Manufacturing Services Agreement - Adaptec Inc. and Roxio Inc.
MANUFACTURING SERVICES AGREEMENT
BETWEEN
ADAPTEC, INC.
AND
ROXIO, INC.
EFFECTIVE AS OF APRIL 1, 2001
<PAGE>
MANUFACTURING SERVICES AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 DEFINITIONS...................................................................................1
1.1 ANCILLARY AGREEMENTS...........................................................................1
1.2 COMPONENTS INVENTORY...........................................................................1
1.3 CONFIDENTIAL INFORMATION.......................................................................1
1.4 CUSTOMER.......................................................................................1
1.5 DELIVER, DELIVERED OR DELIVERY.................................................................2
1.6 DELIVERY POINT.................................................................................2
1.7 FINISHED GOODS INVENTORY.......................................................................2
1.8 GUIDELINES.....................................................................................2
1.9 INVENTORY......................................................................................2
1.10 LEAD TIME......................................................................................2
1.11 MASTER SEPARATION AND DISTRIBUTION AGREEMENT...................................................2
1.12 MINIMUM ORDER SIZE.............................................................................2
1.13 PACKAGING SPECIFICATIONS.......................................................................2
1.14 PRODUCT........................................................................................2
1.15 QUARTERLY REVIEW MEETING.......................................................................2
1.16 ROXIO DOCUMENTATION............................................................................2
1.17 ROXIO TECHNOLOGY...............................................................................3
1.18 ROXIO WAREHOUSE................................................................................3
1.19 SERVICE FEE....................................................................................3
1.20 SERVICE ORDERS.................................................................................3
1.21 SERVICES.......................................................................................3
1.22 SPECIFICATIONS.................................................................................3
1.23 STANDARD COST..................................................................................3
1.24 WORK IN PROCESS................................................................................3
ARTICLE 2 TERM OF AGREEMENT.............................................................................3
ARTICLE 3 PERFORMANCE OF SERVICES.......................................................................4
3.1 RETENTION......................................................................................4
3.2 PERFORMANCE OF SERVICES........................................................................4
3.3 LEAD TIME; RESCHEDULING; ALLOCATION............................................................4
3.4 PROVISION OF ROXIO DOCUMENTATION AND ROXIO TECHNOLOGY..........................................4
3.5 PACKAGING......................................................................................4
3.6 MEETINGS.......................................................................................4
3.7 CONTRACTORS....................................................................................4
ARTICLE 4 SERVICE FEES..................................................................................5
ARTICLE 5 FORECASTS, ORDERING AND ADJUSTMENTS...........................................................5
5.1 FORECASTS......................................................................................5
5.2 SERVICE ORDERS.................................................................................5
5.3 SERVICE ORDER ADJUSTMENTS......................................................................6
5.4 LIABILITY FOR INVENTORY........................................................................6
5.5 AGREEMENT CONTROLS.............................................................................6
ARTICLE 6 DELIVERY, CARRIER & RISK OF LOSS..............................................................6
6.1 DELIVERY OF PRODUCT; RISK OF LOSS..............................................................6
6.2 SHIPMENT.......................................................................................7
ARTICLE 7 PAYMENTS......................................................................................7
ARTICLE 8 QUALITY AND INSPECTION........................................................................7
8.1 ADAPTEC'S PROCESS..............................................................................7
8.2 ROXIO INSPECTION...............................................................................7
-i-
<PAGE>
ARTICLE 9 ACCEPTANCE AND REJECTION OF PRODUCTS..........................................................8
ARTICLE 10 WARRANTY.....................................................................................8
10.1 MATERIALS AND WORKMANSHIP......................................................................8
10.2 WARRANTY REPLACEMENT...........................................................................8
10.3 RMA PROCEDURES.................................................................................9
10.4 NO LIABILITY...................................................................................9
10.5 DISCLAIMER OF WARRANTIES.......................................................................9
ARTICLE 11 PRODUCT CHANGES..............................................................................9
11.1 ON ADAPTEC'S NOTICE............................................................................9
11.2 AT ROXIO'S REQUEST.............................................................................9
11.3 CHANGE MANAGEMENT..............................................................................9
ARTICLE 12 OWNERSHIP OF ROXIO TECHNOLOGY................................................................9
ARTICLE 13 INTELLECTUAL PROPERTY INDEMNITY.............................................................10
ARTICLE 14 GENERAL INDEMNITY...........................................................................10
ARTICLE 15 TERMINATION.................................................................................10
15.1 TERMINATION WITHOUT CAUSE.....................................................................10
15.2 EFFECT OF TERMINATION WITHOUT CAUSE...........................................................11
15.3 TERMINATION FOR DEFAULT.......................................................................11
15.4 EFFECT OF TERMINATION IN GENERAL..............................................................11
15.5 TRANSITION ASSISTANCE.........................................................................11
ARTICLE 16 CONFIDENTIALITY.............................................................................12
ARTICLE 17 LIMITATION OF LIABILITY.....................................................................12
ARTICLE 18 DISPUTE RESOLUTION..........................................................................12
ARTICLE 19 GENERAL.....................................................................................13
19.1 NOTICES.......................................................................................13
19.2 ASSIGNMENT....................................................................................14
19.3 DAMAGE LIMITATION.............................................................................14
19.4 ALLOCATION OF RISK............................................................................14
19.5 EXPORT CONTROL................................................................................14
19.6 WAIVER........................................................................................14
19.7 GOVERNING LAW.................................................................................14
19.8 DESCRIPTIVE HEADINGS..........................................................................15
19.9 SEVERABILITY..................................................................................15
19.10 FORCE MAJEURE.................................................................................15
19.11 ENTIRE AGREEMENT..............................................................................15
19.12 CONFLICTING AGREEMENTS........................................................................15
19.13 CONTROLLING DOCUMENT..........................................................................15
19.14 RELATIONSHIP..................................................................................16
19.15 AMENDMENT AND EXECUTION.......................................................................16
</TABLE>
-ii-
<PAGE>
MANUFACTURING SERVICES AGREEMENT
This MANUFACTURING SERVICES AGREEMENT ("Agreement") is made by and
between Adaptec Manufacturing Singapore on its own behalf and on behalf of each
of its parent, Adaptec, Inc. and its majority owned subsidiaries, exclusive of
Roxio, Inc. ("Adaptec"), and Roxio, Inc., a Delaware corporation, on its own
behalf and on behalf of each of its majority owned subsidiaries ("Roxio"), and
is effective as of 12:01 a.m. Pacific Standard Time, April 1, 2001 (the
"Separation Date").
