Exhibit 10.15
CONFIDENTIAL TREATMENT REQUESTED: Certain portions of this document have been
omitted pursuant to a request for confidential treatment and, where applicable,
has been marked with an asterisk to denote where omissions have been made. The
confidential material has been filed separately with the Commission.
GLOBAL SUPPLY AGREEMENT
APPLIED MATERIALS CONFIDENTIAL
This Global Supply Agreement dated and effective as of June 1, 2002 is by and
between Applied Materials, Inc., a Delaware corporation, having places of
business in Santa Clara, California and Austin, Texas, and Kinetics Fluid
Systems, Inc., a California corporation, having places of business in Santa
Clara, California, and Austin, Texas.
In consideration of the mutual promises and consideration provided for in this
Agreement, the parties agree as follows:
DEFINITIONS
The following capitalized terms will have the meanings given below when used in
this Agreement:
"Agreement" means this Global Supply Agreement, all its Exhibits and
Attachments, and all Specifications for Items, all as amended from time to time,
and all Applied Purchase Orders and other Authorized Demand Signals that may be
issued for the purchase of Items (including Services). When used with reference
to the purchase of a particular Item or Items, "Agreement" means those
provisions of the foregoing that apply to such Item or Items and to the
transaction for such purchase.
"Applied's Standard Terms and Conditions of Purchase" means Exhibit 1 to this
Agreement.
"Applied" means Applied Materials, Inc., and all of its domestic and
international divisions and subsidiaries.
"Applied IP" has the meaning given in the IPA.
"Applied System(s)" means capital equipment sold by Applied that incorporates a
Fluid Delivery System.
"Asset Purchase Agreement" means the Asset Purchase Agreement dated June 25,
1999 between Applied Materials, Inc. and Kinetics Fluid Systems, Inc., as
amended and supplemented from time to time.
"Attachment" means one of the documents, records or instruments identified as an
"Attachment" on the List of Exhibits and Attachments set out in this Agreement.
CONFIDENTIAL TREATMENT REQUESTED
"Authorized Demand Signal" means an order or record issued by Applied to
Supplier pursuant to Section 2.1.5.1.
"Bus Route" or "Blanket Order" means an arrangement, method or agreement for the
order and purchase of goods under which the buyer issues a standing, blanket or
open order (under which quantities may be indeterminate, forecasted, or
otherwise provided for) and then periodically specifies quantities for delivery
through summary orders, issuance of a purchase order document, or by electronic
or other notice.
"Business Day" means a day that is not a Saturday, a Sunday, or a holiday or
operating shut down day under the most current fiscal year operating calendar of
Applied in effect under this Agreement.
"Committed Delivery Date" means the date on which Supplier shall deliver a
completed Item and all required documentation to Applied, as determined under
Sections 2.1.5.2 and 2.1.5.3. As to Services for which a Purchase Order is the
"Authorized Demand Signal," the "Committed Delivery Date" means each date
established by such Purchase Order for completion of Services and delivery of
work product or other deliverables to Applied.
"Confidential Information" means all of the following: (a) "Confidential
Information," as such term is defined by the IPA, a Design SOW, a DSA or a DVA
(each as defined below), (b) Internal Applied Data, as defined below, and new
product plans of Applied that are included as Confidential Information under
Section 2.9.2 below, and (c) "Confidential Information" or "Proprietary
Information" of, or received from, Applied or Supplier, under (and as such
term(s) are defined in) any NDA now in effect or hereafter in effect (but in any
case, only for the period applicable under the IPA, NDA or other agreement, as
applicable).
"Configurable Subassemblies" means those configurable products identified by a
non-repeating part numbering system established by Applied (in which a
Subassembly part numbering follows a particular convention, i.e., XXXX-cont.). A
Configurable Subassembly may contain a number of Piece Parts, Modules or devices
(or a combination thereof) that are electrically and/or mechanically connected
and perform a specific function. An FDS is a Configurable Subassembly.
"Configuration Engineering Services" means the engineering services requested by
Applied and provided by Supplier for Applied *
"CCR Services" means the Configuration Engineering Services or CES Services
provided by Supplier pursuant to Applied's CCR.
"CCR" means Applied's request for CES Services or Configuration Engineering
Services in the revision of a Configured BOM or CES Package, which request is
issued after Supplier's acceptance of the applicable SSR or NSO order.
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
"Contract Price" means the price for an Item, including a Service, established
by or in accordance with Attachment 1 or, as to Services for which pricing is
not determined under Attachment 1, the price for Services established by or in
accordance with the applicable Applied Purchase Order issued under this
Agreement.
"CES Package" means all documentation, drawings, specifications and information
prepared or provided by Supplier to implement and record a CES.
"CES Services" means the engineering services provided by Supplier pursuant to
Applied's request to Supplier for a Customer Engineering Special.
"CES" or "Customer Engineering Special" means a modification to an existing
standard Fluid Delivery System configuration, wherein the modification involves
either *
"CPS" means Applied's Installed Customer Productivity Support organization,
formerly known as the Installed Base Service & Support organization, and any
successor organization (such organization being sometimes referred to as "IBSS"
or "CPS").
"Design Services," "Design SOW," "Design Services Agreement," and "DSA" have the
meanings given in the IPA.
"Development Services," "Development Services Agreement," and "DVA" have the
meanings given in the IPA.
"ECO" means an Engineering Change Order issued by Applied to change a
Specification or to make another Engineering Change under (and as defined in)
Section 4.1.1 below or approved by Applied to authorize a change in a
Specification or to make another Engineering Change under Section 4.1.1 below.
"ERS Program" means Applied's "Evaluated Receipts Settlement Program," which is
a system for payment by Applied for Items purchased hereunder, as described in
Section 2.11.1.3 below.
"Exhibit" means one of the documents, records or instruments identified as an
"Exhibit" on the list of Exhibits and Attachments set out in this Agreement.
"FDS" or "Fluid Delivery System" has the meaning given in the IPA. The term FDS
includes (unless otherwise limited by particular provisions of this Agreement)
Volume Manufacturing FDS, Pilot FDS, R&D FDS and NSO FDS.
"First Article" means a new Item, an Item with revised Specifications (including
drawings), or an Item manufactured after a change in Supplier's (or a sub-tier
supplier's) manufacturing location, manufacturing process or any other change
that, pursuant to the QRD (defined below) or the Quality Framework Document
(Attachment 15 to this Agreement), requires the change or the affected Item to
be evaluated and accepted by Applied prior to delivery to Applied or use in
manufacturing of Items under this Agreement.
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
"Internal Applied Data" means all non-public, proprietary information from any
source that is recorded, displayed, maintained or accessed on Applied's SPR,
SSR, NSR, CCR or any internal database, subject to the exclusions of Section
4.1, clauses (i) through (v) of the IPA.
"IP Rights" has the meaning given in the IPA.
"Item" or "Items" means FDS(s), Module(s), other Subassembly(ies), Piece Part(s)
and any other good(s) or Service(s) that (a) Supplier is to provide to Applied
under this Agreement pursuant to any Authorized Demand Signal and (b) are
identified in, or have pricing terms determined as set forth in, Attachment 1
and any amendments to Attachment 1 or are identified in and have pricing terms
set forth in an Applied Purchase Order issued as an Authorized Demand Signal
under this Agreement. Items (excluding Services) shall be deemed to constitute
"goods" as that term is defined in, and used in, the Uniform Commercial Code as
adopted in California, including amendments to such statutes. Certain exclusions
affecting "Items" are also set out in Section 1.4 below.
"Manufacturing Process" has the meaning given in the IPA.
"MFC" means mass flow controller.
"Module" means those standard or configurable parts that may be identified by a
single Applied part number, that contain multiple Piece Parts and that are sold
by Supplier to Applied on a recurring basis as separate units or as assemblies
for use in FDSs, NSOs or other fluid delivery products.
"NDA" means any and all agreements between Applied and Supplier for
confidentiality, nondisclosure or limitation on use of Confidential Information.
Such term, unless otherwise indicated in this Agreement, includes the IPA.
"New Product Transition" or "NPT" means the transition, in accordance with
criteria approved by Applied, of an FDS or Applied System from * to *, or from *
to *.
"New Product Transition Services" or "NPT Services" means the *, * and *
preparation services necessary for New Product Transition. The particular
requirements for each NPT Services project will be defined in * for NPT Services
issued pursuant to an RFP/RFQ process, and will generally include (when
appropriate to the particular project and with compensation to be negotiated)
*and *,* and * specifications, * and *,* of * and *, and * preparation.
"NSO" or "Non-System Order" means a Subassembly or other Item (excluding an FDS)
that (a) is ordered by Applied for Volume Manufacturing, Pilot Manufacturing or
R&D use and (b) either is to be installed or incorporated in a previously
manufactured Configurable Subassembly or is to be used by Applied for R&D
purposes.
"NSR" means a nonstandard request for an Item to be manufactured by Supplier,
which request will include basic process, platform, fab, and chamber information
and other information to describe the Item ordered.
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
"Piece Parts" means piece parts that are contained in Subassemblies or that are
provided by Supplier to Applied separately from a Subassembly.
"Pilot FDSs" means FDSs manufactured by Supplier for incorporation into Applied
Systems under Applied's Pilot Manufacturing program.
"Pilot Manufacturing" excludes R&D Manufacturing and means (i) manufacturing in
the United States of America of FDSs or Modules that have not been released for
Volume Manufacturing by completion of New Product Transition, and/or (ii)
manufacturing of FDSs or Modules in each other country which is specifically
identified from time to time in an Attachment to this Agreement as a country in
which Supplier may provide FDSs or Modules that have not been released for
Volume Manufacturing by completion of New Product Transition.
"Product Development Process" means Applied's process and management procedures
for its new product development programs employed to control design and delivery
of Applied's products.
"Purchase Order," (i) when used to describe a method of ordering Items, means
that method of ordering (sometimes also referred to as "Spot Buy") under which
Applied issues Authorized Demand Signals in accordance with Section 2.1.5.1,
including SSRs, NSRs and Purchase Orders (as defined in the following clause
(ii)), that identify or describe particular Items to be manufactured or provided
to Applied; and (ii) when used to describe an order issued by Applied for
particular Item(s), means Applied's order for particular Item(s) contained in an
Applied purchase order form, except that the provisions of this Agreement
(including Exhibit 1 to this Agreement) shall be a part of each purchase order
form issued as a Purchase Order under this Agreement and shall supersede and
replace in their entirety the terms and conditions stated on the reverse side of
the purchase order form. The Purchase Order method is distinguished from the Bus
Route method. The Purchase Order method will be utilized for the ordering of
FDSs by Applied from Supplier. When used in Section 2.2.3, "Spot Buy" refers to
Supplier's method, arrangement or agreement for the purchase of Piece Parts
under a Purchase Order method.
"QRD" means the "Quality Requirements Document for Manufactured
Assemblies--Kinetics Gas Systems," attached to this Agreement as Attachment 20,
as such document is modified from time to time.
"R&D" means the development, design and related scientific analysis (a) for new
or modified capital equipment for use or application in any Applied System; and
(b) for the prototype manufacture of such new or modified capital equipment.
"R&D Manufacturing" means the manufacturing of FDSs or Modules on a prototype or
other limited basis for use by Applied for R&D purposes.
"R&D Services" means Design Services and Development Services required for R&D
or R&D Manufacturing. R&D Services may include creation of product definitions
and functional requirements, schematics, product structure trees, electronic
valve assignments, definition of test requirements, determination and resolution
of manufacturing engineering issues, and the manufacture of one or more
prototypes. CES Services are not included in the term R&D Services.
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CONFIDENTIAL TREATMENT REQUESTED
"RFP," "RFQ," or "RFP/RFQ" means, as applicable, Applied's Request for Proposal
or Request for Quotation process, as applicable, or a combination of such
processes.
"SAT" means the Supply Account Team (or successor organization) assigned to
Supplier by Applied.
"Services" means Configuration Engineering Services, CES Services, CCR Services,
NPT Services, Design Services, Development Services, and other services
performed by Supplier for Applied pursuant to this Agreement, the IPA (to the
extent applicable), or (as to Design Services or Development Services) the
relevant DSA or DVA.
"SMT" means Applied's Subsystem Management Team (or successor organization)
assigned to Supplier by Applied.
"Source Inspection" means any inspection at Supplier's facilities required by
the quality provisions of this Agreement, including the QRD or the Quality
Framework, Attachment 15.
"Spares" means Items ordered by Applied's CPS pursuant to Section 2.1.5 below.
"Specifications" means authorized drawings, designs, specifications,
instructions relating to installation, assembly and testing, and manufacturing
and product requirements that are applicable to an Item. Specifications include
any ECOs applicable to an Item and information of the types set out above that
is included in, or referred to in, an SSR, NSR, CCR or Purchase Order issued as
to an Item.
"SPR" or "System Production Report" means, as to Volume Manufacturing FDSs,
Pilot Manufacturing FDSs, and NSO Items, Applied's schedule for anticipated
production of Applied Systems and NSOs, which is posted by Applied from time to
time and updated at least weekly for Supplier's electronic access and review,
identifying the Applied Systems and NSO transactions for which Supplier (subject
to the provisions of this Agreement) is anticipated to provide FDSs or NSOs
under this Agreement.
"Standard Services" means any or all of the following: Configuration Engineering
Services; CCR Services; CES Services; and NPT Services.
"Standard Subassemblies" means those products discretely identified by a single
Applied part number. A Standard Subassembly may contain a number of Piece Parts,
Modules or devices (or a combination thereof) that are electrically and/or
mechanically connected and performs a specific function.
"Subassemblies" means both Standard Subassemblies and Configurable
Subassemblies.
"Supplier" means Kinetics Fluid Systems, Inc., a California corporation, and (x)
all unincorporated divisions of Kinetics Fluid Systems, Inc. and (y) those
subsidiaries and affiliates of Kinetics Fluid Systems, Inc. that are approved
(through written supplement to this Agreement) by Applied as permitted to
perform supply or service obligations hereunder. Unit Instruments, Inc. shall
not be included in the term "Supplier" unless a written amendment to this
Agreement, executed by all parties, so provides. As set out in Section 1.4
below, this Agreement does not
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CONFIDENTIAL TREATMENT REQUESTED
apply to goods, products, parts or services that are the subject of agreement(s)
previously entered into with Applied by Insync Systems, Inc., even though
Supplier has succeeded to such prior agreement(s) by merger.
"Supplier Performance Plan" means a formal performance plan for Supplier in the
form of Attachment 16, as modified from time to time. Attachment 16 is the
Supplier Performance Plan in effect on the Effective Date.
"System Specification Report" or "SSR" means Applied's internally generated
report of basic process, platform, fab and chamber information and requirements
describing an order for an Applied System requiring FDS or other Item(s), or for
an NSO, from Supplier, as the same is posted by Applied to the Applied website
designated for Supplier access or as otherwise furnished to Supplier.
"UCC" means the Uniform Commercial Code, as adopted, amended and in effect in
the State of California from time to time, which is currently codified in the
California Commercial Code.
"Volume Manufacturing FDSs" means FDSs manufactured by Supplier for
incorporation into Applied Systems in Applied's Volume Manufacturing operations.
"Volume Manufacturing" or "VMO" means (i) manufacturing in the United States of
America of those FDSs or Modules that are released *, and also (ii)
manufacturing of FDSs or Modules in each other country which is specifically
identified from time to time in an Attachment to this Agreement as a country in
which Supplier may provide FDSs or Modules that have been released *.
"Will" or "shall" have the same meaning and are used to convey an affirmative
duty or obligation (i.e., a requirement).
Capitalized terms used in this Agreement and defined in other provisions will
have the meanings in this Agreement given in such other provision(s). Unless
otherwise indicated, references to Sections, provisions, paragraphs or like
terms are to such elements of this Agreement and to all subsections or subparts
of the referenced Section, provision or paragraph, and "hereof," "herein" and
like words refer to this Agreement as a whole and not to a particular provision,
also unless otherwise indicated. "Including" or "includes" does not indicate a
limitation. Capitalized terms defined in the text of this Global Supply
Agreement that are also used in its Attachments or Exhibits are used in the
Attachments and Exhibits as defined in the text of the Global Supply Agreement,
unless the context of usage indicates otherwise.
1. SCOPE.
1.1. Description of Agreement.
This Agreement defines the terms and requirements applicable between Applied and
Supplier with respect to the supply of Items by Supplier to Applied and to
matters related to such supply
* Material has been omitted and filed separately with the Commission.
7
CONFIDENTIAL TREATMENT REQUESTED
that are covered by this Agreement; each party agrees to observe, perform under
and comply with this Agreement. Applied may, from time to time, issue Authorized
Demand Signals to Supplier for the purchase of Items. Upon acceptance (including
deemed acceptance) of each Authorized Demand Signal, and for valuable
consideration received, Supplier agrees that it shall, throughout the term of
this Agreement, sell and deliver the Item(s) covered by each such Authorized
Demand Signal under and in compliance with this Agreement. Decisions regarding
future purchases from Supplier will be based in part upon Supplier's performance
under this Agreement, and Supplier's achievement toward Applied's business
objectives.
1.2. Addresses and Contact Persons; Notices.
1.2.1. Contact Persons.
The persons to receive notices generally under this Agreement and the
procedures for notice are set out in Section 1.2.2. The following
individual contact persons are identified for convenience of the parties
and certain of the persons listed below are designated, in specific
sections of this Agreement, as the person(s) to receive or initiate
certain specific notices or actions. Each party may change any of its
contact persons or other information in this Section 1.2.1 from time to
time. Upon any such change, notice of the change shall be given promptly
to the other party through the person(s) specified to receive notice under
Section 1.2.2 below, and until such notice is given the change shall not
be effective as to the other party.
SUPPLIER CONTACT PERSONS: KINETICS FLUID SYSTEMS, INC.
Senior Vice President: Xxx Xxxxxx
Phone: (000) 000-0000
Facsimile: (000) 000-0000
E-mail address: xxxxxxx@xxxxxxxxxxxxx.xxx
Vice President Operations: Xxxx Xxxxxx
Phone: (000) 000-0000
E-mail address: xxxxxxx@xxxxxxxxxxxxx.xxx
Vice President Sales: Xxxx Xxxxxx
Phone: (000) 000-0000
E-mail address: xxxxxxx@xxxxxxxxxxxxx.xxx
Senior Director of Operations - Round Rock Division: Xxxx Xxxxxx
Phone: (000) 000-0000
E-mail address: xxxxxxx@xxxxxxxxxxxxx.xxx
Director of Operations - Milpitas Division: Xxxxxxx Xxxxxxxxx
Phone: (000) 000-0000
E-mail address: xxxxxxxxxx@xxxxxxxxxxxxx.xxx
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CONFIDENTIAL TREATMENT REQUESTED
Customer Service Manager (Austin): Xxxxx Xxxxxxxxxxx
Phone: (000) 000-0000
E-mail address: xxxxxxxxxxxx@xxxxxxxxxxxxx.xxx
Cell phone: (000) 000-0000 Pager: (000) 000-0000
Customer Service Manager (Milpitas): Xxxxxx Xxxxxxxxx
Phone: (000) 000-0000
Email address: xxxxxxxxxx@xxxxxxxxxxxxx.xxx
Cell phone: (000) 000-0000 Pager: (000) 000-0000
Engineering Manager: Xxxx Xxxxxxx
Phone: (000) 000-0000
E-mail address: xxxxxxxx@xxxxxxxxxxxxx.xxx
Quality Manager (Round Rock): Xxxx Xxxxxx
Phone: (000) 000-0000
E-mail address: xxxxxxx@xxxxxxxxxxxxx.xxx
Quality Manager (Milpitas): Xxxx Xxxxxx
Phone: (000) 000-0000
E-mail address: xxxxxxx@xxxxxxxxxxxxx.xxx
Finance Manager (Milpitas): Xxxx Xx
Phone: (000) 000-0000
E-mail address: xxx@xxxxxxxxxxxxx.xxx
Finance Manager (Round Rock): Xxxx Xxxxxxx
Phone: (000) 000-0000
E-mail address: xxxxxxxx@xxxxxxxxxxxxx.xxx
Customer Service Manager-Warranty Claims: Xxxx Kitchen
Phone: (000) 000-0000
E-mail address: xxxxxxxx@xxxxxxxxxxxxx.xxx
Senior Counsel - Austin: Xxxxx Xxxxxx
Phone: (000) 000-0000
E-mail address: xxxxxxx@xxxxxxxxxxxxx.xxx
Milpitas Division Address:
0000 Xxxxxx Xxxxxx Xxxxx, Xxxxxxxx, XX 00000
Austin/Round Rock Division Address:
000 X. Xxxxxx Xxxxx, Xxxxxx, Xxxxx 00000
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CONFIDENTIAL TREATMENT REQUESTED
APPLIED CONTACT PERSON:
Xxxxx Xxxxxx, Supply Account Team Lead, M/S 3300
Applied Materials, Inc., 0000 Xxxxxxx 000X, Xxxxxx Xxxxx 00000
Phone: 000-000-0000
Facsimile: (000) 000-0000 Attn: Xxxxx Xxxxxx
E-mail: Xxxxx_X_Xxxxxx@xxxx.xxx
1.2.2. Notices.
Notices required or permitted under this Agreement shall be given in
writing, which shall include facsimile and e-mail transmission with
receipt confirmed (either electronically or by the recipient or on behalf
of the recipient) to the recipient, at the recipient's current business
address, facsimile number or e-mail address, addressed to Supplier or
Applied, as the case may be, and to the attention of the persons specified
below, except as otherwise provided in this Agreement. If hand-delivered
or transmitted by facsimile or e-mail, notice is effective at the time of
receipt at the designated business address, facsimile number or e-mail
address or on the next Business Day after receipt if receipt occurs after
5:00 p.m. (local time of recipient) or on a non-Business Day; if sent by
nationally recognized courier or express service (e.g., Federal Express,
Airborne, Express Mail or equivalent service), or by mail (which shall be
certified mail -- return receipt requested), notice is effective on the
Business Day of receipt, or the next Business Day after receipt, if
receipt occurs on a non-Business Day.
The persons specified to receive notices under the Agreement as provided
in this Section 1.2.2 are:
FOR APPLIED,
Xxxxx Xxxxxx, Supply Account Team Lead, at the address given above
in Section 1.2.1,
with a copy to:
Xxxxx Xxxx, Vice President-Legal Affairs, Applied Materials, Inc.,
Legal Department, 0000 Xxxxx Xxxx., Xxxxxxxx 00, Xxxxx Xxxxx,
Xxxxxxxxxx 00000.
Telephone: (000) 000-0000, Facsimile: (000) 000-0000,
E-mail: Xxxxx_Xxxx@xxxx.xxx;
FOR SUPPLIER,
Xxx Xxxxxx, Senior Vice President, 0000 Xxxxxxx Xxxxxxx Xxxx., Xxxxx
Xxxxx, Xxxxxxxxxx 00000, and whose telephone and facsimile numbers
and e-mail address are given above in Section 1.2.1,
with a copy to:
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CONFIDENTIAL TREATMENT REQUESTED
(a) Xxxx Xxxxxx, Vice President Operations at the address given
above in Section 1.2.1, and
(b) Xxxx Xxxxxxx, Vice President and General Counsel, 0000 Xxxxxxx
Xxxxxxx Xxxx., Xxxxx Xxxxx, Xxxxxxxxxx 00000.
Telephone: (000) 000-0000, Facsimile: (000) 000-0000,
E-mail: xxxxxxxx@xxxxxxxxxxxxx.xxx.
Either party may specify that notices to it, and any required copies of
same, be provided to no more than three persons, and notice shall be
effective as to a party when it has been given as above provided to all
persons so specified. Further, each party may, from time to time, change
the persons(s) specified to receive notice under this Section 1.2.2.
Notice of such a change shall be given to the person(s) specified to
receive notice for the other party under this Section 1.2.2, and such
change shall be effective when notice thereof is effective under the
procedures of this Section 1.2.2.
In certain instances, notice may also be given to one or more "Guarantors" under
and for purposes of the "Performance Guaranty Agreement" (such terms being
defined below) relating to this Agreement. The persons to receive such notice(s)
are set out in such Performance Guaranty Agreement.
1.3. Entire Agreement; Related Agreements; Modification; Prior Transactions.
1.3.1. Certain Related Agreements.
In addition to this Agreement, the parties and certain affiliates of
Supplier have entered into and delivered concurrently with this Agreement
certain other agreements related to, and constituting part of the
consideration for, this Agreement (the "Related Agreements"). The Related
Agreements are the following:
(i) an Acknowledgement and Supplement agreement of even date
herewith to the Asset Purchase Agreement;
(ii) two Acknowledgement and Supplement agreements of even date
herewith to the two Facilities Use Agreements between the parties
and dated, respectively, June 28, 1999, as to Applied's facilities
in Austin, Texas, and September 20, 1999, as to Applied's facilities
in Santa Xxxxx County, California, as the same have been amended
(such Facilities Use Agreements, as amended, being called the
"FUAs");
(iii) An Amended and Restated Intellectual Property Agreement of
even date herewith (such agreement, as amended from time to time,
being called the "IPA"); and
(iv) a Performance Guaranty Agreement of even date herewith of
Kinetics Holdings Corporation (sometimes called "KHC") and
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CONFIDENTIAL TREATMENT REQUESTED
The Kinetics Group, Inc. (sometimes called "KGI") (such agreement, as
amended from time to time, being called the "Performance Guaranty
Agreement" and such corporations being collectively called "Guarantors")
with and for the benefit of Applied.
1.3.2. Entire Agreement.
This Agreement and the Related Agreements set forth the entire
understanding and agreement of the parties as to the subject matter of
this Agreement and of the Related Agreements. From and after the Effective
Date (defined below) of this Agreement, this Agreement and the Related
Agreements supersede, in accordance with their respective terms and
subject to the other provisions below in this Section 1.3.2, all prior
agreements, understandings, negotiations and discussions between the
parties as to the subject matter of this Agreement and of the Related
Agreements.
1.3.2.1. In addition to this Agreement and the Related Agreements,
other agreements now in effect between Applied and Supplier and
referred to in Section 1.3.2.2, clause "third" below, relate to the
subject matter of this Agreement and provide Applied or Supplier
with rights in or licenses of Confidential Information or
intellectual property of the other party, or protect or limit the
use by either of Confidential Information or intellectual property
of the other party (the "Separate Confidential Information
Agreements"). The Separate Confidential Information Agreements shall
remain in effect for the respective terms thereof and each of such
agreements shall control as to the matters covered by such Separate
Confidential Information Agreements, subject to Section 1.3.2.2.
1.3.2.2. In the event (and to the extent) of conflict between or
among any of the documents set out in this Section 1.3.2.2,
precedence shall be given as follows (except as otherwise expressly
agreed in writing, with reference to this Agreement or to the other
affected agreement):
first, to any DVA entered into by Applied and Supplier, and
then to the IPA ;
second, to this Agreement (other than its incorporated
Exhibits or Attachments, unless and to the extent otherwise
provided expressly by this Agreement);
third, to any DSA, and then to any applicable Separate
Confidential Information Agreement (including any NDA) other
than the IPA, a DVA or DSA;
fourth, to Exhibit 1 to this Agreement, and then to all
Attachments and other Exhibits (if any) to this Agreement;
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CONFIDENTIAL TREATMENT REQUESTED
fifth, to Specifications, to other technical documents
incorporated in this Agreement (other than Attachments), and
then to Authorized Demand Signals; and
sixth, to any of the Related Agreements that are not
specifically identified above for precedence.
1.3.2.3. From and after the Effective Date (defined below), this
Agreement supersedes and replaces in its entirety the Amended and
Restated Comprehensive Supplier Agreement dated as of June 28, 1999,
as amended and extended through the Effective Date (the "CSA"), so
that the term of the CSA expires concurrently with this Agreement
becoming effective on its Effective Date, except as to those
obligations, rights and liabilities arising under such CSA that have
accrued at or prior to the Effective Date, or that hereafter accrue
with respect to transactions between the parties that have occurred
under and pursuant to such CSA at or prior to the Effective Date
(including, by way of example, obligations, rights and liabilities
relating to Items provided prior to the Effective Date of this
Agreement), as to which the CSA shall continue in effect in
accordance with its terms. In this regard, the parties specifically
agree (i) that pricing for Items for which an SSR or Purchase Order
issued under the CSA has been accepted, under the procedures
described in Section 2.1.5.1 below, prior to the Effective Date
shall be determined under the CSA, and (ii) that, except for such
pricing of those Items within clause (i) above, the provisions of
this Agreement will apply to Items that are delivered after the
Effective Date but were ordered under the CSA prior to the Effective
Date of this Agreement.
1.3.3. Provisions Continuing in Effect.
Following any termination, cancellation, or expiration of this Agreement,
the provisions of each of Articles 2, 3, 5, 9,11, 21, 22, and 27 of
Exhibit 1 and Sections 2.9.1.1.D, 2.9.2, 4.8, 7 and 9 of this Agreement
will remain in full force and effect, unless specifically terminated by
mutual written agreement between the parties, until the respective stated
expiration of such provisions. The termination, cancellation or expiration
of this Agreement shall not relieve a party of its obligations and
liabilities that accrue or arise under or in connection with this
Agreement through the time of, or in connection with, termination,
cancellation or expiration of this Agreement (or thereafter under or in
connection with provisions that survive as set out above), which
obligations and liabilities and related claims, demands and causes of
action shall continue until the expiration of the applicable period for
the bringing of claims under controlling statutes of limitation or repose.
The various Related Agreements and Separate Confidential Information
Agreements (including NDAs) shall terminate or continue in effect as
provided in such agreements.
1.3.4. Modification.
No amendment to or modification of this Agreement will be binding unless
in writing and signed by a duly authorized representative of each party,
except for amendments or
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CONFIDENTIAL TREATMENT REQUESTED
modifications which Applied is permitted to initiate by posting or notice
under this Section 1.3.4. The Attachments to this Agreement that are
identified on the List of Exhibits and Attachments following the signature
page of this Agreement as subject to modification or amendment by Applied
upon notice (the "Implementation Attachments"), will be deemed to be the
most current versions of such Attachments, as updated and revised from
time to time by Applied in accordance with this Section 1.3.4.
Unless prohibited by law or by separate modification of this Agreement, to
initiate a modification or amendment of an Implementation Attachment,
Applied will either (i) post updates or revisions to current versions of
such Attachment on the Applied website which shall be designated for
Supplier's use and made available to Supplier, or (ii) provide other
written or electronic notice to Supplier of the revision or update, which
notice shall be sent or given to Supplier's Senior Counsel - Austin
identified in Section 1.2.1 above.
If Supplier fails to object within thirty (30) calendar days after the
date (i) on which such modification or amendment to an Implementation
Attachment was posted on Applied's website (provided that Supplier had
timely notice of posting of such modification or amendment through notice
on the Applied website designated for Supplier's use) or (ii) on which
such other notice was provided to Supplier, then such Attachment, as
modified or amended, shall be deemed to be accepted by Supplier as the
Attachment to this Agreement and shall be effective as the applicable
Attachment upon the expiration of such thirty (30) day period.
Any update or revision to an Attachment that is initiated by Applied's
posting of the update or revision on the applicable Applied web site and
that would have the effect of amending this Agreement (other than the
modification or amendment of the affected Attachment) shall be effective
only if Supplier fails to object within thirty (30) days after written,
electronic or other actual notice of such update or revision is received
by Supplier. Notice of such an update or revision subject to this
provision shall be given to Supplier's Senior Counsel - Austin, as above
identified.
1.4. Items Covered.
All Items supplied (including Services other than Development Services) to
Applied by Supplier, even if sold pursuant to a separate Purchase Order, will be
covered by this Agreement; provided that the terms, provisions and conditions of
this Agreement (if any) applicable to Services rendered pursuant to a DVA shall
be determined in accordance with the DVA. This Agreement does not apply to
goods, parts, products or services that Unit Instruments, Inc., or any other
subsidiary or affiliate of Supplier provides to Applied. This Agreement likewise
does not apply to goods, parts, products or services provided to Applied
pursuant to the currently effective Global Supply Agreement dated as of October
27, 2000 (with execution dates of October 4, 2000 and October 19, 2000), for
weldments and other items provided to Applied by Insync Systems, Inc. (now
merged into, and a division of, Supplier), or pursuant to subsequent agreements
for such goods, parts, products or services, even though Supplier is successor
by merger to Insync Systems, Inc. Such other agreement(s) for goods, parts,
products or services shall continue in effect in accordance with their
respective terms, but shall not affect this Agreement. New Items may be added to
Attachment 1 upon mutual written agreement of Applied and Supplier from time to
time.
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CONFIDENTIAL TREATMENT REQUESTED
1.5. Duration of Agreement.
This Agreement is effective and commences on and as of June 1, 2002 (the
"Effective Date").
This Agreement will remain in effect for a term of *, from the Effective Date
through * (the "Initial Term"), unless and to the extent earlier terminated or
cancelled in accordance with its provisions. At any time before expiration of
the Initial Term, Applied may, at Applied's option, extend the term of this
Agreement (subject to all other provisions of this Agreement) for an additional
period of up to 6 months, by notifying Supplier in writing of such extension.
The Initial Term shall include the period of such an extension.
2. LOGISTICS, ORDERING AND OPERATIONAL FRAMEWORK.
2.1. Operation and Management of Orders.
2.1.1. Operating Calendar & Holidays.
This Agreement operates on the basis of Applied's current fiscal year
operating calendar, shown in Attachment 2, as modified from time to time.
Recognized holidays and operating shut down days are as shown on such
calendar. Supplier shall, unless commercially impracticable, adjust its
operations, holidays and any shut down days as necessary to provide all
Items (including Services) and meet its other agreements and obligations
in accordance with this Agreement. Applied may, in accordance with Section
1.3.4, modify its calendar as needed for its operations, which may result
in the requirement for production support seven days a week, twenty-four
hours a day.
2.1.2. Monthly Volume Summaries.
Supplier will prepare periodic summary reports showing quantities of FDSs
and Modules projected by Applied for manufacture by Supplier (the "Monthly
Volume Summaries"), and Supplier will retain a copy or electronic record
of at least one (1) Monthly Volume Summary for each month during the term
of this Agreement. Supplier will retain such copies and records for audit
purposes for a minimum of twelve (12) months following the end of the
month for which the respective Monthly Volume Summary was prepared. All of
Applied's SPRs and other reports regarding Items or Applied Systems and
the information provided by Applied in such SPRs and reports are Applied
Confidential Information, to be used only by Supplier to meet its
obligations to Applied under this Agreement and treated by Supplier as
Confidential Information of Applied. The Monthly Volume Summaries are
Confidential Information of each of Applied and Supplier to the extent of
their respective Confidential Information included in, or used in the
preparation of, any Monthly Volume Summary.
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
2.1.3. Manufacture and Delivery.
Supplier will manufacture, provide, sell and deliver all Items to Applied
for which an Authorized Demand Signal has been issued and accepted or
deemed accepted. Supplier will deliver all such Items to the locations, in
the quantities, and at the times specified in or determined from the
applicable Authorized Demand Signal, as accepted or deemed accepted, as
such Authorized Demand Signal is modified pursuant to this Agreement and
as otherwise required by a controlling provision of this Agreement.
