SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
Commission File Number 001-00395
NCR CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 31-0387920 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) |
1700 South Patterson Blvd.
Dayton, Ohio 45479
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (937) 445-5000
Number of shares of common stock, $.01 par value per share, outstanding as of July 31, 1998 was 101,365,036.
TABLE OF CONTENTS
PART I. Financial Information
Description Page ----------- ---- Item 1. Financial Statements Condensed Consolidated Statements of Operations (Unaudited) Quarter and Six Months Ended June 30, 1998 and 1997 3 Condensed Consolidated Balance Sheets June 30, 1998 (Unaudited) and December 31, 1997 4 Condensed Consolidated Statements of Cash Flows (Unaudited) Three and Six Months Ended June 30, 1998 and 1997 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk 17 PART II. Other Information Description Page ----------- ---- Item 6. Exhibits and Reports on Form 8-K 18 Signature 19 |
Part I. Financial Information
Item 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
In millions, except per share amounts
Quarter Ended June 30 Six Months Ended June 30 --------------------- ------------------------- 1998 1997 1998 1997 ---- ---- ---- ---- Revenue Sales $ 861 $ 925 $1,520 $1,644 Services 713 720 1,363 1,390 ------ ------ ------ ------ Total Revenue 1,574 1,645 2,883 3,034 ------ ------ ------ ------ Operating Expenses Cost of sales 566 641 1,024 1,124 Cost of services 536 546 1,033 1,052 Selling, general and administrative expenses 359 381 667 712 Research and development expenses 90 96 170 183 ------ ------ ------ ------ Total Operating Expenses 1,551 1,664 2,894 3,071 ------ ------ ------ ------ Income (Loss) from Operations 23 (19) (11) (37) Interest expense 4 4 7 6 Other (income) expense, net (73) (25) (110) (30) ------ ------ ------ ------ Income (Loss) Before Income Taxes 92 2 92 (13) Income tax expense 44 6 44 7 ------ ------ ------ ------ Net Income (Loss) $ 48 $ (4) $ 48 $ (20) ====== ====== ====== ====== Net Income (Loss) per Common Share Basic $ .47 $ (.04) $ .47 $ (.20) Diluted $ .46 $ (.04) $ .46 $ (.20) Weighted Average Common Shares Outstanding Basic 102.6 102.1 102.9 101.8 Diluted 104.1 102.1 104.0 101.8 |
See accompanying notes.
CONDENSED CONSOLIDATED BALANCE SHEETS
In millions, except per share amounts
June 30 December 31 1998 1997 ----------- ----------- (Unaudited) Assets Current assets Cash and short-term investments $ 770 $1,129 Accounts receivable, net 1,472 1,471 Inventories 451 489 Other current assets 207 182 ------ ------ Total Current Assets 2,900 3,271 Reworkable service parts, net 234 248 Property, plant and equipment, net 867 858 Other assets 1,021 916 ------ ------ Total Assets $5,022 $5,293 ====== ====== Liabilities and Shareholders' Equity Current liabilities Short-term borrowings $ 69 $ 59 Accounts payable 304 378 Payroll and benefits liabilities 283 343 Customers' deposits and deferred service revenue 445 348 Other current liabilities 794 836 ------ ------ Total Current Liabilities 1,895 1,964 Long-term debt 33 35 Pension and indemnity liabilities 333 342 Postretirement and postemployment benefits liabilities 813 813 Other liabilities 569 522 Minority interests 41 264 ------ ------ Total Liabilities 3,684 3,940 ------ ------ Commitments and contingencies Shareholders' Equity Preferred stock: par value $.01 per share, 100.0 shares authorized, no shares issued or outstanding - - Common stock: par value $.01 per share, 500.0 shares authorized; 103.9 and 103.2 shares issued at June 30, 1998 and December 31, 1997, respectively; 101.7 and 103.2 shares outstanding at June 30, 1998 and December 31, 1997, respectively 1 1 Retained earnings and paid-in capital 1,458 1,445 Other (121) (93) ------ ------ Total Shareholders' Equity 1,338 1,353 ------ ------ Total Liabilities and Shareholders' Equity $5,022 $5,293 ====== ====== |
See accompanying notes.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
In millions
Three Months Six Months Ended June 30 Ended June 30 ---------------------- --------------------- 1998 1997 1998 1997 ---- ---- ---- ---- Operating Activities Net income (loss) $ 48 $ (4) $ 48 $ (20) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 87 94 184 186 Net gain on sales of assets (55) - (55) - Changes in operating assets and liabilities: Receivables (109) (110) 7 11 Inventories 7 18 (49) (78) Payables and other current liabilities (3) 5 (88) (55) Other operating assets and liabilities (92) 73 (140) 30 ----- ----- ----- ------ Net Cash Provided by (Used in) Operating Activities (117) 76 (93) 74 ----- ----- ----- ------ Investing Activities Short-term investments, net 142 (40) 66 (277) Expenditures for service parts (31) (44) (64) (66) Expenditures for property, plant and equipment (23) (57) (84) (83) Acquisition of minority interest in subsidiary (271) - (271) - Proceeds from sales of facilities and other assets 172 - 172 - Other investing activities 3 9 25 15 ----- ----- ----- ------ Net Cash Used in Investing Activities (8) (132) (156) (411) ----- ----- ----- ------ Financing Activities Purchases of Company common stock (78) - (78) - Short-term borrowings, net (2) 12 10 28 Repayments of long-term debt (2) (8) (2) (12) Other financing activities 22 18 39 18 ----- ----- ----- ------ Net Cash Provided by (Used in) Financing Activities (60) 22 (31) 34 ----- ----- ----- ------ Effect of exchange rate changes on cash and cash equivalents (9) 17 (13) (21) ----- ----- ----- ------ Decrease in Cash and Cash Equivalents (194) (17) (293) (324) Cash and Cash Equivalents at Beginning of Period 787 856 886 1,163 ----- ----- ----- ------ Cash and Cash Equivalents at End of Period $ 593 $ 839 $ 593 $ 839 ===== ===== ===== ====== |
See accompanying notes.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been prepared by NCR Corporation (NCR) without audit pursuant to the rules and regulations of the Securities and Exchange Commission and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the consolidated results of operations, financial position, and cash flows for each period presented. The consolidated results for interim periods are not necessarily indicative of results to be expected for the full year. These financial statements should be read in conjunction with NCR's 1997 Annual Report to Stockholders and Form 10-K for the year ended December 31, 1997.
Certain prior years amounts have been reclassified to conform to the 1998 presentation.
2. SUPPLEMENTAL FINANCIAL INFORMATION (in millions)
Periods Ended June 30 ---------------------- Three Months Six Months ------------ ---------- 1998 1997 1998 1997 ---- ---- ---- ---- Net income (loss) $ 48 $ (4) $ 48 $ (20) Change in: Additional minimum pension liability 16 - 15 - Equity translation adjustment (33) 95 (40) 35 ----- ----- ----- ----- Total comprehensive income $ 31 $ 91 $ 23 $ 15 ===== ===== ===== ===== |
June 30 December 31 1998 1997 ------- ----- Cash and Short-term investments Cash and cash equivalents $593 $ 886 Short-term investments 177 243 ---- ------ Total cash and short-term investments $770 $1,129 ==== ====== Inventories Finished goods $378 $ 353 Work in process and raw materials 73 136 ---- ------ Total inventories $451 $ 489 ==== ====== |
3. CONTINGENCIES
In the normal course of business, NCR is subject to various regulations, proceedings, lawsuits, claims, and other matters, including actions under laws and regulations related to the environment and health and safety, among others. Such matters are subject to the resolution of many uncertainties, and accordingly, outcomes are not predictable with assurance. NCR believes the amounts provided in its consolidated financial statements, as prescribed by generally accepted accounting principles, are adequate in light of the probable and estimable liabilities. However, there can be no assurances that the amounts required to discharge alleged liabilities from various lawsuits, claims, legal proceedings, and other matters, and to comply with applicable laws and regulations, will not exceed the amounts reflected in NCR's consolidated financial statements or will not have a material adverse effect on its consolidated results of operations, financial condition, or cash flows. Any amounts of costs that may be incurred in excess of those amounts provided as of June 30, 1998 cannot presently be determined.
Environmental Matters
NCR's facilities and operations are subject to a wide range of environmental
protection laws in the U.S. and other countries related to solid and hazardous
waste disposal, the control of air emissions and water discharges, and the
mitigation of impacts to the environment from past operations and practices. NCR
has investigatory and remedial activities underway at a number of currently and
formerly owned or operated facilities to comply, or to determine compliance,
with applicable environmental protection laws. NCR has been identified, either
by a government agency or by a private party seeking contribution to site
cleanup costs, as a potentially responsible party (PRP) at a number of sites
pursuant to a variety of statutory schemes, both state and federal, including
the Federal Water Pollution Control Act (FWPCA) and comparable state statutes,
and the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended (CERCLA), and comparable state statutes.
In February 1996, NCR received notice from the U.S. Department of the Interior, Fish & Wildlife Service (USF&WS) that USF&WS considers NCR a PRP under the FWPCA and CERCLA with respect to alleged natural resource restoration and damages to the Fox River and related Green Bay environment (Fox River System) due to, among other things, sediment contamination in the Fox River System allegedly resulting from liability arising out of NCR's former carbonless paper manufacturing operations at Appleton and Combined Locks, Wisconsin. USF&WS has also notified a number of other manufacturing companies of their status as PRPs under the FWPCA and CERCLA for natural resource restoration and damages in the Fox River System resulting from their ongoing or former paper manufacturing operations in the Fox River Valley. In addition, NCR has been identified, along with a number of other companies, by the Wisconsin Department of Natural Resources (State) with respect to alleged liability arising out of alleged past discharges that have contaminated sediments in the Fox River System. In December 1996, USF&WS, two Native American tribes, and other federal agencies (Federal Trustees) invited NCR, the other PRP companies, and the State to enter into settlement negotiations over these environmental claims. In January 1997, NCR and the other PRP companies reached agreement on an interim settlement with the State. The Federal Trustees are not parties to that agreement. In January 1997, the Federal Trustees notified NCR and the other PRPs of the Federal Trustees' intent to commence a natural resource damages lawsuit under CERCLA and the FWPCA within 60 days of the notice, unless a negotiated resolution of their claims could be reached. In July 1997, the State, the United States Environmental Protection Agency (USEPA), and the Federal Trustees entered into a Memorandum of Agreement (MOA). The MOA states that it provides a framework under which the parties to that agreement can coordinate remedial and restoration studies and actions regarding the Fox River, including the assertion of claims against the PRPs, and that removal of the PCB-contaminated sediments is expected to be the principal, but not exclusive, action undertaken to achieve restoration of impaired natural resources. In June 1997, USEPA announced its intention to propose the Fox River for inclusion on the National Priorities List; shortly thereafter, the State of Wisconsin announced its opposition to such listing. In July 1997, the USEPA sent the PRPs a Special Notice Letter calling for formal negotiations on the preparation of a remedial investigation and feasibility study (RI/FS) on the Fox River; on July 15, 1997, the PRPs agreed to enter into such negotiations. In December 1997, USEPA denied the PRPs' good faith proposal to perform the official cleanup studies, took control of the cleanup study process, and is working on the studies in conjunction with the State. According to the USEPA's and State's schedule, the key studies may be done in approximately one year. Based on past experience, it would be unusual to perform adequately such studies within one year. Thus far, the PRPs and the Federal Trustees have agreed to postpone litigation while negotiations over the cleanup studies have been taking place. However, the tolling and standstill agreements between the Federal Trustees and NCR and the other identified PRPs have expired. USEPA's recent decision to take control over the cleanup studies appears to minimize the PRP's ability to settle at this time and it is possible that litigation by the Federal Trustees could be commenced during 1998. An estimate of NCR's ultimate share, if any, of such cleanup costs or natural resource restoration and damages liability cannot be made with certainty at this time due to (i) the unknown magnitude, scope, and source of any alleged contamination, (ii) the absence of selected remedial objectives and methods, and (iii) the uncertainty of the amount and scope of any alleged natural resource restoration and damages. NCR believes that there are additional PRPs who may be liable for such natural resource damages and remediation costs. Further, in 1978, NCR sold the business to which the claims apply. In this connection, NCR commenced litigation against the buyer and its former parent alleging that they are responsible for the above-described claims. Subsequent to December 31, 1997, the parties reached an interim partial settlement and arbitration under which the parties are presently, and for the foreseeable future will be, sharing both defense and liability costs.
It is difficult to estimate the future financial impact of environmental laws, including potential liabilities. NCR accrues environmental provisions when it is probable that a liability has been incurred and the amount of the liability is reasonably
estimable. Management expects that the amounts accrued from time to time, will be paid out over the period of investigation, negotiation, remediation, and restoration for the applicable sites, which may be ten to twenty years or more. Provisions for estimated losses from environmental remediation are, depending on the site, based primarily on internal and third-party environmental studies, estimates as to the number and participation level of any other PRPs, the extent of the contamination, and the nature of required remedial and restoration actions. Accruals are adjusted as further information develops or circumstances change. The amounts provided for environmental matters in NCR's consolidated financial statements are the estimated gross undiscounted amount of such liabilities, without deductions for insurance or third-party indemnity claims. Except for the sharing arrangement described above with respect to the Fox River, in those cases where insurance carriers or third-party indemnitors have agreed to pay any amounts and management believes that collectibility of such amounts is probable, the amounts are reflected as receivables in the consolidated financial statements.
Legal Proceedings
In NCR's report on Form 10-Q for the quarter ended March 31, 1998, NCR reported that there were approximately 70 product liability cases pending against NCR alleging that its products caused so-called "repetitive strain injuries" or "musculoskeletal disorders," such as carpal tunnel syndrome (the "RSI Cases"). The RSI Cases are now nearly concluded. Most of the RSI Cases either have been decided in NCR's favor in the courts, dismissed voluntarily by the plaintiffs, or are the subject of an agreement, which NCR expects to be concluded in the near future, that resolves the underlying claims. That agreement, and NCR's obligations thereunder, will not have a material impact on NCR's consolidated results of operations, financial condition or cash flows. A small number of RSI Cases remain pending in the courts, but resolution of them, whether by trial or by agreement, is not expected to have a material impact on NCR's consolidated results of operations, financial condition or cash flows.
NCR was named as one of the defendants in a purported class-action suit filed in November 1996 in Florida. The complaint seeks, among other things, damages from the defendants in the aggregate amount of $200 million, trebled, plus attorneys' fees, based on state antitrust and common-law claims of unlawful restraints of trade, monopolization, and unfair business practices. The portions of the complaint pertinent to NCR, among other things, assert a purported agreement between Siemens-Nixdorf entities (Siemens) and NCR regarding the servicing of certain "ultra-high speed printers" manufactured by Siemens and the agreement's impact upon independent service organizations, brokers, and end- users of such printers. The case is still in the early stages of discovery. The amount of any liabilities or other costs, if any, that may be incurred in connection with this matter cannot currently be determined.
A former NCR employee (who currently has a separate federal court employment action pending against NCR to contest her termination) and her husband, a former NCR consultant, have filed suit against NCR in a federal district court under the qui tam provisions of the False Claims Act. This Act permits private individuals to bring suit on behalf of the federal government to enforce the Act and to share in any recovery. The litigation involves allegations of billing and other improprieties under the Office Automation Technology and Services (OATS) contract with the U.S. Department of Transportation. The complaint does not specify the total amount of money being sought. If certain of the allegations of the complaint were true, however, the potential liability could range from nominal sums representing interest for short periods of time, to tens of millions of dollars if allegations of false billing are true. NCR has no evidence, or reason to believe, that such false billing occurred, and believes that with respect to the only specific allegations made the plaintiffs are misstating internal reports from a secondary data collection system that had nothing to do with actual bills to the government. The government, which is obligated to investigate the allegations and determine whether to assume prosecution of the action, has declined to intervene in the lawsuit but the individual plaintiffs have continued to pursue this action, as they are entitled to do. NCR intends to vigorously contest the allegations, which it believes to be unfounded.
4. STOCK REPURCHASE PROGRAM
On April 16, 1998, NCR's Board of Directors approved a share repurchase program authorizing the repurchase of shares valued up to $200 million. As of June 30, 1998, the Company had repurchased 2.2 million shares at a cost of $78 million.
5. ACQUISITION OF MINORITY INTEREST IN SUBSIDIARY
In April 1998, NCR's Board of Directors approved a cash tender offer to purchase the outstanding 30% minority interest in NCR's Japanese subsidiary, NCR Japan, Ltd. (NCR Japan). In June 1998, pursuant to the tender offer, NCR acquired an
additional 27% ownership interest in NCR Japan at a cost of $271 million, increasing NCR's ownership of the subsidiary to 97%. As a result of the acquisition, which has been accounted for as a purchase, goodwill of approximately $65 million was recorded by NCR and is being amortized on a straight-line basis over 20 years. On a pro forma basis, the impact of the transaction on NCR's consolidated net income (loss) and net income (loss) per share for the six month periods ended June 30, 1998 and 1997 is not material.
6. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In July 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging." SFAS 133 provides guidance for the recognition and measurement of derivatives and hedging activities. It requires an entity to record, at fair value, all derivatives as either assets or liabilities in the balance sheet, and it establishes specific accounting rules for certain types of hedges. This Statement is effective for fiscal years beginning after June 15, 1999 and will be adopted by the Company when required. The impact, if any, of adopting SFAS 133 on NCR's consolidated financial position, results of operations and cash flows, has not been fully determined.
In March 1998, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position 98-1 (SOP 98-1), "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." This Statement provides guidance on accounting for the costs of computer software developed or obtained for internal use and establishes certain capitalization criteria for such costs. SOP 98-1 is effective for fiscal years beginning after December 31, 1998 and will be adopted by NCR when required. The impact, if any, of adopting SOP 98-1 on NCR's consolidated financial position, results of operations and cash flows, has not been fully determined.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The following table displays selected components of NCR's consolidated statements of operations, expressed as a percentage of revenue.
Three Months Six Months Ended June 30 Ended June 30 ---------------- ---------------- 1998 1997 1998 1997 ------ ------ ------ ------ Revenue: Sales 54.7% 56.2% 52.7% 54.2% Services 45.3 43.8 47.3 45.8 ----- ----- ----- ----- Total 100.0% 100.0% 100.0% 100.0% ===== ===== ===== ===== Gross Margin: Sales 34.3% 30.7% 32.6% 31.6% Services 24.8 24.2 24.2 24.3 ----- ----- ----- ----- Total 30.0 27.8 28.7 28.3 Selling, general and administrative expenses 22.8 23.2 23.1 23.5 Research and development expenses 5.7 5.8 5.9 6.0 ----- ----- ----- ----- Income (loss) from operations 1.5% (1.2)% (0.4)% (1.2)% ===== ===== ===== ===== |
Revenue
Revenue for the three months ended June 30, 1998 was $1,574 million, a decrease of 4% from the second quarter of 1997. When adjusted for the unfavorable impact of changes in foreign currency exchange rates, revenue was flat compared with the second quarter of 1997.
Sales revenue decreased 7% to $861 million in the second quarter of 1998 compared to the second quarter of 1997. Revenue gains in the quarter in scalable data warehousing products of 22% were more than offset by revenue declines in retail products of 14%, financial products of 6% and other computer products of 18%. Services revenue decreased 1% to $713 million in the second quarter of 1998 compared to the second quarter of 1997.