RECITALS
WHEREAS, the Boards of Directors of each of Adaptec and Roxio have
determined that it is appropriate and desirable for Adaptec to contribute and
transfer to Roxio, and for Roxio to receive and assume, directly or indirectly,
substantially all of the assets and liabilities currently associated with the
Roxio Business and the stock, investments or similar interests currently held by
Adaptec in subsidiaries and other entities that conduct such business (the
"Separation");
WHEREAS, Adaptec has caused Roxio to be incorporated in order to effect
the Separation and Adaptec currently owns all of the issued and outstanding
capital stock of Roxio; and
WHEREAS, the parties desire that Adaptec perform certain services for
Roxio with respect to the products manufactured by the Roxio Business prior to
the Separation and such additional products as the parties may from time to time
agree.
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 ANCILLARY AGREEMENTS. "Ancillary Agreements" shall have the
meaning set forth in the Master Separation and Distribution Agreement.
1.2 COMPONENTS INVENTORY. "Components Inventory" means the inventory
of raw material and other Product components consistent with Roxio's forecast,
as provided in Section 5.1.
1.3 CONFIDENTIAL INFORMATION. "Confidential Information" shall have
the meaning set forth in the Master Confidential Disclosure Agreement between
Adaptec and Roxio.
1.4 CUSTOMER. "Customer" means Roxio's customer who is purchasing a
Product and who is identified in the Service Order or in a subsequent written
communication from Roxio designating the "ship to" point.
<PAGE>
1.5 DELIVER, DELIVERED OR DELIVERY. "Deliver, Delivered or Delivery"
means the delivery by Adaptec of the Products manufactured pursuant to a
particular Service Order to the Delivery Point for shipment or pull in
accordance with Roxio's instructions, as provided in accordance with the
Guidelines.
1.6 DELIVERY POINT. "Delivery Point" means (a) the San Francisco Bay
Area, with respect to Products destined for shipment to a location in the
Americas, including the United States, Canada, Mexico and South America; (b)
Singapore, with respect to Products destined for shipment to a location outside
the United States; and (c) the Roxio Warehouse, with respect to Products to be
held at the Roxio Warehouse for pull by the Customer.
1.7 FINISHED GOODS INVENTORY. "Finished Goods Inventory" means the
inventory of completed goods consistent with the outstanding Service Orders.
1.8 GUIDELINES. "Guidelines" means the written guidelines provided
by Adaptec to Roxio, as may be amended from time to time upon the agreement of
the parties, with respect to (a) the placement of Service Orders and adjustments
thereto, and (b) the provision of forecasts.
1.9 INVENTORY. "Inventory" means the Components Inventory, Work in
Process and Finished Goods Inventory.
1.10 LEAD TIME. "Lead Time" means the minimum amount of time prior to
the requested Delivery of a Product that a Service Order must be provided to
Adaptec to initiate the performance of Services. The Lead Time as of the
Separation Date is eleven (11) days.
1.11 MASTER SEPARATION AND DISTRIBUTION AGREEMENT. "Master Separation
and Distribution Agreement" means the First Amended and Restated Master
Separation and Distribution Agreement dated February 28, 2001 between Adaptec
and Roxio.
1.12 MINIMUM ORDER SIZE. "Minimum Order Size" means the minimum
quantity of each type of Product for which Services may be initiated, as
specified in EXHIBIT A.
1.13 PACKAGING SPECIFICATIONS. "Packaging Specifications" means the
packaging process and format to be agreed upon by the parties with respect to
each Product and set forth in the applicable specification.
1.14 PRODUCT. "Product" means a completed product to be manufactured
as a result of the Services, initially as set forth in EXHIBIT A, as it may be
amended in accordance with Article 5 from time to time.
1.15 QUARTERLY REVIEW MEETING. "Quarterly Review Meeting" shall mean
a meeting between Roxio and Adaptec for the purpose of reviewing production,
forecasts, fees, inventory liability and related matters.
1.16 ROXIO DOCUMENTATION. "Roxio Documentation" means the
Specifications, Packaging Specifications, approved Bill of Materials ("BOM"),
artwork,
-2-
<PAGE>
manuals, Golden Master and related documentation and materials to be provided to
Adaptec by Roxio with respect to the Products.
1.17 ROXIO TECHNOLOGY. "Roxio Technology" means technical information
specific to the Products, including the Roxio Documentation and software code.
1.18 ROXIO WAREHOUSE. "Roxio Warehouse" means the Roxio Warehouse in
the Netherlands.
1.19 SERVICE FEE. "Service Fee" means the fee to be charged Roxio by
Adaptec to perform Services with respect to each Product, initially as set forth
in EXHIBIT A, or determined in Article 4.
