Specialty Form _: Refurbished Services Agreement

This form will appear in Business Transactions Solutions (Fall 2008) and is
presented with permission of ThomsonlWest. Copyright 2008 ThomsonlWest. For
more information or to order call 1-800-762-5272.

Thisform is an agreement between a manl{facturer and another party, referred to herein

as the "buyer," that sets out the terms upon which the manufacturer will receive and
service (i.e., repair and/or maintain) products that the buyer has previously sold to its
customers. The agreement should describe in detail the exact services to be provided by
the mam1facturer which, in this case, includes securing all products deliveredfof' services
and providing the repair services according to agreed specifications and using paris,
tooling and packaging materials provided by the buyer. The manl{facturer will provide
trained labor and also contribute its own existing equipment for use in carrying out the
repair services. Under the arrangement the manufacturer will become an authorized
service organization for the buyer and thus allow the buyer to outsource its service
requirements for a fixed price set forth in the agreement. R~furbished products can
either be returned to the buyer's original customer or resold by the buyer to new
customers as "r~filrbished items" at a price which covers the cost of the manl{facturer's
work plus an acceptable profit margin. The buyer will provide the manufacturer with
forecasts of the volume of products that will require service based on the buyer's
historical data regarding the quality and performance of the products. In cases where
the buyer anticipates a large volume of service requirements fi'om a single customer
under a warrant contract with that customer the parties may agree that the customer will
have the right to actively monitor the quality and eificiency of the manulacturer 's
activities under this agreement. The agreement should also cover standard issues such
as delivelY procedures, change orders, warranties, limits on liability, term and
termination, payment terms, dispute resolution and confidentiality.
This Refurbished Service Agreement ("Agreement") is entered into as of [- date -] (the
"Effective Date") by and between [- name of service provider -], a [- name of state -]
corporation, with principal offices located at [- address of service provider -]
("Company") and [- nanle of buyer -], a [- name of state -] corporation with principal
offices located at [- address of service provider -] ("Buyer").

1.

Work Scope

During the tenn of this Agreement, Company will be an authorized service organization
for Buyer and Company will provide refurbished services to Buyer that meet all handling,
testing, and packaging requirements at a cost on the products in Company's quotation for
Buyer. The detail handling, testing and packaging specifications for such products
("Specifications") shall be set forth in Exhibit I. Company shall house and secure
approved products that have been delivered to Company approved location for repair and
service from Buyer's customer. Buyer will provide all testing and repair equipment that
are necessary to service Buyer's approved products. Furthermore, Buyer will provide
detail training in handling, testing and procedures deemed necessary to examine and

repair all equipment. Buyer will also provide all approved parts and packaging material
required to use for repair, repackaging and delivery of products. Company will produce
production samples ("First Article") of the refurbished product for acceptance by Buyer
and Buyer's customer. In which case, regular refurbished service and delivery of products
hereunder shall not commence until Buyer has signified acceptance of the First Article as
being in conformity with the Specifications and Statement of Work. Any statements or
advice, technical or otherwise, given by Company with respect to the preparation of the
Specifications or Statement of Work shall be deemed to be given as an accommodation to
Buyer and for no charge and Company shall have no responsibility or liability for the
content or use of such statements or advice.
2.

What is Covered

Company will furnish labor, use Buyer supplied parts, and/or replacement equipment
necessary to repair operational or mechanical breakdowns of the products specified in
this agreement, provided such service is necessitated by product failure during normal
usage. The products specified and covered includes only what is listed in Exhibit 1.
3.

Term and Forecasting

The initial term of this Agreement shall be twelve (12) months from the effective date
with [- minimum number -] units per month minimum. Upon the Effective Date (or as
soon as possible thereafter), and at each subsequent renewal date, Buyer will provide
Company with a twelve (12) month rolling forecast of the refurbished products to be
worked on for the succeeding twelve (12) month period, which shall be updated
thereafter during the first week of each succeeding month. Company will invoice Buyer
based on a minimum order each month. In the event monthly volume is greater than [minimum number -] units, Company will invoice Buyer based on the higher number.
After the initial twelve (12) month term this agreement will automatically be renewed for
another twelve (12) month period as long as Buyer or Company do not object in writing
three (3) months prior to the expiration date of this agreement. These tem1S and
conditions are the only ones that govern Company's repair of Buyer's product. No other
oral or written terms or conditions apply.
4.