Revenue in the second quarter of 1998 compared with the second quarter of 1997 decreased 21% in Japan, decreased 38% in the Asia Pacific region, excluding Japan, increased 1% in the Americas and increased 4% in Europe/Middle East/Africa (EMEA). When adjusted for the unfavorable impact of changes in foreign currency exchange rates, revenue on a local currency basis decreased 8% in Japan, decreased 24% in the Asia Pacific region, excluding Japan, and increased 6% in EMEA. The Americas region comprised 52% of NCR's total revenue in the second quarter of 1998, EMEA region comprised 31%, Japan comprised 11% and the Asia Pacific region, excluding Japan, comprised 6%.
Gross Margin
Gross margin as a percentage of revenue increased 2.2 percentage points to 30.0% in the second quarter of 1998 from 27.8% in the second quarter of 1997. Sales gross margin increased 3.6 percentage points to 34.3% in the second quarter of 1998. This increase is attributable to favorable product mix, primarily from increased sales of scalable data warehousing products. Services gross margin increased 0.6 percentage points to 24.8% in the second quarter of 1998. The improvement is mainly due to decreased costs resulting from reductions in customer support personnel.
Operating Expenses
Selling, general and administrative expenses decreased $22 million, or 6%, in the second quarter of 1998 from the second quarter of 1997. The decrease was mainly driven by reductions in general and administrative expenses due to NCR's continued focus on expense discipline. As a percentage of revenue, selling, general and administrative expenses were 22.8% in the second quarter of 1998 and 23.2% in the second quarter of 1997. Research and development expenses decreased $6 million to $90 million in the second quarter of 1998. As a percentage of revenue, research and development
expenses were 5.7% in the second quarter of 1998 and 5.8% in the second quarter of 1997. The 1998 research and development expenses reflect the continued move toward software and solutions development efforts, with less emphasis on hardware, operating systems and middleware.
Income (Loss) Before Income Taxes
Operating income was $23 million in the second quarter of 1998 compared to an operating loss of $19 million in the second quarter of 1997. Interest expense was $4 million in both the second quarter of 1998 and 1997. Other income, net of expenses, was $73 million in the second quarter of 1998 compared to $25 million in the second quarter of 1997. The increase in other income was primarily due to a gain of $55 million on the sale of NCR's TOP END(R) middleware technology and product family to BEA Systems, Inc. (BEA).
Income before taxes was $92 million in the second quarter of 1998 compared to income before taxes of $2 million in the second quarter of 1997.
Net Income (Loss)
The provision for income taxes was $44 million in the second quarter of 1998 compared to $6 million in the second quarter of 1997. NCR's second quarter 1997 tax provision resulted primarily from a normal provision for income taxes in those foreign tax jurisdictions where its subsidiaries were profitable, and an inability to reflect tax benefits from net operating losses and tax credits, primarily in the United States.
Net income was $48 million in the second quarter of 1998, compared with a net loss of $4 million in the same period in 1997.
Revenue
Revenue for the six months ended June 30, 1998 was $2,883 million, a decrease of 5.0% from the comparable period last year. When adjusted for the unfavorable impact in foreign currency exchange rates, revenue decreased 1%.
Sales revenue decreased 8% to $1,520 million in the first six months of 1998 compared to the same period of 1997. Revenue gains in financial products of 2% and scalable data warehousing products of 1% were more than offset by revenue declines in retail products of 7%, other computer products of 18% and Systemedia products of 4%. Services revenue decreased 2% to $1,363 million in the first six months of 1998 compared to the same period of 1997. This decrease was the result of declines in both customer support and professional services revenues.
Revenue in the first six months of 1998 compared with the first six months of 1997 decreased 21% in Japan, decreased 30% in the Asia Pacific region, excluding Japan, decreased 1% in the Americas and increased 2% in EMEA. When adjusted for the unfavorable impact in foreign currency exchange rates, revenue on a local currency basis decreased 12% in Japan, decreased 13% in the Asia Pacific region, excluding Japan, and increased 5% in EMEA. The Americas region comprised 52% of NCR's total revenues in the first six months of 1998, EMEA region comprised 31%, Japan comprised 11% and the Asia Pacific region, excluding Japan, comprised 6%.
Gross Margin
Gross margin as a percentage of revenue increased 0.4 percentage points to 28.7% in the first six months of 1998 from 28.3% in the first six months of 1997. Sales gross margins increased 1.0 percentage point to 32.6% in the first six months of 1998. This increase is primarily due to improved margins in both retail and financial products. Services gross margins were down 0.1 percentage point to 24.2% in the first six months of 1998. This decrease was the result of a decline in professional services margin, which more than offset improvements in customer support services margin.
Operating Expenses
Selling, general and administrative expenses decreased $45 million, or 6.3%, in the first six months of 1998. The decrease was primarily the result of NCR's continued focus on expense discipline and the favorable impact on expenses of foreign currency exchange rates. As a percentage of revenue, selling, general and administrative expenses were 23.1% in the first six months of 1998 and 23.5% in the same period of 1997. Research and development expenses decreased $13 million to $170 million in the first six months of 1998. As a percentage of revenue, research and development expenses were 5.9% in the first six months of 1998 and 6.0% in the first six months of 1997. The 1998 research and development expenses reflect the continued move toward software and solutions development efforts, with less emphasis on hardware, operating systems and middleware.
Income (Loss) Before Income Taxes
Operating loss was $11 million in the first six months of 1998 compared to an operating loss of $37 million in the first six months of 1997. Interest expense was $7 million in the first six months of 1998 compared to $6 million in the comparable period of 1997. Other income, net of expenses, was $110 million in the first six months of 1998 compared to $30 million in the first six months of 1997. The increase over 1997 primarily reflects the $55 million gain on the sale of TOP END to BEA.
Income before taxes was $92 million in the first six months of 1998 compared to a loss before taxes of $13 million in the first six months of 1997.
Net Income (Loss)
The provision for income taxes was $44 million in the first six months of 1998 compared to $7 million in the first six months of 1997. NCR's tax provision in the first six months of 1997 resulted primarily from a normal provision for income taxes in those foreign tax jurisdictions where its subsidiaries were profitable, and an inability to reflect tax benefits from net operating losses and tax credits, primarily in the United States.
Net income was $48 million in the first six months of 1998 compared to a net loss of $20 million for the same period in 1997.
FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES
NCR's cash and short-term investments totaled $770 million at June 30, 1998 compared to $1,129 million at December 31, 1997.
Net cash flows used in operating activities were $93 million in the first six months of 1998 compared to $74 million provided by operating activities in the first six months of 1997. 1998 operating activities included a $55 million gain on the sale of TOP END to BEA. In addition, in the second quarter of 1997, net cash flows provided by operations included the receipt of approximately $90 million from AT&T Corp. (AT&T) in accordance with certain tax allocation agreements entered into at the time NCR was spun-off from AT&T. No similar payments were included in the 1998 cash flows.
Net cash flows used in investing activities were $156 million in the first six months of 1998 and $411 million in the same period of 1997. In 1998, NCR purchased the minority interest of its Japanese subsidiary for $271 million. This use of cash was partially offset by proceeds from the sale of NCR's TOP END middleware technology to BEA and the sale of NCR's retail and computer systems manufacturing operations to Solectron Corporation (Solectron). Short-term investment activity provided $66 million of cash in the first six months of 1998 compared to a $277 million use of cash in the comparable period in 1997, when NCR was beginning to implement its overall cash management strategy after being spun-off from AT&T. Capital expenditures were $148 million for the first half of 1998 and $149 million for the comparable period in 1997. Capital expenditures generally relate to expenditures for reworkable parts used to service customer equipment, expenditures for equipment and facilities used in research and development, and expenditures for facilities to support sales and marketing activities.
Net cash flows used in financing activities were $31 million in the first six months of 1998 compared to $34 million provided by financing activities in the same period of 1997. In April 1998, NCR implemented a share repurchase program which resulted in the use of $78 million of cash in the second quarter of 1998.
NCR believes that cash flows from operations, its credit facility, and other short- and long-term financings, if any, will be sufficient to satisfy its future working capital, research and development, capital expenditure, and other financing requirements for the foreseeable future.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Management's Discussion and Analysis and other sections of this Form 10-Q contain information based on management's beliefs and forward-looking statements that involve a number of risks, uncertainties, and assumptions. Any Annual Report to Stockholders, Form 10-K, Form 8-K, and other written or oral statements made by the Company or its representatives may also contain such forward-looking statements. These statements are not guarantees of future performance. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.
Business Strategy
NCR's future operating results are dependent upon the Company's ability to implement, successfully and in a timely manner, its business strategy. This strategy focuses on, among other things, profitable revenue growth, improved gross margins, continued expense discipline, and an improved effective tax rate. The results, costs, and benefits associated with implementing NCR's strategy and business plan could vary significantly from those expected. The success of NCR's strategy is dependent upon, among other things, the technologies, actions, products, and strategies of NCR's current and future competitors, general domestic and foreign economic and business conditions, the condition of the information technology industry and the industries in which NCR's customers operate, and other factors, including those described below.
Competition
NCR operates in the extremely competitive information technology industry. The markets for this industry are characterized by rapidly changing technology, evolving industry standards, frequent new product introductions, and price and cost reductions. In addition, the movement toward common industry standards continues to increase the commoditization of products, including servers and other computer products, making differentiation more difficult. NCR's future operating results are dependent upon its ability to rapidly design, develop, and market, or otherwise obtain and introduce new solutions and related products and services that are competitive in the marketplace. The Company must commit significant resources in advance of bringing its business solutions to the marketplace. There are numerous risks and uncertainties inherent in this complex process, including proper identification of customer needs, technological changes, timely and cost-effective development and introduction, differentiation from NCR's competitors, and market acceptance.
New Solutions Introductions
NCR provides its customers with solutions composed of hardware, software, consulting, installation, or maintenance services. NCR also provides selected products and services to its customers on a stand-alone basis. The Company continually refines its current solutions and develops new solutions for its customers. The success of these efforts is dependent upon a number of factors and can be adversely impacted by: development or manufacturing delays; changes in costs; and delays in customer purchases of existing solutions and related products and services in anticipation of the introduction of new offerings, among other factors. In addition, the timing of introductions of new products or services offered by competitors could impact the future operating results of NCR, particularly when these introductions coincide or precede the introduction of NCR's own new solutions and related products and services. Likewise, some of NCR's new solution offerings may replace or compete with the Company's current offerings.
Emerging Markets
NCR's future operating results are also dependent upon its timely recognition of and expansion into new and emerging markets. In addition, NCR's future success may be impacted by its ability to forecast the proper mix of business solutions and related products and services to meet the demands of its customers in these markets as well as established markets.
Margin Pressure
In recent years, the significant competition in the information technology industry has decreased gross margins for many companies and could continue to do so in the future. Future operating results will depend in part on NCR's ability to manage such margin pressure by maintaining a favorable mix of solutions and other revenues and by achieving component cost reductions and operating efficiencies. Changes in the mix of NCR's solutions and related products and services revenues could cause operating results to vary.
Reliance on Third Parties
Due to NCR's focus on providing complex integrated solutions to customers, the Company frequently relies on third parties to provide significant elements of NCR's offerings, which must be integrated with those elements provided by the Company. NCR has from time to time formed alliances with third parties, such as Solectron, that have complementary products, services and skills. These business practices often require the Company to rely on the performance and capabilities of third parties which are beyond NCR's control. NCR's reliance on third parties, including Solectron, introduces a number of risks to NCR's business, including the risk of non-performance by alliance partners or other third parties, difficulties with integrating elements provided by NCR with those of third parties, and delays in the introduction of new NCR solutions. Further, the failure of any of these third parties to provide products or services that conform to NCR's specifications or quality standards could impair the Company's ability to offer solutions that include such third party elements or may impair the quality of such solutions.
A number of NCR's solutions rely on specific suppliers for microprocessors and operating systems. The Company also uses many standard parts and components. NCR believes there are a number of competent vendors for most parts and components. However, there are a number of important components, microprocessors, and operating systems that are developed by and purchased from single sources due to price, quality, technology, or other considerations. In some cases, these items are available only from single sources. For example, NCR's computer systems are based on microprocessors and related peripheral chip technology designed by Intel Corporation. NCR incorporates UNIX (R) and Microsoft Windows NT(R) operating systems into certain of its solutions and may utilize Oracle Corporation's and Informix Corporation's commercial databases for NCR's High Availability Electronic Commerce solution portfolio. Accordingly, NCR's results of operations are dependent upon the Company's ability to secure alternative providers for such parts, components, microprocessors, and operating systems and upon the ability of such technologies to remain competitive.
Key Personnel
NCR's success is also dependent on, among other things, its ability to attract and retain the highly-skilled technical, sales, and other personnel necessary to enable the Company to successfully develop and sell new and existing solutions and related products and services.
Seasonality
NCR's sales are historically seasonal, with revenue higher in the fourth quarter of each year. Consequently, during the three quarters ending in March, June, and September, NCR has historically experienced less favorable results than in the quarter ending in December. Such seasonality also causes NCR's working capital cash flow requirements to vary from quarter to quarter depending on the variability in the volume, timing, and mix of product sales. In addition, in many quarters, a large portion of NCR's revenue is realized in the third month of the quarter. Operating expenses are relatively fixed in the short term and often cannot be materially reduced in a particular quarter if revenue for that quarter falls below anticipated levels.
International Operations
In the first half of 1998, NCR's international operations represented approximately 56% of the Company's consolidated revenue. Specifically, Japan, the United Kingdom, Germany, and France represented approximately 11%, 6%, 5%, and 4% of consolidated revenue, respectively. Although the diversity of NCR's operations may help to mitigate certain of the risks associated with geographic concentrations of operations (for example, adverse changes in foreign currency exchange rates and business disruptions due to natural disasters and economic or political uncertainties), there are numerous other risks inherent in operating abroad. Such operations may be significantly impacted by a variety of factors, many of which cannot be readily foreseen and over which NCR has no control. In addition, a significant change in the value of the dollar or other functional currencies against the currency of one or more countries where NCR recognizes revenues or earnings or maintains net asset investments may significantly impact future operating results. NCR enters into foreign currency
contracts in an attempt to mitigate the impact of changes in currency exchange rates, generally over the short- or medium-term.
Income Taxes
NCR's tax rate is dependent upon the geographical composition of taxable earnings and NCR's ability to realize the benefits from tax losses in certain tax jurisdictions. To the extent that NCR is unable to reflect tax benefits from net operating losses and tax credits, arising primarily in the United States, to offset provisions for income taxes attributable to its profitable foreign subsidiaries, NCR's overall effective tax rate could increase.
Contingencies
In the normal course of business, NCR is subject to regulations, proceedings, lawsuits, claims, and other matters, including actions under laws and regulations related to the environment and health and safety, among others. Such matters are subject to the resolution of many uncertainties, and accordingly, outcomes are not predictable with assurance. Although NCR believes that amounts provided in its financial statements are currently adequate in light of the probable and estimable liabilities, there can be no assurances that the amounts required to discharge alleged liabilities from lawsuits, claims, and other legal proceedings and environmental matters, and to comply with applicable environmental laws, will not impact future operating results.
Year 2000
Year 2000 compliance issues concern the inability of certain computerized information systems to properly process date-sensitive information as the year 2000 approaches. Systems that do not process such information may require modification or replacement prior to the year 2000. Year 2000 issues impact NCR and substantially all companies in the industries in which NCR operates. NCR has developed plans to address the potential risks it faces as a result of Year 2000 issues. These risks include, among other things, the possible failure or malfunction of NCR's internal information systems, problems with the products and services NCR has provided to its customers, the potential for increased warranty, contract and other claims, and possible problems arising from the failure of the Company's suppliers' systems. No litigation has been initiated against NCR in connection with Year 2000 issues, although suits have been brought against other manufacturers of computers and retail equipment, and such claims may be advanced against NCR in the future.
NCR's Year 2000 plans involve replacing or upgrading affected internal information systems, developing Year 2000 qualified products, designating those products that will not be rendered Year 2000 qualified and, in some circumstances, making Year 2000 upgrades available for products. Pursuant to these plans, the Company has completed its analysis of the Year 2000 issues associated with critical internal information systems and the products it offers. The majority of the products NCR presently develops and provides to customers are Year 2000 qualified. The Company expects that the remainder of the products it presently develops and provides to customers will be Year 2000 qualified by or about the end of 1998. However, certain products that NCR does not intend to qualify for Year 2000 may continue to be requested by customers. NCR will evaluate such requests and may, under certain circumstances, provide these products to customers. NCR also expects to complete the modification of its critical internal information systems by or about the end of 1998. Worldwide implementation of these Year 2000 system changes is anticipated to be completed by the end of 1999. The Company has also completed its analysis of non-critical internal information systems and has developed plans to address the associated Year 2000 issues, where appropriate.
In addressing the Year 2000 issues associated with its internal information systems, management believes it is most efficient to incorporate Year 2000 changes with other anticipated non-Year 2000 system changes, when possible. Accordingly, NCR does not separately identify the cost incurred to resolve Year 2000 issues from the costs of other non-Year 2000 system changes, as many of these changes are being implemented concurrently. NCR estimates the combined cost of such Year 2000 and non-Year 2000 internal information system changes to be approximately $135 million. These costs consist primarily of compensation for NCR's information technology employees and contractors, and related hardware and software costs. Approximately $17 million of the Year 2000 and other non-Year 2000 system upgrade and replacement costs were incurred in 1997. During 1998 and 1999, the Company expects to incur system replacement and upgrade costs, including Year 2000, of approximately $65 million and $35 million, respectively. NCR intends to capitalize or expense these costs as required by generally accepted accounting principles. In addition, the Company expects to fund these costs through operating cash flows and, because they will be funded through a reallocation of NCR's overall information
technology and administrative spending, such costs are not expected to result in significant increases in information technology expenditures.
In addition, NCR is evaluating the potential impact of Year 2000 on the products and services provided by its suppliers and has established Year 2000 guidelines for its suppliers. NCR is conducting audits or reviews of its critical suppliers in accordance with these guidelines and plans to substantially complete such activity by the end of 1998. Failure by NCR's critical suppliers to address potential Year 2000 issues or adhere to these guidelines could adversely impact the Company's consolidated results of operations, financial condition, and cash flows.
NCR continues to evaluate the estimated costs associated with Year 2000 issues; however, the impact of Year 2000 on the Company is not fully determinable. Furthermore, there can be no assurances that there will not be delays in implementing the plans described above or increased costs associated with Year 2000 issues or that such delays or costs will not have a material impact on NCR's consolidated results of operations, financial condition, and cash flows.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
NCR is exposed to market risk, including changes in foreign currency exchange rates and interest rates. NCR uses a variety of measures to monitor and manage these risks, including derivative financial instruments. Qualitative disclosures about these risks and derivative instruments are discussed more fully in NCR's Annual Report to Stockholders for the year ended December 31, 1997.
The table below summarizes information about instruments sensitive to currency exchange rates, primarily foreign currency forward contracts, options, and swaps at June 30, 1998 (in millions except for average contract rates). This table should be read in conjunction with the information presented in NCR's Annual Report to Stockholders for the year ended December 31, 1997.