2.1.3.1. Delivery Mechanics.
The specific mechanics and requirements for delivery of Items to
Applied are set out in Attachment 3, and other delivery and
transportation terms and requirements are set out in Section 2.10.3.
Applied and Supplier may provide, by subsequent written agreement,
that Supplier shall manufacture and deliver Items on a lean
manufacturing system; if so, the requirements and specific mechanics
to be followed for lean manufacturing shall be as shown in
Attachment 3, subject to such modifications as may be mutually
agreed at the time.
2.1.3.2. Delivery Dates.
Supplier shall deliver each Item to Applied on its Committed
Delivery Date, as determined under Section 2.1.5.2, as the same may
be modified pursuant to or as provided by Section 2.1.5.3 (or
Section 2.1.4) or extended pursuant to Section 4.2.4(b). Supplier
may make actual delivery of an Item no more than three (3) Business
Days prior to the Committed Delivery Date; unless an earlier actual
delivery date is permitted pursuant to Section 2.5.3. Delivery shall
not be made after an Item is cancelled as provided in this
Agreement, except as provided in Section 2.3.3(a). Supplier shall
use all commercially reasonable efforts to make delivery of an Item
on a date requested by Applied pursuant to Section 2.1.4.4. If Items
are purchased under a Blanket Order (Bus Route) procedure, Items
under the Blanket Order procedures shall be delivered at the date,
time and location specified in the applicable Bus Route delivery
requirements.
The provisions of Section 2.1 shall control over provisions of
Attachment 3 with regard to determination of actual and permitted
dates of delivery.
2.1.4. Change in Delivery Date.
2.1.4.1. Applied may request Supplier to accelerate the manufacture,
completion and delivery of any Item to a date other than the
Committed Delivery Date then established under Section 2.1.5 below.
A request for accelerated delivery shall be issued by a written or
electronic record transmitted to Supplier to the attention of the
Customer Service Manager or Director of Operations (including Senior
Director of Operations) at the affected facility. A request for
accelerated delivery may propose modification of the delivery date
of one or more scheduled Items.
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CONFIDENTIAL TREATMENT REQUESTED
2.1.4.2. Supplier will respond to the request for accelerated
delivery within forty-eight (48) hours (measured during Business
Days and under prevailing Pacific Time), after its receipt of the
request. Supplier will include in its response the following:
changes in price for accelerated manufacture, completion and
delivery; impact of requested accelerated manufacture, completion
and delivery on other Items for which an Authorized Demand Signal
has been issued or which are listed on the most recent SPR;
additional NSR or CCR information required; and limitations or
requirements applicable to the response. Upon request by either
party, Applied and Supplier will consult regarding the request for
accelerated delivery during such forty-eight (48) hour period to
facilitate Supplier's response and to resolve questions as to the
request or response.
2.1.4.3. Promptly upon receipt of Supplier's response to the request
for accelerated delivery, Applied will review such response and
consult with Supplier regarding any additional information needed by
Applied or Supplier. Upon agreement of the parties pursuant to such
request and response, Applied shall issue a revised Authorized
Demand Signal and include in such revised Authorized Demand Signal
the new Committed Delivery Date and all changes in price or other
cost, established in accordance with the request and response.
2.1.4.4. A request for a change accelerating delivery by three (3)
Business days or less from the applicable Committed Delivery Date is
not an accelerated delivery subject to this Section, and the
Contract Price for the Item will not (due to the acceleration of
delivery) be changed. Likewise, the Committed Delivery Date shall
not be deemed to be altered, unless otherwise expressly agreed,
pursuant to a request for accelerated delivery of three (3) Business
days or less.
2.1.5. Orders for Items.
Orders for Items may be issued by Applied under the following methods of
ordering:
Bus Route or Blanket Order: If Bus Route Orders apply, then Applied
will send via daily EDI transmission an Authorized Demand Signal to
Supplier containing Applied's material requirements for Items, which
will be organized according to part numbers and will represent
Applied's daily purchase from Supplier. Unless otherwise agreed by
Applied and Supplier by written amendment to this Agreement, the
Blanket Order or Bus Route method shall not be used for the ordering
and delivery of Items.
Purchase Order: As needed by Applied, Applied will issue Authorized
Demand Signals for one or more Items to Supplier under the
procedures set out in Section 2.1.5.1. Each Authorized Demand Signal
shall apply to the particular Item(s) specified in that signal.
Authorized Demand Signals for orders by Applied under this Agreement may
be issued by Applied using any of the methods provided for in Section
2.1.5.1.
2.1.5.1. Authorized Demand Signals.
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CONFIDENTIAL TREATMENT REQUESTED
Each Authorized Demand Signal issued by Applied constitutes
Applied's offer to purchase from Supplier, in accordance with and
subject to this Agreement, the Item(s) identified in such Authorized
Demand Signal. Supplier agrees that (subject to the refusal terms of
this Agreement and to Section 4.11 of this Agreement) it will accept
the Authorized Demand Signals issued by Applied and sell, provide
and deliver, in accordance with and subject to this Agreement
(including delivery in accordance with provisions regarding
Committed Delivery Date), all Items for which an Authorized Demand
Signal is accepted or deemed accepted by Supplier. Issuance of a
Purchase Order as an Authorized Demand Signal may be made by e-mail
transmission or by facsimile transmission, or, if such transmission
services are not available, by mail or hand delivery, and shall be
effective when transmitted or delivered to Supplier's Customer
Service Manager - Austin, or Customer Service Manager - Milpitas, as
appropriate. Issuance of an Authorized Demand Signal to Supplier
through website posting by Applied and acceptance of such posted
Authorized Demand Signals is effective between the parties as
provided in other provisions below in this Section 2.1.5.1.
A. Issuance of Authorized Demand Signal.
1. VMO or Pilot FDSs, NSOs, and Modules. An Authorized Demand
Signal for Volume Manufacturing FDSs, Pilot Manufacturing
FDSs, NSOs or Modules is issued by Applied posting, at the
Applied website designated for Supplier's access (or, at such
times that website access is unavailable, by transmission by
e-mail or facsimile to, or other delivery to, Supplier's
Customer Service Manager - Austin or Milpitas, as
appropriate), an SSR, NSR, or equivalent spreadsheet, report
or record of basic FDS or other Item Specification, which
identifies the FDS or other Item(s) being ordered and includes
the Applied Project Number or Applied "Spec Id" number. If
Applied elects to provide an Applied Configured BOM pursuant
to Section 2.1.5.1.A.4.c below (Coordination as to Services),
Applied shall issue (or make available by electronic means)
the Applied Configured BOM as part of the Authorized Demand
Signal.
The SSR, NSR, or equivalent spreadsheet, report or record so
posted or furnished (and including an Applied Configured BOM
if such is provided) is an "Authorized Demand Signal."
Applied may also order Modules through an RFP/RFQ process and
issuance of a Purchase Order, as provided in Section
2.1.5.1.A.3 below.
2. R&D. An Authorized Demand Signal for Items for Applied's
R&D purposes is issued by Applied in either of the following
ways:
(a) for FDSs, Modules and NSOs that do not require
Design Services or Development Services, by issuing (or
furnishing) an SSR, NSR or equivalent spreadsheet,
report or record of basic
18
CONFIDENTIAL TREATMENT REQUESTED
Specification to Supplier in the manner provided in
Paragraph A.1 above; or
(b) for any Item to be manufactured in connection with
or as a deliverable under a Design Services Agreement or
Development Services Agreement, by issuance to Supplier
of the Purchase Order that is a part of the relevant
Design Services Agreement, or the Purchase Order for the
Development Services Agreement, in each instance based
on Supplier's proposals or quotations received by
Applied through an RFP/RFQ process and as agreed by the
parties pursuant to the RFP/RFQ process.
The SSR, NSR or equivalent spreadsheet, report or record, or
Purchase Order, for FDS or other Items ordered for R&D
purposes is an "Authorized Demand Signal." Authorized Demand
Signals for R&D purposes shall be issued by electronic
transmission (including e-mail or facsimile transmission), or
by delivery of a written Purchase Order to Supplier to the
attention of Supplier's Customer Service Manager -Milpitas. If
an Item is to be manufactured in connection with or as a
deliverable in connection with Design Services or Development
Services, the Authorized Demand Signal must include the
Purchase Order for such Services and the Authorized Demand
Signal is not effective until that Purchase Order is accepted
or deemed accepted.
3. Spares and Certain Modules. An Authorized Demand Signal for
Spares or for Modules not ordered through the issuance and
acceptance of an SSR ("Non SSR Modules") is issued by Applied
when it issues a Purchase Order to Supplier, to the attention
of Supplier's Customer Service Manager - Warranty based on
Supplier's proposals or quotations received by Applied through
the RFP/RFQ process. A Purchase Order so issued is an
"Authorized Demand Signal." A Purchase Order issued as an
Authorized Demand Signal for Spares or Non SSR Modules, issued
pursuant to an RFP/RFQ process and in conformity with
Supplier's proposal or quotation (or as agreed by the parties
pursuant to such process), is deemed accepted on issuance.
4. Services. An Authorized Demand Signal for Services is
issued as follows:
a. Configuration Engineering Services, CES Services and CCR
Services.
(i) For Configuration Engineering Services, by issuing
the SSR for the Applied System for which
Configuration Engineering is to be performed, or,
as to Configuration Engineering Services that are
CCR Services incident to a CCR, by issuing the
CCR.
19
CONFIDENTIAL TREATMENT REQUESTED
(ii) For CES Services, by issuing an NSR incident to an
SSR, and for CES Services that are CCR Services
incident to a CCR, by issuing the CCR.
Issuance of an NSR, SSR, CCR or Purchase Order as to Services
under this Section 2.1.5.1.A.4.a shall be made as follows:
with respect to VMO or Pilot FDSs, NSOs or Modules, by
posting electronic record of the NSR or SSR on the
Applied website designated by Supplier's access (or as
otherwise provided by Section 2.1.5.1.A as to Purchase
Orders, and in other circumstances as there provided
for), or,
with respect to NSRs, SSRs or Purchase Orders for Items
for which posting is not used, by e-mail or facsimile
transmission (or as otherwise provided by Section
2.1.5.1.A as to Purchase Orders, and in other
circumstances as there provided for), or
with respect to CCR Services, by e-mail or facsimile
transmission, or by hand delivery (if e-mail or
facsimile transmission is not available), of the CCR to
Supplier, to the attention of the Supplier contact
person to whom the initial order to which the CCR
relates was issued.
b. Other Services.
All other Services (including NPT Services) shall be ordered
through a Request for Proposal/Request for Quotation process,
pursuant to which the Authorized Demand Signal will be an
Applied Purchase Order issued in accordance with this Section
2.1.5.1.A.4.b. Design Services or Development Services shall
only be ordered through an RFP/RFQ process and by issuance of
an Applied Purchase Order conforming to Supplier's response to
the RFP/RFQ (or as is otherwise agreed by the parties pursuant
to the RFP/RFQ process). If Item(s) are to be manufactured in
connection with, or as a deliverable under, a Design Services
Agreement or Development Services Agreement, the Purchase
Order that is a part of the Design Services Agreement, or that
is issued for the Development Services Agreement, must also
include the order for such Item(s). Further, a Purchase Order
for Design Services or for Development Services shall also be
issued in accordance with the IPA (including provisions of the
IPA applicable to a DSA or DVA.) The IPA (and any DVA, as
applicable) shall control and have priority in the event of
conflict with this Agreement in accordance with Section
1.3.2.2 above.
c. Coordination as to Services.
(i) Applied may, at the time it issues the Authorized Demand
Signal for an Item, elect to provide to Supplier the
Configured BOM for the Item
20
CONFIDENTIAL TREATMENT REQUESTED
that would otherwise be prepared by Supplier as part of its
Configuration Engineering Services (the "Applied Configured
BOM"). If Applied elects to provide an Applied Configured BOM
for an Item, the Authorized Demand Signal for the Item will be
the SSR, NSR or equivalent spreadsheet, report or record plus
the Applied Configured BOM issued with and included in the
SSR, NSR or equivalent document.
If Applied does not issue an Applied Configured BOM as part of
its Authorized Demand Signal in accordance with this Section
2.1.5.1.A.4.c, then Supplier shall perform those Services that
are ordered pursuant to the Authorized Demand Signal as
determined under other provisions of Section 2.1.5.1.A.4, and
Applied shall pay for Services so performed at the rates
applicable under the cost model (Attachment 1).
(ii) Applied shall be responsible for engineering services in
the preparation of an Applied Configured BOM. Supplier shall
not be required to perform or provide engineering review of an
Applied Configured BOM prior to commencing the manufacture of
the Item.
(iii) Supplier will advise Applied of defects in an Applied
Configured BOM that are identified by Supplier in the
manufacture of the Item. If an Applied Configured BOM is
defective:
(a) Supplier is excused from compliance with the
Committed Delivery Date applicable at the time the
defect in the Applied Configured BOM was identified;
(b) Applied will re-engineer the Applied Configured BOM
to correct the defect(s), or, upon mutual written
agreement pursuant to an RFP/RFQ process (which includes
e-mail and facsimile records of the agreement), Supplier
will re-engineer the Applied Configured BOM to correct
the defect(s) pursuant to the Purchase Order issued
through the RFP/RFQ process;
(c) Changes in Piece Parts for an Item that result from
re-engineering of an Applied Configured BOM pursuant to
this Section 2.1.5.1.A.4.c. (excluding changes involving
digital line-side configurable MFCs) shall be treated as
*s in accordance with Section 2.8 of this Agreement if
occurring within the period covered by Section 2.8.3.1;
(d) Applied and Supplier shall negotiate in good faith
to determine an adjusted Committed Delivery Date; and
(e) Appropriate written modifications of the Committed
Delivery Date shall be made upon mutual agreement.
* Material has been omitted and filed separately with the Commission.
21
CONFIDENTIAL TREATMENT REQUESTED
(iv) Supplier shall review the documentation and information
provided as part of each Authorized Demand Signal and shall
coordinate its Services so that Supplier provides or performs
those Services necessary or appropriate under the Authorized
Demand Signal and its related documentation or information.
(v) The parties may, by mutual written agreement, amend the
scope of or charges for Services for repeat build Items.
d. Quotation of CES Charges.
(i) Applied may require that Supplier provide "Quoted CES
Charges" (as such term is defined below) as to one or more
product line(s), type(s) or model(s) of Applied Systems. The
Applied SAT Team Lead for Supplier shall notify Supplier's
Engineering Manager that Quoted CES Charges are required, and
such notice shall specify the Applied product line(s), type(s)
or model(s) of Applied Systems for which Quoted CES Hours are
required, the date on which Supplier shall commence providing
such quotes, and the person at Applied to whom the Quoted CES
Charges shall be sent. Quotations setting out Quoted CES
Charges shall be provided by Supplier by e-mail or facsimile
transmission to the person so identified.
(ii) "Quoted CES Charges" means the charges for CES Services
that Supplier is to perform pursuant to an Authorized Demand
Signal for CES Services under Section 2.1.5.1.A.4.a that are
in excess of 20 hours as to a Volume Manufacturing FDS or 40
hours as to a Pilot Manufacturing FDS, or such higher
reportable charges threshold as may be specified in the notice
requiring Supplier to provide quotations. Supplier may charge,
in addition to Quoted CES Charges, for two (2) hours of
engineering services for the release of a Configured BOM
through Applied's ECO procedures applicable to an Item when
Supplier performs Configuration Engineering Services or CCR
Services as to the Configured BOM, without having to include
such charges for release of the Configured BOM in its quote.
(iii) If Quoted CES Charges are required with respect to a
Volume Manufacturing FDS or Pilot Manufacturing FDS for which
the Authorized Demand Signal (for the FDS and related CES
Services) is the NSR incident to the primary SSR (a
"Conditional ADS") Supplier shall accept or refuse the
Conditional ADS within the time period otherwise applicable to
that Authorized Demand Signal. The obligations of Supplier and
Applied with respect to a Conditional ADS upon its acceptance
under other provisions of Section 2.1.5.1 are, however,
subject to subsequent agreement on Quoted CES Charges, as
provided in this Section 2.1.5.1.A.4.d. Within two (2)
Business Days after the date of acceptance of a Conditional
ADS, Supplier shall provide its quotation of hours and amounts
to be charged for Quoted CES Services to Applied. Until
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CONFIDENTIAL TREATMENT REQUESTED
Applied accepts (or is deemed to have accepted) the time and
amount for Quoted CES Services shown on the quotation of
Quoted CES Charges, the affected Conditional ADS shall be
subject to Applied's acceptance of the quote for Quoted CES
Services and until such acceptance the Conditional ADS shall
not be binding as to Applied; Supplier, however, shall not
revoke its acceptance of the Conditional ADS or withdraw its
quote of Quoted CES Charges.
(iv) Applied may reject or accept a quotation of Quoted CES
Services by e-mail, facsimile or other record or writing (but
not by telephone or voice-mail) at any time prior to the time
acceptance is deemed to occur by the following sentence. If a
quote for Quoted CES Services is not rejected by Applied
within two (2) Business Days after the quote is issued to
Applied, then the quote for Quoted CES Services shall be
deemed accepted by Applied. Upon Applied's acceptance of the
quotation of Quoted CES Charges, the related Conditional ADS
Demand Signal becomes binding on and agreed to by both
Supplier and Applied at such time. The Committed Delivery Date
shall be determined based on such date of acceptance of the
quotation of Quoted CES Services. Applied's notice of
rejection of Quoted CES Services shall be issued to Supplier's
Engineering Manager. If Applied rejects a quote for Quoted CES
Services, then Supplier and Applied shall promptly negotiate
as to the scope, time and costs for Quoted CES Services. If
the parties agree on the scope, time and costs for Quoted CES
Services after a quote is rejected, then Supplier shall issue
a revised quote for Quoted CES Services and upon Applied's
issuance of an acceptance of such revised quote, the related
Authorized Demand Signal shall be binding on and is agreed to
by both Supplier, and the Committed Delivery Date shall be
determined based on the date of acceptance of the revised
quote by Applied.
(v) Except in those instances in which a quotation of Quoted
CES Charges applies and has been accepted, CCR Services are
not subject to the procedures for quotation and acceptance in
this Section 2.1.5.1.A.4.d. If, after a quote of Quoted CES
Charges has been accepted, Applied changes the relevant SSR or
NSR and such change affects CES Services previously quoted and
accepted, then (a) Supplier shall promptly requote its Quoted
CES Charges to include additional CES Services (or CCR
Services) resulting from the changes in SSR or NSR, (b)
Applied shall promptly accept or reject the Quoted CES
Charges, as so requoted, (c) requoted Quoted CES Charges
accepted by Applied shall become part of the Contract Price of
the Item(s) affected; and (d) the parties shall negotiate in
good faith to determine an adjusted Committed Delivery Date
(if any) due to changes in the SSR or NSR that adversely
affect Supplier's ability to meet the otherwise applicable
Committed Delivery Date.
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CONFIDENTIAL TREATMENT REQUESTED
(vi) A charge for up to two (2) hours for engineering services
for release of a Configured BOM through Applied's ECO
procedures applicable to the Item may be made in addition to
Quoted CES Services.
B. Acceptance and Refusal. Each Authorized Demand Signal issued by
Applied in compliance with Section 2.1.5.1.A and not timely refused
by Supplier as provided by this Section 2.1.5.1.B is agreed to have
been accepted and is effective between Applied and Supplier upon the
expiration of the period specified for Supplier's refusal.
1. VMO or Pilot FDSs, NSOs and Modules. Supplier may refuse an
Authorized Demand Signal issued by Applied for purchases
within the scope of Paragraph A.1. (a) for error by Applied in
the SSR, CCR, or NSR (or equivalent document), (b) as
exceeding Supplier's capacity or flexibility requirements
determined under Section 2.5 (except as to CCRs), or (c) for
failure to provide a required NSR or to provide an Applied
Configured BOM that should have been part of the Authorized
Demand Signal under Section 2.1.5.1.A.4.c, but not for other
reasons. Supplier shall effect a refusal to accept an SSR,
CCR, or NSR (or equivalent document) by posting its refusal on
Supplier's Master Production Schedule document as maintained
on an Applied server, or (if server access is unavailable) by
e-mail or facsimile transmission to the Applied purchasing
representative for the Applied organization issuing the SSR,
CCR, or NSR. Refusal shall be made within ninety-six (96)
hours (measured during Business Days and under prevailing
Pacific Time) after Applied's issuance of the Authorized
Demand Signal for orders in this category.
2. R&D. Supplier may refuse an Authorized Demand Signal issued
by Applied initiated by the SSR process for R&D purchases
within the scope of Paragraph A.2 for (a) error by Applied in
the SSR or NSR (or equivalent document), (b) incomplete design
or unresolved manufacturing issues, (c) as exceeding
Supplier's capacity or flexibility requirements under Section
2.5 below, or (d) failure to provide a required NSR, but not
otherwise. Supplier shall effect a refusal to accept an R&D
SSR order (or equivalent) by posting its refusal on Supplier's
Master Production Schedule document as maintained on an
Applied server, or (if server access is unavailable) by e-mail
or facsimile transmission to the purchasing representative for
the Applied organization issuing the Authorized Demand Signal.
Refusal shall be made within five (5) Business Days after
posting of the R&D SSR. A Purchase Order issued as an
Authorized Demand Signal for an R&D purchase pursuant to an
RFQ/RFP process and in conformity with the proposal or
quotation received from Supplier and the requirements of
Section 2.1.5.1.A.2 where applicable (or as agreed by the
parties pursuant to such RFP/RFQ process) is deemed accepted
upon its issuance.
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CONFIDENTIAL TREATMENT REQUESTED
3. Services. With respect to those Standard Services that are
required for or are incident to the manufacture of an Item or
Items for which the Authorized Demand Signal is an SSR or NSR
(or equivalent spreadsheet or record), the corresponding
Authorized Demand Signal for Standard Services is accepted or
deemed accepted upon and by the acceptance or deemed
acceptance of the SSR or NSR. An Authorized Demand Signal for
CCR Services is deemed accepted upon and by acceptance or
deemed acceptance of the CCR under Section 2.1.5.1.B.1. A
Purchase Order constituting an Authorized Demand Signal for
other Services, issued in accordance with Section 2.1.5.1.A.4,
is deemed accepted upon issuance, whether for Services
required for or incident to manufacture of an Item or Items,
or otherwise.
4. Assurance to Supplier. In addition to the matters set out
above in this Section 2.1.5.1.B as grounds for refusal of an
Authorized Demand Signal, Supplier may also refuse an
Authorized Demand Signal in the circumstances allowed by
Section 2609 of the UCC.
2.1.5.2. Committed Delivery Dates.
A. Except as provided for in Paragraph B, C or D below in this
Section 2.1.5.2, the Committed Delivery Date for Volume, Pilot
and R&D Items shall be determined in accordance with
applicable cycle times in effect at the time the Authorized
Demand Signal is accepted or deemed accepted under the
following schedule:
Volume: From the date of acceptance or deemed acceptance
of Authorized Demand Signal *.
Pilot: From the date of acceptance or deemed acceptance
of Authorized Demand Signal *.
R&D: From the date of acceptance or deemed acceptance of
Authorized Demand Signal when issued by SSR, *; and, for
R&D Items for which a Purchase Order is issued, * from
the date of issuance of the Purchase Order, unless
another date is specified in the Purchase Order.
B. The Committed Delivery Date for NSO Items shall be * from
the date of acceptance or deemed acceptance of the Authorized
Demand Signal; the Committed Delivery Date for Modules shall
be * from the date of acceptance or deemed acceptance of the
Authorized Demand Signal.
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
C. Services for Items ordered through an SSR, NSR, CCR or
equivalent process shall be provided and completed as required
to achieve the applicable Committed Delivery Date for the
Items. Services for which the Authorized Demand Signal is a
Purchase Order (or DSA or DVA, if applicable) shall be
provided in accordance with the applicable Purchase Order (or
DSA or DVA, if applicable) and its Committed Delivery Date or
other delivery or completion requirements of such Purchase
Order (or DSA or DVA, if applicable).
D. For any Items not otherwise governed by the preceding terms
for which the initial Authorized Demand Signal is an Applied
Purchase Order, the Committed Delivery Date shall be the
delivery date set out in such Purchase Order.
E. By mutual written agreement, the parties may amend the
cycle times provided in this Section 2.1.5.2 with respect to
one or more Item(s). The parties will consult together,
identify and, upon mutual written agreement, implement
reductions in cycle time for repeat build Item(s).
2.1.5.3 Modification of Committed Delivery Dates.
A. For Items for which the Committed Delivery Date is established
pursuant to Section 2.1.5.2.A or B, the Committed Delivery Date may
be changed only with Supplier's approval; provided that any
Committed Delivery Date may be changed, without Supplier's approval,
as provided in Section 2.3.2. The delivery date for an Item as
modified as provided in Section 2.3.2 shall become the "Committed
Delivery Date" for such Item.
B. For Items for which the Committed Delivery Date is established by
a Purchase Order issued under Sections 2.1.5.1 and 2.1.5.2, the
Committed Delivery Date shall be modified only through issuance of a
revised Purchase Order, or pursuant to Section 2.3.2.
C. The Committed Delivery Date for an Item may also be modified
pursuant to Section 2.1.4 or Section 2.1.5.1.A.4.c. or d.
2.1.6. Electronic Commerce.
For transactions conducted by electronic means (other than facsimile,
internet or e-mail transmission), Supplier is required to communicate with
Applied using the then current EDI ANSI standards and encouraged to use
either XXXX, EDICT or other approved software. Facsimile, internet and
e-mail transmissions shall be made using commercially available systems
compatible with Applied's e-mail, internet and facsimile applications.
The parties agree that they shall conduct transactions hereunder by
various electronic means and will rely upon electronic means to issue
Authorized Demand Signals, to enter into purchase and sale transactions,
and to exchange delivery and order information under this Agreement. To
the extent electronic means are not accessible or become otherwise
26
CONFIDENTIAL TREATMENT REQUESTED
unavailable due to technical difficulties or due to the effect of any law
or regulation governing electronic transactions (collectively
"Unavailability"), the parties agree: (1) that any transactions entered
into, and any delivery or order information received, by electronic means
prior to the Unavailability date will remain valid, and Supplier and
Applied shall honor their respective obligations; and (2) that they will
continue to conduct their transactions, to the extent of the
Unavailability, by other than electronic means, such as written form or
fax as contemplated in Section 2.1.5 of this Agreement. This Agreement
shall not require all transactions to be conducted by electronic means. If
required by applicable law, a separate agreement concerning electronic
transactions between Applied and Supplier will set out other terms that
will control as to certain aspects of electronic transactions.
2.1.7. Pro Forma.
2.1.7.1. Estimated Pro Forma.
No later than three (3) Business Days prior to Supplier's shipment
of each Item to Applied for which the Contract Price is determined
under Attachment 1, Supplier shall transmit its preliminary "pro
forma invoice" (a "Pro Forma") for such Item. The preliminary Pro
Forma shall identify the Item(s) covered, shall calculate the
Contract Price by applying the appropriate elements of the cost
model set out in Attachment 1, and shall specify separately any
charges (stated separately as to each applicable category) for *s,
Reconfigure Items, Relabel Items, Restock Items (as such terms are
defined below), and any other charges included as applicable to the
Item(s) but not provided for in Attachment 1. The preliminary Pro
Forma shall be delivered by e-mail (or upon request by Applied, by
fax or hand delivery) to the finance representative of the Applied
organization issuing the Authorized Demand Signal, and to such other
persons as Applied may reasonably request. The preliminary Pro Forma
shall identify charges for Standard Services by category.
2.1.7.2. Final Pro Forma.
At the time of Supplier's shipment of each Item to Applied for which
the Contract Price is determined under Attachment 1, Supplier shall
transmit to Applied its final Pro Forma for such Item. The final Pro
Forma shall contain all information, costs and charges applicable to
the Item, including all elements described in Section 2.1.7.1, and
shall be delivered in the manner and to the persons specified in
Section 2.1.7.1. The final Pro Forma shall further identify
separately for each category of Standard Services the charges for
that category of Service and the portions of such charges
attributable to Configuration Engineering Services, CES Services,
and engineering for the release of the Xxxx of Materials for the
Item through Applied's ECO procedures, as applicable.
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
2.2. Definition of Terms for Certain Provisions Affecting Prices or Charges.
2.2.1 The definitions set out in this Section shall apply in determining
charges, credits and payments under Sections 2.8 (*), 2.14 (Provisions for
Reconfiguration or Restocking), 3.1.4 (Further Agreements as to Pricing)
through 3.1.6 (Adjustment for *), and 4.11 (Wind Down Provisions).
Each of these sections will provide further definitions or procedures that
will control the particular matters to which it applies.
2.2.2 For the purposes of Section 2.2 and the sections identified in
Section 2.2.1, Piece Parts (including MFCs) installed on or removed from
an Item are classified in one of the following categories:
i) NonReusable Materials
ii) NonConsumable Materials
iii) NonConsumable MFCs
iv) Consumable Materials
v) Consumable MFCs
vi) Floor Stock Scrap.
2.2.3 The following provisions and definitions apply generally for the
purposes of Section 2.2 and the Sections indicated above:
(a) "NonReusable Materials" means those Piece Parts, excluding Floor
Stock Scrap, used in the manufacture of an Item that are (i) missing
or damaged at the time of inspection prior to disassembly and
teardown (as Reconfigure or Restock Items only), (ii) damaged in the
course of disassembly and teardown when using commercially
reasonable practices, or (iii) obsolete and no longer meet current
revision levels of applicable specifications.
(b) "Floor Stock Scrap" means those Piece Parts removed from an Item
in the course of disassembly and teardown that have a unit cost of
$10.00 or less.
(c) "Consumable Materials" are all recoverable Piece Parts for an
Item other than NonReusable Materials, NonConsumable Materials,
NonConsumable MFCs and Floor Stock Scrap.
(d) "NonConsumable Materials" consists of Bus Route NonConsumable
Materials, and Spot Buy NonConsumable Materials.
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
(e) "Bus Route NonConsumable Materials" are those * Piece Parts for
an Item that * on a Bus Route basis and have been used in, or
delivered to Supplier for, the manufacture of the Item at the
Relevant Date that are * (x) Supplier's * for such Piece Parts over
the * following the Relevant Date *.
(f) "Spot Buy NonConsumable Materials" are those * Piece Parts for
an Item that * on a Spot Buy basis and have been used in, or
delivered to Supplier for (or for which Supplier has issued its
non-cancelable purchase order), the manufacture of the Item at the
Relevant Date, that are * (x) Supplier's * for such Piece Parts over
the * following the Relevant Date, *.
(g) "NonConsumable MFCs" are those MFCs (excluding all *
configurable MFCs) that have been used in, or delivered to Supplier
for (or for which Supplier has issued its non-cancelable purchase
order), the manufacture of the Item at the Relevant Date, and that
are in excess of Supplier's then applicable * (calculated separately
for Spot Buy and Bus Route MFCs using the methodology for Spot Buy
NonConsumable Materials and for Bus Route NonConsumable Materials)
for such MFCs current at the Relevant Date. NonConsumable MFCs shall
be handled only under provisions for NonConsumable MFCs, and not
through charges for NonConsumable Materials.
(h) Supplier's "Current Average Cost of Materials" shall be the
average cost to Supplier calculated with respect to quantities * and
taking into account the * of the affected Piece Part under the
method employed by Supplier on the Effective Date and in accordance
with generally accepted accounting principles in effect in the
United States of America and consistently applied. The "Current
Average Cost of Materials" as so determined is subject to adjustment
under Sections 3.1.5 and 3.1.6 of this Agreement.
(i) Supplier's "Standard Cost of Materials" is the materials cost
charged by Supplier to Applied for Piece Parts incorporated in Items
sold to Applied and conforming to the schedule or database of
materials costs then in effect and maintained by Supplier on its
Oracle (or other enterprise accounting system) database. The
"Standard Cost of Materials" as so determined is subject to
adjustment under Sections 3.1.5 and 3.1.6 of this Agreement.
(j) "MRP Demand" means the demand for an affected Piece Part under
the manufacturing requirements planning standards employed in the
industry.
(k) "Relevant Date" means the following:
1) For * charges (Section 2.8.3), the date on which the * is
requested by Applied.
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
2) For Restock Items and Reconfigure Items (Section 2.14), the
date on which the Item is classified by Applied as a Restock
Item or Reconfigure Item.
(l) Each Piece Part shall be included in only one category of
charge.
(m) Supplier shall return to Applied's Asset Recovery Management
organization, or destroy if so instructed by Applied, all Piece
Parts for which a cancellation charge is made, except for Floor
Stock Scrap and NonConsumable MFCs (to be retained by Supplier).
2.3. Cancellation of Items.
2.3.1. Items Subject to Cancellation.
Applied may cancel Items in accordance with this Section 2.3 at any time
by written or electronic notice (but not telephone or verbal notice) to
Supplier's Customer Service Manager (Austin or Milpitas, as applicable) as
designated in Section 1.2, between (a) the date on which Applied's
Authorized Demand Signal has been accepted or deemed accepted and (b) the
Committed Delivery Date. Applied may withdraw order(s) for Item(s) set out
in Authorized Demand Signal(s) issued, but not accepted or deemed
accepted, at any time prior to acceptance or deemed acceptance.
2.3.2. Deferral.
Without cancellation of an Item, Applied may defer the delivery date of
any Item(s) for a period of up to * following the initially applicable
Committed Delivery Date *. To defer delivery, Applied shall give notice of
deferral, to the Supplier contact person and in the manner provided under
Section 2.3.1, no later than * before the Committed Delivery Date in
effect at the time of deferral; provided that the cumulative period of
deferral as to each Item shall not exceed * from the initially applicable
Committed Delivery Date.
In exercising its rights of deferral under this Section 2.3.2, Applied
will consult with Supplier with respect to the date that will become the
new Committed Delivery Date resulting from deferral so that, to the extent
consistent with Applied's requirements for manufacturing and shipment of
Applied Systems, such new Committed Delivery Date is not unreasonably
burdensome to Supplier, taking into account the available manufacturing
capacity and flexibility capabilities of Supplier through the new
Committed Delivery Date. Applied shall, however, be entitled to set the
new Committed Delivery Date as required for its timely manufacturing and
shipment of Applied Systems.
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
2.3.3. Cancellation.
If Applied cancels an Item (including as a cancellation any Item as to
which Applied does not initiate delivery of an Item within the * period
provided by Section 2.3.2 following a deferral), the costs, expenses and
charges arising from such cancellation (including failure to initiate
delivery) shall be governed by the following terms:
(a) If cancellation occurs less than * calendar days before the
Committed Delivery Date, then Applied shall purchase the Item at its
*, the Item shall be delivered to Applied only if requested by
Applied, and the Item may be classified by Applied as a * Item under
Section 2.14 below. Applied shall have no obligation to Supplier
arising from cancellation except those under this Section 2.3.3(a).
(b) All costs, expenses and charges for cancellation of Items, other
than cancellations to which Section 2.3.3(a) applies, are accounted
for and included in the * and shall be the sole responsibility of
Supplier. Applied shall have no obligation to Supplier arising from
cancellations to which Section 2.3.3(a) does not apply.
