Apple 2003 Annual Report Download - page 112

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14.3 If the number of Failed Units manufactured [**] and sold hereunder exceeds the Failure Threshold within [**] of manufacture of each
such Failed Unit, Apple will promptly notify IBM specifying with particularity the nature of the Failures. Upon receipt of such notice, IBM
will, with Apple assistance, promptly analyze and attempt to determine the cause of such Failures and IBM may stop all such Product
shipments to Apple [**] while IBM and Apple analyze the Failures and discuss whether shipments should resume. Either party may escalate
these discussions to the executive of the other party designated for such purpose pursuant to Section 21.2.
14.3.1 If such Failures result from: (i) defects in materials or workmanship in the Failed Units; or (ii) design defects in the
PowerPC Failed Units, IBM and Apple shall promptly meet to devise a mutually acceptable and timely plan to:
(a) at Apple’s option, either replace the Failed Units (if a replacement is available), or credit the full purchase price of
returned Failed Units; and
[**]
14.3.2 If after each party has used all reasonable efforts to analyze and determine the cause of such Failures, the cause(s) remain(s)
unknown, such Failure shall not be subject to the remedies provided in this Section and IBM and Apple will promptly discuss
appropriate ways in which they can work together to assist Apple customers who have experienced such Failures. If IBM disputes
that a Failure has occurred, IBM may escalate its concern to the Apple executive designated for such purpose pursuant to Section 21.2.
14.3.3 Repair/Replacement by Apple. If it is deemed by Apple and IBM to be the most timely and cost effective approach, Apple or
its authorized repair facilities may repair or replace Failed units. In such event, Apple will promptly submit to IBM, in writing, the
serial numbers and date codes of the Failed Units, the date Apple received the Failed Units, the nature of the Failures, and the date of
repair of the Failed Units by Apple or its authorized repair facility. Apple will send to IBM the defective replaced parts of the Failed
Units. IBM shall provide Apple with the necessary replacement parts at no cost for Failed Units replaced by Apple [**]
14.3.4 No Liability. The provisions of this Section 14.3 shall not apply to the extent that defects in the Exhibit 4 Product, or any
other ASIC Product that the parties may agree to treat in a similar manner, are due to Apple’s or a third party’s (but excluding IBM’s
subcontractors or agents) abuse, improper use, accident, tampering, alteration or faulty repair.
14.3.5 No Waiver. Except as otherwise provided herein, Apple’s approval of the materials used will not relieve IBM of its
obligations set forth in this Section 14.3, nor
[**] = information redacted pursuant to a confidential treatment request. Such omitted information has been filed separately with the Securities
and Exchange Commission.