EXHIBIT 10.38
Portions of this Exhibit marked with an "*" have been omitted and filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
MICROSOFT CORPORATION
MANUFACTURING AND SUPPLY AND SERVICES AGREEMENT
CONFIDENTIAL
This Microsoft Manufacturing and Supply and Services Agreement
("Agreement") is made and entered into this day of July, 2001 ("Effective
Date"), by and between Microsoft Corporation ("Microsoft"), a Washington, USA
corporation, and StarTek, Inc. ("StarTek"), a Colorado corporation.
RECITALS
WHEREAS, Microsoft and StarTek intend to create a formal relationship by
which StarTek shall provide certain manufacturing and distribution services with
respect to orders for Microsoft software and hardware products.
WHEREAS, the parties intend in this Agreement to set forth specific
terms and conditions governing the performance of certain manufacturing and
distribution services by StarTek for Microsoft; and
NOW, THEREFORE, in consideration of the covenants and conditions set
forth below, the adequacy of which is agreed to and hereby acknowledged, the
parties agree as follows:
AGREEMENT
1. DEFINITIONS.
The following terms, whenever initially capitalized, shall have the following
meanings for the purposes of this Agreement:
(a) "BOM" shall mean the bill of materials document provided by
Microsoft to StarTek, which bill of materials identifies all components
comprising a given Product or Product Component. BOMB may be modified in writing
prospectively from time to time by Microsoft at its sole discretion.
(b) "Customers" shall mean customers designated by Microsoft,
including Microsoft internal customers and distribution vendors, to whom
Microsoft authorizes StarTek to deliver Product pursuant to the terms and
conditions of this Agreement and the Statements of Work.
(c) "Deliverables" shall mean and include all Hardware, code
material, source material, software masters or replicative material or other
such documented material, of any kind or description and in any form including
compact disk, other disks or diskettes, tape, text or any electronic or other
medium supplied by Microsoft or at its direction. It does not include such
materials if held under an independent contractual relationship with an Original
Equipment Manufacturer ("OEM") which contract contains the requisite license.
Nor does it include Products acquired for office purposes and used by StarTek in
its offices.
(d) "Facility" shall mean the manufacturing facility operated,
owned, subcontracted or leased by StarTek, at *.
(e) "Finished Product Unit" shall mean fully packaged Microsoft
Product, which includes all requisite Product Components, Microsoft software
and/or Hardware, ready for delivery to a Customer.
(f) "Hardware" shall mean, without limitation, all Microsoft
keyboards, mice, joysticks and other Microsoft Products which could not
reasonably be categorized as software.
(g) "Insolvent" shall mean a financial condition such as to make the
sum of a party's debts greater than all of the party's assets, at fair
valuation; or, when a party has incurred debts beyond that party's ability to
pay such debts as they mature; or, when a party is engaged in a business or
transaction for which the party has unreasonably small capital.
(h) "Intellectual Property" shall mean any and all trademarks,
copyrights, patents and other proprietary rights comprising or encompassing a
given Product.
(i) "Inventory" includes Finished Product Units, Deliverables, work
in process, Product Components, Hardware or Raw Materials pertaining to the
Products that contain Microsoft software, trademarks, copyrighted material,
logos or other proprietary materials.
(j) "Manufacturing and Supply" or "Manufacturing and Supplying"
shall mean the manufacturing and supply of Product Components and Products as
described in the Statements of Work.
(k) "Products List" shall mean a list provided to StarTek by
Microsoft from time to time that will list the Products to be Manufactured and
Supplied by StarTek and Services to be provided by StarTek for Products pursuant
to the terms of this Agreement.
(l) "Product(s)" shall mean the copyrighted and/or patented
Microsoft software products, including Product Components, Microsoft software,
and any associated documentation, packaging and other written materials,
including, where applicable, the specified user documentation, which Microsoft
may request StarTek to Manufacture pursuant to this Agreement, by the issuance
of a purchase order.
(m) "Product Components" shall mean the Product CD-ROMs, Jewel Case
Components, Disk Set Components, Assembled Box Components and Microsoft software
products.
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(n) "Raw Materials" shall mean each raw material purchased by
StarTek from third parties and used to compromise a Product or Product Component
such as, for example and without limitation, disks, polyvinyl disk baggies,
documentation, boxes, retail *.
(o) "Services" shall mean packaging and distribution services
described in this Agreement and the Statement of Work.
(p) "Statement(s) of Work" shall mean the attached Exhibits A and B,
including any modifications made thereto pursuant to Section 14(b).
(q) "Product CD-ROMs" shall mean the Product CD-ROM media either
supplied by Microsoft or produced or procured by StarTek, but shall not include
any Microsoft software included on the CD-ROM.
(r) "Disk Set Component" shall mean the fully assembled disk set,
including polyvinyl disk baggies and duplicated disks either supplied by
Microsoft or produced or procured by StarTek, but shall not include any
Microsoft software included on the disks.
(s) "Jewel Case Component" shall mean a fully assembled jewel case
or CD sleeve, including all documentation and other printed material, such as
the front and back liners but excluding the Product CD-ROMs, to be included as
an insert in the jewel case.
(t) "Assembled Box Component" shall mean the fully assembled retail
packaging, including without limitation, retail bar code labels and all manuals
and other documentation that is to be included with the Product, but excluding
the Product CD-ROMs, Jewel Case Components, Disk Set Components.
2. MANUFACTURING AND SERVICES.
(a) General. StarTek hereby agrees to conduct Manufacturing and
Supply and Services for Products on the Products List at the Facility pursuant
to the terms and conditions set forth in this Agreement, including without
limitation, the Statements of Work. StarTek shall not conduct Manufacturing and
Supply and Services at or from any location other than the Facility without
Microsoft's prior written approval. In the event of any conflict between the
terms contained in this Agreement and terms contained in the Statements of Work,
the terms contained in this Agreement shall control.
(b) Other Manufacturing/Services. In addition to Manufacturing and
Supply and Services, the parties may identify other manufacturing and/or
services to be provided under this Agreement through an addendum signed by the
parties hereto.
(c) Reports. StarTek, at the scheduled times shall provide Microsoft
with reports as specified herein or in the Exhibits (each a "Report"), with
respect to all Products or Manufacturing and Supply and Services ordered or sold
hereunder through StarTek to Customers. All Reports shall be in the form shown
in the Exhibits and have the content as set forth in this Agreement or as
otherwise agreed by the parties in writing, and shall be
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complete as required under this Agreement and accurate. Each Report, whether in
paper or electronic format, shall meet the Standard Report Requirements
identified for the Report in the Exhibits and shall be delivered as specified in
the Exhibits. StarTek shall use reasonable efforts to correct any errors in a
Report within * following Microsoft's notice specifying the item in respect of
which an error has occurred. StarTek shall deliver each Report and all required
supporting documentation therefor, by the time and on the date specified in the
Exhibits.
(d) No Alteration; No Misrepresentation. Except in accordance with
the terms of this Agreement or as otherwise authorized in writing by Microsoft,
StarTek shall not alter the Product or Product packaging without the specific
prior written consent of Microsoft, and shall have no authority to make copies
of Microsoft diskettes or documentation other than as provided in this
Agreement. StarTek shall distribute Product to Customers as specified in the
Statements of Work. No other product or informational piece, including without
limitation flyers, literature, documentation and advertising may be bundled with
any product without the prior written consent of Microsoft. All materials used
by StarTek in the distribution of Product shall comply with Section 4 hereof and
shall clearly note that such Product is Microsoft Product. Such materials may
include, but are not limited to, Microsoft invoices, packing slips, and
packaging.
(e) Inventory. All of the Inventory shall at all times be held
exclusively for assembly and delivery to shipping locations as authorized by
Microsoft and for no other purpose, use or disposition, except as may be
directed in writing by Microsoft. StarTek shall at all times cause the Inventory
to be free and clear of any and all liens, encumbrances and other claims of its
creditors. StarTek grants Microsoft the option, assignable to any affiliated
corporation, to acquire by purchase all of the Inventory and/or Product
Components (less Finished Product Units which have already been purchased by
Microsoft) upon * notice, and payment as would apply for unused Inventory in the
case of termination as stated in Section 10, at the price set forth at in
Exhibit C. At any time, upon Microsoft's request, StarTek shall take all
necessary steps and shall execute such documents as may be necessary or
advisable under the local law where the Inventory is located, in order to effect
the sale of such Inventory and/or Product Components to Microsoft and to
document Microsoft's title to Inventory and/or Product Components owned by
Microsoft. Use of Intellectual Property in any manner by StarTek after
expiration or termination of this Agreement for any reason, whether or not
incorporated in Inventory, shall be deemed to be in violation of Microsoft's
Intellectual Property rights and shall entitle Microsoft to have all remedies
provided by law or equity (including injunctive relief); provided, however, (i)
this does not preclude StarTek from continuing to use in its offices Microsoft
Products legally acquired for that purpose; and (ii) it does not preclude
StarTek's performance of independent contractual relationships with Microsoft or
an OEM (original equipment manufacturer) or other party, which contract contains
the requisite Microsoft product replication license.
(f) Inventory Consignment. If, and to the extent that, Microsoft
delivers Deliverables, Product CD-ROMs and/or Disk Set Components (collectively
referred to
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herein as the "Consigned Inventory") to StarTek or places it under StarTek's
control, this is a true consignment agreement governing such Consigned
inventory, which StarTek shall hold in trust for the sole benefit of Microsoft
pursuant to Section 6(b)(i). StarTek is not purchasing the Consigned Inventory.
StarTek shall hold the Consigned Inventory either (a) for delivery to
Microsoft's distribution center pursuant to this Agreement or (b) for return to
Microsoft, and StarTek's authority is limited thereto. Microsoft consents only
to sales in the ordinary course of providing the Services pursuant to this
Agreement. The references in this subsection or elsewhere in this Agreement to
"StarTek's control" means its ability to exercise restraining or directing
influence over the item described. All of the Consigned Inventory shall be held
in the Microsoft approved Facilities and exclusively for transfer to Microsoft's
distribution center as authorized by Microsoft and for no other purpose, use or
disposition, except as may be directed by Microsoft. Microsoft shall have title
and ownership of the entire Consigned Inventory. StarTek shall at all times
cause the Consigned Inventory to be free and clear of any and all liens,
encumbrances and other claims of StarTek's creditors. StarTek shall label all
Consigned Inventory as being the "property of Microsoft" and keep all such
Consigned Inventory completely and totally segregated from any materials,
supplies or inventory belonging to StarTek or any of its customers. At any time,
at Microsoft's request, StarTek shall take all reasonable steps and shall
execute a security agreement and financing statements, or their equivalents, all
as may be necessary or advisable under the local law where the Consigned
Inventory is located, in order to place of record Microsoft's ownership of all
Consigned Inventory, and its unavailability to any creditor or creditors of
StarTek. Microsoft shall bear the reasonable cost to StarTek (not to exceed $*)
of reviewing, negotiating and executing any such security agreements or
financing statements, except that StarTek shall bear the cost of executing any
such agreements or statements done contemporaneously in connection with the
execution of this Agreement.
(g) Declaration of Trust.
(1) Generally. StarTek hereby declares, confirms and agrees
that throughout the term of this Agreement, StarTek shall hold in trust for the
sole benefit of Microsoft all Consigned Inventory within StarTek's possession or
within its reasonable control, of any kind, description or character. StarTek
further agrees to account for the Consigned Inventory in its possession or under
its reasonable control as property held in trust for Microsoft and not as assets
belonging to StarTek, and not to present any Consigned Inventory as assets of
StarTek in its balance sheet or in any representations (whether oral or written)
to its creditors.
Wherever this Agreement states StarTek holds property in trust or as
trustee, StarTek agrees to exercise ordinary care that Consigned Inventory
received by StarTek will be handled as specified in this Agreement, but it does
not, because of any trust or otherwise, undertake any greater standard of care.
(2) Accounting. StarTek agrees to account for the
disposition of all Consigned Inventory received by StarTek, such accounting to
be given to Microsoft at
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Microsoft's request, at the times and in the manner reasonably requested by
Microsoft. If this is beyond the reports otherwise required hereunder, the
reasonable expense of it shall be paid by Microsoft.