2.3.4. Applicability; Payment.
(a) If an Item that has been deferred under Section 2.3.2 is
subsequently cancelled, Section 2.3.3(a) applies if either (a) the
cancellation occurs * before the Committed Delivery Date as then
applicable following deferral, or (b) the Item was initially
deferred * prior to the original Committed Delivery Date.
(b) The Pro Forma for an Item purchased pursuant to Section 2.3.3(a)
shall be issued by Supplier to Applied within * after the date on
which cancellation becomes effective, and such purchase amount shall
be payable (and subject to prompt payment discount) under the terms
of Section 2.11.
2.3.5. Other Rights.
Applied's rights of cancellation are in addition to, and shall be
independent of its rights under, and the limitations of, Section 2.14 of
this Agreement, except as to Items that become classified under Section
2.14 pursuant to Section 2.3.3(a).
2.3.6. Services.
If Services for which a Purchase Order was issued are cancelled, and such
cancelled Services are not CES Services, Configuration Engineering
Services or CCR Services performed on a cancelled Item, Supplier shall
charge for its Services actually performed through the date of
cancellation, at rates and in accordance with the applicable Purchase
Order.
* Material has been omitted and filed separately with the Commission.
31
CONFIDENTIAL TREATMENT REQUESTED
2.4. Response Time, Turnaround and Implementation Time.
This Section establishes the methods by which Applied will communicate its
Production Issues to Supplier and the time periods for Supplier to respond and
implement solutions.
2.4.1. Production Issues.
A "Production Issue" is an interruption or stoppage of any of Applied's
manufacturing operations in the United States of America (as, or
equivalent to, a "line down" situation) that results from a failure of an
Item to conform to warranty, from other defect in or damage to an Item
delivered by Supplier, a failure or interruption in the timely delivery of
Items by Supplier on Committed Delivery Dates, or from other failure in
Supplier's performance under this Agreement. Applied shall notify Supplier
of a Production Issue by telephone, cell-phone or pager to the following
persons:
Supplier's Customer Service Manager at Austin or Milpitas, as
appropriate, using the contact information set out in Section 1.2.1.
Supplier shall contact the Applied originator of a notice of Production
Issue within * of the issuance by Applied of the notice of a Production
Issue. This notice and response procedure is not subject to Section 1.2.2.
2.4.2. Turnaround and Implementation Time.
Supplier will, in the case of a Production Issue, repair, replace and
correct Item(s), deliver (or restore delivery of) Items, and otherwise
resolve and correct such Production Issue in accordance with the following
requirements:
(a) Supplier shall commence its repair, replacement, correction or
solution of a Production Issue within one (1) hour after its
response to Applied and shall complete the repair, replacement,
correction or solution within the time period necessary to meet
Applied's production requirements, not to exceed * after its
response to Applied, unless a longer time is required for completion
in accordance with best practices in the industry.
(b) Supplier shall provide timely status reports to Applied
regarding the repair, replacement, correction or solution to assist
Applied in managing its manufacturing operations affected by the
Production Issue.
2.5. Capacity Planning and Flexibility Requirements.
2.5.1 Capacity Planning.
(a) Supplier will use commercially reasonable efforts to plan its
manufacturing capacity, including materials, staff, engineering support,
facilities, and other production factors in order to:
* Material has been omitted and filed separately with the Commission.
32
CONFIDENTIAL TREATMENT REQUESTED
have capacity adequate for projected quantities and projected
delivery dates shown in Applied's SPR, as released to Supplier and
as revised from time to time (and at least weekly);
have additional capacity available to supply Items ordered through
Purchase Orders as Authorized Demand Signals but not previously
shown on the SPR provided to Supplier; and
to implement adjustments in operations and manufacturing to comply
with the flexibility requirements applicable under Section 2.5.2.
(b) As part of its capacity planning, Supplier shall review with
Applied's Supplier Performance Management organization and any Applied
organization subsequently performing its functions (the "SPM") on a
monthly basis (as part of its monthly performance review) Supplier's
manufacturing capacity and Supplier's capability to increase such capacity
when and as changes occur in Applied's manufacturing volumes and
requirements. Supplier shall advise Applied at such monthly meetings of
Supplier's manufacturing capacity as planned by Supplier under Section
2.5.1 (a) and, in consultation with the Applied SPM, determine appropriate
changes in manufacturing capacity for periods covered in the monthly
performance review (collectively, the "Capacity Projections") The Capacity
Projections shall be made a part of the Supplier Performance Plan
(Attachment 16) and shall provide capacity at least equal to the rolling *
forecast of the then-current SPR for Items anticipated to be provided by
Supplier.
2.5.2 Flexibility.
In addition to manufacturing capacity planning under Section 2.5.1,
Supplier shall also use commercially reasonable efforts to plan for and to
implement manufacturing flexibility capabilities in addition to Supplier's
manufacturing capacity. Supplier shall review such plans and capabilities
with Applied's SPM at least monthly (as part of the monthly performance
review activity) and, in consultation with the Applied SPM, establish
manufacturing flexibility levels applicable to Supplier as part of the
Supplier Performance Plan (Attachment 16) consistent with known or
anticipated changes in Applied's manufacturing volumes, delivery dates and
product requirements. Supplier's manufacturing flexibility levels shall at
least allow for manufacturing volumes and output to * over Supplier's
basic manufacturing capacity established and reported to Applied, from
time to time, in accordance with Section 2.5.1 within a given * period.
* Material has been omitted and filed separately with the Commission.
33
CONFIDENTIAL TREATMENT REQUESTED
2.5.3. Acceptance; Delivery.
(a) Supplier shall not refuse to accept, on the basis of the
quantity of Items involved, Authorized Demand Signals under Section
2.1.5.1 that are within current manufacturing capacities, production
volumes, and operating levels or are within Capacity Projections or
flexibility levels included in the Supplier Performance Plan. Supplier
shall also advise Applied (upon request) regarding additional volumes of
Items that are within increases in such capacities, volumes and levels,
beyond the Capacity Projections and flexibility levels under the Supplier
Performance Plan, that Supplier can achieve through use of commercially
reasonable efforts.
(b) If week to week variations in the quantities of Items
deliverable under Authorized Demand Signals, together with changes in
Committed Delivery Dates through deferral of Items pursuant to Section
2.3.3 cause the volumes of Items that are to be delivered in a weekly
period to exceed Supplier's delivery volumes provided for by the Supplier
Performance Plan and if Supplier is not able to complete and make delivery
of the quantities solely due to such variations (and exclusive of any
delivery volume limitations or other problems resulting from Supplier's
failure or inability to achieve capacity and flexibility levels
established for the affected periods under the Supplier Performance Plan),
then Applied will allow Supplier to deliver Items that are affected by the
excessive increase for that period up to a maximum of two (2) weeks in
advance of the applicable Committed Delivery Dates. Such early delivery
allowance shall be in effect only to the extent and for the period
commercially necessary to enable Supplier to comply with the Committed
Delivery Date(s) of Items exceeding its capacity and flexibility levels,
and in no event later than the time revised capacity or flexibility
requirements can be established on a commercially reasonable basis.
This Section 2.5 does not alter the provisions of this Agreement in
Section 2.3 (Cancellation of Items), Section 2.14 (Provisions for
Reconfiguration or Restocking), or Section 2.8 (*).
2.6. On-Site Support Requirements.
Supplier may be asked by Applied to provide appropriate or necessary personnel
required to support on-site operations at Applied's facilities. On-site
representatives will comply with all Applied facilities requirements. Applied,
at its sole discretion, may require Supplier to execute an On-site
Representative Agreement, in the form set forth in Attachment 18, and may
require the On-site Representative to execute an NDA joinder in the form
required by the On-Site Representative Agreement, prior to issuing a building
badge to Supplier's representative(s) or permitting access to Confidential
Information. Supplier agrees to notify Applied immediately of any changes in its
staffing assignments involving those individuals with access to Applied's
facilities or IS&T systems, applications or databases.
* Material has been omitted and filed separately with the Commission.
34
CONFIDENTIAL TREATMENT REQUESTED
In the event that Supplier's personnel will provide such support at the premises
of a customer of Applied, Supplier agrees to comply with the requirements and
restrictions imposed by such customer for access to its premises (in addition to
the terms of any On-site Representative Agreement executed by Supplier).
2.7. [Omitted]
2.8. *.
2.8.1. Modifications and *s.
In addition to its rights of cancellation under Section 2.3 and of
relabeling, reconfiguration and restocking under Section 2.14, Applied
shall have the right to modify the SSR or Specifications for Items after
the issuance and acceptance of any Authorized Demand Signal and prior to
the actual delivery of the Item. Changes initiated by Applied as to an
Item through changes to an SSR or Specifications (including those
initiated by Applied as ECOs) * covered by this Section 2.8 are * or "*s."
2.8.2. Scope of *s.
An * includes only changes initiated by Applied * the * of an Authorized
Demand Signal and excludes changes resulting from other requests for CES
Services, CCR Services or Configuration Engineering Services, and design
or engineering changes attributable to Supplier. Changes that involve *
are not *s.
2.8.3. Charges for *s.
Applied shall * for *s ("*") determined under the following terms:
1. If the * is requested * prior to the then applicable Committed
Delivery Date, the * Charges shall be the *: Supplier's
Standard Cost of Materials for Bus Route NonConsumable
Materials, Supplier's Standard Cost of Materials for Spot Buy
NonConsumable Materials, 70% of Supplier's Standard Cost of
Materials for NonConsumable MFCs, and Supplier's Standard Cost
of Materials for NonReusable Materials, applied to Piece Parts
removed from the affected Item as a result of the *. * for
materials resulting from an * shall be shown as a separate
line item materials charge in Supplier's Pro Forma for the
affected Item and become a part of the Contract Price for an
Item.
2. If the * is requested * or more prior to the then applicable
Committed Delivery Date, no * Charges shall apply.
* Material has been omitted and filed separately with the Commission.
35
CONFIDENTIAL TREATMENT REQUESTED
3. Supplier shall also charge for, as a rate per hour charge in
accordance with the terms of Attachment 1, but subject to the
terms of Section 2.1.5.1.A.4.d as to "Quoted CES Charges" and
Section 2.1.5.1.A.4.c as to "Coordination of Services," the
actual CES, CCR and Configuration Engineering Services
resulting from an *, as part of the Contract Price for the
affected Item.
Supplier shall maintain a record of the Piece Parts removed from an Item
or classified as NonConsumable or NonReusable as a result of *s, and
Supplier shall identify all NonConsumable and NonReusable Materials
(excluding Floor Stock Scrap) by preparation of a Xxxx of Materials for
NonConsumable and NonReusable Materials (the "NRM BOM"), classified by the
affected Applied System or affected Purchase Order, which NRM BOM will be
invoiced on the Pro Forma for the Item and will be retained by Supplier
for a period of one (1) year from the invoice date for the *. All removed
Piece Parts, excluding NonConsumable MFCs, for which an * is made to
Applied shall be delivered to Applied's Asset Recovery Management Unit.
2.9. Information.
2.9.1. Applied Internal Databases.
Supplier may be given electronic access to Internal Applied Data, and such
access may, at Applied's sole discretion, be subject to certain further
limitations and requirements on Supplier, including Supplier-provided
employee control lists, audit rights and the requirement that Supplier's
employees execute a joinder in the IPA as to confidentiality with Applied.
This access, if granted, and all Internal Applied Data accessed shall be
used solely by Supplier and only to directly facilitate Supplier's
production and delivery of Items to support Applied's requirements.
Supplier's access to, and utilization of, all Internal Applied Data is
subject to the confidentiality provisions and obligations of the IPA with
respect to Confidential Information and the terms of this Agreement and
any applicable NDA between the parties. Applied may terminate Supplier's
access to Internal Applied Data at any time at the discretion of Applied.
If Applied terminates Supplier's access to Internal Applied Data under
this Section, whether with or without cause, then Applied and Supplier
shall promptly consult to develop alternative ways of providing Supplier
with access to Internal Applied Data for the purpose of Supplier's
performance under this Agreement.
* Material has been omitted and filed separately with the Commission.
36
CONFIDENTIAL TREATMENT REQUESTED
2.9.1.1. Applied IS&T Services.
A. Applied and Supplier have agreed on the services and scope
of services * for voice and data telecommunication and * to
Applied *, all for Supplier's use in the performance of its
obligations under this Agreement and the Related Agreements,
as more fully set out in the "EPSP Global Help Desk Service
Level Agreement" attached to this Agreement as Attachment 21
(the "IS&T Services" and the "IS&T Agreement"), as such is
modified by the provisions of this Section 2.9.1.1 regarding
costs and rates of charge. The IPA and the Tooling Loan
Agreement (Attachment 19) also set out rights and obligations
of Applied and Supplier with respect to the services, * and
telecommunications and access services provided under the IS&T
Agreement. Applied and Supplier each shall perform, provide,
pay for and observe such IS&T Agreement, as herein modified,
as part of this Agreement from and after the Effective Date
hereof for the term of this Agreement, as the same may be
amended from time to time.
B. All charges and costs payable by Supplier pursuant to the
"Custom IS Services Service Level Agreement" as in effect
between Applied and Supplier pursuant to the FUAs prior to the
Effective Date through the Effective Date have been resolved
by the parties through, and are payable by Supplier to the
extent provided for by, separate agreements. From and after
the Effective Date, Applied will * not be * charges and costs
for IS&T Services * of the IS&T Agreement for initial set-up
activities or for additional services requested by Supplier.
C. Except as provided below, failure by Applied to furnish the
IS&T Services to any extent, or any cessation thereof, shall
not render Applied liable in any respect for damages to either
person or property, and such failure or cessation shall not
relieve Supplier from performing as provided in this
Agreement, except to the extent that such failure to perform
on the part of Supplier is excused under Article 23(b) of
Exhibit 1. If IS&T Services are not restored by the fifteenth
(15th) Business Day after cessation or failure by Applied to
furnish such Services, Supplier may terminate the IS&T
Agreement with respect to the particular IS&T Services
affected. To the extent so terminated, neither Supplier nor
Applied shall have any further rights or obligations under the
IS&T Agreement from and after the date of termination except
for any rights or obligations that expressly survive
termination of the IS&T Agreement. Termination by Supplier
under this paragraph shall not relieve Supplier of its
obligations for performance under this Agreement, but such
performance shall be excused to the extent provided by Article
23(b) of Exhibit 1, or the time for performance shall be
equitably adjusted.
* Material has been omitted and filed separately with the Commission.
37
CONFIDENTIAL TREATMENT REQUESTED
D. Access to IS&T Services. The IS&T Services are those
services to be provided by Applied, as specified in the IS&T
Agreement.
D.1. Access Restriction. Access to Applied's network and
the Confidential Information contained thereon is
granted to Supplier solely to facilitate the performance
of Supplier's obligations under this Agreement and the
IPA, is limited to the specific information,
applications, systems, time periods and personnel
approved by Supplier and Applied and is subject to the
obligations regarding confidentiality of Article 4 of
the IPA. Access is subject to and Supplier agrees to be
governed by business control and information protection
policies, standards, and guidelines of Applied. Use of
any other Applied information, applications, systems or
in other time periods or by other personnel is expressly
prohibited. This prohibition applies even when
information or an application or system that Supplier is
authorized to access serves as a gateway to other
information, application(s) or system outside the scope
of Supplier's authorization. Without limiting the
foregoing, Supplier shall be responsible for the
implementation and execution of security measures as to
its operations and personnel designed to comply with the
above obligations and to insure that access granted
hereunder will not impair the integrity and availability
of Applied's information, applications and systems.
D.2. Provision of Information. Supplier agrees to take
commercially reasonable actions to provide to Applied
all employee and other information that is reasonably
necessary for Applied to approve or disapprove, as the
case may be, access and use by any Supplier employees,
consultants, agents or representatives to the Applied
network. Furthermore, Supplier agrees to advise Applied,
as soon as reasonably possible, of any changes in the
status or identities of those employees, consultants,
agents, or representatives to whom Applied has granted
access and use.
D.3. Audit Rights. Supplier acknowledges that Applied
has a vested interest in assuring that Supplier complies
with its obligations of confidentiality. Accordingly,
Supplier agrees that Applied may take all steps that
Applied, in its sole discretion, believes are useful in
limiting and controlling Supplier's access to the
Applied network and the Applied Confidential Information
presented or accessed thereby, including the provision
of passwords, the utilization of security checks, and
the issuance of user identifications that restrict
Supplier's access, provided that such discretion shall
be reasonably exercised. Supplier also agrees that
Applied, upon prior notice to Supplier's Senior Director
of
38
CONFIDENTIAL TREATMENT REQUESTED
Operations - Round Rock, or Director of Operations -
Milpitas, as appropriate, and at reasonable times, may
audit Supplier's access to the Applied network and use
of Applied Confidential Information, including
inspection or audit of Supplier's facilities, inventory,
records, documentation and personnel, with respect to
compliance with the requirements of this Section 2.9.1.
Applied, in its sole discretion, will decide the
frequency and extent of such audits, provided that such
discretion shall be reasonably exercised. Applied agrees
to cooperate with Supplier to limit the burden to
Supplier of any such audits and to implement steps to
protect the Applied Confidential Information.
D.4. Segregation of Applied Confidential Information.
Supplier agrees: to segregate the Applied Confidential
Information that it receives; to take all other
reasonable steps to keep Applied Confidential
Information separate from Supplier information or
information of others to which Supplier has access; and
to assure that the Applied Confidential Information is
readily locatable and identifiable.
D.5. Effect of Failure to Comply. Supplier agrees that
its failure to comply in any material respect with any
duty or obligation pursuant to this Section 2.9.1.1.D
constitutes a breach of its confidentiality obligations
under the IPA and that Applied may initiate termination
pursuant to Section 5.2.3 of the IPA.
D.6. Need to Know. The parties will cooperate to limit
the number of Supplier's employees accessing and
utilizing the Applications and Databases (as such are
defined in the IPA) to only those employees reasonably
necessary for Supplier to perform its duties and
obligations under this Agreement and the Related
Agreements. The parties agree, however, that Applied
retains final approval concerning access to and
utilization of any such Applications and Databases.
Supplier agrees to have all current employees with
access to Applied Confidential Information execute an
Employee Joinder (in the form attached to the IPA)
within two (2) weeks after the execution and delivery of
this Agreement, and to forward a copy of each signed
Joinder to Applied, by transmission to Applied
Materials, Inc., Attn: Law Department, 0000 Xxxxxxx
000X, X/X 0000, Xxxxxx, Xxxxx 00000. Thereafter,
Supplier agrees to provide to Applied, as soon as
reasonably possible and to its Law Department at the
above address, a copy of an executed Joinder for each
employee receiving Applied Confidential Information. In
this regard, for those Supplier employees requiring
access to the Applied computer network, Supplier will
forward the original executed Joinders concurrently with
the respective request for access to the Applied
39
CONFIDENTIAL TREATMENT REQUESTED
Law Department at the above address. For those Supplier
employees receiving Applied Confidential Information,
but for whom access to the Applied computer network is
not required, Supplier will forward copies of executed
Joinders to the Applied Law Department, at the above
address. The liability of Supplier and any of its
employees involved for any violation of the provisions
of this Agreement or of the IPA regarding Applied's
Confidential Information, shall be joint and several. If
an employee violates any of the provisions of this
Agreement or the IPA regarding Applied's Confidential
Information after the time his or her employment with
Supplier has terminated and if Supplier, as part of its
exit interviews and procedures, specifically advised
such former employee of the continuing nature of his or
her obligation regarding such Confidential Information,
then Supplier shall not have such joint and several
liability to Applied for such subsequent violation by
such former employee by reason of the previous
employment relationship.
2.9.2. Applied New Product Plans.
Supplier will, on occasion and at Applied's discretion, be invited to
forums in which Applied's new product plans are shared. Any Applied new
product plans provided to Supplier are Confidential Information of Applied
and are subject to the confidentiality provisions of Article 4 of the IPA
and of this Agreement, and any applicable NDA executed in connection with
the forum(s) at which such plans are shared.
2.9.3. Compliance with Securities Laws.
Supplier agrees that the Internal Applied Data and Applied new product
plans contain Confidential Information of or disclosed by Applied to
Supplier and to those of its employees, contractors, representatives, and
agents receiving such Confidential Information or new product plans solely
for performance of Supplier's obligations to Applied, and that possession
of Confidential Information which is material, non-public information
concerning companies with publicly-traded securities prohibits Supplier
and its employees, contractors, representatives and agents with direct or
indirect access to such Confidential Information from (1) buying or
selling such companies' publicly traded securities (stock, options, etc.)
("xxxxxxx xxxxxxx") until after such Confidential Information has been
disclosed to the public and absorbed by the market (at least two business
days), and (2) passing the Confidential Information on to anyone who may
buy or sell such companies' securities ("tipping"). Supplier shall comply
with (and shall direct its employees, contractors, representatives and
agents to comply with) all federal and state securities laws prohibiting
xxxxxxx xxxxxxx and tipping, and shall immediately notify Applied if
Supplier violates any such laws or if Supplier becomes aware of any such
violation by any of its employees, contractors, agents or representatives.
Supplier also agrees to execute additional NDAs or other agreements as may
be required to comply with applicable securities laws. Applied has
established a corporate policy prohibiting xxxxxxx xxxxxxx and tipping by
all members of its workforce as to its securities
40
CONFIDENTIAL TREATMENT REQUESTED
and as to securities of companies other than Applied. Applied will
maintain a policy against such xxxxxxx xxxxxxx and tipping in effect
throughout the term of this Agreement.
2.10. Packaging and Transportation.
2.10.1. Packaging and Shipment.
Supplier will have all Items packaged "ready for use" in accordance with
Applied's packaging Specification (Attachment 6a). Supplier will xxxx and
identify every Item in compliance with Applied's part marking
identification Specifications and requirements (Attachment 6b). In
addition, Applied may require specific fit-for-use packaging for certain
Items and/or deliveries.
2.10.2. Bar Coding.
All shipments of Items shall be bar coded to Applied's Specifications in
Attachment 5.
2.10.3. Transportation Requirements.
2.10.3.1. F.O.B Destination.
Supplier shall ship all Items "F.O.B. Destination," provided that
allocation of risk of loss and terms for passage of title otherwise
applicable as to Items shipped by Supplier may be varied by the
provisions of this Agreement. Applied will specify the applicable
destination point, which may be an Applied Facility or another
location. Supplier shall ship all Items in accordance with Applied's
Corporate Routing Guide (Attachment 7), including use of approved
carriers. Supplier shall ship all Items to accomplish delivery of
all Items at the applicable destination point, on time.
2.10.3.2. Freight and Delivery Costs.
Except for Items shipped by Supplier on Supplier owned trucks
pursuant to prior written approval by Applied and except as provided
below for Items shipped with freight prepaid with prior approval,
all freight and delivery costs for Items shall be specified as
"Freight Collect" on bills of lading or shipping receipts, to be
paid directly by Applied. With prior written approval by Applied,
Supplier may prepay freight and delivery costs (to be shown as
"Freight Paid and Charged Back" on the bills of lading or shipping
receipts) and invoice Applied for the actual amounts of such costs.
Applied will not pay freight and delivery costs in excess of the
costs determined under the Corporate Routing Guide for applicable
delivery methods. Applied will not pay any freight and delivery
costs if Supplier uses a carrier that is not approved under
Applied's Corporate Routing Guide. Any variance in these
requirements must be approved by Applied in advance, in writing.
41
CONFIDENTIAL TREATMENT REQUESTED
2.10.3.3. Risk of Loss; Title.
For all Items shipped Freight Collect or "Freight Prepaid and
Charged Back" in accordance with 2.10.3.2 and by a carrier approved
by Applied, Applied shall bear all risk of loss as to such Items
while in transit. For those Items that, with Applied's prior written
approval, are shipped using Supplier owned trucks, Supplier shall
bear all risk of loss as to all such Items while in transit and
continuing until Applied or its designee has acknowledged receipt of
the Items at the specified destination point. Acknowledgment of
receipt occurs when Applied enters the receipt of the Items in
Applied's data and accounting system. Applied shall be responsible,
however, for any loss as to an Item occasioned by the gross
negligence of its employees, acting within the scope of their
employment, regardless of whether there has been acknowledgement of
receipt or passing of title as to such Item.
2.11. Payment.
2.11.1. Invoices; Certain Acceptance Terms.
(a) Invoices (other than for Services invoiced under Section 2.11.1(c)
below) shall contain the following information: Purchase Order number,
Item number, description, sizes, quantities, unit prices, and extended
totals in addition to tax amounts and any other information requested. Pro
Formas shall comply with Section 2.1.7. Applied's payment of an invoice or
other account, or payment made under an ERS Program, does not in itself
represent unconditional acceptance of Items or preclude revocation of
acceptance.
(b) If Services are included in an invoice described in Section 2.11.1(a),
Supplier shall provide on the invoice the charges for each category of
Service, and the portions of such charges attributable to Configuration
Engineering Services, CES Services, engineering for Design Services or
Development Services, and engineering for the release of the Xxxx of
Materials for the Item through Applied's ECO procedures, as applicable.
(c) When Supplier has completed Services which are not related to an Item
for which Supplier is to issue a Pro Forma or an invoice and has delivered
any work product or other deliverables related to the Services, Supplier
shall issue an invoice or other notice of completion of Services and
delivery (a "Completion Notice") to Applied, to the attention of the
purchasing representative of the Applied organization issuing the relevant
Authorized Demand Signal, which may have been a Purchase Order that is
part of a DSA or that was issued for a DVA. A Completion Notice shall
include: the Applied Purchase Order number, the date(s) of completion and
delivery, a description of the Services performed and work product or
other deliverables delivered, and the Applied representative to whom
delivery was made. A Completion Notice may be issued by Supplier in
invoice form or as an e-mail or letter, and may be delivered by mail,
facsimile, or e-mail transmission.
42
CONFIDENTIAL TREATMENT REQUESTED
(d) (i) Applied may reject any Item (including Services handled under
Section 2.11.1(d)(ii)) until receipt of that Item has been acknowledged by
entry of the receipt in Applied's data and accounting system (a "Receipt
Entry"). Applied's Receipt Entry is deemed to be acceptance of the Item(s)
identified in the Receipt Entry, in accordance with and subject to the
terms of this Agreement. Supplier agrees that Applied may revoke its
acceptance as to any Item or Items deemed accepted through Receipt Entry
that do not conform to the warranty terms applicable to the Item(s) and
are not timely corrected, repaired or replaced by Supplier in compliance
with Section 7.2.2, as the value of such Item(s) to Applied is
substantially impaired. Revocation of acceptance as to such Item(s) shall
be made within a reasonable time after Applied discovers the defect or
nonconformity and is not effective until Applied notifies Supplier of
revocation.
(ii) Services performed or provided by Supplier pursuant to a
Purchase Order, DSA or DVA will be handled under the preceding Receipt
Entry procedures by issuance of an Applied "in-house packing slip."
Acceptance of such Services by Applied for purposes of payment shall not
occur until all of the following have occurred: (i) an Applied Purchase
Order, DSA or DVA, as applicable, has been issued for such Services; (ii)
the Services have been completed and all work product deliverables have
been delivered to Applied in accordance with the Purchase Order, DSA or
DVA; (iii) Supplier has delivered its Completion Notice for the Services
to Applied in accordance with the applicable Purchase Order, DSA or DVA;
and (iv) Applied has issued its "in-house packing slip" to initiate
payment of the amounts charged under the Completion Notice, whether by
check, electronic funds transfer or otherwise.
(iii) Acceptance of Items or of Services, as described above, is
acceptance for purposes of payment and shall not impair any remedy or
right of Applied, or warranty or other obligation of Supplier, under this
Agreement or applicable law other than that of rejection of Item(s) deemed
accepted that are governed by the UCC and rights equivalent to rejection
as to Services governed by laws other than the UCC. All payments made by
Applied will be subject to adjustment for errors, shortages or
nonconformity with warranty provisions, and to revocation of acceptance
where applicable.
2.11.1.1. Delivery of Invoices.
All invoices must be sent directly to Applied's Accounts Payable
Department in Austin:
Accounts Payable
Applied Materials
0000 XX Xxxxxxx 000 Xxxx X/X 0000
Xxxxxx, XX 00000-0000
2.11.1.2. Method of Payment.
Applied is authorized by Supplier to make payments under this
Agreement by either check or electronic funds transfer. Supplier
will provide Applied with the
43
CONFIDENTIAL TREATMENT REQUESTED
required bank routing coordinates and other information that may be
required by Applied to establish electronic funds transfer
capability.
2.11.1.3. ERS Program.
If Supplier participates in Applied's ERS Program, Supplier will
provide Pro Formas pursuant to Section 2.1.7, but otherwise will not
provide invoices to Applied for sales of Items to which that program
applies. Supplier will be responsible for the verification of all
prices and quantities prior to shipment and will enter that
information on the Pro Forma for each Item. All applicable sales and
use tax will be remitted to Supplier with payment by Applied. ERS
payments will be subject to adjustment for errors, shortages,
non-conformities or defects, as well as prompt payment discounts.
2.11.1.4. Packing Slips.
Supplier must include a valid packing slip number or package ID on
each package or shipment.
2.11.2. *.
Payment terms will be *:
a. if payment is made from Supplier's invoice, then from the later
of (i) Applied's receipt of Supplier's invoice, in form and
substance acceptable to Applied, for the Item(s), or (ii) delivery
of, and Applied's entry of receipt for, the Item(s) in Applied's
data and accounting system.
b. if payment is made under the ERS Program, then from the date of
Applied's entry of its receipt of the Item(s) in Applied's data and
accounting system.
If payment is made within * after the applicable date under clause (a) or
(b) *.
2.11.3. Offsets, Debits.
Applied may at any time set off any amount owed by Applied to Supplier
against any amount owed by Supplier (whether in Supplier's name or in the
name of Insync Systems, Incorporated) to Applied.
Applied anticipates implementing, in the Third Quarter of its 2002 fiscal
year, a procedure under which Applied will issue to Supplier notices of
scheduled debits or offsets approximately * in advance of the execution of
such debit or offset. Applied will advise Supplier if Applied will not be
able to implement such procedure in the anticipated period with use of
commercially reasonable efforts, and the parties will negotiate in good
faith to determine if alternative notice procedures can be established by
the parties.
* Material has been omitted and filed separately with the Commission.
44
CONFIDENTIAL TREATMENT REQUESTED
Notices of debits or offsets under such a procedure, if implemented, shall
be given to Supplier's Finance Manager.
2.11.4. Effect of Payment.
Time and method of payment shall not alter the time at which title to
Items passes to Applied, nor shall payment, in itself, preclude Applied
from the exercise of remedies under this Agreement or as permitted by law,
in each instance in accordance with this Agreement.
2.11.5. Reconciliation of Payment Discrepancies.
Attachment 22 to this Agreement sets out agreements of Applied and
Supplier as to any claims of Supplier with respect to "Payment
Discrepancies," as such term is defined in Attachment 22.
To the extent permitted by Attachment 22, Applied may initiate
amendment(s) of such Attachment 22 by posting of an amendment on the
Applied website to which Supplier has access in accordance with Section
1.3.4, and each amendment so initiated becomes effective if Supplier does
not object to the amendment within thirty (30) days of such posting.
Amendments that the terms of Attachment 22 exclude from such website
modification procedure shall be made in accordance with the provisions of
such attachment.
2.12. Disaster Recovery Plan.
Supplier shall develop and provide to Applied, upon request, reasonable
information describing or evidence of a disaster recovery plan that includes
emergency back up capacity, and appropriate record protection and recovery.
Applied shall have the right to verify Supplier's internal processes for
compliance with this provision.
2.13. Performance Constraints.
2.13.1. Constraints.
Supplier shall use commercially reasonable efforts to anticipate material
constraints affecting its ability to perform its obligations under this
Agreement. If Supplier believes that any such constraints are reasonably
likely to materially and adversely affect its performance under this
Agreement, Supplier will inform Applied's Subsystems Management Team and
Supply Chain Management organizations (through the contact persons
designated for Supplier by those organizations) thereof and of action
plans to resolve them. Typical constraints might include, but are not
limited to:
a. Consumption over forecast
b. Consumption under forecast
c. Quality problems
d. Capacity/production problems
e. Sub-tier supplier supply-chain management problems
45
CONFIDENTIAL TREATMENT REQUESTED
2.14. Provisions for Reconfiguration or Restocking.
2.14.1. "Affected Items."
This Section 2.14 applies to those FDS, NSO, Module and Spares Items which
have been delivered to Applied by Supplier pursuant to an Authorized
Demand Signal issued under Section 2.1.5, which conform to applicable
requirements (including Specifications) of this Agreement, and which,
subsequent to delivery to Applied (and prior to shipment by Applied to its
customer), Applied identifies for relabeling, reconfiguration, or return
and restock based on Applied's current manufacturing requirements
("Affected Items"). As to Items that Applied identifies as Affected Items,
Applied shall use its commercially reasonable efforts to locate Applied
customers that will purchase Affected Items, so that such will be treated
as Relabel or Reconfigure Items, rather than as Restock Items.
2.14.2. Categories.
Applied shall notify Supplier of those Items that are identified as
Affected Items by Applied from time to time. Applied's notice to Supplier
of the Affected Items so classified shall be given by fax or e-mail notice
to Supplier's Customer Service Manager in Austin or Milpitas, as
appropriate. Applied will classify Affected Items in the following
categories:
a. Relabel Items
b. Reconfigure Items
c. Restock Items
2.14.3. "Relabel Items."
An Affected Item which Applied determines is appropriate for relabeling
and/or minor reworking (for which no re-testing is required) at Applied's
facility, to meet the requirements of an Applied customer, is a "Relabel
Item."
2.14.3.A. Applied shall issue new or revised configuration, labeling
and related Specifications and completion requirements (the "Revised
SSR") to Supplier for each Relabel Item at the time when Applied has
determined the particular manufacturing requirements of Applied and
its customer. Within ninety-six (96) hours (measured during Business
Days and under prevailing Pacific Time) following receipt of the
Revised SSR, Supplier will determine if the Revised SSR requires any
CES Services or Configuration Engineering Services, beyond
Configuration Engineering Services required solely to relabel, and
if the completion requirements are feasible. Unless (i) Supplier
specifically refuses (under the standards applicable to refusal of
an initial SSR) the new or Revised SSR for the Relabel Item within
forty-eight (48) hours (measured during Business Days and under
prevailing Pacific Time) following the time Supplier has made the
determinations under the preceding sentence, or (ii) Supplier
determines, with
46
CONFIDENTIAL TREATMENT REQUESTED
Applied's concurrence, that CES Services or Configuration
Engineering Services, beyond Configuration Engineering Services
solely to relabel, are required by the Revised SSR, Supplier shall
rework and relabel each Relabel Item at the Applied manufacturing
facility where that Item is held. Such reworking and relabeling
shall be performed by Supplier in compliance with all requirements
of the Agreement applicable to such Item, including Applied's new or
Revised SSR issued under this Section 2.14.3; as reworked and
relabeled, the Relabel Item shall be deemed a new Item for warranty,
performance and other provisions of this Agreement.
2.14.3.B. The total charge from Supplier to Applied for each Relabel
Item shall be *.
