectives”).

	 	 	 	 	 	 	 
	 	 	 	 	Service Restoration	 	 
	Severity	 	Characteristics	 	Objective	 	Problem Examples
	1

Severe Business

Impact

	 	-   Critical System, network or key application outage
(or imminent outage) with critical impact on service
delivery or 

-   Total loss of production service to all P2P
Platform Client or

-   Impacts one or more service level commitments or 

-   Revenue or delivery schedule impact

	 	Continuous effort
aimed to restore
service within 24
hours
	 	-  Server down

-  IBM network component down
preventing access to
production
application

-   Application down

	 
	 	 	 	 	 	 
	2

Major Business

Impact

	 	-   Key component, application, critical P2P Platform
Client computer or network is down, degraded, or
unusable or

-   Potential critical impact on service delivery or

-   Service performance degradation; service delivery
impacted or

-   Some P2P Platform Clients affected

	 	3 calendar days
	 	-   Degraded

performance

-   Intermittent problem

	 
	 	 	 	 	 	 
	3

Minor

Business

Impact

	 	-   A component, minor application or procedure is
down, unusable, or difficult to use or

-   Some operational impact, but no immediate impact
on service delivery or

-   Service outage but alternative workaround
available or

-   Problems that degrade service but do not prevent
delivery of service or

-   Potential exposure to ability to deliver service or

-   Scattered P2P Platform Clients affected

	 	
7 calendar days
	 	-   automated
monitoring problem
(require manual
monitoring until
problem is resolved)

	 
	 	 	 	 	 	 
	4

Minimal or No

Business Impact

	 	-   Component, procedure not critical to customer
is unusable or

-   Alternative is available; deferred maintenance is
acceptable or

-   No impact to service or

-   No Production affected or

-   Individual P2P Platform Client (such as Solectron)
affected

	 	30 calendar days
	 	-   Development or test

environment problem

	4.0	 	Operational Centers: Business Continuity

A situation may arise which affects continuity of Services provided by the Procurement
Operations Centers, Customer Assistance Centers, and Accounts Payable Operations Centers with
respect to the P2P Platform. Specifically, there could be a situation in which an event such as
flood or a fire renders an IBM Operational center unusable yet does not impact the availability of
the P2P infrastructure. In this event, IBM will invoke its existing contingency plans to relocate
the affected team(s) and/or workload to other IBM facilities or Locations, in accordance with the
Agreement, which can provide the necessary connectivity to the P2P Platform infrastructure and
Services. IBM has multiple Procurement Operations Centers, Customer Assistance Centers, and
Accounts Payable Operations Centers around the globe. The restoration objective is to restore
services for emergency services within twenty- four (24) hours of such an event, and to restore
normal services within fifty-six (56) hours of such an event.

			
	 	 	 
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	5.0	 	Emergency Communications Procedures

IBM maintains a Standard Emergency Communications Procedure which describes the emergency
communications procedures to follow in the event of either a natural disaster or a technical
problem which results in any component of the P2P Platform infrastructure being unavailable and
which prevents P2P Platform Clients and / or IBM support teams from fully using the P2P Platform
infrastructure for an extended period of time, such as a period in excess of four (4) hours.

The key focal point for communications with Solectron will be the IBM Global Project Executive
(described In Schedule F (Governance)). The IBM Global Project Executive will be responsible for
informing Solectron of the event and for providing regular status reports to the Management
Committee and/or the Executive Steering Committee during the period of Services interruption.
These status reports will be provided on a weekly basis at a minimum, or on a more frequent basis
as mutually agreed by the Parties, or is otherwise apporpriate given the nature of the problem.