(3) Directions. Microsoft may at any time direct StarTek to
return to Microsoft according to Microsoft's direction and at Microsoft's sole
expense part or all of the Consigned Inventory in StarTek's possession or under
its reasonable control. StarTek shall promptly * comply with any such direction.
(h) Agreement Not to Sell. StarTek acknowledges that, under the
terms of this Agreement, that both during and after the term of this Agreement
it has no rights within the licenses pertaining to software or other Microsoft
proprietary materials or Products which would allow StarTek to be a seller or
distributor of any Products. Whenever requested by Microsoft and from time to
time, it will sign separate mutually acceptable agreements to this effect.
(i) Safe Storage and *. StarTek agrees not to store any other goods
near or in such relation to the Products or Product Components as to cause
injury to those Products or Product Components through contamination by strong
odors, leakage, or otherwise. *
(j) Non-exclusivity. This Agreement is not an exclusive agreement.
At all times Microsoft shall have the right to appoint other third parties to
perform Manufacturing and Supply and Services and other services for Microsoft
or Customers. Provided that StarTek would not be placed in breach of this
Agreement, StarTek may contract with and conduct manufacturing services for
other software companies.
(k) Financial Information. Within * days after StarTek learns that
it has become or will become Insolvent, StarTek shall submit financial
statements to Microsoft in sufficient detail to allow Microsoft to determine
whether StarTek shall be capable of continuing to perform its obligations
hereunder. The financial statements shall include, but shall not be limited to,
balance sheets and related statements of income and retained earnings and
statements of changes in financial condition. To the extent those statements are
audited, the audit report of the certified public accountant performing the
audit shall also be made available to Microsoft.
(l) Return of Deliverables. StarTek will have possession of
Deliverables and replicable material for certain Products and other property for
purposes of the replication to be done under this Agreement. Upon termination of
this Agreement and at any early time whenever requested by Microsoft to do so,
StarTek shall immediately deliver, at Microsoft's cost, to Microsoft all of such
Deliverables (provided that in no event shall such a request by Microsoft for
StarTek's return of the Deliverables prejudice StarTek's right to full
performance by Microsoft tinder this Agreement), replicable materials and all
and any other Microsoft proprietary materials ever received by it and it shall
not retain any copy or original of the same in any way whatsoever.
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(m) Quality Requirements. StarTek shall ensure that in performing
its obligations under this Agreement, it shall operate in accordance with the
quality guidelines as posted on Microsoft's Website, which can be found at *
(the "Microsoft Website") and as set forth in the Statements of Work.
(n) Production. StarTek covenants and agrees to meet Microsoft's
demands for Product related to designated shipping locations, as such demands
may be adjusted from time to time. Additional measurement procedures may be
implemented as mutually agreed upon by Microsoft and StarTek.
(o) Non-Conforming Product. StarTek shall promptly replace and
deliver, within * from notification, at no charge to Microsoft or its Customers,
any non-conforming Product if any delivery of Product, or any portion of it, to
any Customer fails to meet the quality standards specified in the Statements of
Work. If StarTek is unable to obtain Product Components necessary to replace
non-conforming Product within the specified * period, then replacement of such
non-conforming Products shall take place as soon as possible after necessary
Product Components are obtained by StarTek. StarTek agrees to use its best
efforts to obtain Product Components as quickly as possible. In the event
Microsoft determines that a Product recall is necessary due to a breach of
StarTek's warranties hereunder, or due to a manufacturing defect, StarTek shall
cooperate with Microsoft in all respects to conduct such recall at StarTek's
expense; provided that if StarTek has given prior notice of the possible defect
and recommended against delivery and the Product is nonetheless delivered at
Microsoft's direction, or if the recall is necessary because of a Microsoft
error, the recall on account of that defect shall be at Microsoft's expense, but
StarTek shall still cooperate with it, and in such a case, Microsoft shall
reimburse StarTek for the costs of Manufacturing and Supply and Services for the
replacement Products.
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3. DEDICATED REPRESENTATIVES. StarTek shall appoint one qualified staff
member ("StarTek Account Manager") who has or is hereby granted authority to (i)
submit material and information requests to Microsoft; (ii) provide access to
StarTek's staff and independent advisors (including accountants) to provide
information and answer questions; and (iii) provide schedules and plans to
Microsoft for Microsoft' review and/or approval. StarTek shall also appoint a
more senior officer who shall have authority to act for StarTek in making
binding decisions with respect to this Agreement, and amend this Agreement.
Microsoft shall appoint one or more qualified staff members ("Microsoft Vendor
Account Manager") who has or is hereby granted authority to (i) act for
Microsoft and make binding decisions with respect to this Agreement, and amend
this Agreement; (ii) review information supplied by StarTek; (iii) provide any
Microsoft information and answer questions and provide Product training to
StarTek. The StarTek Account Manager is * and the Microsoft Vendor Account
Manager is *. StarTek's senior officer described above is *, its *. Either party
may change account managers and StarTek may change the designated senior officer
upon * prior notice to the other (as long as or to the extent that such notice
is reasonably possible).
4. PRICE AND PAYMENT.
(a) General. Microsoft and StarTek agree that StarTek shall be
compensated for the Manufacturing and Supply and Services pursuant to the Price
and Payment terms and conditions set forth in Exhibit C *. Microsoft shall be
liable for payment to StarTek for Raw Materials that have been purchased in
support of the weekly forecasts issued by Microsoft. Such forecasts shall only
cover a * period and Microsoft shall not be responsible for Raw Materials
purchased in excess of such forecasts. StarTek will use all reasonable efforts
to provide competitive pricing to Microsoft. Except for Miscellaneous Charges
(as defined below), all payments due by Microsoft to StarTek under this
Agreement for Manufacturing Services shall be made * from Microsoft's receipt of
a Purchase Order Receipt from StarTek. Payment shall be made by Microsoft in
accordance with the Microsoft SAP Autovoucher Procedures. Payment for
Miscellaneous Charges due by Microsoft to StarTek under this Agreement shall be
made net * from Microsoft's receipt of an invoice from StarTek. Any undisputed
payment that is overdue for more than *, shall thereafter bear interest at an
annual rate of * per annum (or such lower rate as may then be the highest rate
legally available).
(b) Manner of Payment; Invoices. For Manufacturing and Supply and
Services, with the exception of Miscellaneous Charges, StarTek shall provide
daily Purchase Order Receipts in accordance with the Microsoft SAP Autovoucher
Procedures. StarTek shall render accurate monthly invoices for the Miscellaneous
Charges earned by the date of the Microsoft Fiscal Month Close. For purposes of
this Section 4, "Miscellaneous Charges" shall be defined as including, without
limitation, prep/tooling, freight charges, pallet charges and samples. Such
invoices shall consist of a complete, itemized listing of all such Manufacturing
and Supplying and Services performed or Miscellaneous Charges incurred during
the current invoice period. Microsoft shall pay within * of its receipt of an
invoice, the
8
entire amount of the invoice (except for Disputed Amounts), if the invoice is
accurate, complete and accompanied by backup documentation required in the
Statements of Work. All invoices shall be expressed in U.S. dollars. All
payments shall be made by Microsoft in U.S. dollars either by first class mail,
postage paid, at the address specified herein for notices to StarTek or in such
other manner or at such other place as StarTek may reasonably designate from
time to time by notice to Microsoft or electronically, at Microsoft's sole
option. Payment shall be deemed credited to the account of Microsoft when
received by StarTek if sent by first class mail or upon receipt by StarTek's
financial institution if sent electronically.
(c) Disputed Amounts. As used herein, "Disputed Amounts" means
invoice or Purchase Order Receipt amounts that are subject to a bona fide
dispute raised by Microsoft in writing within * of Microsoft's receipt of an
invoice, in the case of Miscellaneous Charges, or within * of an audit of
Purchase Order Receipts, in the case of Manufacturing Services, which claim of
dispute may concern not only the accuracy of the charge itself, but also any
claim of deficient service or performance or any other claim of breach of this
Agreement that relates to the specific charges in the invoice or Purchase Order
Receipt. All Disputed Amounts that Microsoft subsequently agrees in writing to
pay ("Agreed Payment") or that are required to be paid pursuant to a proper
court order or award from any mutually submitted arbitration ("Required
Payment") shall be paid within * from the date of such agreement or
determination. Payment of an invoice or Purchase Order Receipt without asserting
a dispute is not a waiver as to any claim or circumstance.
(d) Revisions to StarTek Services. From time to time, Microsoft may
request that StarTek revise its Manufacturing and Supply and Services. If (i)
Microsoft makes a request or a series of requests that materially changes the
Manufacturing and Supply and Services and (ii) StarTek determines that a change
in compensation is warranted, StarTek may provide Microsoft with a quote of the
change in cost, by unit or other appropriate measure, for which it will
undertake the change of Services ("Interim Rate Quote"). Microsoft may accept or
reject any Interim Rate Quote. If Microsoft accepts an Interim Rate Quote,
StarTek's Manufacturing and Supply and Services and the corresponding costs to
Microsoft shall be revised accordingly, which revision shall be memorialized in
a written amendment signed by both parties. If Microsoft rejects an Interim Rate
Quote, StarTek's Manufacturing and Supply and Services shall not be revised but
Microsoft shall then be free to have the changed Manufacturing and Supply and
Services in question performed by a third party and to terminate the relevant
portion of the Manufacturing and Supply and Services upon * prior notice to
StarTek. StarTek agrees, at Microsoft's reasonable expense, to cooperate with
such third party to transition and allow it to perform such Manufacturing and
Supply and Services. This Section 4(d) does not impair either party's rights
under Section 11(b) hereof.
(e) Cost Containment.*
(f) Taxes. In the event income taxes are required to be withheld by
Microsoft on payments to StarTek required hereunder, Microsoft agrees to provide
StarTek with
9
reasonable notice in advance of the first such withholding, and Microsoft may
deduct such income taxes from the amounts owed and timely pay such taxes, when
required, to the appropriate taxing authority. Microsoft shall in turn promptly
secure and deliver to StarTek an official receipt for any income taxes withheld.
Microsoft agrees-to pay all applicable goods and services or other applicable
consumption taxes (other than income taxes) levied on it by a duly constituted
and authorized taxing authority on the Manufacturing and Supply and Services. To
the extent required by any such taxing authority, StarTek may collect such
taxes, if any, from Microsoft, and, in such case, shall remit to Microsoft
official tax receipts indicating that such taxes have been collected by StarTek
and remitted to the appropriate tax authorities, to the extent such receipts are
available, and StarTek shall show such taxes as separate line items on invoices
to Microsoft. StarTek agrees to take such steps as are reasonably requested by
Microsoft to minimize such taxes in accordance with all relevant laws and to
cooperate with and assist Microsoft, in challenging the validity of any taxes
applicable to the Manufacturing and Supply and Services and collected from
Microsoft by StarTek or otherwise paid by Microsoft. Except as required by law
or where expressly agreed to, in writing, by Microsoft pursuant to Exhibit C,
Microsoft shall not pay any taxes other than those described above, including,
without limitation (1) taxes on or with respect to or measured by any net or
gross income or receipts of StarTek, (2) any franchise taxes, taxes on doing
business, gross receipts taxes or capital stock taxes (including any minimum
taxes and taxes measured by any item of tax preference), (3) any taxes imposed
or assessed for work performed without the written authorization by Microsoft
after the date upon which this Agreement is terminated, (4) taxes based upon or
imposed with reference to StarTek's real and personal property ownership, (5)
taxes incurred by StarTek on all goods and services purchased from other related
or unrelated parties, and/or (6) any taxes similar to or in the nature of those
taxes described in (1), (2), (3), (4) or (5) above. StarTek agrees to make
available to Microsoft any and all records necessary to comply with any and all
tax obligations as provided herein, including but not limited to reports
necessary for goods and services tax compliance and audit purposes. The contents
and form of such reports shall be mutually agreed to between the parties.