2.14.3.C. Upon notice to Supplier, to be sent to the attention of
Supplier's Customer Service Manager - Austin or - Milpitas, as
appropriate, Applied may change the classification of a Relabel Item
to another category, whether or not work under the applicable SSR
has been initiated or completed. Pricing for a Relabel Item that is
changed to a Restock Item after the work has been performed by
Supplier for the relabeling shall be calculated as if such had
originally been a *.
2.14.4. "Reconfigure Items."
An Affected Item (i) which Applied determines (after consultation with
Supplier as to the scope of work involved) is appropriate for reworking,
reconfiguration (including related CES or Configuration Engineering
Services) and testing at Supplier's facilities to meet the requirements of
Applied or its customer(s), and (ii) for which Applied has issued a new or
Revised SSR from which a new Committed Delivery Date is determined, is a
"Reconfigure Item." Unless Supplier specifically refuses the applicable
new or Revised SSR within ninety-six (96) hours (measured during Business
Days and under prevailing Pacific Time) after its issuance by Applied
(under the standards applicable to refusal of an initial SSR) the SSR
shall be deemed accepted by Supplier and the Committed Delivery Date shall
(unless otherwise mutually agreed) be determined by the standard cycle
time for the Item based on the date of acceptance or deemed acceptance.
2.14.4.A. Upon Supplier's acceptance or deemed acceptance of a
Revised SSR, Applied will ship Reconfigure Items to Supplier, at
Applied's cost and risk of loss until delivery to Supplier's
receiving dock. Supplier shall have risk of loss and shall hold all
Reconfigure Items as bailee for Applied from the time the Item is
delivered to Supplier's receiving dock. Supplier shall maintain in
force insurance covering Reconfigure Items against risks and in
amounts that are appropriate to protect the interests of Applied in
such goods. Applied shall include, as part of its shipment to
Supplier, any safety notice required for the Affected Item, to
include a notice that the Affected Item has not been exposed to
toxic or corrosive gases or chemicals and that no decontamination is
required.
* Material has been omitted and filed separately with the Commission.
47
CONFIDENTIAL TREATMENT REQUESTED
2.14.4.B. Applied shall issue a new SSR or a Revised SSR for each
Reconfigure Item when Applied has determined the particular
manufacturing requirements of Applied and its customer and prior to
shipment of the Reconfigure Item to Supplier. Supplier will perform
applicable CES Services, Configuration Engineering Services and CCR
Services and reconfigure, rework, test, and relabel each Reconfigure
Item at Supplier's facility. Such CES Services, Configuration
Engineering Services and CCR Services, reconfiguration, reworking,
testing, and relabeling shall be performed by Supplier in compliance
with all requirements and Specifications of the Agreement applicable
to such Item, including Applied's new SSR or Revised SSR issued
under this Section 2.14.4, and as reconfigured, reworked, tested and
relabeled, the Reconfigure Item shall be deemed a new Item for
warranty, performance and other provisions of this Agreement.
2.14.4.C. The total charge from Supplier to Applied for each
Reconfigure Item shall be equal to the sum of:
*
2.14.4.D. Upon notice to Supplier, whether or not the
reconfiguration has been initiated or completed, which notice shall
be given by e-mail or fax transmission to the attention of
Supplier's Customer Service Manager - Austin or - Milpitas, as
appropriate, Applied may direct that Supplier cease work on a
Reconfigure Item or may change the classification of a Reconfigure
Item. Applied shall specify in its notice under this Section
2.14.4.D whether the Item as to which work is to cease shall then
become a new Reconfigure Item, a Relabel Item, or a Restock Item;
alternatively, Applied may direct that it be delivered as an
incomplete Reconfigure Item. The date of the notice of conversion
shall be deemed the date of receipt by Supplier of the Item as a
Restock, Relabel, or new Reconfigure Item. If the Item is changed
from a Reconfigure Item to a Restock Item, Section 2.14.5 shall
apply after that date.
2.14.4.E. Each completed Reconfigure Item shall be shipped to
Applied by Supplier in accordance with the terms of the Agreement
and on the Committed Delivery Date. Supplier shall provide its Pro
Forma for the Reconfigure Item in accordance with Section 2.1.7 and
payment shall be handled under the applicable payment procedures for
new Items. Applied shall review the Pro Forma under the applicable
pricing model, shall advise Supplier of any dispute as to the Pro
Forma amount, and then issue its Purchase Order in accordance with
the pricing model, the above terms as to Reconfigure Items, and the
Pro Forma (as revised, if necessary).
* Material has been omitted and filed separately with the Commission.
48
CONFIDENTIAL TREATMENT REQUESTED
2.14.4.F. All NonReusable and NonConsumable Materials removed by
Supplier from a Reconfigure Item (other than NonConsumable MFCs,
missing parts and Floor Stock Scrap) shall be returned to Applied in
accordance with Applied's Asset Recovery Management process.
2.14.4.G. If Applied directs Supplier to cease work on a Reconfigure
Item under Section 2.14.4.D above without delivery of same to
Applied, such Item shall be treated as a Restock Item under Section
2.14.5 as of the date of the direction to cease work. Supplier
shall, however, charge Applied for the following amounts, which
shall be determined in addition to the amounts payable with respect
to the Restock Item:
*
2.14.5. "Restock Items."
Affected Items returned by Applied for disassembly and restocking by
Supplier as set out in Sections 2.14.5 and 2.14.6 are "Restock Items."
Applied will ship Restock Items to Supplier, at Applied's cost and risk of
loss until delivery to Supplier's receiving dock. Supplier shall have risk
of loss from the time the Restock Item is delivered to its receiving dock.
Supplier shall acquire all Restock Items (including all materials and
Piece Parts other than NonConsumable Materials or NonReusable Materials
and Floor Stock Scrap) from Applied. Supplier shall deliver to Applied any
applicable tax exemption certificates and shall pay any applicable tax.
Supplier shall return all NonReusable Materials and NonConsumable
Materials to Applied in accordance with Applied's Asset Recovery
Management process (or destroy, as instructed by Applied). Applied shall
include, as part of its shipment to Supplier, any safety notice required
for the Affected Item, to include a notice that the Affected Item has not
been exposed to toxic or corrosive gases or chemicals and that no
decontamination is required.
2.14.6. Restocking Process and Charges.
2.14.6.A. Within ten (10) days after completion of disassembly of
each Restock Item by Supplier, Supplier shall (i) immediately record
and notify Applied under Section 2.14.6.C below of, all
NonConsumable and NonReusable Materials (as defined in Section
2.2.3) and deliver a detailed listing of all Piece Parts; (ii)
restock, or (as to NonConsumable and NonReusable Materials) return,
all Piece Parts, and (iii) deliver to Applied the
Reconfiguration/Tear-Down Reconciliation Form ("Reconciliation
Form") for each Restock Item. The Reconciliation Form shall specify
the amount for which Supplier shall acquire the Consumable Materials
and NonConsumable MFCs from the Restock Item, which amount payable
by Supplier is equal to the total of *.
Supplier must identify on the Reconciliation Form prices for all
NonReusable Materials and NonConsumable Materials (excluding Floor
Stock Scrap) for each Restock Item being handled under this Section,
which prices shall be *.
* Material has been omitted and filed separately with the Commission.
49
CONFIDENTIAL TREATMENT REQUESTED
2.14.6.B. Supplier shall deliver the Reconciliation Form to Applied
as required by Section 2.14.6.A. Applied shall audit such form for
compliance with the terms of this Section 2.14 and for any
NonReusable Materials or NonConsumable Materials with costs in
excess of $250.00. The Reconciliation Form shall not be released for
processing and payment until Applied has approved same under
Sections 2.14.6.B and C.
2.14.6.C. Supplier shall return all NonConsumable and NonReusable
Materials to Applied (other than missing parts or materials and
NonConsumable MFCs) at Applied's Asset Recovery Management location,
or destroy such NonConsumable and NonReusable Materials if so
directed by Applied, in writing.
2.14.7. Provisions as to Restocked or Removed Parts.
A. Supplier shall identify and return to Applied (for Asset Recovery
Management by Applied) all NonReusable Materials removed from any Affected
Item and shall scrap or destroy all Floor Stock Scrap. Supplier accepts
all Restock Items and all Piece Parts and materials removed or obtained
from any other Affected Item (not identified by it, and returned, as
NonReusable Materials or scrapped as Floor Stock Scrap) (collectively,
"Goods") "AS IS."
B. EXCEPT FOR THE WARRANTY IN PARAGRAPH D BELOW, APPLIED MAKES NO WARRANTY
OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE GOODS OR ANY PART
THEREOF. APPLIED HEREBY DISCLAIMS WITH RESPECT TO THE GOODS ALL IMPLIED
WARRANTIES, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE AND WARRANTIES OF TITLE AND OF NONINFRINGEMENT.
C. WITH RESPECT TO SUCH GOODS AND EXCEPT AS TO MATTERS COVERED BY THE
WARRANTY OF PARAGRAPH D BELOW, IN NO EVENT SHALL APPLIED BE LIABLE FOR ANY
DAMAGES THAT ARE EXCLUDED DAMAGES UNDER ARTICLE 17 OF EXHIBIT 1 TO THIS
AGREEMENT FOR ANY REASON, WHETHER OR NOT APPLIED OR SUPPLIER HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND APPLIED EXCLUDES AND
SUPPLIER WAIVES ANY LIABILITY OF APPLIED FOR ANY SUCH DAMAGES.
D. Applied WARRANTS to Supplier: (a) that none of the Goods returned as
Reconfigure Items or Restock Items shall have been exposed to toxic or
corrosive gases or chemicals; (b) that as to any Items returned to
Supplier as a result of a warranty claim of Applied under this Agreement
or pursuant to Section 5.2.1, Applied will have decontaminated and
prepared for safe handling under all applicable safety and environmental
laws and regulations any such Items delivered to Supplier that have been
exposed to toxic or corrosive gases or chemicals while in Applied's
possession; (c) that all applicable safety and environmental notices and
labels shall be affixed to or provided with the delivery of any such Goods
or Items; and (d) that none of such Goods have been delivered to any
person other than Applied or Supplier following Applied's receipt of
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CONFIDENTIAL TREATMENT REQUESTED
same. The limitations of Paragraph C above do not apply to the warranties
set out in this Section 2.14.7.D.
2.14.8. Processing and Payments.
Supplier shall calculate the amount payable by it for Restock Items in
accordance with the provisions of this Section 2.14, and shall authorize
Applied to charge Supplier for the Restock Item by issuing the
Reconciliation Form and related NRM BOM. Applied shall review the
Reconciliation Form and NRM BOM and shall charge and collect from Supplier
the calculated amount payable to Applied for the Restock Item by debit
memo or other offset against amounts otherwise payable by Applied to
Supplier. If Applied believes that additional amounts are properly payable
by Supplier in excess of the calculated amount, it shall promptly advise
Supplier of such claim and the parties shall review the determination of
the amount payable by Supplier for the affected Restock Item. If the
parties do not agree on the proper charge to be made within 30 days after
the dispute arises, the parties shall proceed under the Business Review
Process as defined in Section 7 below to attempt resolution of the
dispute. Applied shall not effect a debit or other offset (in excess of
the amount initially calculated by Supplier) until the parties have failed
to reach agreement and have failed to reach a resolution within the time
allowed for the Business Review Process.
3. PRICING FRAMEWORK
3.1. Contract Prices.
3.1.1. Pricing and Cost Model of Attachment 1.
Attachment 1 contains the contract terms agreed upon with respect to the
following: (i) the pricing and cost model, which set out the elements and
calculations by which Contract Prices are determined on an ongoing basis;
* indicated periods during the term of the Agreement. Any modifications to
Attachment 1 must be made in accordance with Section 1.3.4 of this
Agreement. Supplier shall price and sell, and Applied shall purchase, all
Items in accordance with this Agreement, including Attachment 1. Supplier
will provide R&D Items at non-discriminatory prices that take into
consideration the total value of Applied's business with Supplier.
Applied and Supplier have established pricing for certain Services on a
rate-per-hour basis as part of Attachment 1 or in other provisions of this
Agreement. Unless otherwise agreed at the time, pricing for Services
provided by Supplier pursuant to Purchase Order(s) will be determined at
applicable rates set out in Attachment 1.
The Contract Prices of additional and/or revised Items will be based upon
applicable elements of the pricing or cost model set forth in Attachment
1.
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
Attachment 1 is sometimes referred to as the "cost model" or "pricing
model" for the Agreement.
3.1.2. Application of Prices.
On the Effective Date and in accordance with Section 1.3.2.3, the pricing
for Items shall be determined pursuant to this Agreement, including
Attachment 1; provided that pricing under this Agreement shall not apply
to FDSs or other Items for which an SSR or Purchase Order has been
accepted (based on the procedures of Section 2.1.5.1 hereof) prior to the
Effective Date.
Specific circumstances may result in a review of Agreement terms,
including Contract Prices. These circumstances include, but are not
limited to:
a. Volume increases or decreases resulting in an increase or
decrease in the value of the Agreement of over 20%;
b. Addition or deletion of Items to the Agreement increasing or
decreasing the value of the Agreement over 20%;
c. Cost increases or reductions exceeding those committed in
Supplier's Performance Plan; and
d. Reductions or increases in market prices for equivalent
materials and services.
Any amendment or change in terms shall be made in accordance with Section
1.3.4 of this Agreement. Nothing contained in this Section 3.1 shall
require either party to amend or change any term of this Agreement.
3.1.3. Pricing Model.
The parties have anticipated that changes will occur in the design,
Specifications, Piece Parts, and other elements of Items to be provided
pursuant to this Agreement and have negotiated the pricing model shown in
Attachment 1 to accommodate such changes and to apply to Items that are
affected by such change. The pricing model is agreed to apply
appropriately to Items as changed in the future. However, if unanticipated
changes not within the contemplation of the parties have a material and
adverse impact on the operation of the pricing model, and alternative
pricing is not agreed to by the parties at the time, then the Item(s)
affected shall be removed from this Agreement. Such removal shall not be
classified as a partial termination.
3.1.4. Further Agreements as to Pricing.
(a) Upon request made by Applied through the SAT Team Lead for Supplier
and delivered to Supplier's Vice President - Sales, Applied and Supplier
will review pricing models proposed by Applied from time to time,
including by way of example, option based pricing models. The parties may,
by mutual written amendment to this Agreement, implement one or more
alternative pricing models with respect to those Item(s) identified in or
made subject to such alternative pricing model(s) by such amendment. The
Items or Piece Parts subject to an alternative pricing model shall not be
subject to Section 3.1.5 or
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CONFIDENTIAL TREATMENT REQUESTED
Section 3.1.6 unless the parties expressly so provide in the amendment
implementing the relevant alternative pricing model.
(b) (i) The prices of Piece Parts sold to Applied, whether incorporated in
FDSs or otherwise sold to Applied, shall be as follows:
A. Non-Unit MFCs (defined below in Section 3.1.4(b)(ii) shall be *;
B. All other Piece Parts *; and
C. Adjustments to the foregoing prices shall be made in accordance
with Section 3.1.5 and 3.1.6.
(ii) *
(c) Upon request of Applied or Supplier, the parties shall confer and
establish milestones and criteria applicable for the transition of Item(s)
from R&D Manufacturing to Pilot Manufacturing, and from Pilot
Manufacturing to Volume Manufacturing and further shall develop, based on
milestones and criteria established, checklists and procedures appropriate
to the transition of the affected Item(s). An illustrative form of NPT
checklist is attached to this Agreement as Attachment 23.
3.1.5. * Terms.
(a) The "Commodity Classifications" are * "Weldments," and "Unit MFC."
Guidelines for determining the Commodity Classification applicable to a
particular Commodity for each periodic reclassification are set out in
Section 3.1.5.1(d). The * are the periods, denominated periods 1 through 5
and stated as monthly periods from June 1, 2002 and ending on the last
date of the indicated month, in the table set out in Section 3.1.5 (d).
(b) Prior to each * and in accordance with Sections 3.1.5 and 3.1.6,
Supplier will prepare a preliminary table of Commodity Classifications for
all Commodities. Supplier and Applied shall review and consult on, and
agree to, the actual classification of Commodities for * for purposes of
the * Matrix for the *. Each actual classification of Commodities agreed
upon by the parties shall be attached to this Agreement as part of
Attachment 24.
(c) Two weeks prior to each * and in accordance with the table classifying
Commodities as agreed upon by the parties and with Sections 3.1.5 and
3.1.6, Supplier shall prepare a * under Section 3.1.5.1 (e) that specifies
* for each Piece Part that is to be incorporated in any FDS forecasted to
be built during that * and is included in the Commodity Classification to
which * in the next * ("Forecasted Piece Part"). The Applied Forecast to
be used in preparing a * Matrix shall be the most recent Applied Forecast
reflected in Supplier's MRP system as of the date which is * prior to the
beginning of the applicable * (the "* Forecast"). Supplier shall then
implement such
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
pricing for each Forecasted Piece Part used in an Item ordered during the
* or that is sold to Applied under this Agreement as a separately
purchased Item (excluding in this latter case Unit MFCs). In addition,
Supplier shall also * in accordance with Section 3.1.6 for all Piece Parts
for which * apply as a result of *.
(d) The * and * for each Commodity Classification are as follows:
-----------------------------------------------------------------------------------------------------------
* * FOR * * FOR * *% FOR * *
COMMODITIES COMMODITIES % FOR *
-----------------------------------------------------------------------------------------------------------
#1/* * * * *
-----------------------------------------------------------------------------------------------------------
#2/* * * * *
-----------------------------------------------------------------------------------------------------------
#3/* * * * *
-----------------------------------------------------------------------------------------------------------
#4/* * * * *
-----------------------------------------------------------------------------------------------------------
#5/* * * * *
-----------------------------------------------------------------------------------------------------------
3.1.5.1 Calculation of New *.
(a) Initial Classifications. Attachment 24 to this Agreement is the
initial table of Commodity Classifications and *, agreed upon by the
parties as of the Effective Date and applicable for * No. 1, classifying
all Piece Parts into *:*.
(b) Periodic Reclassifications. Not later than * prior to the beginning of
each * after the first period, Supplier shall deliver to Applied (to the
attention of the Supplier's SAT Team Lead at Applied) Supplier's proposed
classification table of all * for the next *. Applied and Supplier shall
promptly review and negotiate in good faith to establish the
classification table for *, utilizing the classification guidelines set
out in Section 3.1.5.1(d) below. If the parties fail to agree upon the
classification table to be used within ten (10) Business Days after
Supplier's delivery of the proposed classification table, either party may
initiate the Business Review Process of Section 7.2.5 with respect to such
failure as a "Dispute."
(c) Special Provisions. Special provisions related to prices applicable to
Piece Parts affected by * (as such term is defined in Section 3.1.6) will
be governed by Section 3.1.6, and those provisions shall control over the
* provisions of Section 3.1.5 to the extent of any conflict.
(d) Commodity Classification Guidelines. In preparing the Commodity
Classification table for each *, Supplier and Applied shall utilize the
guidelines of this Section 3.1.5(d), subject to the exclusions applicable
under Section 3.1.5.2.
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
A. Guidelines for * Commodities Classification.
* Commodities will include all Commodities that are identified by
the parties under any of the following descriptions:
(i) Sheet metal, cables, harnesses, and hardware and such
other Commodities as are set out as * on the initial table of
Commodity Classifications in Attachment 24.
(ii) All Commodities for which Supplier has had authority to
select the supplier or source of such Commodity, whether as a
no-preference choice or because neither Applied nor its
customers have required a specific source or supplier provided
that the Piece Parts meet Applied design requirements and, if
applicable, the provider is a qualified supplier, in at least
* of the FDSs which Applied has ordered from Supplier in the 9
month period preceding the start of the applicable *. Examples
of Commodities that will be evaluated under this guideline are
valves, transducers, filters and similar Commodities.
B. Guidelines for * Commodity Classification.
* Commodities are Commodities that are not now or hereafter
classified as *, and include, by way of example, *.
C. Status Change.
Once a Commodity is classified as *, that Commodity (to include, as
to a commodity group, all Piece Parts in such group) remains
classified as * during the remainder of the Agreement and shall not
be reclassified in a periodic reclassification process.
D. MFCs.
MFCs are not treated as *. Unit MFCs shall have pricing adjustments
made in accordance with the table set out in Section 3.1.5(d).
E. Weldments.
Weldment Commodities will include all weldments that are
incorporated in an FDS ordered by Applied under this Agreement.
After the first *, Supplier may treat the Weldment Commodities and
the * Commodities as one Commodity Classification for purposes of
calculation of the Total Gross Dollars, the * and new Piece Part
pricing applicable pursuant to Sections 3.1.5.1(e) (4), (5) and (6)
of this Agreement.
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
(e) *. Each * Matrix for a * shall reflect:
(1) The Commodity Classification of each Forecasted Piece Part.
(2) The pricing then in effect for each Forecasted Piece Part within
the Commodity Classification to which the reduction will apply.
After the initial price reduction is made with respect to a
particular Forecasted Piece Part, whether as a result of the * or
application of a Negotiated Price under Section 3.1.6. below,
references in this Agreement (including these * terms) to applicable
Piece Part prices will mean such prices as then adjusted under
Sections 3.1.5 and 3.1.6.
(3) The forecasted demand for each Forecasted Piece Part during the
applicable * based on the * Forecast.
(4) The total gross dollars forecasted for the entire list of
Forecasted Piece Parts in the Commodity Classification based on the
* Forecast, to which a percentage reduction applies during the
applicable * ("Total Gross Dollars"). Total Gross Dollars equals the
sum of the then current Forecasted Piece Part pricing (i.e., the
prices actually charged to Applied by Supplier immediately prior to
the start of the applicable *) multiplied by the respective
forecasted demand in the * Forecast.
(5) The * dollar amount * which is the product of the * multiplied
by the Total Gross Dollars.
(6) The new Piece Part pricing which represents Kinetics' allocation
of the * across the list of Forecasted Piece Parts. Supplier shall
use commercially reasonable methods in its allocation of the * and
its selection of new Piece Part pricing. However, the difference
between the Total Gross Dollars and the sum of the new Piece Part
pricing multiplied by the respective forecasted demand in the
applicable * Forecast must equal the * Percentage for the applicable
*.
3.1.5.2 Exclusion; Particular Terms.
(a) A particular Piece Part shall not be classified or included in the *
(either as a Forecasted Part utilized in calculating the * or as a Piece
Part to which a price reduction shall apply pursuant to a Pricing
Reduction Matrix) until the first * that occurs six (6) months after the
time when the Piece Part is first assigned a part number.
(b) A particular Piece Part that is a non-recurring purchase resulting
from a CES requirement shall not be included as a Forecasted Piece Part
and Supplier shall provide a list of such excluded Piece Parts with the
affected *.
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
(c) Prices of Unit MFCs under a * apply only to purchases of Unit MFC's
that are incorporated in an FDS ordered by Applied under this Agreement.
(d) Prices of * are not subject to the * terms of this Section 3.1.5.
3.1.6. Adjustment for *.
(a) Applied may *
(b) The parties shall meet at least once per quarter to coordinate their
respective efforts related to existing commitments from, or ongoing
negotiations with, * This notice will be given to Supplier's Vice
President Sales.
(c) The *:
(1) If the * for that Piece Part, the price charged to Applied *.
(2) If the Negotiated Price for a Piece Part is below Supplier's
Current Average Cost for such part, * under this Section 3.1.6.
(3) *
3.2. Volume.
Applied does not commit to buy a specific volume, quantity, or percentage of any
Piece Part or Item from Supplier, and Applied may buy the same or similar Piece
Part or Item from multiple sources.
3.3. Export.
Applied may require, from time to time, Supplier to ship Items to locations
outside of the United States of America. Supplier will prepare the export
paperwork and be the exporter of record. Supplier must utilize Applied's
preferred carriers for the export of the Items. Applied will pay the freight
charges based on Applied's rates with its preferred carriers. Applied will be
responsible for importing the goods into the destination country.
3.4. Currency.
All prices shall be quoted by Supplier in U. S. dollars; prices for foreign
manufactured Items will not be adjusted to reflect changes in the exchange rate.
Supplier is encouraged to obtain any necessary currency exchange protection
which it deems appropriate.
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
4. TECHNICAL FRAMEWORK.
4.1. Engineering Change Orders.
4.1.1. ECO Procedures.
(a) Applied may change its Specifications at any time and generate a
proposed ECO with respect to such change. An Applied Supplier Engineer may
review with Supplier the Applied proposed ECOs that affect any Item(s).
(b) Supplier shall utilize one of the following procedures to initiate or
request any engineering change to an Item or a change affecting
Specifications (an "Engineering Change"):
i) Supplier may prepare and submit for approval a proposed ECO for
an Engineering Change if such action is authorized under Supplier's
Manufacturing Engineering Authority ("MEA"), as defined in Applied's
documentation of its ECO procedures and standards in effect from
time to time and provided to Supplier (a "Supplier ECO"); or
ii) Supplier may request an ECO to authorize an Engineering Change
through a Request for Engineering Action ("REA") if such request is
authorized under Supplier's MEA (a "Supplier Request"); or
iii) Supplier may initiate the development of an Engineering Change
by submitting a Supplier Problem Sheet (Attachment 13) (an "SPS") to
the SPS Administrator designated for Supplier.
(c) Changes to which an SPS or the ECO process applies shall not be
implemented by Supplier (and Supplier shall not ship any Items with any
Engineering Change) until written permission to proceed is given by
Applied as required by its applicable SPS and ECO procedures. Applied will
provide, in writing (to the attention of Supplier's Engineering Manager)
or by release on Applied's current ECO database, notice of approved ECOs
(Attachment 12), indicating the effective dates of all changes. Unless
otherwise notified, Applied's receiving inspection will inspect to the
latest revision in effect at the time of receipt of Items.
(d) If Applied has not responded to an SPS, REA or proposed ECO within the
time period indicated in this Paragraph (d), Supplier may request review
of the SPS, REA or proposed ECO by the SMT Supplier Engineer for Supplier.
Applied is not obligated to approve any SPS, REA or proposed ECO. The
response time for purposes of this Paragraph (d) is eighteen (18) days
after initial submission of a proposed ECO or REA or after initial
submission of an SPS.
(e) Each Supplier ECO and Supplier Request shall be handled in accordance
with applicable MEA procedures and shall not modify or eliminate any
requirement of the Quality Framework Document (Attachment 15) or the QRD
(Attachment 20) for review
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CONFIDENTIAL TREATMENT REQUESTED
and approval by Applied prior to implementation. Each Engineering Change
initiated as a Supplier Request or Supplier ECO shall, prior to
implementation by Supplier:
(i) have been released by Supplier to Applied's assigned organizations for
REA or ECO review and approval under the REA and ECO workflow and approval
routing requirements of Applied in effect at the time;
(ii) have been properly completed and documented under Applied's REA and
ECO workflow and preparation requirements, including
(a) the document control process,
(b) applicable safety checklists, and
(c) other safety engineering or information requirements, as in
effect at the time; and
(iii) have been approved, in writing (to include electronic authorization)
as required by Applied's ECO, REA or other applicable approval procedures.
4.2. Tooling.
4.2.1. General Tooling Provisions.
(a) Except as otherwise set forth in Section 4.2 or as otherwise agreed by
the parties in a separate writing, special dies, tools, patterns, test
fixtures, and like equipment (collectively, "Tooling") used in the
manufacture of Items shall be furnished by and at the expense of Supplier
and shall be owned by Supplier. As to those items of Tooling covered in
Sections 4.2.2 and 4.2.3 (the "Test Fixture Hardware" and "Test Fixture
Software," such latter term being defined in Section 4.2.3(c)), the terms
of Sections 4.2.2 and 4.2.3 shall apply and not the terms of this Section
4.2.1.
(b) Supplier agrees that Applied may, at Applied's option, purchase from
Supplier Tooling to which this Section 4.2.1 applies that is unique to the
Items or is unique to the manufacture of Items, *. Pursuant to such
option, Applied may purchase from time to time (but subject to the
limitations and requirements of Section 4.2.4(c)) items of such Tooling at
the fair market value of such Tooling, as determined at the time of the
exercise by Applied of this option. As part of such purchase and without
additional consideration, Supplier shall assign to Applied, or if such
assignment is not possible, license on a royalty-free, non-terminable
basis, all IP Rights associated with such Tooling, including software (if
any) associated with such Tooling *. In this regard, Supplier will obtain
from its employees, consultants, agents and representatives, as necessary,
all assignments necessary for assignment of IP Rights to Applied.
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
(c) Prior to acquisition of an item of Tooling that is unique to the Items
or is unique to the manufacture of Items, Supplier will provide a separate
line item quote for any such item of Tooling (excluding, however, Tooling
subject to provisions of Sections 4.2.2 or 4.2.3) that Supplier will
acquire for use in the manufacture of Items after the Effective Date. If
Applied accepts such quote under such procedures, Applied will pay the
cost of such Tooling separately, title to the Tooling shall be held by
Applied, and the parties shall execute and deliver a Tooling Loan
Agreement (or a supplement or schedule to an existing Tooling Loan
Agreement) as to such Tooling. Supplier will establish appropriate
accountability and tracking of any Tooling owned by Applied.
(d) Supplier shall not at any time use Tooling owned by Applied ("Applied
Tooling") for the production of goods for persons other than Applied or in
any manner other than in performance of Supplier's obligations under this
Agreement, without Applied's written approval. Applied and Supplier shall
execute a tooling loan agreement of even date with this Agreement in the
form of Attachment 19 (the "Tooling Loan Agreement") for any Applied
Tooling in Supplier's possession, or a supplement or schedule to include
such Applied Tooling under an existing Tooling Loan Agreement.
4.2.2. Current FDS Test Fixtures.
(a) The FDS test fixtures (including, for purposes of this Section 4.2, *)
identified on Schedule 4.2.2(a) to this Agreement (the "Purchased FDS Test
Fixtures") were purchased by Supplier from Applied. Each Purchased FDS
Test Fixture (i) shall be located only at premises approved, in writing
and in advance, by Applied (subject to the provision below as to changes
of location among facilities of Supplier), and (ii) shall be used by
Supplier solely to perform its obligations under this Agreement for
manufacturing Applied FDSs to be sold to Applied pursuant to this
Agreement. Further, Supplier grants and extends to all Purchased FDS Test
Fixtures a security interest in favor of Applied to secure performance by
Supplier of its obligations in respect of repurchase of the Purchased FDS
Test Fixtures by Applied pursuant to Section 4.2.2(b) below.
Supplier may, upon at least ten (10) calendar days prior notice to Applied
given to Applied's Supply Account Team Lead as specified under Section
1.2.2 above, relocate any of the Purchased FDS Test Fixtures from their
current locations to any manufacturing facility of Supplier in Milpitas,
California, Austin, Texas or Round Rock, Texas.
(b) Supplier grants to Applied the right, exercisable from time to time by
Applied, at its option, whether or not default has occurred under this
Agreement but subject to the requirements of Section 4.2.4(c) below, to
purchase from Supplier any or all of the Purchased FDS Test Fixtures(s)
and all then existing hardware modifications and improvements to such
fixture(s). The purchase price for such Purchased FDS Test Fixture(s)
shall be equal to the following percentages of the purchase price
initially paid by Supplier to Applied for such Purchased FDS Test Fixtures
and modifications and improvements: *. Upon payment of such purchase price
Supplier shall convey to
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
Applied, and Applied shall be the owner of, such test fixture(s) and all
IP rights in or to such test fixture(s) (*). Supplier agrees to assign to
Applied as part of such purchase and without additional consideration, and
to obtain from its employees, consultants, agents and representatives, as
necessary, all assignments of, all IP Rights it or they may have relating
to the Purchased FDS Test Fixture(s) (*).
(c) The FDS test fixtures identified on * to this Agreement are owned by
Applied (the "Applied Test Fixtures") *.
(d) The FDS test fixtures identified on * are owned by Supplier (the
"Supplier Test Fixtures"). *. Improvements, additions and alterations to
the Supplier Test Fixtures (excluding Improved Software, as defined below)
shall be procured, purchased, funded and owned by Supplier.
4.2.3. Future FDS Test Fixtures.
(a) Capacity FDS Hardware.
Supplier shall regularly consult with Applied's SPM regarding such new FDS
test fixture hardware and any modifications to existing FDS test fixture
hardware (excluding modifications to the *) that Supplier will need within
the following six (6) month period either (i) to meet manufacturing
capacity and flexibility requirements under the Supplier Performance Plan
then in effect, (ii) to achieve production levels established pursuant to
its capacity planning under Section 2.5.1, or (iii) to achieve increases
in manufacturing capacity and flexibility, production volumes or operating
levels to accommodate changes in quantities of Items under Section 2.5.2
(the "Capacity FDS Hardware"), and to develop operational requirements for
the Capacity FDS Hardware and a schedule for the acquisition and
installation of such hardware, together with any related software. Applied
shall provide or purchase all items of Capacity FDS Hardware that are, in
its commercially reasonable judgment, necessary and appropriate for the
purposes set out above in this Section 4.2.3(a). All Capacity FDS Hardware
purchased or provided by Applied shall be owned by Applied and shall be
subject to the Tooling Loan Agreement and this Agreement and upon request
by Applied shall be identified by a supplement to * as Applied Test
Fixtures. Whether or not default has occurred under this Agreement but
subject to the requirements and limitations of Section 4.2.4(c) below,
Applied shall have the right to remove or otherwise take possession of
such Capacity FDS Hardware.
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
(b) Product Change Hardware and Improved Software.
Supplier shall regularly consult with the Applied SAT Lead regarding (i)
any new or modified hardware for test fixtures that will be used to
manufacture or test any FDS, Module, or other Item for Applied, which new
or modified hardware will be needed as a result of new Applied products,
modifications of existing Applied products, or new or modified testing
requirements or Specifications for Applied products that Supplier may be
selected to manufacture or supply Items for (the "Product Change
Hardware") and (ii) any new or modified software for test fixtures that
will be used to manufacture or test any FDS, Module or other Item for
Applied, which new or modified software will be needed as a result of new
Applied products, modifications of existing Applied products, or new or
modified testing requirements or Specifications for Applied products that
Supplier may be selected to manufacture or supply Items for, or changes in
Supplier's manufacturing capacities, equipment or volumes (the "Improved
Software"). Applied (including its SAT Lead and the Tooling and Test
Organization) shall regularly consult with Supplier as to new Applied FDS
products and modifications of existing Applied FDS products that Supplier
may be selected to manufacture and as to changes in Applied's FDS test
requirements. Supplier will use commercially reasonable efforts to
identify and advise the SAT Lead of Product Change Hardware and Improved
Software, the need for which is known to Supplier, that will result from
such new or modified products, testing, manufacturing requirements, or
Specifications.
Applied shall have the option to provide or purchase all items of Product
Change Hardware and Improved Software that, in its commercially reasonable
judgment, are necessary and appropriate for the manufacture and testing of
FDSs, Modules or other Items for Applied, but shall not be required to
provide or purchase Product Change Hardware or Improved Software. Supplier
will not acquire or install Improved Software not purchased or provided by
Applied. All Product Change Hardware and Improved Software purchased or
provided by Applied shall be owned by Applied and, in the case of Product
Change Hardware and Improved Software, be subject to the Tooling Loan
Agreement and this Agreement and upon request by Applied shall be
identified by a supplement to * as Applied Test Fixtures. Whether or not
default has occurred under this Agreement, but subject to the requirements
of Section 4.2.4(c) below, Applied shall have the right to remove or
otherwise take possession of such Product Change Hardware.
