Purchase Agreement - Network Engines Inc. and EMC Corp.
Purchase Agreement
For Product
Between
NETWORK ENGINES, INC.
And
EMC CORPORATION
Contents Page
-------- ----
1.0 Definitions..........................................................2
2.0 Scope Of Agreement...................................................3
3.0 Term And Termination.................................................3
4.0 Intellectual Property Rights.........................................4
5.0 Product Documentation................................................4
6.0 Price And Payment....................................................4
7.0 Purchase Orders......................................................5
8.0 Forecasts............................................................5
9.0 Supply Flexibility...................................................5
10.0 Shipping, Delivery And Packaging.....................................6
11.0 Acceptance...........................................................7
12.0 Warranty.............................................................7
13.0 Product Support......................................................8
14.0 EMC Requested Changes................................................8
15.0 Mandatory Engineering Changes........................................9
16.0 NEI Requested Changes................................................9
17.0 Product Withdrawals.................................................10
18.0 Left Intentionally Blank............................................10
19.0 Product Quality.....................................................11
20.0 Review And Planning Meetings........................................11
21.0 Reports.............................................................11
22.0 Liability For Injury And Limitation Of Liability....................11
23.0 Confidential Information & Publicity................................12
24.0 Infringement........................................................12
25.0 Manufacturing Rights................................................13
26.0 Miscellaneous Provisions............................................14
27.0 Entire Agreement....................................................17
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Exhibits
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A Product / Repair Pricing, Lead-time, Upside, Cancellation and
Reschedule Terms
B EMC On-Order Parts
C Product Specification and Requirements
D NEI Quality Plan
E Technical Support
F RMA Procedure
G Product Repair
H Software License
I Indemnity Country List
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Purchase Agreement For Product
This Purchase Agreement for Product ("Agreement"), effective as of the date last
signed ("Effective Date"), is entered into by and between EMC CORPORATION
("EMC"), a Massachusetts (U.S.A.) corporation, with offices at 171 South Street,
Hopkinton, MA 01748 and NETWORK ENGINES, INC. ("NEI"), a Delaware (U.S.A.)
corporation with offices at 25 Dan Road, Canton, Massachusetts, 02021.
Business Background and Objectives
WHEREAS, NEI has developed, designs and manufactures and/or markets certain
items, more specifically defined below as "Product(s)", and
WHEREAS, the parties desire for EMC and/or certain other companies to be
able to purchase such items and to use, resell and/or distribute such through
EMC's customary marketing and product fulfillment channels;
NOW, THEREFORE, in consideration of the premises and covenants set forth
herein and intending to be legally bound, the parties hereby agree as follows:
Terms of Agreement
1.0 DEFINITIONS
-----------
1.1 "Product(s)" means the items described in Exhibit C, "Technical Purchase
Specification"," which is hereby attached to and incorporated into this
Agreement. The parties may add other items available from NEI to this
Agreement as mutually agreed upon in writing, and such shall also become
"Product(s)". The "Product" shall not include the packaging for any
Products, which shall be the responsibility of EMC, as referenced in
Section 10.9. In the event there is a conflict between or among any of the
headings set forth in Exhibit C, the following rules of construction shall
apply: The Product Specification shall control in the event of conflict
with NEI's part number or description. NEI's part number is referenced for
NEI's convenience only.
1.2 "Product Specification" means the information set forth in, and the EMC
part number specified in Exhibit C, "Technical Purchase Specification",
which is hereby attached to and incorporated into this Agreement. The
Product Specifications shall be mutually developed and agreed for each
Product. To the extent that Product Specifications contain Confidential
Information of NEI, the Product Specification shall be deemed Confidential
Information, as further described in Section 23.
1.3 "Product Support" means support that includes, but is not limited to
testing, repair, upgrades, reporting, failure analysis, and closed loop
corrective action for both hardware and software.
1.4 "Product Documentation" means the, user manual, diagnostic software
documentation, and operations manual for the Product(s)to the extent that
NEI has produced any such documents.
1.4 "End User" means EMC's customer as delivered through EMC's direct or
indirect channel, or EMC, for EMC's internal use.
1.5 "Business Day(s)" means a day which is Monday through Friday, excluding
legal holidays, unless otherwise detailed in this Agreement.
1.6 "EMC Logistics Partner" means a business or company, as listed in Exhibit
J, "EMC Logistics Partners", that is authorized to buy Product(s) from NEI,
under the terms set forth in this
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Agreement for the sole purpose of providing customer fulfillment for EMC.
The list of entities set forth on Exhibit J may be amended from time to
time upon the mutual written agreement of the parties. Any such EMC
Logistics Partner shall (a) specifically agree to be bound by the terms of
this Agreement, and (b) be subject to NEI's credit requirements.
1.7 "Authorized Repair Agent" shall include EMC Field Service personnel, when
such personnel are replacing, repairing or otherwise servicing field
replaceable units, such as disk drives or entire units. NEI may certify
other third party personnel as Authorized Repair Agents in its reasonable
discretion.
2.0 SCOPE OF AGREEMENT
------------------
2.1 NEI agrees to sell Product(s) and provide Product Support to EMC in
accordance with the terms and conditions of this Agreement. This Agreement
is non-exclusive and the parties may enter into similar agreements with
other parties. EMC shall not be obligated to purchase any Product(s) or
Product Support from NEI hereunder.
2.2 NEI agrees to offer to sell all generally available Product(s) features,
functions and support, maintenance and other related services to EMC as
early as it does to any of its other customers, provided, however, that the
sale of any such Products to EMC may be delayed in the event that EMC
requests different or customized Specification for the EMC version of the
Product.
3.0 TERM AND TERMINATION
--------------------
3.1 Subject to the provisions of sub-Sections 3.2, 3.3, 3.4 and 3.5 below, this
Agreement shall consist of an initial term of three (3) year(s), commencing
on the Effective Date and shall thereafter automatically renew for
successive periods of one (1) year each, unless either party sends the
other written notice of nonrenewal at least three (3) months prior to the
expiration of the then current period.
3.2 Expiration of this Agreement will not relieve the parties of any
obligations incurred prior to the date of termination.
3.3 In addition to the expiration specified in sub-Section 3.1 above, either
party may immediately terminate this Agreement upon written notice if the
other party:
3.3.1 becomes insolvent or bankrupt, files or has filed against it a
petition in bankruptcy, or undergoes a reorganization pursuant to a
petition in bankruptcy filed with respect to it; provided that such
proceeding is not vacated, dismissed or set aside within thirty (30)
days after the date of commencement thereof; or
3.3.2 is dissolved or liquidated, or has a petition for dissolution or
liquidation filed with respect to it; or
3.3.3 makes an assignment for the benefit of creditors; or
3.3.4 ceases to function as a going concern or to conduct its operations in
the normal course of business.
3.4 If either party breaches any material provision of this Agreement, the
other Party may terminate this Agreement upon thirty (30) days prior
written notice, provided the breach is not cured within such thirty (30)
day period, and provided further that if the breach is not capable of cure
within thirty days, the non-breaching party may not terminate for sixty
days if the breaching party promptly commences to cure such breach (within
the thirty day period) and diligently and continuously pursues cure until
such time as the breach is fully cured.
3.5 EMC will, in its sole discretion, have the right to terminate this
Agreement and/or any license(s) granted to NEI by written notice to NEI,
such termination to be effective immediately, if NEI
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merges, is acquired, or undergoes any consolidation such that it is not the
continuing or surviving corporation, or attempts to assign any of its
rights or obligations under this Agreement without EMC's prior written
consent, which shall not be unreasonably withheld or delayed. EMC's consent
shall be deemed to have been given if EMC does not specifically notify NEI
that it is withholding its consent within ten business days of receiving
notice from NEI of a pending transaction.
3.6 If EMC terminates this Agreement under Sections 3.3, 3.4 or 3.5 above, then
during any notice period, or simultaneously with its termination notice,
EMC may issue additional purchase orders with deliveries to be scheduled
not later than sixty (60) days after the specified termination date.
4.0 INTELLECTUAL PROPERTY RIGHTS
----------------------------
4.1 During the term of this Agreement, EMC is authorized to use NEI's
trademarks, trade names and logos in connection with EMC's sale,
advertisement, and promotion of Product(s) but only in a manner as
specified by NEI, and only in a manner beneficial to NEI or as otherwise
permitted by law. Upon termination of this Agreement, except to the extent
permitted by law, EMC shall cease to use any such marks, names, or logos
and shall, within a reasonable time, remove any reference to NEI from its
advertising and promotional material. EMC shall not make any claim of
ownership to any NEI mark.
4.2 Except as permitted at law, NEI shall not publicize or use the name or
trademark of EMC in any manner related to this Agreement without EMC's
written consent.
4.3 NEI grants EMC all appropriate rights and licenses under NEI's applicable
patents, copyrights and other intellectual property rights, necessary for
EMC to use, market, promote, lease, and sell and/or license the Product(s)
provided under this Agreement. Except as herein stated, no other rights or
licenses are granted to EMC.
4.4 Software License terms are as specified in the Exhibit H, which is hereby
attached to and made a part of this Agreement.
5.0 PRODUCT DOCUMENTATION
---------------------
5.1 NEI shall provide EMC with one (1) electronic master copy of current
Product Documentation for each Product(s) immediately following the
execution of this Agreement solely for internal use and for the purpose of
the qualification, sale, service, and support of Product(s) under this
Agreement. Each set of documentation shall include all similar
documentation generally provided to NEI's OEM customers. Additional copies
of Product Documentation and changes thereto may be ordered by EMC. NEI
shall provide EMC with all updates and changes to such documentation, as
they become available to NEI.
5.2 NEI hereby grants EMC, under all of NEI's applicable intellectual property
rights, a worldwide, non-exclusive, right and license to prepare, or
authorize others to prepare on EMC's behalf, derivative works based on the
Product Documentation for reproduction, publication, training, distribution
and use solely in connection with Product(s) purchased under this
Agreement; provided, however, that EMC shall have no right to publish or
distribute any Product Documentation which is marked as NEI Confidential
Information except as allowed under Section 11.4 and Exhibit E, Section
1.5. EMC shall preserve NEI's copyright and other notices, and shall not
remove such notices from the Product Documentation. However, EMC shall have
all right, title, and interest in that portion of the altered Product
Documentation prepared by EMC. EMC shall make no substantive
representations concerning NEI or the Products except as set forth in the
printed documentation furnished to EMC by NEI. If EMC modifies and
introduces errors into the Product Documentation, NEI has no liability for
such errors and EMC shall indemnify NEI regarding any such errors.
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6.0 PRICE AND PAYMENT
-----------------
6.1 The prices to be paid by EMC for any Product(s) ordered pursuant to this
Agreement are set forth in Exhibit A. [**], these prices are the [**]
prices [**] during the initial term of this Agreement. NEI shall update the
Exhibit A pricing on a quarterly basis at a minimum. The updated pricing
shall apply to NEI shipments beginning the first day of each calendar
quarter unless otherwise agreed to by EMC.
6.2 NEI warrants to EMC that the prices in this Agreement do not exceed those
offered to other customers purchasing products identical to the Product(s)
in like or lesser quantities and upon substantially similar terms and
conditions.