Special Tooling, Fixtures and Programs

In certain cases Company may be required to incur costs associated with tooling, fixtures
and set up charges which are not ret1ected in the quoted price for the service. Tn such
cases Company shall notify Buyer in advance of incurring any such costs. Buyer shall
signify in writing its acceptance of such costs and shall reimburse Company for such
costs prior to Company's acceptance of any Buyer orders for service. Title to fixtures and
tools shall pass to Buyer upon receipt of payment by Company.
5.

Engineering Change Orders

Buyer may initiate engineering change orders ("ECO's"), which shall constitute a change
to the Specifications under the following conditions:
(a)
Buyer shall provide Company with as much advance notice of the proposed ECO
as is reasonably possible. If the ECO is identified as being critical by Buyer, Company
will respond as soon as possible upon receipt of such notice. Implementation of the ECO
is contingent on accessory availability. All other ECO implementation schedules will be
as mutually agreed to.
Company shall provide Buyer a written assessment of the anticipated effect of an
(b)
ECO on Company's schedule and delivery costs. Buyer shall be responsible for all
rework or scrap costs (including costs associated with unusable inventory or parts on
order) incurred by Company that result from, design, test, component or material changes
made by Buyer. Company shall use reasonable efforts to minimize Buyer's liability
hereunder as a consequence of an ECO.
6.

Ordering

All orders hereunder are subject to acceptance by Company. Orders shall be initiated by
Buyer through the issuance of purchase orders in hard copy or electronic form provided
that any electronically submitted order is in a form acceptable to Company. Only the
transaction specific terms of an order shall apply. The preprinted tenns of any Buyer
purchase order shall be void and of no legal effect. Each order shall, subject to the criteria
set forth in the Specifications, Statement of Work and quoted lead times, specify the
products or services being ordered, quantities, prices, part numbers, descriptions,
requested delivery dates and such other information as may be necessary for Company to
fulfill the order. Once accepted, an order cannot be cancelled, modified or rescheduled
for shipment without Company's consent. Since the actual number of units that will be
reworked may change every month, a purchase order will be based on the minimlun
quantity; however, the actual invoice will be based on the actual number of units that may
be higher than the minimum order stated on the purchase order. Company will only
consent to cancellation of an order on the condition that Buyer will accept delivery of and
pay for all completed work at the time of cancellation and reimburse Company for all
costs associated with work in progress and inventory that resides at Company service
center.
7.

Prices

Prices shall be as quoted by Company to Buyer based on $ [- dollar amount -] per unit
cost and [- minimum number -] units minimum order per month, "FOB" [- address of
service provider -]. Company will provide to buyer a copy of all processed orders placed
with Buyer's customer form. Unless otherwise specified in Company's quotation prices
quoted are good for [- number -] days. Company reserves the right to increase the price
for any refurbished work whose cost is scheduled to increase beyond the current quoted
price due to major change in work requirement.

8.

Taxes

All prices are quoted net of any sales, use, excise, value added and similar taxes imposed
by any governmental authority regardless of how denominated; and any domestic
shipping charges, broker's fees, consular fees and customs duties, which shall be the
responsibility of Buyer or Buyer's customer. Buyer shall pay all such charges in the event
Buyer's customer refusal to pay. In the event Company is required to pay any taxes or
other charges for which Buyer or Buyer's customer is responsible hereunder, Buyer shall
promptly pay the same to Company upon receipt of Company's invoice therefore.

9.

Payment Terms

Unless otherwise agreed, payments herennder shall be due [- number -] days from the
date of invoice, subject to Company's credit approval. Payments shall be made without
offset or deductions. Company reserves the right to require payment in advance or by
COD if Company reasonably and in good faith has reason to believe that Buyer's ability
to fultill its payment obligations may be impaired or if Buyer is delinquent in any
payments then owing to Company. Company also reserves the right to cancel or suspend
delivery of all or part of an order if Buyer is delinquent in any payments owing
Company. Buyer shall nonetheless remain liable for any partial deliveries already made
as well as for payment for any work in progress and inventory that cannot be returned to
Company's suppliers for credit. Upon request of Company Buyer agrees to provide such
financial information as Company may reasonably require for the extension of credit
terms. Company shall retain a purchase money security interest in any products delivered
pursuant to an order nntil it has received payment in full. Buyer agrees to execute any
financing statements or similar documents as may be reasonably required for Company to
perfect such security interest. Buyer shall pay a late payment charge of one (l) percent
per month, but not in excess of the lawful maximum, on any past due balance. Late
payment charge is calculated based on the number of days late, the amolmt of past due
balance that is late, and an annual rate of 12%.
!