			
	 	 	 
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INDIRECT SOURCING SERVICES AGREEMENT

Between

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SCHEDULE K

DISENGAGEMENT ASSISTANCE

			
	 	 	 
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TABLE OF CONTENTS

	 	 	 	 	 	 	 
	1.	 	INTRODUCTION	 	1
	 
	 	1.1	 	Definition	 	1
	 
	 	1.2	 	Disengagement Plan	 	1
	 
	 	 	 	 	 	 
	2.	 	SOLECTRON ACCESS TO PERSONNEL, EQUIPMENT, THIRD PARTY SERVICE CONTRACTS AND SOFTWARE LICENSES	 	1
	 
	 	2.1	 	Personnel	 	1
	 
	 	2.2	 	Third Party Service Contracts	 	1
	 
	 	 	 	 	 	 
	3.	 	OTHER TERMS REGARDING DISENGAGEMENT ASSISTANCE	 	2
	 
	 	3.1	 	Commercially Reasonable Efforts	 	2
	 
	 	3.2	 	Duration	 	2
	 
	 	3.3	 	Survival of Agreement	 	2
	 
	 	3.4	 	Compensation	 	2

			
	 	 	 
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	1.	 	INTRODUCTION.
	 
	1.1	 	Definition.
	 
	 	 	“Disengagement Assistance” means, collectively, the Functions (in addition to continued
performance of the Services) that IBM is required to carry out in connection with the
cessation of any Services or the expiration or earlier termination (for any reason) of the
Agreement (or any Local Adoption Agreement(s)) or to facilitate the orderly wind-down and,
where applicable, migration of the affected Services from IBM to Solectron and/or its
designee(s), as directed by Solectron including, if requested by Solectron, upon the removal
of any Services from scope.

	1.2	 	Disengagement Plan.

	 	(a)	 	Disengagement Assistance will be provided pursuant to a mutually agreed
plan, including a ramp-down schedule for the IBM Personnel performing the affected
Services (the “Disengagement Plan”).
	 
	 	(b)	 	The Parties will develop the Disengagement Plan as described in Section 1.2.3,
below, promptly upon any of the following: (i) receipt of a notice of termination of
the Agreement or a Local Adoption Agreement; (ii) upon request from Solectron upon
the removal of any Services from scope; (iii) six (6) months before the scheduled
expiration of the Agreement; and (iv) receipt of a notice of a Force Majeure Event
under Section 19.3 (Force Majeure) of the Agreement.
	 
	 	(c)	 	IBM will prepare the proposed Disengagement Plan for review, comment and
mutual agreement. Once the Disengagement Plan has been agreed, both Parties will
comply with it, subject to Solectron’s right to extend the Disengagement Assistance
period as provided in the Agreement (or the applicable Local Adoption Agreement).

	2	 	SOLECTRON ACCESS TO PERSONNEL, EQUIPMENT, THIRD PARTY SERVICE CONTRACTS AND SOFTWARE
LICENSES.
	 
	2.1	 	Personel.
	 
	 	 	If relevant under a particular Local Adoption Agreement, Solectron will have the right
to recruit and hire IBM Personnel as specified in such Local Adoption Agreement.

	2.2	 	Third Party Service Contracts.
	 
	 	 	At Solectron’s request, IBM will provide information to Solectron or its designee
concerning the third party service contracts of IBM (or its Subcontractors) that are used
primarily to perform the Services being terminated. IBM will use Commercially Reasonable
Efforts to obtain any Required Consents and thereafter, to the extent permitted under the
applicable agreement, assign some or all of such contracts to Solectron or its designee, as
directed by Solectron. To the extent permitted under the applicable agreements, the
assignee will assume the as-

			
	 	 	 
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	 	 	signing Party’s obligations under such contracts relating to
periods after the date of assignment.

	3.0	 	OTHER TERMS REGARDING DISENGAGEMENT ASSISTANCE.
	 
	3.1	 	Commercially Reasonable Efforts.
	 
	 	 	The Disengagement Plan will provide for each Party to use Commercially Reasonable
Efforts to assist the other Party in the orderly termination of the affected Services and
the transfer of Deliverables, work-in-progress, and other materials required to facilitate
the orderly, non-disrupted business continuation of each Party.

	3.2	 	Duration.
	 
	 	 	IBM agrees to provide Disengagement Assistance for up to six (6) months following the
initially scheduled effective date of termination/expiration (or such other period as is set
forth in the mutually agreed Disengagement Plan).