1.20 SERVICE ORDERS. "Service Orders" means written or electronically
transmitted Service Orders for Products placed by Roxio with Adaptec in
accordance with the Guidelines, including the description, quantity, Customer,
Delivery Point, requested Delivery date, ship to point and other relevant
information relating to the order and shipment.
1.21 SERVICES. "Services" means the operations services performed by
Adaptec hereunder with respect to the Products, including procurement, demand
fulfillment, planning, forecasting, manufacturing, packaging, shipping,
receiving, internal warehousing, invoicing and engineering/document control.
1.22 SPECIFICATIONS. "Specifications" means the respective
specifications for each Product provided by Roxio.
1.23 STANDARD COST. "Standard Cost" means the standard cost of
performing Services with respect to a component or Product, as set forth in
Adaptec's SAP system, at the Separation Date or such later date as a Service Fee
with respect to a Product may be determined in accordance with Article 4.
1.24 WORK IN PROCESS. "Work in Process" means Adaptec's inventory of
partially completed Products consistent with Roxio's outstanding Service Orders.
ARTICLE 2
TERM OF AGREEMENT
The term of this Agreement ("Term") shall commence on the Separation
Date and shall continue for a period of twelve (12) months, subject to earlier
termination as provided in Article 15.
-3-
<PAGE>
ARTICLE 3
PERFORMANCE OF SERVICES
3.1 RETENTION. Roxio hereby retains Adaptec to perform the Services
in accordance with the terms and conditions of this Agreement and Adaptec hereby
consents to such retention.
3.2 PERFORMANCE OF SERVICES. During the Term, Adaptec shall use
reasonable commercial efforts to perform the Services in accordance with the
terms of this Agreement. Additional Products may be added to this Agreement upon
the parties' mutual written agreement with respect to the Product, and its
Service Fee and other relevant Product-specific terms and conditions. Services
shall not be performed after the Separation Date with respect to any Product
that has not been fully production released by Roxio. Adaptec will initiate
Services with respect to a Product upon receipt of a Service Order.
3.3 LEAD TIME; RESCHEDULING; ALLOCATION. Adaptec shall use
reasonable commercial efforts to accept and perform any Service Order placed in
accordance with the terms and conditions of this Agreement, including the
applicable Lead Times (which may be revised by Adaptec from time to time upon
notice to Roxio). Adaptec may, at its sole discretion, allocate its capacity
among Adaptec's customers, but will provide Roxio with priority equivalent to
that given to customers purchasing similar services, in similar quantities,
using similar processes or materials.
3.4 PROVISION OF ROXIO DOCUMENTATION AND ROXIO TECHNOLOGY. As soon
as required after the Separation Date, Roxio will deliver to Adaptec the Roxio
Documentation for each Product. Subject to the terms and conditions of this
Agreement, Roxio grants to Adaptec and any subcontractor retained by Adaptec in
connection with the performance of Adaptec's obligations under this Agreement,
during the Term of this Agreement, a non-exclusive, non-transferable license to
use the Roxio Technology solely to the extent required to perform the Services.
Roxio shall retain all right, title and interest in and to the Roxio
Documentation and Roxio Technology.
3.5 PACKAGING. Adaptec will package each Product substantially in
accordance with the applicable Packaging Specification, as it may be amended
from time to time upon agreement of the parties and subject to approval of the
respective engineering organizations of the parties.
3.6 MEETINGS. Commencing on the Separation Date and during the Term,
Roxio shall schedule a Quarterly Review Meeting to occur in the second week of
each calendar quarter and will prepare the agenda for discussion. In addition,
either party may request additional meetings from time to time to address
additional issues or problems that have arisen. Each party shall use reasonable
efforts to have appropriate personnel attend such meetings in order to conduct a
thorough operations review in accordance with the agenda.
3.7 CONTRACTORS. Adaptec may retain third parties ("Contractors")
and subsidiary companies ("Subsidiaries") to furnish services to it in
connection with the performance of its obligations hereunder and permit such
Contractors and Subsidiaries to have access to Roxio's Confidential Information,
but only to the extent and insofar as reasonably required in connection with the
performance of Adaptec's obligations under this Agreement; provided that all
such Contractors and Subsidiaries shall be required by Adaptec to execute a
-4-
<PAGE>
written agreement that (a) is sufficient to secure compliance by such
Contractors and Subsidiaries with Adaptec's obligation of confidentiality
concerning Confidential Information set forth in Article 16; (b) acknowledges
the Contractor's or Subsidiary's obligation to assign all work product in
connection with performance hereunder; and (c) assigns to Roxio all Intellectual
Property Rights concerning any Roxio Technology. Roxio, upon request, may review
such agreements at any time before or after execution by such Contractors and
Subsidiaries to ensure compliance with this Agreement.
ARTICLE 4
SERVICE FEES
Subject to the terms and conditions of this Agreement, Adaptec agrees
initially to perform the Services for the respective Service Fees set forth on
EXHIBIT A. Any Service Fee which is not set forth on EXHIBIT A initially will be
set at the Standard Cost with respect to the Product at the time of production
release, plus ten percent (10%). All Service Fees shall be reviewed at the
Quarterly Review Meeting and shall be adjusted such that they are approximately
equivalent to the Standard Cost with respect to the Product, plus ten percent
(10 %). Unless otherwise agreed to in writing by Adaptec, all Service Fees are
exclusive of transportation and insurance from Adaptec's Singapore facilities to
the Delivery Point, and all taxes, duties and assessments (except taxes levied
against Adaptec's net income), including state and local use, sales property and
similar taxes (collectively, "Taxes"). Roxio agrees to pay all Taxes, unless
Roxio has provided Adaptec with (i) an exemption resale certificate in the
appropriate form for the jurisdiction of Roxio's place of business and any
jurisdiction to which Product is to be directly shipped hereunder, or (ii)
written evidence that such sale is otherwise exempt from such taxes. In the
event Adaptec is required to pay any Tax or transportation or insurance charges,
Roxio shall reimburse Adaptec the amount of the Tax or charge plus five percent
(5%). Where applicable, Taxes shall appear as separate items on Adaptec's
invoice.