6.3 All prices and fees described or contemplated under this Agreement are in
U.S. dollars. Product(s) pricing does not include federal, state, or local
excise, sales, or use taxes, except those taxes that are based on NEI's
income. If such taxes are applicable, they shall be set out as a separate
line item on NEI's invoice. EMC agrees to pay all applicable taxes (other
than taxes based upon NEI's net income), unless EMC procures and provides
to NEI an exemption certificate in a form reasonably acceptable to NEI and
to the appropriate taxing authority.
6.4 Payment terms for all Product(s) sold to EMC by NEI shall be net [**] days
from the date of receipt of a correct invoice provided that the invoice is
issued on or after the day the applicable Product(s) is shipped from NEI to
EMC. Payment and/or acceptance of payment of an invoice shall not
constitute or imply acceptance of the Product(s) or relieve NEI or EMC of
any obligations assumed under this Agreement, nor prevent EMC or NEI from
asserting any other rights it may have under this Agreement.
7.0 PURCHASE ORDERS
---------------
7.1 EMC shall submit a written purchase order for all Product(s) ordered from
NEI. EMC shall, during the first week of every month, provide NEI with a
rolling, [**]-day Purchase Order, cancelable and reschedulable only as
provided in Exhibit A. Purchase orders shall specify EMC's part numbers,
Product(s) model numbers, quantity ordered, shipping destination, carrier,
and shipment dates. NEI shall acknowledge in writing to EMC its receipt and
acceptance or rejection of such purchase order within [**] (Business Days
of NEI's receipt of each purchase order. NEI's acceptance shall neither
change nor add to the provisions of this Agreement. For quantities of
Products, as listed in Exhibit C, that are within EMC's forecasts, NEI
shall accept such purchase orders at lead-time, provided such purchase
orders comply with the terms of this Agreement. NEI shall establish a
supply line that results in sufficient material being available to support
the requested delivery dates in EMC's Rolling [**] day Purchase Order
Purchase Order(s), plus upside orders, as described in Exhibit A. If,
within [**] Business Days from NEI's receipt of a purchase order, EMC does
not receive written notice from NEI rejecting the purchase order and
specifying the reasons for such rejection, the purchase order shall be
deemed accepted by NEI. In the event of a conflict between the provisions
of this Agreement and the terms and conditions of EMC's purchase order, the
provisions of this Agreement shall prevail. Any additional terms contained
in EMC's purchase orders or NEI's order acknowledgements shall not be
binding unless accepted by the other party in writing.
8.0 FORECASTS
---------
8.1 EMC will provide NEI with good faith monthly rolling forecasts for [**]
months (i.e. [**] days beyond the Purchase Order as described in Section
7.1 above) of EMC's estimated Product(s) purchase requirements. EMC's
forecasts are for planning purposes only. EMC is under no obligation to
purchase forecasted quantities and if EMC fails to purchase any forecasted
quantities,
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EMC shall have no liability of any kind except as specifically provided in
Exhibits A and B, nor incur any penalties or retroactive price increases
unless otherwise agreed to by EMC in writing.
9.0 SUPPLY FLEXIBILITY
------------------
9.1 LEAD-TIME: Product(s) lead-time is defined as that period of time
---------
commencing upon NEI's receipt of EMC's purchase order until shipment by NEI
to EMC. Lead-time for each Product is stated in Exhibit A, Product Pricing,
Lead-time, Upside, Cancellation and Reschedule Terms. NEI may request to
change a Product's standard Lead Time. Such a request must be made in
writing and contain the reason for the requested change, a corrective
action plan to reestablish the standard Lead Time and the anticipated date
as to when the original standard Lead Time will be reestablished. All
changes to a Product's standard Lead Time are subject to EMC's written
approval, which shall not be unreasonably withheld.
9.2 RESCHEDULES: EMC shall have the right and ability to reschedule any
-----------
purchase order according to the terms documented under Reschedule Terms in
Exhibit A, Product Pricing, Lead-time, Upside, Cancellation and Reschedule
Terms.
9.3 UPSIDE SUPPLY: NEI shall establish a supply line that results in sufficient
-------------
material being available to support upside quantities according to the
terms documented under Upside Support in Exhibit A, Product Pricing,
Lead-time, Upside, Cancellation and Reschedule Terms.
9.4 CANCELLATION: EMC shall have the right to cancel delivery of any purchase
------------
order according to the terms documented under Cancellation Terms, at any
time without NEI's consent, provided NEI receives EMC's written notice
prior to shipment. Such cancellations shall be subject to the conditions
documented under Cancellation Terms in Exhibit A Product Pricing,
Lead-time, Upside, Cancellation and Reschedule Terms. NEI shall use
commercially reasonable efforts to mitigate EMC's liabilities for all
material exposure due to cancellations, by, among other things, canceling
or rescheduling orders for component parts, using component parts for
orders for other customers, if feasible and/or, with EMC's permission,
brokering component parts to other parties.
10 SHIPPING, DELIVERY AND PACKAGING
--------------------------------
10.1 Delivery ("Delivery") shall be F.O.B. Origin. Title and risk of loss shall
pass to EMC upon Delivery to the carrier. EMC may modify its routing
instructions from time to time and will provide NEI with an updated version
of any such modified instructions.
10.2 EMC and NEI may drop-ship product(s) to End User upon written request by
EMC. EMC shall provide the name and billing number of its preferred freight
carrier. EMC will issue individual purchase orders for each of its drop
shipment customer requirements (frequency could be multiple purchase orders
daily). NEI is required to communicate (via fax or electronically) drop
shipment information such as purchase order number, date of shipment,
carrier waybill number, invoice number and serial numbers shipped to EMC
[**] following the date the Product(s) shipped. Should the volume of
drop-ship orders be such that NEI cannot provide such information [**], NEI
shall use its best efforts to develop an automated system such that it can
provide the requested information, in a form acceptable to EMC, [**].
10.3 NEI shall be responsible for any increased freight charges incurred for
Product(s) shipped outside the routing instructions to include, but not be
limited to, use of other than EMC preferred carriers, unless it is not
commercially feasible to comply with the routing instructions. If there are
any conflicts between the current version of routing instructions provided
to NEI and the contents of this Section 10, the current routing
instructions will prevail.
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10.4 The shipment dates shall be those specified in each purchase order issued
under this Agreement. Shipments will be considered on time if they are made
no more than [**] than the shipment date specified in the EMC purchase
order. If EMC agrees to take partial shipments of any order, each such
partial shipment shall be deemed a separate sale. At the regular Review and
Planning Meetings conducted as described in Section 20 below, the parties
shall review NEI's record of on time shipments, and shall identify issues
and develop a plan to address any problems with repeated late shipments.
Chronic and/or sustained poor on-time delivery performance shall be
considered a material breach of this Agreement. For purposes of this
Agreement, "Chronic and/or Sustained Poor On-time Delivery Performance"
shall be defined as delivering less than [**] % of the units scheduled for
delivery in a given month on time for [**] consecutive months, or for a
total of [**] or more over the course of a year.
10.5 If NEI anticipates or becomes aware that it will not supply the Product on
the shipment date acknowledged by NEI, for any reason to include but not be
limited to material shortage, process changes, capacity limitations or
causes due to common carriers, NEI shall notify EMC immediately after NEI
has knowledge of the situation. The notification may be communicated by
facsimile, telephone, electronic mail or any other method agreed to by the
parties, provided that NEI shall use reasonable efforts to obtain EMC's
actual acknowledgment of the notice of anticipated delay. NEI and EMC will
jointly develop alternatives to resolve any late shipment of the Product,
including use of premium routing. NEI will develop recovery plans with new
committed shipment dates and communicate such plans to EMC within [**]
hours of missed shipments. If NEI is unable to deliver the Product at the
FOB Point on the acknowledged ship date, through no fault of EMC and not
for a reason excused under Section 26.7 Force Majeure, EMC may require NEI
to use premium routing and ship the freight pre-paid at NEI's expense for
the excess cost. In the event NEI has an allocation situation, NEI shall
use an allocation formula for EMC [**].
10.7 All shipments shall be uninsured unless otherwise specified by EMC's
designated procurement agents. Prepay and bill shipment shall be used only
when specified by EMC's designated procurement agents. In the event that
prepay and bill is used, NEI shall indicate the number of shipping
containers, weight of each shipment and carrier name on the invoice. Risk
of loss shall pass to EMC at the FOB point.
10.8 Each shipment of the Product by NEI shall include a packing slip which
contains at a minimum, (i) NEI name, (ii) box number (e.g., 1 of 3, 2 of
3), (iii) receiving address, (iv) EMC's purchase order number, (v) EMC's
part number, (vi) shipping quantity, (vii) date of shipment, and (viii) RMA
number when applicable per Exhibit E.
10.9 All Product shall be packaged, marked and otherwise prepared in accordance
with EMC's specifications attached as Exhibit C and all applicable
government regulations per good commercial practices EMC shall be
responsible if its specifications violate or do not meet governmental
regulations. NEI shall notify EMC if NEI becomes aware that EMC's
specifications do not meet applicable regulations. All Product shall be
private labeled in accordance with EMC branding instructions as outlined in
Exhibit C. Packaging for export shipments from the United States may also
be subject to specific instructions. NEI will notify EMC of any
extraordinary charges incurred by NEI for such export shipments prior to
invoicing EMC for these charges.
10.10 NEI will use reasonable commercial efforts to provide the following
information about its Product in writing within two (2) weeks of receiving
a written request from EMC: i) country of origin; ii) NAFTA preference
criteria; iii) harmonized scheduled tariff classification number; and iv)
export commerce control number ("ECCN"). Upon request by EMC and subject to
EMC's reasonable assistance, NEI will prepare all international shipping
documentation, including commercial
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invoice, NAFTA certificate, Shipper's Letter of Instruction, Shipper's
Export Declaration and any other necessary documentation, for international
shipments.
11.0 ACCEPTANCE
----------
Products will be deemed to be accepted when NEI Delivers Products as ordered by
EMC. EMC shall promptly notify NEI if EMC receives any shipments that do not
match an applicable order. NEI shall cure any defective delivery of Products as
described in Section 12, Warranty, below (including advance shipment of
replacement Products, as provided in Section 12).
12.0 WARRANTY
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12.1 NEI warrants that all Product(s)shipped under this Agreement will for a
period of [**] months from the date of shipment of the Product: (i) conform
to and perform in accordance with the applicable Product Specifications;
set forth in Exhibit C under normal use and operation; (ii) and be free
from defects in design, materials and workmanship. Should any products fail
to conform with the foregoing warranty within the first [**] days after
delivery, NEI shall advance-ship replacement Products to EMC's designated
location, within [**] hours of notice of the defect from EMC. EMC shall
return the defective Products to NEI within [**] weeks of receipt of the
replacement Products. Except with regard to repaired Product(s), NEI
further warrants that only new materials will be used in the Product(s).
12.2 All warranties made in this Agreement shall survive inspection, test,
acceptance and payment.
12.3 Product(s)repaired under this Agreement shall be warranted for the longer
of [**] days or the balance of the original Product(s)warranty.