5. LICENSE GRANT.
(a) General. In order to allow StarTek to perform its Manufacturing
and Supply and Services as required hereunder during the term of this Agreement,
Microsoft grants StarTek a non-exclusive, non-transferable, personal, limited
license right to the Intellectual Property for each Product:
(1) to procure materials, reproduce and/or Manufacture and
Supply the Product Components based upon the applicable BOM(s) and purchase
orders delivered by Microsoft pursuant to the Statements of Work;
(2) to assemble the Product Components into Finished Product
Unit(s) solely in accordance with the written instructions and BOM(s) delivered
by Microsoft, including the right to reproduce and manufacture any Microsoft
software and documentation specified in the BOM(s) as necessary to build the
Finished Product Unit(s); and
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(3) to deliver the Finished Product Unit(s) to Customers
solely in accordance with the Statements of Work.
(b) License Restrictions.
(1) Except as expressly provided in the Statements of Work
or in this Agreement, StarTek shall not in any way modify any BOM, Print
Specifications, Products or Intellectual Property without obtaining, in advance,
the express written permission of Microsoft;
(2) StarTek shall not reproduce, manufacture, or distribute
any Product or Intellectual Property except pursuant to. the terms of this
Agreement or pursuant to a separate legal contractual arrangement, which
contains a valid Microsoft license or authorization to do same;
(3) StarTek shall not reverse engineer, decompile, or
disassemble any Products or Intellectual Property. Notwithstanding the
foregoing, StarTek may physically disassemble those Product Components that do
not consist of software or hardware solely for the purpose improving Product
assembly and/or quality. No other product or informational piece, including
without limitation flyers, literature, documentation and advertising, may be
bundled with any Products without the prior written consent of Microsoft.
(4) StarTek shall perform the Manufacturing and Supply and
Services (including, but not limited to replication and assembly of Products)
only at the Facilities. Additional StarTek Facilities may be added to Exhibit H,
but the addition of such locations is subject to Microsoft's prior written
approval and, in the case of a StarTek subsidiary, the full execution by the
StarTek subsidiary of the Microsoft Subsidiary Agreement between Microsoft and
such StarTek subsidiary as shown in Exhibit I. StarTek hereby guarantees its
subsidiary's fulfillment of the applicable obligations imposed on StarTek by
this Agreement. StarTek agrees to indemnify Microsoft for all damages and/or
costs of any kind, without limitation, incurred by Microsoft or any third party
and caused by a breach of its subsidiary's fulfillment of the applicable
obligations imposed on StarTek by this Agreement, including, without limitation,
StarTek's payment of any costs, fees and/or monetary judgments awarded in favor
of Microsoft, by a court of competent jurisdiction, resulting from StarTek's
subsidiary's unauthorized replication and/or distribution of Product(s).
(5) StarTek shall perform Manufacturing and Supply and
Services solely in accordance with this Agreement, including without limitation,
the Statements of Work.
(6) All rights not expressly granted herein, without
limitation, are reserved by, and shall exclusively inure to the benefit of,
Microsoft.
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6. SUBCONTRACTING.
(a) To Third Parties. StarTek shall not subcontract any of its
rights or obligations under this Agreement, with respect to Manufacturing and
Supply and Services, except as follows:
(1) Prior to any subcontractor performing any such services
for StarTek under this Agreement, StarTek and its subcontractor shall enter into
a written agreement ("Subcontractor Agreement") that expressly provides that
Microsoft is a third party beneficiary of the Subcontractor Agreement with
rights to enforce such agreement should StarTek fail to timely do so; that
Microsoft, at its sole discretion, reserves the right to evaluate the
Subcontractor, either in person or in written form; and further that requires
Subcontractor to:
(A) comply with the applicable obligations identical
to those imposed on StarTek under Sections 2, 5(b), 7(a), 8(a)(1), 9, 10, 11(c),
12, 13, 16(k), 16(1) and Exhibits A and B of this Agreement, and
(B) halt reproduction of Product(s) as required
under this Agreement or upon notice from StarTek or Microsoft of the termination
or expiration of this Agreement, and
(C) pay Microsoft's attorneys' fees if Microsoft
employs attorneys to enforce any rights arising out of the Subcontractor
Agreement; and
(2) StarTek guarantees its subcontractor's fulfillment of
the applicable obligations imposed on StarTek by this Agreement; and
(3) StarTek shall indemnify, defend and hold Microsoft
harmless for all damages and/or costs of any kind, including without limitation,
those incurred by Microsoft and caused by a breach of the Subcontractor
Agreement by a subcontractor and/or subcontractor's failure to fulfill the
applicable obligations imposed on StarTek by this Agreement, including, but not
limited to, StarTek's payment of any monetary judgments awarded to Microsoft by
a court of competent jurisdiction and any costs and fees relating thereto, not
paid by subcontractor, resulting from subcontractor's unauthorized replication
and/or distribution of Product(s) in accordance with the Subcontractor
Agreement; and
(4) Upon execution of this Agreement and thereafter prior to
a subcontractor performing any services under this Agreement, StarTek shall
provide Microsoft with a written certification, signed by a StarTek officer,
representing and warranting that StarTek is in compliance with the provisions of
Section 6 of this Agreement; and
(5) Microsoft, in its reasonable discretion, will provide an
approved CD and COA supplier list as seen in Exhibit F which may be updated by
Microsoft from time to
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time. If a supplier used by StarTek as a subcontractor is removed from such list
by Microsoft, Microsoft acknowledges that StarTek may not be able to immediately
discontinue use of subcontractor. In such case, subject to other rights and
obligations of enforcement as set forth in the Agreement, Microsoft and StarTek
will mutually agree to a transition plan.
(b) Rights Pass Through. It is the intention of this section that
StarTek be able to subcontract, provided StarTek fully maintains quality
standards and protects Microsoft's property rights in Microsoft's Intellectual
Property and Deliverables such that, in addition to Microsoft's recourse to
StarTek under this Agreement, Microsoft shall also have rights enforceable
directly against the subcontractor. The responsibility and liability of StarTek
under this Agreement is not diminished on account of any subcontract and StarTek
shall be fully responsible for the subcontractors performance and work.
(c) Export Restrictions. StarTek hereby agrees that in
subcontracting portions of the Manufacturing and Supply and Services to third
parties pursuant to Section 6(a) or (b) above, StarTek shall not, directly or
indirectly, export or transmit (i) any Product Component, Product and/or
technical data or (ii) any Product (or any part thereof), process, or service
that is the direct product of a Product, to (a) any countries that are subject
to U.S. export restrictions (including as of the Effective Date, but not limited
to, the Afghanistan (Taliban controlled areas only), Cuba, Iran, Iraq, Libya,
North Korea, Sudan and Syria); (b) any end-user whom StarTek knows or has reason
to know will utilize such Product Component, Product and/or technical data in
the design, development or production of nuclear, chemical or biological
weapons; or (c) any other country to which such export or transmission is
restricted by the export control laws and regulations of the United States, and
any amendments thereof, without prior written consent, if required, of the
Bureau of Export Administration of the U.S. Department of Commerce, or such
other governmental entity as may have jurisdiction over such export or
transactions, unless Microsoft specifically directs StarTek in writing to do so.
(d) StarTek Subcontracting Requirements. To the extent that StarTek
is providing products and/or performing services for Microsoft in the United
States pursuant to this Agreement and is authorized to obtain and does obtain
some or all of the products and/or services from any third party in fulfilling
its obligations under this Agreement (the "Third Party Products and/or
Services"), StarTek agrees to acquire Third Party Products and/or Services from
the following:
(1) Small Businesses. At least * of the total amount paid by
StarTek to suppliers of Third. Party Products and/or Services shall be
attributable to Third Party Products and/or Services obtained from Small
Businesses. For purposes of this section, "Small Businesses" shall mean those
businesses that are classified as small businesses by the U.S. Small Business
Administration.
(A) Minority-Owned and Operated Small Businesses.
StarTek's obligation identified in Section 1, above, shall include at least * of
the total amount paid by StarTek to suppliers of Third Party Products and/or
Services attributable to
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Third Party Products and/or Services obtained from Small Businesses that are
Minority-Owned and Operated Businesses. For purposes of this section,
"Minority-Owned and Operated Businesses" shall mean businesses (a) which are at
least fifty-one percent (51%) owned by a Minority Person or Persons or, in the
case of any publicly owned business, at least fifty-one percent (51%) of the
stock of which is owned by a Minority Person or Persons and (b) whose management
and daily business operations are controlled by one or more of the same Minority
Person or Persons having such ownership interest. For purposes of this section,
"Minority Person or Persons" shall mean one or more individuals residing in the
United States who is/are (a) African-American/Back, (b) Hispanic, (c)
Asian-American/Pacific Islander (including native Hawaiians), and/or (d) Native
American/American Indian (including Inuits and Aleuts); and
(B) Women-Owned and Operated Small Businesses.
StarTek's obligation identified in Section 1, above, shall include at least * of
the total amount paid by StarTek to suppliers of Third Party Products and/or
Services attributable to Third Party Products and/or Services obtained from
Small Businesses that are Women-Owned and Operated Businesses. For purposes of
this section, "Women-Owned and Operated Businesses" shall mean businesses (a)
which are at least fifty-one percent (51%) owned by one or more women residing
in the United States, or, in the case of zany publicly owned business, at least
fifty-one percent (51%) of the stock of which is owned by one or more women
residing in the United States and (b) whose management and daily business
operations are controlled by one or more of the same women having such ownership
interest.
By the * following each calendar quarter, StarTek shall complete all information
required on General Services Administration Standard Form 294 ("SF294") and
submit SF294 to Microsoft's Vendor Account Manager (the "VAM"). SF294, when
signed by an officer of StarTek, shall indicate StarTek's compliance with the
requirements of this section. The information provided by StarTek on SF294 shall
include, but may not be limited to, the name(s) of all third parties from which
StarTek obtains Third Party Products and/or Services and the total dollar amount
of such purchases for the preceding quarter. StarTek agrees that the total
dollar amount of such purchases shall not be co-reported or double-reported to
government agencies or other third parties. StarTek shall provide the VAM with
the name of a specific StarTek employee contact responsible for administration
of StarTek's obligations under this section (the "StarTek Contact").
If StarTek has used best efforts to fulfill its obligations under this section
(including the efforts identified in the preceding paragraph), but has failed to
do so for reasons beyond StarTek's reasonable control, then the StarTek Contact
shall:
1. meet with the VAM and Supplier Diversity
Program Manager to discuss StarTek's efforts to comply with this section. If the
VAM and Supplier Diversity Program Manager determine that StarTek has made best,
but unsuccessful, efforts to be in compliance with this section, then, at
Microsoft's sole reasonable discretion, (a) Microsoft shall not enforce
StarTek's obligations under this section for a period not to exceed the
timeframe required by StarTek to comply with the provisions of subsection 2,
14
below, (b) Microsoft shall confirm the same in writing, and (c) Microsoft shall
not consider StarTek to be in breach of its obligations under this section, and
2. develop, in conjunction with the VAM and
Supplier Diversity Program Manager, a mutually agreeable plan (including, but
not limited to, a compliance timeline, quarterly compliance milestones, and
quarterly reporting requirements) by which StarTek shall come into compliance
with its obligations under this section.
If, after meeting with the StarTek Contact as provided above, Microsoft
determines in its sole reasonable discretion that it is not feasible or
reasonable to require StarTek's full compliance with this section, Microsoft
shall either (a) modify the Small Business percentage requirements in order to
facilitate StarTek's compliance or (b) eliminate StarTek's obligation to comply
with this section in its entirety.
(e) Indemnification. If StarTek delivers Product(s) to a Customer
specified by Microsoft or at Microsoft's direction, Microsoft agrees to
indemnify StarTek for any consequent indirect violation of the export
restrictions described in subsection 6(c) above.
(f) Enforcement. StarTek agrees that it will diligently and timely
enforce all rights against or obligations of any subcontractor(s) in order to
enforce compliance with the applicable terms of this Agreement and/or to
otherwise cure a subcontractor breach.
