Private Label Agreement and Project Development and License Agreement [Amendment No. 5] - Cisco Systems Inc. and Frontier Software Development Inc.
AMENDMENT NO. 5 TO
PRIVATE LABEL AGREEMENT
AND
PROJECT DEVELOPMENT AND LICENSE AGREEMENT
BETWEEN
CISCO SYSTEMS, INC.
AND
NETSCOUT SYSTEMS, INC.
This Amendment No. 5 ("Amendment #5"), having an Effective Date of Dec
26, 1999, is made by and between Cisco Systems, Inc., a California corporation
having its principal place of business at 170 West Tasman Drive, San Jose, CA
95134-1706, U.S.A. ("Cisco"), and NetScout Systems, Inc., (Formerly known as
Frontier Software Development, Inc.) a Delaware corporation having its principal
place of business at 4 Technology Park Drive, Westford, Massachusetts 01886
("NetScout").
WHEREAS, Cisco and NetScout entered into the Project Development and
License Agreement on July 13, 1994 ("Software Agreement"), a Private Label
Agreement on October 17, 1995 ("Hardware Agreement") and four amendments dated
January 4, 1995 ("Amendment #1"), May 15, 1996 ("Amendment #2"), October 29,
1996 ("Amendment #3"), and Feb 23, 1998 ("Amendment #4"), collectively the
"Agreement"; and
WHEREAS, Cisco and NetScout desire to change and add certain terms to
the Agreement as specified below.
NOW THEREFORE, in consideration of the covenants and conditions
contained herein, the parties agree as follows:
1.0 DEFINITIONS.
All defined terms shall have the meaning as defined in the Agreement
except that terms defined herein shall have the meaning as defined in this
Amendment #5.
"Applications" shall mean, collectively, all NetScout RMON and other management
and monitoring application programs shipped to Cisco as Products (see Section 1
of Amendment #2) under the Agreement, including but not limited to,
TrafficDirector and TrafficScout. SwitchProbes, RMON Agents, and Embedded Agents
are not considered Applications.
"CWSI-LAN Bundle" shall mean a Cisco LAN management product that includes one or
more Cisco LAN management applications, and specifically includes the NetScout
TrafficScout Application or the Cisco version of NetScout's NetScout Manager
Plus Application known as TrafficDirector as a bundled component. In the event
that the parties choose to include additional NetScout Applications within the
CWSI-LAN Bundle, the parties shall negotiate in good faith to establish royalty
payments and other terms and conditions relating to the inclusion of these
additional Applications to this bundle.
"Effective Date" as used herein shall mean the Effective Date of this Amendment
#5.
"First Customer Shipment (FCS)" shall mean first shipment for revenue of a new
release of a product by Cisco per Cisco's then existing new product release
process.
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"Strategic Feature Set" shall mean one or more product features, as agreed to by
the parties, for which Cisco shall pay an incremental royalty for Products that
incorporate such feature set.
"WAN Bundle" shall mean a Cisco WAN (Wide Area Networking) management product
that includes one or more Cisco WAN management applications, and specifically
includes the NetScout TrafficScout Application or the Cisco version of
NetScout's NetScout Manager Plus Application known as TrafficDirector as a
bundled component. In the event that the parties choose to include additional
NetScout Applications within the WAN Bundle, the parties shall negotiate in good
faith to establish the royalty payments and other terms and conditions relating
to the inclusion of these additional Applications to this bundle.
2.0 TERM EXTENSION.
The term of the Agreement is hereby extended to October 31, 2002.
Thereafter, this Agreement shall be automatically renewed for additional
successive one (1) year periods, unless written notice of non-renewal is
received by the other party no later than ninety (90) days prior to the
expiration of the then current term
3.0 ROYALTIES.
(a) CWSI-LAN Bundle Royalties. Notwithstanding anything to the contrary
in the Agreement, the royalty for each unit of the CWSI-LAN Bundle shipped for
revenue by Cisco, but excluding units shipped pursuant to Cisco's customer
support contract obligations for CWSI-LAN products (which are covered under the
maintenance fees in Section 4.0 below and except as provided in subsection (b)
below), shall be as follows:
(i) Beginning on the Effective Date, the base royalty for the
CWSI-LAN Bundle shall be [*] per unit.
(ii) Thereafter the base royalty shall be reduced [*] per unit
for units shipped after the start of the seventh (7th)
complete Cisco fiscal month after the Effective Date and
shall be reduced an additional [*] per unit for units
shipped at each successive six (6) month interval
thereafter, provided however that the minimum base royalty
(exclusive of incremental royalties for Strategic Features)
shall be [*] per unit.