12.4 NEI further warrants that EMC shall receive good title to each
Product(s)free and clear of all liens, encumbrance, and claims, and in
performing under this Agreement, NEI shall, and each Product(s)delivered
under this Agreement shall, comply with all applicable federal, state and
local, laws, statutes, ordinances, rules and government regulations and
codes as such laws, statutes, ordinances, rules and regulations and codes
existed on the date of Delivery.
12.5 NEI further warrants that each Product(s)has been, and will continue for
[**] months from Delivery to be regulatory compliant as any applicable
regulations existed on the original date of Delivery of the Product. Each
Product(s)shall bear appropriate labels indicating compliance with the
requirements of this Section.
12.6 NEI acknowledges that certain components integrated into the Product(s) are
designated as Field Replaceable Units (FRUs). Installation and removal of
Product FRUs by EMC shall not void the Product Warranty.
12.7 If the Products sold hereunder are not as warranted, NEI shall, either
repair or replace the Product at NEI's expense. EMC agrees that parts
utilized in warranty services may be remanufactured and/or refurbished. All
replaced parts shall be the property of NEI, on an exchange basis.
The above warranties shall not apply to Product(s) that have been damaged
as a result of misuse, neglect or accident; operation outside of the
environmental or power specifications provided by NEI; have been wired,
repaired or altered by anyone other than NEI or an Authorized Repair Agent;
or have had their serial numbers removed, defaced or altered. NEI's sole
obligation hereunder for Products that do not apply to the above warranties
shall be to repair, replace or scrap Product(s) at EMC's option and
expense.
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12.8 THE FOREGOING WARRANTIES SET FORTH IN THIS SECTION 12 ARE IN LIEU OF, AND
NEI EXPRESSLY DISCLAIMS, ALL OTHER REPRESENTATIONS, WARRANTIES OR
CONDITIONS, WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, INCLUDING,
WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR
A PARTICULAR PURPOSE AND NON-INFRINGEMENT OF THIRD PARTY RIGHTS.
13.0 PRODUCT SUPPORT
---------------
13.1 NEI will provide technical support to EMC for the Product(s) as described
in Exhibit E, which is hereby attached to and incorporated into this
Agreement.
13.2 The process for returning defective Product(s) and obtaining a Return
Material Authorization ("RMA") is set forth in Exhibit F, which is hereby
attached to and made a part of this Agreement
13.3 NEI will provide repair for the Product(s) to EMC in accordance with
Exhibit G, which is hereby attached to and incorporated into this
Agreement.
13.4 NEI will provide EMC, [**], with initial familiarization and standard sales
training, including materials, [**], for a reasonable number of EMC
employees at an EMC facility specified by EMC in Massachusetts. NEI hereby
authorizes EMC to reproduce such materials in an amount reasonably
necessary to implement the provisions of this Section 13. All expenses of
NEI's employees associated with such training, such as transportation,
meals and lodging, are the responsibility of NEI. Additional standard
technical training courses from NEI's Training Department shall be made
available to EMC at NEI's standard locations, rates, and terms.
14.0 EMC REQUESTED CHANGES
---------------------
14.1 EMC may request, in writing, that NEI evaluate free of charge a change to
the method of packing, packaging, or shipment, or evaluate an engineering
change to the Product(s) which is not a Mandatory Engineering Change (as
defined in Section 15 below). Such request will include a description of
the proposed change sufficient to permit NEI to evaluate its feasibility.
14.2 Promptly after receipt of such request, NEI shall notify EMC in writing of
its response to such request. Acceptance of such EMC proposed change(s)
shall not be unreasonably withheld by NEI, provided, however, that NEI may
condition its acceptance of a change on EMC's commitment to purchase a firm
quantity of such changed Products. If such response indicates acceptance of
the proposed change, NEI shall also state in such response (i) the terms
and conditions under which it would make the proposed change, (ii) the
impact on NEI's costs and the resulting charges to EMC, if any, created by
the changes, and (iii) the earliest date which NEI estimates such change
could be implemented. If the proposed change is to result in an increased
charge to EMC, EMC must provide prior written approval to NEI before the
change is implemented. If the proposed change would affect regulatory
agency certifications, the above referenced period shall be extended to
account for the time periods necessary for those regulatory agencies to
carry out their evaluations.
15.0 MANDATORY ENGINEERING CHANGES
-----------------------------
15.1 In the event that changes are required to make the Product(s) conform to
safety/regulatory agency requirements ("Mandatory Engineering Changes"),
NEI shall immediately implement the Mandatory Engineering Changes in new
production of the Product(s)without charge to EMC.
15.2 NEI and EMC shall discuss and mutually agree upon one or more of the
following remedies for implementing Mandatory Engineering Changes on
previously delivered Product, including which party shall bear the costs of
any such Mandatory Engineering Change, provided, however, that if the
Products did not, or do not, conform to safety/regulatory agency
requirements as such
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requirements existed on the date of delivery, all such changes shall be at
no charge to EMC, including shipping and transportation costs. NEI shall
use reasonable efforts to immediately implement the selected remedies.
15.2.1 EMC may request an RMA number and return the affected Product(s)to
NEI or an authorized repair facility for repair or replacement.
15.2.2 EMC may request and NEI will ship Mandatory Engineering Change kits
for Product(s). NEI shall provide EMC with installation instructions
necessary to implement the Mandatory Engineering Changes at EMC's or
EMC's customer's locations.
15.2.3 NEI may be asked to provide on-site technical assistance at the
appropriate location to install the Mandatory Engineering Change.
15.2.4 EMC may request that a NEI-approved third party maintenance
organization install the Mandatory Engineering Change kits for the
affected Product.
15.3 NEI shall provide EMC with written notice of any Mandatory Engineering
Changes as soon as possible after NEI knows of such change.
15.4 EMC shall have the option to cancel open purchase orders without penalty if
the Mandatory Engineering Changes are due to the fault or negligence of NEI
and such Changes are incompatible with or adversely affect performance of
Product(s) purchased by EMC and such changes are not made compatible with
the Product(s), or EMC is not provided with an acceptable remedy within
[**] days after NEI receives notification from EMC of its intent to cancel
its open purchase orders.
16.0 NEI REQUESTED CHANGES
---------------------
16.1 Both parties recognize that there may be optional changes proposed by NEI
affecting form, fit or function which are not Mandatory Engineering Changes
("Optional Engineering Changes"). Optional Engineering Changes may also
include changes in processes or materials. NEI shall provide EMC copies of
all Engineering Change Notices affecting Form, Fit, Function (as defined
below), active components, or reliability as soon as practically possible
prior to being implemented. NEI will also provide copies of Process Change
Notification forms related to mutually agreed upon EMC specific
manufacturing or test processes that would affect the following as soon as
practical prior to being implemented:
16.1.1 Form: Defined as a change in the dimensions or the external
appearance of the Product(s).
16.1.2 Fit: Defined as a change that affects the physical
interchangeability of the Product(s)or a field replaceable unit
("FRU") of the Product(s).
16.1.3 Function: Defined as a change that introduces a capability not
available in the previous connectivity interface, software, firmware,
or operator interface or affects the interchangeability of the FRUs
within the Product(s).
16.2 The notice required in sub-Section 16.1, above, shall include a written
description of the proposed change, including the reason for the change and
the expected effect of the change on the Product(s), including its price.
NEI will send such change proposals to EMC's designated engineer, via mail,
Email, or fax, as agreed between the parties. NEI's notice shall also
contain (i) an evaluation as to whether or not the changes, if accepted by
EMC, would be likely to require EMC to re-qualify the Product(s), and (ii)
a recommendation for or against such re-qualification.
16.3 If the Optional Engineering Changes to Form, Fit or Function of the
Product(s) proposed by NEI in EMC's sole opinion necessitate evaluation by
EMC of compatibility with EMC's systems and/or specifications, NEI upon
EMC's request, shall provide EMC with [**] evaluation products, parts or
designs which incorporate the proposed changes. EMC shall have the right to
accept, reject or
11
<PAGE>
mutually agree to an alternate plan for NEI's proposed Optional Engineering
Changes and will inform NEI of its approval or rejection of those changes
in writing within [**] days from receipt of the evaluation products, parts
or designs provided to EMC, or within [**] days of EMC's receipt of notice
of such changes, whichever is later. Such approval shall not be
unreasonably withheld.
16.4 If EMC rejects the Optional Engineering Changes, EMC may, in its sole
discretion, require NEI to continue supplying the unaltered Product(s).
16.5 NEI will incorporate changes accepted by EMC into Product(s) on EMC's open
purchase orders at no charge.
16.6 Unless EMC specifically rejects such changes, each version of the
Product(s) will possess at least the same features and functions, if not
more, than are offered by NEI in the Product(s) or similar product offered
by NEI for the same server/host environment. NEI shall introduce all new
non-exclusive features or functions for the Product(s) as early as the
introduction in any other similar NEI products for that environment,
provided, however, that any such feature or functions may be delayed in the
event that EMC requests different or customized Specification for the EMC
version of the Product.
16.7 Any changed Product(s) resulting from application of Sections 14, 15 and 16
shall be considered added as Product(s) to this Agreement, and subject to
its terms and conditions.
17.0 PRODUCT WITHDRAWALS
-------------------
17.1 NEI will notify EMC in writing at least [**] days prior to Product(s)
withdrawal. During the withdrawal notice period, EMC may issue purchase
orders with normal lead-time up until the last time buy. NEI will extend
EMC a [**] month delivery window for the last time buy quantity. Any last
time buy purchase order shall be placed by EMC shall be non-cancellable.
The [**] month window commences upon termination of the [**] day withdrawal
notice period. If the EOL is initiated by EMC, EMC will provide NEI an EOL
plan and will issue non-cancellable purchase orders within 3 months of the
notice for the quantities and delivery dates required by EMC. NEI shall
notify EMC as soon as practically possible if it receives a notice from a
supplier that the supplier is withdrawing a component for the Products, for
which there is no commercially reasonable substitute. If, as a result of
such component EOL, NEI must withdraw a Product hereunder, and if NEI is
required to make a last-time purchase of such components in order to comply
with its obligations under this Section 17, EMC shall bear the expense of
the component purchase as it is incurred by NEI, with the cost of such
expense being credited, in a manner approved by EMC on a case by case
basis, toward the purchase price of the resultant Products.
17.2 NEI shall provide Product repair service for the Product(s) to EMC at a
reasonable price and lead time, until the end of [**] years after
Product(s) withdrawal, pursuant to terms and conditions set forth in
Exhibit G, Product Repair. The foregoing notwithstanding, EMC shall have no
obligation to order any Product repair service from NEI.
18.0 Left Intentionally Blank
19.0 PRODUCT QUALITY
---------------
19.1 NEI shall participate in the NEI Quality Plan as required in Exhibit D,
which is hereby attached and incorporated into this Agreement, and shall
meet or exceed the quality and reliability requirements stated therein.