7. REPRESENTATIONS & WARRANTIES.
(a) By StarTek. StarTek represents and warrants to Microsoft as
follows:
(1) StarTek has full right and power to enter into and
perform according to the terms of this Agreement and doing so does not violate
any agreement between it and any third party;
(2) the Manufacturing and Supply and Services, including any
portion done by any subcontractor as contemplated in Section 5, will strictly
comply with all applicable laws, as well as the terms and conditions of this
Agreement, including without limitation the Statements of Work;
(3) the Products (including the Raw Materials, reproduction
quality, Product Components and Finished Product Unit quality) will satisfy the
quality workmanship standards and service levels set forth in the Microsoft
Website * and Statements of Work and StarTek shall further protect Microsoft's
property rights in Microsoft's Intellectual Property and Deliverables from
unauthorized use within the scope of this Agreement;
(4) StarTek shall at all times comply with its commitments
and obligations as stated in this Agreement;
(5) StarTek's performance of Manufacturing and Supply and
Services, pursuant to the rights granted under this Agreement, does not infringe
any third party's
15
patent, copyright, trade secret and/or any other intellectual property right
with respect to StarTek's replication, assembly, and/or distribution processes;
(6) StarTek will, at all times relevant to this Agreement,
keep any and all license agreement with third parties relevant to Manufacturing
and Supply and Services for the Products in force and in good standing; and
(7) StarTek shall promptly replace, at no charge to
Microsoft or the Customers, any non-conforming Products, and all transportation,
customs, and/or taxes relating thereto, if any delivery of Products to Microsoft
or Customers, or any portion of it, breaches the warranties of Section 7(a). In
the event Microsoft determines that a Product recall is necessary, StarTek shall
cooperate with Microsoft in all respects to conduct such recall at StarTek's
expense, provided that if the recall is necessary because of a Microsoft error,
the recall on the account of that defect shall be at Microsoft's expense, but
StarTek shall still cooperate with it, and in such a case, Microsoft shall
reimburse StarTek for the costs of producing and distributing the replacement
Products.
(8) StarTek agrees that it will not make any warranties,
statements or representations regarding Product(s) beyond the scope of what is
authorized by this Agreement or contained in Microsoft-provided written
documentation or other Microsoft documents or contained in the written Microsoft
Software License Agreement.
(9) StarTek agrees that it will not modify any of the
warranties regarding Product(s) set forth in the written Microsoft Software
License Agreement or in Microsoft-provided written documentation or other
Microsoft documents.
(10) StarTek shall indemnify, defend and hold Microsoft
harmless from all Claims threatened, asserted or filed by any person or entity
arising out of or related to any other warranty of alleged warranty made or
modified by StarTek.
(b) By Microsoft. Microsoft hereby represents and warrants to
StarTek as follows:
(1) Microsoft has the full and exclusive right and power to
enter into and perform according to the terms of this Agreement;
(2) Microsoft has and will have, at all relevant times,
sufficient rights in the Products to grant StarTek the rights granted in this
Agreement;
(3) that at all times relevant to this Agreement, Microsoft
will keep any and all license agreements with third parties relevant to the
reproduction and manufacture of the Products in force and in good standing; and
(4) that any and all software and Intellectual Property
provided by Microsoft to StarTek for incorporation into the Products will be
exportable into the countries where Microsoft requests it be delivered.
16
(c) Disclaimer of Warranty. THE WARRANTIES SET FORTH IN SECTIONS
7(a) AND 7(b) ABOVE ARE THE ONLY WARRANTIES MADE BY THE PARTIES AND ARE IN LIEU
OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, OR STATUTORY, INCLUDING BUT NOT
LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY AND/OR FITNESS FOR A PARTICULAR
PURPOSE WITH RESPECT TO THE PRODUCTS.
8. INDEMNIFICATION.
(a) Indemnity.
(1) By StarTek. StarTek agrees to hold harmless and
indemnify Microsoft, its subsidiaries and affiliates, and their respective
directors, officers, and employees, from and against any and all claims, suits,
actions, proceedings, or liabilities of any kind, including reasonable attorneys
fees and expenses associated therewith or with successfully establishing the
right to indemnification hereunder, which arises out of or is connected with
this Agreement, except to the comparative extent such claims, suits, actions,
proceedings or liabilities result from the fault, negligence, or willful acts of
Microsoft. StarTek shall further hold harmless and indemnify Microsoft from and
against any and all claims, suits, actions, proceedings, or liabilities of any
kind, including reasonable attorneys fees and expenses incurred in connection
therewith or with successfully establishing the right to indemnification
hereunder, which arise out of (i) the breach or alleged breach of any
representation, warranty or agreement made by StarTek in this Agreement, or (ii)
the breach or default by StarTek in the performance of any obligation to be
fulfilled by StarTek under this Agreement.
(2) By Microsoft. Microsoft agrees to hold ham-less and
indemnify StarTek, its subsidiaries and affiliates, and their respective
directors, officers, and employees, from and against any and all claims, suits,
actions, proceedings, or liabilities of any kind, including reasonable attorneys
fees and expenses associated therewith or with successfully establishing the
right to indemnification hereunder, which arises out of or is connected with any
claim that, if true, would constitute a breach of Microsoft's representations
and warranties set forth in Section 7(b) above.
(b) Survival. StarTek and Microsoft agree that the indemnities set
forth in this Section 8 shall survive and shall be enforceable beyond the
termination or completion of this Agreement.
(c) Limitation on Liability. STARTEK'S TOTAL LIABILITY AS TO MATTERS
ARISING UNDER THIS AGREEMENT SHALL BE LIMITED TO THE LESSER OF * OR *, WITH THE
EXCEPTION THAT STARTEK'S LIABILITY SHALL BE UNLIMITED AS TO: (i) ANY
INDEMNIFICATION OBLIGATION FOR PERSONAL INJURY, DEATH OR PROPERTY DAMAGE TO THE
EXTENT SUCH CLAIM IS BASED UPON STRICT LIABILITY, NEGLIGENCE, GROSS NEGLIGENCE,
INTENTIONAL ACT OR OTHER FAULT OF STARTEK OR ITS
17
SUBCONTRACTOR(S); (ii) ANY MATTER ARISING UNDER SECTIONS 9 OR OF THIS AGREEMENT;
(iii) FOR THE COST OF REPLACING PRODUCTS AND ASSOCIATED TRANSPORTATION COSTS OF
ANY PRODUCT RECALL; (iv) ANY FAILURE TO RETURN ANY DELIVERABLES AS IS OTHERWISE
PROVIDED FOR IN THIS AGREEMENT; OR (v) ANY COPYRIGHT, PATENT, TRADEMARK OR TRADE
SECRET INFRINGEMENT(S) (ALL OF THE FOREGOING BEING COLLECTIVELY REFERRED TO AS
THE "STARTEK EXCLUDED MATTERS"). MICROSOFT'S TOTAL LIABILITY AS TO MATTERS
ARISING UNDER THIS AGREEMENT SHALL ALSO BE LIMITED TO THE LESSER OF * OR *,
EXCEPT FOR ANY MATTERS ARISING UNDER SECTION 9 OF THIS AGREEMENT. EXCEPT WITH
REGARD TO STARTEK EXCLUDED MATTERS (WHICH TERM FOR THE PURPOSES OF THIS SENTENCE
SHALL NOT INCLUDE ANY LIABILITY AS TO RECALL), NO PARTY HERETO SHALL BE LIABLE
TO ANOTHER FOR ANY INDIRECT, CONSEQUENTIAL, PUNITIVE OR INCIDENTAL DAMAGES
ARISING OUT OR RELATED TO THIS AGREEMENT. THE PARTIES ACKNOWLEDGE THAT THE OTHER
PROVISIONS OF THIS AGREEMENT RELY UPON THE INCLUSION OF THIS SECTION 8(c).
9. CONFIDENTIALITY.
(a) General. Each party expressly undertakes to retain in confidence
the terms of this Agreement and the Agreement itself, along with all information
and know-how transmitted to or otherwise received by each party that the
disclosing party has identified as being proprietary and/or confidential or
that, by the nature of the circumstances surrounding the disclosure, ought in
good faith to be treated as proprietary and/or confidential (collectively,
"Confidential Information"), and will make no use of such Confidential
Information except under the terms and during the existence of this Agreement.
Notwithstanding the foregoing, any party may disclose the terms of this
Agreement to its outside legal and financial advisors with whom such party has a
confidential relationship and who are obligated to retain such information in
confidence, in the ordinary course of business. In addition, no party shall have
an obligation to maintain the confidentiality of information that (i) it
received rightfully from an unaffiliated third party prior to its receipt from
the disclosing party; (ii) the disclosing party has disclosed to an unaffiliated
third party without any obligation to maintain such information in confidence;
or (iii) is independently developed by the obligated party. Further, each party
may disclose Confidential Information as required by governmental or judicial
order, provided such party gives the disclosing party prompt written notice
prior to such disclosure, and complies with any protective order (or equivalent)
imposed on such disclosure, and provides the disclosing party the option of
either seeking a protective order or having its Confidential Information be
subject to the same protective orders as may apply to information of the party
subject to the governmental or judicial order. No party shall disclose,
disseminate or distribute any other party's Confidential Information to any
third party without the other's prior written permission. Each party's
obligation under this Section 8 shall extend to the earlier of such time as the
information protected hereby is in the public domain through no fault of the
obligated party
18
or five (5) years following termination or expiration of this Agreement. Each
party shall take all reasonable steps to ensure that their employees (and in the
case of StarTek, also its subcontractors) comply with this Section 9(a).
(b) Ownership Rights. Both parties agree that each has and shall
retain ownership rights to its own Confidential Information and that upon
completion or termination of this Agreement and request from the other party,
each party will return the other's Confidential Information regardless of the
media in which it is stored. For Microsoft, Confidential Information at least
and specifically includes, but is not limited to: (i) *. Notwithstanding the
foregoing, if as a result of StarTek's performance of the Services, StarTek
enhances or improves Microsoft Customer lists, such enhancements or improvements
shall be the sole property of Microsoft. Both parties agree to return all
Confidential Information including, but not limited to, records released to
either party for marketing and distribution services, to either party
immediately upon either party's written request, and upon termination or
expiration of this Agreement.
(c) Injunctive Relief. Both parties acknowledge that unauthorized
disclosure or use of Confidential Information could cause irreparable harm and
significant injury which may be difficult to ascertain. Accordingly, both
parties agree that the aggrieved party will have the right to seek and obtain
injunctive relief from breaches of this Agreement, in addition to any other
rights and remedies it may have.
(d) Facility Tours. Microsoft acknowledges that customers and
potential customers of StarTek may tour the Facility. Microsoft agrees that any
casual viewing during such a tour of Products that Microsoft has already
commercially released does not violate Section 9(a) above. * In the event that
Microsoft reasonably believes that additional security measures are necessary,
Microsoft will notify StarTek, and the parties will implement additional
mutually agreeable security procedures for so long as necessary.
10. RISK OF LOSS.
(a) General. Risk of loss for all Consigned Inventory, Inventory,
Deliverables, Products, Finished Product Units, and Microsoft property which are
the subject of this Agreement, together with all Product Components (including
the associated Raw Materials), shall remain with StarTek except as otherwise
provided in this Section 10. StarTek shall take all reasonable precautions to
protect Microsoft property against loss, damage, theft or disappearance while in
its care, custody or control.
(b) Transit Risks. Risk of loss for Product(s) or Product Components
in transit shall remain at all times with StarTek unless and until acceptance of
Finished Product Units is made by a Microsoft or Customer directed carrier.
(c) On Premises Risk. StarTek shall be responsible for all risk of
loss or damage to all Microsoft property while located at StarTek's or its
subcontractor's facilities. StarTek shall be responsible for the full amount of
the loss or damage and shall reimburse Microsoft
19
for such loss or damage. Reimbursable amount for any loss or damage shall be as
set forth in Section (d) below.