U.S. Dollar Value of Net Foreign Exchange Contracts
Net Underlying Average Currency Contract Exposure Rate Associated (Foreign with Firmly Currency Committed Notional per US Transactions Value Dollar) Gain/(Loss) ------------ -------- -------- ----------- Forward Contracts: British Pound 267 585 .62 5 Japanese Yen 194 194 131.81 7 Canadian Dollar 16 68 1.42 (3) Cross-dollar, non-U.S. 332 351 N/A (30) Other 194 195 N/A (2) Options: British Pound - 82 .62 - French Franc 23 37 5.94 (1) Other - 37 N/A - Swaps: Cross-dollar, non-U.S. 171 171 N/A (25) |
In the second quarter of 1998, NCR revised its foreign currency hedging program to increase the use of option contracts to hedge forecasted transactions. Accordingly, the table above reflects the resulting increase in option contracts held as compared with the information contained in NCR's 1997 Annual Report to Stockholders. There have been no significant changes in the carrying value, fair value, maturity schedule, or other information related to NCR's outstanding borrowings at June 30, 1998, as compared with that reported in its Annual Report to Stockholders for the year ended December 31, 1997.
Part II. Other Information
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Purchase and Manufacturing Agreement, effective April 27, 1998, by and between NCR Corporation and Solectron Corporation. Confidential treatment has been requested with respect to certain portions of this exhibit pursuant to an Application for Confidential Treatment filed with the Commission under Rule 24b-2(b) under the Securities Exchange Act of 1934, as amended.
27 Financial Data Schedule
(b) Reports on Form 8-K
(1) On June 2, 1998, NCR filed a Current Report on Form 8-K with respect to its news release on the announcement that BEA Systems, Inc. will acquire NCR Corporation's TOP END Enterprise Middleware product family.
(2) On July 16, 1998, NCR filed a Current Report on Form 8-K, including unaudited consolidated balance sheets as of June 30, 1998, and unaudited consolidated statements of operations, consolidated revenue summary, and condensed consolidated statements of cash flows for the quarter ended June 30, 1998, with respect to its news release on the second quarter financial results of 1998.
UNIX is a registered trademark in the United States and other countries, exclusively licensed through X/OPEN Company Limited. Windows NT is a registered trademark of Microsoft Corporation. TOP END is a registered trademark of BEA Systems, Inc.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NCR CORPORATION
Date: August 13, 1998 By: /s/ John L. Giering -------------------------------------- John L. Giering, Senior Vice-President and Chief Financial Officer |
27 Financial Data Schedule
EXHIBIT 10.1
[ ] Confidential treatment has been requested pursuant to an Application for Confidential Treatment filed with the Commission under Rule 24b-2(b) under the Securities Exchange Act of 1934, as amended. The confidential portion that is omitted has been filed separately with the Commission.
PURCHASE AND MANUFACTURING SERVICES
AGREEMENT
Agreement Number 98-M-SU-0005
-------------------------------------------------------------------------------- Solectron Corporation NCR CORPORATION 847 Gibraltar Drive 1700 S. Patterson Blvd. Milpitas, CA 95035 Dayton, OH 45479 -------------------------------------------------------------------------------- |
This Agreement is effective on April 27, 1998 and will terminate on April 30, 2003, unless renewed in accordance with the Agreement.
ARTICLE I - GENERAL TERMS AND CONDITIONS........................................................... 3 ARTICLE II - OEM................................................................................... 10 ARTICLE III - MANUFACTURING SERVICES............................................................... 19 EXHIBIT A - PRODUCT SPECIFICATIONS................................................................. 29 EXHIBIT B - PRICING, LEADTIME, FLEXIBILITY, ORDER RESCHEDULING, CANCELLATION, AND RETURNED EVALUATION EQUIPMENT.................................................................. 33 EXHIBIT C - QUALITY................................................................................ 36 EXHIBIT D - SUPPORT SERVICE REQUIREMENTS........................................................... 47 EXHIBIT E - SAFETY AND REGULATORY REQUIREMENTS..................................................... 50 EXHIBIT F - SERVICE LEVEL AGREEMENT................................................................ 56 EXHIBIT G - ELECTRONIC DATA INTERCHANGE............................................................ 76 EXHIBIT H - NCR AND THIRD PARTY SOFTWARE........................................................... 80 EXHIBIT I - YEAR 2000.............................................................................. 89 |
NCR CORPORATION, a Maryland corporation, having a place of business at 1700 S. Patterson Blvd., Dayton, OH 45479 USA ("NCR") and Solectron Corporation, having a place of business at 847 Gibraltar Drive, Milpitas, CA 95035 ("Solectron "),
AGREE AS FOLLOWS:
This document sets forth a set of agreements between the parties. Each agreement consists of Article I (General Terms and Conditions) together with a consecutively number article and any exhibits referenced therein ("Agreement"). For example, Article I and Article II (OEM) make up a contract between the parties; and Article I and Article III (Manufacturing Services) make up a separate contract between the parties.
AGREED by the following authorized representatives:
SOLECTRON CORPORATION NCR CORPORATION BY: /s/ SUSAN A. WANG BY: /s/ WILLIAM J. EISENMAN ------------------------------- ------------------------------ NAME: SUSAN A. WANG NAME: WILLIAM J. EISENMAN ------------------------------ ----------------------------- TITLE: CHIEF FINANCIAL OFFICER TITLE: SENIOR VICE PRESIDENT ----------------------------- ---------------------------- DATE: APRIL 14, 1998 DATE: APRIL 13, 1998 ------------------------------ ----------------------------- |
ARTICLE I
General Terms and Conditions
1. CONFIDENTIAL MATERIALS................................... 3 2. NOTICES.................................................. 4 3. AUDIT.................................................... 4 4. DISPUTES................................................. 5 5. GENERAL.................................................. 6 5.1 Assignment.......................................... 6 5.2 Severability........................................ 6 5.3 Excused Performance................................. 6 5.4 Choice of Law....................................... 6 5.5 Constrained Capacity................................ 6 5.6 Affiliate Participation............................. 6 5.7 Waiver or Delay..................................... 6 5.8 Solectron Disaster Plan............................. 7 5.9 Duty Drawback....................................... 7 5.10 Country of Origin.................................. 7 5.11 Compliance with Laws............................... 7 5.12 Personal Warranties................................ 7 5.13 Relationship of Parties............................ 7 5.14 Periods of Time.................................... 7 5.15 Publication of Agreement........................... 7 5.16 Limitation of Liability............................ 7 5.17 Entire Agreement................................... 8 6. OTHER OBLIGATIONS........................................ 8 6.1 Reduction [ ]........................................ 8 6.2 Tooling............................................. 8 6.3 [ ]................................................. 8 6.4 Year 2000 Test...................................... 8 7. DEFINITIONS.............................................. 8 |
1. CONFIDENTIAL MATERIALS
For a period of 5 years from the date of receipt, the recipient will use the same degree of care to prevent the disclosure of Confidential Information to any other person as it uses to protect other information of a similar nature which it owns or possesses, but in no event less than reasonable care, unless disclosure is required by law. The recipient may disclose Confidential Information only to those of its employees with a legitimate need to know. Unless the discloser provides written notice to the contrary, the recipient may disclose Confidential Information to its affiliates or contractors with a legitimate need to know who agree in writing to confidentiality obligations consistent with this
Section. All materials containing Confidential Information are and remain the discloser's property, and upon written request the recipient will promptly return them, and all copies of them, except a single archival copy.
2. NOTICES
Except as otherwise specifically provided herein, notices and other communications will be delivered by any method providing for proof of delivery, except that a notice of default or termination may be delivered by facsimile transmission if the original document is also promptly delivered to the recipient. A notice will be deemed given on the date of receipt at the following address(es): the addresses shown on the cover page of this Agreement, with an additional copies to:
General Counsel/Notices WHQ-5 Susan Wang NCR Corporation Senior Vice President and CFO Dayton, OH 45479 Solectron Corporation 847 Gibraltar Drive Vice President, Supplier Management Milpitas, CA 95035 NCR Corporation 3325 Platt Springs Rd. Legal Department West Columbia, SC 29170 Solectron Corporation 847 Gibraltar Drive Vice President, Supplier Management Milpitas, CA 95035 NCR Corporation 2651 Satellite Blvd. Duluth, GA 30096 |
Either party may change its address upon notice as required by this Section.
3. AUDIT
3.1 During the term of this Agreement, Solectron agrees to keep all usual and proper records and books of account and all usual and proper entries relating to the compliance with provisions concerning quality control, third party software licenses procured by NCR in connection with this Agreement, NCR software, component and Part price information required to be disclosed by Solectron to NCR in connection with Exhibit B, Year 2000 and Safety regulatory warranties, Sections 5.5, 5.9, 5,10, 5.11 of Article I, Section 6.9 of Article II, Section 5.9 of Article III, Section 5.2 of Exhibit D, Exhibit F, royalties reported under Exhibit B, and most favored pricing. Solectron shall maintain on Solectron premises such records for itself and for each Solectron subsidiary which exercises rights under this Agreement.
3.2 In order to verify Solectron's compliance with the terms of this Agreement expressly set forth in Section 3.1 of Article I and any third party or governmental audit requirements, NCR may cause (i) an audit to be made of Solectron's and/or Solectron's subsidiaries' books and records directly related to the audited matters and/or (ii) an inspection to be made of Solectron's and/or Solectron's subsidiaries' facilities and procedures. Any audit and/or inspection shall be conducted during regular business hours at such facilities, with 5 business days notice. Any audit may be conducted by NCR or an independent
certified public accountant selected by NCR (other than on a contingent fee basis) reasonably acceptable to Solectron. Such third party auditor shall enter into a nondisclosure agreement with Solectron and shall only report to NCR on Solectron's compliance with respect to the audited matter.
3.3 Solectron agrees to provide NCR's designated audit or inspection team access to the relevant Solectron's and/or Solectron's subsidiaries' records and facilities, except to the extent such access may be limited or prohibited by Solectron's agreements with its other customers.
3.4 Prompt adjustment shall be made to compensate for any errors or omissions disclosed by such audit unless Solectron objects to the results of the audit in writing. Any such audit shall be paid for by NCR unless material discrepancies are disclosed. If material discrepancies are disclosed, Solectron agrees to pay NCR for the reasonable costs associated with the audit. In no event shall audits be made more frequently than semi-annually unless the immediately preceding audit disclosed a material discrepancy.
4. DISPUTES
4.1 In the event any controversy or claim arises between the parties to this Agreement, they will attempt in good faith to negotiate a solution to their differences by elevating the issue to senior management for resolution and, if negotiation does not result in a resolution within 30 days, they agree to participate in good faith mediation as administered by the American Arbitration Association. In the event of threatened or actual irreparable harm, a party may elect to bypass this Section and proceed directly pursuant to Sections 4.2 or 4.4.
4.2 Any controversy or claim between the parties to this Agreement, whether based on contract, tort, statute, or other legal theory (including but not limited to any claim of infringement, fraud or misrepresentation), which cannot be resolved by negotiation or mediation will be resolved by arbitration pursuant to this section and the then-current Commercial Rules and supervision of the American Arbitration Association. The duty to arbitrate will extend to any employee, officer, shareholder, agent, or affiliate of a party hereto making or defending a claim which would be subject to arbitration if brought by a party hereto. If any part of this section is held to be unenforceable, it will be severed and will not affect either the duty to arbitrate hereunder or any other part of this section.
4.3 The arbitration will be held in the US headquarters city of the party not initiating the claim before a sole arbitrator who is knowledgeable in business information and electronic data processing systems. The arbitrator's award will be final and binding and may be entered in any court having jurisdiction thereof. The arbitrator will not have the power to award any damages excluded by, or in excess of, any damage limitations expressed in this Agreement. Issues of arbitrability will be determined in accordance solely with the federal substantive and procedural laws relating to arbitration; in all other respects, the arbitrator will be obligated to apply and follow the substantive law of the state or nation specified in this Agreement. Each party will bear its own attorney's fees associated with the arbitration and other costs and expenses of the arbitration will be borne as provided by the rules of the American Arbitration Association.
4.4 If a party breaches any provision of this Agreement related to the other party's or the other party's supplier's intellectual property, the other party will have no adequate
remedy at law and may petition a court of law for injunctive relief to protect the intellectual property.
5. GENERAL
No assignment of this Agreement by a party will be valid without the prior written consent of the other party which will not be unreasonably withheld. As used in this Section, "assignment" shall not include mergers, consolidations or the acquisition of the majority of the outstanding voting shares or other controlling interest in the party. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. NCR, if it sells an operating unit that is using this Agreement, may replicate this Agreement to such operating unit.
5.18 Further, this Agreement shall take precedence over any conflicting terms in any Exhibit hereto or any Purchase Orders hereunder.
6. OTHER OBLIGATIONS
6.3 [ ]
7. DEFINITIONS
7.1 "Affiliate" shall mean any corporation that has outstanding voting securities, at least fifty percent (50%) of which are directly held by NCR.
7.2 "Confidential Information" is information reasonably related to this Agreement that complies with this paragraph. Confidential Information disclosed in documents or other tangible form must be clearly marked as confidential at the time of disclosure. Confidential Information in oral or other intangible form must be identified as confidential at the time of disclosure, and summarized in tangible form clearly marked as confidential and delivered to the recipient within 10 calendar days thereafter. Confidential Information will also include any information which the recipient knows or should know to be confidential even if not marked. Confidential Information does not include information which is or becomes available without restriction to the recipient or any other person through no wrongful act.
7.3 "Effective Date" means the first day of the initial term of this Agreement.
7.4 The term "Products for which NCR or RSG or CSG has design ownership" (whether capitalized or not) or similar forms shall mean Products for which NCR has provided the engineering design to Solectron other than pursuant to the Asset Purchase Agreement between the parties dated April 1, 1998 despite the actual owner of the intellectual property in the design. The term "Products for which Solectron has design ownership" (whether capitalized or not) or similar forms shall mean Products for which Solectron has engineering design responsibility, despite the actual owner of the intellectual property in the design. The foregoing definitions of "Products for which Solectron has
design ownership" includes, but is not limited to, Entry Level Computers designed by NCR's engineering team before the Effective Date of this Agreement.
ARTICLE II
OEM
1. BACKGROUND................................................................ 11 1.1 Scope................................................................ 11 1.2 Leading Technology................................................... 11 1.3 Commitment........................................................... 11 1.4 Exceptions........................................................... 11 1.5 Right of First Negotiation........................................... 11 2. DEFINITIONS............................................................... 11 3. FORECAST/ORDER PLACEMENT/FLEXIBILITY...................................... 12 4. PRICES.................................................................... 12 5. SERVICE SUPPORT REQUIREMENTS.............................................. 12 6. LEAD TIME, DELIVERY, AND PAYMENT.......................................... 12 7. TAXES..................................................................... 14 8. QUALITY................................................................... 14 9. LICENSE OF SOFTWARE AND DOCUMENTATION..................................... 14 10. OTHER OBLIGATIONS......................................................... 15 10.1 New Products........................................................ 15 10.2 Service Level Agreement............................................. 15 10.3 Leading Edge Procurement............................................ 15 10.4 Executive Reviews................................................... 15 11. WARRANTY AND PRODUCT LIABILITY............................................ 15 11.1 General Warranty.................................................... 15 11.2 DOA................................................................. 16 11.3 Services............................................................ 16 11.4 Safety and Regulatory Agency Requirements........................... 16 11.5 Epidemic Failures................................................... 16 11.6 Indemnification..................................................... 16 11.7 Contribution........................................................ 16 11.8 Insurance........................................................... 16 11.9 Year 2000........................................................... 17 12. INDEMNIFICATION FOR INFRINGEMENT.......................................... 17 13. TERM AND TERMINATION...................................................... 17 14. MANUFACTURING LICENSE..................................................... 18 |
1. BACKGROUND
1.3 Commitment. [ ]
1.4 Exceptions. The commitment in Section 1.3 of Article II does not [ ]
2. DEFINITIONS
2.1 "Entry Level Computers" shall mean general purpose personal computers and server computers which use up to 4 microprocessors and have a mass storage device such as a hard disk drive or a removable disk drive and are for resale to end users under NCR's brand name. Entry Level Computers do not include terminals, network computers, mass storage subsystems, parts, or computers specifically identified by an NCR customer.
2.2 "Forecast" - A non-binding, administrative document setting forth the anticipated requirements for Products or Parts during a specific time frame of 9 months, used to facilitate the placement of individual Purchase Orders. Forecasts are not Orders.
2.3 "Master Purchase Order" or "MPO" - NCR's purchase authorization to Solectron for Products, Parts or services under this Agreement in preparation of the receipt of Purchase Orders. It is understood that MPO's are for planning and administrative purposes and are not Purchase Orders.
2.4 "Part" - Any component, subassembly, field replaceable unit, or other module of the Product sold under this Agreement.
2.5 "Product" - An item, including Solectron's standard products, services and Software, as described in the Specifications attached to Exhibit A, including any and all modifications, changes and improvements made during the term of this Agreement.
2.6 Purchase Order", "Sales Order" or "Order" - A document issued by NCR for the purpose of ordering specific Products or Parts pursuant to this Agreement. Purchase Orders, Sales Orders or Orders may include an NCR Purchase Order Form, an NCR Release Order Form written against an MPO, or a defined Electronic Data Interface (EDI) Order transmission as defined by the Solectron and NCR in an EDI Agreement attached as Exhibit G. The only parts of a Purchase Order that become part of this Agreement are the quantity, price, description, delivery date and delivery terms.
2.7 "Software" - Versions of computer programs including software or firmware.
2.8 "Specifications" - The specifications for the Product attached hereto as Exhibit A, including any and all modifications, amendments or changes thereto made pursuant to this Agreement.
3. FORECAST/ORDER PLACEMENT/FLEXIBILITY
Provisions related to Forecasts, Order placement and flexibility are set forth in Exhibit B.
4. PRICES
4.1 [ ]
5. SERVICE SUPPORT REQUIREMENTS.
Solectron will provide Product support in accordance with Exhibit D.
6. LEAD TIME, DELIVERY AND PAYMENT
This will not, however, limit any other remedy to which NCR may be entitled on account of Solectron's inability to supply NCR's requirements.
a) Ship the material complete unless otherwise instructed.
b) Ship all Products, Parts, and other items in accordance with "ex- works" terms.
c) Initiate shipments in accordance with routing instructions given by NCR.
d) Enclose a packaging memorandum with each shipment and, when more than one package is shipped, identify the package containing the memorandum.
e) Mark the Purchase Order number on all packages and shipping papers.
f) Mark with the NCR part number.
g) Mark the NCR freight account code on the bill of lading for truck shipments, or in the shipper's reference field on the air waybill, or in the reference field for UPS or RPS shipments.
h) All shipments are to be consolidated via the same mode on any one day to one consignment address under one bill of lading.
i) Include specific shipping instructions for spare parts as specified in Exhibit D.
information and assistance to permit an independent classification of the Product or Part.