20.0 REVIEW AND PLANNING MEETINGS
----------------------------
20.1 NEI hereby appoints its OEM Program Manager as its liaison to monitor NEI's
performance and delivery of Product(s) under this Agreement. EMC hereby
appoints its designated NEI Business
12
<PAGE>
Manager as its liaison to monitor NEI's performance and delivery of
Product(s) hereunder. These liaisons will also be responsible for
coordinating meetings and discussions and reports provided for in this
Agreement. The names, telephone and facsimile numbers of the liaisons will
be provided by the parties to each other and the liaisons may be changed by
written notice from one party to the other.
20.2 EMC's designated NEI Business Manager will conduct quarterly NEI
performance review and planning reviews with NEI's EMC account management
team. EMC and NEI will determine the location and times for these meetings.
The purpose of these meetings is listed below:
20.2.1 Review NEI's performance over the past quarter;
20.2.2 Review action items and resolution;
20.2.3 Identify opportunities and areas of improvement;
20.2.4 Agree on commitments, set target dates, and define "persons"
responsible;
20.2.5 Review appropriate NEI reports; and
20.2.6 Review NEI quality and reliability improvement plans
20.2.7 Review the accuracy of EMC's forecasting process
20.2.8 Resolve any outstanding payment issues
20.2.9 Review EMC's performance of its obligations over the past quarter.
21.0 REPORTS
-------
21.1 Recurring reports to be provided by NEI and EMC under this Agreement are
referenced in Exhibit A, Exhibit D and Exhibit G. All reports will be
provided to EMC in electronic form or as otherwise mutually agreed. There
shall be no charge to EMC for any reports required under this Agreement.
22.0 LIABILITY FOR INJURY AND LIMITATION OF LIABILITY
------------------------------------------------
22.1 NEI shall indemnify, defend and hold EMC harmless against all claims,
suits, losses, expenses and liabilities for bodily injury, personal injury,
death, and property damage directly or indirectly caused by any Product(s)
or through the negligence of NEI or any person for whose actions NEI is
legally liable. The indemnities provided in this sub-Section 22.1 are
conditioned upon the fact that (i) EMC has notified NEI promptly in writing
of any such claims, (ii) NEI shall have sole control of the defense of such
claims and all negotiations for its settlement and compromise, and (iii)
EMC shall reasonably cooperate with NEI in the defense or settlement of
such claims. NEI shall carry and maintain Workers Compensation and general
liability insurance coverage to satisfactorily cover NEI's obligations
under this Section.
22.2 NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY INDIRECT, SPECIAL,
INCIDENTAL, OR CONSEQUENTIAL DAMAGES,INCLUDING LOST PROFITS, ARISING OUT OF
THIS AGREEMENT OR ANY PERFORMANCE HEREUNDER, EVEN IF SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES EXCEPT FOR THEIR RESPECTIVE
OBLIGATIONS UNDER SECTION 22 (LIABILITY FOR INJURY,) SECTION 24,
(INFRINGEMENT) AND 23 (CONFIDENTIAL INFORMATION AND PUBLICITY) AND EMC'S
OBLIGATION TO PAY FOR PRODUCT'S PURCHASED HEREUNDER, EACH PARTY'S TOTAL
LIABILITY FOR ANY CAUSE OF ACTION ARISING IN CONNECTION WITH THIS
AGREEMENT, AND REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT OR IN
TORT INCLUDING NEGLIGENCE, SHALL BE LIMITED TO THER LESSER OF THE
13
<PAGE>
AMOUNT ACTUALLY PAID BY EMC TO NEI OVER THE YEAR PREVIOUS TO THE CAUSE OF
ACTION, OR ONE MILLION DOLLARS ($1,000,000).
22.3 Indemnification by EMC: EMC shall indemnify and hold NEI harmless from and
against any and all claims, actions, or demands arising with respect to
technology or products added by EMC or sold by EMC with the Products.
23.0 CONFIDENTIAL INFORMATION & PUBLICITY
------------------------------------
23.1 Either party may, in connection with this Agreement, disclose to the other
party information considered confidential and proprietary information of
the disclosing party ("Confidential Information"). Information shall be
considered Confidential Information if clearly identified in writing as
confidential in nature by the disclosing party at the time of disclosure,
or if the disclosure is oral, within ten (10) Business Days thereafter. The
receiving party shall protect the disclosing party's Confidential
Information with the same degree of care that it regularly uses to protect
its own Confidential Information from unauthorized use or disclosure. Each
party shall use the other's confidential information solely for purposes of
performing under this Agreement. No rights or licenses under patents,
trademarks or copyrights are granted or implied by any disclosure of
Confidential Information. Sections 23.1 and 23.2 shall survive the
expiration or termination of this Agreement for a period of five (5) years.
23.2 The obligations of confidentiality imposed by this Agreement shall not
apply to any Confidential Information that: (a) is rightfully received from
a third party without accompanying markings or disclosure restrictions; (b)
is independently developed by employees of the receiving party who have not
had access to such Confidential Information; (c) is or becomes publicly
available through no wrongful act of the receiving party; (d) is already
known by the receiving party as evidenced by documentation bearing a date
prior to the date of disclosure; or, (e) is approved for release in writing
by an authorized representative of the disclosing party. This sub-Section
23.2 shall not supersede any other nondisclosure agreement(s) which may
otherwise bind the parties.
23.3 Neither party will originate, or authorize, assist or authorize another
party to produce, any written publicity, news release, marketing collateral
or other publication or public announcement, whether to the press, actual
or potential customers, stockholders, or others, relating to this Agreement
or to any amendment hereto, or to performance hereunder or to the existence
of an arrangement between the parties, or shall in any manner disclose,
advertise, or publish the fact that NEI has furnished or contracted to
furnish the Product(s) to EMC without the prior written consent of the
other party. Notwithstanding anything in this Agreement to the contrary, i)
EMC shall not unreasonably withhold or delay approval of disclosure of the
Agreement for the purpose of NEI complying with any SEC or legal
regulations and ii) NEI shall allow EMC to propose the exact timing of the
initial public release regarding the relationship provided that EMC
provides no less than five (5) Business Days' written notice and
opportunity to review and approve the release. The existence, terms and
conditions of this Agreement are considered the Confidential Information of
both parties.
23.4 Any press release announcing the establishment of this business
relationship requires EMC's review and written approval, prior to its
disclosure. Such approval may be withheld at EMC's sole discretion.
24.0 INFRINGEMENT
------------
24.1 NEI warrants that, as of the Effective Date, neither any Product(s) nor any
part of any Product(s) infringes any copyright or trade secret right of any
person or entity and that, to NEI'S knowledge,
14
<PAGE>
neither the Product(s) nor any part of the Product(s) infringes any patent
or trademark issued in the countries set forth in Exhibit H, which is
hereby attached and incorporated into this Agreement. NEI shall, at NEI's
expense, indemnify and hold EMC, [**] harmless from and against any claims,
demands, suits, actions or judgments brought against EMC, [**] (including
reasonable attorney's fees and costs and including any special,
consequential or punitive damages awarded by the court in any such suit or
action) to the extent such action is based upon a claim that any Product(s)
purchased hereunder infringes a patent issued in the countries set forth in
Exhibit H, or any copyright, trademark or other intellectual property right
or misappropriates a trade secret right of any third party, provided that
EMC gives NEI prompt written notice of any such claim, available
information, reasonable assistance, and sole authority and control to
settle or defend the claim. NEI reserves the right to choose the attorneys
who may pursue any action on its behalf, but EMC may be represented in any
such action by its own attorneys at its own expense.
24.2 If any Product(s) should become, or in NEI's opinion is likely to become,
the subject of claim as described in sub-Section 24.1, NEI shall, at NEI's
expense, implement one of the following remedies: (i) procure for EMC the
right to continue using the Product, or (ii) replace or modify the
Product(s) so that its use and resale becomes non-infringing, provided that
any replacement or modified Product(s) meets substantially the same
specifications as the original, maintains the same form, fit, function and
quality, and is acceptable to EMC. If NEI is unable to implement either
remedy set forth in this sub-Section 24.2, then NEI shall grant EMC a
refund for the original purchase price of the infringing Product(s) as
depreciated over a three year term, and accept its return.
24.3 NEI shall have no liability to EMC to the extent that a claim described in
sub-Section 24.1 is based upon: (i) compliance with specifications or
designs provided by EMC; (ii) the combination of the Product(s) with other
product or devices not purchased hereunder where the Product(s) itself
would not be infringing; or (iii) modifications of the Product(s) made by
EMC where unmodified Product(s) would not be infringing.
24.4 THE FOREGOING PROVISIONS OF THIS SECTION 24 STATE EMC'S SOLE AND EXCLUSIVE
REMEDY FOR ANY ALLEGED INFRINGEMENT OR MISAPPROPRIATION BY THE PRODUCTS OF
ANY THIRD PARTY INTELLECTUAL PROPERTY RIGHTS OF ANY KIND.
25.0 MANUFACTURING RIGHTS
--------------------
25.1 Concurrent with the execution of this Agreement by the parties hereto, NEI
shall deposit in escrow and periodically update with Data Securities
International or some other independent escrow agent reasonably acceptable
to EMC, pursuant to such party's regular form of escrow agreement, all
drawings, plans, specifications, methods, techniques and all other
information, in written or documentary form, human readable or machine
readable, in any media, regarding or concerning the design, manufacture,
testing, use, maintenance, operation and reliability, including without
limitation, product specifications, software and firmware source code
listings, engineering drawings, approved vendor lists, manufacturing,
assembly and fabrication process sheets, in process and final test
procedures and specifications, schematics, bills of materials and
performance data regarding the design of the Products(s) purchased
hereunder (collectively, the Manufacturing Information). The escrow agent
so designated shall be bound to retain the Manufacturing Information in
escrow for [**] years under the terms of this Agreement and released to EMC
upon EMC's written certification by an officer of the company that either
of the following two events has occurred:
15
<PAGE>
(1) An event of default under Section 3.3 has occurred, NEI was notified of
the default and has failed to cure such default; or,
(2) The technical and management team procedure described below fails to
develop a suitable recovery plan that resumes normal Product shipments to
EMC within [**] days of the executive management team's first convening:
If during the term of this Agreement NEI fails to make delivery for a
period of [**] days after receipt of written notice of default for Products
listed in Exhibit C in violation of this Agreement, and as long as EMC is
not also in breach of this Agreement, then NEI and EMC agree to convene, if
necessary, at NEI's Canton, MA facility as follows:
For a period of [**] days, a focused team comprising of technical staff
from both NEI and EMC will jointly identify, investigate and resolve
whatever issues have disrupted the normal flow of Product deliveries to
EMC. At a minimum, NEI agrees to make available the appropriate Engineering
Manager, Production Manager, Product Engineer and Account Manager to this
team. In turn, EMC agrees to make available the appropriate Engineering
Manager, Production Manager, Product Engineer, Commodity Manager and Buyer
and any relevant technical information to this team.
If, after this [**] day period, a mutually acceptable recovery plan has not
yet been established, a focused executive management team from both NEI and
EMC will convene to jointly establish a suitable recovery plan which
expeditiously facilitates the normal production and flow of product to EMC.
At a minimum, NEI agrees to make available its President and CEO and the
appropriate VP's of Sales, Business Development, Quality and Worldwide
Manufacturing. In turn, EMC agrees to make available its VP's of Supply
Base Management, Commercial and Technical and Director of Commodity
Management for the Products listed in Exhibit A.