(d) Reimbursable Amount. StarTek shall reimburse Microsoft for any
loss or damage to Finished Product Units as follows:
(1) StarTek shall reimburse Microsoft for the * as
established by Microsoft for any loss or damage to Finished Product Units,
except loss or damage resulting from (i) theft; (ii) mysterious disappearance;
(iii) StarTek's negligence or willful acts; or (iv) Shortage (as defined below)
in excess of *. The * variance will be calculated as defined in the Statement of
Work Metrics Reporting attachment;
(2) StarTek shall reimburse Microsoft for * as established
by Microsoft for any loss to Finished Product Units resulting from (i) theft;
(ii) mysterious disappearance; (iii) the negligence or willful acts of StarTek;
or (iv) Shortage (as defined below) in excess of *
(e) Protection of Microsoft Intellectual Property. StarTek shall
ensure that the Intellectual Property provided by Microsoft to StarTek or its
Microsoft-approved subcontractor in accordance with this Agreement is retained
and held by StarTek or its Microsoft-approved subcontractor in such a manner as
to prevent its unauthorized use. Without limiting the generality of the
foregoing, StarTek shall ensure that the Media *. For purposes of this Section,
(a) "Intellectual Property" shall mean any and all trademarks, copyrights,
patents and other proprietary rights comprising or encompassing a given Product,
(b) "Product" shall mean those Microsoft products, including without limitation,
any associated documentation and packaging that StarTek or its
Microsoft-approved subcontractor manufactures pursuant to the Agreement, and (c)
"Media" shall mean the media upon which the Intellectual Property is stored,
including, but not limited to, electronic and physical artwork files, PID files
and labels, labels and label art, CD serialization files and labels, film, all
software media on disk, CD-R masters, CD-ROM masters, glass masters, stampers
and electronic files.
Obsolete Media shall be destroyed to prevent unauthorized use in the
following manner:
(1) StarTek shall verify that CD stampers *.
(2) CD-R masters shall be *.
(3) Electronic media and artwork files shall be *.
(4) Printed materials shall be *.
(5) Label printing ribbons shall be *.
20
Product obsolescence and the corresponding Media destruction shall be
coordinated through the Microsoft Vendor Account Manager. Physical destruction
of the Media shall either be witnessed by Microsoft personnel or certified in
writing by StarTek.
(f) Shortage. StarTek shall be liable for and shall reimburse
Microsoft for any Product(s) that is unaccounted for ("Shortage"), when such
Shortage exceeds *, calculated as shown in Exhibit __, as reported in the *
build reports provided to Microsoft, or as determined upon physical
inventory/audit conducted pursuant to Section 12 of this Agreement. "Shortage"
shall be include *.
(g) Salvage. At all times, and regardless of whether StarTek or its
insurers are required to compensate Microsoft for property losses as provided
for in this section, Microsoft shall retain sole rights to salvage for damaged
Products. StarTek shall not surrender damaged goods to carriers, insurers, other
parties or for destruction or disposal without first obtaining the written
consent of Microsoft.
(h) Notice of Loss. *
11. TERM AND TERMINATION.
(a) Duration. The term of this Agreement shall commence on the
Effective Date and continue until * (the "Initial Term"), unless terminated
earlier as provided below. Upon expiration of the Initial Term, this Agreement
shall automatically renew for successive * terms (each a "Renewal Term") at the
then current pricing, unless either party notifies the other party of its intent
not to renew by providing the other party with written notice not less than *
prior to the expiration of the Initial Term or any subsequent Renewal Term.
(b) Early Termination and Default. Microsoft may terminate this
Agreement immediately upon notice if StarTek: (i) fails to strictly comply with
Section(s) 5 or 9 of this Agreement, (ii) makes or attempts to make an
assignment in violation of Section 16(a) of this Agreement, or (iii) experiences
an Insolvency Event of Default, as defined below. In addition to the foregoing,
Microsoft or StarTek may terminate this Agreement without cause with * notice in
writing. The rights and remedies provided herein to the parties shall not be
exclusive and are in addition to any other rights and remedies provided by law.
In the event a non-defaulting party in its discretion elects not to terminate
this Agreement, such election shall not be a waiver of any claims of that party
for a default(s). Further, the non-defaulting party may elect to leave this
Agreement in full force and effect and to institute legal action against the
defaulting party for specific performance and/or damages suffered by such party
as a result of the default(s). For purposes of this Agreement, an "Insolvency
Event of Default" shall be deemed to have occurred in the event the applicable
party fails to formally dismiss the Insolvency Event of Default within * after
commencement of any of the following proceedings: (v) any party admits in
writing its inability to pay its debts generally or makes a general assignment
for the benefit of its creditors; (w) a proceeding is instituted, voluntarily or
otherwise, by or against any party seeking to adjudicate it a bankrupt or
insolvent, or seeking
21
reorganization, arrangement adjustment or composition of it or its debt, which
is not dismissed within *; (x) a proceeding is instituted against any party
seeking to appoint a receiver, trustee or similar official for it or for any
substantial part of its property; (y) a party ceases to pay its debts as they
become due; or (z) any party becomes Insolvent, as defined elsewhere herein. "
Notwithstanding the foregoing, Microsoft may, at its sole discretion,
immediately terminate this Agreement if, due to StarTek's lack of diligence,
StarTek engages in or permits its subcontractor(s) to engage in the unauthorized
replication and/or distribution of Product(s). StarTek will diligently attempt
to prevent any unauthorized replication and/or distribution of Product(s) by
StarTek employees or any subcontractor and will cooperate fully with Microsoft
to that end. Microsoft may, at its sole discretion, immediately terminate
StarTek's right to subcontract the replication and/or assembly of Product(s), in
accordance with Section 6 of this Agreement, if Microsoft determines that
StarTek's subcontractor is or has been involved in the unauthorized replication
and/or distribution of Product(s) or any third party products.
(c) Obligations Upon Termination/Expiration of this Agreement.
Within *, or earlier as noted, after termination or expiration of this
Agreement, StarTek shall do all of the following:
(1) deliver to Microsoft any Finished Product Units built
against a Microsoft purchase order, but not yet delivered, at the Prices set
forth in Exhibit C. StarTek shall destroy all other Finished Product Units and
shall, upon request of Microsoft, issue a letter certifying that such
destruction has taken place.
(2) StarTek shall, at Microsoft's election, either deliver
to Microsoft or destroy any other unused Inventory (excluding Finished Product
Units), as designated by Microsoft. Microsoft's payment obligation for such
unused Inventory shall be in accordance with Exhibit C.
(3) Subject to payment as set forth in Exhibit C, StarTek
shall, at Microsoft's request, provide Microsoft the opportunity to purchase any
other Product Components owned by StarTek (excluding unused Inventory).
(4) StarTek immediately shall deliver to Microsoft any
Microsoft Deliverables and any Confidential Information not covered by the
foregoing. StarTek shall not retain any copy or original of any Microsoft
Deliverable or Confidential Information in any way or form whatsoever.
StarTek shall work with Microsoft to terminate the Manufacturing and Supply and
Services in an orderly manner in the event of the termination of this Agreement.
Use of Intellectual Property in any manner by StarTek after expiration or
termination of this Agreement for any reason, whether or not incorporated in
Inventory, shall be deemed to be in violation of Microsoft's Intellectual
Property rights and shall entitle Microsoft to
22
have all remedies provided by law or equity (including injunctive relief);
provided, however, this does not preclude StarTek from continuing to use
Products properly acquired outside of this Agreement in accordance with the
applicable license.
(d) Effect of Default. If there is a Default, the parties shall have
all rights and remedies provided in this Agreement or otherwise available under
law as limited by this Agreement.
(e) Survival. Sections 2(d), 7, 8, 9, 12, 14 and 16(b) shall survive
termination or expiration of this Agreement. With respect to tax matters, the
provisions of Section 4(d) shall survive termination or expiration until the
expiration of any applicable statute of limitations or extension thereof.
12. RECORD KEEPING AND AUDIT REQUIREMENTS.
(a) Record Keeping Requirements. During the term of this Agreement,
StarTek agrees to keep all usual and proper production and delivery records and
books of account and all usual and proper entries relating to StarTek's (and any
subcontractor's) performance of this Agreement for a minimum period of * from
the date they are created. StarTek agrees to keep all usual and proper tax
records relating to StarTek's (and any Subcontractor's) performance of this
Agreement for a minimum period of * from the date they are created. Such
records, books of account, and entries shall be kept in accordance with
generally accepted accounting principles.
(b) Documentation. During the term of this Agreement, StarTek agrees
to provide Microsoft with any and all information, as mutually agreed upon
between the parties, that Microsoft determines necessary for tax compliance and
statutory reporting purposes. The information required will include, but may not
be limited to, the data shown on Exhibit E. Unless Microsoft indicates
otherwise, StarTek shall provide such information in an electronic format, at an
agreed upon quarterly deadline. Microsoft shall specify the data requirements
and make every reasonable effort to assist StarTek in designing the report
format. All information should be based on the Microsoft fiscal year-to-date
basis. Such report shall also cover StarTek's subcontractor's). Microsoft
reserves the right to modify the form of such reports by providing StarTek with
written notice of any such modifications.
(c) Audit. Notwithstanding the foregoing provisions, upon * written
notice if Microsoft reasonably believes a breach is occurring under this
Agreement (with such notice specifying the alleged breach) and otherwise upon
reasonable notice as agreed upon between the parties (but in no event shall such
reasonable notice exceed * and StarTek shall not unreasonably delay or withhold
its agreement), Microsoft may cause an audit to be made of StarTek's (and any
applicable subcontractor's) books and records, and/or an inspection of
replication, assembly, and distribution locations, including the Facility, in
order to verify StarTek's compliance with the terms of this Agreement and to
verify financial reports issued by StarTek. This right of audit extends beyond
the termination of this Agreement for a period of *.
23
. Any such audit shall be made by an independent certified public
accountant selected by Microsoft (other than on a contingent fee basis) and/or a
Microsoft internal audit team. Any audit and/or inspection shall be conducted
during regular business hours at StarTek's (or any applicable subcontractor's)
offices. StarTek agrees to provide Microsoft's designated audit or inspection
team access to relevant StarTek records and all replication and/or assembly
locations. Any such audit shall be paid for by Microsoft unless material
discrepancies are disclosed. * If material discrepancies are disclosed, StarTek
agrees to pay Microsoft for the costs associated with the audit. No unauthorized
duplication or replication of Product will be permitted. StarTek shall be liable
for any Unaccounted Product discrepancies in excess of the Shortage allowance in
an amount equal to * "Unaccounted Product's)" shall be defined as the number of
Finished Product(s) Units that the audit and/or inspection determines have been
replicated and assembled by StarTek and/or one of StarTek's subcontractors, but
(i) have not been properly delivered in accordance with the terms of this
Agreement, (ii) are not in StarTek's inventory, (iii) are not in transit in
accordance with the terms of this Agreement; (iv) have not been properly
destroyed at Microsoft's direction; (v) have not been otherwise accounted for as
damaged or destroyed or lost by theft; or (vi) are not lost or damaged as a
result of the negligence or willful acts of StarTek. StarTek shall also be
liable for Unaccounted Products of its subcontractor(s). StarTek's obligation to
pay Microsoft for Unaccounted Product's) shall not be Microsoft's exclusive
remedy and is in addition to any other rights and remedies Microsoft may have as
provided by law or this Agreement.
(d) Facility Inspections. Microsoft may cause an inspection to be
made, with at least * prior notice, of the Facility to verify that StarTek
and/or any subcontractor is providing Manufacturing and Supply and Services in
compliance with the terms of this Agreement. Any inspection conducted pursuant
to this Section 12(d) shall be conducted during regular business hours at the
Facility. StarTek agrees to provide Microsoft's designated inspection team
access to relevant records and the Facility. StarTek may designate a
representative to accompany the inspector or inspectors, and it may reasonably
restrict access from specific areas containing confidential information of
StarTek or its other customers. If material discrepancies from the provisions of
this Agreement are disclosed, StarTek agrees to implement agreed-upon corrective
action. Nothing herein shall preclude Microsoft from exercising any other rights
or remedies it has under law or other provisions of this Agreement.
(e) Confidentiality. Notwithstanding the foregoing, StarTek may edit
its books and records to protect confidential information of StarTek that is
unrelated to the subject of a Microsoft record review, or to protect
confidential information of StarTek's customers.