(iii) The royalty shall be increased above the then current base
royalty by [*] per unit for each Strategic Feature Set
incorporated within the for CWSI-LAN Bundle.
(b) CWSI-LAN Bundle Upgrades. Cisco shall pay a one-time upgrade fee of
[*] per unit to upgrade a customer who had previously licensed a Cisco product
containing TrafficDirector to the CWSI-LAN Bundle containing TrafficScout.
(c) WAN Bundle Royalties. Notwithstanding anything to the contrary in
the Agreement, the royalty for each unit of the WAN Bundle shipped for revenue
by Cisco, but excluding units shipped pursuant to Cisco's support contract
obligations (which are covered under the maintenance fees in Section 4.0 below),
shall be as follows:
(i) Beginning at FCS for the first commercial release of the WAN
Bundle accepted by Cisco the base royalty shall be [*] per
unit.
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(ii) Beginning at the start of the thirteenth (13th) complete
Cisco fiscal month after FCS the base royalty shall be [*]
per unit.
(iii) Beginning at the start of the nineteenth (19th) complete
Cisco fiscal month after FCS the base royalty shall be [*]
and shall continue at this level.
(iv) The royalty shall be increased above the then current base
royalty by [*] per unit for each Strategic Feature Set
incorporated within the for WAN Bundle.
(d) WAN Bundle Upgrades. Cisco shall have no obligation to pay an
upgrade fee or any other royalty, for units of WAN Bundle shipped by Cisco
pursuant to its obligations under support contracts, to upgrade customers who
had previously purchased the WAN Bundle including TrafficDirector to a WAN
Bundle which includes TrafficScout.
(e) Other Application Royalties. Notwithstanding anything to the
contrary in the Agreement, except as provided for the CWSI-LAN Bundle and WAN
Bundle herein, and excluding units shipped pursuant to Cisco's support contract
obligations, Cisco shall pay a royalty of [*] of the then existing NetScout [*]
for its comparable product for each unit of an Application shipped for revenue
by Cisco.
4.0 MAINTENANCE FEES.
Beginning on the Effective Date, Cisco shall pay NetScout a
consolidated maintenance fee of [*] per Cisco fiscal quarter for all maintenance
activity relating to all Applications hereunder. (First quarter shall be paid on
a pro rata basis.) Such maintenance fee shall be paid within 45 days after the
completion of each Cisco fiscal quarter. At the beginning of the fifth complete
Cisco fiscal quarter after the Effective Date, the maintenance fee shall be
increased to [*]. Thereafter, at yearly intervals, the parties shall review the
maintenance activity to determine the appropriate maintenance fee for the next
four Cisco fiscal quarters. In the event the parties cannot agree upon a new
maintenance fee, the maintenance fee shall increase by [*] at each annual
anniversary of the first increase.
Notwithstanding anything to the contrary in the Agreement, except for
the upgrade payments pursuant to Section 3 (b) herein, after the Effective Date,
Cisco shall not be obligated to pay per-unit maintenance fees or royalties for
units of Applications shipped as updates or upgrades pursuant to Cisco's product
support obligations (including but not limited to, SAS Software Application
Support, SASU, Software Application Support with Upgrades, SMARTnet). It is the
intent of the parties that the maintenance fees per this Section 4 shall
constitute the sole and total maintenance fees payable by Cisco to NetScout for
Applications.
5.0 YEAR 2000.
(a) Year 2000 Warranty. NetScout hereby represents and warrants to
Cisco that the occurrence in or use by the Product of dates before, on or after
January 1, 2000 ("Millennial Dates") will not adversely affect its performance
with respect to date-dependent data, computations, output, or other functions
(including, without limitation, calculating, comparing and sequencing) and that
the Product will create, store, process and output information related to or
including Millennial Dates without error or omissions and at no additional cost
to Cisco. The Product includes calendar year 2000 date conversion and
compatibility capabilities, including, but not limited to, date data century
recognition, same century and multiple century formula and date value
calculations, and user interface date data values that reflect the century, and
that the Product will (i) manage and manipulate data involving dates, including
single century and multiple century dates (including proper handling of leap
year), and will not cause an abnormal abend or abort or result in the generation
of incorrect values or invalid output involving such dates; and (ii)
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include the indication of the correct century in all date-related user interface
functionalities; (iii) include the indication of the correct century in all
date-related system-to-system or application-to-application data interface
functionalities; and (iv) respond to two-digit year-date input in a way that
resolves the ambiguity as to century in a disclosed, defined, and predetermined
manner.