(c) Right to Remove or Copy Software.
Applied owns, has provided to Supplier and has paid the cost of the
software currently used in the testing operation of all test fixtures
listed on Schedules 4.2.2(a)-(d) (the "Current TF Software"). (The Current
TF Software, the software for Capacity FDS Hardware and the Improved
Software are the "Test Fixture Software.") Any Test Fixture Software in
Supplier's possession may be copied by Applied at any time or times, upon
reasonable notice to Supplier, to the attention of Supplier's Engineering
Manager. Test Fixture Software in Supplier's possession may also be
removed by Applied at any time or times; provided that as to removal of
Test Fixture Software, Applied shall give the notice
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
and comply with the other requirements of Section 4.2.4(c) below. Applied
shall have the right to hold all source code and original documentation of
Test Fixture Software. Applied shall have the obligation to maintain the
Test Fixture Software, and Supplier shall cooperate with Applied in such
maintenance.
4.2.4. General Application.
(a) Supplier shall not at any time use Test Fixture Hardware or the Test
Fixture Software (other than the Supplier Test Fixtures and hardware or
software that, in each instance (i) are not provided or purchased by
Applied under Sections 4.2.3(a)-(c) or (ii) do not constitute Applied IP)
for the production of goods for persons other than Applied or in any
manner other than in performance of Supplier's obligations under this
Agreements without Applied's written approval. Any such Test Fixture
Hardware in Supplier's possession shall be subject to this Agreement, the
IPA, and also the Tooling Loan Agreement; the Test Fixture Software shall
be subject to this Agreement, the Tooling Loan Agreement, and also the
IPA.
(b) If Applied fails to provide or delays providing (after notice by
Supplier, given to Applied's SMT Operations Manager, that the failure or
delay will affect Committed Delivery Dates), items of Capacity FDS
Hardware, Product Change Hardware or Improved Software that are required
for the manufacture and testing of new FDSs, Modules or other Items for
Applied Systems, modifications of existing Applied Systems, or new or
modified testing requirements or Specifications for Applied Systems that
Supplier is selected to manufacture or to supply Items for, or changes in
Supplier's manufacturing capacities, equipment or volumes, after the
Effective Date, then, to the extent of delays in testing and delivery that
result directly from such failure of Applied after notice under this
Section 4.2.4(b), the Committed Delivery Date of the Items(s) so delayed
shall be extended for a period equal to the period of Applied's failure or
delay in providing such hardware or software.
(c) Applied may exercise any of its options or rights to purchase,
repossess, or remove any Tooling or Test Fixture Hardware and Test Fixture
Software, to the extent provided for in this Section 4.2, at any time,
without the occurrence or continuance of a default by Supplier, but only
in connection with a termination or cancellation of this Agreement, in
whole or in part. If exercised in connection with a partial termination or
cancellation, the right of Applied shall extend only to such items of
Tooling, Test Fixtures and Test Fixture Software that are reasonably
required for or in connection with the manufacture and testing of those
Items (including Applied System product lines) as to which the termination
or cancellation relates. Applied shall give Supplier prior notice under
Section 1.2.2 of Applied's intent to purchase, repossess or remove any
Tooling, Test Fixtures or Test Fixture Software or other items which it
owns or may acquire hereunder, which shall be given at a time reasonably
in advance of acquisition or relocation to allow Supplier to complete
production of Items affected by the cancellation or termination and for
which an Authorized Demand Signal has been issued, provided that notice
given at least eight (8) weeks (or a period equal to such lesser product
cycle time as may be applicable to the affected Items at the time) prior
to the repossession, removal or purchase shall be deemed reasonable.
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CONFIDENTIAL TREATMENT REQUESTED
4.3. Design Changes and Resolution.
(a) Supplier will not make changes to the Specifications, form, fit, function or
manufacturing process of Item(s), without having first complied with the
applicable requirements of Sections 4.1, 4.3, 4.4, and 4.5 of this Agreement.
(b) Supplier shall not subcontract any Design Service or Development Service
except as permitted by and in compliance with the IPA and shall not utilize in
any Services any consultant, contractor, or employee for whom an executed
joinder in the confidentiality provisions of the IPA has not been delivered to
Applied. Supplier shall implement changes affecting Items and resulting from
Design Services or Development Services only upon obtaining prior written
approval required under applicable ECO, Applied Product Definition Form, and
other procedures from Applied's Supplier Engineer designated for Supplier and,
as applicable, as required by the DSA or DVA.
4.4. Process Changes and Resolution.
Supplier shall be responsible for its compliance and compliance by its sub-tier
suppliers, subcontractors, providers and special process suppliers with
manufacturing requirements, Specifications and provisions of the QRD and Quality
Framework and shall inform Applied of any special process or other sub-tier
supplier, provider or subcontractor changes to Items, including any changes in
the manufacturing process of Supplier or of a sub-tier supplier, special process
supplier, subcontractor or provider, even when Specifications are being met
(excluding changes in physical layout of Supplier's manufacturing plant or in
Supplier's manufacturing line design). Supplier must receive approval in writing
from Applied with respect to the implementation of each such change. As required
by the QRD, Supplier must use special process suppliers from the list set forth
in Attachment 14.
4.5. QRD and Special Process Requirements.
4.5.1 Critical and Source Specific Materials.
The manufacture, processes, Specifications, manufacturing processes and
requirements of and for, and the providers of, Piece Parts, Modules,
assemblies or Subassemblies designated as "Critical" or "Source Specific"
pursuant to the QRD, and any Subassemblies transitioned to a sub-tier
supplier or subcontractor (the "Critical and Source Specific Materials")
shall comply with Applied's QRD, Quality Framework, and Special Process
Supplier requirements in or pursuant to Attachments 14, 15 and 20 to this
Agreement and documents or procedures referred to therein, all as revised
from time to time. Supplier shall not make or authorize any change in any
of the foregoing without prior written approval by Applied pursuant to the
Quality Framework, QRD and Special Process Supplier requirements and
related documents and procedures.
4.5.2 Supplier's Subcontractors.
Supplier will ensure that all sub-tier suppliers, providers and
subcontractors of Supplier who have access (directly or indirectly) to
Applied's Specifications or Internal Applied Data or other Confidential
Information sign and are governed by a confidentiality
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CONFIDENTIAL TREATMENT REQUESTED
agreement with Supplier that is similar in form and substance to the
confidentiality provisions of the IPA applicable to Supplier, and Sections
2.9.1 and 2.9.2 of this Agreement. Approval by Applied of a sub-tier
supplier, provider, or subcontractor selected by Supplier shall not alter
Supplier's obligations to Applied.
4.5.3. Costs of Supplier Change.
The party initiating a change in a subcontractor, provider or sub-tier
supplier to Supplier for Source Specific Parts shall bear the costs of
qualifying the new sub-tier supplier, provider or subcontractor for the
affected Piece Part, material or other element.
4.5.4. Waivers.
In addition to the provisions of Section 9.4 of this Agreement, if Applied
waives any drawing, Specification or other requirement for one or more of
the Items, it will not constitute a waiver as to remaining Items to be
delivered, unless stated by Applied in writing.
4.6. First Articles and Source Inspections.
First Article and Source Inspections shall be conducted in compliance with the
QRD and Quality Framework and the documents and procedures referred to therein.
4.7. Applied's Right to Subcontract.
Applied may at its discretion elect to contract with a manufacturer, integrator
or outsource provider of Subassemblies (a "Subassembler"), which Subassemblies
will incorporate or include Item(s) Applied may purchase under this Agreement.
Applied will advise Supplier of the new Subassembler and of the Items affected.
Supplier understands that the selection and sourcing of any Items to be
incorporated or included in Subassemblies to be provided by the Subassembler
will be made by the Subassembler, and that, pursuant to Article 17 of Exhibit 1,
Applied may assign this Agreement, in whole or in part, in connection with its
contract with the Subassembler.
4.8. Product Support
4.8.1. Global Technical Support and Product Support.
(a) Technical Support. Supplier shall provide a telephone support system
for global technical assistance to Applied, seven days a week, 24 hours a
day, at no additional charge. Supplier shall include as part of its
technical support hot pager contact for access at times outside Supplier's
normal operating periods. Supplier is expected to use commercially
reasonable efforts to provide a resolution to Applied's requests for
technical assistance.
(b) Product Support. In addition to support, repair and replacement
services covered by other provisions of this Agreement and in addition to
the above technical support, Supplier will, upon request by Applied,
provide support globally to Applied (and at the direction of Applied, to
Applied's customers) for all Items that Supplier provides to
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CONFIDENTIAL TREATMENT REQUESTED
Applied, to include repair, replacement or correction of Items. Supplier
agrees to have an established and, at Applied's request, deployable global
product support service capability. Supplier may utilize one or more
affiliates of Supplier, Supplier distributor(s) or other qualified
entities designated by Supplier and acceptable to Applied to meet this
requirement. If support services provided by Supplier are not covered as
warranty obligations to be provided pursuant to Section 7 of this
Agreement, Supplier will be compensated for the services so provided as
agreed by the parties on a case by case basis or under standard pricing as
agreed. Except as required for those requests, if any, for global support
covered by Section 2.4, when Applied has not been able to resolve a
defect, failure or problem affecting an Item through the above technical
support process, Kinetics shall respond to each request for global support
from Applied and propose a plan for the correction, solution, repair or
replacement within forty-eight (48) hours (as to requests initiated by
Applied's Customer Engineer), and as to all other requests from Applied,
within a period that is prompt under commercially reasonable standards
considering the nature and urgency of the request.
4.8.2. Product Support Period.
Supplier agrees to maintain the capability to provide Items and to provide
the same types and level of global product service and technical support
to Applied described in Section 4.8.1 above, for all of the Items, for a
minimum of ten years from the date of the last shipment of an Item to
Applied under this Agreement to Applied for its manufacturing operations
(the "Post Term Support"), in addition to meeting Supplier's warranty
obligations. Upon Applied's request, Supplier shall provide Post Term
Support on a time and materials basis, at rates and cost determined as set
out in Section 4.8.1 above.
4.8.3. Product Post Term Support Options.
(a) If Supplier desires to modify or reduce its Post Term Support
obligation, Supplier agrees, as a condition of such a reduction or
modification, that Supplier shall have prepared a transition and support
plan for Post Term Support and shall have obtained Applied's approval, not
to be unreasonably withheld, of such plan. As part of such plan, Supplier
shall have negotiated (and obtained such approval from Applied of) a
contract for Post Term Support (including capability to provide Items and
the provision of global product support and technical support) to be
provided by a financially responsible entity with established capability
and expertise and a license to such third party of IP Rights to meet the
requirements for Post Term Support, to the extent Supplier desires to
reduce or modify its obligations for Post Term Support.
(b) If, after the use of commercially reasonable efforts, Supplier has not
located a third party to provide Items as required for modification or
reduction of Post Term Support obligations of Supplier or to negotiate a
contract for the provision of Items under Post Term Support as described
in Section 4.8.3(a), then Supplier shall provide in good faith all
assistance reasonably required by Applied for Applied to provide or obtain
the Items for which Supplier has Post Term Support obligations and, for
such purpose, Applied shall have and may exercise the license in respect
of cover pursuant to Section 3.13 of the IPA. If Supplier fails in any
respect (other than as to arrangements for the provision of Items) to
provide Post Term Support, or to have obtained approval of a
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CONFIDENTIAL TREATMENT REQUESTED
transition and support plan under Section 4.8.3(a), then Supplier shall
provide in good faith all assistance reasonably required by Applied for
Applied to provide or obtain the affected Post Term Support and, for such
purpose, Applied shall have and may exercise the license in respect of
cover pursuant to Section 3.13 of the IPA.
4.9. Periodic Business Review.
Applied and Supplier shall periodically review their activities and agreements
through a formal business review process. As part of such business review
process during any Wind Down Period, the parties shall determine if Supplier
holds any documentation of a Future Modification (as defined in the IPA) in
which Applied holds any rights as owner or licensee pursuant to the IPA or any
DSA or DVA, which documentation Supplier is required to deliver to Applied
pursuant to the IPA, but which documentation has not been delivered to Applied
(the "Deliverable Documentation"). Supplier shall promptly deliver to Applied,
upon identification of same, upon subsequent request by Applied, any Deliverable
Documentation.
4.10. [Omitted].
4.11. Wind Down Provisions.
(a) The "Wind Down Period" is the period preceding expiration or termination of
this Agreement that is applicable under the following provisions:
(i) With respect to the expiration of this Agreement, a period of up to *
that is designated by Applied as the Wind Down Period, which period shall
commence on the date specified in a notice by Applied (given under Section
1.2.2) that a Wind Down Period shall apply in connection with the
expiration of this Agreement. If the otherwise applicable term of this
Agreement would expire prior to the end of such designated Wind Down
Period, Applied shall extend the term of this Agreement to the last day of
the Wind Down Period by an extension pursuant to Section 1.5, so that the
term of the Agreement shall automatically be extended to and expire upon
the last day of the designated Wind Down Period.
(ii) If Applied terminates this Agreement pursuant to Article 25 of
Exhibit 1 to this Agreement or Article 26 of Exhibit 1 to this Agreement,
the Wind Down Period shall be a period of up to * that is designated by
Applied in its notice (given under Section 1.2.2) exercising such right of
termination, which period commences on the date the notice of termination
is issued and ends on the date termination is effective, which effective
date of termination shall be set out in the notice of termination and
shall comply with the requirements of this Section 4.11 and of Article 25
or 26 (as applicable) of Exhibit 1. If Supplier * the Wind Down Period
shall be a period of at least * that is designated by Supplier in its
notice *, which period commences on the date the notice * is issued and
ends on the date * is effective, which effective date * shall be set out
in the notice * and shall comply with the requirements of this Section
4.11 and of *.
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
If termination is in part and not in whole, the Wind Down Period shall apply
with respect to that portion of the Agreement affected by the termination.
During the Wind Down Period, Supplier shall continue to supply all Items for
which an Authorized Demand Signal is issued and accepted or deemed accepted
under this Agreement. The parties shall use commercially reasonable efforts and
cooperate so that Items for which Authorized Demand Signals are issued and
accepted during or prior to commencement of the Wind Down Period will have
Committed Delivery Dates on or before the end of the Wind Down Period. Supplier
and Applied each shall perform its agreements and obligations regarding the Wind
Down Period under the IPA and this Agreement. The Wind Down Period continues
from the date it commences until the date termination or expiration is
effective.
(b) The provisions of Section 4.8 shall apply during, and continue in effect
after, the Wind Down Period, without limitation of other survival provisions of
this Agreement.
(c) No later than the conclusion of the Wind Down Period (and, when applicable
for a partial termination, then as to the portion affected):
(i) Supplier shall convey its title, if any, to, and shall deliver to
Applied, *. In the event of Termination for Default or an expiration of
the term of this Agreement, Applied shall have the option, but not an
obligation, to purchase from Supplier the Remaining Consumable Materials.
*. Prices for partially completed Items shall be determined by applying
the cost model (Attachment 1) to actual materials consumed or installed in
the partially completed Item, and by a charge for actual Services
performed and actual manufacturing labor (at the rate for work in
Supplier's facility). The price payable by Applied for Remaining
Consumable Materials shall be determined under Section 4.11(d) below.
Supplier shall not charge for documentation of or relating to, Applied IP.
(ii) Supplier and Applied shall have performed and discharged their
respective obligations under the IPA and this Agreement.
(iii) Supplier will return all Tooling, capital or other equipment
(including any Tooling and capital equipment that Applied has acquired
ownership rights in as a result of exercising its rights under this
Agreement) and material owned by Applied. Supplier will be responsible for
the packaging and transportation costs associated with the return of these
items if the termination is for default; Applied shall be responsible for
such packaging and transportation costs in all other events.
(iv) Applied and Supplier shall each have paid the other all amounts then
due and payable under this Agreement and any Related Agreement, except for
amounts in bona fide dispute.
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
(d) "Remaining Consumable Materials" shall be determined as follows: Supplier
shall record and report to Applied, within 10 days after the date notice of
termination is given, * following the date on which notification is given, *
affected by the notification over the following *. The "Remaining Consumable
Materials" is the quantity of * that were actually on hand, or for which
Supplier had issued noncancellable purchaser orders, that were not used or
consumed in the course of operations under the Agreement. The charge or price
for Remaining Consumable Materials is determined * for the * at the date of
notification.
(e) During the period after notification and prior to termination, Applied and
Supplier shall negotiate the terms of and charges for Restock or Reconfigure
Items, and the formula provisions of Sections 2.14.4 and 2.14.6 shall not apply.
Supplier shall not be required, during a Wind Down Period relating to
termination, to accept Restock Items or Reconfigure Items that are first
designated as such during such a Wind Down Period. The provisions of this
Agreement as to cancellation of Items and as to *s, however, are not modified
during a Wind Down Period.
5. NONCONFORMANCE.
5.1. Nonconformance and Corrective Action.
5.1.1. [Omitted.]
5.1.2. Supplier Corrective Action Request.
Applied will complete a "Supplier Corrective Action Request" (Attachment
10) pursuant to ISO 9000 processes to record and request corrective action
for recurring nonconformities. Upon receipt of a Supplier Corrective
Action Request, Supplier will promptly respond as appropriate and use best
industry practices to cure the nonconformities and the cause of
nonconformity. A corrective action process to resolve nonconformance will
be documented and used by the parties. In addition, Supplier will
participate in continuous improvement plans and programs as defined by
Applied and Supplier.
5.2. Applied Nonconformance and Corrective Action.
5.2.1. Items Affected.
Applied will, at its option, return Items at Applied's expense that do not
conform to Applied's requirements due to Applied's errors or damage caused
by Applied. These Items will be returned to Supplier for repair or
potential rework. Applied may, at its option, require Supplier to repair a
Subassembly at Applied's facility. If Applied returns an Item to Supplier
under this Section 5.2.1, Applied shall deliver to Supplier with such
Item, when returned, certification of decontamination and preparation for
safe handling if the Item has been exposed to toxic or corrosive gases or
chemicals, in compliance with Section 2.14.7.D.
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
5.2.2. Standard Repair Costs.
Except for instances for which the parties have established "standard"
repair costs (labor, Items and freight) for Items not covered under
warranty, Supplier shall charge, and Applied shall pay, for non-warranty
repair or correction of Items on a time and materials basis. Materials
shall be charged at the *; Supplier's labor charges for repairs performed
at Supplier's facilities shall not exceed *. If Supplier is required to
provide labor at Applied facilities to meet repair times for Production
Issue Items, the labor cost will not exceed *.
Supplier will assess repair and rework costs and timing and quote same to
Applied before work is performed. Upon approval of Supplier's quote,
Applied will issue its Purchase Order for such costs. Applied may at its
option elect (a) to have the Item repaired or reworked, or (b) to purchase
a new Item at pricing determined under Attachment 1. Supplier shall
prepare its quotation based on the completion terms of Section 5.2.3 and
shall advise Applied as part of its quotation if more than five (5)
Business Days will be required.
5.2.3. Time for Repair.
Supplier shall repair, replace, or correct defects or defective Items
resulting from Applied's error or damage within * after Applied notifies
Supplier of the defect or damage (unless a longer period is required in
the use of best professional practices), or at such other time as is
agreed by the parties as part of the issuance of Applied's Purchase Order,
except for Items Applied identifies as a Production Issue in its initial
notice under Section 2.4, as to which Supplier shall respond and act in
accordance with Section 2.4.2. Costs and pricing for repair of damages or
defects caused by Applied error will be established under Section 5.2.2
above.
5.2.4. Return of Items.
Items repaired or reworked by Supplier will be shipped in accordance with
generally applicable transportation and packaging requirements. Supplier
will deliver such Items to Applied at the times determined under Section
5.2.3 above. Prior to Supplier's return of a repaired or reworked Item to
Applied, Supplier will xxxx such Item with Applied's part number, serial
number, range and gas (if applicable). Applied shall pay costs of
transportation and bear the risk of loss or damage during transit of
repaired or reworked Items, whether or not such Items meet warranty or
other requirements.
6. SUPPLIER PERFORMANCE PLAN.
As part of this Agreement, Applied and Supplier have prepared a Supplier
Performance Plan, which is Attachment 16 to this Agreement. Supplier's
performance and compliance with the applicable Supplier Performance Plan shall
be reviewed in periodic business review meetings
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
conducted by Applied's SPM. A recurring failure of Supplier to perform at (or to
achieve) the standards set, or to comply with terms of, the Supplier Performance
Plan will be deemed a Dispute for purposes of Section 7.2.5, as to which either
party may initiate the Business Review Process and, if such recurring failure is
material, may be the basis of an action by Applied under Article 25(a)(iii) of
Exhibit 1. A recurring failure for purposes of this Section 6 and of the
Supplier Performance Plan is a failure that occurs in at least *.
7. WARRANTIES AND REMEDIES.
7.1. Supplier Warranty.
7.1.1. Basic Warranty.
Subject to the limitations set out in Section 7.1.4 below, Supplier
warrants to Applied, for the warranty period set out in Section 7.1.3
below, that each Item delivered to Applied (excluding Services separately
warranted under Section 7.1.2 below):
(a) will be free from defects in materials, workmanship and
manufacture, and will be of good title;
(b) will conform to (i) all Specifications, and (ii) those
requirements of (or made applicable through) the following documents
and Sections of this Agreement applicable to such Item: the Quality
Requirements Document (Attachment 20); the Process Qualification
Program in effect at the time of manufacture under the QRD and
applicable to the Item; the Quality Framework (Attachment 15);
Special Process Suppliers (Attachment 14); and Sections 4.4 and 4.5
of this Agreement;
(c) will have been manufactured in compliance with those provisions
of the Quality Requirements Document (Attachment 20), Process
Qualification Program in effect at the time of manufacture under the
QRD and applicable to the Item, Quality Framework (Attachment 15),
the Supplier Performance Plan (Attachment 16), and Sections 4.4 and
4.5 of this Agreement, applicable to the manufacture of such Item
and with manufacturing standards suitable for the manufacture of
high quality, process sensitive components of Applied Systems
("Suitable Manufacturing Standards"); and will consist of new
materials and Piece Parts;
(d) will be of merchantable quality and fit for the intended purpose
of use with or incorporation in Applied Systems for semiconductor
wafer fabrication, flat panel display fabrication, thin film
application processes or manufacturing, toxics abatement or
recycling, or wafer inspection and metrology, as applicable; and
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
(e) will, to the extent of Configuration Engineering Services, CES
Services, CCR Services, NPT Services and Design Services or
Development Services, provided by Supplier, be free from defect in
such Services excluding, however, any defects caused by error in the
applicable product design that was not itself caused by Supplier or
its Services.
7.1.2. Services.
As to Services, for the warranty period set out in Section 7.1.3 below and
subject to the limitations set out in Section 7.1.4 below, Supplier
warrants to Applied that its Services have been performed in a competent,
professional and workmanlike manner, and are free from defect and in
accordance with the best professional practices of the industry.
7.1.3. Warranty Period.
The warranty period applicable under this Agreement commences on the date
of delivery to Applied of the Item (and, as to Services, commences upon
completion of the Service and delivery of the completed work product and
any other deliverables to Applied) and extends for a period of * after
such date *; subject, however, to applicable limitations under Section
7.1.4(iii), and provided that Supplier's warranty period as to a Third
Party OEM Component (as defined in Section 7.1.5. below) extends *. If
Applied's warranty to the Applied customer by whom the Item is used or
purchased expires during Supplier's stated 24 month warranty period, *. If
Applied's warranty to the Applied customer by whom the Item is used or
purchased does not have a stated period or term, *.
7.1.4. Limitations on Warranty.
Supplier's warranties under this Agreement are subject to the following
limitations:
(i) Supplier makes NO WARRANTIES under this Agreement, whether
express, implied, statutory or otherwise, except those warranties
provided in this Agreement. The remedies provided for in or through
this Agreement (and as to Services, where applicable, provided for
in or through the IPA, DSAs, or DVAs) constitute the sole and
exclusive remedies of Applied with respect to Items that fail to
conform to such warranties. EXCEPT FOR THE WARRANTIES EXPRESSLY SET
FORTH IN THIS SECTION 7.1 AND THOSE EXPRESSLY PROVIDED IN THE IPA
AND ANY DSAs OR DVAs, (a) SUPPLIER DISCLAIMS ALL OTHER WARRANTIES,
EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE WITH RESPECT TO ITEMS
(INCLUDING SERVICES) INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES
OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, AND (b) THE ITEMS ARE PROVIDED "AS IS."
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
(ii) In determining whether an Item is of a quality that is
merchantable (Section 7.1.1(d) above), an Item must be of a quality
at least equal to the standards of minimum acceptability for the
same or like Items that are employed by Applied at the time of its
manufacture; however, such standards shall not limit application of,
or excuse compliance with, specific warranty requirements of Section
7.1.1 above applicable to the specific Item. In determining whether
an Item is of a quality that is merchantable, the standards for
merchantable quality of the Item shall be those that are currently
applied at the time of its manufacture. In determining whether an
Item is fit for its intended purpose, such warranty shall extend to
use or incorporation in semiconductor wafer fabrication, flat panel
display fabrication, thin film application processes or
manufacturing, toxics abatement or recycling, or wafer inspection
and metrology systems, as applicable, employed in processes (a) that
are customary or generally contemplated within the industries using
such systems, or (b) that are specifically identified by Applied to
Supplier, in writing (including e-mail, facsimile and posting of
information on the Applied website designated for Supplier's access)
as an intended use.
(iii) Supplier's warranties do not extend to defects, failure or
malfunction of an Item to the extent such failure, defect or
malfunction (a) results from conformance by Supplier with
Specifications prepared by Applied, provided that this exclusion
shall not alter or limit Supplier's warranties of its Services; (b)
is caused by accident, negligence, misuse, alteration, modification
or tampering of or caused by any person other than Supplier, or (c)
is caused by use or operation in environments or for processes that
are not customary or generally contemplated in those industries
using semiconductor wafer fabrication, flat panel display
fabrication, thin film application processes or manufacturing,
toxics abatement or recycling, or wafer inspection and metrology
systems, as applicable, or not specifically identified by Applied to
Supplier as intended uses or environments.
7.1.5. Third Party OEM Components.
(a) A "Third Party OEM Component" is any product (i) that is
identified by an Applied Commodity Code (under Applied's Commodity
Code Document 0250-10856) with an initial designator equal to or
greater than "0500" and (ii) for which the original manufacturer's
warranty is for a period of at least thirteen (13) months from the
date of Supplier's purchase and expressly runs to Applied or has
been validly assigned to Applied by Supplier. The foregoing
provision as to products with an initial Commodity Code designator
equal to or greater than "0500" includes products: (i) that are
identified by Applied Commodity Codes with initial designators
between "0220" and "0229" but that would otherwise be assigned
Applied Commodity Codes with an initial designator greater than
"0500"; and also, (ii) that are new products to which a Commodity
Code initial designator greater than "0500" would be assigned under
the terms of Applied Document Commodity Code Document 0250-10856 as
in effect on the Effective Date.
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CONFIDENTIAL TREATMENT REQUESTED
(b) *
(c) Effective on the shipment by Applied to its customer of the Item
or Applied System containing a Third Party OEM Component, Supplier
assigns to Applied, to the fullest extent permitted by applicable
law and agreements, all of Supplier's warranties, warranty rights
and recoveries from or against each manufacturer and supplier of
each Third Party OEM Component installed or incorporated in the Item
or Applied System that may not be enforced by Applied, unless so
assigned. Supplier will cooperate with Applied in Applied's
enforcement of and recovery under such assigned or available
warranties of Third Party OEM Components, including the execution
and delivery of such further instruments as Applied may reasonably
request to perfect and protect the foregoing assignment or rights of
Applied, provided that Supplier shall not be required to bear costs
and expenses of such cooperation that are not reasonable under the
circumstances. If, following the date of assignment to Applied of
the warranty and warranty rights and recoveries, Supplier is sued
and such warranty and warranty rights or recoveries are reasonably
required for Supplier's defense of, or for the assertion of
counterclaim against, the claims against Supplier, Applied will
cooperate with Supplier with respect to such warranty and warranty
rights and recoveries and, upon reasonable terms and
indemnification, assign back to Supplier, to the extent so required,
the warranty and warranty rights or recoveries.
7.1.6. Debit Recoveries.
(a) Prior to Applied's initiation of a debit or other offset under
Section 2.11.3 to effect a recovery for a warranty claim of Applied
against Supplier, Applied shall advise Supplier, to the attention of
Supplier's Customer Service Manager - Warranty Claims (in addition
to the notice to Supplier's Finance Manager as provided by Section
2.11.3) of the expected debit or offset amount and shall ship to
Supplier for inspection the Item for which Applied proposes to
effect a debit or offset based on its warranty claim (the "Warranted
Part"). Supplier shall cooperate in arranging for delivery and shall
provide, promptly upon request by Applied and without prejudice to
Supplier as to warranty coverage, Supplier's Return Materials
Authorization ("RMA") for the return of the Warranted Part under
this Section 7.1.6. Applied shall not use debits or offsets to
recover amounts for warranty claims as to Services only.
(b) If a Warranted Part has been destroyed or is not available to
Applied for delivery for purposes of the debit process under this
Section, Applied will not initiate a debit process for the warranty
claim. If Applied fails to effect delivery of the Warranted Part to
Supplier under Section 7.1.6 (a), the debit or offset shall be
recredited in full. If Applied does not proceed under this Section,
Applied
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
retains and may pursue all its other remedies. Applied is not
required to proceed under this Section to assert or recover for its
warranty claims against Supplier; this Section only applies to
debits or offsets relating to warranty claims.
(c) If, after Supplier's examination of a Warranted Part, Supplier
disputes the debit, offset or warranty coverage, Supplier shall
notify its assigned Supplier Quality Engineer ("SQE") at Applied and
shall specify the amount Supplier requests to be re-credited
("Disputed Amount"). This notification and specification of the
Disputed Amount must in any event be given to Applied within thirty
(30) days after the RMA delivery of the Warranted Part to Supplier.
If the SQE approves the Supplier's request, the Disputed Amount
shall be recredited.
(d) If the SQE and Supplier do not agree on the amount to be
re-credited, or on the disposition of the claim, Supplier may (i)
accept the determination of the SQE or (ii) initiate the Business
Review Process for resolution of the dispute as described in Section
7.2.5.
7.1.7. Survival of Warranties.
Supplier's warranties shall survive any delivery, acceptance, inspection,
or payment by Applied, except as expressly provided otherwise in this
Section 7.1. Applied's approval of Supplier's material or design will not
relieve Supplier of the warranties established in this Agreement.
7.2. Applied's Remedies.
This Section 7.2 sets out obligations of Supplier and provides remedies of
Applied for Supplier's failure to make timely delivery of Item(s) and for breach
of Supplier's warranties as to Items. In addition to the remedies for such
failure of delivery and for breach of warranty provided for in this Section 7.2,
Applied has the remedies and rights provided under Articles 22 and 25 of Exhibit
1 (subject to the limitations and requirements of such Articles and of Article
21 of Exhibit 1). Provisions for recovery of damages by Applied in this Section
7.2 or in Article 25 are subject to applicable limitations under Article 21 of
Exhibit 1.
7.2.1. Failure to Deliver.
If Supplier fails to deliver one or more Items (or to provide Services
with completed work product and deliverables) on the Committed Delivery
Date or otherwise at the times provided by the applicable Authorized
Demand Signal or as agreed by the parties:
(a) Supplier shall initiate all actions necessary to complete and
deliver the Items (or provide Services, work product and
deliverables) promptly, without notice or demand by Applied. All
increased costs and expenses for completion and delivery that result
from Supplier's failure to timely deliver Items (or provide
Services, work product and deliverables) shall be paid by Supplier.
Supplier shall use the most expeditious manner commercially
available to effect completion and delivery of Item(s), Services,
work product and deliverables.
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CONFIDENTIAL TREATMENT REQUESTED
(b) If the failure constitutes or results in a Production Issue
under Section 2.4, Supplier shall comply with that Section of this
Agreement.
(c) If Supplier fails to comply with Section 2.4, where applicable,
or if Supplier otherwise fails to cure the late delivery promptly
after the applicable Committed Delivery Date or repudiates, Applied
may recover its damages resulting from the failure to comply or
deliver, from late delivery or from repudiation and may exercise all
remedies available pursuant to the UCC and, as to Services and
related deliverables, may recover its damages and exercise all
remedies provided by law or equity. Where applicable, the procedures
and limitations of (or, provided for through) Section 7.1.6,
7.2.1(d), or 7.2.1(e) and of Article 21 of Exhibit 1 will apply to
exercise, enforcement and recovery by Applied.
(d) Prior to effecting cover under the preceding paragraph (c),
Applied shall give notice of its intent to cover, which notice shall
be given to Supplier's Customer Service Manager in Austin or
Milpitas, as applicable by e-mail or facsimile transmission and by
voice message (telephone, pager, or voice mail). The notice of
intent to cover shall identify the Item(s) for which cover is
intended, and shall specify the Cover Period (defined below). Within
24 hours (measured during Business Days and under prevailing Pacific
Time) from the time notice is so given, Supplier shall notify
Applied (in the same manner as provided for the notice to Supplier)
by e-mail or facsimile notice to the Supply Account Team Lead
specified in Section 1.2.1 if Supplier will provide to Applied the
Item(s) within the Cover Period or if Supplier declines to proceed.
If Supplier elects to provide such Item(s), Supplier shall provide
such Item(s) on or before the expiration of the Cover Period at the
original Contract Price. The "Cover Period" is that period which is
reasonable under the circumstances for the Item(s), or
equivalent(s), to be completed and delivered (but not to exceed the
period within which the Item(s), or equivalent(s), can be obtained
from a source other than Supplier).
(e) (i) Prior to effecting cancellation through termination for
default, in part, with respect to the particular affected Item(s),
as a remedy pursuant to clause (c) above, Applied shall give notice
of intent to cancel to Supplier's Customer Service Manager in Austin
or Milpitas, as appropriate, and may (but shall not be required to)
initiate the Business Review Process under Section 7.2.5. This
cancellation through termination for default as to particular
Item(s) shall not be limited by or conducted under Article 25 of
Exhibit 1, but Applied may proceed to exercise such right by notice
to Supplier. If Applied does elect to utilize the Business Review
Process and the failure is not resolved by the Business Review
Process, when applicable, or if Supplier fails to perform in a
material respect under a resolution developed by the Business Review
Process, Applied may give notice of default and cancel this
Agreement as to the particular Item(s) without compliance with
Article 25 of Exhibit 1.
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CONFIDENTIAL TREATMENT REQUESTED
(ii) If Applied intends to effect cancellation as to more than
the particular affected Item(s) through termination for default
(which may be in part or in whole), Applied shall proceed in
accordance with Article 25 of Exhibit 1 and the Business Review
Process.