24
13. EXPORT RESTRICTIONS. StarTek shall comply with U.S. export laws and
regulations. StarTek shall not, directly or indirectly, export, re-export or
transmit any Product (or any part thereof), technical data, process, or service
that is directly associated with a Product, to any country, person, entity,
Customer or end-user subject to U.S. export restrictions, including but not
limited to:
(a) any countries to which the U.S. has embargoed or that are
subject to U.S. export restrictions (including, but not limited to, the
Afghanistan (Taliban controlled areas only), Cuba, Iran, Iraq, Libya, North
Korea, Sudan and Syria) or to any national of any such country, wherever
located, who intends to transmit or transport the Product back to such country;
(b) any Customer or end-user whom StarTek knows or has reason to
know will utilize them in the design, development or production of nuclear,
chemical or biological weapons, or to any end-user who has been prohibited from
participating in U.S. export transactions by any federal agency of the U.S.
government;
(c) any other country to which such export of transmission is
restricted by the export control laws and regulations of the United States, and
any amendments thereof, without prior written consent, if required, of the
Bureau of Export Administration of the U.S. Department of Commerce, or such
other governmental entity as may have jurisdiction over such export or
transactions; and
(d) any exportable product (or portions thereof) regulated under the
Export Administration Regulation (EAR, 15 CFR 730-744) of the U.S. Commerce
Department, Bureau of Export Administration (BXA) outside the U. S. or Canada.
StarTek warrants and represents that neither the BXA nor any other U.S.
Federal agency has suspended, revoked or denied its export privileges. StarTek
shall comply with the published Microsoft Global Trade Compliance Programs.
StarTek shall be responsible for acquiring program documentation and interacting
with Microsoft to ensure its full and successful implementation. Microsoft will
be responsible for communicating to StarTek any changes or updates to any of the
published Microsoft Global Trade Compliance Programs and StarTek will be allowed
appropriate time to implement the changes or updates. StarTek agrees that
Microsoft may audit StarTek's compliance with the published Microsoft Global
Trade Compliance Programs at any time, pursuant to Section 11 above.
14. NOTICES AND PRINCIPAL CONTACTS.
All notices, authorizations, and requests in connection with this
Agreement shall be deemed given on the day they are sent by air express courier,
charges prepaid; and addressed as follows:
25
STARTEK: StarTek Inc.
Chief Operating Officer
100 Garfield Street, 4th Floor
Denver, CO 80206
Telephone: (303) 399-2400
Fax: (303) 388-4970
With a copy to: StarTek General Counsel
Telephone:
Fax:
MICROSOFT: Microsoft Corporation
One Microsoft Way
Redmond, WA 98052-6399
Attn: *
Telephone: *
Fax: *
With a copy to: Law & Corporate Affairs
Microsoft Corporation
One Microsoft Way
Redmond, WA 98052-6399
Telephone: (425) 882-8080
Fax: (425) 936-7329
or such other person or address as each party, respectively, so designates by
written notice to the other parties.
15. ENTIRE AGREEMENT AND MODIFICATIONS.
(a) Entire Agreement. This Agreement, including all exhibits hereto,
constitutes the entire agreement between StarTek and Microsoft with regard to
the subject matter hereof and merge all prior and contemporaneous
communications. The Statements of Work, as may be modified pursuant to Section
14(b) below, is a part of this Agreement for all purposes.
(b) Statements of Work. The Statements of Work may be modified as
follows: each modification must be approved by Microsoft and StarTek, and such
approval must be documented with a confirming e-mail or other written
communication between authorized representatives of the two parties. In
addition, if Microsoft deems it necessary and appropriate, it shall prepare on a
* basis an updated version of the Statements of Work incorporating all
modifications made since the prior update and clearly setting forth the
26
"Date of Revision" on the front page. Microsoft shall circulate each such update
to StarTek. The most current revised version of the Statements of Work that has
been circulated in this manner to the parties, together with subsequent
modifications documented pursuant to this Section 15(b) shall constitute the
Statements of Work for the purposes of this Agreement. StarTek shall maintain
and make available to Microsoft upon request copies of all of its documentation
regarding modifications to the Statements of Work. For purposes of this
Agreement, references to Statements of Work includes any agreed modification
even if prior to the quarterly incorporation of such changes.
(c) Amendment. This Agreement may be amended only in writing signed
by authorized representatives of both parties. Notwithstanding the foregoing,
Microsoft reserves the right to change, by * prior notice to StarTek, any
policies of Microsoft.
(d) Other. Except as provided in this Section 15, the provisions of
this Agreement may be modified only by written instrument signed by duly
authorized representatives of Microsoft and StarTek.
16. GENERAL.
(a) Prohibition Against Assignment. Except as expressly provided in
this Section 16(a), no party may assign its rights or obligations under this
Agreement (by actual assignment or by operation of law, including without
limitation through a merger, consolidation, exchange of shares, or sale or other
disposition of assets, including disposition on dissolution), without the prior
written consent of the other party, which consent shall not be unreasonably
withheld. Microsoft may, however, assign this Agreement to a Microsoft
subsidiary without the consent of StarTek. Notwithstanding the foregoing, this
is a contract for personal services and Microsoft relies upon the
qualifications, reputation and expertise of StarTek to perform all obligations
hereunder. In particular, Microsoft relies upon StarTek's history of performance
over more than * of operation,
(b) Controlling Law. This Agreement shall be construed and
controlled by the laws of the State of Washington, and StarTek consents to
jurisdiction and venue in the state and federal courts sitting in the State of
Washington. Process may be served on any party in the manner set forth in
Section 13 for the delivery of notices or by such other method as is authorized
by Washington law or court rule.
(c) No Partnership/Joint Venture/Agency/Franchise. This Agreement
shall not be construed as creating a partnership, joint venture,
employer-employee or agency relationship or as granting a franchise.
(d) Severability. If any provision of this Agreement shall be held
by a court of competent jurisdiction to be illegal, invalid or unenforceable,
the remaining provisions shall remain in full force and effect.
27
(e) Attorneys' Fees. If any party employs attorneys to enforce any
rights arising out of or relating to Agreement, the prevailing party shall be
entitled to recover its reasonable attorneys' fees, costs and other expenses.
(f) Waiver. No waiver of any breach of any provision of this
Agreement shall constitute a waiver of any prior, concurrent or subsequent
breach of the same or any other provisions hereof, and no waiver shall be
effective unless made in writing and signed by an authorized representative of
the waiving party.
(g) Section Headings. The Section headings used in this Agreement
are intended for convenience only and shall not be deemed to supersede or modify
any provisions.
(h) Governmental Approvals. Each party shall, at its own expense,
obtain and arrange for the maintenance in full force and effect of any and all
governmental approvals, consents, licenses, authorizations, declarations,
filings, and registrations as may be necessary or advisable for the performance
of all of the terms and conditions of this Agreement.
(i) Force Majeure.
(1) Except as otherwise provided in this Section 16(i),
neither party shall be in default by reason of any failure in performance of
this Agreement, if such failure arises out of causes beyond the control and
without the fault or negligence of the involving party including, but not
restricted to, acts of God, acts of the Government, fires, floods, epidemics,
quarantine restrictions, strikes, lock-outs, freight embargoes and unusually
severe weather. This Section shall also apply to StarTek's contractors where a
contractor's failure arises out of the same causes, except insofar as StarTek
could have reasonably been expected to obtain contractor supply from alternate
sources.
(2) StarTek shall give a written notice to Microsoft within
* after StarTek becomes aware of any circumstances or event which may reasonably
be anticipated to cause or constitute, or which constitute a force majeure as
described in Section 16(i)(1), above. Such notice shall contain a detailed
description of the delay and of the affected portion of the Agreement. Within a
further * after such notice, StarTek shall deliver a detailed written
description of the work-around plan, alternative sources, and any other
reasonable means that StarTek shall, at its own cost, use to prevent such
further delay.
(3) If the delivery of any Products shall be delayed by
reason of force majeure for more than * beyond when delivery was scheduled,
Microsoft may upon written notice to StarTek with respect to the undelivered
Products, either terminate any or all this Agreement hereunder. In the event of
such termination, the parties shall comply with their obligations as specified
in Section 11.
(j) Exhibit(s). The following exhibits, as amended from time to
time, are incorporated into this Agreement by this reference ("Exhibit(s)"):
28
EXHIBIT DESCRIPTION
A Statement of Work - Manufacturing
B Statement of Work - Distribution
C Component Pricing Matrix
D Insurance
E Required Tax Information
F Approved Subcontractor List
G Certificate of Material Destruction
H StarTek Facilities
I Subsidiary Agreement
All references to the "Agreement" are references to this Agreement and all
Exhibits, all as amended from time to time. To the extent that any provision
contained in any Exhibit is inconsistent or conflicts with this Agreement
exclusive of the Exhibits, the provisions of this Agreement (exclusive of the
Exhibits) shall control.
(k) Press Releases/Publicity. StarTek shall not issue any new press
releases or publicity that may relate or refer to this Agreement. Any press
statements shall only be released by joint agreement of the parties, except as
legally required by the SEC or NYSE. StarTek shall not use the name "Microsoft"
or "Microsoft Corporation" in any advertisements. StarTek may, however, with the
prior written consent of Microsoft, use the name "Microsoft Corporation" in
brochures, written response to requests for client lists as part of Requests for
Proposals, Requests for Information, etc. StarTek may also use the name
"Microsoft" or "Microsoft Corporation" in verbal client presentations.
(l) Insurance. Prior to the commencement of the Manufacturing and
Supply and Services to be performed hereunder and throughout the entire period
of performance by StarTek, StarTek shall procure and maintain the insurance
coverage set forth in Exhibit D. Such insurance shall be in a form and with
insurers acceptable to Microsoft, and shall comply with the minimum requirements
set forth in Exhibit D.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set
forth above. All signed copies of this Agreement shall be deemed originals.
MICROSOFT CORPORATION STARTEK INC.
/s/ Mark Roenigk /s/ E. Preston Sumner, Jr.
- -------------------------------- ------------------------------------
By By
Mark Roenigk E. Preston Sumner, Jr.
- -------------------------------- ------------------------------------
Name (Print) Name (Print)
29
General Manager Executive Vice President
- -------------------------------- ------------------------------------
Title Title
August 6, 2001 July 25, 2001
- -------------------------------- ------------------------------------
Date Date
30
State of Washington )
) ss:
County of King )
I certify that I know or have satisfactory evidence that
_______________________ is the person who appeared before me, and said person
acknowledged that (he/she) signed this instrument, on oath stated that (he/she)
was authorized to execute the instrument and acknowledged it as the
___________________________ of MICROSOFT CORPORATION to be the free and
voluntary act of such party for the uses and purposes mentioned in the
instrument.
Dated:
------------------
------------------------------------
Notary Public
[Seal or Stamp] ------------------------------------
[Printed Name]
My appointment expires:
-------------
31
State of Colorado )
) ss:
County of Arapahoe )
I certify that I know or have satisfactory evidence that
____________________ is the person who appeared before me, and said person
acknowledged that (he/she) signed this instrument, on oath stated that (he/she)
was authorized to execute the instrument and acknowledged it as the
_________________________ of StarTek, Inc. to be the free and voluntary act of
such party for the uses and purposes mentioned in the instrument.
Dated:
------------------
------------------------------------
Notary Public
[Seal or Stamp] ------------------------------------
[Printed Name]
My appointment expires:
-------------
32
EXHIBIT A
*
STARTEK, INC. MANUFACTURING STATEMENT OF WORK
JULY, 2001
For purposes of this exhibit, "Company" shall mean StarTek USA. All other
capitalized terms not otherwise defined in this Exhibit shall have the same
meaning as set forth in the Agreement to which this is an Exhibit.
1. GENERAL:
1.1 Purpose and Requirement Scope
This document describes the requirements that the Company must
meet as a manufacturer and service provider to Microsoft. The
general requirements under this agreement are:
1.1.1 Source and procure raw materials in accordance with
Microsoft specifications.
1.1.2 Build finished package product in accordance with
Microsoft specifications in the quantities ordered by
Microsoft pursuant to a Finished Goods Purchase Order.
1.1.3 Make Finished Product units available to a Microsoft
designated distribution center or ship direct to
designated Microsoft customers as requested.
1.1.4 Make Less Than Finished Goods components available to
Microsoft at the locations specified in a Less Than
Finished Goods Purchase Order.