(b) Compliance with Year 2000 Specification. The parties agree that for
a Product to comply with the warranty in Section 5(a) above, the Product must
pass all relevant tests conducted by Cisco per Cisco's then existing Year 2000
Specification which Cisco applies for all of its products.
6.0 CHANGES AND CANCELLATIONS.
Section 4.5 of the Hardware Agreement shall be deleted and replaced in
its entirety with the following:
"4.5 Cancellations and Reschedules
Prior to the delivery of any item, Cisco may notify NetScout in writing of its
intent to cancel the order for the Products. Written notice may be provided via
e-mail. Such emails must be sent to Robert Massad at the email address of
massadb@netscout.com, Tracy Steele at the email address of steelet@netscout.com
and Tom Hill at the email address of thill@netscout.com. It is solely up to
NetScout to notify Cisco of any changes to this list of people to be notified in
the case of a cancellation notification.
Cisco shall have the right to cancel orders or portions of orders per the terms
herein, and subject to the cancellation charges per the "NetScout/Cisco -
Maximum Cancellation Charges" table below, provided the aggregate Cisco purchase
price of units cancelled is limited to [*] per calendar quarter. Additional
cancellations, which exceed the [*], will be reviewed and agreed upon by Cisco
and NetScout on a case by case basis. NetScout may not unreasonably withhold
acceptance of the cancellation request. In the event that Cisco requests
additional cancellations, NetScout shall not add value to nor ship any Product
subject to the cancellation request. Cisco and NetScout shall have the right to
request a mutually agreed upon third party auditor to settle any cancellation
disputes.
In the event that Cisco cancels additional quantity of Product, Cisco shall be
liable for time, materials, reasonable markups on components or WIP that is not
sellable, by NetScout, within 120 days of cancellation. As a part of this
overall settlement, but not in addition to it, Cisco shall prepay the charges
outlined in "NetScout/Cisco - Maximum Cancellation Charges" table. In the event
that Cisco chooses to cancel additional quantities of Product, Cisco shall be
liable for time, materials, reasonable markups on any components or WIP that is
not sellable, by NetScout, within 120 days of cancellation or for the
cancellation charges outlined in the "NetScout/Cisco Maximum Cancellation
Charges" table below, whichever is greater. NetScout and Cisco will work
together to use commercially reasonable efforts to mitigate the cancellation
costs. A claim by NetScout for cancellation charges shall be limited to the
reasonable markups previously referred to and the actual, documented costs
incurred by NetScout related to the canceled portion of the purchase order,
including, only to the extent that any components, materials and other inventory
cannot be used in any of NetScout's non-Cisco products, as follows: (i)
NetScout's cost of component inventory for the terminated portion of the
purchase order(s), (ii) NetScout's cost of work in process materials including
manufacturing operations completed at the time of cancellation for the canceled
portion of Cisco's purchase order, and (iii) reasonable cancellation charges
incurred by NetScout from component suppliers for the canceled portion of
Cisco's purchase order. Cisco and NetScout shall have the right to request a
mutually agreed upon third party auditor to settle any component cost issues.
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NETSCOUT/CISCO - MAXIMUM CANCELLATION CHARGES
Notice prior to Scheduled Delivery Date* Cancellation Charge
Greater than 15 days [*]
11 to 15 days [*]
6 to 10 days [*]
3 to 5 days [*]
*Due date at Cisco's dock
Cisco may reschedule the delivery of all or any portion of Products ordered
under a purchase order or modify the delivery locations provided that NetScout
has received written notice at least [*] working days prior to the due date at
Cisco's dock. Cisco may reschedule the delivery of Product up to 120 days from
the original delivery date without incurring cancellation charges. NetScout may
charge Cisco an inventory-carrying cost for Product rescheduled thirty (30)
calendar days or more past the original purchase order date. Carrying cost shall
not exceed [*] of Cisco purchase price of the Product for each full thirty (30)
day period past the original purchase order [delivery] date."
7.0 ON-TIME PERFORMANCE.
NetScout's on-time performance shall be measured as [*] early, [*] days
late. Cisco has the right to cancel any late product providing that the order
was placed within the normal lead time parameters ** and expedited service is
not requested** .
All other terms and conditions of the Agreement remain in full force and effect
except as modified herein by Amendment #5.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by
their duly authorized representatives effective as of the last date given below.
CISCO SYSTEMS, INC. NETSCOUT SYSTEMS, INC.
/s/ Jeff Krause /s/ Anil K. Singhal
-------------------------------- --------------------------------
Signature Signature
Jeff Krause Anil K. Singhal
-------------------------------- --------------------------------
Name Name
VP & GM, EMBU Chairman & CEO
-------------------------------- --------------------------------
Title Title
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SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.