7.2.2 Defective Items.
If Supplier delivers Items (or provides Services) that do not conform to
the warranty terms applicable to the Item(s) or Service(s) (a "Defective
Item"), Applied shall give written notice (including notice by e-mail,
facsimile or other electronic record) to Supplier's Customer Service
Manager in Austin or Milpitas, as appropriate, of the Defective Item, and
thereafter:
(a) Supplier shall promptly correct, repair or replace, at
Supplier's cost and expense, the Defective Item(s) without further
notice from or demand by Applied. As to Services, Supplier's
obligations include the prompt correction or re-performance of the
Services and any work product or other deliverables. Supplier shall
use the most expeditious commercially available means to effect
repair, replacement or correction, including the provision of a new
Item in lieu of repair. Applied may require repair, replacement or
correction at Applied's facility.
(b) If the failure constitutes or results in a Production Issue
under Section 2.4, Supplier shall comply with that Section. If the
failure is subject to Section 5.1.2, as applicable under this
Agreement, Supplier shall comply with that Section of this
Agreement.
(c) If Supplier fails to comply with Section 2.4, where applicable,
or if Supplier otherwise fails to promptly repair, replace or
correct any Defective Item(s) or if Supplier repudiates, Applied may
recover its damages resulting from such failure and may exercise all
remedies available pursuant to the UCC (to include revocation of
acceptance) and, as to Services and related deliverables, may
recover its damages and exercise all remedies provided by law or
equity. Applied may, as part of its recovery, include premium costs
for expedited delivery. Where applicable, the procedures and
limitations of (or, provided for through) Section 7.1.6, 7.2.2(e)
and (f), and Article 21 of Exhibit 1 will apply to exercise,
enforcement and recovery by Applied.
(d) (i) Applied will utilize the procedures of this Section 7.2.2(d)
to make repair, replacement or correction of a Defective Item in
those instances in which (a) Supplier fails to comply with Section
2.4, if applicable, (b) Supplier fails to correct, repair or replace
the Defective Item within the period requested by Applied or
otherwise established by the parties or this Agreement, or (c) the
Defective Item has been shipped to or is installed at an Applied
customer location.
(ii) When Applied effects repair, replacement or correction of
a Defective Item under this Section 7.2.2(d), Applied shall be
entitled to recover, and Supplier shall pay to Applied each of the
following that applies:
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CONFIDENTIAL TREATMENT REQUESTED
1. The cost of goods obtained or used by Applied to make the
repair, replacement or correction of the Defective Item, and
of any necessary engineering or similar services relating to
such goods.
2. The cost of freight or shipping and of taxes for the goods
obtained for the repair, replacement or correction, and for
the return of any Defective Item(s).
3. The cost of labor required to remove, repair, replace and
reinstall a Defective Item (if repaired) and remove and
reinstall other Piece Parts necessary to the repair,
correction or replacement.
Costs of labor shall be determined at Applied's then standard labor
rates; if labor is provided at facilities of Applied's customers or
through the Applied CPS organization, the labor charge by Applied to
Supplier shall be equal to the field service labor charge calculated
at Applied's CPS rates (not to exceed *). Costs of engineering
services shall be determined by Applied at its customary rates, then
in effect, not to exceed *. This Section 7.2.2(d) shall not limit
Applied's other remedies or recoveries provided for in (but subject
to the limitations of) other provisions of this Agreement.
(e) Prior to effecting replacement under paragraph (d) above of a
Defective Item that is an FDS, Applied shall give notice of its
intent to make such a replacement, which notice shall be given to
Supplier's Customer Service Manager in Austin or Milpitas, as
appropriate, by e-mail or facsimile transmission and by voice
message (telephone, pager, or voice mail). The notice of intent to
replace shall identify the Item(s) for which such replacement is
intended, and shall specify the Replacement Period (defined below).
Within 24 hours (measured during Business Days and under prevailing
Pacific Time) from the time notice is so given, Supplier shall
notify Applied (in the same manner as provided for the notice to
Supplier) by e-mail or facsimile notice to the Supply Account Team
Lead specified in Section 1.2.1 if Supplier will replace the Item(s)
within the Replacement Period or if Supplier declines to proceed. If
Supplier elects to replace such Item(s), Supplier shall replace such
Item(s) on or before the expiration of the Replacement Period. The
"Replacement Period" is that period which is reasonable under the
circumstances for the Item(s), or equivalent(s), to be replaced (but
not to exceed the period within which the Item(s), or equivalent(s),
can be obtained from a source other than Supplier).
(f) If Applied intends to cancel the Agreement as to more than the
particular affected Item(s) through termination for default (which
may be in part or in whole) as a result of Supplier's breach or
default under this Section, Applied shall proceed in accordance with
Article 25 of Exhibit 1 and the Business Review Process.
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
(g) If Applied makes a warranty claim with respect to an Item that
has been modified or repaired, Applied shall include as part of the
documentation of such claim the maintenance and service record
relating to the modification or repair.
7.2.3. Cumulative Remedies.
The remedies of Applied and Supplier shall be cumulative, and no election
of remedies shall occur.
7.2.4. Remedies for Other Breach or Default.
7.2.4.1. Subject to the exclusions provided in this Section 7.2.4 or
provided in Article 25 of Exhibit 1 to this Agreement, if Supplier
or Applied fails to comply with, observe or perform any term,
provision or condition of this Agreement, or otherwise defaults
under or breaches any term, provision or condition of this
Agreement, the other party shall initiate the Business Review
Process prior to proceeding to enforce or exercise its rights,
remedies and actions available to it under this Agreement or under
applicable law.
7.2.4.2. The requirement in Section 7.2.4.1 of initiation of the
Business Review Process shall not apply: (a) to the enforcement or
exercise of equitable rights or remedies, and actions seeking
equitable relief; or (b) to claims, matters, remedies, and actions
that are provided for in Section 7.2.1 or Section 7.2.2 with respect
to particular Item(s).
7.2.4.3. If Supplier or Applied has failed to comply with, observe
or perform, or otherwise has defaulted under or breached, any term,
provision or condition of this Agreement, then (after any applicable
period of notice or consultation applicable under this Agreement and
after conclusion of the Business Review Process, where applicable)
the other party may proceed to enforce or exercise its rights and
remedies as provided under this Agreement or as provided by law or
equity (subject to procedural requirements of this Agreement and,
where applicable, to the limitations of Article 21 of Exhibit 1 to
this Agreement), all as it may elect, concurrently and in the
alternative, without waiver or election by the pursuit of any one or
more right, remedy or action.
7.2.4.4. In this Agreement, the phrase "term, provision or
condition" shall include any term, provision, condition, covenant,
agreement, representation, warranty, obligation, indemnity,
undertaking, requirement, or other part of this Agreement or of
another indicated agreement, and such phrase shall be so construed
unless the context clearly requires otherwise.
7.2.5 Business Review Process.
7.2.5.1. With respect to any dispute, issue, controversy or claim of
breach arising under this Agreement (a "Dispute"), either party may
initiate the process described in this Section 7.2.5 (the "Business
Review Process") to seek resolution of the Dispute. Except as
specifically provided to the contrary in this Agreement,
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CONFIDENTIAL TREATMENT REQUESTED
compliance with the Business Review Process is not a condition or
requirement to the exercise of any legal remedies or proceedings, to
the exercise of rights or remedies provided by or under this
Agreement, or to other action by a person.
7.2.5.2. The Business Review Process is initiated by a Notice from
Applied or Kinetics to the other of a Dispute, which notice shall be
given under Section 1.2.2, and a request for review of the Dispute
under the Business Review Process. Upon such Notice and request,
Applied shall designate a representative at its director level or
higher, and Kinetics shall designate a representative at its
director level or higher, to constitute their representatives for
this Business Review Process. These representatives shall promptly
confer and use commercially reasonable efforts in good faith to
resolve the Dispute. The Business Review Process shall continue for
twenty (20) Business Days after the date on which the party
initiating the process designates its representative, unless
otherwise agreed by the two representatives. If the Dispute is not
resolved through the Business Review Process or a party fails to
comply with, perform or observe the terms for cure, correction or
waiver of the breach, default or Dispute established through the
Business Review Process, then all parties shall be free to pursue
all rights, remedies and relief as may be available, without further
application of the Business Review Process or other provision for
cure or correction.
8. AMENDMENTS AND MODIFICATIONS; CAPTIONS AND CONSTRUCTION; INTERPRETATION.
8.1 Amendments and Modifications.
Subject to Section 1.3 above, amendments or modifications to this Agreement must
be in writing, signed by a duly authorized representative for each of Supplier
and Applied, traced by revision or amendment numbers and attached to this
original Agreement. The master copy of this Agreement and any revisions are to
be maintained by Applied.
8.2 Captions and Construction.
Headings and captions in this Agreement are for the convenience of the parties
only and shall not affect the interpretation or construction of this Agreement.
The provisions of this Agreement (including Exhibits and Attachments) shall be
construed as a whole, each supplementing the other, except for instances of
conflict which shall be governed by Section 1.3.2.2 as to precedence. This
Agreement, including also any Purchase Order issued for Items, shall control
over any invoice, delivery ticket, or other document issued by Supplier.
References to a party's internal business organization shall refer to such
organization and successor organizations performing similar functions.
8.3 Interpretation.
Supplier and Applied have each participated fully in the negotiation and
preparation of this Agreement. Each party has engaged its own legal counsel and
has relied upon its own representatives, employees and counsel, and not the
other party or its counsel, in the negotiation and preparation of this
Agreement. The rule that a contract shall be construed against the party
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CONFIDENTIAL TREATMENT REQUESTED
drafting the agreement and statutes of like effect, including California Civil
Code Section 1654, shall not apply to the construction or interpretation of this
Agreement.
9. PROVISIONS OF GENERAL APPLICATION.
9.1. Independent Contractor.
Throughout the term of this Agreement, the relationship between Applied and
Supplier shall be that of independent contractors. Nothing set forth herein or
in any Related Agreement shall be deemed or construed to render the parties
joint venturers, partners, or employer and employee, and under no circumstances
may either party hold itself out to be a partner, employee, franchisee,
representative, servant or agent of the other party. Neither party is authorized
to make any commitment or representation on the other's behalf. Neither party
may create any obligations or responsibilities on behalf of or in the name of
the other party. Throughout the term of this Agreement, if the term
"partnership," "partner," or "development partner" or the like is used to
describe the parties' relationship, Applied and Supplier agree to make it clear
to third parties that these terms refer only to the spirit of cooperation
between them and neither describe, nor expressly or implicitly create, the legal
status of partners or joint venturers. Each party also agrees not to make false
or misleading statements, claims or representations about the other party, its
products or the relationship of the parties.
9.2. No Third Party Beneficiary.
Each and all of the agreements, covenants, obligations, duties, conditions,
terms, warranties, representations and benefits in or arising under this
Agreement, whether express or implied by law, are and shall be solely for the
benefit of the parties to this Agreement and the respective permitted
successors, assigns, and legal representatives of each party hereto. It is the
express intention and agreement of Applied and Supplier that no entity not a
party to this Agreement (including any customer of Applied) shall be or shall be
deemed a third-party beneficiary of this Agreement, or of any of its agreements,
covenants, obligations, duties, conditions, terms, warranties, representations
and benefits.
9.3. Severability.
Any provision or provisions of this Agreement or of any Related Agreement that
are determined by a final judgment or order of a court of competent jurisdiction
to be invalid or unenforceable in any jurisdiction or as to any person or
circumstance shall be reformed, as permitted by law, so as to be valid and
enforceable, and, if (or to the extent) not so reformed, shall be severed, and
the remainder of the affected agreement or agreements shall continue in effect
and be enforced, construed and applied without such severed provision(s).
9.4 Waiver.
Any provision, right, remedy or requirement of this Agreement may be waived by
the party entitled to the benefit thereof by written waiver, signed by such
party. A waiver so made or given shall extend only to the specific matter or
event, and shall be effective only to the extent, specifically provided for in
such waiver. A waiver of any breach or default under this Agreement shall not be
construed as a continued waiver of other breaches of the same, or of any
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CONFIDENTIAL TREATMENT REQUESTED
other, provision of this Agreement, nor as a bar to, or waiver of, any right or
remedy as to any subsequent event, occurrence, default or breach. Except as
provided above as to written waivers, no act, omission, or course of conduct or
of performance shall be deemed to constitute a waiver hereunder. In furtherance
of the preceding provision, if Applied or Supplier delays or fails to insist on
strict performance of any of the terms, conditions, provisions, requirements,
covenants or obligations set forth in this Agreement, such delay or failure
shall not constitute a waiver.
9.5. Successors and Assigns.
This Agreement shall be binding upon, and shall inure to the benefit of, each
party and its respective permitted successors and assigns.
9.6. Execution.
This Agreement may be executed in any number of counterparts, each of which when
so executed and delivered shall be deemed an original, and such counterparts
shall constitute one and the same instrument. Each Party shall receive a
duplicate original of the counterpart copy or copies executed by it. For
purposes hereof, a facsimile copy of this Agreement, including the signature
pages hereto, shall be deemed to be an original. Notwithstanding the foregoing,
the Parties shall deliver original execution copies of this Agreement to one
another as soon as practicable following execution thereof.
10. REPRESENTATIONS AND WARRANTIES OF THE PARTIES.
Each party (the "Warranting Party") warrants and represents to the other party
that:
(a) the Warranting Party is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction in which
it is organized, with full corporate power and authority to carry on its
business as it is now being conducted;
(b) the Warranting Party has full power and corporate authority to enter
into this Agreement;
(c) the execution, delivery and performance of this Agreement has been
duly authorized by the Warranting Party, and does not and will not violate
any other agreement, any provision of the charter or organizational
documents of the Warranting Party or any applicable law, regulation,
decree, judgment or order of any regulatory government agency or any court
of competent jurisdiction, which violation would have a material adverse
effect on the Warranting Party;
(d) except as provided herein, the Warranting Party will not enter into
any agreement, the execution and/or performance of which violates any term
of this Agreement;
(e) the Warranting Party is not a party to any agreement calling for the
payment to, or receipt from, any third party by the Warranting Party of
any commission, gratuity, or other similar thing or amount in
consideration of the other party's entry into this Agreement;
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CONFIDENTIAL TREATMENT REQUESTED
(f) this Agreement has been duly executed and delivered by the Warranting
Party and constitutes a valid and binding obligation of the Warranting
Party, enforceable against the Warranting Party in accordance with its
terms, except that such enforceability may be subject to bankruptcy,
insolvency, reorganization, moratorium, or similar laws now or hereafter
in effect relating to creditors' rights and to general equitable
principles (whether enforcement is sought through legal or equitable
proceedings).
11. ACCEPTANCE AND EXECUTION.
This Agreement is executed and delivered by each of the undersigned parties,
acting through its officer or other representatives, duly authorized to act for
and on behalf of the indicated party, and is effective on and as of the
Effective Date.
Accepted:
Applied Materials, Inc. Kinetics Fluid Systems, Inc.
BY: /s/ Xxxx Xxxxxxxxx BY: /s/ Xxx Xxxxx
------------------------------ ------------------------------
Name: Xxxx Xxxxxxxxx Name: Xxx Xxxxx
-------------------- --------------------
Title: Vice President Title: President
-------------------- --------------------
Date: 5/21/02 Date: 5/21/02
-------------------- --------------------
83
LIST OF EXHIBITS AND ATTACHMENTS
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EXHIBITS
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Exhibit 1: Applied's Standard Terms & Conditions
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* INDICATES
ATTACHMENTS
THAT HAVE
ATTACHMENTS NOTIFICATION
REVISION
PROCESS ON
WEB SITE
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*
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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*
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* *
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* *
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* *
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* *
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* *
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* *
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*
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* Material has been omitted and filed separately with the Commission.
84
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* *
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18. On-site Representative Agreement *
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19. Tooling Loan Agreement
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*
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*
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*
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*
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*
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*
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* UPDATES AND CURRENT VERSIONS OF THESE ATTACHMENTS ARE POSTED ON
APPLIED'S WEBSITE WHICH IS AVAILABLE TO SUPPLIER FOR PURPOSES OF SECTION
1.3.
* Material has been omitted and filed separately with the Commission.
85
CONFIDENTIAL TREATMENT REQUESTED
TABLE OF CONTENTS
DEFINITIONS..................................................................................................... 1
1. SCOPE.................................................................................................. 8
1.1. Description of Agreement...................................................................... 8
1.2. Addresses and Contact Persons; Notices........................................................ 8
1.2.1. Contact Persons...................................................................... 8
1.2.2. Notices..............................................................................10
1.3. Entire Agreement; Related Agreements; Modification; Prior Transactions........................11
1.3.1. Certain Related Agreements...........................................................11
1.3.2. Entire Agreement.....................................................................12
1.3.3. Provisions Continuing in Effect......................................................13
1.3.4. Modification.........................................................................14
1.4. Items Covered.................................................................................14
1.5. Duration of Agreement.........................................................................15
2. LOGISTICS, ORDERING AND OPERATIONAL FRAMEWORK..........................................................15
2.1. Operation and Management of Orders............................................................15
2.1.1. Operating Calendar & Holidays........................................................15
2.1.2. Monthly Volume Summaries.............................................................15
2.1.3. Manufacture and Delivery.............................................................16
2.1.4. Change in Delivery Date..............................................................16
2.1.5. Orders for Items.....................................................................17
2.1.6. Electronic Commerce..................................................................26
2.1.7. Pro Forma............................................................................27
2.2. Definition of Terms for Certain Provisions Affecting Prices or Charges........................28
2.3. Cancellation of Items.........................................................................30
2.3.1. Items Subject to Cancellation........................................................30
2.3.2. Deferral.............................................................................30
2.3.3. Cancellation.........................................................................30
2.3.4. Applicability; Payment...............................................................31
2.3.5. Other Rights.........................................................................31
2.3.6. Services.............................................................................31
2.4. Response Time, Turnaround and Implementation Time.............................................31
2.4.1. Production Issues....................................................................31
2.4.2. Turnaround and Implementation Time...................................................32
2.5. Capacity Planning and Flexibility Requirements................................................32
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CONFIDENTIAL TREATMENT REQUESTED
2.5.1. Capacity Planning....................................................................32
2.5.2. Flexibility..........................................................................33
2.5.3. Acceptance; Delivery.................................................................33
2.6. On-Site Support Requirements..................................................................34
2.7. [Omitted].....................................................................................34
2.8. *.............................................................................................34
2.8.1. Modifications and *s.................................................................34
2.8.2. Scope of *s..........................................................................34
2.8.3. Charges for *s.......................................................................35
2.9. Information...................................................................................35
2.9.1. Applied Internal Databases...........................................................35
2.9.2. Applied New Product Plans............................................................39
2.9.3. Compliance with Securities Laws......................................................39
2.10. Packaging and Transportation..................................................................40
2.10.1. Packaging and Shipment...............................................................40
2.10.2. Bar Coding...........................................................................40
2.10.3. Transportation Requirements..........................................................40
2.11. Payment.......................................................................................41
2.11.1. Invoices; Certain Acceptance Terms...................................................41
2.11.2. *....................................................................................43
2.11.3. Offsets, Debits......................................................................44
2.11.4. Effect of Payment....................................................................44
2.11.5. Reconciliation of Payment Discrepancies..............................................44
2.12. Disaster Recovery Plan........................................................................44
2.13. Performance Constraints.......................................................................45
2.13.1. Constraints..........................................................................45
2.14. Provisions for Reconfiguration or Restocking..................................................45
2.14.1. "Affected Items."....................................................................45
2.14.2. Categories...........................................................................45
2.14.3. "Relabel Items.".....................................................................46
2.14.4. "Reconfigure Items.".................................................................46
2.14.5. "Restock Items.".....................................................................49
2.14.6. Restocking Process and Charges.......................................................49
2.14.7. Provisions as to Restocked or Removed Parts..........................................50
2.14.8. Processing and Payments..............................................................51
* Material has been omitted and filed separately with the Commission.
87
CONFIDENTIAL TREATMENT REQUESTED
3. PRICING FRAMEWORK......................................................................................51
3.1. Contract Prices...............................................................................51
3.1.1. Pricing and Cost Model of Attachment 1...............................................51
3.1.2. Application of Prices................................................................52
3.1.3. Pricing Model........................................................................52
3.1.4. Further Agreements as to Pricing.....................................................53
3.1.5. * Terms..............................................................................53
3.1.6. Adjustment for *.....................................................................57
3.2. Volume........................................................................................58
3.3. Export........................................................................................58
3.4. Currency......................................................................................58
4. TECHNICAL FRAMEWORK....................................................................................59
4.1. Engineering Change Orders.....................................................................59
4.1.1. ECO Procedures.......................................................................59
4.2. Tooling.......................................................................................60
4.2.1. General Tooling Provisions...........................................................60
4.2.2. Current FDS Test Fixtures............................................................61
4.2.3. Future FDS Test Fixtures.............................................................62
4.2.4. General Application..................................................................64
4.3. Design Changes and Resolution.................................................................65
4.4. Process Changes and Resolution................................................................65
4.5. QRD and Special Process Requirements..........................................................65
4.5.1 Critical and Source Specific Materials...............................................65
4.5.2 Supplier's Subcontractors............................................................65
4.5.3. Costs of Supplier Change.............................................................66
4.5.4. Waivers..............................................................................66
4.6. First Articles and Source Inspections.........................................................66
4.7. Applied's Right to Subcontract................................................................66
4.8. Product Support...............................................................................66
4.8.1. Global Technical Support and Product Support.........................................66
4.8.2. Product Support Period...............................................................67
4.8.3. Product Post Term Support Options....................................................67
4.9. Periodic Business Review......................................................................68
4.10. [Omitted].....................................................................................68
4.11. Wind Down Provisions..........................................................................68
* Material has been omitted and filed separately with the Commission.
88
CONFIDENTIAL TREATMENT REQUESTED
5. NONCONFORMANCE.........................................................................................70
5.1. Nonconformance and Corrective Action..........................................................70
5.1.1. [Omitted.]...........................................................................70
5.1.2. Supplier Corrective Action Request...................................................70
5.2. Applied Nonconformance and Corrective Action..................................................70
5.2.1. Items Affected.......................................................................70
5.2.2. Standard Repair Costs................................................................71
5.2.3. Time for Repair......................................................................71
5.2.4. Return of Items......................................................................71
6. SUPPLIER PERFORMANCE PLAN..............................................................................71
7. WARRANTIES AND REMEDIES................................................................................72
7.1. Supplier Warranty.............................................................................72
7.1.1. Basic Warranty.......................................................................72
7.1.2. Services.............................................................................73
7.1.3. Warranty Period......................................................................73
7.1.4. Limitations on Warranty..............................................................73
7.1.5. Third Party OEM Components...........................................................74
7.1.6. Debit Recoveries.....................................................................75
7.1.7. Survival of Warranties...............................................................76
7.2. Applied's Remedies............................................................................76
7.2.1. Failure to Deliver...................................................................76
7.2.2 Defective Items......................................................................77
7.2.3. Cumulative Remedies..................................................................79
7.2.4. Remedies for Other Breach or Default.................................................80
7.2.5 Business Review Process..............................................................80
8. AMENDMENTS AND MODIFICATIONS; CAPTIONS AND CONSTRUCTION; INTERPRETATION................................81
8.1 Amendments and Modifications..................................................................81
8.2 Captions and Construction.....................................................................81
8.3 Interpretation................................................................................81
9. PROVISIONS OF GENERAL APPLICATION......................................................................81
9.1. Independent Contractor........................................................................81
9.2. No Third Party Beneficiary....................................................................82
9.3. Severability..................................................................................82
9.4 Waiver........................................................................................82
9.5. Successors and Assigns........................................................................83
9.6. Execution.....................................................................................83
89
CONFIDENTIAL TREATMENT REQUESTED
10. REPRESENTATIONS AND WARRANTIES OF THE PARTIES..........................................................83
11. ACCEPTANCE AND EXECUTION...............................................................................84
90
CONFIDENTIAL TREATMENT REQUESTED
APPLIED MATERIALS CONFIDENTIAL
EXHIBIT 1
APPLIED MATERIALS STANDARD TERMS AND CONDITIONS OF PURCHASE
Table of Contents
1. ACCEPTANCE............................................................................................. 1
2. CONFIDENTIAL INFORMATION............................................................................... 1
3. INTELLECTUAL PROPERTY RIGHTS AND OWNERSHIP THEREOF..................................................... 1
4. [OMITTED].............................................................................................. 1
5. PRESS RELEASES/PUBLIC DISCLOSURE NOT AUTHORIZED........................................................ 1
6. PRICING................................................................................................ 2
7. DUTY DRAWBACK AND COUNTRY OF MANUFACTURE............................................................... 3
8. OZONE DEPLETING CHEMICAL ("ODC")....................................................................... 3
9. COMPLIANCE WITH LAWS................................................................................... 4
10. EQUAL EMPLOYMENT OPPORTUNITY........................................................................... 4
11. APPLICABLE LAW, CONSENT TO JURISDICTION AND VENUE...................................................... 4
12. NOTICE OF LABOR DISPUTES............................................................................... 5
13. TAXES.................................................................................................. 5
14. [OMITTED].............................................................................................. 5
15. INSURANCE.............................................................................................. 5
16. CERTAIN EVENTS AND NOTICES; FINANCIAL INFORMATION...................................................... 6
17. ASSIGNMENT AND SUCCESSION..............................................................................11
18. GRATUITIES.............................................................................................14
19. [OMITTED]..............................................................................................14
20. [OMITTED]..............................................................................................14
21. DISCLAIMERS AND LIMITATIONS OF LIABILITY AS TO EXCLUDED DAMAGES........................................14
22. INDEMNITY..............................................................................................15
23. FORCE MAJEURE..........................................................................................18
24. CHANGES................................................................................................18
25. TERMINATION FOR DEFAULT; OTHER REMEDIES................................................................19
26. TERMINATION FOR CONVENIENCE............................................................................22
27. POST-TERMINATION OBLIGATIONS...........................................................................24
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CONFIDENTIAL TREATMENT REQUESTED
Exhibit 1
APPLIED MATERIALS STANDARD TERMS AND CONDITIONS OF PURCHASE
1. Acceptance.
The terms and conditions stated in these Applied Materials Standard Terms
and Conditions of Purchase are an integral part of the Global Supply Agreement
between the parties to which this Exhibit 1 is attached ("Agreement") and which
covers the purchase of Items, as defined in such Agreement. Defined terms used
herein shall have the meanings ascribed to them in other provisions of the
Agreement unless otherwise defined in this Exhibit 1. Additional or different
terms or conditions of purchase will not be applicable unless accepted in
writing by a duly authorized representative of each of Supplier and Applied.
2. Confidential Information.
(a) Supplier and Applied, respectively, will comply with each NDA executed
by Supplier or Applied, as applicable, with or for the benefit of the other,
whether now or hereafter in effect; subject, however, to the provisions of the
Agreement as to priority among conflicting agreements.
(b) The obligations of the parties with respect to Confidential
Information under and for purposes of the Agreement are governed by the IPA.
Such obligations include those arising pursuant to Sections 2.9.1.1.D and 2.9.2
of the Agreement and Article 5(a) of this Exhibit 1.
3. Intellectual Property Rights and Ownership Thereof.
Rights of the parties in, ownership of, and other matters relating to
intellectual property under and for purposes of the Agreement shall be governed
by the IPA.
4. [Omitted]
5. Press Releases/Public Disclosure Not Authorized.
(a) The Agreement and Related Agreements contain Confidential Information
of Applied and Supplier, and such Confidential Information is protected as set
out in the IPA. As part of their respective obligations under the IPA as to
Confidential Information, neither Supplier nor Applied shall disclose to any
third party, including any governmental authority, or publicly release the terms
of the Agreement or of any Related Agreement without the prior written approval
of the other party; provided, however, that subject to its compliance with this
Article 5(a), either party may make any public disclosure (which shall include
disclosure in the course of litigation, as well as under other applicable law,
rule or regulation) it believes in good faith that it is required to make by
applicable law, rule or regulation. The disclosing party: shall notify the other
party in advance of such a disclosure or release; shall take commercially
reasonable efforts (at least equal to the efforts such party takes to protect
the confidentiality of its own information) to protect the confidentiality of
the Confidential Information of the other party in the Agreement, which shall
include deleting the financial terms and other Confidential Information of the
other party in the Agreement from (or requesting such deletion or equivalent
protection or confidential
92
CONFIDENTIAL TREATMENT REQUESTED
treatment where approval by a court or governmental authority is required)
disclosure or public release when permitted by applicable law, rule or
regulation. Section 4.1(v) of the IPA may also apply in regard to disclosures.
(b) Further, and without limiting the foregoing provision, Supplier and
Applied, respectively, will not, without the prior written approval of the
other, issue any press release, advertising, publicity or public statement or in
any way engage in any other form of public disclosure that indicates the
relationship of the parties (except for disclosures as may be made under, and in
compliance with, requirements applicable under Article 5(a) and disclosure of
the existence of the Agreement), or implies any endorsement by Applied of
Supplier or Supplier's products or services.
(c) Any requests or notices under this Article 5 must be made in writing
and submitted to the person(s) designated to receive notices under Section 1.2.2
of the Agreement.
6. Pricing.
(a) *
(b) In no event shall Supplier quote, or shall Applied receive, prices
that would be unlawfully discriminatory under any applicable law. *
(c) A "Covered Product" is a good sold by Supplier (i) that is not an *
form, fit and function to an Item under this Agreement.
7. Duty Drawback and Country of Manufacture.
(a) Duty Drawback
Supplier will provide Applied, or any agent designated by Applied for this
purpose, with all U.S. Customs entry and shipment data concerning applicable
Items that Applied determines is necessary for Applied to qualify for duty
drawback ("Duty Drawback Information"). Such data shall include information and
receipts for duties paid, directly or indirectly, on all Items that are either
imported or contain imported Piece Parts. Such data shall further include serial
numbers, unique part numbers, lot numbers and any other data that will assist
Applied in identifying imported Items sold to Applied. This data will be
provided to Applied within thirty (30) days after the end of each calendar
quarter and shall be accompanied by a completed Certificate of Delivery of
Imported Merchandise or Certificate of Manufacture and Delivery of Imported
Merchandise (Customs Form 331) as promulgated pursuant to U. S. 19 CFR 191.
(b) Country of Manufacture
Supplier shall provide Applied with country of manufacture data for each
Item Supplier provides to Applied. This data shall identify each Item by Applied
part number and shall list the corresponding country of manufacture for the
Item. This data shall be provided to Applied
* Material has been omitted and filed separately with the Commission.
93
CONFIDENTIAL TREATMENT REQUESTED
within fifteen (15) days after the end of each month and as requested by
Applied. If Supplier is a United States manufacturer of any Item supplied to
Applied, as defined by United States Customs regulations, Supplier shall, on an
annual basis and in accordance with Applied's written instructions, provide
Applied with a signed manufacturer's affidavit.
(c) All information to be provided to Applied under this Article 7 shall
be sent to the attention of:
Manager, Customs Compliance
Applied Materials
0000 Xxxxx Xxxx.
X/X 0000
Xxxxx Xxxxx, XX 00000
or any agent designated by Applied in writing to Supplier.
8. Ozone Depleting Chemical ("ODC").
In the event that the Items are manufactured with or contain Class I ODCs,
as defined under Section 602 of the Federal Clean Air Act (42 USC Section 7671a)
and implementing regulations, or if Supplier believes that such a condition
exists with respect to any one or more Items, Supplier shall notify Applied
prior to performing any further work with respect to such Items pursuant to the
Agreement. Applied shall have the right to: (a) terminate the Agreement as to
such Items, upon notice and without penalty, and without application of the
termination procedures of Articles 25 and 26; and, in addition, (b) return any
and all Items delivered that are found to contain or have been manufactured with
Class I ODCs. Supplier shall pay (or if already paid by Applied, then reimburse
Applied for) all costs of shipping, special handling, and returning, for labor
to remove and replace, and for the purchase price paid by Applied as to such
Items.
9. Compliance With Laws.
Supplier represents and warrants that no law, rule or ordinance of the
United States, any state, any other governmental agency, or any country has been
or will be violated in manufacturing or supplying the Items purchased, or to be
purchased, under the Agreement.
10. Equal Employment Opportunity.
Supplier represents and warrants that it is in compliance with Executive
Order 11246, any amending or supplementing Executive Orders and implementing
regulations, unless exempted.
11. Applicable Law, Consent to Jurisdiction and Venue.
(a) THE AGREEMENT SHALL BE GOVERNED BY, SUBJECT TO, AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, EXCLUDING
CONFLICTS OF LAW RULES. THE PARTIES AGREE THAT ANY SUIT ARISING OUT OF THE
AGREEMENT FOR ANY CLAIM OR CAUSE OF ACTION, WHETHER IN CONTRACT, IN TORT,
STATUTORY, AT LAW OR IN EQUITY, SHALL EXCLUSIVELY BE
94
CONFIDENTIAL TREATMENT REQUESTED
BROUGHT IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
CALIFORNIA, THE SUPERIOR COURTS OF SANTA XXXXX COUNTY, CALIFORNIA, THE UNITED
STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS, AUSTIN DIVISION, OR THE
TEXAS STATE DISTRICT COURTS OF XXXXXX COUNTY, TEXAS, PROVIDED THAT SUCH COURT
HAS JURISDICTION OVER THE SUBJECT MATTER OF THE ACTION. EACH PARTY AGREES THAT
EACH OF THE NAMED COURTS SHALL HAVE PERSONAL JURISDICTION OVER IT AND CONSENTS
TO SUCH JURISDICTION. EACH PARTY FURTHER AGREES THAT VENUE OF ANY SUIT ARISING
OUT OF THE AGREEMENT IS PROPER AND APPROPRIATE IN ANY OF THE COURTS IDENTIFIED
ABOVE.
(b) WITH RESPECT TO TRANSACTIONS TO WHICH THE 1980 UNITED NATIONS
CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS WOULD OTHERWISE
APPLY, THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THE AGREEMENT, INCLUDING
THESE TERMS AND CONDITIONS, SHALL NOT BE GOVERNED BY THE PROVISIONS OF THE 1980
UNITED NATIONS CONVENTION OF CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS.
APPLICABLE LAWS OF THE STATE OF CALIFORNIA, INCLUDING THE UNIFORM COMMERCIAL
CODE AS ADOPTED THEREIN (BUT EXCLUSIVE OF SUCH 1980 UNITED NATIONS CONVENTION),
SHALL GOVERN THE AGREEMENT AND ALL TRANSACTIONS RELATED TO THE AGREEMENT (EXCEPT
TO THE EXTENT THE PROVISIONS OF SUCH APPLICABLE LAWS HAVE BEEN MODIFIED OR
SUPERSEDED BY EXPRESS PROVISIONS OF THIS AGREEMENT).
12. Notice of Labor Disputes.
Whenever an actual or potential labor dispute, or any government embargo
or regulatory or tribunal proceedings relating thereto, is delaying or threatens
to delay the timely performance of the Agreement, Supplier will immediately
notify Applied of such dispute and furnish all relevant details, regardless of
whether said dispute arose directly or indirectly as a result of an actual or
potential dispute within the Supplier's sub-tier supply base or Supplier's own
operations.
13. Taxes.
(a) Supplier shall not charge or collect sales or use tax for Items for
which an applicable sales and use tax exemption or resale certificate is
provided by Applied. For all other Items, Supplier will include all applicable
federal, state, and local taxes, where applicable, on Supplier's invoices, or
(when payment is made under Applied's ERS Program) in Pro Formas, stated as a
separate item.