10.

Shipment

All deliveries are FOB Company's shipping point. Title and risk of loss shall pass to
Buyer upon delivery to the common carrier, which shall be selected by Company unless
otherwise specified by Buyer. Company shall be responsible for all transportation and
related shipping costs, charges for which shall be separately stated on Company's invoice
and invoiced to Buyer's customer. Shipping dates are approximate. Company shall use
reasonable efforts to meet Buyer's requested delivery dates but in no event shall
Company be liable for any damages or penalties because of failure to meet such dates,
nor shall any delay in the delivery of one or more installments give Buyer the right to
cancel all or part of an order. Company reserves the right to make deliveries in
installments. Any claim regarding shortages must be made witllin [- number -] days of
arrival of the shipment at Buyer's customer facility. Buyer agrees to supply Company
with a monthly butTer management report which Company will use to monitor and decide
if the buffer should be increased or reduced in size. In the event this agreement is

tenninated, Buyer agrees to accept all Buyer's inventory including testing and packaging
material that resides at Company's service center.
11.

Acceptance

Buyer or Buyer's customer shall be responsible for inspection of products. Unless Buyer
gives Company notice within [- number -] days of arrival of the shipment at Buyer's
facility, the products will be deemed to be accepted. Any notice of rejection or nonconfonnance must state with specificity the reasons therefore. Products will only be
accepted for return pursuant to a Return Material Authorization issued by Company.
Returned products must be in their original shipping cartons complete with all packing
materials and shall be returned to Company's designated return location freight prepaid.

12.

Warranty

Company warrants to Buyer that, upon delivery, products reworked and marked as pass
hereunder will confonn to the Buyer's applicable specifications. Except for these limited
warranties which are made solely to Buyer, Company MAKES NO WARRANTIES TO
BUYER OR ANY THIRD PARTY, EXPRESS OR IMPLIED, INCLUDING BUT NOT
LIMITED TO THE IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR
PURPOSE AND MERCHANTABILITY, OR ARISING FROM A COURSE OF
DEALING, USAGE OR TRADE PRACTICE, OR RESPECTING NONINFRINGEMENT. Company's warranty obligations with respect to products are limited,
at Company's option, to repair or replace the products pursuant to the Return Material
Authorization procedure described in Section 10, above, or to refund the service price
paid by Buyer for the affected products. With respect to any services or value-added
work perfonned by Company. Company's warranty obligations are limited, at
Company's option, to correct any deficiency or non-confonnity of the services or valueadded work or refund the price paid by Buyer for the affected services or value-added
work. Company agrees to transfer to Buyer, to the extent the same are transferable, any
indemnities and warranties that Company has received from its suppliers with respect to
the products, including any indemnities respecting intellectual property infringement.
13.

Time for Service

The Company's refurbished services will be perfonned during the hours of [- time -]
a.m. to [- time -] p.m. local time Monday through Friday, excluding local holidays.
14.

Place of Service

All refUrbished services will be provided at authorized Company service center: [address of service provider -]. Buyer shall be responsible for all freight charges
associated with delivery to Company service center and shipping from Company service
center.

15.

Failed Units

All units or parts that are deemed failing and beyond repair will either be shipped
separately to Buyer or Buyer may elect Company to dispose such parts and products in
accordance with applicable provisions of law, and, Company will invoice Buyer
separately for any charges or disposing fees associated with such parts and products.
Buyer shall be responsible for all freight charges associated with failed parts and units
that are shipped out of Company service center.

16.

Reselling By Buyer

If Buyer is reselling the products, Buyer represents that it has acquired all authorizations
and regulatory approvals applicable to the products. Buyer shall be solely responsible for
providing support to its resellers or customers. Buyer agrees to indemnify and hold
Company harmless from any claim asserted by a third party, regardless of the theory
under which such claim is asserted, based on Company's compliance with the
Specifications or Statement of Work or a breach of any warranty or representation made
by Buyer with respect to the products.

17.

Unauthorized Use of Products

The products reworked by Company hereunder, including accessories, are not intended
or authorized for use with any life saving or life sustaining systems, nuclear facilities or
for any other application in which failure of the products could create a situation where
personal injury or death may occur. Buyer warrants that it will not use or knowingly sell
such products to Buyer's customers who intend to use the products in such unintended
and unauthorized applications.