ARTICLE 5
FORECASTS, ORDERING AND ADJUSTMENTS
5.1 FORECASTS. Roxio will provide Adaptec, on the Separation Date,
and thereafter, in accordance with the Guidelines, a monthly forecast of Roxio's
requirements for Services covering the remainder of the Term. Such forecasts
shall represent and reflect Roxio's good faith expectations of its requirements
based upon customer demand. Roxio acknowledges that Adaptec will use forecasts
for material and manufacturing planning purposes in connection with the Services
and, further, that Adaptec will purchase Components Inventory required for the
Services in accordance with such forecast.
5.2 SERVICE ORDERS. Roxio shall place Service Orders with Adaptec in
accordance with the Guidelines to initiate the performance of Services by
Adaptec. Each Service Order (a) will be issued by Roxio in accordance with the
applicable Lead Time(s), which initially shall be eleven (11) days and (b) will
be at least the Minimum Order Size for that Product as specified in EXHIBIT A.
Adaptec shall use reasonable efforts to perform the Services in accordance with
the Service Order. Roxio recognizes that its placement of Service Orders in
-5-
<PAGE>
accordance with the Guidelines is a material term of this Agreement, and
acknowledges its obligation to adjust its forecast such that no Product
purchases are forecast for any period during which Roxio will not be able to
place Service Orders in accordance with the Guidelines.
5.3 SERVICE ORDER ADJUSTMENTS. Roxio may not cancel any Products for
which a Service Order has been received by Adaptec. Roxio can change the "ship
to" location and/or the scheduled Delivery date until 72 hours prior to the
expected shipping date; however, such adjustment may be subject to additional
costs or charges. Roxio may not modify a Service Order within 72 hours of the
scheduled shipping date, without Adaptec's prior consent. Any requests to modify
a Service Order within 72 hours of the scheduled shipping date shall be directed
to Adaptec's manager of demand fulfillment, or his or her designee, and will be
handled on a case by case basis.
5.4 LIABILITY FOR INVENTORY. Roxio shall be liable to purchase all
Inventory purchased to forecast or built to a Service Order for which Delivery
of the relevant Product has not been taken upon the expiration of the Term, or
in the event of termination by Roxio pursuant to Section 15.1 or termination by
Adaptec pursuant to Section 15.3. Adaptec shall invoice Roxio for such Inventory
promptly upon determining the amount of the claim. Upon full payment for such
Inventory and receipt of "ship to" Delivery Point instructions, the Inventory
shall be Delivered to Roxio. Unless otherwise agreed by the parties, shipping
and insurance costs from Adaptec's Inventory location to the "ship to" Delivery
Point will be paid by Adaptec and reimbursed by Roxio Roxio will be billed for
the charges at the rate of actual shipping and insurance costs plus five percent
(5%). In the event payment is not made or shipping instructions are not received
within thirty (30) days of Adaptec's invoice, Adaptec may scrap the affected
Inventory without further liability to Roxio. In addition, the parties shall
review Inventory at the Quarterly Review Meeting and shall identify and agree
upon any Inventory, which is obsolete, which may be scrapped by Adaptec promptly
thereafter. The scrapping of such Inventory pursuant to this Section 5.4, shall
not affect Roxio's obligation to pay for such Inventory.
5.5 AGREEMENT CONTROLS. Except for the identification of Products,
quantities and other matters necessary to be specified by a Service Order, the
terms governing the performance of Services will be governed by the terms and
conditions of this Agreement. In the case of conflict between this Agreement and
any Service Order, invoice, acknowledgement or similar document, the terms of
this Agreement will prevail. Any remedies at law or equity not specifically
disclaimed or modified by this Agreement remain available to both parties.
ARTICLE 6
DELIVERY, CARRIER & RISK OF LOSS
6.1 DELIVERY OF PRODUCT; RISK OF LOSS. All Products manufactured
hereunder shall be Delivered (a) FOB Adaptec's warehouse in the San Francisco
Bay Area, with respect to orders destined for shipment to a location in the
Americas, including the United States, Canada, Mexico and South America; (b) EX
WORKS Singapore, with respect to orders destined for shipment to a location
outside the United States; and (c) FOB the Roxio Warehouse, with respect to
orders to be held at the Roxio Warehouse for pull by a Customer. Risk of loss
shall transfer (a) upon delivery to the carrier at Adaptec's warehouse in the
San Francisco Bay Area,
-6-
<PAGE>
with respect to orders destined for shipment to a location in the Americas,
including the United States, Canada, Mexico and South America; (b) upon the
carrier's taking possession in Singapore, with respect to orders destined for
shipment to a location outside the United States; and (c) upon receipt at the
Roxio Warehouse, with respect to orders to be held at the Roxio Warehouse for
pull by a Customer. All quoted Delivery dates are estimates only and Adaptec
shall not be liable for any failure to meet a quoted Delivery date.
6.2 SHIPMENT. Unless otherwise agreed by the parties, shipping and
insurance costs from Adaptec's Singapore facility to the Delivery Point will be
paid by Adaptec and reimbursed by Roxio. Roxio will be billed for the charges on
a monthly basis at the rate of actual shipping and insurance costs plus five
percent (5%). Adaptec will select the carrier. In no event shall Adaptec be
liable for any delay in delivery, or assume any liability in connection with
shipment, nor shall the carrier be deemed an agent of Adaptec. All claims for
damages must be filed with the carrier. Shipments may be made in installments.