	3.3	 	Survival of Agreement.
	 
	 	 	Disengagement Assistance will be deemed to be governed by the terms and conditions of
the Agreement notwithstanding its earlier termination or expiration, other than any terms or
conditions that do not reasonably apply to the Disengagement Assistance.

	3.4	 	Compensation.
	 
	 	 	Solectron will compensate IBM for all Disengagement Assistance on a T&M basis in
accordance with Schedule C (Charges) or on such other basis as may be mutually
agreed by the Parties provided, however, that Solectron’s payment for such Disengagement
Assistance shall be without prejudice to any right Solectron may have to claim that such
amounts paid by it constitute recoverable damages were IBM found to have breached the
Agreement. If the Agreement is being terminated by IBM under Section 11.4 (Termination By
IBM) of the Agreement, then IBM may condition its provision of the Disengagement Assistance
under this Schedule K on monthly pre-payment for such assistance.

			
	 	 	 
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INDIRECT SOURCING SERVICES AGREEMENT

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SCHEDULE L

APPROVED SUBCONTRACTORS

			
	 	 	 
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	Ref.#	 	IBM Subcontractor(s)	 	IBM Subcontractor Location
	1.

	 	Emptoris
	 	200 Wheeler Road

Burlington, MA 01803

			
	 	 	 
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INDIRECT SOURCING SERVICES AGREEMENT

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SCHEDULE M

IBM INSURANCE COVERAGE

			
	 	 	 
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	 	1	 	INSURANCE coverage requirements
	 
	 	 	 	IBM shall maintain the following insurance coverage and be responsible for its
Subcontractors (if any) maintaining sufficient limits of the appropriate insurance coverage.
	 
	 	1.1	 	Workers Compensation
	 
	 	 	 	Statutory workers’ compensation in accordance with all applicable statutory
requirements and applicable local country laws, if any;
	 
	 	1.2	 	Liability Insurance

	 	(a)	 	Employer’s liability insurance with minimum limits of $1,000,000;
	 
	 	(b)	 	Commercial general liability (including contractual liability insurance) with a combined
single limit of $1,000,000 per occurrence, subject to a $2,000,000 annual aggregate, Solectron
shall be included on such policy as an additional insured;
	 
	 	(c)	 	Comprehensive automobile liability covering all vehicles that IBM owns, hires or leases in an
amount not less than $1,000,000 per occurrence (combined single limit for bodily injury and
property damage); and

	 	1.3	 	Property Insurance
	 
	 	IBM will maintain Property insurance, including coverage for electronic data processing
equipment, providing “all risk” or “special cause of loss” coverage on a replacement cost
basis, on all IBM Machines owned or leased by IBM and used to provide the Services.
	 
	 	1.4	 	Fidelity/Crime Insurance
	 
	 	 	 	IBM will maintain Fidelity/Crime Insurance covering employee dishonesty for IBM’s
employees involved in the performance of this Agreement with limits not less than
US$10,000,000.
	 
	 	2.	 	ADDITIONAL INSURANCE PROVISIONS

	 	(a)	 	Before commencing performance of the Services, IBM shall furnish Solectron with
certificates of insurance and endorsements of all required insurance for IBM.
	 
	 	(b)	 	The documentation shall state that the insurer shall endeavor to provide thirty (30) days’
prior written notice to Solectron prior to cancellation.
	 
	 	(c)	 	Upon request, IBM shall furnish Solectron the same evidence of insurance for its
Subcontractors as Solectron requires of IBM.

			
	 	 	 
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	 	(d)	 	In the case of loss or damage or other event that requires notice or other action under the
terms of any insurance coverage described above, IBM will be solely responsible for taking such
action. IBM will provide Solectron with contemporaneous notice and with such other information as
Solectron may reasonably request regarding the event.
	 