18.

Limitation of Liability

NEITHER PARTY SHALL BE LIABLE TO THE OTHER HEREUNDER FOR ANY

INDIRECT,
SPECIAL,
CONSEQUENTIAL OR PUNITIVE
DAMAGES,
INCLUDING, WITHOUT LIMITATION, LOSS OF PROFITS OR REVENUE, LOSS
OF DATA, PROCUREMENT COSTS, OR BUSINESS INTERRUPTION COSTS,
EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. EXCEPT AS SET
FORTH IN SECTION 16, BELOW, OR FOR PERSONAL INJURY OR PROPERTY
DAMAGE TO THE EXTENT CAUSED BY COMPANY'S GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT, IN NO EVENT WILL COMPANY BE LIABLE TO
BUYER FOR ANY DAMAGES IN EXCESS OF THE PURCHASE PRICE OF THE
PRODUCTS, SERVICES OR VALUE ADDED WORK GIVING RISE TO SUCH
CLAIM REGARDLESS OF THE THEORY UNDER WHICH SUCH CLAIM IS
ASSERTED.

19.

Intellectual Property Indemnities

Buyer shall indemnify and hold Company harmless from any claim asserted by a third
party, and pay all costs, settlements and judgments associated therewith, including

reasonable attorney's fees, that the products, when produced or delivered in confOlmity to
the Specifications or Statement of Work, infringe a patent, copyright, trademark or other
intellectual property right of a third party. To the extent that any work perfonned by
Company hereunder causes a product to infringe a patent, trademark, copyright or other
intellectual property right of a third party, except to the extent that such work was
required to ensure the product's compliance with the Specifications or Statement of
Work, Company shall indemnify and hold Buyer hannless from such claim, and shall pay
all costs, settlements and judgments associated therewith, including reasonable attorneys
fees. In the event of such claim, Company shall either procure for Buyer the right to
continue using the product; modify the product so as to make it non-infringing; or take
back the product and refund the purchase price paid less a reasonable amount for use,
damage or obsolescence.

20.

Licensed Material

If any software or other licensed materials ("Licensed Materials") are delivered to Buyer
as part of an order, then the possession, use and further distribution of such Licensed
Materials by Buyer are subject to the ten11S ofthe license agreements accompanying such
Licensed Materials. Unless Company and Buyer have executed a separate license
agreement covering the Licensed Materials, Company is not the licensor of Licensed
Materials and Buyer's license rights to the Licensed Materials are between Buyer and
Company's suppliers or their licensors. Nothing herein shall be construed as granting
Buyer any rights to Licensed Materials inconsistent with the tenns of any such license
agreements.

21.

Termination

Either party may tenninate this Agreement, with or without cause, upon [- number -]
days prior written notice. In the case of termination without cause by Buyer or
tennination with cause by Company, Buyer shall be obligated to purchase all completed
products and reimburse Company for all costs associated with work in progress and
inventory (including parts or materials on order) that cannot be returned to the original
manufacturer for credit. Either party may tenninate this Agreement immediately if the
other party makes an assignment for the benefit of creditors (other than solely an
assignment of moneys due). If a proceeding is comnlenced under any provision of the
United States Bankruptcy Code by or against either party, and this Agreement has not
been tenninated, the non-debtor party may tile a request with the bankruptcy court to set
a date within sixty (60) days after commencement of the case by which the debtor party
will assume or reject this Agreement.

22.

Export Control

Neither party shall export or re-export any product or technical data except in full
compliance with the export control laws and regulations of the United States government,
its departments ffild agencies, or import or re-export any product or technical data except

in full compliance of the laws of the jurisdiction into which, or from which, such product
or technical data is being imported or re-exported.
23.

Force Majeure

Except for the payment of monies due and owing, neither party shall be liable for any
failure to perform hereunder where such failure is due to causes beyond its reasonable
control, including, but not limited to, natural disasters and other acts of god, military or
civil strife, labor unrest, acts of govermnents, or material shortages. In the case of
material shortages Company reserves the right to allocate the delivery of affected
materials on a pro rata basis. The time for performance shall be extended by the period of
the force majeure.
24.