In either case, EMC shall certify that it will comply with the terms of the
manufacturing license granted hereunder.
25.2 In order to secure NEI's performance of its obligations under this
Agreement, including without limitation manufacture and delivery of the
Product(s) and spare parts in a timely manner and performance of warranty
services, in connection with Product(s) and/or services which are or may be
purchased under this Agreement, NEI hereby grants to EMC a license to all
documents pertaining to process and procedures, product data, process
software, firmware, patent rights, and other information used or useful for
such purposes at a mutually satisfactory licensing arrangement to be
reasonably agreed by the parties, providing royalty payments reasonably
satisfactory to NEI. Included in this license is the right to use, modify,
design manufacture or have manufactured and maintain said manufacturing
information in the manufacture or contract manufacture of Product(s). Such
license shall extend to the Products as defined by the then-current Product
Specifications as listed in Exhibit C, and shall not be construed to grant
to EMC the right to use any intellectual property or confidential
information regarding the Products to develop next generation or derivative
Products. Notwithstanding the foregoing, however, EMC shall have no use or
benefit of the license granted in this paragraph unless and until, one of
the two escrow release conditions described above has occurred, and EMC
shall not have availed itself of another remedy to such default. Prior to
EMC's request to the escrow agent requesting release of the Manufacturing
Information and the effectivity of the rights and licenses granted above
EMC will give NEI [**] days' written notice specifying the default
condition. Such [**]-day notice shall run concurrently with any cure
periods otherwise granted to Supplier in this Section 25.
16
<PAGE>
26.0 MISCELLANEOUS PROVISIONS
------------------------
26.1 This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts, excluding its conflict of law
rules and excluding the United Nations Convention on Contracts for the
International Sale of Goods.
26.2 The parties are and shall remain at all times, independent contractors in
the performance of this Agreement and nothing herein shall be deemed to
create a joint venture, partnership or agency relationship between the
parties. Neither party shall have the right or authority to assume or to
create any obligation or responsibility, express or implied, on behalf of
the other except as may be expressly provided otherwise in this Agreement.
Each party shall be solely responsible for the performance of its employees
hereunder and for all costs and expenses of its employees, to include but
not be limited to employee benefits.
26.3 The failure of either party to insist upon or enforce strict conformance by
the other party of any provision of this Agreement or to exercise any right
under this Agreement shall not be construed as a waiver or relinquishment
of such party's right unless made in writing and shall not constitute any
subsequent waiver or relinquishment.
26.4 To be valid, amendments or modifications to the Agreement must be in
writing and signed by an authorized representative of each party. Any
verbal agreements, discussions, and understandings, expressed or implied,
shall not constitute amendments to this Agreement.
26.5 If any provision of this Agreement is finally held by a court of competent
jurisdiction to be illegal or unenforceable, then such provision shall be
deemed adjusted to conform to the applicable requirements, to the extent
reasonably possible, and the adjusted provision, if any, shall have the
same effect as if originally included herein. In any event, the legality,
validity, and enforceability of the remaining provisions of this Agreement
shall not be affected or impaired.
26.6 The provisions of this Agreement which by their nature survive termination
or expiration of the Agreement, including but not limited to the provisions
of Section 1 (Definitions), Subsection 3.6 of Section 3 (Term and
Termination), Section 4 (Intellectual Property Rights), Subsection 5.2 of
Section 5 (Documentation), Subsection 6.2, 6.3, and 6.4 of Section 6 (Price
and Payment), Section11 (Acceptance), Section 12 (Warranty), Subsections
13.1, 13.2 and 13.3 of Section 13 (Product Support), Subsection 17.2 of
Section 17 (Product Withdrawals), Section 22 (Limitation of Liability),
Section 23 (Confidential Information), Section 24 (Infringement), together
with Section 26 (Miscellaneous), Section 27 (Entire Agreement), Exhibit A
(Product/Repair Pricing, Lead-time, Upside, Cancellation and Rescheduling
Terms, Exhibit B EMC On-Order Parts, Exhibit E (Technical Support), Exhibit
F (RMA Procedure), Exhibit G (Product Repair), and Exhibit H (Software
License) of this Agreement shall survive the termination or expiration of
this Agreement. Outstanding purchase orders accepted by NEI shall survive
the expiration or termination of this Agreement by EMC for cause, unless
EMC cancels the purchase orders Termination of this Agreement for cause by
NEI under Section 3.3, or 3.4 shall act to also terminate any outstanding
purchase orders, unless otherwise specified in writing by NEI.
26.7 If the performance hereof, or any obligation hereunder is prevented,
restricted or interfered with by reason of fire or other casualty or
accident; strikes or labor disputes; war or other violence; any law, order,
proclamation, regulation, ordinance, demand or requirement of any
governmental agency; or any other act or condition whatsoever beyond the
reasonable control of the parties hereto, excluding weather conditions
other than catastrophic weather conditions and excluding events which could
reasonably have been avoided by the exercise of reasonable prudence, the
party whose performance is so affected, upon giving prompt notice to the
other party, shall be excused from such performance to the extent of such
prevention, restriction or interference; provided,
17
<PAGE>
however, that the party so affected shall take all reasonable steps to
avoid or remove such causes of non-performance and shall immediately
continue performance hereunder whenever such causes are removed. If the
delay lasts for sixty (60) or more days from the original date of
performance, the party receiving notice of the delay shall have the right
to terminate the performance of the affected obligation and/or the
Agreement.
26.8 Neither party may assign any rights hereunder without the prior written
consent of the other party, which consent shall not be unreasonably
withheld. Any assignment of rights shall not work as a novation of
obligations hereunder without written agreement. Any attempt to assign any
rights, duties or obligations hereunder without the other party's written
consent will be void.
26.9 If either party commences litigation to enforce any provision of this
Agreement, the prevailing party shall be entitled to seek to recover
reasonable attorneys' fees and expenses of litigation, including fees and
expenses of any appeal.
26.10 Unless otherwise expressly provided for, all notices, requests, demands,
consents or other communications required or pertaining to this Agreement
must be in writing and must be delivered personally or sent by certified or
registered mail (postage prepaid and return receipt requested) to the other
party at the address set forth below, or to any other address given by
either party to the other party in writing:
NEI: Network Engines, Inc
25 Dan Road
Canton, MA 02021
Attn: Chief Financial Officer
CC: Chief Counsel
EMC: EMC Corporation
171 South Street
Hopkinton, MA 01738
Attn: VP Supply Base Management Commercial
CC: Chief Counsel
In case of mailing, the effective date of delivery of any notice,
demand, or consent shall be considered to be five (5) Business Days
after proper mailing.
26.11 Technical Contacts -With respect to all other communications between the
parties, the principal contacts are noted below. This information may be
changed by written notice between the parties and without the necessity of
amending this Agreement:
NEI: Network Engines, Inc.
25 Dan Road
Canton, MA 02021
Attn: Director of Engineering
EMC: Supply Base Manager, Third-Party Products
-----------------------------------------
EMC CORPORATION
---------------
171 South Street
----------------
Hopkinton, MA 01748
-------------------
26.12 The section and paragraph headings of this Agreement are intended as a
convenience only, and shall not affect the interpretation of its
provisions.
18
<PAGE>
26.13 The parties agree that the terms and conditions of this Agreement shall
prevail, notwithstanding the contrary or additional terms in any purchase
order, sales acknowledgment, confirmation or any other document issued by
either party effecting the purchase and/or sale of Product(s).
26.14 Neither party will export, re-export or resell any Product(s) or technical
data without first complying with all applicable export laws, orders and
regulations and obtaining all necessary governmental permits, licenses and
clearances.
26.15 Nothing in this Agreement shall be construed as preventing EMC from
developing, acquiring, marketing, selling, supporting or maintaining
products similar to or competitive with Product, or from entering into
agreements with or providing specifications (but not Product
Specifications, as referenced herein) for competitors of NEI, provided that
in so doing, EMC does not breach its obligations under this Agreement,
including, without limitation, Section 23
27.0 ENTIRE AGREEMENT
----------------
The following Exhibits are part of this agreement and are incorporated herein by
this reference:
Exhibit A Product/Repair Pricing, Lead-Time, Upside, Cancellation and
Rescheduling Terms
Exhibit B EMC On-Order Parts
Exhibit C Technical Purchase Specification
Exhibit D NEI Quality Plan
Exhibit E Technical Support
Exhibit F RMA Procedure
Exhibit G Product Repair
Exhibit H Software License
Exhibit I Indemnity Country List
Exhibit J EMC Logistics Partners
This Agreement, including all Exhibits, constitutes the entire Agreement between
the parties and supersedes all prior or contemporaneous agreements, discussions,
and understandings between the parties, either express or implied.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their duly authorized representatives, effective as of the date last signed
("Effective Date"),.
Network Engines, Inc. EMC Corporation
------------------------------- ------------------------------------
"NEI" "EMC"
By: /s/John H. Curtis By: /s/William Monagle 2/5/02
---------------------------- --------------------------------
(Signature) (Signature)
Name: John H. Curtis Name: William Monagle
(Please Print or Type) (Please Print or Type)
Title: President & CEO Title: Vice President
Corporate Procurement
Date: January 30, 2002 Date: EMC Corporation
19
<PAGE>
EXHIBIT A
Product Pricing, Lead-time, Upside, Cancellation and Reschedule Terms
Product and Repair Pricing
----------------------------------------------------------------------------
EMC Part # NEI Part # Description Maximum Lead Unit Price
Time
----------------------------------------------------------------------------
[**] [**] Storage Server Node [**] weeks $[**]
----------------------------------------------------------------------------
[**] Disk Sled Assembly [**] weeks $[**]
----------------------------------------------------------------------------
Lead-time: EMC shall, during the first week of every month, provide NEI with a
---------
rolling, [**] -day Purchase Order, cancelable and reschedulable only as provided
below. The lead-time for all Product, based on a rolling [**] day Purchase
Order, will vary between [**] calendar days or [**] weeks, and [**] days or [**]
weeks. Maximum lead-time for all Product covered under this agreement will be
[**] calendar days or [**] weeks. In some cases, EMC may request delivery sooner
than the lead-time stated above. In such cases, NEI will make reasonable
commercial efforts to support these inside lead-time requests.
EMC On-order Parts: EMC shall, on the first week of every month issue a rolling
------------------
[**]-week forecast, by estimated delivery date, of its product requirements. NEI
will support the lead-time and upside requirements by identifying and procuring
parts using the individual component lead times as listed in Exhibit B and EMC
requested delivery dates as the key trigger points on which to base that
procurement, and then adding [**] to account for manufacturing time. EMC's
liability for NEI inventory shall be limited to On-Order Parts as defined in
Exhibit B and the liability defined in this Exhibit A. NEI shall be solely
responsible for the inventory of all other parts, and for that portion of the
On-Order Parts inventory that (1) exceeds the forecast, purchase order and
upside requirements established in this Agreement or (2) that are ordered in
advance of the time necessary to support the forecast, purchase order and upside
requirements established in this Agreement, unless EMC provides written
authorization to procure additional requirements beyond that (i.e. last time
buy).