	 	(e)	 	The Parties do not intend to shift all risk of loss to insurance. IBM’s obligation to
maintain insurance coverage in specified amounts will not act as a limitation on any other
liability or obligation which IBM would otherwise have under the Agreement. Similarly, the naming
of Solectron and its Affiliates as additional insureds is not intended to be a limitation of IBM’s
liability under the Agreement and will in no event be deemed to, or serve to, limit IBM’s liability
to Solectron to available insurance coverage or to the policy limits specified in this Schedule M,
nor to limit Solectron’s rights to exercise any and all remedies available to Solectron under the
Agreement, at law or in equity.

			
	 	 	 
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Schedule N

Change Control

			
	 	 	 
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	1.0	 	Change Management Process

	 	1.1	 	Objectives
	 
	 	 	 	The objectives of the Change Management Process are:

	 	1.1.1	 	To manage each Change Request in order to keep the scope of the Services under control
with full traceability;
	 
	 	1.1.2	 	To make sure each Change Request is assessed by key stakeholders;
	 
	 	1.1.3	 	To make sure each assessed Change Request is accepted, rejected, or deferred by the Parties;
	 
	 	1.1.4	 	To track the implementation of each accepted Change Request and the creation of relevant
documentation associated with amendments to the Agreement; and
	 
	 	1.1.5	 	To allow the impact of all Changes to be understood, documented, and managed.

	 	1.2	 	Process

	 	1.2.1	 	The Services, including the P2P and Strategic Sourcing standards, processes, procedures
and controls or associated IT technologies, architectures, standards, products, Software,
Equipment, and Systems provided, operated, managed, supported or used to provide the Services may
be changed only by a writing signed by authorized representatives of Solectron and IBM. Either
Solectron or IBM may request a change to the Services subject to the following change control
procedure:
	 
	 	1.2.2	 	A Change Request will be submitted by the requesting Parties’ Project Executive and will
reference the Services, describe at a reasonable level of detail the change, the rationale for the
change and the impact the change may have on the Services both if it is accepted and if it is
rejected.
	 
	 	1.2.3	 	The Project Executives will review the Change Request and will do one of the following:

	 	(a)	 	Approve the change by authorized representatives of Solectron and IBM signing the
Change Request. Upon such approval, the change will be implemented, except that any Change
Request proposing any modification to or that would otherwise conflict with any provision of
the Terms and Conditions, Schedule B (Performance Management) or Schedule C (Charges) will not
be effective until also reviewed and approved by each Party’s legal department; or

			
	 	 	 
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	 	(b)	 	agree in writing to submit the Change Request for further investigation in accordance with
Section 6.4 (Detailed Analysis), and, if the Change Request was submitted by Solectron, to pay
IBM in accordance with Section 7 (Performance of T&M Work) of Schedule C for IBM’s
investigation. Solectron and IBM will then agree to mutually approve or reject the Change
Request. If Solectron and IBM do not agree, either IBM or Solectron may submit such Change
Request to the Management Board for resolution; or
	 
	 	(c)	 	reject the Change Request. If rejected, the Change Request will be returned to the
requesting Project Executive along with the reason for rejection.
	 
	 	(d)	 	The Parties shall agree upon which Party shall bear financial responsibility for the
charges, fees and costs associated with any change, including all charges, fees and costs
associated with (i) the design, installation, implementation, testing and rollout of such
change, (ii) any modification or enhancement to, or substitution for, any impacted business
process or associated Software, Equipment, System, or Services, (iii) any increase in the cost
to Solectron or the Services Recipients of operating, maintaining or supporting any impacted
business process or associated Software, Equipment, System, or Services, and (iv) any increase
in Resource Unit usage resulting from such change.
	 
	 	(e)	 	Until a change is agreed upon in writing, IBM and Solectron will continue to act in
accordance with the latest agreed version of the Agreement.

	 	1.3	 	Impact Assessment

	 	1.3.1	 	Except for upgrades to the P2P Platform, if IBM desires to make any change to the
Services, including any upgrade, replacement or addition that may (i) increase Solectron’s total
cost of receiving the Services; (ii) require changes that will have a non-trivial adverse impact on
Solectron’s or an Affiliate’s or Service Recipient’s business; (iii) require IBM, Solectron or any
Service Recipients to install a new version, release, upgrade of, or replacement for, any Software
or Equipment or to modify any Software or Equipment, or (iv) have a material adverse impact on the
functionality, interoperability, performance, accuracy, speed, responsiveness, quality or resource
efficiency of the Services, then IBM shall provide to Solectron a written proposal describing in
detail the extent to which the desired change may affect the functionality, performance, price or
resource efficiency of the Services and any benefits, savings or risks to Solectron or the Service
Recipients associated with such change.