1.1.5 Provide information regarding production and delivery as
required.
2. SCOPE OF BUSINESS
Microsoft may elect to split the book of business between two or more
companies.
3. FORECASTS
3.1 * Rolling Forecast:
Microsoft will provide a * rolling forecast for weeks * for all
Products anticipated to be built by the Company (reference
attachment 1). This
33
forecast may be used by the Company at the Company's discretion
for planning and procuring raw materials. Microsoft may change
the forecast up to the issuance of a *, followed by a Microsoft
Purchase Order, with no penalty or responsibility for any raw
materials, Product Components, or Product acquired/built to such
forecast, with the exception that certain long lead-time
components may be procured in advance of the frozen build signal
with agreement by the VAM.
3.2 Manufacturing Systems
The company shall perform procurement, scheduling and
manufacturing activities on their own manufacturing system(s).
Microsoft will not be responsible for providing the Company with
any manufacturing system.
4. PURCHASE ORDER PROCEDURES
4.1 Purchase Orders (PO)
During the term of the Agreement, Microsoft will issue a *
frozen build signal, in the form of an Excel spreadsheet, to the
Company by * for Finished Product Units for * (reference
attachment 2). Within *, a PO will be issued that requires
Finished Product Units to be prepared and delivered to a
distribution center the * following the * or direct to
designated customers on a scheduled agreed to by Microsoft and
the Company in advance of shipment. The purchase order will
include but not be limited to the SKU, quantity, price and
required delivery date. Microsoft may prioritize Products on the
PO so Company will be able to build more urgent requirements
first. The purchase order will officially authorize the Company
to manufacture Microsoft Products. Microsoft accepts ownership
and liability for only those quantities of raw materials
purchased, and finished goods built, that meet the * frozen
build signal, unless prior arrangements have been made in
writing and agreed to by both parties.
4.2 Once Microsoft has issued a PO, Microsoft may change the build
requirements or issue engineering change notices (ECN)
corresponding to that PO, but raw materials procured by the
Company to fulfill such PO, in accordance with section 4.1, that
are left unused will be the responsibility of Microsoft. Company
may charge Microsoft for the storage of any such unused raw
materials at the rate of $* commencing when the materials are
stored. If any such materials remain in storage at the end of *
after fulfillment of the PO, Microsoft will reimburse Company
for the cost of such raw materials. In order to be reimbursed by
Microsoft, the Company must provide a raw material inventory age
report for which Microsoft owns liability upon expiration of the
* holding period. In case of an ECN that stops and/or starts a
component, the Company must notify Microsoft of the related
charges within * of the change
34
order. Related charges will be tracked and reviewed at *
management meetings. This notification must include the
Microsoft ECN#, the component part number and the quantity that
Microsoft is liable for. Microsoft will determine and
communicate in writing whether or not to scrap any raw material
or finished goods and reimburse the Company accordingly.
4.3 Microsoft intends to remit payment to the Company via the auto
voucher process, for all Finished Product Units upon receipt of
the po quantity by the applicable distribution turnkey vendor
("DTV") or from another Microsoft-authorized entity in the event
the shipment does not deliver to a DTV. All error-free invoices
submitted by the Company will be paid within the payment terms
of the Agreement. When invoice discrepancies are found, invoices
will be immediately rearmed to the company for correction and
re-submittal. Corrected invoices submitted to Microsoft must
reflect a revised invoice date (not the original invoice date).
It is in the Company's best interest to submit error-free
invoices to Microsoft for prompt payment, as invoice errors will
delay Microsoft payment to the Company. Microsoft will make
payments for services in US dollars.
5. FINISHED GOODS TRANSACTION REPORT AND RECEIPTS
5.1 When production has been completed per the Microsoft Purchase
Order, the Company must notify DTV of the completed Finished
Product Units by sending an advance ship notice (ASN).
5.1.1 Company must notify Microsoft immediately * of any
inventory movements that may require inventory
adjustments. Adjustments include but are not limited to
quality issues, cycle count adjustments, rework, and
site to site stock transfers.
6. PROCUREMENT
6.1 Company will be responsible for procuring all raw materials for
assembly. Raw materials procured must meet Microsoft Global
Quality specifications for Full Packaged Product (FPP).
Microsoft may at times designate 'Approved Subcontractors' for
certain raw material components such as security components,
third party pieces and hardware. Microsoft may at times supply
raw material to the Company. The Company will be notified of the
approved subcontractors. All raw materials that the Company
procures are subject to audit at the Company's Facility for
adherence to Microsoft Global Quality Standards for Full
Packaged Product located on *.
6.2 Pre-Press Work, Engineering, and Die Charges
35
These are costs associated with the output of electronic files
to plate ready film, color separations, proofs, prototypes, and
die charges and are not to be calculated in the unit or
component cost of the part. These are to be billed on a separate
invoice to Microsoft noting the Microsoft part number to which
the costs are related. Costs associated with frequently
performed services such as outputting postscript files for
manual text, preparing provided film for plate imposition etc.
shall be charged *. Charges for other non-standard goods and
services shall be billed * provided the Company can demonstrate
that these charges are competitive for similar goods and
services within the region.
7. SUBCONTRACTING
Any references to subcontractors in this Exhibit shall be subject to the
requirements for subcontractors set for in the Agreement.
8. PRINTING
8.1 Procure
Company must be capable of procuring printed materials per
Microsoft provided specifications and in quantities to meet
Microsoft's finished goods production requirements and Less Than
Finished Goods component order requirements.
8.2 Print Specifications
Printed materials must meet the quality standards and
specifications identified in Microsoft Print Specification
documentation and in the Microsoft Global Quality Standards. For
ongoing business, the Company will access all required quality
specifications using the Internet on *. From time to time
printed samples may be requested. The Company must supply
samples to Microsoft upon request.
8.3 Monitor and Order Artwork for Printing
It is the Company's responsibility to *
8.3.1 Identify Components
Company will pull a BOM from EDT based on demand seen in
* of the *. Company will review the Microsoft BOM and
determine whether or not artwork is needed.
36
8.3.2 Track Components
Company must have an internal mechanism to track
outstanding artwork and receipt dates for film. The
purpose of the tracking mechanism is to proactively
monitor whether outstanding artwork will impact Product
builds. Company will provide a * report of all Microsoft
film ordered and/or received in the previous *.
8.3.3 Monitor Microsoft Artwork Release
Company will receive * reports via email from Microsoft
Product Information Release Services (PIRS). It is the
Company's responsibility to monitor the * print release
reports. These reports notify the Company that the *.
8.3.4 Pulling and Prepping Electronic Files
Electronic files include but are not limited to 1-2
color print components, print specifications, film order
forms and software images. It is the Company's
responsibility to pull electronic files posted to EDT
for parts required as soon as parts are released to EDT,
or SKU demand is seen in * of the *, whichever is later.
Electronic art files are to be sent to Company's
supplier to be converted to bluelines as soon as they
are pulled. Bluelines are to be sent to Microsoft or its
designated art agency as defined on the Print
Specifications documentation within * of pulling the
electronic files from EDT. Blueline approval from
Microsoft or its designated art agency is required
before the component can be used in building Product.
8.3.5 Ordering Film
For film-based components (over 2 colors) it is the
Company's responsibility to pull film order forms from
EDT, complete all required information (film
requirements, ship-to address, required delivery date,
etc.) and send the order form via email directly to the
designated film house.
Company must report all printed material discrepancies
immediately to Microsoft through the *.
8.4 Registration/License Card Printing
Company shall have the capability to have printed product part
numbers, product ID numbers or other Microsoft identified
information on Microsoft registration cards and Microsoft
license agreements.
37
8.5 CD Component Printing
Company shall procure printed components included in replicated
CD-ROMs. These components shall consistently meet the quality
requirements of Microsoft CD ROM Quality Specifications found in
the Microsoft Global Quality Standards. For ongoing business
with Microsoft, the Company will access all required quality
specifications in *.
9. DISK DUPLICATION
Duplicated disks may be produced or procured by the Company, as set
forth in the * PO.
9.1 Disk Duplication Capabilities
Company or Company's duplication subcontractor must be capable
of duplicating diskettes in accordance with the requirements
identified in Microsoft Global Quality Standards. Company or
Company's duplication subcontractor duplication equipment must
have the ability to control all aspects of the quality of the
duplication process including image integrity, bit placement,
window margin, and revolutions per minute (RPM) of the drive
spindle.
9.2 Disk Duplication Quality Control
Company or Company's duplication subcontractor must have *. The
* shall be used to ensure that the proper image is being
duplicated.
9.3 Disk Duplication Process
Company or Company's duplication subcontractor must have:
9.3.1 A preventive maintenance program or backup
subcontracting program in place capable of preventing
disk duplicating delays for finished goods production.
9.3.2 A format training program in place for all duplication
operators and support personnel.
9.3.3 A staff technically capable of supporting all of
Microsoft's duplication requirements within the weekly
production variability range.
9.3.4 A write and verify process for all duplicated Product.
9.3.5 The capability to utilize Microsoft * and other tools
when necessary.
38
9.4 Virus Protection
To ensure that every possible avenue to preventing Microsoft
deliverable Product from being infected with a computer virus is
pursued, Company shall implement the following:
9.4.1 *
9.4.1.1. *
9.4.1.2. *
9.4.1.3. *
9.4.1.4. *
9.4.1.5. *
*
9.5 Diskette Quality
Company or Company's duplication subcontractor must perform
quality checks on duplicated disks. Diskettes shall be
duplicated and verified in accordance with the Microsoft Floppy
Diskette workmanship specification (S000257). Company must be
capable of tracking and reporting duplication performance data.
9.6 Customer Master Disk Handling
Company or Company's duplication subcontractor must have the
capability of receiving software master images *. Company or
Company's duplication subcontractor shall ensure proper
handling, storage, retrieval and control of the master disk(s)
provided or created to ensure the integrity of the software
images.
9.7 Disk Copy Protection *
Company or Company's duplication subcontractor's disk
duplication process must be capable of supporting disk copy
protection and *.
9.8 Disk Labeling and Collation
9.8.1 Label Images
Microsoft will provide all label images *.
39
9.8.2 Label Printers
Company or Company's duplication subcontractor shall
print *.
9.8.3 Labelers
Company or Company's duplication subcontractor's
labeling equipment and/or procedures shall be capable of
consistently meeting or exceeding Microsoft's label
placement specification as described in *. For ongoing
business with Microsoft the Company will access all
required quality specifications using the Internet on *.
9.8.4 Collation
Company or Company's duplication subcontractor shall
have sufficient and appropriate process equipment to
seal collated disk sets into polyvinyl bags. Company is
responsible for ensuring that collation process for
diskettes meets Microsoft Floppy Diskette workmanship
specification (S000257).
10. CD AND DVD REPLICATION
CD's and DVD shall be procured by Company, as set forth in the * PO's
for Product and for Less Than Finished Goods. Company or Company's CD
subcontractor shall have documented processes and appropriate equipment
to effectively produce CD-ROM's, DVD and associated CD components which
consistently meet or exceed the requirements of the Microsoft Global
Quality Specifications for CD ROM. Company's CD subcontractor agrees to
perform all required maintenance on the equipment at its own cost.
Company's CD subcontractor shall have a * to hold CD-ROMs and DVD and
material until they can be rendered unusable or recycled. When Company
procures CDs and DVD, the following apply:
10.1 CD ROM and DVD Production Process
Company or Company's CD subcontractor shall have documented
processes for the following:
10.1.1 Company's CD subcontractor shall have a preventative
maintenance program in place capable of preventing
delays for finished goods production.
10.1.2 Company's CD subcontractor shall have a formal training
program in place for all CD and DVD operations
(Premastering, Mastering, and Replication) and support
personnel.
40
10.1.3 Company and Company's CD subcontractor shall have staffs
technically capable of supporting all of Microsoft's CD
and DVD requirements within the * production variability
range.
10.2 Handling of CD ROM and DVD Masters
Company or Company's CD subcontractor shall have documented
procedures in place, which ensure proper handling, storage, and
retrieval of Microsoft supplied CD master files.