Quarterly, (or more frequently, if EMC requests), NEI and EMC will review and
audit EMC On-Order Parts in NEI's inventory and on NEI's backlog. EMC may
request adjustments based on anticipated changes in consumption level of the
Product(s). Cancellation charges resulting from EMC-requested adjustments will
be the responsibility of EMC provided, as stated above, that prior
review/approval of the purchases was completed by EMC.
Upside Support: NEI agrees to manage its business with EMC so as to support EMC
--------------
requests for delivery of un-forecasted Product (upsides) as follows (assumes
calendar days):
1
<PAGE>
Request made by EMC X days
before original PO delivery date NEI upside commitment
-------------------------------- ---------------------
[**] days [**]
[**] days [**]% above on-order quantity
[**] days [**]% above on-order quantity
[**] days [**] above on-order quantity
Cancellation Terms: NEI agrees to support the following cancellation terms for
------------------
EMC production Product (assumes calendar days):
Request made by EMC X days EMC cancellation liability
before original PO delivery date (% of $ value of on order Product)
-------------------------------- ----------------------------------
[**] days Full price of finished Product, or may
be rescheduled (see note below)
[**] days Liability limited to cost of EMC
On-Order Parts identified in Exhibit B,
Sections 2.0, 3.0 and 4.0 and an
additional [**]% adder to the total cost
of the material kitted in preparation of
supporting Product requirements for day
[**] through [**]. This represents a
restocking charge.
[**] days Liability limited to cost of EMC
On-Order Parts identified in Exhibit B,
Sections 2.0, 3.0 and 4.0 .*
*Note: In instances where business conditions mandate EMC cancellation
of Product, NEI will take all reasonable actions to de-book,
return reschedule or otherwise dispose of materials on backlog
with zero or minimum liability so as to minimize liability passed
on to EMC.
Reschedule Terms: NEI agrees to support the following reschedule terms for all
----------------
EMC production Product (assumes calendar days):
Request made by EMC X days
before original PO delivery date Reschedule Allowed
-------------------------------- ------------------
[**] days [**].
[**] days [**] days from original due date.
[**] days [**] days from original due date.
[**] days [**].
2
<PAGE>
Exhibit B - EMC On-Order Parts
------------------------------
EMC shall be liable only for the parts listed in paragraphs 2.0, 3.0 and 4.0
below. EMC's liability is limited to that quantity of Parts that NEI must order,
in accordance with the ordering lead time for such parts, in order to
manufacture and deliver Products to EMC in accordance with the delivery dates
listed in the forecast, Purchase Orders and upside requirements ("On-Order
Parts").
1.0 Definitions
-----------
1.1 EMC Custom Parts: Parts that are not commodity Products in the
----------------
commercial market, but are manufactured solely for incorporation into
EMC Products.
1.2 EMC Unique Parts: Commodity parts procured solely for incorporation
----------------
into EMC Products and not used on other NEI products.
1.3 Other Parts: Parts other than those listed in 1.1 or 1.2 above that
-----------
are components of the Product, but which are not custom to EMC or
unique to the Products EMC is purchasing hereunder.
2.0 EMC Custom Parts List
---------------------
Item Number Part Description Rev Qty Per L/T(Bus days) Weeks
----------------------------------------------------------------------
[**] [**] 01 1 [**] [**]
[**] [**] 01 1 [**] [**]
[**] [**] 01 1 [**] [**]
3.0 EMC Unique Parts List
---------------------
Item Number Part Description Rev Qty Per L/T(Bus days) Weeks
----------------------------------------------------------------------
[**] [**] 0A 1 [**] [**]
[**] [**] 0A 8 [**] [**]
[**] [**] 02 1 [**] [**]
[**] [**] 02 1 [**] [**]
[**] [**] 02 1 [**] [**]
[**] [**] 0A 1 [**] [**]
[**] [**] 00 1 [**] [**]
[**] [**] 0A 4 [**] [**]
[**] [**] 01 2 [**] [**]
[**] [**] 0A 1 [**] [**]
[**] [**] 01 1 [**] [**]
1
<PAGE>
4.0 Other Parts List
----------------
Item Number Part Description Rev Qty Per L/T(Bus days) Weeks
---------------------------------------------------------------------
[**] [**] 0A 1 [**] [**]
[**] [**] 0A 2 [**] [**]
[**] [**] 0A 2 [**] [**]
[**] [**] 0A.1 12 [**] [**]
[**] [**] 0A 17 [**] [**]
[**] [**] 0A 10 [**] [**]
[**] [**] 0A 2 [**] [**]
[**] [**] 0A A/R [**] [**]
[**] [**] 0A 1 [**] [**]
[**] [**] 0A 1 [**] [**]
[**] [**] 0B.1 1 [**] [**]
[**] [**] 0B.1 1 [**] [**]
[**] [**] 0B 1 [**] [**]
[**] [**] 0A 1 [**] [**]
[**] [**] 0A 1 [**] [**]
[**] [**] 0A 1 [**] [**]
[**] [**] 0A 1 [**] [**]
[**] [**] 0A 1 [**] [**]
[**] [**] 0A 1.5 [**] [**]
[**] [**] 0A 1 [**] [**]
[**] [**] 0A 1 [**] [**]
[**] [**] 0A 1 [**] [**]
[**] [**] 00 1 [**] [**]
[**] [**] 0A 1 [**] [**]
[**] [**] 0A 1 [**] [**]
[**] [**] 0A.1 1 [**] [**]
[**] [**] 0A 1 [**] [**]
[**] [**] 0A 1 [**] [**]
[**] [**] 0A 1 [**] [**]
[**] [**] 0A 1 [**] [**]
[**] [**] 0A 4 [**] [**]
[**] [**] 0A 1 [**] [**]
[**] [**] 0A 1 [**] [**]
[**] [**] 0A 1 [**] [**]
[**] [**] 0B 1 [**] [**]
[**] [**] 0E 1 [**] [**]
[**] [**] 0A 1 [**] [**]
[**] [**] 0A 1 [**] [**]
2
<PAGE>
Technical Purchase Specification
Disk Sled Assembly
118032103
Rev "E01"
December 19, 2001
[**] Systems Division
WESTBORO, MA 01580
1
<PAGE>
TABLE OF CONTENTS
CONTENTS
PAGE
TABLE OF CONTENTS............................................................1
1. SCOPE...................................................................3
2. SPECIFICATION REVISION DETAILS..........................................3
3. APPLICABLE DOCUMENTS AND ITEMS..........................................3
4. HARDWARE DESCRIPTION....................................................4
4.1 Disk Drives.......................................................4
4.2 Metal Sleds.......................................................4
4.3 Mounting Screws...................................................4
5. SOFTWARE IMAGES, TEST PROCEDURES, & TEST REQUIREMENTS...................4
5.1 Standard NEI Test Software, Processes, and Metrics...............44
5.2 EMC [**] Software................................................44
5.3 EMC [**] Software Test Process and Metrics......................44
6. AGENCY COMPLIANCE.......................................................4
7. SHIPPING PACKAGE REQUIREMENTS...........................................5
8. NOTIFICATION OF DESIGN, PROCESS, OR AVL CHANGES.........................6
9. DELIVERY REQUIREMENTS...................................................7
2
<PAGE>
1. SCOPE
This document defines the requirements for an [**] Disk Sled Assembly
consisting of [**]. This document and the documents referenced in this
document collectively define the functional, electrical, mechanical,
environmental, and reliability specifications, as well as safety agency
approvals, which must be met by suppliers to EMC. The [**] Disk Sled
Assembly is hereafter referred to as the "DISK SLED". Network Engines, Inc.
is hereafter referred to as "NEI".
2. SPECIFICATION REVISION DETAILS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
Revision Table
-------------------------------------------------------------------------------------------------------
Revisions Emc Corporation
-------------------------------------------------------------------------------------------------------
Date App'd. By ECO # Rev Title: [**] Disk Sled Assembly Purchase Specification
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
11/28/01 [**] E00 Initial revision
-------------------------------------------------------------------------------------------------------
12/19/01 [**] E01 Add NEI part numbers and revisions, EMC drive part number
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: No changes or revisions to this purchased product will be allowed by
either EMC Corporation or NEI without going through the change notification
process detailed in Section 8 of this specification.
3. APPLICABLE DOCUMENTS AND ITEMS
The DISK SLED shall meet the requirements defined by the specified revision
of following documents. In case of conflict, the order of precedence is as
follows.
1. This purchase specification: 118032103, revision E01
2. The following corporate standards:
108000066 Package Test Specification, revision 07
108000143 Packaging Specification for Suppliers of EMC,
revision 10
108000174 Bar Coding Requirements for Shipping Containers,
revision 09
108000336 Midrange Storage Environmental Guideline, revision 08
108000721 EMC Serial Number Labeling Requirements, revision A18
108000495 Purchased Products: Compliance and Certification
Requirements,
revision 06
The specified revisions of the 108 specifications are included in the
appendix of this document.
3
<PAGE>
4. HARDWARE DESCRIPTION
The DISK SLED consists of [**]. The DISK SLEDs [**].
In general, all NEI parts have the format www-xxxxx-yy rev zz where each w,
x, y, or z is an alphanumeric character. Their revisions start at 0A for a
released product and will increase to 0B, 0C, 0D, ... as new revisions are
required.
The NEI assembly number for the DISK SLED is [**]. The following sections
define the exact components comprising the DISK SLED. The EMC part number
for the assembly is [**]. NEI will label the disk sled assembly with the
EMC part number, revision, and serial number in both bar code and human
readable form according to the 108000721 EMC Serial Number Labeling
Requirements Specification. These labels are not required to be visually
accessible when the DISK SLED is installed [**].
4.1 Disk Drives
The DISK SLED will contain [**]. NEI shall [**]. The drives will be labeled
by Maxtor with the EMC part number, revision, and serial number. The NEI
part number for the drives is [**].
4.2 Metal Sleds
The NEI part number for the metal sled is [**]. This is [**].
4.3 Mounting Screws
The disk and the sled are [**]. The NEI part number for the [**].
5. SOFTWARE IMAGES, TEST PROCEDURES, & TEST REQUIREMENTS
Each DISK SLED will [**] DISK SLEDs will [**]. The [**] DISK SLEDs [**],
NEI will [**] the DISK SLEDs [**], NEI will [**] from EMC and will[**].
5.1 Standard NEI Test Software, Processes, and Metrics
NEI will [**] with EMC. This document will refer to [**]. There will be
[**]. The NEI part number [**].
5.2 EMC [**] Software
Each DISK SLED [**]. The EMC [**].
5.3 EMC [**] Software Test Process and Metrics
The [**] DISK SLED should [**] NEI will [**] the DISK SLEDs [**].
6. AGENCY COMPLIANCE
Since the DISK SLED is [**].
4
<PAGE>
7. SHIPPING PACKAGE REQUIREMENTS
The basic shipping package will be based on an NEI-designed single disk
shipping box [**]. This package will be sent as an individual unit in this
package or multiples of these packages may be aggregated in boxes or on
pallets as needed. The rest of this section lists the EMC requirements for
this shipping package. It is Network Engines responsibility to satisfy all
of these items.