			
	 	 	 
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	 	1.3.2	 	For planned upgrades to the P2P Platform, IBM shall provide to Solectron a written plan
describing in detail the extent to which the planned upgrade may affect the functionality,
performance, or resources and any benefits, savings or risks to Solectron or the Service Recipients
associated with such change. Such upgrades shall be performed at IBM’s discretion, however, IBM
will be responsible for any incremental costs to Solectron necessary to prevent any degradation in
Solectron’s ability to receive the Services related to such upgrade.

	 	1.4	 	Detailed Analysis
	 
	 	 	 	If Solectron directs IBM to perform a Detailed Analysis, IBM will provide to Solectron
in writing an assessment and evaluation of the impact of the Change on the then-current
scope, price, and performance of the Services in accordance with the timescale agreed
between the Parties. In doing so, IBM will include at least the following:

	 	1.4.1	 	a description of the Change
	 
	 	1.4.2	 	an analysis of the impact of the Change on the following (as appropriate given the nature of
the Change):

	 	(a)	 	Scope of the Agreement;
	 
	 	(b)	 	Savings;
	 
	 	(c)	 	Service Levels or other performance metrics;
	 
	 	(d)	 	Delivery dates;
	 
	 	(e)	 	Any disaster recovery or business continuity plan
	 
	 	(f)	 	Infrastructure requirements
	 
	 	(g)	 	Any other matter reasonably requested by PG&E or reasonably considered by IBM to be
relevant

	 	1.4.3	 	a list of Work Products or Deliverables required from each Party for implementing the
Change
	 
	 	1.4.4	 	a timetable for implementation of the Change
	 
	 	1.4.5	 	any proposed changes to the Charges, including;
	 
	 	1.4.6	 	an analysis of the reasons that IBM believes its costs will be materially impacted by the
Change and any supporting documentation

			
	 	 	 
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	 	1.4.7	 	any proposed modifications or additions to or deletions from the pricing elements from which
the Charges are calculated
	 
	 	1.4.8	 	any other relevant information, including information justifying the proposed charges or
modifications to the Charges
	 
	 	1.4.9	 	an assessment of the added value of a proposed Change to Solectron
	 
	 	1.4.10	 	an assessment whether any or all of the activities identified in the proposed Change
constitute New Services, as defined in Section 2.8 (New Services) of the Agreement;
	 
	 	1.4.11	 	any consequent amendments to the Agreement required to implement the Change.

	 	1.5	 	Testing
	 
	 	 	 	Prior to making any change or using any new (e.g., not tested in or for the Solectron
environment) Software, Equipment or System used to provide the Services, IBM shall have
verified by appropriate testing that the change or item has been properly installed, is
operating in accordance with its specifications and is performing its intended functions in
a reliable manner.
	 
	 	1.6	 	Implementation of changes
	 
	 	 	 	IBM shall schedule and implement all changes so as not to (i) non-trivially disrupt or
adversely impact the business or operations of Solectron or any Service Recipient, (ii)
degrade the Services then being received by them, or (iii) unreasonably interfere with their
ability to obtain the full benefit of the Services.
	 
	 	1.7	 	Temporary Emergency Changes
	 
	 	 	 	Notwithstanding the foregoing, IBM may make temporary changes required by an emergency
if it has been unable to contact the Solectron Global PM or his or her designee to obtain
approval after making reasonable efforts. IBM shall document and report such emergency
changes to Solectron as promptly as reasonably possible given the circumstances, but not
later than two business days after the change is
made. Such changes shall not be implemented on a permanent basis unless and until agreed by
the Parties.

			
	 	 	 
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