Unless otherwise agreed in writing or as set forth in the Packaging
Specification, all Products will be packed and shipped in accordance with
Adaptec's normal practices.
ARTICLE 7
PAYMENTS
Upon completion of the Services specifically relating to the
manufacture and shipment of Products, as evidenced by shipment of the Product
from Adaptec's Singapore facility, Adaptec will send an invoice to Roxio
identifying the Service Order, and confirming the quantity and description of
all Products that have been shipped. Roxio will pay invoices for the Services,
or such other invoices as are issued under this Agreement, including invoices
for scrapped Inventory, cancellation charges, shipping costs, inspection
expenses, Product modifications and transition assistance, within thirty (30)
days of receipt. Payment of invoices shall be made to Adaptec. Payment does not
constitute final acceptance of the Services or resulting Products and is subject
to adjustments for errors, shortages and defects in the Products. Performance of
the Services shall at all times be subject to the approval of Adaptec's credit
department and Adaptec may at any time decline to perform any Services, or
Deliver any Products, except upon receipt of payment, or upon terms and
conditions or security satisfactory to Adaptec. Adaptec will provide Roxio with
credit terms in accordance with the credit policies established by its credit
department.
ARTICLE 8
QUALITY AND INSPECTION
8.1 ADAPTEC'S PROCESS. Adaptec will manufacture and inspect the
Products in accordance with its general process and quality procedures.
8.2 ROXIO INSPECTION. Roxio, or its representative (which must be
reasonably acceptable to Adaptec), will be entitled to inspect the Products and
their manufacturing process at the manufacturing facilities of Adaptec or its
Subcontractor, or at Adaptec's warehouse, prior to Delivery and during the
course of Adaptec's performance of Services. Such inspection shall
-7-
<PAGE>
be solely for the purpose of reviewing the quality of such Products and
processes. Any such inspection shall be subject to reasonable prior written
notice given to Adaptec by Roxio and to the execution of a reasonable form of
non-disclosure agreement by Roxio and any approved representative. Adaptec shall
not be responsible for any delay in Delivery or shipment of the affected
Products that results from the inspection, and Roxio shall bear all costs of the
inspection. In the event Adaptec bears any costs as a consequence of the
inspection, Roxio shall reimburse Adaptec for its actual expenses, plus five
percent (5%).
ARTICLE 9
ACCEPTANCE AND REJECTION OF PRODUCTS
Any Product Delivered hereunder shall be deemed accepted by Roxio
unless Adaptec receives written notice of a defect or non-conformity with
respect to such Product within thirty (30) days of shipment from the Delivery
Point to Roxio or its Customer, or, if shipped to the Roxio Warehouse, within
thirty (30) days of receipt at the Roxio Warehouse. In the event a Product
appears not to conform to the Specifications or a shipment does not conform to
the requirements of a Service Order, Roxio shall promptly notify the appropriate
Adaptec contact, as identified to Roxio by Adaptec from time to time, specifying
the non-conformity and requesting a Return Material Authorization ("RMA") number
for Product return. Adaptec will issue a RMA number within 48 hours of Roxio's
request. This RMA number must be referenced on all paperwork and shipping
containers with respect to the returned Product. Upon receipt of receipt of the
Product, Adaptec will be afforded a reasonable opportunity to inspect it to
validate non-conformance. No Product shall be returned to Adaptec without
compliance with the foregoing RMA procedures.
ARTICLE 10
WARRANTY
10.1 MATERIALS AND WORKMANSHIP. Adaptec makes no warranty with
respect to the Services or the results thereof, except that Adaptec warrants, to
Roxio only, that the media upon which the Products are reproduced will, for a
period of ninety (90) days commencing on the date of Delivery or pull from the
Roxio Warehouse, whichever is later ("Warranty Period"), be free from defects in
material and workmanship.
10.2 WARRANTY REPLACEMENT. If any Product is found to breach the
warranty specified in Section 10.1 during the Warranty Period, Roxio may return,
or direct its Customer to return, the Product to Adaptec, and Adaptec shall, at
Adaptec's option and expense, promptly (a) replace such defective Product and
return the replacement unit to Roxio, or (b) refund or credit to Roxio the
Service Fee paid for the defective Product. The foregoing shall constitute
Roxio's sole remedy and Adaptec's sole obligation with respect to any breach of
warranty under this Agreement.
-8-
<PAGE>
10.3 RMA PROCEDURES. All returns of the Products made by Roxio or its
Customers shall comply with the RMA Procedures then in effect, a current version
of which is attached hereto as EXHIBIT B.
10.4 NO LIABILITY. Adaptec shall have no liability or obligation to
Roxio under this Article 10 with respect to any Products which have been
subjected to abuse, misuse, improper use, negligence, accident, alteration,
repair or rework performed by unauthorized parties.
10.5 DISCLAIMER OF WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH IN
SECTION 10.1, THE SERVICES ARE PERFORMED AND THE PRODUCTS ARE PROVIDED "AS IS"
AND ADAPTEC MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR
STATUTORY, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, AND NONINFRINGEMENT.
ARTICLE 11
PRODUCT CHANGES
11.1 ON ADAPTEC'S NOTICE. In no event shall Adaptec make any
modification to a Product or its packaging without Roxio's prior written
approval, which shall not unreasonably be withheld or delayed.