7. TAXES.
Unless otherwise stated, Product and Part prices do not include applicable federal, state or local sales, use, property, excise, value added or similar taxes that may be levied upon Solectron as a result of sale or delivery of any Product or Part under this Agreement. All such taxes will be assumed and paid by NCR except any taxes refundable to or creditable by Solectron. If a resale certificate or other document is required in order to exempt the sale of Products or Parts from taxes, NCR will furnish Solectron with appropriate documentation at Solectron's request. If Solectron pays any such taxes at NCR's request, NCR will reimburse Solectron upon being appropriately invoiced for the exact amount of such taxes and being provided with documentation which will allow NCR to claim a credit for such taxes. Solectron shall be responsible for all taxes based upon its personal property ownership and gross or net income.
8. QUALITY
Solectron will use data driven processes based on continuous improvement and defect prevention with a goal of delivering defect free Products, Parts and services to NCR and its customers. Solectron will implement all quality processes that will contribute to meeting the quality and reliability requirements defined in Exhibit C.
9. LICENSE OF SOFTWARE AND DOCUMENTATION
transferable, royalty-free license to reproduce, distribute, perform and display copies and create derivative works of the Documentation for use with the Products and Parts. The foregoing includes any medium such as Internet access (FTP, WWW) and CD-ROM.
10. OTHER OBLIGATIONS
11. WARRANTY AND PRODUCT LIABILITY
OR RELATING TO THE PRODUCTS, PARTS, SOFTWARE OR DOCUMENTATION, OR ANY MATERIALS OR SERVICES PROVIDED TO NCR UNDER THIS AGREEMENT. SOLECTRON SPECIFICALLY DISCLAIMS ALL IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT WITH RESPECT TO THE PRODUCTS, PARTS, SOFTWARE, DOCUMENTATION, AND SAID OTHER MATERIALS AND SERVICES, AND WITH RESPECT TO THE USE OF ANY OF THE FOREGOING.
requirements will be furnished by Solectron prior to the signing of this Agreement and sent to: NCR, Corp., Risk Management Department, 1700 S. Patterson Blvd. WHQ-3E, Dayton, OH 45479. Certificates will state that the policy or policies have been issued and are in force, will not expire or lapse, and will not be canceled or changed so as to affect the insurance described in he certificate. Compliance or non-compliance with the requirements of this Section shall not relieve Solectron from any responsibility to indemnify NCR or its liability to NCR as specified in any other provision of this Agreement. Indemnity obligations specified elsewhere in this Agreement shall not be negated or reduced by virtue of any insurance carrier's denial of insurance coverage for the occurrence or event which is the subject matter of the claim; or refusal to defend any named insured.
12. INDEMNIFICATION FOR INFRINGEMENT
13. TERM AND TERMINATION
13.1 Unless earlier terminated under any other provision of this Agreement, this Agreement will continue for an initial term as set out on the first page of this Agreement and, after that, will automatically continue in force until NCR or Solectron gives 180 days notice of termination, or unless earlier terminated under any other provision of this Agreement.
13.2 Either party may terminate this Agreement upon 60 days prior written
notice to the other party for failure of the other party to fulfill any of
its material obligations, including failure due to causes specified in
Section 5.3 of Article I; unless during such 60 day period the other party
remedies the failure, in which case this Agreement will continue in effect
as if the failure had not occurred. Termination of this Agreement by
either Solectron or NCR under this Section will not prejudice or otherwise
affect any manufacturing license to which NCR may be entitled. Termination
of this Agreement by either party will not prejudice it or the other party
to recover any money amounts or require performance of any obligations due
at the time of the termination.
13.3 The following Sections will survive termination of this Agreement:
Sections 1, 3, 4, 5.4, 5.9, 5.10, 5.11, 5.16 of Article I; Sections 1.1, 5,
9, 11, 12, 13.4, of Article II; the intellectual property provisions of
Section 1.3 of Article II; and the continuation engineering portions of
Exhibit F.
13.4 In the event of termination or expiration of this Agreement, or in the event NCR decides, subject to Section 1.3 of Article II to transfer manufacturing of a Product or Part to another person, Solectron will use reasonable efforts to efficiently transition the manufacture of Products or Parts to the other person. Solectron will bear its own costs of such transition except in the event of expiration of this Agreement or termination of this Agreement by Solectron for NCR's breach in which case NCR will pay for Solectron's reasonable out of pocket costs for transitioning the manufacture of Products or Parts to such other person. Solectron will deliver to NCR and grant NCR the worldwide, perpetual, royalty free right to copy, use, and create derivative works from the tooling and manufacturing test software used in production of the Products or Parts solely for the purpose of manufacturing and supporting products and parts that NCR will sell; provided that Solectron will have no obligation to provide any manufacturing test software which was developed by Solectron for use with the manufacture of products other than the Products and Parts. Solectron will grant NCR license to copy, use, and create derivative works from such non NCR specific manufacturing test software solely for the purpose of manufacturing and supporting products and parts that NCR will sell for a reasonable royalty taking into account any value that NCR has previously provided. NCR may exercise the foregoing licenses directly or have another person exercise them on its behalf. In addition, if NCR requests Solectron to consult with it or its manufacturer on questions related to the manufacturing of Products or Parts, Solectron will provide such consultation on a reasonable time and materials basis.
14. MANUFACTURING LICENSE
In the event that NCR desires to manufacture any Product or Part through one of its subsidiaries due to regional deployment or volume constraint, the parties will negotiate in good faith a site specific licensing agreement to be amended to this Agreement. NCR agrees to provide to Solectron opportunity to bid for a period of 30 days for manufacturing such Products or Parts. If the Agreement is terminated by NCR due to Solectron's material breach of this Agreement or if Solectron discontinues the manufacture or marketing of the Product or Part, or is unable to supply NCR with NCR's reasonable requirements of Products or Parts ordered, Solectron will promptly grant a non-exclusive, world-wide license to NCR and provide all relevant information so that NCR may use, modify, copy, sell, distribute, manufacture, or have manufactured, Solectron's Products or Parts for the sole purpose of supplying Products or Parts to NCR's resellers, distributors, end users, or other customers. Such license shall apply only to Products and Part models that were purchased during the initial term of this Agreement. Such license shall apply only to Products and Part models that were purchased during the initial term of this Agreement.
ARTICLE III
Manufacturing Services
1. BACKGROUND................................................................ 20 1.1 Scope................................................................ 20 1.2 Leading Technology................................................... 20 1.3 Commitment........................................................... 20 1.4 Exceptions........................................................... 20 2. DEFINITIONS................................................................ 20 3. FORECAST/ORDER PLACEMENT/FLEXIBILITY...................................... 21 4. PRICES.................................................................... 21 5. LEAD TIME, DELIVERY, AND PAYMENT.......................................... 21 6. LICENSE OF SOFTWARE AND DOCUMENTATION..................................... 23 7. SERVICE SUPPORT REQUIREMENTS; EMERGENCY SPARE PARTS....................... 24 8. TAXES..................................................................... 24 9. QUALITY................................................................... 24 10. WARRANTY................................................................. 24 10.1 General Warranty.................................................... 24 10.2 DOA................................................................. 24 10.3 Services............................................................ 24 10.4 Safety and Regulatory Agency Requirements........................... 24 10.5 Year 2000........................................................... 25 10.6 Epidemic Failures................................................... 25 11. SPECIFICATION, ENGINEERING AND OTHER CHANGES............................. 25 12. INDEMNIFICATION.......................................................... 26 12.1 IP Indemnification by Solectron..................................... 26 12.2 Parts Indemnification............................................... 26 12.3 IP Indemnification by NCR........................................... 26 12.4 Litigation by Others................................................ 26 12.5 Insurance........................................................... 26 13. OTHER OBLIGATIONS........................................................ 27 13.1 Service Level Agreement............................................. 27 13.2 Leading Edge Procurement............................................ 27 13.3 Executive Reviews................................................... 27 14. TERM AND TERMINATION..................................................... 27 |
1. BACKGROUND
2. DEFINITIONS
2.1 "Committed Ship Date" ("CSD") - The date Solectron agrees to deliver to a factory an order release or replenishment signal.
2.2 [ ]
2.3 "Desired Receipt Date" ("DRD") - The date NCR requests in an Order or Release Order that Products or parts be delivered to NCR.
2.4 "Forecast" - A planning tool which expresses NCR's estimated Product demand, typically in weekly and/or monthly buckets, spanning a minimum of 9 months. It is understood that the Forecast is for planning and administrative purposes only, and that NCR will have no obligation to purchase any or all of the Products or parts identified in an NCR Forecast, except as otherwise provided herein.
2.5 "Lead Time" - The number of calendar days measured from the time Solectron receives an Order and/or sends a replenishment signal until Solectron ships the Product.
2.6 [ ]
2.7 "Master Purchase Order" or "MPO" - NCR's purchase authorization to Solectron for Products, Parts or services under this Agreement in preparation of the receipt of Purchase Orders. It is understood that MPO's are for planning and administrative purposes and are not Purchase Orders.
2.8 "Part" - Any component, subassembly, field replaceable unit, or other module of the Product sold under this Agreement.
2.9 "Product" - Any finished assembly, subassembly or module built by Solectron under this Agreement according to NCR Specifications.
2.10 "Purchase Order", "Sales Order" or "Order" - A document issued by NCR for the purpose of ordering Product or Parts pursuant to this Agreement. Purchase Orders, Sales Orders or Orders may include an NCR Purchase Order Form, an NCR Release Order Form written against an MPO, or a defined Electronic Data Interface (EDI) Order transmissions as defined by Solectron and NCR in an EDI Agreement attached as Exhibit G.
2.11 "Release Order" - A firm Order written against and referencing an existing MPO. A Release Order may also take the form of an Electronic Data Interface (EDI) Order transmissions as defined by Solectron and NCR in an EDI Agreement attached as Exhibit G.
2.12 "Specifications" - NCR provided prototypes, engineering drawings, diagrams and other documentation specific to a particular Product as amended from time to time.
2.13 "Software" - Versions of computer programs including software or firmware.
3. FORECAST/ORDER PLACEMENT/FLEXIBILITY
Provisions related to Forecasts, Order placement and flexibility are set forth in Exhibit B.
4. PRICES
4.1 [ ]
5. LEAD TIME, DELIVERY, AND PAYMENT
Solectron will notify NCR prior to shipping a partial quantity of a particular Order of Products or Parts. [ ]
a) Ship the material complete unless otherwise instructed.
b) Ship all Products, Parts, and other items in accordance with "ex- works" terms.
c) Initiate shipments in accordance with routing instructions given by NCR.
d) Enclose a packaging memorandum with each shipment and, when more than one package is shipped, identify the package containing the memorandum.
e) Mark the Purchase Order number on all packages and shipping papers.
f) Mark with the NCR part number.
g) Mark the NCR freight account code on the bill of lading for truck shipments, or in the shipper's reference field on the air waybill, or in the reference field for UPS or RPS shipments.
h) All shipments are to be consolidated via the same mode on any one day to one consignment address under one bill of lading.
i) Include specific shipping instructions for spare parts as specified in Exhibit D.
6. LICENSE OF SOFTWARE AND DOCUMENTATION
7. SERVICE SUPPORT REQUIREMENTS; EMERGENCY SPARE PARTS
Solectron will provide Product support in accordance with Exhibit D.
8. TAXES
Product prices do not include applicable federal, state or local sales, use, property, excise, or similar taxes that may be levied upon Solectron as a result of sale or delivery of any Product under this Agreement. All such taxes will be assumed and paid by NCR except any taxes refundable or creditable to Solectron. If a resale certificate or other document is required in order to exempt the sale of Products from taxes, NCR will furnish Solectron, at Solectron's request, with appropriate documentation prior to shipment by Solectron. If Solectron pays any such taxes at NCR's request, NCR will reimburse Solectron upon being appropriately invoiced for the exact amount of such taxes and being provided with documentation which will allow NCR to claim a credit for such taxes. Solectron shall be responsible for all taxes based upon its personal property ownership and gross or net income.
9. QUALITY
Solectron will use data driven processes based on continuous improvement and defect prevention with a goal of delivering defect free Products, Parts and services to NCR and its customers. Solectron will implement all quality processes that will contribute to meeting the quality and reliability requirements defined in Exhibits C.
10. WARRANTY
certified by a nationally recognized testing laboratory with NCR's name, NCR's tradename, NCR's trademark and file number. Additional Product specific safety and regulatory requirements may be indicated in the Product Specifications. Solectron will promptly repair or replace, at its option and expense, non-complying Products or Parts, at the end user site, or alternately, will pay NCR its costs of remedying the non-compliance at the end user site. Any shipment of non-complying Products or Parts by NCR to Solectron, and the return shipment of repaired or replacement Products or Parts by Solectron to NCR under this Section, will be at Solectron's expense. NCR will take title to replacement Products and Parts at the Solectron facility that are intended for export and arrange for their shipment to the end-user site.
11. SPECIFICATION, ENGINEERING AND OTHER CHANGES
provide NCR at least [ ] written notice prior to the termination within the
[ ]. If during the [ ], Solectron has difficulty with production or repair
of parts because of components becoming obsolete and Solectron has
knowledge of component obsolescence, then Solectron will notify NCR at
least [ ] prior to production termination. Prior to this production
termination, NCR may develop a Forecast and make a final buy of the
component parts so ongoing production or repairs may continue.
12. INDEMNIFICATION
12.4.1 Except for claims regarding intellectual property infringement covered in Sections 12.1 and 12.2 of this Agreement, [ ] 12.4.2 [ ] 12.4.3 [ ] 12.4.4 For purposes of any arbitration conducted between NCR and Solectron with respect to [ ] |
negated or reduced by virtue of any insurance carrier's denial of insurance coverage for the occurrence or event which is the subject matter of the claim; or refusal to defend any named insured.
13. OTHER OBLIGATIONS
14. TERM AND TERMINATION
14.1 Unless earlier terminated under any other provision of this Agreement, this Agreement will continue for an initial term as set out on the first page of this Agreement and, after that, will be automatically continue in force until NCR or Solectron gives 180 days notice of termination, or unless earlier terminated under any other provision of this Agreement.
14.2 Either party may terminate this Agreement upon 60 days prior written
notice to the other party for failure of the other party to fulfill any of
its material obligations, including failure due to causes specified in
Section 5.3 of Article I; unless during such 60 day period the other party
remedies the failure, in which case this Agreement will continue in effect
as if the failure had not occurred. Termination of this Agreement by
either Solectron or NCR under this Section will not prejudice or otherwise
affect any manufacturing license to which NCR may be entitled. Termination
of this Agreement by either party will not prejudice it or the other party
to recover any money amounts or require performance of any obligations due
at the time of the termination.
14.3 The following Sections will survive termination of this Agreement:
Sections 1, 3, 4, 5.4, 5.9, 5.10, 5.11, 5.16 of Article I; Sections 1.1, 6,
7, 10, 12, 14.4, of Article III; and the continuation engineering portions
of Exhibit F.
14.4 In the event of termination or expiration of this Agreement, or in the event NCR decides, subject to Section 1.3 of Article III to transfer manufacturing of a Product or Part to another person, Solectron will use reasonable efforts to efficiently transition the manufacture of Products or Parts to the other person. Solectron will bear its own costs of such transition except in the event of expiration of this Agreement or termination of this Agreement by Solectron for NCR's breach in which case NCR will pay for Solectron's reasonable out of pocket costs for transitioning the manufacture of Products or Parts to such other person. Solectron will deliver to NCR and grant NCR the worldwide, perpetual, royalty free right to copy, use, and create derivative works from the tooling and manufacturing test software used in production of the Products or Parts
solely for the purpose of manufacturing and supporting products and parts that NCR will sell; provided that Solectron will have no obligation to provide any manufacturing test software which was developed by Solectron for use with the manufacture of products other than the Products and Parts. Solectron will grant NCR license to copy, use, and create derivative works from such non NCR specific manufacturing test software solely for the purpose of manufacturing and supporting products and parts that NCR will sell for a reasonable royalty taking into account any value that NCR has previously provided. NCR may exercise the foregoing licenses directly or have another person exercise them on its behalf. In addition, if NCR requests Solectron to consult with it or its manufacturer on questions related to the manufacturing of Products or Parts, Solectron will provide such consultation on a reasonable time and materials basis.
This Exhibit specifies the products that are covered by the Agreement. This Exhibit is divided into three parts (A-I, A-II, A-III).
Part A-I specifies [ ]
Part A-II specifies [ ]
Part A-III specifies [ ]
A-I [ ]
1.0 PRODUCT SPECIFICATIONS
NCR will provide Solectron a New Product Specification for each NCR product or feature to be developed by Solectron. The Product Specification will be comprised of one or more NCR produced documents that, in their entirety, provide the following required Product Information.
[ ]
2.0 PREFERRED SUPPLIER
Solectron will [ ]
A-II [ ]
In the event of any conflict between the terms of the Product CLASS Specification(s) listed in this Exhibit and the provisions contained in the Agreement, the terms of the Agreement shall prevail.
THE FOLLOWING TABLE (SECTION 1) LISTS THE PRODUCTS THAT WILL BE ORDERABLE
THROUGH SOLECTRON. [ ]
A-III [ ]
IN THE EVENT OF ANY CONFLICT BETWEEN THE TERMS OF THE PRODUCT CLASS SPECIFICATION(S) LISTED IN THIS EXHIBIT AND THE PROVISIONS CONTAINED IN THE AGREEMENT, THE TERMS OF THE AGREEMENT SHALL PREVAIL.
The following tables (section 1) list the products that will be orderable through Solectron. The lists are [ ]
PRICING, LEADTIME, FLEXIBILITY, ORDER RESCHEDULING, CANCELLATION, AND RETURNED
EVALUATION EQUIPMENT SCHEDULE
1. PRODUCT and PART PRICING: Pricing for Orderable Products shall be established [ ] using the formula below. [ ]. The price will be [ ]. The pricing will [ ]. The pricing formula is as follows: |
[ ]
Affiliates. If Solectron uses any of its affiliates to provide products, board assemblies, sub-assemblies, upgrade kits and components or perform other services under this Agreement, Solectron will ensure:
[ ]
Columbia Lease. [ ]
2. DEFINITIONS:
[ ]
3. [ ] REVIEWS:
The NCR Cost Management Team will meet [ ] with the Solectron Cost Management Team to [ ]
4. [ ] REVIEWS:
E. Solectron will provide [ ]
5. [ ]
6. [ ]
7. PRICING FOR MANUFACTURING SERVICES:
[ ]
8. NCR Cost Improvement Commitments:
[ ]
9. [ ]
10. [ ]
11. PURCHASE ACTIVITY REPORTING To the extent the facilities acquired from NCR do so prior to the Effective Date, Solectron shall do the following:
[ ]
12. LEADTIMES
[ ]
13. RETURNED EVALUATION EQUIPMENT
[ ]
Equipment deliveries will adhere to Committed Ship Dates. If the delivery is late, [ ]
14. [ ] PRICING:
[ ]
15. CONTINUOUS IMPROVEMENTS
All items listed in this Exhibit will be managed via a continuous improvement process. The process to be used is the Supplier Value Add (SVA) process. Solectron agrees to commit appropriate resources to facilitate this process.