Independent Contractors

Neither this Agreement nor the terms of any order shall constitute appointment by either
party as the agent or legal representative of the other party for any purpose whatsoever, or
be deemed to create a partnership, joint venture, or relationship of associates. Both parties
are independent contractors and principals for their own accounts and neither party shall
represent or hold itself out in any other capacity.
25.

Confidentiality

Company and Buyer acknowledge that infonnation supplied by either party in connection
with this Agreement and work performed under any order and designated by such party
as confidential is the confidential infon11ation of the disclosing party. The receiving party
agrees: (i) to hold the confidential information in confidence using the same degree of
care that it uses to protect its own confidential infonnation of similar importance, but not
less than a reasonable degree of care; (ii) not to make use of confidential infonnation
other than to perform the obligations under the order and (iii) not to reproduce
confidential information except as required to perform its obligations under this
Agreement. The receiving party's obligations with respect to confidentiality do not apply
to information which: (i) becomes generally available to the public other than as a result
of unauthorized disclosure by receiving party, (ii) is disclosed to receiving party by a
third party whom receiving party has no reason to believe is wlder any obligation of
confidentiality with respect to such information, (iii) was in receiving party's possession
prior to disclosure by disclosing party, or (iv) was developed by receiving party
independent of the confidential information disclosed by disclosing party.
26.

No License

Except as may be required for each party to carry out its responsibilities hereunder,
nothing in this Agreement shall be deemed to constitute a license, by implication or
estoppel, to either party's present or future patents, trade secrets, trademarks, copyrights
or other intellectual property rights.

27.

Compliance with Laws

Each party agrees to comply with all laws and regulations applicable to its perfornlance
under this Agreement and in the conduct of its business operations and to be responsible
for obtaining any approvals or licenses necessary to maintain such compliance.
28.

Notices

All notices pertaining to this Agreement shall be in writing and delivered to the address
specified below or to such other address as the parties may specify from time to time:
of service provider ~l
[~address of service provider ~l
Attention: [~responsible person at service provider ~1
To

[~name

of buyer ~l
[~address of buyer ~l
Attention: [~responsible person at buyer ~l

To

29.

[~name

Assignment

Buyer shall not assign this Agreement or any order placed hereunder, by operation of law
or otherwise, without Company's prior written consent. Any assigmllent attempted in
violation of this provision shall be void and of no legal effect.
30.

Governing Law

This Agreement shall be governed and construed in accordance with the laws of the state
of California excluding its choice of law provisions. The United Nations Convention tor
the International Sale of Goods shall not apply.
31.

Arbitration

Any dispute, claim or controversy arising out of or relating to this Agreement or the
breach, termination, enforcement, interpretation or validity thereof, including the
determination of the scope or applicability of this agreement to arbitrate, shall be
determined by arbitration in [~location ~l, before one arbitrator. The arbitration shall be
administered by the American Arbitration Association pursuant to its Commercial
Arbitration Rules. The arbitrator shall have no power to add to, delete from or modify
this Agreement. Each party shall have the right to conduct any and all discovery to which
it would be entitled had the dispute been resolved in a state court of general jurisdiction
in the state of [~name of state~]. Judgment on the arbitrator's award may be entered in
any court having jurisdiction. This clause shall not preclude parties from seeking
provisional remedies in aid of arbitration from a court of appropriate jurisdiction. The
arbitrator may, in the award, allocate all or part of the costs of the arbitration, including
the fees of the arbitrator and the reasonable attorneys' fees of the prevailing party.

32.

Survival

The obligations of the parties under this Agreement, which by their nature would
continue beyond the termination, cancellation or expiration of this Agreement. shall
survive any termination, cancellation or expiration of this Agreement.
33.

Entire Agreement

This Agreement (including its Exhibits) and the transaction specific terms of any order
accepted by Company hereunder represent the entire agreement between the parties with
respect to such order, and supersedes all prior negotiations and understandings
concerning the same. No modification or amendment or waiver of rights will be effective
except in a written document signed by both parties. The waiver of any breach or default
will not constitute a waiver of any other right hereunder or any subsequent breach or
default.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by

their duly authorized representatives as of the Effective Date.
[- name of service provider -] ("Company")
By: [- signature -]
N arne: [- name of signatory -]
Title: [- title of signatory-]
[- name of buyer -] ("Buyer")
By: [- signature -]
Name: [- name of signatory-]
Title: [- title of signatory-]
Exhibit I
Testing Specifications: [- description-]