11.2 AT ROXIO'S REQUEST. Should Roxio desire modifications in a
Product or its packaging, Roxio shall submit its request to Adaptec in writing,
and Adaptec shall use reasonable commercial efforts to respond to such request
in writing within five (5) business days, setting forth the impact of such
proposed change on the performance of the Services and the relevant Service Fee
with respect to the Products. Any change necessary for proper functioning of the
Products will be implemented by Adaptec as soon as possible. Unless the parties
agree otherwise, requested changes will not affect the Products already
scheduled or rescheduled for Delivery as of the date Adaptec receives such
request. Roxio shall be responsible for payment for any Inventory, which is made
obsolete as a consequence of the implementation of the change.
11.3 CHANGE MANAGEMENT. All changes to a Product shall be subject to
Adaptec's standard change management procedure.
ARTICLE 12
OWNERSHIP OF ROXIO TECHNOLOGY
Roxio owns the Roxio Technology. Nothing in this Agreement shall limit
the ability of Adaptec to produce products or portions of products which are
similar to the Products for customers other than Roxio, either during the term
of this Agreement or after its termination, provided that in doing so, Adaptec
does not infringe Roxio's intellectual property rights. or use Roxio Technology
or Roxio Confidential Information.
-9-
<PAGE>
ARTICLE 13
INTELLECTUAL PROPERTY INDEMNITY
Roxio shall, at its expense and at Adaptec's request, defend any claim
or action brought against Adaptec, and Adaptec's subsidiaries, affiliates,
directors, officers, employees, agents and independent contractors, to the
extent it is based on a claim that the Roxio Documentation, the Product or any
third party intellectual property incorporated in Product at the direction of
Roxio, infringes any patent, copyright, mask work right or other intellectual
property right, or misappropriates any trade secret, of a third party ("Claim").
Roxio shall pay all costs of defense and settlement, together with any judgment
which may be finally awarded; provided: (a) Adaptec gives Roxio reasonably
prompt notice in writing of any such suit and permits Roxio, through counsel of
its choice, to defend and/or settle such Claim; and (b) Adaptec provides Roxio
information, assistance and authority, at Roxio's expense, to enable Roxio to
defend such Claim. Roxio shall not be responsible for any settlement made by
Adaptec without Roxio's written permission.
ARTICLE 14
GENERAL INDEMNITY
Each party hereto (the "Indemnifying Party") shall, at its own expense,
defend the other party, and its subsidiaries, affiliates, directors, officers,
employees, agents and independent contractors (collectively, the "Indemnified
Party"), from and against any and all loss, cost, liability or expense
(including costs and reasonable fees of attorneys and other professionals)
arising out of or in connection with the negligence of the Indemnifying Party's
agents and employees. Such indemnity shall include claims brought with respect
to the defective design or code of the Product for which Roxio shall be the
indemnifying party. The Indemnifying Party shall pay all costs of defense and
settlement, together with any judgment which may be finally awarded; provided:
(a) the Indemnified Party gives the Indemnifying Party reasonably prompt notice
in writing of any such suit and permits the Indemnifying Party, through counsel
of its choice, to defend and/or settle such Claim; and (b) the Indemnified Party
provides the Indemnifying Party information, assistance and authority, at the
Indemnifying Party's expense, to enable the Indemnifying Party to defend such
Claim. The Indemnifying Party shall not be responsible for any settlement made
by the Indemnified Party without the Indemnifying Party's written permission.
ARTICLE 15
TERMINATION
15.1 TERMINATION WITHOUT CAUSE. Roxio may, for any reason or for no
reason whatsoever, terminate this Agreement, in whole, or in part, upon two (2)
months advance notice to Adaptec.
-10-
<PAGE>
15.2 EFFECT OF TERMINATION WITHOUT CAUSE. In the event Roxio
terminates this Agreement pursuant to Section 15.1, Adaptec may submit a written
claim for Inventory in accordance with Section 5.4.
15.3 TERMINATION FOR DEFAULT. Either party may suspend its
performance and/or terminate this Agreement immediately upon written notice at
any time if:
(a) The other party is in material breach of any warranty,
term, condition or covenant of this Agreement other than those contained in
Article 16 and fails to cure that breach within thirty (30) days after written
notice of that breach and of the first party's intention to suspend its
performance or terminate;
(b) The other party is in material breach of any warranty,
term, condition or covenant of Article 16; or
(c) The other party: (i) becomes insolvent; (ii) admits in
writing its insolvency or inability to pay its debts or perform its obligations
as they mature; or (iii) makes a general assignment for the benefit of
creditors.
15.4 EFFECT OF TERMINATION IN GENERAL. The following terms apply to
any termination under this Agreement, including without limitation, termination
for convenience and for default:
(a) Immediately upon any termination of this Agreement,
Adaptec shall, to the extent and at the times specified by Roxio, stop all work
on outstanding Service Orders, incur no further direct cost, and protect all
property in which Roxio has or may acquire an interest pursuant to this Article
15.
(b) Immediately upon any termination of this Agreement,
each party will return to the other party or, pursuant to the other party's
written instructions, destroy all materials in its possession containing
Confidential Information of the other party. Returned Confidential Information
materials shall be shipped freight collect. In addition Adaptec shall
immediately deliver to Roxio any and all Roxio Technology, Roxio Documentation
or other property of Roxio within Adaptec's possession or control.
Notwithstanding the foregoing, Adaptec shall have no obligation to deliver any
Inventory until and unless it has been paid for by Roxio.
(c) If this Agreement is terminated by Adaptec pursuant to
Section 15.3, then Adaptec may submit a claim for Inventory in accordance with
Section 5.4.
(d) Notwithstanding any termination of this Agreement, the
provisions of Sections 5.4, 7, 9, 10, 12, 13, 14, 16, 17, 18 and the relevant
sections of Articles 15 and 19 shall remain in effect.