Quality Exhibit C
Table of Contents
Exhibit C1 - Quality
1.0 Purpose
2.0 Scope
3.0 Terms and Definition
4.0 Quality Performance Requirements
5.0 Notification of Change
6.0 RMA Requirements
7.0 Formal Reviews and Audits
8.0 Reliability Programs
9.0 NCR Supplier Management Process
10.0 Weights and Measures
11.0 Laser Safety
12.0 Supplier Responsibilities
Exhibit C2- Performance Requirements and Metrics
1.0 Purpose
2.0 Metrics
3.0 NCR 1998 Balanced Scorecard Objectives
Exhibit C3 - Software Quality Assurance - Replication and Development
Installation Services
1.0 Definitions
2.0 Gold Drive Loads
3.0 Records Keeping
4.0 General
5.0 Additional Support Requirements
Software Development or Modification of Existing Software Component
1.0 Statements of Work
2.0 Acceptance Testing
3.0 Closed Loop Corrective Action
4.0 Additional Support Requirements
1.0 PURPOSE
The purpose of Exhibit C1 (Quality) is to provide an overview of the quality requirements which are directly linked to the metrics defined in Exhibit C2 (Performance Requirements and Metrics). Additional requirements may be indicated in each Product Specification as well as NCR's Business Level Agreement. The content of Exhibit C1 also establishes a mutual understanding of NCR's qualitative objectives.
1.1 RESPONSIBILITY
Solectron must provide quality data in to NCR each month for review maintaining the same content and form that is currently in place. In the event that Solectron does not meet the requirements defined in Exhibit C2, immediate action must be taken to contain and correct all non-conformances. Solectron must submit a corrective action plan to NCR identifying all root causes and planned actions. NCR agrees to work with Solectron in a proactive manner to meet the stated goals. Solectron and NCR will work together to manually agree on ownership of expenses related to any non- conformances.
2.0 SCOPE
The parties commit to data driven processes based on continuous improvement and defect prevention with a goal of delivering defect free Products, Parts and Services to NCR and it's customers. This exhibit also establishes NCR's quality reporting requirements which will be used to measure Supplier performance against the requirements established in Exhibit C2. The intent is to establish Solectron's responsibilities for meeting NCR's quality / reliability goals and business objectives.
3.0 TERMS AND DEFINITIONS
[ ]
using NCR's Product Readiness Assessment (PRA) model or mutually accepted equivalent.
[ ]
[ ]
4.0 QUALITY PERFORMANCE REQUIREMENTS
Specific quality performance requirements will be stipulated in Exhibit C2 Performance Requirements and Metrics. If performance levels are not consistently maintained, [ ]
[ ]
Agreement, or other Specifications may also be required based on business needs and requirements.
[ ]
4.4.3 Product/Component quality history. [ ]
The NPI plan must also include the following elements to the extent consistent with NCR's Pre-Acquisition Practices:
[ ]
[ ]
5.0 NOTIFICATION OF CHANGE
The reference to "changes" in this section refers to changes to [ ]. The notice of change from Solectron must include at a minimum the following:
1. [ ]
5.1 Unless otherwise agreed for all design related changes, Solectron is required to submit Notification of Change to the identified NCR contacts. NCR and Solectron will agree to the appropriate response time in line with the requirements necessary to meet end-user demand. It is expected that Solectron will notify NCR of intended changes [ ].
5.2 [ ]
5.5 NCR will respond in writing with the approval or rejection of the change request.
[ ]
7.0 FORMAL REVIEWS AND AUDITS
NCR at it's own discretion shall have the right to perform formal audit and reviews of all Solectron processes affecting products purchased by NCR in accordance with Section 3 of Article I of the Agreement. NCR will provide Solectron with written advance request of such audit. Solectron must permit reasonable access to all processes and procedures to provide the necessary support for successful completion of the audit. This includes and is not limited to any requested data or information as it applies to the products being manufactured or designed. The following are classified as formal reviews:
1. [ ]
All formal reviews and audit findings shall be documented along with corrective action plans and action items. Audit findings will be documented and reported using the supplier corrective action process. NCR may or may not perform all of the above reviews. Solectron will provide all reasonable assistance with any such requested review by NCR. Performance of such will be based on business needs.
8.0 RELIABILITY PROGRAMS
The purpose of this section 8 is to define Solectron's responsibility for meeting NCR's [ ] requirements as defined in Exhibit C2 and/or the Product Specifications. [ ]
9.0 NCR SUPPLIER MANAGEMENT PROCESS
NCR expects Solectron to be a participatory partner in applying NCR's supplier development and Supplier Value Add (SVA) processes. [ ]
Both parties will work together to coordinate and align NCR's SVA and QIS programs with Solectron's Customer Satisfaction Index (CSI).
10.0 WEIGHTS AND MEASURES
Products being shipped into or within European Union countries are required to be manufactured in facilities that have a Quality System Approved to Council Directive 90/384/EC, Non Automatic weighing Instruments. Solectron must comply to this requirement. These products include and are not limited to Scales, Scanner Scales, and POS terminals that interface to non- automatic weighing systems.
11.0 LASER SAFETY Solectron must comply to Laser Safety standards as defined by [ ]
Exhibit C2 -Performance Requirements and Metrics
1.0 PURPOSE
The purpose of Exhibit C2 is to define NCR's quality metrics and to establish Solectron's performance requirements for 1998 in a manner consistent with NCR's Pre-Acquisition Practice. [ ]
2.0 METRICS
The metrics shown in the subsequent sections are taken directly from NCR's Balanced Score Card. The Score Card represents metrics that are critical to the success of NCR's business. They will be used to measure Solectron's performance on a monthly basis to determine if the stated requirements are being met
[ ]
3.0 NCR 1998 Balanced Scorecard Objectives
Solectron must provide the data represented below each month, along with [ ]
Exhibit C3 Software Quality Assurance - Replication and Development
Purpose
The purpose of this section is to specify quality assurance terms when
Solectron performs software installation services or Software development
services.
I INSTALLATION SERVICES
1.1 "Preinstalled Software Product" - shall mean a copy of the Software Product installed on each Product hard disk or on a CD Rom.
1.2 "Software Development Product" - shall mean software developed or modified by Solectron for NCR.
1.3 "Software Product" - shall mean any copyrighted and/or patented software product(s) (including where applicable, Software Product in object code form, Software Product documentation) owned by NCR or a third party.
1.4 "Software Product Deliverables" - shall mean (i) Software Product in object code form (ii) installation utilities, if applicable (iii) a single copy of Software Product documentation; and (iv) or otherwise identified by Software Product publisher as Software Product Deliverables.
1.5 "Statement of Work" (SOW) - shall mean a document negotiated by NCR and Solectron amended to this Agreement that contains the business terms and technical descriptions for each Software Development Product.
NCR will provide Solectron with written instructions indicating specific Software Products which may only be installed on specific Products. Solectron may not install or distribute the Software Product in any other manner other than described in these written instructions and then only within the parameters specified in this Exhibit and Exhibit H. Solectron shall distribute Software Product only in the Product configurations specified by NCR.
Solectron agrees to keep all usual and proper records and books of account and all usual and proper entries relating to each Software Product licensed sufficient to substantiate the number of copies of Software Product and the number of Products distributed for NCR. Solectron agrees to report to NCR in the form provided by NCR, information concerning Software Products installed, including, without limitation, the number of units of each Software Product installed and/or the number of packages
inserted, corresponding NCR model number(s), and shipment destination; and, the number of units of Software Product packages in inventory.
4.2 Solectron shall document and communicate to NCR its procedures for executing software loads.
4.3 Solectron will document and adhere to procedures for the physical security of any gold drives provided by NCR. In addition Solectron will document tests and procedures to assure that no virus or other harmful code is introduced to the gold drives or Products intended to be loaded by the gold drives.
[ ]
II. SOFTWARE DEVELOPMENT OR MODIFICATION OF EXISTING SOFTWARE COMPONENT
1.1 The requirements shall be included as part of a negotiated Statement of Work.
[ ]
1.2 System Testing
1.2.1 Solectron agrees to fully test the identified deliverables to ensure that the system [ ]
1.2.4 The following criteria must be met for Solectron to release the deliverables to NCR:
[ ]
1.2.5 A system test report shall be generated by Solectron at the completion of system testing and promptly communicated to NCR. The test report shall include the following information:
[ ]
1.2.6 NCR reserves the right to send a software quality assurance representative to Solectron to be present during the system testing to audit the processes and results of Solectron's system testing efforts.
2.1 NCR shall conduct, or have conducted, acceptance testing on the deliverables provided by Solectron. Such testing shall generally include the following:
[ ]
2.1.3 NCR will communicate the results of its acceptance testing to Solectron, via a written report.
During the execution of the technical and non-technical requirements contained within the Statement of Work, Solectron shall comply with the Closed-Loop-Corrective-Action requirements (CLCA) as indicated in Exhibit C of the Agreement.
[ ]
4.2 Solectron will provide [ ]
[ ]
4.4 NCR reserves the right to make, or have made, version changes to the developed Software component.
4.5 If specified in the SOW, Solectron shall provide the deliverables, including source code and/or documentation (information products) to an escrow agent identified by NCR. NCR reserves the right to audit the escrow account to ensure compliance with the escrow requirement.
4.6 Solectron must provide full Product(s) support including communication
with NCR, as necessary, to resolve system level problems. This includes
[ ] In the event the Agreement is terminated Product support will continue
as described.
[ ]
1.0 SCOPE
Unless otherwise specified, all defined terms in the Agreement have the same meaning when used in this Exhibit. NCR will act as the primary point of contact for all Customers experiencing Product problems. Solectron plays a key role in enabling NCR to support its Customers. This Exhibit details Solectron's responsibilities with respect to that support and is the definitive agreement for Service Parts and Service related items. In addition, Solectron will [ ].
2.0 TECHNICAL INFORMATION
2.1 To the extent available now, [ ], and during the life of this Agreement, Solectron will provide the following, collectively referred to as "Technical Information," [ ]
2.2 Where available documentation will be in Microsoft Word electronic format suitable for reproduction, and will be updated by new documentation from time-to-time as it becomes available at no cost to NCR. Documentation currently available will be provided to NCR as soon as practicable, but not more than thirty (30) days following the signing of this Agreement. New documentation will be provided to NCR within thirty (30) days following its creation.
2.3 NCR will have the right to copy, modify and use, and have copied, modified and used, the Documentation provided by Solectron for the purpose of providing desired manuals, training or support materials, or the like concerning the Product, provided that any Solectron and Solectron vendor copyrights therein are appropriately safeguarded. Such manuals, training or support materials shall be used solely to support the Products. Solectron will include with each unit of Product purchased a complete set of Documentation agreed upon by NCR and Solectron relating to the operation and/or maintenance thereof as is customarily supplied to end users.
3.0 TRAINING
Solectron will provide Product training ("Train the Trainer") [ ]. Solectron authorizes NCR to video tape such classes and grants to NCR a royalty-free license to duplicate and distribute the tape and any related class materials to NCR authorized support providers.
4.0 TECHNICAL SUPPORT
4.1 General Description. [ ]
4.2 Levels of Support
[ ]
4.3 Response, Update and Resolution Guidelines. When Solectron has been engaged in problem resolution, it will comply with the following guidelines. These guidelines will enable NCR to meet customer commitments. Time measurement begins when Solectron is first contacted by NCR. Time frames stated in days are contiguous calendar days.
------------------------------------------------------------------------------------------------------ [ ------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------ ] ------------------------------------------------------------------------------------------------------ |
4.4 Solectron Point(s) of Contact. Solectron's point(s) of contact for Technical Support and Emergency Service Parts will be provided to NCR as soon as practicable, but not more than thirty (30) days following the signing of this Agreement.
4.5 Continuing Availability. Solectron's Technical Support as described in this Section 4 shall be available to NCR during [ ]
4.6 Reporting. The NCR business critical customer environments dictate that timely analysis of failed Part(s) be performed and that subsequent data be reported back to NCR for presentation to the end- user. NCR expects Solectron to provide detailed failure information in accordance with the provisions Exhibit C. Solectron will also provide NCR with a [ ]
5.0 PARTS
5.1 Identification. A complete orderable Parts list with NCR Part numbers for the Products and Parts will be provided to NCR at least thirty (30) days prior to the delivery of the first Product of each type ordered by NCR. Such lists shall include the following for each Part: [ ]
5.2 Availability. Solectron will make available to NCR such Parts as NCR may require for all Products purchased by NCR from Solectron during the Product production. For a period of not less than [ ] after the date of delivery by Solectron of the last unit of the Product delivered, Solectron shall also undertake the following: [ ]
5.3 Lead Time. Solectron will carry inventory adequate to meet [ ]
5.4 Emergency Orders. Solectron agrees to [ ]
5.5 Reworkable Parts. Reworkable Parts are Parts which have failed but may be economically reworked to perform in accordance with their Specifications. [ ]
5.6 Packaging. Solectron will package parts individually in a protective package that is suitable for individual distribution, labeled and barcoded as described in the NCR Supplier Guide, hereby incorporated by reference and provided to Solectron under separate cover.
5.7 EDI. Solectron and NCR agree to use EDI to exchange data between the two companies. Transactions are, but not limited to, Purchasing, acknowledgment, shipping, invoicing, and defective receipt. (Refer to exhibit G)
5.8 Pricing. [ ]
6.0 PRODUCT CHANGES
6.1 NCR Approval. Notwithstanding NCR's approval of Product Changes, Solectron agrees to the following with respect to any change in the Product or its Parts that Solectron has design ownership or supply line management responsibility.
[ ]
7.0 WARRANTY REIMBURSEMENT
[ ]
8.0 SUPPLIER'S SUPPORT SERVICES PERFORMANCE
Support Services performance will be measured using the [ ] The results of which will trigger appropriate management escalation processes.
EXHIBIT E IS DIVIDED INTO TWO PARTS:
PART E-1 APPLIES TO PRODUCTS COVERED BY THE AGREEMENT FOR WHICH SOLECTRON
HAS DESIGN OWNERSHIP.
PART E-2 APPLIES TO PRODUCTS COVERED BY THE AGREEMENT FOR WHICH NCR HAS
DESIGN OWNERSHIP.
EXHIBIT E, PART E-1
FOR SOLECTRON ENGINEERED PRODUCTS
SAFETY AND REGULATORY AGENCY REQUIREMENTS BY COUNTRY
Solectron is responsible for assuring that product design complies with the applicable regulatory requirements, obtaining the appropriate regulatory certifications, and manufacturing products in compliance with the appropriate regulatory requirements. These responsibilities apply to requirements, set out below, set out in the Specification for the Product, or any other requirements that apply in the jurisdictions set out below or in the Specification for the Product. One copy of each international certification documentation with the testing and compliance investigation reports, shall be maintained by Solectron for at least ten years beyond the last date of manufacture, or provided to NCR for archival purposes. NCR may update this Exhibit from time to time as regulatory or safety requirements change.
A. Product Safety - The Product will be Listed , per UL Standard 1950 for use as Information Technology Equipment, by Underwriters Laboratories or other Nationally Recognized Test Laboratories. Each unit will be marked with the appropriate safety agency labeling requirements.
B. Electro-Magnetic Emissions - The Product will comply with Federal Communications Commission (FCC) requirements CFR Title 47, Parts 2 and 15. Each unit will be labeled appropriately for Class A or Class B and documentation will contain user statements as required per the FCC rules.
C. Telecommunication Equipment - All equipment that connects directly to a telecommunication network, either public or private, will comply with Federal Communications Commission (FCC) requirements CFR Title 47, Part 68. Each unit will be labeled appropriately as required by the FCC rules.
D. Laser Containing Devices - All Products which contain laser devices (scanners, printers, CD devices, etc.) must comply with the Department of Health and Human Services (DHHS) regulations CFR Title 21, Subchapter J. Each unit will bear a DHHS compliance label and any caution labels appropriate for the class laser device integrated into the Product per the regulations. All Product documentation must contain the required user warning statements. In addition, Products must comply with individual state laws (i.e., New York) that require additional registration and/or approval.
E. Ozone Depleting Chemicals - Seller will label all Products and Parts (including all packaging) as required by the United States Environmental Protection Agency's regulations in effect at the time of delivery of the Product or Parts. As of September 1993, the basic regulations may be found at Volume 40 of the Code of Federal Regulations, Part 82, entitled "Protection of Stratospheric Ozone," Subpart E, entitled "The Labeling of Products Using Ozone Depleting Substances."
Check off applicable regulatory requirements for countries and regions where Product release and installations are planned outside the United States.
A. Product Safety:
__X__ Canada - The Product will be certified by the Canadian Standards Association for compliance with the latest edition of the CSA Standard C22.2 No. 950, Safety of
Information Technology Equipment. As an alternate, Underwriters Laboratories may be used for certification to CSA Standard C22.2 No. 950.
__X__ European Community (EC) - Product compliance with EC Directive 73/23/ECC (Low Voltage Directive) is required. Testing and certification by any national "notified Body" (VDE, TUV, BSI, etc.) for compliance to EN 60950 "Safety of Information Technology Equipment" is acceptable. Products should be appropriately labeled with the European CE mark.
__X__ CB Scheme - A CB Certificate and Report verifying compliance to IEC 950/EN6050 including Nordic deviations must be provided.
__X__ Mexico - Certification to NOM-019 is required. __X__ Saudi Arabia - Certification by SASO is required __X__ Russia - GOST-R Certification is required. |
__X__ Other International Countries - Product compliance with IEC 950, "Safety of Information Technology Equipment" is required.
B. Electro-Magnetic Emissions:
__X__ Canada - Compliance with U.S. FCC rules is satisfactory for Canadian requirements but Additionally each Product must be labeled and documentation statements included per the Canadian Department of Communications Radio Interference Regulations.
__X__ European Community (EC) - Product compliance with EC Directive 89/336/ECC (EMC Directive) is required. Testing for compliance is required to the following European standards: EN55022 (emissions), EN50082-1 (immunity), EN61000-3-2 (harmonic currents) and EN61000-3-3 (flicker). All test results are to be documented in a formal report and provided to NCR. Products should be appropriately labeled with the European CE mark.
__X__ Japan - Products must be tested and certified for Japanese VCCI compliance. Products must be labeled per VCCI requirements.
__X__ Korea - Products must be tested and certified by the Korean Radio Research Laboratory for compliance with the Korean Ministry of Communication Ordinance 825.
__X__ Australia/New Zealand - Products must be tested and certified for compliance with AS/NZS 3548: 1995. All test results are to be documented in a formal report and provided to NCR. Products should be appropriately labeled with the C-Tick mark per the requirements of the Australian Communications Authority.
__X__ Taiwan - Products must be in compliance with the "Commodity EMC Regulation" and tested for compliance to Chinese National Standard 13438 by a laboratory approved by the bureau of Commodity Inspection & Quarantine (BCIQ). Products should be appropriately labeled with the Taiwan Certification mark per the requirements of the BCIQ.
C. Telecommunication Equipment Approvals:
__X__ Canada - The Product must have an equipment grant issued by the Canadian Department of communications (DOC) verifying compliance with the Standard for Technical Equipment CS-03.
__X__ European Community (EC) - Product compliance with EC Directive 91/263/ECC (Telecom Directive) is required. Testing and certification for compliance is required to the appropriate European Common Technical Requirements (CTR's). Products should be appropriately labeled with the European CE mark and any country specific requirements.
__X__ Other International Countries - Most countries outside the U.S. require permission (which may be in the form of a license) to be obtained from a local PTT authority prior to connection to
a telecommunications network. Specific country PTT approvals for the purchased Product should be specified below. Products should be appropriately labeled with any country specific requirements.
D. Laser Containing Products:
__X__ Outside the U.S. - Products containing laser devices must show evidence of compliance with IEC 825 "Safety of Laser Devices".
