Amendment 013 To Outsourcing Agreement

Exhibit 10.34


Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.


Amendment 013 to Outsourcing Agreement
between
IBM and MSL


The purpose of this document is to amend the IBM/MSL Outsourcing Agreement between International Business Machines Corporation ("IBM") and Manufacturer's Services Western U.S. Operations, Incorporated ("MSL"), dated May 5, 1998 ("Agreement"). Following execution signatures by IBM and MSL (each a Party and together the "Parties"), this amendment will be effective on June 1, 2002 unless otherwise stated for specific Sections of this Amendment 013.


The Parties agree to amend the Agreement as follow:


1. Delete Section 1.15 of the Outsourcing Base Agreement, as amended in Amendment 012, in its entirety and replace with the following:


""Product Attachment" shall mean Attachments A, G, and L of the
Statement of Work and Exhibit 1 to Supplement 1 of the Statement of
Work to this Agreement which describe the details of a specific
transaction or series of transactions. Product Attachments are
incorporated into and made a part of this Agreement."


2. Delete the first sentence in SECTION 4.0 TERM of the Outsourcing Base Agreement, as amended in Amendment 012, in its entirety and replace with the following:


"This Agreement shall become effective on the Effective Date and shall
continue for a period of seven (7) years unless terminated as provided
in Section 5.0."


3. Delete SECTION 2.0 TERM of Attachment 1, Statement of Work to the Agreement, as amended in Amendment 012, in its entirety and replace with the following:


"This Attachment and its Product Attachments shall become effective on
the Effective Date and shall continue for a period of seven (7) years
unless terminated as provided in Section 5.0 of the Base Agreement.
This Attachment will automatically be renewed for periods of twelve
(12) months unless either party gives six (6) months written notice of
its intent to terminate this Agreement. Such renewals shall continue
for successive periods under the same terms and conditions, unless
otherwise agreed in writing by both Parties."


4. Delete the RELATIONSHIP MANAGERS identification information which follows Section 5.2 g) of Attachment 1, Statement of Work to the Agreement, as amended in Amendment 012, in its entirety and replace with the following:


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"WORLD WIDE RELATIONSHIP MANAGERS:


IBM: Jesus Martinez Ons
Mgr of RS Mfg&FF Operations Local Mgr C. Valenciana / Murcia
Avenida de Aragon, 30 46021 Valencia ( Spain )
+34-96-3881861
+34-96-3610640
jmartinez @ es.ibm.com


MSL: J. Donald Oldham
VP Worldwide Sales and Program Management
300 Baker Avenue Concord, Massachusetts USA 01742-2121
+1-978-371-5426
+1-978-287-5635
don.oldham @msl.com" 5. Add the following to Section 7.4 of Attachment 1, Statement of Work to the Agreement in its entirety:


"f) In the event that IBM recognizes a potential loss of an
incremental business opportunity, based upon the pricing of
MSL Products and/or Services, including, without limitation,
those for pre machine type 4800 RS Product(s), and IBM
believes that MSL can assist by making reasonable adjustments
to such pricing of MSL Products and/or Services, IBM will
notify the MSL World Wide Relationship Manager in writing,
requesting special pricing consideration. MSL shall have five
(5) Days after such IBM written notice to respond to IBM's
request in writing with it's good faith efforts to satisfy
IBM's request."


6. Delete Section 7.5 e) of Attachment 1, Statement of Work to the Agreement, as amended in Amendment 012, in its entirety and replace with the following:


"Proposals for updates to the initial prices will be reviewed each
quarter on a thirty (30) calendar day cycle. The schedule will be as
follows


"T" shall be the date that MSL prices and IBM Inter Company
Billing Price's (ICBPs) are ready for table load; it is the
last day of a calendar quarter end month.


Thirty (30) calendar days before T, MSL shall initiate an
update proposal.


Fifteen (15) calendar days before T, MSL shall answer all IBM
questions and issues and revise its proposal.


Update reviews shall include:


i) Updates of materials costs, including packaging costs, with
latest quotes of IBM Nominated Suppliers and MSL suppliers.
IBM Parts materials costs will be updated to the latest IBM
market price. For Parts with a low annual value, the material
costs will be updated to the latest purchase costs.


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ii) Updates of MSL Value Add shall only occur semiannually.
MSL Value Add updates are to be included in MSL prices on the
last calendar day of each March and on the last calendar day
of each September. MSL Value Add is determined by multiplying
Materials Cost times the appropriate Value Add Rate from table
1 a) of Appendix 1: Mark Up to Attachment 1, Statement of Work
to the Agreement.


iii) Update of MSL quotes for MSL manufactured Products.


iv) Changes in MSL labor rates, markups and margins, in
accordance with the best price and Product price conditions of
Sections 7.4 and 7.5 a), b), c), and d).


v) Changes in Integration Labor Hours for specific Integration
projects based on the latest IBM agreed to quotes."


7. Delete Section 13.0 f) of Attachment 1, Statement of Work to the Agreement in its entirety and replace with the following:


"MSL prices, and MSL WW surplus inventory carrying charges ("SICC") as
specified in Section 13.0 g) of Attachment 1, Statement of Work to the
Agreement, include charges for MSL inventory management and ownership.
Both parties agree that IBM has no liability for inventories that MSL
purchases for the purposes of this contract, providing that forecast
(requirements) accuracy is equal to or greater than the level defined
in Appendix 2. If Requirements Accuracy falls below 65% liabilities for
any machine type for any quarter, IBM will compensate MSL according to
the method describe in Appendix 2."