1. The DISK SLED shipping package shall not be marked [**]. The DISK SLED
shipping package will [**].
2. The DISK SLED shipping package shall be marked with the following:
. Shipping label(s) [**].
. [**] shipping label(s).
3. NEI is responsible for performing all shipping and container
performance testing on the single DISK SLED shipping package. The
following requirements pertain when packaged in the vendor's shipping
carton. This DISK SLED [**]. These tests include but are not limited
to:
. [**]
. [**]
. [**].
8. NOTIFICATION OF DESIGN, PROCESS, OR AVL CHANGES
MANDATORY ENGINEERING CHANGES
-----------------------------
8.1 In the event that changes are required to make the Product(s) conform to
safety/regulatory agency requirements ("Mandatory Engineering Changes"),
NEI shall immediately implement the Mandatory Engineering Changes in new
production of the Product(s) without charge to EMC.
8.2 NEI and EMC shall discuss and mutually agree upon one or more of the
following remedies for implementing Mandatory Engineering Changes on
previously delivered Product, including which party shall bear the costs of
any such Mandatory Engineering Change, provided, however, that if the
Products did not, or do not, conform to safety/regulatory agency
requirements as such requirements existed on the date of delivery, all such
changes shall be at no charge to EMC, including shipping and transportation
costs. NEI shall use reasonable efforts to immediately implement the
selected remedies.
8.2.1 EMC may request an RMA number and return the affected Product(s)to
NEI or an authorized repair facility for repair or replacement.
8.2.2 EMC may request and NEI will ship Mandatory Engineering Change kits
for Product(s). NEI shall provide EMC with installation instructions
necessary to implement the Mandatory Engineering Changes at EMC's or
EMC's customer's locations.
8.2.3 NEI may be asked to provide on-site technical assistance at the
appropriate location to install the Mandatory Engineering Change.
8.2.4 EMC may request that a NEI-approved third party maintenance
organization install the Mandatory Engineering Change kits for the
affected Product.
5
<PAGE>
8.3 NEI shall provide EMC with written notice of any Mandatory Engineering
Changes as soon as possible after NEI knows of such change.
8.4 EMC shall have the option to cancel open purchase orders without penalty if
the Mandatory Engineering Changes are due to the fault or negligence of NEI
and such Changes are incompatible with or adversely affect performance of
Product(s) purchased by EMC and such changes are not made compatible with
the Product(s), or EMC is not provided with an acceptable remedy within
[**] days after NEI receives notification from EMC of its intent to cancel
its open purchase orders.
NEI REQUESTED CHANGES
8.5 Both parties recognize that there may be optional changes proposed by NEI
affecting form, fit or function which are not Mandatory Engineering Changes
("Optional Engineering Changes"). Optional Engineering Changes may also
include changes in processes or materials. NEI shall provide EMC copies of
all Engineering Change Notices affecting Form, Fit, Function (as defined
below), active components, or reliability as soon as practically possible
prior to being implemented NEI will also provide copies of Process Change
Notification forms related to mutually agreed upon EMC specific
manufacturing or test processes that would affect the following as soon as
practical prior to being implemented:
8.5.1.1 Form: Defined as a change in the dimensions or the external
appearance of the Product(s).
8.5.1.2 Fit: Defined as a change that affects the physical
interchangeability of the Product(s)or a field replaceable unit
("FRU") of the Product(s).
8.5.1.3 Function: Defined as a change that introduces a capability not
available in the previous connectivity interface, software, firmware,
or operator interface or affects the interchangeability of the FRUs
within the Product(s).
8.6 The notice required in sub-Section 105.1, above, shall include a written
description of the proposed change, including the reason for the change and
the expected effect of the change on the Product(s), including its price.
NEI will send such change proposals to EMC's designated engineer, via mail,
Email, or fax, as agreed between the parties. NEI's notice shall also
contain (i) an evaluation as to whether or not the changes, if accepted by
EMC, would be likely to require EMC to re-qualify the Product(s), and (ii)
a recommendation for or against such re-qualification.
8.7 If the Optional Engineering Changes to Form, Fit or Function of the
Product(s) proposed by NEI in EMC's sole opinion necessitate evaluation by
EMC of compatibility with EMC's systems and/or specifications, NEI upon
EMC's request, shall provide EMC with [**]of evaluation products, parts or
designs which incorporate the proposed changes. EMC shall have the right to
accept, reject or mutually agree to an alternate plan for NEI's proposed
Optional Engineering Changes and will inform NEI of its approval or
rejection of those changes in writing within [**] days from receipt of the
evaluation products, parts or designs provided to EMC, or within [**] days
of EMC's receipt of notice of such changes, whichever is later. Such
approval shall not be unreasonably withheld.
8.8 If EMC rejects the Optional Engineering Changes, EMC may require NEI to
continue supplying the unaltered Product(s)or to provide EMC with
opportunities for a last time buy of the unaltered Product(s).
8.9 NEI will incorporate changes accepted by EMC into Product(s) on EMC's open
purchase orders at no charge.
8.10 Unless EMC specifically rejects such changes, each version of the
Product(s) will possess at least the same features and functions, if not
more, than are offered by NEI in the Product(s) or similar product offered
by NEI for the same server/host environment. NEI shall introduce all new
non-exclusive features or functions for the Product(s) as early as the
introduction in any other similar
6
<PAGE>
NEI products for that environment, provided, however, that any such feature
or functions may be delayed in the event that EMC requests different or
customized Specification for the EMC version of the Product.
8.11 Any changed Product(s) resulting from application of Sections 14, 15 and 16
shall be considered added as Product(s) to this Agreement, and subject to
its terms and conditions.
8.12 INCOMING QUALITY AND RELIABILITY REQUIREMENTS
NEI shall participate [**].
9. DELIVERY REQUIREMENTS
Incoming DISK SLEDs shall be packaged [**].
[**].
7
<PAGE>
EXHIBIT D
NEI Quality Plan
1.0 INTRODUCTION
------------
1.1 This document is the Quality Plan for NEI and defines the quality systems
NEI will use to ensure that they meet the quality and on-time-delivery
expectations of EMC.
1.2 With reasonable notice, EMC shall have the right to inspect and audit any
NEI manufacturing or administrative site that supplies goods or services.
EMC shall have the right to review relevant documents pertaining to quality
information, procedures, certificates of conformance, etc. affecting
materials received.
2.0 DEFINITIONS
-----------
2.1 Plug and Play Failure: Any failure in the first [**] hours of operation
initiates a "Plug and Play" (PnP) process to start. This process notifies
many individuals of the failure, including the EMC NEI Engineer for that
item. Failures within the first [**] hours may also be referred to as a
"Dead on Arrival" (DOA).
2.2 Reliability Failure: Any failure that occurs after the first [**] hours of
operation at the EMC's customer's site. EMC metrics for reliability
failures are:
. Annualized Failure Rate (AFR). AFR is a % of confirmed failures per
population shipped.
. Annualized Rate of Return (ARR). ARR is a % of units returned (whether
confirmed or not) per population shipped.
. Failure in Time (FIT). FIT is a specification of failures per billion
hours of operation.
. Mean-Time-Between-Failures (MTBF). MTBF is the reciprocal of the sum
of failure rates of all the components of a system, or it is the
average of the time between failures in a population.
. Mean-Time-Between-Product-Replacements (MTBPR). MTBPR is a measurement
of hours of operation before a product replacement (whether confirmed
or not).
2.3 Defects per Million (DPM): DPM is a quality metric used to measure the
rejection rate at the EMC factory. "DPM" is represented in terms of # units
bad in a population of 1 million devices. The "defects" used in the
calculation includes any and all functional and non-functional failures
(incorrect labels, missing jumpers, etc.) that do not meet the Product
Specifications in Exhibit C.
2.4 Serious Failure(s): Serious failures are defined as failures where EMC's
customer is experiencing system instability to the point where customer
data or daily business operations are disrupted or at risk in the event of
additional failures.
2.5 Critical Failure(s): Critical failures are defined as failures where EMC's
customer's systems or business operations are down or non-functional, or
performance has deteriorated to the point that the customer's business is
significantly impacted, including but not limited to problems that affect
data integrity, safety, or that create other significant operation impacts.
2.6 Purge: Discrepancy issue with a particular lot or date code of the
Product(s) that requires EMC to remove and segregate the Product(s) in
EMC's factory and service centers.
2.7 ORT: Ongoing Reliability Testing.
2.8 HALT: Highly Accelerated Life Testing.
3.0 PERFORMANCE REQUIREMENTS
------------------------
1
<PAGE>
3.1 The quality numbers stated in this section are requirements. NEI will work
with EMC to define and work toward these requirements. EMC will measure NEI
during the quarterly NEI performance reviews using these quality numbers.
3.2 EMC Factory Performance: NEI agrees to worst-case target DPM levels as
-----------------------
follows:
. Goal of [**]K DPM for the first [**]K production Product; NEI
commitment of [**]K DPM.
. Goal of [**]K DPM for [**]to [**]K production Product; NEI commitment
of [**]K DPM.
. Goal of [**]K DPM for >[**]K production Product; NEI commitment of
[**]K DPM.
If DPM levels committed to by NEI are not achieved, NEI will provide an
improvement plan and schedule within [**] weeks of EMC's request for such
information and will take all reasonable steps to reduce DPM to below the
levels committed to [**].
3.3 EMC Field Reliability: NEI agrees to the following field reliability goals:
---------------------
.. Plug and Play (PnP) of [**] %. See Note 1 for details.
.. AFR = [**] %. See Note 2 for details.
.. FIT = [**] failures per billion hours of operation. See Note 2 for details.
Note 1: The Plug and Play metric is monitored monthly so to allow for real
time visibility to issues, but the reliability goal will be measured
against a rolling [**] average so to minimize statistically insignificant
sample sizes.
Note 2: The AFR and FIT goals are based on the [**] calculations provided
by Network Engines. The metrics assume a [**] degree assumed temperature.
This temperature was agreed upon by EMC and NEI.
Should any of these field reliability metric be exceeded by [**]x or
greater, NEI agrees to meet with EMC on an expedited basis to agree on and
implement a plan to remedy the situation as soon as possible. Such plan may
include some or all of the following provision, or other provisions as the
parties may agree:
[**] all affected material.
[**] all affected material in accordance with Exhibit G.
Provide other [**] actions including, but not limited to:
. [**] Product.
. [**].
. [**] Product supplied to EMC.
2
<PAGE>
4.0 TECHNICAL RESPONSIVENESS/SUPPORT
--------------------------------
4.1 Routine Questions and Issues: NEI will provide same day acknowledgment, by
electronic mail ("email"), facsimile ("fax") or other method of
communication agreed to by the parties, of all EMC requests for assistance
with Routine Questions and Issues, including but not limited to questions
regarding Product(s) service and support. EMC shall have access to
developers, order fulfillment personnel, quality and/or technical personnel
to assist EMC. NEI shall use best efforts to respond to EMC's requests for
assistance within [**] Business Days of receipt of the request.