15.5 TRANSITION ASSISTANCE. Upon expiration or earlier termination of
this Agreement by Roxio pursuant to Sections 15.1 or 15.3, Adaptec shall deliver
to Roxio, or to
-11-
<PAGE>
Roxio's agent, as Roxio may direct, a copy of the Roxio Documentation applicable
to each Product in order to assist in the transfer of the performance of the
Services to Roxio or its designated third party manufacturer. Such Roxio
Documentation shall, as applicable, be in compiled, electronic form.
Additionally, subject to the mutual agreement of the parties with respect to
scheduling and compensation to Adaptec, Adaptec shall provide such technical
assistance to Roxio or Roxio's designated third party manufacturer, as Roxio may
reasonably request in connection with such transfer.
ARTICLE 16
CONFIDENTIALITY
Each party will protect the other's Confidential Information in
accordance with the terms of the Master Confidential Disclosure Agreement.
ARTICLE 17
LIMITATION OF LIABILITY
EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, AND EXCEPT AS SET FORTH
IN ARTICLES 13 AND 14, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER OR
ANY OTHER PERSON FOR ANY SPECIAL, INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES
OF ANY KIND, INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS OR DAMAGES TO THE
OTHER PARTY'S BUSINESS REPUTATION HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY,
WHETHER IN AN ACTION FOR CONTRACT, STRICT LIABILITY OR TORT (INCLUDING
NEGLIGENCE) OR OTHERWISE, WHETHER OR NOT THE FIRST PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGE AND NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE
OF ANY REMEDY.
ARTICLE 18
DISPUTE RESOLUTION
Resolution of any and all disputes arising from or in connection with
this Agreement ("Disputes") shall be exclusively governed by and settled in
accordance with the provisions of this Article 18.
(a) The parties shall make a good faith attempt to resolve
any Dispute arising out of or relating to this Agreement through informal
negotiation between appropriate representatives or each of Adaptec and Roxio. If
at any time either party feels that such negotiations are not leading to a
resolution of the Dispute, such party may send a notice to the other party
describing the Dispute and requesting a meeting of the senior executives from
each party. Within ten (10) business days after such notice of a Dispute is
given, each party shall select appropriate senior executives (e.g. director or
V.P. level) of each party who shall have the
-12-
<PAGE>
authority to resolve the matter and shall meet to attempt in good faith to
negotiate a resolution of the Dispute prior to pursuing other available
remedies. During the course of negotiations under this Section 18 (a), all
reasonable requests made by one party to the other for information, including
requests for copies of relevant documents, will be honored. The specific format
for such negotiations will be left to the discretion of the designated
negotiating senior executives but may include the preparation of agreed upon
statements of fact or written statements of position furnished to the other
party. In the event that any Dispute arising out of or related to this Agreement
is not settled by the parties within thirty (30) days after the first meeting of
the negotiating senior executives, either party may commence litigation with
respect to the Dispute. However, except as provided below in Section 18 (b),
neither party shall commence litigation against the other party to resolve the
Dispute (i) until the parties try in good faith to settle the Dispute by
negotiation for at least thirty (30) days after the first meeting of the
negotiating senior executives, or (b) until forty (40) days after notice of a
Dispute is given by either party to the other party, whichever occurs first.
(b) Any Dispute regarding the following is not required to
be negotiated prior to seeking relief from a court of competent jurisdiction:
breach of any obligation of confidentiality; infringement, misappropriation, or
misuse of any intellectual property right; or any other claim where interim
relief from the court is sought to prevent serious and irreparable injury to a
party. However, the parties to the Dispute shall make a good faith effort to
negotiate such Dispute, according to the above procedures, while such court
action is pending.
ARTICLE 19
GENERAL
19.1 NOTICES. Any notice, demand, offer, request or other
communication required or permitted to be given by either party pursuant to the
terms of this Agreement shall be in writing and shall be deemed effectively
given the earlier of (i) when received, (ii) when delivered personally, (iii)
one (1) Business Day after being delivered by facsimile (with electronic receipt
of appropriate confirmation), (iv) one (1) Business Day after being deposited
with a nationally recognized overnight courier service or (v) four (4) days
after being deposited in the U.S. mail, First Class with postage prepaid, and
addressed to the attention of:
If to Adaptec:
Adaptec, Inc.
691 S. Milpitas Boulevard
Milpitas, California 95035
Attention: Vice President, Operations
cc: Vice President and General Counsel
-13-
<PAGE>
If to Roxio:
Roxio, Inc.
461 S. Milpitas Boulevard
Milpitas, California 95035
Attention: William Christopher Gorog
19.2 ASSIGNMENT. Neither party shall assign any of its rights or
privileges hereunder without the prior written consent of the other party;
provided, however, that Adaptec may subcontract the performance of any or all of
the Services without Roxio's consent, subject to Adaptec's compliance with the
provisions of Section 3.6. Any attempt at assignment in derogation of the
foregoing shall be null and void. Subject to the foregoing, this Agreement shall
be binding upon and inure to the benefit of the parties hereto, their
subsidiaries, and their respective successors and assigns.
19.3 DAMAGE LIMITATION. INDEPENDENTLY OF ANY OTHER REMEDY LIMITATION
HEREOF AND NOTWITHSTANDING ANY FAILURE OF THE ESSENTIAL PURPOSE OF ANY SUCH
LIMITED REMEDY, THE PARTIES AGREE THAT IN NO EVENT SHALL ADAPTEC BE LIABLE FOR
SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND UNDER THIS AGREEMENT.