10.3 CD and DVD Anti-Piracy *
Company or Company's CD subcontractor shall be capable of
supporting Anti-Piracy initiatives and * applicable to CD-ROMs
and DVD upon Microsoft request.
10.4 CD ROM and DVD Quality Control
Company or Company's CD subcontractor shall have a documented
verification process in place to ensure the integrity of the
replicated CD-ROM matches the original supplied by Microsoft. In
addition, Company or Company's CD subcontractor of supply shall
have documented and implemented processes to verify * parameters
which ensure compliance to Microsoft Global Specifications. The
Company will access all required quality specifications using
the Internet on *. Company or Company's CD subcontractor must be
capable of tracking and reporting CD quality data to Microsoft.
10.5 CD Label Screen Printing and DVD Pit Art
Company or Company's CD subcontractor, should have a process to
receive CD or DVD label images *. Process must be established to
ensure the correct label image is applied to the correct CD or
DVD title. Processes must prevent any CD's of DVD's used in the
setup of the print processes *.
10.6 *
*
11. PRODUCTION
11.1 Assembly Capability
Company will establish and maintain an assembly process capable
of producing sufficient quantities of Product that meet
Microsoft's Purchase Order requirements, or minimum capacity,
whichever is lower. If Microsoft
41
demand exceeds the Company's capacity and subcontracting is
necessary to meet this demand, Microsoft must be notified prior
to proceeding with off-site builds. The Microsoft Specifications
for full packaged Products as stated in * must be met.
11.2 *
Company shall have the proper equipment to *
11.3 Shrink-wrapping
Company shall be capable of shrink-wrapping all sizes of
Products, in accordance with Microsoft Quality Standards on *.
11.4 Assembly Quality
Company shall perform in-process and final verifications of
assembled Products to ensure compliance to the Microsoft
requirements and quality standards.
11.5 Bundling
Microsoft may notify the Company that a bundling operation is
required and will provide Company with SKU number, quantity and
specific bundling instructions. The Company shall provide the
Microsoft Vendor Account Manager (VAM) with a * for the bundling
effort within * in sufficient detail to allow Microsoft to
perform an analysis of the major cost elements. The VAM will
provide the Company with written authorization to proceed at the
agreed upon price. The Company shall be responsible for bundling
the Products in accordance with the Microsoft provided bundling
instructions and submitting an invoice to the VAM at the agreed
upon price. The Company may be required to purchase finished
goods and/or raw materials from other Companies to fulfill the
bundling requirement(s).
11.6 Rework
Microsoft may notify the Company that rework is required and
will provide Company with SKU number, quantity and requested
completion date. The Company shall provide the Microsoft VAM
with a * for the rework effort within *, in sufficient detail to
allow Microsoft perform an analysis of the major cost elements.
The VAM will provide the Company with written authorization to
proceed *. The Company shall be responsible for reworking the
Products in accordance with the Microsoft BOM and submitting an
invoice to the VAM *. A touch is defined as a labor measurement
activity on a component.
42
11.7 Orders Requested Prior to Normal Lead-Time
There will be situations where Microsoft will request orders to
be built in less than the normal * lead-time. (Please reference
section 4.1 hereof). When Microsoft requests such an order, the
Company will reply with at least but not limited to *. This will
give Microsoft the opportunity to decide which option best suits
the situation. These orders will be communicated to the Company
by the Microsoft VAM in situations where faster Product
deliveries are required due to urgent customer requests. The
Microsoft VAM and Company shall mutually agree that the option
taken is acceptable and the Microsoft VAM will provide
authorization to proceed.
11.8 Scrap Process
Subcontractor must have written authorization from Microsoft VAM
prior to scrapping and/or disposing of Microsoft finished goods
or components (please reference attachment 3).
12. DELIVERY REQUIREMENTS
12.1 Preparation
The Company is responsible for delivering the Finished Product
Units to the Distribution Center. This preparation includes
ensuring that finished goods are correctly palletized,
shrink-wrapped and ready for transit to the Distribution Center.
12.2 Pallet Loading
The Company shall adhere to the Microsoft Global specifications
for pallet configuration specifications when stacking Product.
12.3 Finished Goods Handling
The Company shall have proper handling procedures for finished
goods to prevent loss of damage between assembly and pick-up by
the Distribution Center.
12.4 Advance Shipment Notification
The Company is responsible for providing * to the Distribution
Center.
12.5 Ship Directly to Customer
43
On regular basis, the manufacturing supplier will be requested
to prepare Product for direct shipment to the distributor. The
Company will invoice upon shipment. Upon doing any direct
shipment, company will provide Microsoft with electronic
notification containing all relevant shipment information.
13. REPORTING / COMMUNICATION REQUIREMENTS
13.1 Manufacturing Delay
*
13.2 Reporting
13.2.1 The Company shall provide:
*
13.2.2 Microsoft shall provide
*
14. QUALITY
14.1 ISO Certification
Company shall remain ISO certified during the period of the
Agreement.
14.2 Quality Records
Company shall maintain records of inspection, repairs, reworks
and tests for the term of the Agreement. Records shall be made
available to Microsoft upon request.
14.3 *
*
14.4 *
*
14.5 *
*
44
15. CONFIGURATION MANAGEMENT
15.1 BOM's and CAD's
Company will use Microsoft supplied Bills of Material (BOM's)
and CAD's as a reference to ensure proper assembly of Product as
specified in *. Company must inspect and approve all new
releases and first time builds per first article process.
15.2 Changes to BOM's and CAD's
All changes to the configuration of Products will be managed
through the Microsoft Configuration group. The Company must
manage all resulting changes to Bills of Material accordingly.
Company may make no changes to Product configuration or content
without written authorization from Microsoft, however, Company
is encouraged to suggest changes that * the Product. Any
discrepancies between Microsoft's BOM, CAD or Kit and Company's
BOM shall be resolved prior to each build.
15.3 * Record Retention
Company shall maintain records of * used to assemble Product for
the term of the Agreement. All records will be made available to
Microsoft upon request.
16. INFORMATION TECHNOLOGY
16.1 Infrastructure Requirements
The Company Facility shall have an infrastructure capable of
supporting a variety of data communications required to
Manufacture Product. This includes the ability to connect to
Microsoft's external network. External network connections will
be used to transfer information about Product builds.
16.2 *
*
*
16.3 Technical Personnel
The information technology requirements outlined above are
deemed mission critical. The Company shall have in-house or
readily available technical support at the Company's primary
facility. These Company personnel will
45
work with Microsoft personnel to ensure that the site is
properly set up to communicate with Microsoft. Microsoft will
work with the Company to establish competency with any
non-commercially available Microsoft-specific software that may
be used in the operation. Company will be responsible for
on-going training of replacement or additional personnel used to
support the operation.
16.4 Data Exchanges
Data exchanges will be required throughout the term of the
Agreement. Exchanges will occur primarily through *, and may
include, but are not be limited to, * and routine information
required to Manufacture Product.
16.5 System Alternatives
Microsoft may wish to employ any or all of the following system
alternatives:
*
16.6 *
*
17. MANAGEMENT
17.1 Meetings and Reviews
Company will meet with designated Microsoft team members at
least * for * business reviews. These meetings will include a
Company performance review, pricing reviews, continuous
improvement projects, management status reviews, cost reduction
initiatives and other operational areas and issues. * business
reviews * may be held at Company's facility, Microsoft's
facility or by video teleconference (VTC).
17.2 Metrics
Microsoft may request that certain metrics be captured and
reported on a *.
18. ATTACHMENTS
The following Microsoft documents, which may be modified by Microsoft
from time to time, are hereby incorporated as part of this SOW in
Exhibit J:
46
------------------------------------------------------------------------
Attachment Number Attachment Name
------------------------------------------------------------------------
1 * Frozen Forecast
------------------------------------------------------------------------
2 Frozen Build Signal *
------------------------------------------------------------------------
3 Procedure for Destruction/Scrap
------------------------------------------------------------------------
4 Approved Suppliers for COA and CD-Rom/DVD
------------------------------------------------------------------------
5 Metrics Reporting for Inventory Shrinkage
------------------------------------------------------------------------
19. COMMON MICROSOFT ACRONYMS:
------------------------------------------------------------------------
- ASN Advance Ship Notice
------------------------------------------------------------------------
- ASAP As soon as possible
------------------------------------------------------------------------
- BOM Bill of Materials
------------------------------------------------------------------------
- CAD Computer Aided Drawing
------------------------------------------------------------------------
- COGS Cost of Goods Sold
------------------------------------------------------------------------
- CSP Customer Service Pack's
------------------------------------------------------------------------
- DC Distribution Center
------------------------------------------------------------------------
- DMF Distributed Media Format
------------------------------------------------------------------------
- * *
------------------------------------------------------------------------
- * *
------------------------------------------------------------------------
- ECD Engineering Change Date
------------------------------------------------------------------------
- ECN Engineering Change Notice
------------------------------------------------------------------------
- ECR Engineering Change Request
------------------------------------------------------------------------
- EDI Electronic Data Interchange
------------------------------------------------------------------------
- EDT Electronic Delivery Tool
------------------------------------------------------------------------
- FINOPS Financial Operations
------------------------------------------------------------------------
- ISO International Organization of Standards
------------------------------------------------------------------------
- ITG Microsoft Information Technology Group
------------------------------------------------------------------------
- LTFG Less Than Finished Goods
------------------------------------------------------------------------
- MLP Microsoft License Pack's
------------------------------------------------------------------------
- * *
------------------------------------------------------------------------
- * *
------------------------------------------------------------------------
- NDA Non-Disclosure Agreement
------------------------------------------------------------------------
- PDM Product Data Manager
------------------------------------------------------------------------
- PID Product Identifier
------------------------------------------------------------------------
- PO Purchase Order
------------------------------------------------------------------------
- PST Pacific Standard Time
------------------------------------------------------------------------
- * *
------------------------------------------------------------------------
- RMA Returned Merchandise Authorization
------------------------------------------------------------------------
- SOW Statements of Work
------------------------------------------------------------------------
- UPC Universal Product Code
------------------------------------------------------------------------
- VAM Vendor Account Manager
------------------------------------------------------------------------
47
ATTACHMENT 1
SAMPLE OF [SIXTEEN WEEK] FROZEN FORECAST
*
48
- ----------------------------------------------------------------------------------------------------------------------------------
105-00205 MONEY 99 W32 ES CD 3,510 290 290 290 290 290 290
- ----------------------------------------------------------------------------------------------------------------------------------
105-00217 MONEY 99 W32 XC CD 350 200 2,650 270 270 270 270 270 270
- ----------------------------------------------------------------------------------------------------------------------------------
105-00269 MONEY 99 W32 EN NA CD STD BOX 3,120
- ----------------------------------------------------------------------------------------------------------------------------------
147-095V622 MSDOS 6.22 UPGRADE (3.5) HD 360 360 360 360 360 720 360 360 720
- ----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------
105-00205 MONEY 99 W32 ES CD 400
- ------------------------------------------------------------
105-00217 MONEY 99 W32 XC CD
- ------------------------------------------------------------
105-00269 MONEY 99 W32 EN NA CD STD BOX
- ------------------------------------------------------------
147-095V622 MSDOS 6.22 UPGRADE (3.5) HD 360 360]
- ------------------------------------------------------------
49
ATTACHMENT 2
SAMPLE OF FROZEN BUILD SIGNAL *
*
50
ATTACHMENT 3
PROCEDURE FOR DESTRUCTION/SCRAP
51
ATTACHMENT 4
APPROVED SUPPLIERS FOR COA AND CD-ROM/DVD
*
52
ATTACHMENT 5
METRICS REPORTING FOR INVENTORY SHRINKAGE
The calculation that is used to determine inventory accuracy is included below.
*
*
53
EXHIBIT B
COMPONENT PRICING MATRIX
PRICING AND PAYMENT TERMS FOR MANUFACTURING
STATEMENT OF WORK
PRICE AND PAYMENT TERMS OF PRODUCT COMPONENTS
*
*
54
*
55
EXHIBIT H
STARTEK MANUFACTURING AND DISTRIBUTION FACILITIES
*]
56
EXHIBIT J
ATTACHMENTS
57