(b) Supplier may request from Applied information or documentation of
facts relating to Supplier's periodic application for property tax abatement or
tax reduction under rules regarding a "Texas Freeport Exemption"; Applied will
provide reasonable cooperation and assistance to Supplier in responding to
requests by Supplier for this purpose through provision of information or
completion of documentation to support Supplier's application(s) for such tax
benefits.
14. [Omitted]
15. Insurance.
95
CONFIDENTIAL TREATMENT REQUESTED
(a) Supplier shall maintain (i) comprehensive general liability insurance
covering bodily injury, property damage, contractual liability, products
liability and completed operations, (ii) Worker's Compensation and employer's
liability insurance, and (iii) auto insurance, all in such amounts as are
necessary to insure against the risks to Supplier's operations.
(b) *, Supplier will obtain and keep in force, insurance of the types
and in the amounts set forth below:
Insurance *
Worker's Compensation *
Employer's Liability *
Automobile Liability * per occurrence
Comprehensive General Liability
(including Products Liability) * per occurrence
Umbrella/Excess Liability * per occurrence
All policies must be primary and non-contributing and shall include
Applied as an additional insured. Supplier will require, and will use
commercially reasonable efforts to verify, that each of its subcontractors
carries at least the same insurance coverage and minimum limits of insurance as
Supplier is required to carry pursuant to the Agreement. Supplier shall notify
Applied at least thirty (30) days prior to the cancellation or implementation of
any material change in the foregoing policy coverage that would affect Applied's
interests. Upon request, Supplier shall furnish to Applied as evidence of
insurance a certificate of insurance stating that the coverage would not be
canceled or materially altered without thirty (30) days prior notice to Applied
or, as to cancellation for failure to pay premiums, without ten (10) days prior
notice to Applied.
16. Certain Events and Notices; Financial Information.
16.1 Certain Events and Notices.
(a) As used in this Exhibit 1, a "Notice Event" means any of the
following: (i) a change in the person or persons with power to direct, or to
cause the direction of, management or policies of Supplier or of any Guarantor;
(ii) a change, however such occurs (including, by way of example, sale,
purchase, merger, or business combination), in the ownership of capital stock of
Supplier or of any Guarantor for which notice is to be given under Article
16.1(b) below; (iii) a sale or disposition of all or substantially all of the
assets of Supplier, or sale or disposition of a line of business of Supplier or
of all or substantially all of the assets of Supplier relating to or used in a
line of business, whether or not the Agreement is assigned; or (iv) a sale or
disposition of all or substantially all of the assets of a Guarantor, or a sale
or disposition of a line of business of a Guarantor or of all or substantially
all the assets of a Guarantor relating to or used in a line
* Material has been omitted and filed separately with the Commission.
96
CONFIDENTIAL TREATMENT REQUESTED
of business, which sale or disposition results in (or will result in) a material
change in the nature of the business of such Guarantor or in a material adverse
change in the financial condition of the Guarantors as a whole.
(1) A Notice Event may result from a single transaction or from a series
of related transactions. Transactions with a single person, with a
group of persons covered by Section 13(d)(3) of the Securities
Exchange Act of 1934 (the "Exchange Act"), or with persons under
common control shall be considered a single transaction.
(2) A "Public Offering Event" is the issuance by Supplier or any
Guarantor of capital stock to the public in an underwritten public
offering of capital stock registered pursuant to a registration
statement on Form S-1 with the federal Securities and Exchange
Commission.
(b) Supplier shall provide (and shall cause an affected Guarantor to
provide) notice to Applied in accordance with Section 1.2.2 of the Agreement as
to matters provided for by this Section 16.1(b).
(1) If a Notice Event will result from a transaction to which Supplier
or any Guarantor is a party, Supplier shall give (and shall cause
the affected Guarantor to give) notice to Applied, in accordance
with Section 1.2.2 of the Agreement, (i) except when such notice
would violate applicable securities laws or regulations or another
obligation of confidentiality, (x) at least five (5) Business Days
prior to the date of actual public disclosure of the transaction or,
if earlier, the date such public disclosure should have been made if
Supplier or the affected Guarantor, as applicable, were a company
with publicly traded securities, but (y) in any event no later than
twenty-one (21) calendar days prior to the closing or consummation
of such transaction, and (ii) of the consummation or closing of such
transaction, at the time of such closing or consummation. The Notice
Event shall not occur, however, until the closing or consummation of
the transaction(s) or event(s) that cause or will result in the
Notice Event. If the giving of notice to Applied under this Article
16.1(b)(1) is restricted by an obligation of confidentiality,
Supplier (or such Guarantor) shall make a good faith effort to
obtain approval or consent to give the notice provided for in this
Article 16.1(b)(1).
(2) If securities of Supplier or any Guarantor are or are to be the
subject of a Public Offering Event, Supplier shall give (and shall
cause an affected Guarantor to give) Applied notice of (and
concurrently with) each of the following: the filing of a
registration statement with respect to any such securities; and a
registration statement becoming effective as to any securities of
Supplier or any Guarantor.
(3) Supplier shall, in addition to notices provided for in Article
16.1(b)(1) and (2), give (and shall cause an affected Guarantor to
give) notice to Applied in accordance with Section 1.2.2 of the
Agreement of each of the following events, occurrences or
transactions, each of which is a Notice Event:
97
CONFIDENTIAL TREATMENT REQUESTED
(i) Notice shall be given promptly upon the occurrence of any
Notice Event of a type covered by Article 16.1(a)(i), (iii) or (iv)
above.
(ii) If Supplier or a Guarantor does not have capital stock
registered with the federal Securities and Exchange Commission, a
Notice Event occurs upon, and the affected company shall give
Applied notice promptly upon (a) the acquisition of ownership of ten
percent (10%) or more of the outstanding capital stock of such
company by any person that is a Competitor (as defined below) of
Applied, and also promptly upon (b) the acquisition of ownership of
twenty-five percent (25%) or more of the outstanding capital stock
of such company by any person, whether or not a Competitor of
Applied.
(iii) If any class of capital stock of Supplier or any
Guarantor is registered with the federal Securities and Exchange
Commission, a Notice Event occurs (with respect to the company
having registered stock) upon, and the affected company shall give
Applied notice promptly upon, (a) the acquisition of ownership of
five percent (5%) or more of the outstanding capital stock of each
such a class by a person that is a Competitor of Applied in a
transaction to which Supplier, any Guarantor, or any Affiliate of
Supplier or a Guarantor is a party, and (b) (x) receipt of a
Schedule 13D pursuant to the Exchange Act, or (y) Supplier or any
Guarantor having actual knowledge of, any acquisition of ownership
of five percent (5%) or more of the outstanding capital stock of
such a registered class. Notice under this clause (b) shall be given
(where notice is received by Supplier or the affected Guarantor
through the receipt of a Schedule 13D) by forwarding a copy of such
schedule to Applied.
(iv) If any capital stock of any class of Supplier or any
Guarantor is registered with the federal Securities and Exchange
Commission, the affected company shall give Applied notice of the
occurrence of any event reportable pursuant to Item 1 of Form 8-K as
in effect pursuant to the Exchange Act by notice given concurrently
with filing of the report or announcement of such event.
(c) The following provisions and definitions are part of this Article
16.1:
(1) In addition to notices provided for above, Supplier shall give (and
shall cause each Guarantor to give) to Applied, on the 15th day of
each January and July during the term of this Agreement, a schedule
showing the name of each owner of five percent (5%) or more of the
ownership of capital stock of Supplier or any Guarantor as of
January 1 and July 1 of such year. This requirement shall apply only
to those companies that do not have publicly traded securities.
(2) In compliance with the confidentiality obligations of the IPA,
Supplier shall not provide Confidential Information of, or received
from, Applied to any third party in connection with a Notice Event
or the negotiation or evaluation of same, without Applied's prior
written consent (and upon such conditions as Applied may require).
Information received by Applied from Supplier or a Guarantor
pursuant to Article 16.1(b) and Article 16.1(c)(1) shall be deemed
Confidential
98
CONFIDENTIAL TREATMENT REQUESTED
Information of Supplier under Article 4 of the IPA, subject to the
exclusions of Section 4.1 of the IPA.
(3) References to "capital stock" shall include any equity interest,
ownership interest or like right or interest, such as interests of
members in a limited liability company. References to "ownership"
shall include legal or beneficial ownership or the right to vote.
(4) A "Competitor" of Applied means (I) any person identified to
Supplier by Applied as a competitor in any of the Fields of Use (as
specified below) through written notice given in accordance with
Section 1.2.2 of the Agreement, if Applied elects to provide such a
notice or (II) any person that an executive officer of Supplier
knows is a competitor of Applied in any Field of Use. The
information in a notice from Applied under this Article
16.1(c)(4)(I) is Confidential Information of Applied, subject to the
exclusions of Section 4.1 of the IPA. The "Fields of Use" applicable
to this definition of Competitor are the design, manufacturing and
marketing of: (a) semiconductor wafer fabrication equipment, (b)
wafer inspection and metrology equipment, (c) flat panel display
fabrication equipment, (d) wafer fabrication factory control
software, (e) toxics abatement or recycling equipment, or (f) thin
film application processes.
(5) "Affiliate" means any person that directly or indirectly controls,
is under common control with, or is controlled by, Supplier or any
Guarantor.
(6) "Promptly" means, for purposes of this Article 16.1 only, not later
than the third Business Day after the occurrence of the event or
transaction for which notice is to be given.
(7) The following are excluded from "Notice Event":
a) The acquisition of ownership of capital stock by a person that, on
the Effective Date, owns 5% or more of the outstanding capital stock
of any class of Supplier or of the affected Guarantor, unless such
acquisition constitutes or results in another Notice Event.
b) A change in corporate form of Supplier or a Guarantor that does not
alter the ownership, management or control of the Supplier or
Guarantor, such as conversion from a corporation to a limited
liability company through a transaction in which ownership and
control are maintained as such existed in a corporate form prior to
the conversion.
c) A distribution of all outstanding capital stock of Supplier or KGI
to the shareholders of KHC in proportion to their ownership in KHC.
d) A merger, consolidation or business combination of Supplier with or
into, or a sale of all outstanding stock of Supplier to, another
99
CONFIDENTIAL TREATMENT REQUESTED
entity that is wholly owned (directly or indirectly) by KHC that
does not cause or result in a material change in the nature of the
business conducted by Supplier prior to such event or in a material
adverse change in the management or operations of Supplier.
e) A merger, consolidation or business combination of KGI with or into,
or a sale of all outstanding stock of KGI to, another entity that is
wholly owned (directly or indirectly) by KHC that does not cause or
result in a material change in the nature of the business conducted
by KGI prior to such event or in a material adverse change in the
financial condition of the Guarantors as a whole.
16.2 Financial Information of Supplier and Guarantors.
(a) Supplier will provide Applied with financial information, and shall
cause KHC to provide to Applied financial information, as follows: (i) within 90
days after the end of each fiscal year, and within 45 days after the end of each
fiscal quarter, financial statements for such year or period as to KHC, to
include the balance sheet, statement of income, and statement of cash flow (on a
consolidated basis with its subsidiaries) of KHC, such annual (but not
quarterly) financial statements to have been audited by independent certified
public accountants of recognized national standing; and (ii) from time to time
such additional financial information as Applied may reasonably request. All
financial statements of KHC shall be prepared on the basis of generally accepted
accounting principles in effect in the United States of America ("GAAP"),
consistently applied. Applied's request for financial information from Supplier
or from KHC to be provided through Applied's Form F-15 shall be deemed a
reasonable request under clause (ii) of this Article 16.2(a) when Applied has
determined that it requires information in addition to that contained in the KHC
financial statements referred to in Article 16.2(a)(i). Information on Form F-15
is not required to be presented in compliance with GAAP.
(b) Supplier agrees to keep true, complete and accurate books and records,
of Supplier's costs and other information relevant to price and cost reduction
provisions of the Agreement and xxxxxxxx by Supplier to Applied under the
Agreement. Supplier will provide:
(1) upon request by Applied's Supply Chain Management organization or
successor organization of Applied performing the functions of such
organization ("SCM"), made on a case by case basis, a complete
costed xxxx of materials for those FDS(s) delivered to Applied that
are specified in the applicable request(s), to include detailed
Piece Part costs at Supplier's Standard Cost of Materials, Current
Average Cost of Materials, or other Piece Part price, in each case
as applicable to the Piece Parts in such xxxx of materials, to be
provided to Applied's SCM organization or to such other recipient at
Applied as specifically identified in instructions given to Supplier
by Applied's SCM through the Supply Account Team Lead;
(2) upon request by Applied's SCM, access to Supplier's books and
records (at Supplier's facilities and during regular business hours)
to determine the accuracy of Supplier's Piece Part prices charged to
Applied and, as applicable, Supplier's
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CONFIDENTIAL TREATMENT REQUESTED
adjustments thereto under cost reduction provisions of the Agreement
(including Sections 3.1.5 and 3.1.6); and
(3) copies of its books and records (or access to its books and
records), upon request and upon reasonable notice, for review or
audit during regular business hours (to include access to original
records or data) to reconcile differences between the parties as to
xxxxxxxx and payments. At the conclusion of a review or audit as to
billing and payment differences, Applied shall provide to Supplier a
report with reasonably detailed supporting information from
Applied's books and records to support the conclusions reached with
respect to such differences.
(c) Upon mutual agreement of the parties after request by Applied, Applied
(or independent nationally recognized accountants designated by Applied and
reasonably acceptable to Supplier) shall have the right, at Applied's expense
and upon reasonable notice, to conduct audits of all of Supplier's books and
records and of any financial statements or other information provided by
Supplier. This Article 16.2(c) does not limit Applied's rights under Article
16.2(b).
17. Assignment and Succession.
(a) The Agreement shall be binding upon, and inure to the benefit of, each
of the parties and its respective successors and permitted assigns. Neither
Supplier nor Applied shall assign, transfer to or permit to vest in another
person the Agreement, or its rights, interests and obligations under the
Agreement, in whole or in part, whether voluntarily or by operation of law, (i)
without the express, prior written consent of the other party, or (ii) except as
permitted by the following provisions of this Article 17, as applicable.
(b) Applied may assign the Agreement in whole or in part to any other
person(s), as follows:
(i) Assignment in whole or in part is permitted if Applied remains
obligated, either primarily or equally with the assignee, for
performance of the obligations assigned by Applied;
(ii) Assignment in whole or in part is permitted in connection with, or
to effect, a change in manufacturing operations resulting from an
agreement between Applied and a Subassembler under Section 4.7 of
the Agreement, or to accomplish a change in manufacturing of any
Applied Systems relating to such an agreement;
(iii) Assignment in whole or in part is permitted in connection with, or
to effect, a sale or transfer of assets used in manufacturing
operations of Applied Systems, where such occurs to facilitate or as
part of any bona fide change in the organization or structure of the
manufacturing or integration of Applied Systems, which may include
manufacture or integration by a third party, and which may be
related to changes as to any product line(s), type(s) or model(s) of
Applied System(s), line(s) of business of Applied, or geographic or
other reorganization; or
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CONFIDENTIAL TREATMENT REQUESTED
(iv) Assignment in whole or in part is permitted in connection with, or
to effect, arrangements or agreements for outsourcing, contract,
turnkey or similar manufacturing, or for modular build, of Applied
Systems or assemblies or subassemblies, where such occurs to
facilitate (or as part of) any bona fide change in the organization
or structure of the manufacturing or integration of Applied Systems,
which may include manufacture or integration by a third party, and
which may be related to changes as to any product line(s), type(s)
or model(s) of Applied System(s), line(s) of business of Applied, or
geographic or other reorganization.
An assignee from Applied under an assignment made by Applied pursuant to this
Article 17(b) may not further assign, either in whole or in part, the Agreement
(or the portion of the Agreement assigned to the assignee) without the prior
written consent of Supplier to such subsequent assignment.
(c) A transfer or vesting of the Agreement, and rights and obligations
hereunder, in whole but not in part, in another person in the event of or
incident to a merger, consolidation or business combination to which Applied is
a party shall be permitted.
(d) Supplier may assign the Agreement, in whole or in part, to any other
person, and the Agreement may be transferred to, or vest in, another person, in
whole but not in part, by reason of a merger, consolidation or business
combination to which Supplier is a party, as follows:
(i) Assignment, in whole or in part, is permitted if, after notice from
Supplier under Article 17(f), Applied (x) has determined, in the
reasonable discretion of Applied, that: (A) such person is
reasonably likely to qualify, or is then qualified, as a "preferred"
supplier under the then-current standards of Applied, without
prejudice to subsequent assessments during the term of the
Agreement; (B) such person and the terms of the assignment do not
present an adverse risk to Applied with respect to: manufacturing
process, delivery cycle time, product pricing, quality, or financial
responsibility or condition; (C) such person and the terms of the
assignment do not present an adverse risk to Applied with respect to
protection, confidentiality, misuse or misappropriation of, access
to, or control over confidential or proprietary information, trade
secrets and like property of Applied (or in which it has an
interest); (D) such person and the terms of the Assignment do not
present an adverse risk to Applied that a Competitor of Applied (or
an Affiliate of such a Competitor (as the terms Competitor and
Affiliate are defined in Article 16.1(c)) would be or become a party
to, or in control of a party to, the Agreement or the Related
Agreements; and (y) has issued its written consent based on such
determination. In its assessment as to financial responsibility and
condition under Clause B above, Applied may consider whether the
Performance Guaranty Agreement will continue in effect as to the
Agreement (or portion assigned).
(ii) Transfer or vesting, in whole but not in part, is permitted in the
event of a merger, consolidation or business combination of Supplier
with or into, or a sale of all
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CONFIDENTIAL TREATMENT REQUESTED
outstanding stock of Supplier to, another entity that is wholly
owned (directly or indirectly) by KHC, or as part of a transfer of a
substantial part of the assets of Supplier to a third party that is
wholly owned (directly or indirectly) by KHC, provided that a
transaction under this Article 17(d)(ii) does not cause or result in
a material change in the nature of the business conducted by
Supplier prior to such transaction or a material adverse change in
the management or operations of Supplier.
(e) Any assignee or successor of Applied or Supplier shall also assume, be
bound by and be (or become) a party to and obligated under this Agreement, the
IPA and other Related Agreements (as such agreements are then in effect), either
in whole (if the permitted assignment or other transaction is as to the
Agreement in whole), or in part (if in part).
(f) Each party shall endeavor to provide the other with prior written
notice and, if applicable, a request for consent with respect to a transaction
to which this Article 17 applies, and a brief description of the transaction and
of the assignee or transferee at least seventy-five (75) days before the closing
of such transaction. Further, each party shall give the other party, at least
fifteen (15) days prior to the closing of such a transaction, written notice of,
and, if applicable, a request for consent as to, any proposed or permitted
transaction to which this Article 17 applies and a brief description of the
transaction and of the assignee or transferee of such transaction, if not
previously provided. Failure to give such notice shall not, by itself, affect
the validity of such assignment or transfer as between the parties thereto.
(g) In the event of, and to the extent of, an assignment, merger or other
transaction to which Supplier is a party with respect to the Agreement of a type
described in Article 17(d), Supplier shall maintain during the period prior to
the assignment, merger or such other transaction becoming effective the supply
of Item(s) without interruption or delay and without breach of other provision
of the Agreement. An assignment or transfer of this Agreement, or of obligations
hereunder, shall not apply to, or relieve an assigning or transferring party of,
the obligations, liabilities and debts accrued, incurred or existing at the date
of assignment or transfer or subsequently accruing, arising, or existing under
or in connection with transactions between the parties prior to such date, but
the assigning or transferring party shall remain primarily and directly
obligated and liable for such obligations, liabilities and debts.
(h) Any assignment, merger or other transaction subject to this Article 17
that is not made in compliance with this Article 17, shall, at the option of the
party (Applied or Supplier, as the case may be) that is not a party to such
assignment, merger or other transaction, be deemed a breach of and a default
under the Agreement and not be binding upon that party. The party, Applied or
Supplier, exercising such option to declare breach and default shall give
written notice of such exercise to the other party, and shall not be required to
proceed with any period of review or cure under Article 25, however, the party
so in breach shall continue to be bound by, and shall perform and observe all
its obligations applicable under this Agreement through the conclusion of a Wind
Down Period, if applicable, and thereafter under provisions that survive.
(i) Assignment of this Agreement in part shall mean that all rights,
interests and obligations of the party assigning and all terms, provisions and
conditions of the Agreement shall be assigned to and assumed by (or apply to)
the assignee with respect to the Item(s), product
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CONFIDENTIAL TREATMENT REQUESTED
line(s), type(s) or model(s) of Applied System(s) or FDSs, or line(s) of
business to which the assignment applies (the "Assigned Products").
Notwithstanding the foregoing, (i) only those pricing provisions (whether set
forth in Attachment 1 or elsewhere in the Agreement) applicable to Assigned
Products affected by the assignment shall be assigned to the assignee and (ii)
the liability of Supplier to Applied and any assignee(s) of Applied * below
shall be apportioned pursuant to the assignment among Applied and each assignee
* liability of Supplier to Applied and such assignee(s) *. In the event of
an assignment, the parties shall cooperate in the implementation of operational
processes and procedures to effect the assignment.
18. Gratuities.
Supplier represents and warrants that it has not offered or given and will
not offer or give any gratuity to induce any person or entity to enter into,
execute or perform the Agreement or any other agreement between Supplier and
Applied. Upon Applied's written request, an officer of Supplier shall certify in
writing that Supplier has complied with and continues to comply with this
Article. Any breach of this representation and warranty shall be a material
breach of the Agreement and any other agreement between Applied and Supplier.
19. [Omitted]
20. [Omitted]
21. Disclaimers and Limitations of Liability as to Excluded Damages.
(a) As used in this Article 21, "Excluded Damages" means all special,
indirect, punitive, consequential or contingent damages that arise from or
relate to the Agreement.
(b) The exclusions and limitations of this Article 21 as to the
liabilities of Applied * for Excluded Damages are expressly made a part of the
Agreement and are accepted by each party.
(c) Subject to the exceptions provided in Article 21(e), Applied EXCLUDES
all liability to Supplier for Excluded Damages, whether or not Applied has been
advised of the possibility of such Excluded Damages.
(d) *:
(e) An exclusion or limitation, as applicable, that is provided by this
Article 21 shall only apply to Excluded Damages and further shall not apply to
damages of any type, obligations of a party, or claims or liabilities against a
party that:
(i) arise from or relate to matters covered by an indemnity under
Article 22 of this Exhibit 1;
(ii) arise from or relate to the IPA, or matters covered by an indemnity
under the IPA; or
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
(iii) arise from or relate to, or are for, personal injury, death, or
damage to or loss of tangible property.
22. Indemnity.
(a) Supplier's Indemnity Obligation. In the event a third party brings a
claim or asserts liability against Applied alleging that Items or the work
product of Services ("Work Product"), as provided by Supplier under this
Agreement, or the manufacture, use, sale or offer for sale of such Items or Work
Product by Applied or the use of same by Applied's customers infringes,
misappropriates or otherwise violates third party IP Rights (an "Applied Third
Party Claim"), SUPPLIER SHALL DEFEND, INDEMNIFY AND OTHERWISE HOLD HARMLESS
APPLIED against such Applied Third Party Claim, including the payment of
reasonable fees and expenses of any attorneys and other professionals employed
by Applied in accordance with Article 22(f) in defending the Applied Third Party
Claim and the payment of any judgment finally awarded against Applied or the
payment of any settlement amount agreed to by Supplier to settle such Applied
Third Party Claim. Supplier will not be liable for any settlement of an Applied
Third Party Claim made by Applied without Supplier's consent, except as provided
in Article 22(h) below.
(b) Exceptions to Supplier's Indemnity Obligation. Supplier's obligations
pursuant to Article 22(a) will not apply to any claims or assertions of
liabilities if: (x) Supplier would not otherwise be liable for inducing or
contributing to infringement, misappropriation or other violation; and (y) the
infringement, misappropriation or other violation: (1) was unavoidably caused by
Supplier's compliance with specifications or designs furnished and required by
Applied or by Applied's non-compliance with Supplier's prior written advice or
warning of a possible and likely infringement, misappropriation or other
violation relating to such compliance, or (2) arises from a combination not
performed by Supplier of Items and/or Work Product with other equipment,
hardware, software, materials or components not provided by Supplier and any
such claim or assertion of infringement, misappropriation or other violation
would not arise but for such combination, or (3) is a direct result of
Supplier's combination of components mandated by Applied.
(c) *
(d) Reduction of Indemnification Amounts. The amount that any party is or
may be required to pay to or on behalf of any other person pursuant to an
indemnity under this Article 22 shall be reduced (including retroactive
reduction or reimbursement) by (i) any amounts received by an indemnified party
from an insurance carrier or paid and resolved by an insurance carrier on behalf
of the insured indemnified party (in a manner that results in no further
liability to the indemnified person), in either case net of any applicable
premium adjustment, retrospectively rated premium, deductible, retention, cost
or reserve paid or held by or for the benefit of the insured, or (ii) any other
amounts or tax benefits actually recovered by or on behalf of such indemnified
person in reduction of such payment. If an indemnified person shall have
received the payment required by this Article 22 from an indemnifying party and
shall subsequently actually receive insurance proceeds or other amounts or tax
benefits in respect of such payment
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
as specified above, then such indemnified person shall pay to such indemnifying
party a sum equal to the amount of any such double recovery actually received.
This provision shall not, however, operate to relieve a party of liability to an
insurer subrogated to the rights of the insured.
(e) Indemnified Party's Obligations. A party seeking indemnification (i)
shall give the other party prompt written notice of any Applied Third Party
Claim or Supplier Third Party Claim, as applicable (each a "Third Party Claim"),
that may give rise to any indemnification obligation under this Article 22,
together with the estimated amount (if reasonably available) of such Third Party
Claim, and (ii) shall provide reasonable cooperation and assistance to the
indemnifying party in the defense and/or settlement of such claim, including, to
the extent reasonably requested, the retention, and the provision to the
indemnifying party (which shall pay the reasonable costs incurred in providing
or collecting such records) of records and information reasonably relevant to
such Third Party Claim. Failure to give such notice or to provide the
cooperation provided for herein shall not affect the indemnification obligations
hereunder in the absence of material prejudice to the indemnifying party. Except
for the foregoing obligation to pay the reasonable costs incurred in providing
or collecting records, the indemnifying party shall not be liable under this
Article 22 for any internal personnel costs or expenses (including opportunity
costs) suffered or incurred by the indemnified party in connection with a Third
Party Claim.
(f) Selection of Counsel. The indemnifying party shall have the right to
conduct and control the defense and, as herein provided, settlement (at its own
expense) of any such Third Party Claim through counsel of its own choosing by so
notifying the party seeking indemnification within thirty (30) calendar days of
the indemnifying party's first receipt of notice of the Third Party Claim;
provided, however, that any such counsel shall be reasonably satisfactory to the
party seeking indemnification. If the indemnifying party assumes such defense,
the party seeking indemnification shall have the right to participate in the
defense thereof and to employ counsel, at its own expense, separate from the
counsel employed by the indemnifying party. If, under applicable standards of
professional conduct, a conflict with respect to any significant issue between
any indemnified party and the indemnifying party exists in respect of such Third
Party Claim, the indemnifying party shall also pay the reasonable fees and
expense of such additional counsel as may be required to be retained by reason
of such conflict.
(g) Indemnified Party's Consent to Settlement. The indemnifying party
shall not, without the prior written consent of the indemnified party: (i) agree
to the settlement, compromise or discharge of such Third Party Claim unless, by
its terms, such settlement, compromise or discharge actually, fully and finally
discharges the indemnified party from the full amount of liability in connection
with such Third Party Claim; nor (ii) agree to the entry of any judgment or
enter into any settlement that: (1) provides for injunctive or other
non-monetary relief adversely affecting the indemnified party, or (2) does not
include as an unconditional term thereof the giving of a release for all
liability with respect to such claim by each claimant or plaintiff to each
indemnified party that is the subject of such Third Party Claim.
(h) Consequences of Breach by Indemnifying Party. In the event that the
indemnifying party does not assume and conduct the defense of a Third Party
Claim in
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CONFIDENTIAL TREATMENT REQUESTED
accordance with this Article 22, or fails to perform any of its other
obligations under Article 22(a), (c), (f) or (g), and therefore is in breach of
its obligations under this Article 22: (i) the indemnified party may defend such
Third Party Claim in any manner it reasonably may deem appropriate (and the
indemnified party need not consult with, or obtain any consent from, the
indemnifying party in connection therewith); (ii) the indemnified party may
consent to the entry of any judgment or enter into any settlement with respect
to such Third Party Claim, provided that, before so consenting to entry of
judgment or entering into a settlement : (1) the indemnified party gives the
indemnifying party written notice of the terms of the proposed consent judgment
or settlement, and (2) the indemnifying party does not thereafter comply with
its obligations under this Article 22 in respect of the Third Party Claim and,
within three Business Days after receipt of such notice, give to the indemnified
party a signed written statement acknowledging that the indemnifying party is
liable under this Article 22 in respect of the Third Party Claim and undertakes
to comply promptly with its obligations under this Article 22; and (iii) subject
to compliance by the indemnified party with the foregoing obligations, as
applicable, the indemnifying party will remain liable to the fullest extent
provided in this Article 22.
(i) IPA Indemnity Obligations. The indemnities and related obligations
under this Article 22 are in addition to the indemnities and related obligations
provided in the IPA; however, this Article 22 shall not apply to any Third Party
Claim that is also subject to an indemnity provided in the IPA. Accordingly, the
indemnity provisions in the IPA shall supersede the provisions of this Article
22 in respect of any Third Party Claim to which the IPA indemnity applies, to
avoid any double indemnity liability or conflicting indemnity liability. The
parties' indemnity obligations as to matters covered by the IPA shall be as
provided in the IPA, except as to Excluded Damages that are limited by Article
21(d).
(j) Relation to Warranty Terms. Limitations or disclaimers of warranties
shall not be construed or applied to alter or affect the obligations and
liabilities of Applied or Supplier, as the case may be, that arise under or are
provided for by the indemnity provisions of this Article 22 or of the IPA.
23. Force Majeure.
(a) A failure by either party to perform its obligations under the
Agreement due to causes, events or conditions beyond its control and without the
fault or negligence of the party shall be deemed excusable during the period in
which the cause of the failure persists. Such causes may include, but not be
limited to, acts of God or the public enemy, acts of the government in either
sovereign or contractual capacity, fires, floods, epidemics, strikes, freight
embargoes and unusually severe weather. If the failure to perform by Supplier is
caused by the default of a sub-tier supplier of Supplier, and such default
arises out of causes beyond the control of both Supplier and sub-tier supplier,
and without the fault or negligence of either of them, Supplier will not be
liable for any excess cost for failure to perform, unless the supplies or
services to be furnished by the sub-tier supplier were obtainable from other
sources in sufficient time to permit Supplier to meet the required delivery
releases of Items. When Supplier or Applied becomes aware of any potential force
majeure condition as described above, that party shall immediately notify the
other of the condition and provide relevant details.
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CONFIDENTIAL TREATMENT REQUESTED
(b) A failure by Supplier to perform its obligations under this Agreement
will be deemed excused to the extent caused by Applied's failure to timely
perform its obligations under the FUAs or under the IS&T Agreement (as such is
modified by the Agreement), each as in effect from time to time, including but
not limited to, an interruption in services or failure to provide or maintain
services that Applied is obligated to provide under an FUA or such IS&T
Agreement, which interruption or failure is not timely cured by Applied,
adversely affects Supplier's ability to perform under the Agreement, and
Supplier is unable to perform through use of available alternative services.
24. Changes.
Applied may at any time, by a written order and without notice to
Guarantors, make changes within the general scope of the Agreement to any one or
more of the following:
(a) Specifications;
(b) method of shipment or packing;
(c) place and date of delivery; or
(d) place and date of inspection or acceptance.
Changes in costs, pricing or other terms resulting from changes made
pursuant to this Article shall be determined pursuant to the Agreement. If any
such change not otherwise provided for under the Agreement causes an increase or
decrease in the cost of or time required for performance of the Agreement, an
equitable adjustment shall be made in the Contract Price or delivery schedule,
or both, and the Agreement shall be modified in writing accordingly. No claim by
Supplier for adjustment under this Article 24 shall be valid unless in writing
and received by Applied within sixty (60) days from the date of receipt by
Supplier of the notification of change, provided, however, such period may be
extended upon the written approval of Applied. However, nothing in this Article
shall excuse Supplier from proceeding with the Agreement as changed or amended.
25. Termination for Default; Other Remedies.
(a) Any of the following events, failures, occurrences or breaches and,
when applicable with respect to an event, failure, occurrence or breach to which
Article 25(a)(i) or (a)(iii) applies, the failure of Supplier, after notice by
Applied under Article 25(b), to cure or correct same, if curable, during the
Business Review Process under Section 7.2.5 of the Agreement (or such period as
is established by the Business Review Process) shall constitute a "Default"
under the Agreement:
(i) the recurring material failure by Supplier to deliver Items on time
and in compliance with the warranty provisions of the Agreement;
(ii) Supplier's becoming insolvent; the filing by Supplier of a voluntary
petition under any bankruptcy, insolvency or like law; the filing
against Supplier of an
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CONFIDENTIAL TREATMENT REQUESTED
involuntary petition under any bankruptcy, insolvency or like law
(which is not dismissed within 45 days after its filing); the making
of an assignment by Supplier for the benefit of creditors; and/or
any material adverse change in the business, properties, operation
or condition (financial or otherwise) of Supplier;
(iii) other than those failures to which Article 25(a)(i) applies, the
material failure by Supplier to perform, observe, or comply with any
term, provision, or condition of the Agreement, including recurring
failures that together constitute a material failure, or the
occurrence of any event or condition constituting a default or
breach in a material respect under any term, provision or condition
of the Agreement; or
(iv) (a) the occurrence of any event or condition constituting a material
default under or breach of any provision of (i) the Performance
Guaranty Agreement, as in effect from time to time, or (ii) the APA
or an FUA, as in effect from time to time, without cure or
correction after notice pursuant to the APA or an FUA, as
applicable, or (b) the exercise by Applied of a right of termination
of the IPA in accordance with its terms pursuant to Section 5.2 of
the IPA.
Upon the occurrence of a Default, Applied shall have the right, at its option,
to terminate the Agreement, either in whole or in part. A termination in part
for Default shall apply to the Items, product line(s), type(s) or model(s) of
Applied Systems or FDSs, or line(s) of business affected by the Default and as
to which Applied exercises its right to terminate for Default (the "Terminated
Products").
A termination of the Agreement in part for a default or the exercise of other
rights and remedies pursuant to Section 7.2.1 or Section 7.2.2 with respect to
the particular Item(s) affected shall not be subject to the procedural
requirements of this Article 25. A default as to which Section 7.2.1 or Section
7.2.2 applies may, however, also become an element of a Default under this
Article 25. In addition to its rights of termination for Default as to the
Agreement under this Article 25, Applied shall have the rights provided by the
UCC as to transactions governed by such statute (and by other law of the State
of California where the UCC does not apply) to terminate for default (or cancel)
or revoke acceptance with respect to any particular Item(s) and to recover its
damages in connection with such Item(s), without the application of the
procedures of this Article 25 or the Business Review Process.