19.4 ALLOCATION OF RISK. The parties acknowledge and affirm that the
sections on limitation of liability, warranties and disclaimer of warranties and
damage limitation in this Agreement allocate the risks between the parties. This
allocation is reflected in the pricing of the Products and is an essential
element of the basis of the bargain between the parties.
19.5 EXPORT CONTROL.
(a) REPRESENTATION. Roxio agrees to comply strictly and
fully with all export controls imposed on the Products and the Roxio Technology
by any country or organization in whose jurisdiction Roxio operates or does
business. Roxio will not knowingly, export or re-export any Product to any
country prohibited under United States Export Administration Regulations
("EAR"), without first obtaining a valid license to so export or re-export the
Products.
(b) RESPONSIBILITY. Except as otherwise agreed in writing
between the parties, all export permits, import certificates, insurance, duty,
customs clearance charges and/or licenses and related costs from the Delivery
Point will be Roxio's responsibility. Adaptec shall not be required to ship any
Product if it believes that such shipment may violate any applicable EAR. Roxio
will promptly inform Adaptec of any change in any Product, which may affect its
export status, including any change , which may affect its EAR Export Commerce
Control Number or License designator, after the Separation Date.
19.6 WAIVER. The waiver by either party hereto of a breach or
violation of any provision of this Agreement shall be made only in a writing
signed by the party making such waiver, and shall not operate as, or be
construed to constitute, a waiver of any subsequent breach of the same or
another provision hereof.
19.7 GOVERNING LAW. This Agreement shall be construed in accordance
with and all Disputes hereunder shall be governed by the laws of the State of
California, excluding its conflict of law rules and the United Nations
Convention on Contracts for the International Sale of Goods. The Superior Court
of Santa Clara County and/or the United States District Court for the Northern
-14-
<PAGE>
District of California, San Jose Division, shall have jurisdiction and venue
over all Disputes between the parties that are permitted to be brought in a
court of law pursuant to Section 18.7 above.
19.8 DESCRIPTIVE HEADINGS. The headings contained in this Agreement,
in any Exhibit or Schedule hereto and in the table of contents to this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Any capitalized term used in any Exhibit or
Schedule but not otherwise defined therein, shall have the meaning assigned to
such term in this Agreement. When a reference is made in this Agreement to an
Article, Section, Exhibit or Schedule, such reference shall be to an Article or
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated.
19.9 SEVERABILITY. The parties hereto have negotiated and prepared
the terms of this Agreement in good faith with the intent that each and every
one of the terms, covenants and conditions herein be binding upon and inure to
the benefit of the respective parties. Accordingly, if any one or more of the
terms, provisions, promises, covenants or conditions of this Agreement or the
application thereof to any person or circumstance shall be adjudged to any
extent invalid, unenforceable, void or voidable for any reason whatsoever by a
court of competent jurisdiction, such provision shall be as narrowly construed
as possible, and each and all of the remaining terms, provisions, promises,
covenants and conditions of this Agreement or their application to other persons
or circumstances shall not be affected thereby and shall be valid and
enforceable to the fullest extent permitted by law. To the extent this Agreement
is in violation of applicable law, then the parties agree to negotiate in good
faith to amend the Agreement, to the extent possible consistent with its
purposes, to conform to law.
19.10 FORCE MAJEURE. Neither of the parties shall be deemed to be in
default of this Agreement to the extent any failure to perform hereunder is a
result of conditions beyond the other party's reasonable control, including but
not limited to, acts of God, war, strikes, fires, floods, earthquakes, work
stoppages and embargoes, material shortages, subcontractor delays, acts of any
governmental entity, equipment or other facilities failures (which delays or
failures are beyond the reasonable control, without negligence, of the
defaulting party), and neither party shall have the right to terminate this
Agreement for any such delay or default on the part of the other party.
19.11 ENTIRE AGREEMENT. This Agreement, the Master Separation and
Distribution Agreement and the other Ancillary Agreements and the Exhibits and
Schedules referenced or attached hereto and thereto, constitute the entire
agreement between the parties with respect to the subject matter hereof and
shall supersede all prior written and oral and all contemporaneous oral
agreements and understandings with respect to the subject matter hereof. This
Agreement shall prevail in the event of any conflicting terms or legends which
may appear on any portion of the Assigned Technology or the Licensed Technology.
19.12 CONFLICTING AGREEMENTS. In the event of a conflict between this
Agreement and the Master Separation and Distribution Agreement or any Ancillary
Agreement executed in connection herewith, the provisions of this Agreement
shall prevail.
19.13 CONTROLLING DOCUMENT. All Service Orders for the Products shall
be governed by this Agreement. Any additional, inconsistent or conflicting
clauses in any order,
-15-
<PAGE>
release, acceptance or other written correspondence between the parties shall be
considered null and void, unless expressly executed by duly authorized
representatives of both parties.
19.14 RELATIONSHIP. The parties are independent contractors. Nothing
contained herein and no action taken pursuant hereto shall constitute the
parties as joint ventures or the agents of the other party for any purpose or in
any sense whatsoever.
19.15 AMENDMENT AND EXECUTION. This Agreement and amendments hereto
shall be in writing and executed in multiple copies via facsimile or otherwise
on behalf of Adaptec and Roxio by their respective duly authorized officers or
representatives. Each multiple copy shall be deemed an original, but all
multiple copies together shall constitute one and the same instrument.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-16-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the Separation Date.
ADAPTEC, INC. ROXIO, INC.
By: By:
----------------------------------- ------------------------------
Name: Name:
-------------------------------- ---------------------------
Title: Title:
-------------------------------- ---------------------------
[SIGNATURE PAGE TO MANUFACTURING AGREEMENT]