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SERVICES AGREEMENT

This Services Agreement (this Agreement) is entered into as of October 12, 2001 (the Effective Date), by and between IM-Logistics, a division of Ingram Inc., an Delaware corporation (Ingram), with its principal place of business at 1600 East St. Andrews Place, Santa Ana, California 92705 and SmartDisk Corporation, a Delaware corporation (SmartDisk), with its principal place of business at 3506 Mercantile Avenue, Naples, Florida 34104

A. SmartDisk desires to have the right to obtain certain services, including inventory management, order fulfillment, and related services from Ingram;

B. Ingram is willing to provide such services to SmartDisk in accordance with the terms and conditions set forth in this Agreement;

C. SmartDisk and Ingram desire to enter into a mutually beneficial arrangement whereby Ingram shall provide services to SmartDisk, all as set forth in this Agreement.

NOW, THEREFORE, for good and valuable consideration received and to be received, Ingram and SmartDisk hereby agree as follows:

The these terms when capitalized in the Agreement shall have the following meaning:

Business Day shall mean Monday through Friday, excluding federal holidays observed by Ingram.

Cost of Goods shall mean the bill of materials cost of a unit of Inventory.

Customer shall mean customers of SmartDisk who will receive Inventory processed and shipped by Ingram as permitted under this Agreement.

Inventory shall mean product inventory acquired and owned by SmartDisk that is delivered to Ingram for storage and processing under the terms of this Agreement.

Lost Inventory means Inventory lost in a Facility.

Package Damage means damage to the carton or other packaging associated with a unit of Inventory, but not to the Inventory itself.

Order means an order for Inventory placed by SmartDisk with Ingram.

Inventory Damage means damage to a unit of Inventory.

Services mean all of the services described in Section 2 and detailed in the Attachments and Schedules attached hereto and any other additional services which SmartDisk may request of Ingram.

Inventory Turns means Inventory turns measured monthly for the prior 90 days COGS and ending inventory.

16.1 Unauthorized Returns means the return of any Inventory to any IM-Logistics Distribution Center that has been received by the customer who has subsequently decided to return it with or without an RMA. This also includes product that has been issued an RMA by SmartDisk which, has been delivered to the incorrect address by the sender.


2.		Ingram Services and Fees

2.1		Services. Ingram shall provide the services more fully described in the following designated Schedules attached to this Agreement:

Services		Schedules
Inventory Management		A
Order Processing		B
Information Technology		C
Transportation		D
Export		E


		Ingram will be responsible for ensuring that the Services are performed competently and with integrity and that it observes all applicable safety and workplace regulations and policies when performing the Services.

2.2		Inventory. As more fully described in this Agreement and the Schedules and Attachments attached hereto, Ingram shall receive, store and process Inventory. Ingram will hold Inventory tendered pursuant to this Agreement exclusively for distribution as directed by SmartDisk and for no other purpose, use or disposition except as may be directed in writing by SmartDisk. All right, title and interest to such Inventory will remain at all times with SmartDisk or its customers, unless expressly stated otherwise hereunder. Ingram will hold all such Inventory as a bailee only and will not permit any lien or other encumbrance to be placed against the Inventory when in Ingrams care, custody and control.

2.3		Facilities. Ingram will utilize the Facilities listed in each Schedule to provide the Services. Ingram may use other facilities to perform the Services; provided that, it shall notify SmartDisk in writing 90 days prior to relocating Inventory from a Facility listed in a Schedule to another facility. Ingram will bear all costs and expenses associated with securing and maintaining the Facilities, including but not limited to lease costs, insurance costs, utilities, communication expenses, security, and repair costs, unless stated otherwise in a Schedule.

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