(b) Following the occurrence of an event, failure, occurrence or breach
that constitutes or may constitute a Default under Article 25(a), Applied may,
at its sole option, initiate and proceed with termination of the Agreement, as
follows:
(i) Applied shall give initial notice to Supplier, in accordance
with Section 1.2.2 of the Agreement, which shall include the
following: notice of the Default or potential Default and of
Applied's intent to terminate the Agreement; notice that the parties
shall proceed with the Business Review Process as referred to in
Article 25(a) with respect to an event, failure, occurrence or
breach to which Article 25(a)(i) or 25(a)(iii) applies, (except that
a breach as to the 15 day notice under Article 17(f) shall not be
subject to the Business Review Process); notice of
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CONFIDENTIAL TREATMENT REQUESTED
any event, occurrence, failure or breach which is determined by
Applied to be an incurable or uncorrectable Default; and notice of
the period of cure or correction for any event, occurrence, failure
or breach (that is curable or correctable but not otherwise subject
to the Business Review Process) established by Applied in such
notice (such a period to be not less than ten (10) days).
(ii) If (x) the event, occurrence, failure, or breach has not been
cured to Applied's reasonable satisfaction at or before the
expiration of the Business Review Process (where applicable) or of
such period for cure or correction as is established by such
process, or at the expiration of such other period (of not less than
ten (10) days) established by Applied for matters not otherwise
subject to the Business Review Process, or (y) the event,
occurrence, failure or breach is incurable, Applied may at such time
or at any time thereafter issue a written or electronic notice of
termination (a "Notice of Termination for Default"), and the
Agreement shall terminate on and as of the date for termination
specified in the Notice of Termination for Default.
(c) *
(d) *
(e) (i) The rights and remedies of each party pursuant to this Article
25 or any other provision of the Agreement for any purpose are in addition to
and shall not limit or preclude resort to any other rights and remedies provided
by agreement, by law (subject to procedural requirements of the Agreement) or in
equity. With respect to equitable relief, a party may proceed to seek and obtain
such relief, where authorized under applicable law, without the declaration of a
Default * or compliance with other procedural requirements of the Agreement.
(ii) In the event of a Default *, the non-defaulting party shall
retain, and may exercise, all rights and remedies provided for by this Agreement
or other applicable law for the recovery of damages and/or other relief or
remedies with respect to the failure, breach, default or other event (subject,
however, to applicable limitations of the Agreement as to damages and to
procedural requirements of the Agreement). Termination of the Agreement for
Default * shall constitute "cancellation" under the UCC.
(f) Damages shall not be recoverable with respect to Items for which no
Authorized Demand Signal has been accepted by Supplier prior to the effective
date of termination.
26. Termination for Convenience.
(a) Applied may terminate the Agreement with respect to some or all of the
Items at any time for Applied's convenience (to "terminate for convenience" or a
"Termination for Convenience"), by giving Supplier written or electronic notice
of such Termination for Convenience in accordance with Section 1.2.2 of the
Agreement, which notice shall state the extent of the termination and the
conduct requested of Supplier in connection therewith as to
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
matters described in Article 27 below, but excluding Article 27(v) (a "Notice of
Termination for Convenience"). Upon the effective date of the Notice of
Termination for Convenience, the Agreement shall terminate to the extent
indicated in the Notice of Termination for Convenience, and Applied shall pay to
Supplier the Termination Charges as determined in accordance with paragraphs (c)
and (d) below.
(b) Each Notice of Termination for Convenience shall:
(i) Specify the Item(s), product lines, types of Applied Systems, or
other method by which the Item(s) or scope of the Termination for
Convenience will be determined, if less than all.
(ii) Specify the effective date of the Termination for Convenience, which
shall be at least three (3) months after the date of issuance of the
Notice of Termination for Convenience.
(iii) Provide such instructions or procedures as shall in Applied's
commercially reasonable judgment be appropriate to implement Section
4.11 of the Agreement as to the Termination for Convenience.
Upon a Termination for Convenience of the Agreement in whole or in part by
Applied, Supplier shall promptly follow Applied's directions as set forth on the
Notice of Termination for Convenience, and the parties shall implement the Wind
Down Procedures of Section 4.11, as applicable.
(c) Within ninety (90) days from the effective date of termination
pursuant to a Notice of Termination for Convenience, Supplier shall deliver to
Applied a written statement setting forth all of Supplier's claims in connection
with the Termination of Convenience (the "Termination Charges"), in the form and
containing such documentation as required by Applied. Failure by Supplier to
deliver such claim for Termination Charges within said ninety (90) day period
shall constitute a waiver by Supplier of all claims against Applied for such
Termination for Convenience and a release of all Applied's liability arising out
of such Termination for Convenience.
(d) If Applied does not agree with the amount specified in Supplier's
claim for Termination Charges, Applied and Supplier will attempt to agree upon a
reasonable amount for Termination Charges. If Applied and Supplier fail to agree
upon such an amount within * after receipt by Applied of the claim for
Termination Charges from Supplier, then the Termination Charges will be
conclusively presumed to be the sum of the following (provided that no costs
shall be duplicated):
*
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
(c) The provisions of this Article 26 apply solely to a Termination for
Convenience by Applied and shall not affect or impair any right of Applied to
terminate the Agreement due to the default or breach of Supplier as provided in
Article 25 or to seek any remedies in the event of such breach or default of
Supplier as otherwise permitted.
(d) Applied shall have the right to initiate Termination for Convenience,
in whole or in part, based on the occurrence of a Notice Event. Such right to
terminate for convenience shall not limit Applied's right to terminate for
convenience, in whole or in part, at any other time.
27. Post-termination Obligations.
On the date termination of the Agreement becomes effective as specified in the
applicable Notice of Termination for Default or for Convenience, Supplier shall
(i) stop work being performed by Supplier pursuant to the Agreement, (ii) cancel
orders for parts and/or materials with Supplier's sub-tier suppliers and cease
ordering any such parts and/or materials, (iii) cancel work being performed by
Supplier's sub-tier suppliers for Supplier for the Agreement, (iv) assign to
Applied Supplier's interests in contracts with Supplier's sub-tier suppliers (to
the extent such contracts are assignable, are for goods used in the manufacture
of Items, and any required consents to assignment are obtained), (v) (except in
the case of Termination for Convenience) make commercially reasonable efforts to
furnish Applied with releases of claims from Supplier's sub-tier suppliers
resulting from orders and/or work canceled by Supplier, (vi) protect all
property in which Applied has or may acquire an interest, and (vii) comply with
the provisions of this Agreement, and of the TLA as to Tooling, Test Fixtures
and Wind Down.
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CONFIDENTIAL TREATMENT REQUESTED
ATTACHMENT 18
FORM OF
ON-SITE REPRESENTATIVE AGREEMENT
This On-Site Representative Agreement ("Agreement") is made this day of ____, by
and between Applied Materials, Inc. ("Applied") and Kinetics Fluid Systems, Inc.
("Supplier") (collectively referred to as the "Parties").
Whereas, Supplier provides parts or services to Applied or desires to sell parts
or services to Applied under the terms of, and pursuant to, a Global Supply
Agreement effective as of June 1, 2002 ("GSA"); and
Whereas, the Parties agree that if certain duties and functions were to be
performed by an employee of Supplier on Applied's premises or at an Applied
facility it would facilitate Supplier's performance and benefit both Supplier
and Applied;
Now, therefore the Parties agree as follows:
1. Statement of Work
Supplier will assign, at no cost to Applied, an individual on-site
representative ("OSR") to perform, on Applied's premises, functions ("OSR
Functions") described in the Statement of Work attached hereto as Exhibit
No. 1 (the "SOW").
Supplier agrees to notify Applied immediately of any changes in its
staffing assignments involving the OSR, or in the OSR Functions, whereby
access to Applied's facilities or IS&T systems may no longer be essential
to performing the OSR Functions.
2. Status of OSR
The OSR is an employee of Supplier, subject to its right of direction,
control and discipline. The OSR is not an employee of Applied, nor shall
he or she be entitled to any rights, benefits, or privileges of an Applied
employee. Prior to the commencement by the OSR of an assignment at
Applied, Supplier represents that it will review this Agreement with the
OSR, inform the OSR of the obligations under this Agreement and the
"Joinder" required under this Agreement, and have the OSR enter into a
"Kinetics Employee Joinder" in the form set out in Schedule 4.4
("Joinder") to the Restated and Amended Intellectual Property Agreement
between Applied and Supplier of even date with the GSA (the "IPA").
3. Confidentiality and Performance
Applied shall inform the OSR of hours of access to Applied's premises,
pertinent safety regulations, and all other requirements which Applied
deems necessary. The OSR shall comply with any applicable policies and
regulations of Applied. Compliance with all policies and regulations of
Applied is mandatory and is the responsibility of both the
113
CONFIDENTIAL TREATMENT REQUESTED
OSR and Supplier; failure to comply with these policies and regulations
will be cause for immediate removal of the OSR from the premises.
Supplier agrees that the OSR Functions to be performed by the OSR will
comply with this Agreement, including Attachments 1 and 2 to this OSR
Agreement, and will also comply with any purchase, confidentiality,
supplier-planner access, nondisclosure, intellectual property, joint
design, joint development or other agreements that may be in effect
between Supplier and Applied and including the Amended and Restated
Intellectual Property Agreement with an Effective Date of June 1, 2002
(the "Related Agreements") at the time this Agreement is executed by the
Parties or that is subsequently in effect.
4. OSR Associated Expenses
All salary, benefits, and travel and business expenses for OSR will be the
sole responsibility of Supplier.
5. Access
Subject to Applied's approval and the completion of the security
background check, the OSR may be granted access to the following:
- Only those specific Applied facilities to which the OSR
requires access in order to perform the tasks stated in the
SOW
- Telephone and fax lines (for matters related to Applied only)
- Computer/modem and/or database or system information access as
deemed necessary by Applied in order for the OSR to perform
the tasks stated in the SOW.
If a Joinder is attached to this Agreement and executed by the OSR, then
such Joinder shall apply to all "Confidential Information" (as therein
defined), and all Applied databases, applications and servers, that the
OSR obtains, accesses or is exposed to as a result of the OSR Functions
under this Agreement. If a Joinder is not attached and executed by the
OSR, the OSR shall not have access to any information that is
confidential, proprietary, or sensitive or to any Applied databases,
applications or servers.
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CONFIDENTIAL TREATMENT REQUESTED
6. Termination of Agreement
This Agreement may be terminated immediately by either Party at any time
without penalty; if not earlier terminated, this Agreement shall terminate
upon completion of the tasks identified in the SOW.
7. Entire Agreement
This Agreement, including its Attachments, and together with all Related
Agreements constitutes the entire agreement between Supplier and Applied
Materials with respect to OSR Functions, and with respect to OSR Functions
it supersedes all preexisting agreements or arrangements, except for (a)
the GSA and any Facilities Use Agreement as in effect for Applied
facilities which the OSR may access, (b) any Supplier-Planner Access
Agreement now or hereafter in effect, (c) any claims or causes of action
of Applied relating to breach of a pre-existing OSR agreement or
arrangement, and (d) any ongoing duty or obligation(s) of Supplier under a
pre-existing OSR agreement or arrangement. In the event of any conflict
between the terms of this Agreement and the terms of a Related Agreement,
the GSA or any Facilities Use Agreement as in effect for Applied
facilities which the OSR may access, precedence shall be given in
accordance with Section 1.3.2.2 of the GSA.
Kinetics Fluid Systems, Inc. Applied Materials, Inc.
("Supplier") ("Applied")
By: By:
------------------------------ -----------------------------
Its: Its:
----------------------------- -----------------------------
Date: Date:
---------------------------- ---------------------------
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CONFIDENTIAL TREATMENT REQUESTED
Exhibit 1 - Statement of Work
(On-site Representative Agreement)
This Attachment describes the activities and services included in the OSR
Functions of the Supplier's OSR. Changes in the OSR Functions may be made by
agreement of Applied and Supplier. The OSR Functions include
- Daily consultation with Applied's representatives concerning
Supplier performance, production or project scheduling, and
resolution of problems or errors.
- Evaluation and reporting of problems or errors, and of anticipated
problems, and constraints or delays.
- Consultation with Applied's engineering and production
representatives concerning product quality, product delivery, and
product technical problems and revisions.
- [To be added and revised by Applied's representatives.]
- [To be added and revised by Applied's representatives.]
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CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 2
On-Site Representative Agreement
The "Joinder" required by this On-Site Representative Agreement is
the "Kinetics Employee Joinder" set out in Schedule 4.4 to the
Amended and Restated Intellectual Property Agreement of the Parties
identified in this On-Site Representative Agreement.
i
ATTACHMENT 19
TOOLING LOAN AGREEMENT
This Tooling Loan Agreement, is dated as of June 1, 2002 (the "Effective
Date"), and made by and between Applied Materials, Inc., a Delaware corporation
("Applied"), and Kinetics Fluid Systems, Inc., a California corporation
("Supplier"). This Tooling Loan Agreement, together with all Attachments hereto,
is referred to herein as the "Agreement." This Agreement is entered into in
connection with the Global Supplier Agreement between Applied and Supplier,
which itself has an effective date of June 1, 2002 ("GSA"), and is the Tooling
Loan Agreement referred to in Sections 4.2.1 through 4.2.4 of the GSA.
Solely for Supplier's use in fulfilling its obligations to Applied under
the GSA, under Design Services Agreements and Development Services Agreements
entered into from time to time as contemplated by the GSA (the terms "Design
Services Agreement" and "Development Services Agreement" being used herein as
defined in the GSA), and under the Amended and Restated Intellectual Property
Agreement of even date ("IPA"), Applied has agreed to loan to Supplier, on the
terms and conditions contained herein, the property identified in the
Attachments to this Agreement (collectively, the "Tooling"), which Attachments
will be updated from time to time. The Tooling includes * identified in Schedule
4.2.2.(c) to the GSA, the * provided under the "IS&T Agreement" identified in
Section 2.9.1.1 of the GSA, and * in or used in the operation of *. The GSA,
Design Services Agreements, Development Services Agreements, and the IPA, all as
amended from time to time, are collectively called the "Operational Agreements."
In consideration of the premises, the agreements of the parties set forth
herein and in the Operational Agreements, and Applied's lending the Tooling to
Supplier, Applied and Supplier agree as follows:
1.0 Ownership.
(a) Title to and ownership of the Tooling (other than * "Third Party
Applications", as such term is defined in the IPA) shall remain exclusively in
Applied at all times, and Supplier shall have no ownership or beneficial
interest therein, except as provided in Section 1.3 (b) as to Supplier Provided
Improvements. Title to and ownership of * Third Party Applications shall remain
exclusively in the owner of same, and Supplier shall have no ownership or
beneficial interest therein. Supplier shall affix and maintain prominently on
each item of Tooling a label indicating that the Tooling is owned by Applied or
the other owner thereof. All additions, attachments, alterations, and
modifications to the Tooling (except for *) shall become part of the Tooling and
the exclusive property of Applied or the other owner thereof.
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
(b) Supplier authorizes Applied to file this Agreement or any copy hereof,
as well as to make any other filings, in any jurisdiction as Applied may deem
appropriate to protect its interests or those of any other owner of Tooling.
Upon Applied's request, Supplier shall execute or obtain from third parties and
deliver to Applied such statements or other instruments as Applied deems
necessary or advisable to confirm or perfect the interests of Applied or other
owner in the Tooling, including filings under the Uniform Commercial Code and
landlord or mortgagee waivers, and Supplier hereby grants to Applied the right
to execute Supplier's name thereon where permitted by law.
(c) Supplier shall, at its expense, protect and defend title to the
Tooling of Applied or other owner against all persons claiming against or
through Supplier, at all times keeping the Tooling free from any legal process
or encumbrance whatsoever including but not limited to liens, attachments,
levies, executions and other claims by third parties, and shall give Applied
immediate written notice of any such third party claim and shall indemnify
Applied against any cost, liability or loss caused thereby.
(d) The Tooling is, and shall at all times be and remain, personal
property notwithstanding that the Tooling or any part thereof may now be, or
hereafter become, in any manner affixed or attached to real property or any
improvements thereon.
1.1 Delivery.
Applied shall package the Tooling for shipment to Supplier to provide for
handling and protection of the Tooling sufficient to comply with the carrier's
requirements and consistent with the manner in which Applied packages shipments
of a like nature for its own use. Absent Applied's agreeing otherwise in
writing, Applied shall arrange shipping as it deems appropriate to the
applicable destination specified in the Attachment applicable to the item of
Tooling. Upon delivery of the Tooling to Supplier, Supplier shall inspect the
Tooling. If Supplier believes the Tooling is not in good working order and
repair, it shall notify Applied promptly in writing. If such notice is not
received by Applied within five business days after installation of the Tooling
by Supplier, then Supplier shall be deemed to have accepted the Tooling, and the
Tooling shall be deemed in good working order and repair.
1.2 Risk of Loss.
Supplier shall bear all risks of loss, damage or destruction to the
Tooling from and after the date the Tooling is delivered to Supplier until
Applied accepts return of the Tooling. During such period, Supplier shall
maintain, in addition to any other insurance required under its other contracts
with Applied, all risk insurance with respect to the Tooling, comprehensive
general liability insurance covering bodily injury, property damage, contractual
liability, products liability and completed operations and workers compensation
and employer's liability insurance with financially sound and reputable insurers
in amounts and on terms customarily insured against in similar circumstances (or
in such greater amounts or on such different terms as may be requested by
Applied). Supplier shall furnish evidence of such insurance to Applied prior to
execution of this Agreement, and such insurance shall require the insurer to
give at least 30 days' advance notice to Applied of any material alteration or
cancellation thereof (at least 10 days' prior notice as to cancellation for
nonpayment of premiums). In the event of any loss or damage
2
CONFIDENTIAL TREATMENT REQUESTED
to the Tooling, Supplier shall pay Applied within 45 days following the event of
loss or damage the amount of loss or damage to the Tooling, which, in the event
of a total loss shall be the value of the item of Tooling. Applied shall have
the discretion to determine whether to replace any item of Tooling that is lost,
damaged or destroyed.
1.3 Use, Maintenance and Alteration.
(a) Supplier shall cause each item of Tooling to be installed and used at
the applicable location set forth in the Attachment applicable to the item, and
shall not copy, remove, reinstall or modify any software, and shall not relocate
any Tooling to any other location (except as provided in Section 4.2.2 (a) of
the GSA) without Applied's prior written permission. Except as otherwise agreed
in writing by Applied, Supplier shall use the Tooling solely to fulfill its
obligations to Applied under one or more of the Operational Agreements, all in
compliance with this Agreement and the Operational Agreements. Supplier shall
operate, protect, maintain and calibrate the Tooling in compliance with all
applicable laws, rules and regulations (including those relating to safety), the
conditions of all applicable insurance policies and best industry practices
(including any maintenance schedules delivered by Applied or furnished by the
Tooling manufacturer or distributor). Supplier shall obtain training for the
Supplier personnel who will operate the Tooling, and Supplier shall operate the
Tooling in compliance with such training. Under no circumstances shall Supplier
operate the Tooling in a manner which could cause injury or death to any person
or damage or injury to any property, including the Tooling. If Applied or the
Tooling manufacturer or distributor specifies certain parties who are authorized
to service the Tooling or special equipment required to maintain or calibrate
the Tooling, Supplier shall use such authorized parties and/or special
equipment. Supplier shall maintain logs and reports of the maintenance and
operation of the Tooling and permit Applied, on reasonable prior notice, to
inspect the Tooling to determine whether the Tooling is being used, protected,
maintained and calibrated in accordance with this Agreement and to make copies
of such logs and reports. Supplier shall correct immediately any deficiencies
disclosed by such inspection upon notice from Applied. No such inspection or
lack of inspection by Applied shall in any way diminish the sole responsibility
of Supplier for the proper use, protection, maintenance and calibration of all
Tooling. If an item of Tooling becomes inoperable, Supplier shall (subject to
the limitations of Section 1.3(b) below) make immediate reasonable attempts to
restore it to operating condition before requesting assistance from Applied's *
Department.
(b) Without the prior written consent of Applied, Supplier shall not make
any alterations, modifications or additions to the Tooling except as provided in
this Section 1.3(b). Further, Supplier shall comply with the IPA, as such
applies to all Tooling or to the use of or rights in Tooling. Modifications or
improvements to Tooling that constitute Capacity FDS Hardware or Product Change
Hardware provided or purchased by Applied pursuant to Section 4.2.3 of the GSA
shall be owned by Applied as part of the Tooling. Supplier may acquire and
install on the Tooling, * those alternations, modifications, improvements or
additions to Tooling that are items of Capacity FDS Hardware or Product Change
Hardware that have been proposed by Supplier and Applied does not provide or
procure under the procedures of Section 4.2.3 of the GSA and * (the "Supplier
Provided Improvements").
* Material has been omitted and filed separately with the Commission.
3
CONFIDENTIAL TREATMENT REQUESTED
(c) Costs associated with Applied approved or directed alterations,
modifications, improvements or additions, as well as any third-party calibration
services required to keep the Tooling within specified dimensional or sampling
tolerances, shall be borne by Applied. Supplier shall not undertake, or incur
any costs associated with, such activity until an authorizing purchase order has
been received from the Applied organization ordering the Items that require
usage of the Tooling.
(d) Routine care, maintenance, and calibration performed by Supplier as
part of normal operations shall be done at no cost to Applied.
(e) Supplier shall comply with the requirements of the * Support Work
Instruction (Form *) which can be found at http:// *.
1.4 Reserved Rights; Return of Tooling.
(a) Applied may at its discretion, which discretion is to be reasonably
exercised, access, inspect, modify, upgrade, replace, or remove from use any
Tooling. Applied may also direct Supplier to allow Applied or its
representatives to use Tooling at Supplier's location on a temporary basis as
part of Applied's efforts to review and develop its products and processes.
Supplier agrees to accept, subject to the terms of this Agreement, and
incorporate into its manufacturing, testing and other processes any item of
Tooling designated and furnished by Applied.
(b) To the extent practicable, Applied will give Supplier reasonable
advance notice of any action by Applied under the preceding Section 1.4 (a) or
that would otherwise make the Tooling unavailable for use by Supplier on a
temporary or permanent basis. If Applied requires a temporary or permanent
cessation of use of any Tooling and such results in delays in Supplier's testing
or delivery of Items under the GSA, then the extension period provided to
Supplier under Section 4.2.4(b) of the GSA shall apply until Tooling required
for testing or completion of Items is returned to use or replaced by Applied,
unless otherwise agreed at the time.
(c) At the time of termination or expiration of the GSA, in whole or in
part, and also as provided in Section 4.2.4 of the GSA, Applied may exercise
rights to purchase, repossess or remove Tooling in accordance with the GSA and
this Agreement and the procedures of Section 4.2.4 of the GSA. In the event of
Termination for Default pursuant to the GSA, Applied may require that Supplier
return any or all items of Tooling to Applied, and in that event Supplier shall
return such item(s) of Tooling, labeled and shipped in accordance with Applied's
then current policies and specifications, which Supplier shall obtain from
Applied. Supplier shall deliver each such item of Tooling at the appropriate
location (which may be Supplier's facility in those instances in which Applied
is proceeding under Section 4.2.4 of the GSA) in proper operating order, free
from any legal process or encumbrance whatsoever. As to items of Tooling to
which the IPA applies, Supplier shall also comply with Section 5.3 of the IPA
upon
* Material has been omitted and filed separately with the Commission.
4
CONFIDENTIAL TREATMENT REQUESTED
termination or expiration of the IPA. If Supplier shall fail to deliver, as
required, any item of Tooling in good working order and condition (reasonable
wear and tear excepted), Supplier shall be responsible for all costs and
expenses incurred by Applied in replacing the Tooling or in returning the
Tooling to such required condition or any reduction in the value as a result
thereof.
(d) Upon receipt of notice from Applied that Applied will purchase,
repossess or remove Tooling, Supplier shall remove from the affected Tooling all
Supplier Provided Improvements. If Supplier has not removed such Supplier
Provided Improvements at the time Applied takes possession of the Tooling
pursuant to the notice, Applied shall be entitled to remove such improvements,
using commercially reasonable procedures, and shall tender possession of such
removed Supplier Provided Improvements to Supplier.
2.0 Exclusions of Warranties.
SUPPLIER ACCEPTS EACH ITEM OF TOOLING "AS IS" AND "WITH ALL FAULTS."
SUPPLIER ACKNOWLEDGES THAT IT HAS HAD AN OPPORTUNITY TO INSPECT THE TOOLING, AND
THAT SUPPLIER IS EXPERIENCED IN THE OPERATION AND MAINTENANCE OF SUCH TOOLING.
APPLIED MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF
THE TOOLING OR ANY PART THEREOF. APPLIED HEREBY DISCLAIMS ALL IMPLIED
WARRANTIES, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF TITLE,
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND WARRANTIES OF
NONINFRINGEMENT; PROVIDED, THAT THE EXCLUSION AND DISCLAIMERS OF THIS AGREEMENT
ARE, HOWEVER, SUBJECT TO, AND SHALL NOT ALTER, IMPAIR OR MODIFY, ANY WARRANTIES
MADE BY APPLIED IN THE IPA OR GSA THAT ARE APPLICABLE TO TOOLING.
2.1 Exclusion of Certain Damages.
IN NO EVENT SHALL APPLIED BE LIABLE FOR ANY SPECIAL, INDIRECT, PUNITIVE,
CONSEQUENTIAL OR CONTINGENT DAMAGES ("EXCLUDED DAMAGES") THAT ARISE FROM OR
RELATE TO THIS AGREEMENT FOR ANY REASON, WHETHER OR NOT APPLIED HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES, AND APPLIED EXCLUDES AND SUPPLIER WAIVES ANY
LIABILITY OF APPLIED FOR ANY SUCH EXCLUDED DAMAGES; PROVIDED, THAT THIS
EXCLUSION AS TO EXCLUDED DAMAGES IS, HOWEVER, SUBJECT TO AND SHALL NOT ALTER,
IMPAIR OR MODIFY ANY INDEMNITY OBLIGATION OF APPLIED PURSUANT TO THE IPA OR GSA
THAT IS APPLICABLE TO TOOLING OR THIS AGREEMENT.
3.0 [Omitted.]
3.1 Intellectual Property.
(a) Nothing in this Agreement shall be deemed to grant to Supplier any
license or other right under any of Applied's intellectual property (including,
without limitation, Applied's patents, copyrights, trade and service marks,
trade secrets and Confidential Information, such
5
CONFIDENTIAL TREATMENT REQUESTED
latter term being used as defined in the IPA) for Supplier's own benefit or to
provide or offer Items or other products or services to any party other than
Applied.
(b) The IPA shall apply to and govern the rights and obligations of
Applied and of Supplier with respect to "IP Rights" and "Confidential
Information" (as such terms are defined in the IPA) in or relating to Tooling,
including *, *, and * in or used in the operation of * or *.
3.2 Injunctive Relief; Reports.
Supplier acknowledges and agrees that Applied would suffer immediate and
irreparable harm for which monetary damages would be an inadequate remedy if
Supplier were to breach its obligations under Sections 1.4 or 3.1. Supplier
further acknowledges and agrees that equitable relief would be appropriate to
protect Applied's rights and interests if such a breach were to arise, or were
threatened, or were asserted.
4.0 Entire Agreement; Amendments.
(a) This Agreement (including the Attachments hereto and provisions
incorporated herein by reference), provisions of the GSA applicable to Tooling
(including Section 4.2 of the GSA), those provisions of the IPA applicable to
Tooling (including related software) and the IS&T Agreement (such term being
used as defined in the GSA), all as amended, set forth the entire understanding
and agreement of the parties as to the loan of the Tooling and supersede all
prior agreements, understandings, negotiations and discussions between the
parties as to such subject matter. The parties may be, or may become, parties to
other agreements relating to the manufacture or sale of products to Applied or
the provision of services to Applied, which other agreements shall govern their
respective subject matters.
(b) No amendment to, modification of or waiver of any provision of this
Agreement will be binding unless in writing and signed by a duly authorized
representative of the party sought to be bound.
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
4.1 Notices.
Revisions, updates or other amendments or modifications to this Agreement
(including Attachments) shall be effective only if in set out in a writing (or
other record) executed (or authenticated) by each of Applied and Supplier, and
communications hereunder may be given by mail, fax or e-mail to the individuals
listed below.
Supplier:
----------------------------------------------------------------
(Name) Xxx Xxxxxx, Senior Vice President
----------------------------------------------------------------
(Address 1) 0000 Xxxxxxx Xxxxxxx Xxxx.
----------------------------------------------------------------
(Address 2) Xxxxx Xxxxx, Xxxxxxxxxx 00000
----------------------------------------------------------------
(Phone) (000) 000-0000
----------------------------------------------------------------
(FAX) (000) 000-0000
----------------------------------------------------------------
(E-mail) xxxxxxx@xxxxxxxxxxxxx.xxx
----------------------------------------------------------------
Applied:
Applied Materials, Inc.
0000 X.X. Xxx 290 East M/S 3300
Xxxxxx, Xxxxx 00000
Phone: 000-000-0000
Fax: 000-000-0000
Attn: Xx. Xxxxx Xxxxxx (email address is: Xxxxx_X_Xxxxxx@XXXX.xxx)
Each party shall advise the other in writing of any change to such party's
contact persons.
4.2 Applicable Law; Consent to Jurisdiction; Venue.
This Agreement shall be governed by, subject to and construed in
accordance with the internal laws of the State of California, excluding
conflicts of law rules. The parties incorporate by reference Article 11 of
Exhibit 1 of the GSA and agree that the provisions of such Article apply to this
Agreement.
4.3 Assignments.
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CONFIDENTIAL TREATMENT REQUESTED
The parties incorporate by reference Article 17 of Exhibit 1 of the GSA
and agree that the provisions of such Article apply to this Agreement.
4.4 Waiver.
In the event Applied delays or fails to insist on performance of any of
the terms and conditions set forth herein or delays or fails to exercise any of
its rights or privileges under this Agreement, such delay or failure shall not
constitute a waiver of such terms, conditions, rights or privileges.
4.5 Indemnity by Supplier.
SUPPLIER SHALL DEFEND, INDEMNIFY AND HOLD HARMLESS APPLIED FROM AND
AGAINST, AND SHALL SOLELY AND EXCLUSIVELY BEAR AND PAY, ANY AND ALL CLAIMS,
SUITS, LOSSES, PENALTIES, DAMAGES (WHETHER ACTUAL, PUNITIVE, CONSEQUENTIAL OR
OTHERWISE) AND ALL LIABILITIES AND THE ASSOCIATED COSTS AND EXPENSES, INCLUDING
ATTORNEY'S FEES, EXPERT'S FEES, AND COSTS OF INVESTIGATION (ALL OF THE FOREGOING
BEING COLLECTIVELY CALLED "INDEMNIFIED LIABILITIES"), WHICH ARISE FROM OR RELATE
TO, OR ARE FOR, PERSONAL INJURY, DEATH, OR DAMAGE TO OR LOSS OF TANGIBLE
PROPERTY RESULTING (IN WHOLE OR IN PART) FROM THE USE OR OPERATION OF THE
TOOLING BY SUPPLIER, OTHER THAN (a) AS A RESULT OF DEFECTS IN THE TOOLING
EXISTING AT THE TIME OF DELIVERY TO SUPPLIER OR (b) FOR INFRINGEMENT OR OTHER
MATTERS AS TO WHICH APPLIED HAS WARRANTY OR INDEMNITY OBLIGATIONS TO SUPPLIER.
THIS INDEMNITY IS SUBJECT TO, AND SHALL NOT ALTER, IMPAIR OR MODIFY, ANY
WARRANTY OR INDEMNITY BY APPLIED OR SUPPLIER TO OR FOR THE BENEFIT OF THE OTHER
UNDER THE IPA OR GSA.
4.6 Supplier's Expense and Risk; Taxes.
Supplier shall perform all of its obligations hereunder at its own expense
and risk, including without limitation those specified herein as being at
Supplier's expense. Supplier shall be responsible for paying any use tax
assessed in connection with the loan of Tooling contemplated by this Agreement.
4.7 Captions and Severability.
Captions in this Agreement are for the convenience of the parties only and
shall not affect the interpretation or construction of this Agreement. In the
event any provision of this Agreement is held to be invalid or unenforceable,
such provision shall be severed from the remainder of this Agreement, and such
remainder will remain in force and effect.
4.8 Counterparts and Attachments.
This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument.
Particular items of Tooling subject to this Agreement may be added or deleted by
the parties from time to time; as items are added or deleted, a new Attachment
(or an amendment to a current Attachment) to this Agreement shall be executed by
the parties to identify changes in Tooling.
8
CONFIDENTIAL TREATMENT REQUESTED
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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CONFIDENTIAL TREATMENT REQUESTED
IN WITNESS WHEREOF, the parties hereto have caused their names to be signed
hereto by their respective duly authorized officers, all as of the Effective
Date.
APPLIED: SUPPLIER:
APPLIED MATERIALS, INC. KINETICS FLUID SYSTEMS, INC.
By: /s/ Xxxx Xxxxxxxxx By: /s/ Xxx Xxxxx
------------------------------- -------------------------------
Name: Xxxx Xxxxxxxxx Name: Xxx Xxxxx
----------------------------- -----------------------------
Title: Vice President Title: President
---------------------------- ----------------------------
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CONFIDENTIAL TREATMENT REQUESTED
ATTACHMENT 1
The * Attachment 1 consists of:
(a) Schedule 4.2.2(c) to the GSA as of the Effective Date;
(b) The Test Fixture Software (as defined in Section 4.2.3(c) of the GSA,
and which is not required to be scheduled);
(c) The * identified on Addendum * to the * Agreement and all * the Third
Party Applications set out on Schedule 2.3.8 to the IPA and the *
identified under * in Schedule 2.8 to the IPA; and
(d) The * identified under * in Schedule 2.8 to the IPA.
* Material has been omitted and filed separately with the Commission.
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CONFIDENTIAL TREATMENT REQUESTED
As to Tooling delivered *, the following form shall be used:
Supplement to Attachment 1
Applied Materials, Inc. ("Applied") and the below named Supplier ("Supplier")
agree that the property described below to Supplier has been delivered to
Supplier as "Tooling" under, and is subject to, that certain Tooling Loan
Agreement dated as of _________ __, _____ between Applied and the Supplier:
Place of Delivery for Tooling and any Packaging or Shipping Instructions:
[Enter "Deliver To" Address]
Detailed Description of Each Item of Tooling Identification Number Agreed Value
-------------------------------------------- --------------------- ------------
-------------------------------------------- --------------------- ------------
-------------------------------------------- --------------------- ------------
TOTAL VALUE OF TOOLING
$ TBD
Dated:
---------------------
* Material has been omitted and filed separately with the Commission.
12
CONFIDENTIAL TREATMENT REQUESTED
APPLIED MATERIALS, INC. KINETICS FLUID SYSTEMS, INC.
By: By:
-------------------------------- --------------------------------
Name: Name:
------------------------------ ------------------------------
Title: Title:
----------------------------- -----------------------------
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