NOTE: All products must be certified and labeled in accordance with the specific requirements for the regulatory approvals required above in this Exhibit E, Part E-II. As new national statutory and regulatory requirements emerge, and as current requirements are revised, Solectron will be responsible for maintaining compliance of product design accordingly. Solectron will be responsible for insuring that production units are modified as needed to maintain compliance to such new requirements.
EXHIBIT E, PART E-2
FOR NCR ENGINEERED PRODUCTS
SAFETY AND REGULATORY AGENCY REQUIREMENTS BY COUNTRY
NCR is responsible for assuring that product design complies with the applicable regulatory requirements. Solectron will be responsible for manufacturing products in compliance with the appropriate regulatory requirements. Solectron must assess the potential impact of build changes on regulatory compliance and consult with NCR's Regulatory Compliance Team as needed prior to making such changes. Any changes to components, materials, or suppliers should be reviewed and approved by NCR's Regulatory Compliance staff prior to implementation. NCR's Product Safety Engineer should have access to Solectron's manufacturing facility to perform audits for safety compliance. These responsibilities apply to requirements, set out below, set out in the Specification for the Product, or any other requirements that apply in the jurisdictions set out below or in the Specification for the Product. One copy of each international certification documentation with the testing and compliance investigation reports, shall be maintained by NCR for at least ten years beyond the last date of manufacture. NCR may update this Exhibit from time to time as regulatory or safety requirements change.
A. Product Safety - NCR is responsible for obtaining UL Listing or Recognition per UL Standard 1950 for use as Information Technology Equipment, by Underwriters Laboratories or other Nationally Recognized Test Laboratories. Solectron will assure that each unit will be marked with the appropriate safety agency logo and the required safety warnings (both markings and documentation) shall be provided as specified by NCR. Solectron will manufacture products in accordance with safety agency requirements and provide the necessary documentation to identify materials and components available for UL Field Representatives during inspections. Solectron shall also perform production-line testing in accordance with safety agency requirements and insure that products are constructed in accordance with the safety agency's Follow-up Service Procedure.
B. Electro-Magnetic Compatibility- NCR is responsible for insuring that product design complies with Federal Communications Commission (FCC) requirements CFR Title 47, Parts 2 and 15. Solectron will assure that each unit will be labeled appropriately for Class A or Class B and documentation will contain user statements as required per the FCC rules and as specified by NCR. For products which incorporate intentional transmitters, each unit should be labeled with the required FCC ID number.
C. Telecommunication Equipment - All equipment that connects directly to a telecommunication network, either public or private, will comply with Federal Communications Commission (FCC) requirements CFR Title 47, Part 68. Each unit will be labeled appropriately as required by the FCC rules.
D. Laser Containing Devices - All Products which contain laser devices (scanners, printers, CD devices, etc.) must comply with the Department of Health and Human Services (DHHS) regulations CFR Title 21, Subchapter J. Each unit will bear a DHHS compliance label and any caution labels appropriate for the class laser device integrated into the Product per the regulations. All Product documentation must contain the required user warning statements. In
addition, Products must comply with individual state laws (i.e., New York) that require additional registration and/or approval.
E. Ozone Depleting Chemicals - Seller will label all Products and Parts (including all packaging) as required by the United States Environmental Protection Agency's regulations in effect at the time of delivery of the Product or Parts. As of September 1993, the basic regulations may be found at Volume 40 of the Code of Federal Regulations, Part 82, entitled "Protection of Stratospheric Ozone," Subpart E, entitled "The Labeling of Products Using Ozone Depleting Substances."
A. Product Safety:
Solectron will assure that each unit will be marked with the appropriate safety agency logos and the required safety warnings (both markings and documentation) shall be provided as specified by NCR. Solectron will manufacture products in accordance with safety agency requirements and have the necessary documentation to identify materials and components available for safety agency representatives during inspections. Solectron shall also perform production-line testing in accordance with safety agency requirements.
NCR insure that product design complies with safety agency requirements for the countries where products will be sold and obtain the necessary agency certifications. As noted below:
Canada - The Product will be certified by the Canadian Standards Association for compliance with the latest edition of the CSA Standard C22.2 No. 950, Safety of Information Technology Equipment. UL certification for Canada (C-UL) in accordance with UL 1950 3/rd/ Edition may be obtained in lieu of CSA certification.
European Community (EC) - Product compliance with EC Directive 73/23/ECC (Low Voltage Directive) is required. Testing and certification by any national "notified body" (VDE, TUV, BSI, etc.) for compliance to EN 60950 "Safety of Information Technology Equipment" is acceptable. Units destined for EU countries should have the CE mark on the product ID label and carton.
European Free Trade Association (EFTA) Countries - Product testing and certification by NEMKO (or equivalent) for compliance to EN 60950 is required.
Mexico -. Certification to NOM-019 is required
Saudi Arabia - Certification by SASO.
Russia - GOST-R Certification is required.
Other International Countries - Product compliance with IEC 950, "Safety of Information Technology Equipment" is required.
B. Electro-MagneticCompatibility
Solectron will assure that each unit will be labeled appropriately for Class A or Class B and documentation will contain user statements as required and as specified by NCR. NCR shall insure that product design complies with the EMC requirements for the respective countries where products will be sold and obtain the necessary certifications as noted below:
Canada - Each product must be labeled and documentation statements included per the Canadian Department of Communications Radio Interference Regulations.
European EU Countries -Compliance with the EU's EMC Directive 89/336/EEC, EN 55022 (CISPR 22) and EN50082-1.Units destined for EU countries should have the CE mark on the product ID label and carton.
European EFTA Countries - Products must comply with the requirements of
CISPR 22 or EN 55022.
Japan - Products must be tested and certified for Japanese VCCI compliance.
Korea - Products must be tested and certified by the Korean Radio Research Laboratory for compliance with the Korean Ministry of Communication Ordinance 825.
New Zealand and Australia - Products must be tested and certified for compliance in accordance with the Electromagnetic Compatibility Framework using AS/NZS 3548:1995 and bear the C-Tick mark and the Australian Company Number (ACN).
Taiwan - Products must be tested and certified for compliance with CNS 13438. Product should be marked with BCIQ (Bureau of commodity Inspections & Quarantine) certification number and marking.
Other International Countries - Evidence of compliance with CISPR 22 is required.
For products which incorporate intentional transmitters, the required certifications will be obtained by NCR. Solectron shall insure that each unit should be labeled with the required certification numbers.
C. Telecommunication Equipment Approvals:
Canada - The Product must have an equipment grant issued by the Canadian Department of Communications (DOC) verifying compliance with the Standard for Technical Equipment CS-03.
United Kingdom - The Product must be authorized by the British Approvals Board for Telecommunications (BABT) for connection to a telecommunication network.
Other International Countries - Most countries outside the U.S. require permission (which may be in the form of a license) to be obtained from a local PTT authority prior to connection to a telecommunications network. Specific country PTT approvals for the purchased Product should be specified below.
D. Laser Containing Products:
Outside the U.S. - Products containing laser devices must show evidence of compliance with IEC 825 "Safety of Laser Devices".
NOTE: All products must be labeled in accordance with the specific requirements for the regulatory approvals required above in this Exhibit E, Part E-III. As new national statutory and regulatory requirements emerge, and as current requirements are revised, NCR will be responsible for maintaining compliance of product design accordingly. Solectron will be responsible for insuring that production units are modified as needed to maintain compliance to such new requirements.
This exhibit contains four distinct sections pertaining to the relationship between Solectron and NCR. The sections have been separated to add clarity to service levels required for each.
Section I: NCR RSG design owned product sourced and/or manufactured from Solectron
Section II: NCR CSG design owned product sourced and/or manufactured from Solectron
Section III: Solectron design owned product sourced and/or manufactured from Solectron
Section IV: NCR Staging Definition and Implementation
Service level agreement
SECTION I: NCR RSG design owned product sourced and/or manufactured from Solectron
Table of Contents
1.0 Purpose
2.0 Definition of Terms
3.0 Cost Tracking Requirements
3.1 [ ]
4.0 Customer Delivery Requirements
4.1 [ ]
5.0 Quality Performance
6.0 New Product Introduction
6.1 [ ]
7.0 Continuation Engineering
7.1 [ ]
8.0 Export and Import Compliance
9.0 Customer Order, Shipment, and Inventory System Requirements
10.0 Supply Line Management
10.1 Supplier Base
10.2 Commodity Responsibilities
10.3 Engineering Support
10.4 Continuous Improvement
1.0 Purpose
This Service level agreement outlines the minimum acceptable expectations for the Manufacturing Partnership between Solectron and NCR-RSG. [ ]
Detailed process information supporting these service level expectations are included in the Business level agreement which is expected to be a living document which NCR and Solectron associates use to guide themselves in their day-to-day work activities.
2.0 Definition of Terms
2.1 B-models: Pre-production models of a new product. At NCR's option, NCR
may request that Solectron build B-models. See the B-model
manufacturing paragraph in the New Product Introduction section 6.0
for more detail.
2.2 A-models or Prototype: For the purpose of this agreement, there is no
difference between A-models, Prototypes, and B-models.
2.3 C-models: Full production quality units. Although production units for
a product that have been in production for a year are technically "C-
models", the term is most often used to describe the first set of
production units that are used to run final product acceptance
testing, and are expected to either be sold to end customers or to be
functionally identical to the first units sold to customers.
2.4 ICI: Initial Customer Installation: The first customer installation of
C-models of a new product that have completed all of the required NCR
certifications. The term ICI is sometimes used to refer to the product
development milestone, ICI-ready, where the first C-model units have
been built and are ready to be sold and shipped to a customer.
2.5 GCA: General Customer Availability: Product is ready for volume
shipments with no special controls or filters on incoming orders.
2.6 CD/E: Controlled Deployment and Evaluation: Typically, the period of
time between [ ].
2.7 FBOM: NCR's Featurized Bill of Materials used to control the certified
configurations of the Product. The FBOM includes [ ].
2.8 EBOM or Preliminary FBOM: [ ].
2.9 MCC Product cost: The cost/price at which Solectron transfers product
to NCR as described in Exhibit B.
2.10 RSG Products: Products that Solectron manufactures for NCR as defined
in the RSG section of Exhibit A. New products will be added to this
exhibit in the future.
2.11 NCR SLM: NCR's Supply Line Management organization - responsible for
supplier qualification, supplier management, and material purchasing,
among other things.
2.12 NCR OLM: NCR's Order and Logistics Management - responsible for
accepting customer orders and scheduling production, among other
things.
2.13 PRT or PRT team: NCR's cross functional product development management
team -responsible for product definition, development, and deployment.
Team composition typically includes representatives from [ ]
2.14 Gold disk or Gold drive: A master copy of a hard disk with a binary
image of an operating system and other software loaded onto it. This
Gold Disk is then used in the manufacturing process to create multiple
copies of which are to be used in NCR POS terminals
2.15 SCER: Special Construction Estimate/Engineering Request - A process
that NCR uses to [ ].
2.16 Commodity management: Tasks associated with [ ]
2.17 Supplier management: Tasks associated with managing the continuous improvement of supplier performance in all aspects of a business relationship.
2.18 Acceptance Test (ACT): The ACT is a test process performed to certify the manufacturing process and the Supply Line Management Procurement Process. To make this test meaningful [ ].
2.19 Design Qualification Test (DQT): The DQT is a test process performed to certify that the design of the product meets the criteria as defined in the product functional specification. [ ]
2.20 Development Release (DR): The DR process is the process used by NCR to
issue engineering change orders and the introduction/release of new
products into manufacturing. For this document, the term DR includes
[ ]
2.21 Manufacturing Trial Order (MTO): The MTO process is used to validate the manufacturing process and the end unit test process before the actual break-in of a DR. NCR and Solectron will jointly decide if an MTO is required for a new product or change DR.
2.22 Field Retrofit Order (FRO): Process executed due to a safety or reliability issue on an NCR product [ ]
2.23 Printed Circuit Board (PCB) layout: The PCB layout process is used to do the physical layout of circuit boards. Designers work from schematics to define the position of components and their interconnecting copper lines.
2.24 Request For Change (RFC): The RFC process is a formalized process for requesting engineering changes and manufacturing deviations for part substitutions. It is intended for use by NCR and Solectron as the vehicle for requesting all product changes
2.25 Stop Order/Stop Order Release (SO/SOR): The SO/SOR process is used as
a method of controlling procurement, build and shipment of products.
[ ]
2.26 WSL: NCR's inventory warehouse at Peachtree
2.27 CDC: Customer Delivery Center - NCR consolidation and staging center.
2.28 Material Requisition (MR): The MR process is used to order items from manufacturing stock. It requires a charge number for the item to be charged to.
2.29 Managed Support and Service Planning (MSSP): The MSSP group is an NCR group charged with planning all support activity and assuring the necessary steps are taken to support a new product or changes to an existing product.
2.30 SPPR: Service Parts Procurement Request
2.31 [ ]
2.32 Replacement Product- a product with a new or modified product set specification which meets all the following criteria:
1. [ ]
2.35 New Product - a product with a new product specification which meets all of the following criteria:
1) [ ]
2.36 Replacement Service: A new service which provides essentially the same results as an existing service covered by the Agreement, although possibly at an improved level of performance. If delivered at an improved level of performance, the improvement is considered a normal outcome of continuous improvement processes.
2.37 New Service: A new service which establishes a significant new capability/result or a significant enhancement to an existing service which would not normally be the outcome of normal commercial continuous improvement processes. The party receiving the service would normally be expected to compensate the service provider for this New Service if it was provided at the request of the receiver and if there is a material incremental cost incurred by the service provider to develop this service capability and if the receiver agrees to pay for said service.
3.0 Cost Tracking Requirements
3.1 Pricing: Product transactions between Solectron and NCR RSG will be priced according to Exhibit B.
3.2 Cost Attack Team (CAT) Process
3.2.1 [ ]
3.3 Cost Reviews: All cost reviews will be conducted in accordance with Ex B.
4.0 Customer Delivery Requirements - Forecasting, Order Fulfillment
4.1 Forecasting: [ ]
4.2 Order Management: Solectron will also be responsible for all order fulfillment activities, [ ]
4.3 Order Change Flexibility - NCR RSG currently measures [ ]
4.4 Order Responsiveness - [ ]
4.5 Invalid Order Configurations - [ ]
4.6 Shipment Records - Solectron will send shipment transaction data to NCR [ ] This data will be used by NCR to update the [ ].
4.6.1 [ ] 4.7 Product Life Cycle Management - New Product Introduction 4.7.1 [ ] |
4.8 Product Life Cycle Management - Product, Feature, Cable and Kit Discontinuation
4.8.1 [ ]
5.0 Quality Performance
Solectron shall meet the requirements set forth in Exhibit C for NCR RSG designed products.
6.0 New Product Introduction
This New Product Introduction section defines the service level expectations associated with the release of a new product from engineering to manufacturing. There are some common processes used in New Product Introduction as well as in Continuation Engineering. These processes may be documented in the Continuation Engineering section. It is expected that Solectron will provide [ ]
6.24 [ ]
7.0 Continuation Engineering
This Continuation Engineering section defines the service level expectations associated with maintaining a product through the normal production life cycle. There are some common processes used in New Product Introduction as well as in Continuation Engineering. These processes may be documented in the New Product Introduction section. It is expected that Solectron will provide [ ].
Access to systems and data currently available is required in the execution of processes in this document. This is required to maintain and improve quality and productivity through electronic interfaces and automation.
[ ]
8.0 Export and Import Compliance
8.1 Solectron will be totally responsible for all import activities associated with materials that Solectron procures.
8.2 Solectron will be the exporter of record for all products/components/subassemblies it ships to other Solectron organizations.
8.3 NCR will be the exporter of record for all products, components, subassemblies, software and documentation ordered by NCR or its affiliates for export from the country of manufacture - currently the United States and Ireland.
8.4 The exporter of record will be separately accountable to the applicable government agencies for complying with all relevant regulations when importing or exporting Solectron products, components, subassemblies, software and documentation.
8.5 At NCR's request, Solectron will provide NCR with complete Bill of Materials (BOM) identifying country of origin and Solectron cost for each part or component separately integrated into its products. NCR will require this information where products manufactured in the United States are proposed for transactions involving the Agency for International Development (AID) or EX-IMBank. Further, NCR may require this information to determine if products manufactured outside the US are subject export controls based on US parts content.
9.0 Customer Order, Shipment and Inventory System Requirements
9.1 [ ]
10.0 Supply Line Management
10.1 Supplier Base
10.1.1 [ ]
10.2 Commodity Responsibilities
10.2.1 [ ]
10.2.2 [ ]
10.3 Engineering Support
10.3.1 [ ]
10.4 Continuous Improvement
10.4.1 Solectron agrees to drive continuous improvement throughout
all aspects of the supplier relationship.
Service level agreement
SECTION II: NCR CSG design owned product sourced and/or manufactured from Solectron
Table of Contents
1.0 Purpose
2.0 Definition of Terms
3.0 Cost Tracking Requirements
3.1 [ ]
4.0 Customer Delivery Requirements
4.1 [ ]
5.0 Quality Performance
6.0 New Product Introduction
6.1 [ ]
7.0 Continuation Engineering
7.1 [ ]
8.0 Export and Import Compliance
9.0 Customer Order, Shipment, and Inventory System Requirements
10.0 Supply Line Management
10.1 Supplier Base
10.2 Commodity Responsibilities
10.3 Engineering Support
10.4 Continuous Improvement
1.0 Purpose
This Service level agreement outlines the minimum acceptable expectations for the Manufacturing Partnership between Solectron and NCR-CSG. [ ]
Detailed process information supporting these service level expectations are included in the Business level agreement which is expected to be a living document which NCR and Solectron associates use to guide themselves in their day-to-day work activities.
2.0 Definition of Terms
2.1 B-models: Pre-production models of a new product. At NCR's option, NCR may request that Solectron build B-models. See the B-model manufacturing paragraph in the New Product Introduction section 6.0 for more detail.
2.2 A-models or Prototype: For the purpose of this agreement, there is no difference between A-models, Prototypes, and B-models.
2.3 C-models: Full production quality units. Although production units for a product that have been in production for a year are technically "C- models", the term is most often used to describe the first set of production units that are used to run final product acceptance testing, and are expected to either be sold to end customers or to be functionally identical to the first units sold to customers.
2.4 ICI: Initial Customer Installation: The first customer installation of C-models of a new product that have completed all of the required NCR certifications. The term ICI is sometimes used to refer to the product development milestone, ICI-ready, where the first C-model units have been built and are ready to be sold and shipped to a customer.
2.5 GCA: General Customer Availability: Product is ready for volume shipments with no special controls or filters on incoming orders.
2.6 CD/E: Controlled Deployment and Evaluation: Typically, the period of time between [ ]
2.7 FBOM: NCR's Featurized Bill of Materials used to control the certified configurations of the Product. The FBOM includes [ ].
2.8 EBOM: [ ]
2.9 MCC Product cost: The cost/price at which Solectron transfers product to NCR as described in Exhibit B.
2.10 CSG Products: Products that Solectron manufactures for NCR as defined in the CSG section of Exhibit A. New products will be added to this exhibit in the future.
2.11 NCR SLM: NCR's Supply Line Management organization - responsible for supplier qualification, supplier management, and material purchasing, among other things.