8. Add the following to Section 13.0 of Attachment 1, Statement of Work to the Agreement in its entirety:


"g) IBM will pay agreed to SICC to MSL quarterly at [**]% annual
rate as specified in Section 13.0 g) i) and as specified in
Section 13.0 g) ii) and as specified in Section 13.0 g) iii).
The SICC rate will be renegotiated annually such that a
revised rate is effective each June, beginning June 2003. IBM
and MSL must mutually agree upon MSL WW surplus RS inventory
subject to SICC. MSL WW surplus RS inventory is MSL RS
inventory which exceeds the next 12 months requirements
according to the latest IBM forecast, and which MSL purchased
consistent with IBM forecasts and agreed upon lead times.


i) For a period beginning June 1, 2002 through the term
of the Agreement, IBM will pay MSL SICC for inventory
contained in the March 2001 ICC payment list, less
the inventory sold or otherwise no longer mutually
considered part of this inventory .


ii) For a period beginning April 1, 2002 through the term
of the Agreement, IBM will pay MSL SICC for MSL WW
surplus RS inventory which was purchased prior to
June 1,2002, and which is not contained in the March
2001 ICC payment list, less the inventory sold or
otherwise no longer mutually considered part of this
inventory.


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iii) For MSL WW surplus RS inventory which was purchased
on June 1, 2002 or later (less the inventory sold or
otherwise no longer considered part of this
inventory), IBM, at the end of each quarter, will
calculate the maximum MSL WW surplus RS inventory for
all machine types and models by using an algorithm
which has been agreed upon by both Parties in
writing. At the end of each quarter, the average ship
cost for all RS machine types and models is known and
will be stated in US currency. IBM's maximum
liability for MSL WW surplus RS inventory for the
quarter will be the maximum MSL WW surplus RS
inventory multiplied by the respective average ship
cost, multiplied by the current SICC rate. IBM's
maximum SICC liability for MSL WW surplus RS
inventory for the quarter will be compared to MSL' s
respective claim, and IBM will pay MSL the lower of
the two."


9. Add the following to the first paragraph of Section 7.0 of Attachment 1, Statement of Work to the Agreement in its entirety.


"All prices in this Agreement which are stated in pesetas will be
divided by [**] for conversion to Euros."


10. Add the following to the end of the first paragraph of Section 11.2 of Attachment 1, Statement of Work to the Agreement:


"Weekly when driven by significant change to the most recent IBM
forecast, IBM may provide updates of up to the current month plus the
following two months."


11. Delete Section 11.2 b of Attachment 1, Statement of Work to the Agreement in its entirety and replace with the following:


"MSL will notify IBM within ten (10) Days of receipt of a monthly
forecast if MSL is unable to meet the quantities and Delivery Dates.
MSL will notify IBM within five (5) Days of receipt of a weekly
forecast if MSL is unable to meet the quantities and Delivery Dates. If
MSL cannot meet the quantities and Delivery Dates in a weekly forecast,
MSL shall have an additional five (5) Days to meet the quantities and
Delivery Dates in the weekly forecast. MSL will notify IBM, again,
within the additional five (5) Days if MSL remains unable to meet the
quantities and Delivery Dates requested in the weekly forecast. If MSL
fails to notify IBM within ten (10) Days following receipt of a monthly
forecast, or if MSL fails to notify IBM within the five (5) Days
following receipt of a weekly forecast, or if MSL fails to notify IBM
again within the additional five (5) Days following receipt of a weekly
forecast, MSL will be deemed to have accepted the quantities and
Delivery Dates and will be bound by them; provided, however, that MSL's
actual or deemed acceptance of any forecast shall be subject to the
availability of IBM Parts and IBM Designated Parts as needed, and MSL
shall not be subject to any penalties (and IBM shall not be able to
reject any proposed rescheduling of Delivery Dates) under this
Agreement for failure to meet Delivery Dates due to the unavailability
of such Parts at the times necessary to meet Delivery Dates, provided
further however that such unavailability of IBM Parts or IBM Designated
Parts is not due to MSL's failure to properly order such Parts or
otherwise properly manage its relationship with the provider of such
Parts."


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12. Delete the first paragraph of Section 11.2 c) of Attachment 1, Statement of Work to the Agreement in its entirety and replace with the following:


"If MSL notifies IBM that it cannot meet the quantities and Delivery
Dates in an IBM forecast, MSL's notification will include the
quantities MSL can deliver within the forecast's Delivery Dates and
proposed schedule of Delivery Dates for delivering the quantities MSL
cannot deliver within the forecast. IBM shall notify MSL in writing,
within ten (10) Days of receipt of MSL's notification relative to a
monthly forecast or within (5) Days of receipt of MSL's additional five
(5) Day notification relative to a weekly forecast, of its decision
either, in its sole discretion to:"


13. Add the following to Section 11.2 of Attachment 1, Statement of Work to the Agreement:


"e) MSL, has on Ian. 15, 2002, forwarded to IBM a proposed
solution for the weekly full MRP Plan ("Proposal"). The
parties agree to work together in good faith to finalize the
processes, timing and costs of the Proposal with the common
goal to implement the Proposal as soon as practicable. Subject
to such timely implementation, MSL will have WW processes in
place by Dec. 31, 2002 such that MSL will respond to IBM's
monthly rolling twelve (12) month forecast by machine type,
model and geography within five (5) Days with notification to
IBM of MSL's ability to meet requested quantities and
Delivery Dates."


14. Delete the table in 1 a) of Appendix 1: Mark Up, as amended by Am ...