2.12 NCR OLM: NCR's Order and Logistics Management - responsible for accepting customer orders and scheduling production, among other things.
2.13 PRT or PRT team: NCR's cross functional product development management team -responsible for product definition, development, and deployment. Team composition typically includes representatives from [ ]
2.14 ERT or DRT team: NCR's cross-functional Engineering/Development Realization Team responsible for new product development, development schedules, product design, product certification, product requirements adherence and quality. Team composition typically includes [ ]
2.15 PRP/GRP: NCR's Program Realization Process used for the life cycle management of the Product from Product Conception through Product end- of-life.
2.16 Gold disk or Gold drive: A master copy of a hard disk with a binary image of an operating system and other software loaded onto it. This includes firmware. Master copies of any software or firmware may be on writable media (e.g.: disk or PROM) or may be reserved in a designated electronic file agreed to by both NCR and Solectron. This Gold Disk is then used in the manufacturing process to create multiple copies of which are to be used in NCR Servers.
2.17 SCER: Special Customer Engineering Request - A process that NCR uses to [ ].
2.18 Commodity management: Tasks associated with [ ].
2.19 Supplier management: Tasks associated with managing the continuous improvement of supplier performance in all aspects of a business relationship.
2.20 Acceptance Test (ACT): The ACT is a test process performed to certify the manufacturing process and the Supply Line Management Procurement Process. To make this test meaningful [ ]. Exceptions to the test will be provided in a report to NCR.
2.21 Design Qualification Test (DQT): The DQT is a test process performed to certify that the design of the product meets the criteria as defined in the product functional specification. [ ]
2.22 Development Release (DR): The DR process is the process used by NCR to
issue engineering change orders and the introduction/release of new
products into manufacturing. For this document, the term DR includes
[ ].
2.23 Manufacturing Trial Order (MTO): The MTO process is used to validate the manufacturing process and the end unit test process before the actual break-in of a DR. NCR and Solectron will jointly decide if an MTO is required for a new product or change DR.
2.24 Field Retrofit Order (FRO): Process executed due to a safety or reliability issue on an NCR product, [ ].
2.25 Printed Circuit Board (PCB) layout: The PCB layout process is used to do the physical layout of circuit boards. Designers work from schematics to define the position of components and their interconnecting copper lines.
2.26 Request For Change (RFC): The RFC process is a formalized process for requesting engineering changes and manufacturing deviations for part substitutions. It is intended for use by NCR and Solectron as the vehicle for requesting all product changes
2.27 Stop Order/Stop Order Release (SO/SOR): The SO/SOR process is used as
a method of controlling procurement, build and shipment of products.
[ ]
2.28 WSL: NCR's inventory warehouse.
2.29 CDC: Customer Delivery Center - NCR consolidation and staging center.
2.30 Material Requisition (MR): The MR process is used to order items from manufacturing stock. It requires a charge number for the item to be charged to.
2.31 Managed Support and Service Planning (MSSP): The MSSP group is an NCR group charged with planning all support activity and assuring the necessary steps are taken to support a new product or changes to an existing product.
2.32 SPPR: Service Parts Procurement Request
2.33 [ ]
2.34 [ ]
2.35 [ ]
2.36 Replacement Product- a product with a new or modified product set
specification which meets all the following criteria:
1. [ ]
2.37 New Product - a product with a new product specification which meets all of the following criteria:
[ ]
2.38 Replacement Service: A new service which provides essentially the same results as an existing service covered by the Agreement, although possibly at an improved level of performance. If delivered at an improved level of performance, the improvement is considered a normal outcome of continuous improvement processes.
2.39 New Service: A new service which establishes a significant new capability/result or a significant enhancement to an existing service which would not normally be the outcome of normal commercial continuous improvement processes. The party receiving the service would normally be expected to compensate the service provider for this New Service if it was provided at the request of the receiver and if there is a material incremental cost incurred by the service provider to develop this service capability and if the receiver agrees to pay for said service.
3.0 Cost Tracking Requirements
3.1 Pricing: Product transactions between Solectron and NCR CSG will be priced according to Exhibit B.
3.2 Margin Improvement Team (MIT)
3.2.1 [ ]
3.3 Cost Reviews: All cost reviews will be conducted in accordance with Ex B.
4.0 Customer Delivery Requirements - Forecasting, Order Fulfillment
4.1 [ ]
4.2 Order Management: Solectron will also be responsible for [ ]
4.3.1 Order Change Flexibility - NCR CSG currently measures [ ]
4.4 Order Responsiveness - [ ]
4.5 Invalid Order Configurations - [ ]
4.6 Shipment Records - Solectron will send shipment transaction data to NCR [ ]. This data will be used by NCR to update the World Wide Inventory Transfer System.
4.6.1 [ ] 4.7 Product Life Cycle Management - New Product Introduction 4.7.1 [ ] |
4.8 Product Life Cycle Management - Product, Feature, Cable and Kit Discontinuation
4.8.1 [ ]
5.0 Quality Performance
Solectron shall meet the requirements set forth in Exhibit C for NCR CSG designed products.
6.0 New Product Introduction
This New Product Introduction section defines the service level expectations associated with the release of a new product from engineering to manufacturing. [ ] Specific timelines for any project will be negotiated on a project-by-project basis.
There are some common processes used in New Product Introduction as well as in Continuation Engineering. These processes may be documented in the Continuation Engineering section. All Solectron provided services documented in this section are expected to be provided at no additional cost to NCR.
6.1 [ ]
7.0 Continuation Engineering
This Continuation Engineering section defines the service level expectations associated with maintaining a product through the normal production life cycle. There are some common processes used in New Product Introduction as well as in Continuation Engineering. These processes may be documented in the New Product Introduction section.
Access to systems and data currently available is required in the execution of processes in this document. This is required to maintain and improve quality and productivity through electronic interfaces and automation.
[ ]
8.0 Export and Import Compliance
8.1 Solectron will be totally responsible for all import activities associated with materials that Solectron procures.
8.2 Solectron will be the exporter of record for all products/components/subassemblies it ships to other Solectron organizations.
8.3 NCR will be the exporter of record for all products, components, subassemblies, software and documentation ordered by NCR or its affiliates for export from the country of manufacture - currently the United States and Ireland.
8.4 The exporter of record will be separately accountable to the applicable government agencies for complying with all relevant regulations when importing or exporting Solectron products, components, subassemblies, software and documentation.
8.5 At NCR's request, Solectron will provide NCR with complete Bill Of Materials (BOM) identifying country of origin and Solectron cost for each part or component separately integrated into its products. NCR will require this information where products manufactured in the United States are proposed for transactions involving the Agency for International Development (AID) or EX-IM Bank. Further, NCR may require this information to determine if products manufactured outside the US are subject export controls based on US parts content.
9.0 Customer Order, Shipment and Inventory System Requirements
9.1 [ ]
10.0 Supply Line Management
10.1 Supplier Base
10.1.1 [ ]
10.2 Commodity Responsibilities
[ ]
10.3 Engineering Support
10.3.1 [ ]
10.4 Continuous Improvement
10.4.1 Solectron agrees to drive continuous improvement throughout all aspects of the supplier relationship.
Service level agreement
SECTION III: Solectron designed products sourced and/or manufactured from Solectron
This Statement of Work provides a general description of the deliverables Solectron will provide for NCR, and the activities Solectron will perform for NCR, related to new Product Introduction of Solectron engineered products. Many of the interfaces and expectations for Solectron designed products will remain consistent with those detailed in Section II: NCR-CSG Engineered Products. These sections are noted below and will not be repeated in this section. Additional terms are as noted in the following sections.
Applicable Sections from Section II
Definition of Terms
Customer Delivery Requirements
Forecasting
Order Management
Order Change Flexibility
Order Responsiveness
Invalid Order Configurations
Shipment Records
Product Life Cycle Management - New Product Introduction
Product Life Cycle Management - Product, Feature, Cable, and Kit
Discontinuation
Quality Performance
Continuation Engineering
Request for Change
Stop Order / Stop Order Release
Export and Import Compliance
Customer Order, Shipment, and Inventory System Requirements
Supply Line Management
Continuous Improvement
NCR and Solectron shall each appoint a Program Manager and Technical Contact (may be the same individual) who shall be responsible for all communications with the other party, including those related to product qualification, testing, and support. Supplier program managers shall provide program and deliverables schedules with updates on a regular basis as mutually agreed to by respective program managers.
[ ]
3.1 Participation in Roadmap Development and Product Definition
Solectron will provide regular presentations (on a TBD basis) to NCR of potential and committed Roadmaps. NCR will treat these as confidential briefings but will have the ability to share such roadmap information with major accounts. Solectron will use its best efforts to incorporate NCR feedback into future Roadmaps, and to the extent NCR is funding the design work, Solectron will incorporate NCR's feedback into the Roadmap. In conjunction with these reviews, NCR shall also participate in the architectural phase of system development and in the definition of product content.
4.1 PC & ELS System Deliveries
[ ]
4.2 Prototype Deliveries
Prototype systems will be supplied to NCR by Solectron with quantity and schedule to be negotiated on a program-by-program basis. Such units may include custom components ("non-standard" adapters, colors, logos, labels, "generic" versions of many components) and prototype releases of BIOS and other Firmware/Software as necessary.
4.3 Production Deliveries
Production Models representing full production-ready systems (including BIOS and other Firmware/Software) shall be provided to NCR by Solectron for final verification with quantity and schedule to be negotiated on a program-by-program basis. Production models for first article inspection by indirect channel customer may also be required. Such inspections will usually be performed on Solectron premises and will require support of manufacturer's personnel
4.4 Certifications
Solectron shall perform operating System Certifications for NT, Solaris, MP-RAS (as appropriate) and other Ready-to-Run Operating Systems as defined by the Product Requirements document. Solectron shall put in place a process for obtaining Operating System and Agency Certifications of NCR "special features" (e.g., adapters that are not a part of the standard offering) as required. Such certifications may include components that may be custom for special customers (including indirect channel).
Safety certifications shall be provided as indicated in Exhibit E of this Agreement.
4.5 Feature Management
[ ]
4.6 Technical Documentation
Solectron will provide NCR technical and end-user documentation [ ]. Both pre- release and final release versions of the documentation will be made available to NCR on a mutually agreed upon product-by- product schedule. Solectron will deliver end-user documentation in electronic Microsoft Word format in generic format with references to COMPANY NAME or COMPANY product names limited to the following components: book cover, preface, copyright, headers, and footers. Exceptions are references to or publications for OEM products which will continue to display the COMPANY name and/or logo. NCR may order copies of documentation which Solectron specifies as orderable under the same terms as Products.
4.7 Product Packaging
Solectron will develop and provide shipping packaging to meet NCR requirements. All Products will be packed by Solectron in accordance with generally accepted industry standards, as well as other requirements set forth in the NCR packaging specifications. Under no circumstances will Solectron utilize any packaging material consisting in whole or in part of polystyrene foam manufactured through a process using any of the following blowing agents: CFC-11, CFC-12, CFC-113, CFC-114, OR CFC-115. In compliance with certain state statutes, Solectron certifies that the packaging and/or packaging components associated with the Products have been manufactured without the intentional addition of lead, cadmium, mercury or hexavalent chromium. and that the sum concentration levels of the four metals is less than 100 parts per million. Solectron will package parts individually (except for small parts, such as screws) with appropriate protective material to guarantee safe arrival (e.g., plug-in boards should be in static controlled packaging and in foam-lined packs or padded cartons). Each box will contain Products ordered under a single Purchase Order, but multiple boxes may be placed in a larger container. Solectron will, when so requested by NCR and without additional charge, provide and affix to each Product's packaging, bar code labels as specified in Exhibit D.
4.8 Product Training
Solectron will provide Product training in the following areas: [ ] . Solectron authorizes NCR to video tape such training events conducted for or attended by NCR and grants to NCR a royalty-free license to duplicate and distribute the tape and any related training materials to NCR associates and NCR authorized sales, services, and support providers. NCR may also create additional training using this information and materials.
4.9 NCR ID Capability
Solectron shall maintain the capability to logo products per NCR's requirements as well as the requirements of NCR's indirect channel customers.
4.10 Manufacturing Deliverables to PRT / Feature Release Teams
Solectron shall [ ].
4.11 Continuation Engineering
Solectron is responsible for Continuation Engineering problem resolution and life-cycle management for all NCR past, current, and future released Personal Computers, Entry Level Servers and features. Solectron will retain Continuation Engineering responsibility for any new platforms / features developed by Solectron and as released in the future.
4.12 Short Term Loaner
Equipment to Support New Product Introduction: Solectron will provide NCR with a small number (typically 1 or 2) of new products (in this paragraph, new product is defined as a New Product, Replacement Product or an existing product covered by this Agreement that has an engineering change made to it) for a short term "loan" period, typically not more than 1 week, to support new product introductions. NCR and Solectron will agree on the financial inventory tracking methodology to support this process; NCR currently uses the "request for NCR built equipment" process to remove the product from manufacturing inventory and the manufacturing representative to the PRT performs the necessary transactions to return the product to manufacturing inventory. There are no refurbishment charges associated with the return of these products unless they have been damaged or require upgrade due to product changes which may have occurred during the "loan" period.
5.0 Requirements for Certification of Operating Systems and Support for Server Management Software:
5.1 Microsoft NT -
. Platforms must be on Microsoft NT Server, Back Office, Wolfpack, and Cluster Server Hardware Compatibility Lists for most recent versions of both NT Server and NT Server Enterprise Edition under the NCR system name, and must be designated in the HCLs as "Designed for Windows NT".
. Within [ ] of a new version of Windows NT (5.0 , NT 64-bit, etc.), existing platforms must appear on the above Compatibility Lists.
. Platform must conform to the "Hardware Design Guide for Microsoft Windows NT" published by Intel Corporation and Microsoft Corporation.
. Platforms must not require a specialized Hardware Abstraction Layer (HAL) for Windows NT. Platforms must be fully supported with a standard Microsoft-delivered HAL within [ ]
5.2 Solaris
. Platforms must perform and pass Solaris Hardware Compatibility Tests (HCT) for most recent version of the operating system, and be included on Solaris Hardware Compatibility Lists for Solaris Intel Edition.
. Within [ ] of a new version of Solaris, existing platforms must pass the HCT.
. Platforms must not require a specialized Hardware Abstraction Layer (HAL) for Solaris. Platforms must be fully supported by the shrink-wrapped Solaris OS within [ ]
5.3 NCR UNIX MP-RAS
. For Entry Level and Mid-Range platforms specified by NCR, tests will be run and test reports will be provided. NCR will provide test plans and test cases. NCR will provide and support unreleased peripheral boards for the testing, with the level of support, board type, and board quantity to be negotiated.
. [ ]
6.0 Major Bid Support
For certain major bids, NCR will require Solectron to provide commitments for lead-time and capacity to support a large customer rollout of product. [ ]
7.0 Special Customer Engineering Request Support
[ ]
SECTION IV: NCR Staging Definition and Implementation
[ ]
1. PURPOSE
1.1 Solectron and NCR Corporation desire to execute the transactions listed in Attachment 1G ("Transactions") by transmitting and receiving the data sets implementing those Transactions ("Documents") electronically rather than in paper form, and to provide for the legal validity and enforceability of those Documents.
1.2 Documents will be transmitted electronically to each party either as specified in Attachment 1G directly or through any third party service provider ("Provider") with which either party may contract. Either party may modify its election to use, not use, or change a Provider thirty (30) days after written notice under Section 7.2 has been accomplished.
2. PREREQUISITES
2.1 We each must, at our respective expense, provide and maintain the equipment, software, and services necessary to transmit, receive, store and handle Documents under this Exhibit. Charges specific to Third Party network, if any, are outlined in Attachment 1G.
2.2 We each must implement security procedures (including those specified in Attachment 1G, if any) which are reasonably designed to ensure that all Document transmissions are authorized and to protect our respective business records from improper access.
2.3 We each agree to adopt as a signature an electronic identification (e.g., a Duns Number) consisting of symbols or codes which will be transmitted with each Document to authenticate that Document ("Signature").
2.4 The contacts for issues in this Exhibit are set out in Attachment 2G.
3. DOCUMENT TRANSMISSIONS
3.1 All Document transmissions must conform to the standards listed in Attachment 1G ("Standards").
3.2 Unless the Standards specify otherwise, after receiving a Document, the receiver must promptly electronically transmit a functional acknowledgment. A functional acknowledgment is conclusive evidence of receipt of a Document, but a Document is not deemed to be transmitted under this Agreement except as Section 5.2 of this Exhibit provides.
3.3 The receiver of a garbled or unintelligible Document must promptly notify the originator (if identifiable from the received Document) in a reasonable manner. If the receiver reasonably could have given that notice but did not, the originator's records of the contents of that Document will control.
4. TRANSACTION TERMS
4.1 Except to the extent a Document expressly provides otherwise, each Transaction will be subject to this Exhibit and to the OEM Purchase and Manufacturing Services Agreement ("Agreement"). If there is a conflict between any term of this Exhibit and any term of the Agreement, the terms of this Exhibit will control.
4.2 No information contained in any Document or otherwise exchanged between us under this Exhibit is confidential except as provided for in this Exhibit, a separate written agreement between us, or applicable law.
5. VALIDITY AND ENFORCEABILITY DOCUMENTS
5.1 This Exhibit confirms our intent to enter into binding Transactions by electronically transmitting and receiving the appropriate Documents. Our conduct under this Exhibit, including our use of Signed Documents, is for all purposes a course of dealing and a course of performance which we accept in furtherance of this Exhibit and any Transaction.
5.2 A Document has no effect under this Exhibit until (i) that Document is intelligible at the receiver's Receipt Computer designated in Attachment 1G except as provided in Section 3.3 above, and (ii) if the Transaction requires acceptance of that Document, the originator of that Document has received the corresponding acceptance Document. Any electronic transmission which is not a Document has no effect except to the extent specified in a separate written agreement between us.
5.3 Any Document effective under Section 5.2 is for all purposes (i) a "writing" and "in writing," and (ii) an "original" when printed from electronic records established and maintained in the normal course of business. Transmission of a Signature with a Document effective under Section 5.2 will be sufficient to verify that the owner of the
Signature originated that Document ("Signed Document"). A Signed Document is for all purposes "signed."
5.4 We each agree not to contest the validity or enforceability of any Signed Document because of the electronic origination, transmission, storage, or handling of that Signed Document. We each agree that Signed Documents, if introduced on paper in any judicial, arbitration, mediation, or administrative proceeding, will be admissible to the same extent and under the same conditions as other business records originated and maintained in documentary form. Neither of us may contest the admissibility of copies of Signed Documents under either the business records exception to the hearsay rule or the best evidence rule on the basis that the Signed Documents were originated and maintained in electronic form.
6. TERMINATION
6.1 This Exhibit will be effective until one of us terminates it by giving the other at least 30 days prior written notice under Section 6.2 specifying the effective date of termination. No termination of this Exhibit will affect our respective rights or obligations arising under any Document or otherwise under this Exhibit before the effective date of termination.
6.2 Written notices under this Exhibit shall be directed to:
NCR Corporation Solectron
Contact: Contact:
[ ]
6.3 Attachment 1G may be revised by both parties executing a revised version which will supersede and replace the previous version. This Exhibit does not obligate either of us to enter into any Transaction.
ATTACHMENT 1G
STANDARDS, DOCUMENTS, RECEIPT COMPUTERS,
THIRD PARTY NETWORKS, AND SECURITY PROCEDURES
[ ]
FORM OF AGREEMENT
This NCR and Third Party Software Agreement ("Agreement") is made and entered into this ____ day of _________, 19___ ("Effective Date") by and between NCR Corporation, a Maryland corporation and its subsidiaries ("NCR") and Solectron Corporation, a Delaware corporation and its subsidiaries("Solectron").
Recitals
Whereas, NCR owns or has licensed certain software product(s) as described in Exhibit A below ("TP Software"); and
Whereas, NCR desires to have Solectron install the TP Software on NCR Products or Parts and/or ship TP Software packages with of NCR's Products or Parts;
Now, Therefore, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
Agreement
a. "APM" or "Associated Product Materials" shall mean materials specified by Microsoft to be distributed as part of TP Software which may include a certificate of authenticity, an end user license agreement, an Microsoft product registration card, and/or other materials designated by Microsoft.
b. "Authorized Replicator" shall mean a third party approved by Microsoft from which NCR has acquired TP Software reproduced in accordance with Microsoft specifications.
c. "MS/OEM License" shall mean the OEM License Agreement between NCR and Microsoft under which NCR licenses some of the TP Software from Microsoft.
d. "TP Software Packages" shall mean Microsoft TP Software documentation, TP Software, and/or APM as received from NCR, or an Authorized Replicator on behalf of NCR.
e. All other capitalized terms will have the meaning given to them in the OEM Purchase and Manufacturing Services Agreement between NCR and Solectron dated _________.
a. Subject to the terms and conditions of this Agreement, Solectron shall, as specifically directed by NCR: (i) install the TP Software in object code form on specific NCR Product models using the installation utilities and master copy of TP Software provided by NCR, (ii) distribute TP Software with Products.
b. Installation and/or packaging of TP Software shall be performed by Solectron employees or contractors only at the specific Solectron premises indicated in Section 11.
c. Solectron shall deliver the Products with installed TP Software only on behalf of NCR in accordance with NCR's instructions.
d. Solectron shall halt reproduction of TP Software or any specific version, or product thereof upon notice from NCR. Upon receipt of such notice, Solectron shall not use nor employ such TP Software as part or portion of any product that Solectron may use, sell, assign, lease, license or transfer to third parties unless permitted to do so under a separate agreement. Solectron shall cease and desist from all use of such TP Software's name(s) and associated trademark(s) and, upon request, deliver to NCR or its authorized representatives or destroy all material upon which such TP Software's name(s) and the associated trademark(s) appear. Solectron shall be compensated for its direct, out of pocket costs in connection with halting reproduction of such TP Software, except in the case of breach of this Agreement by Solectron.
e. Solectron shall not reverse engineer, decompile or disassemble any TP Software.
f. Solectron will strictly comply with any requirements related to licensing the TP Software such as special installation instructions or placing a notice over either the Product power switch in the "off" position or the power inlet connector which informs the end user that turning on the Product indicates acceptance of the terms of the end user license agreement, or such other procedure as is authorized by NCR.
g. Solectron shall maintain the inventory of any such TP Software received on behalf of NCR, separate from inventory of similar TP Software, if any, in Solectron's possession.
The following terms shall also apply to TP Software owned by Microsoft.
[ ]
a. NCR may terminate this Agreement if any of the following events of default occur: (i) if Solectron materially fails to perform or comply with any provision of this Agreement; (ii) if Solectron makes TP Software available separately from NCR's Products; (iii) if Solectron becomes insolvent, enters bankruptcy, reorganization, composition or other similar proceedings under applicable laws, whether voluntary or involuntary, or admits in writing its inability to pay its debts, or makes or attempts to make an assignment for the benefit of creditors; or (iv) upon notice from Microsoft to NCR that NCR shall cease use of Solectron.
b. Termination resulting from default as outlined in this Section shall
be effective upon notice to Solectron, except that in the case of Section
10(a)(iii), termination shall be effective upon notice or as soon thereafter as
is permitted by applicable law.
representatives or destroy all material upon which the TP Software's name(s) and the associated trademark(s) appear.
a. During the term of this Agreement, Solectron agrees to keep all usual and proper records and books of account and all usual and proper entries relating to the compliance with this Agreement. Solectron shall maintain on Solectron premises such records for itself and for each Solectron subsidiary which exercises rights under this Agreement.
b. In order to verify statements issued by Solectron and Solectron's compliance with the terms of this Agreement and any third party or governmental audit requirements, NCR may cause (i) an audit to be made of Solectron's and/or Solectron's subsidiaries' books and records and/or (ii) an inspection to be made of Solectron's and/or Solectron's subsidiaries' facilities and procedures. Any audit and/or inspection shall be conducted during regular business hours at such facilities, with or without notice. Any audit may be conducted by NCR or an independent certified public accountant selected by NCR (other than on a contingent fee basis).
c. Solectron agrees to provide NCR' designated audit or inspection team access to the relevant Solectron records and facilities.
d. Prompt adjustment shall be made to compensate for any errors or omissions disclosed by such audit unless Solectron objects to the results of the audit in writing. Any such audit shall be paid for by NCR unless material discrepancies are disclosed. "Material" shall mean the lesser of $10,000.00 or five percent (5%) of the amount that was reported. If material discrepancies are disclosed, Solectron agrees to pay NCR for the reasonable costs associated with the audit.. In no event shall audits be made more frequently than semi- annually unless the immediately preceding audit disclosed a material discrepancy.
a. The parties agree that their respective promised performances under this Agreement are intended for the benefit of Microsoft Corporation and any other owner of the TP Software ("Third Party Beneficiaries"). For this reason, the parties further agree that the Third Party Beneficiaries have the right to enforce the parties' performance of their respective obligations and duties under this Agreement, and pursuant to such right, may sue to enforce any claim for breach of this Agreement.
b. The Third Party Beneficiaries' right to enforce the obligations of a party to this Agreement shall not be subject to any defenses that such party may have against the party to whom performance is promised.
(a) Except as otherwise specifically provided herein, notices and other communications will be delivered by any method providing for proof of delivery, except that a notice of default or termination may be delivered by facsimile transmission if the original document is also promptly delivered to the recipient. A notice will be deemed given on the date of receipt at the following address(es):
(b) The work to be performed under this Agreement will take place at Solectron's premises located at (or such other location as NCR and Solectron shall agree to from time to time):
a. This Agreement shall be construed and controlled by the laws of the State of New York, and.
b. Process may be served on either party by U.S.A. mails, postage prepaid, certified or registered, return receipt requested or sent by air express courier, charges prepaid, as well as any other method or procedure authorized by applicable law or court rule.
c. In the event that NCR employ attorneys to enforce any rights arising out of or relating to this Agreement, Solectron agrees to pay such attorneys' fees.
d. In the event any controversy or claim arises between the parties to this Agreement, they will attempt in good faith to negotiate a solution to their differences by elevating the issue to senior management for resolution and, if negotiation does not result in a resolution within 30 days, they agree to participate in good faith mediation as administered by the American Arbitration Association. In the event of threatened or actual irreparable harm, a party may elect to bypass this Section and proceed directly pursuant to Section 12(g).
e. Any controversy or claim between the parties to this Agreement, whether based on contract, tort, statute, or other legal theory (including but not limited to any claim of infringement, fraud or misrepresentation), which cannot be resolved by negotiation or mediation will be resolved by arbitration pursuant to this section and the then-current Commercial Rules and supervision of the American Arbitration Association. The duty to arbitrate will extend to any employee, officer, shareholder, agent, or affiliate of a party hereto making or defending a claim which would be subject to arbitration if brought by a party hereto. If any part of this section is held to be unenforceable, it will be severed and will not affect either the duty to arbitrate hereunder or any other part of this section.
f. The arbitration will be held in the US headquarters city of the party not initiating the claim before a sole arbitrator who is knowledgeable in business information and electronic data processing systems. The arbitrator's award will be final and binding and may be entered in any court having jurisdiction thereof. The arbitrator will not have the power to award any damages excluded by, or in excess of, any damage limitations expressed in this Agreement. Issues of arbitrability will be determined in accordance solely with the federal substantive and procedural laws relating to arbitration; in all other respects, the arbitrator will be obligated to apply and follow the substantive law of the state or nation specified in this Agreement. Each party will bear its own attorney's fees associated with the arbitration and other costs and expenses of the arbitration will be borne as provided by the rules of the American Arbitration Association.
g. If a party breaches any provision of this Agreement related to its or its supplier's intellectual property, the other party will have no adequate remedy at law and may petition a court of law for injunctive relief to protect the intellectual property.
a. Notwithstanding any other limitation, Solectron shall indemnify, defend and hold NCR harmless from and against all liability (including attorneys fees, costs and expenses resulting from any and all claims by third parties or violations of NCR's intellectual property rights arising from or related to any breach of this Agreement by Solectron.
b. No assignment of this Agreement by Solectron will be valid without the prior written consent of NCR which will not be unreasonably withheld. As used in this Section, "assignment" shall include mergers or consolidations (regardless of whether the party is the surviving person) or the acquisition of more than 10% of the outstanding voting shares or other controlling interest in the party. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. NCR may replicate this Agreement to any NCR business unit that operates under it that NCR divests itself of.
c. If any provision of this Agreement shall be held to be illegal, invalid, or unenforceable, the remaining provisions shall remain in full force and effect provided the intent of the parties has not been materially frustrated.
d. This document sets out the entire agreement of the parties, and supersedes all prior communications regarding its subject matter. A waiver or amendment of any provision may only be made in writing signed by the authorized representatives of both parties.
In Witness Whereof, the parties have executed this Agreement as of the date set forth above on their own behalf and for the benefit of MS. All signed copies of this Agreement shall be deemed originals.
NCR: ________________________ Solectron: ______________________ ______________________________________________________________________ By (Signature) By (Signature) ______________________________________________________________________ Name (Print) Name (Print) ______________________________________________________________________ Title Title _____________________________________________________________________ Date Date |
NCR
Year 2000
Qualification Requirements Definition
Version 2.1
4/2/97
Document Title: Year 2000 Qualification Requirements Definition
Document Owner: Freddy J. Worthington
Organization Name: Corporate Technology
Telephone Number: (937)-445-1455
VoicePlus Number: 622-1455
e-mail: freddy.worthington@daytonoh.ncr.com
Change Control Page
--------------------------------------------------------------------------------------- NCR NUMBER: DATE: Year 2000 Qualification Requirements REVISION: Definition 2.1 4/2/97 --------------------------------------------------------------------------------------- |
Revision Date Description Approval ------------------------------------------------------------------------------------------------------------------------ 1.0 11/13/96 Original Issue Y2K Solution Team ------------------------------------------------------------------------------------------------------------------------ 2.0 3/12/97 . Wording changes made to synchronize with warranty language and Y2K Solution Team to address general qualification. . Qualification assumes use of date expansion with convention being a documented exception. ------------------------------------------------------------------------------------------------------------------------ 2.1 4/2/97 . Modified VII Contracts statement Y2K Solution Team Deleted OS & APPLICATION Question: "Dependent on other products being Year 2000 Qualified in order to attain Qualification" ------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------ |
NCR and Year 2000 Qualification
Meaning of "Year 2000 Qualification"
The purpose of this document is to provide NCR's customers, partners, suppliers, and employees a definition for Products that are "Year 2000 Qualified." This document will evolve over time as more information about the requirements and testing are known.
I. "Year 2000 Qualification" means that a Product has been reviewed to confirm that it stores, processes (including sorting and performing mathematical operations), inputs, and outputs data containing date information correctly regardless of whether the data contains dates before, on, or after January 1, 2000. Products which do not perform date manipulation, and which do not alter any date information that flows through them, are also considered Year 2000 Qualified.
II. Specifically:
Dates before, on or after January 1, 2000 may be interpreted and stored using either "FORMAT" or "CONVENTION" techniques. As used by NCR, "Year 2000 Qualification" means that the FORMAT technique is used. However, Qualification by CONVENTION may be used in circumstances where compliance by FORMAT is impractical, or where CONVENTION is required to meet specific external interface requirements; in that case the convention used must be specifically documented. "FORMAT" and "CONVENTION" have the following definitions:
FORMAT: All dates are stored, processed, input, and output in formats that preserve century, decade, and year information.
CONVENTION: Dates are stored, input, or output in a format that preserves only decade and year information, but are processed through a "sliding window" calculation. For example, if the year is 00 to 70, add 2000, and if the year is 71 to 99, add 1900. There is no industry standard for the "cut-off" date used in such calculations, and therefore interfaces may not work correctly between programs or systems using different conventions. Any Product achieving Qualification through CONVENTION must clearly document the cut-off date and any other necessary information relating to the bridging calculation used. This documentation must be included in the product's entry in the NCR Year 2000 Qualification List.
III. Leap Year
The year 2000 itself must be correctly processed as a leap year. In other words, the two days following February 28, 2000 must properly be interpreted as Tuesday, February 29, 2000, and Wednesday, March 1, 2000.
IV. Display
Any display of a date, whether on screens or in reports, should use a four-digit year (YYYY). However, if two-digit display of a date is commonly accepted and does not cause confusion, the year field may be displayed as two digits.
V. Firmware and Hardware
Any firmware, hardware, or networking component in a Year 2000 Qualified computer platform must process dates in accordance with this Definition.
Vl. System Integration
Year 2000 Qualification extends only to the specific product configuration tested, and does not include other software, firmware, or hardware products which may be used in conjunction with the tested configuration. For a Product configuration consisting of multiple components to be considered "Year 2000 Qualified," each constituent component, regardless of vendor, must be "Year 2000 Qualified" in accordance with this Definition, and the system as a whole must be tested for Year 2000 Qualification. "Constituent components" include all software (including operating systems, programs, packages, and utilities), firmware, hardware, networking components, and peripherals provided as part of the configuration.
Vll. Contracts
All contracts with vendors for products to be used in the computer system or platform MUST state that Year 2000 Qualification is a performance requirement.
VIII. Year 2000 Product Qualification Requirements
All of the following questions must be answered as indicated or "NA" for any Product to be identified as "Year 2000 Qualified." Any deviations from these responses must be specifically documented, and approved by NCR.
[x] DATE MANIPULATION QUESTIONS NA No Yes Does the product: 1. Use December 31, 1999 as a regular end of year without special meaning? X 2. Treat September 9, 1999 as a regular day with no special meaning? X 3. Do any of the following date field manipulations? X 4. . 99 indicates last record X 5. . 00 to indicate a null record X 6. . 99 and 00 default values X 7. . Special interpretations of 00 X 8. . Hard coded 19 in 4-digit year field X 9. . Separate manipulations of century digits X 10. Include any license date expiries associated with the end of 1999? X 11. Use dates in name constructions? X 12. Mix date data and control information in commands or flags which are interpreted as one X or the other depending on their values? 13. Use a date as part of the key of an indexed file? X YEAR AND CENTURY QUESTIONS NA No Yes Does the product: 1. Recognize 2000 as a leap year? X 2. Allow itself to be set to any date after 12/31/1999 including 02/29/2000? X 3. Indicate the correct day, date and time when the following test is performed: X With the date set to 12/31/1999, power the product off and then back on when the time will be in 1/1/2000. 4. Indicate the correct day, date, and time when the following test is performed: X With the date set to some time after 1/1/2000, power the product off and back on. 5. Display the date correctly as 2/29/2000 when the following test is performed: X With the date set to 2/28/2000, power the product off, and then back on when the next day has been reached. 6. Treat January 1, 2000, a Saturday? X 7. Treat February 29, 2000, a Tuesday? X 8. Treat March 1, 2000, a Wednesday? X 9. Treat February 28, 2001, a Wednesday? X 10. Treat March 1, 2001, a Thursday? X |
DATA BASE ACCESS AND STORAGE NA No Yes Does the product: 1. Code all years as in a manner that preserves century, decade, and year X information? 2. Correctly perform all of the following manipulations across the century X boundary? 3. . Computations of time spans, due-dates, etc. X 4. . Sorting of data. X 5. . Selections based on key fields X 6. . Selections based on non-key fields X |
OS & APPLICATION QUESTIONS NA No Yes Does the product: 1. Display the year as an unambiguous value with a minimum of two digits? X 2. Correctly handle data with dates before 1/1/2000, on 1/1/2000 and after X 1/1/2000 with the system clock set to today's date? 3. Correctly handle data with dates before 1/1/2000, on 1/1/2000 and after X 1/1/2000 with the system clock set to 1/1/2000? 4. Correctly handle data with dates before 1/1/2000, on 1/1/2000 and after X 1/1/2000 with the system clock set after 1/1/2000? 5. Correctly handle data with dates before 1/1/2000, on 1/1/2000 and after X 1/1/2000 with the system clock set to 12/31/1999? 6. Correctly process dates with the system clock set to 12/31/1999 and processing X allowed to continue across the century boundary? 7. Correctly handle date comparisons where one date is not greater than 12/31/1999 X and the other date is not less than 1/1/2000? 8. Use a sliding window for year calculations? X 9. Contain a date format that does not preserve century information? X 10. Create and/or store data in files or log files or, or generate reports that do X not preserve century information in date fields? 11. Use a 32 bit incrementing signed value for date and time? X 12. Correctly set and maintain the century digits in the real time clock, if the X product uses "AT"-class PC's (286 through Pentiums and clones), does the operating system or your system software correctly set and maintain the century digits in the real-time-clock? 13. Correctly handle all time interval calculations based on the century transition X - both looking back into the past, and looking forward into the future? 14. Correctly handle future time interval calculations that span the century X transition? 15. If required, correctly handle date and time interval calculations based on the X use of data previously stored by the product or previous versions of the product? 16. Formally tested for year 2000 Qualification? X |
ARTICLE 5 |
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FOR NCR CORPORATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AT JUNE 30, 1998 AND THE CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. |
MULTIPLIER: 1,000,000 |
PERIOD TYPE | 3 MOS |
FISCAL YEAR END | DEC 31 1998 |
PERIOD START | APR 01 1998 |
PERIOD END | JUN 30 1998 |
CASH | 593 |
SECURITIES | 177 |
RECEIVABLES | 1,472 |
ALLOWANCES | 0 |
INVENTORY | 451 |
CURRENT ASSETS | 2,900 |
PP&E | 2,185 |
DEPRECIATION | 1,318 |
TOTAL ASSETS | 5,022 |
CURRENT LIABILITIES | 1,895 |
BONDS | 33 |
PREFERRED MANDATORY | 0 |
PREFERRED | 0 |
COMMON | 1 |
OTHER SE | 1,337 |
TOTAL LIABILITY AND EQUITY | 5,022 |
SALES | 861 |
TOTAL REVENUES | 1,574 |
CGS | 566 |
TOTAL COSTS | 1,102 |
OTHER EXPENSES | 449 |
LOSS PROVISION | 0 |
INTEREST EXPENSE | 4 |
INCOME PRETAX | 92 |
INCOME TAX | 44 |
INCOME CONTINUING | 0 |
DISCONTINUED | 0 |
EXTRAORDINARY | 0 |
CHANGES | 0 |
NET INCOME | 48 |
EPS PRIMARY | .47 |
EPS DILUTED | .46 |