4.2 Failure Analysis (F/A): NEI shall perform failure analysis on all failed
Product(s) returned to NEI. Failure analysis will be a cooperative effort
between NEI and EMC to determine the root cause of the failure. Failure
replication and determination of source of failure must be completed within
[**] weeks of receipt of Product. If failure analysis is required at a NEI
vendor site, then NEI will be responsible for managing their sub-vendors
analysis in a timely fashion. Once failure analysis has been completed, NEI
will fax or e-mail a failure analysis report to the EMC NEI Engineer
designated by EMC. This report shall include, at a minimum, the Product(s)
serial number, failure cause, containment plans, and corrective action that
NEI will take to prevent further occurrences of the failure. At EMC's
request, the parties will meet to review failure analysis reports provided
under this sub-Section.
4.3 Quality Issues: Quality issues must be responded to by NEI within [**]
after being notified that such an issue exists. NEI will completely close
the quality issue with effective corrective action that will prevent a
repeat failure. This is expected to occur within [**] days, depending on
the nature of the issue. Quality issues identified at NEI's contract
manufacture site should be brought to EMC's attention in a timely fashion.
4.4 Critical Failures: Critical Failures shall be considered to be highest
priority and shall cause immediate allocation of all necessary NEI
resources to expeditiously develop and implement effective containment and
resolution plans in conjunction with EMC, until problem resolution. NEI's
commitment of resources shall include but not be limited to committing NEI
personnel to work evenings and weekends or if necessary, to send such
personnel to EMC's site.
4.5 EMC requires that communications be in writing or electronic mail, if
requested.
5.0 GENERAL PARTNERSHIP REQUIREMENTS
--------------------------------
5.1 NEI will:
5.1.1 Provide EMC with regular updates to Product(s) futures/roadmaps.
5.1.2 Participate in Concurrent Engineering design reviews.
5.1.3 Participate in quarterly performance reviews and annual on-site
audits.
5.1.4 Have monthly quality and reliability improvement plans and share
those periodically with EMC.
5.1.5 Obtain and maintain ISO registration.
5.1.6 Have pro-active problem notification and resolution process for
problems with the potential to adversely effect delivery, quality or
price. This includes any stop ships or production holds that could
impact shipments or quality.
5.1.7 Maintain repair process for [**] years after Product(s) withdrawal.
5.2 EMC and NEI will each provide the other with the names and telephone
numbers of direct contacts. These lists will be updated as necessary.
3
<PAGE>
6.0 KEY PROCESSES
--------------
6.1 Proper safeguards must be in place to counter the possibility of ESD
damage occurring at all points in the process, including but not limited to
receiving, inspection, stocking, assembling, and shipping of components and
assemblies. Refer to [**] for ESD control and damage prevention methods.
6.2 NEI must utilize appropriate statistical techniques for all key
processes.
7.0 QUALITY DATA PROVIDED
---------------------
Each party shall provide the other via e-mail with the information
summarized in the table below.
--------------------------------------------------------------------------------
Metric Owner Frequency
--------------------------------------------------------------------------------
[**] EMC CQ Monthly
--------------------------------------------------------------------------------
[**] EMC CQ Monthly
--------------------------------------------------------------------------------
[**] EMC CQ or SBM Weekly or Monthly (TBD)
--------------------------------------------------------------------------------
[**] NEI Quality Rep Weekly or Monthly (TBD)
--------------------------------------------------------------------------------
[**] NEI Quality Rep Weekly or Monthly (TBD)
--------------------------------------------------------------------------------
[**] EMC CQ or SBM, Monthly
NEI Quality Rep
--------------------------------------------------------------------------------
8.0 CORRECTIVE ACTION PROCESS
-------------------------
8.1 All EMC factory and field returns shall be resolved to root cause. These
issues will be tracked by the EMC NEI Engineer and communicated back to
NEI.
8.2 EMC will make best efforts to ensure that the defective parts are returned
quickly to NEI for failure analysis. NEI shall ensure that failure analysis
is done on defective parts received from EMC as described in sub-Section
4.2, above.
8.3 Upon determining the root cause of the failure, NEI shall establish a
corrective action plan, with EMC's assistance if requested, to ensure that
the Product(s) defect is removed and that root cause corrective action will
be implemented. EMC will assist NEI with tracking all open failures and
will work with NEI to ensure that the proper repair priority is set.
8.4 If NEI encounters a No-Trouble-Found ("NTF") on a Product(s) sent from EMC,
they will arrange for the Product(s) to be sent back for re-verification.
4
<PAGE>
8.5 When EMC sends Products under warranty to NEI, NEI will [**] for such
Product(s). The parties shall reasonably agree on a procedure to administer the
warranty returns process.
9.0 REPAIR PROCESS
--------------
All field returned Product(s) that are upgraded and/or repaired per
standard process shall be reassembled, tested and packaged per the
requirements for new Product. All final test and inspection required for
new Product(s) shall be performed on field return Product(s) prior to its
return to EMC.
10.0 RELIABILITY ASSURANCE
---------------------
NEI shall implement a method used to monitor the reliability of the
Product. NEI will provide EMC with an outline of how that monitoring and
corrective action process works and a plan of how the process will be
implemented.
11.0 OBJECTIVES OF ONGOING RELIABILITY TESTING
-----------------------------------------
11.1 The primary reason for the existence of Ongoing Reliability Testing ("ORT")
is to provide data to support the following tasks:
11.1.1 Provide an early warning of field reliability problems.
11.1.2 Measure the reliability of components at a FRU level on a continuous
basis.
11.1.3 Monitor the reliability change over time.
11.1.4 Provide a controlled environment for monitoring the effects of
process and material changes.
11.1.5 Measure any infant mortality that may be in the Product.
12.0 HALT STRESS TESTING
-------------------
12.1 Any new Product(s) introductions or key changes to a sub-assembly shall
require [**] a quantity of units to be defined, [**]. NEI & EMC will
utilize this information [**]. NEI shall conduct a design review after
completion of the tests.
12.2 Stress testing shall include [**].
5
<PAGE>
EXHIBIT E
Technical Support
1.0 SUPPORT LEVEL
-------------
1.1 EMC will provide all first-call technical support to its customers. NEI's
technical support group will provide no services directly to EMC's
customers, except as described herein. All technical support, as described
in Sections 1 through 5 of this Exhibit, and Product Support under this
Agreement will be provided at no charge to EMC, unless specified otherwise.
1.2 EMC shall ensure that its field personnel are trained in the installation,
setup, and operational issues involving the Product. The NEI technical
support group will provide technical support to EMC's trained engineering
staff as needed to resolve installation, setup and operational issues
involving the Product.
1.3 NEI will provide engineering level support to EMC's engineering staff as
needed to isolate problem cause, make bug fixes to NEI supplied code, and
produce the object code required by EMC to support and update the
Product(s).
1.4 NEI technical support will be available via telephone during normal working
days between the hours of 8:00 AM and 5:00 PM, Eastern Standard Time,
exclusive of NEI observed holidays.
1.5 In the event that NEI makes available Technical information such as
"Technical Tips" on the Product(s), EMC shall have the right to reproduce
such technical information solely for distribution internally to members of
EMC's technical support group.
2.0 PROBLEM ESCALATION
------------------
2.1 When the NEI technical support group determines that it is unable to
resolve the problem with its own resources, it will escalate the problem.
2.2 In those cases where EMC requires on-site assistance to install, setup,
resolve operational issues or obtain necessary diagnostic information in
order to solve a problem, NEI will provide the services of a field
applications engineer or a product development engineer, as determined by
NEI, for that purpose. If it is determined that the cause of the problem is
not due to a defect in the NEI supplied Product, EMC will reimburse NEI for
time and materials at NEI's then standard rate plus reasonable expenses for
transportation, meals and lodging.
2.3 If the NEI technical support group determines that the problem may be due
to a defect in the NEI supplied Product, the problem will be escalated to
NEI engineering and given a priority response.
3.0 TECHNICAL CONTACTS
------------------
3.1 NEI and EMC will establish contacts to report problems, track status,
exchange technical information, track build requirements, make bug fixes
and coordinate the transfer of software files to and from a customer
account on an NEI Support website.
3.2 For NEI
3.2.1 Technical Support Administrator. NEI will establish the Technical
Support Administrator as the central contact point for receiving
written problem reports and sending problem resolution status via
Email or FAX. All verbal contacts with Technical Support should be
made via supplied telephone numbers.
3.2.2 Development Engineering. NEI will assign Development Engineers as
required to resolve all EMC escalated issues.
3.3 For EMC
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3.3.1 Problem Administrator. EMC will establish one person as the
counterpart to the NEI Technical Support Administrator to send problem
reports and receive problem status.
3.3.2 Engineering. EMC will designate specific members of their engineering
staff who are authorized to have engineering level contact with the
designated NEI Engineer.
4.0 SOFTWARE MAINTENANCE RELEASES
------------------------------
4.1 As part of the support program, NEI will provide production quality
software maintenance releases [**]. Maintenance releases will contain fixes
to known problems as well as NEI defined feature additions and
enhancements.
4.2 Maintenance releases will be derived by integrating the latest released
version of EMC's software and a specified version of NEI standard server
software.
4.3 The standard versions on which maintenance releases may be chosen at EMC's
discretion. NEI will give EMC at least [**] days advance notice of upcoming
standard releases, as well as offer EMC beta versions of all NEI standard
releases should they be available.
4.4 Maintenance releases will typically be delivered to EMC for quality
assurance ("QA") testing at about the time the NEI standard version is
production released, but no less than [**] months after EMC's request.
Maintenance releases will be available for access by EMC in a secured
account on the NEI web Server.
4.5 NEI will provide basic unit test of all code supplied to EMC, however, EMC
is responsible for QA testing of their code release.
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EXHIBIT F
RMA Procedure
1.0 When defective Product(s) must be returned to NEI for repair or
replacement, EMC shall contact NEI to obtain an RMA number. EMC shall
submit the information required on NEI's return material authorization
("RMA") form and return the unit for repair or replacement.
2.0 Upon receipt of the completed RMA information, NEI will verify the warranty
status of each item noted. If all items noted are under warranty, NEI will
Email or fax an RMA number to EMC within one Business Day of EMC's request.
If any of the products are found to be out-of-warranty, the RMA information
with repair charges noted will be returned to EMC with the request for a
purchase order to cover the repair charges. Upon receipt of the purchase
order, NEI will Email or fax an RMA number to EMC within one Business Day
of EMC's request. Blanket purchase orders for out of warranty repairs may
be used as agreed between the parties.
3.0 Upon receipt of the RMA number, EMC shall package the defective Product(s)
and ship it to NEI freight prepaid by EMC with the RMA number clearly
marked on the outside of the box. NEI will not accept any RMA Product(s)
shipped freight collect or with pending import fees and any such shipments
will be returned to EMC at EMC's expense.
4.0 If the returned Product(s) is under warranty, NEI shall provide the repairs
or a replacement unit to EMC at no charge.
5.0 If the returned Product(s) is not under warranty and is determined by NEI,
in its sole judgment, not to be repairable, EMC will be notified of such
and given the option to have the unit scrapped (either returned to EMC or
scrapped by NEI).
6.0 If the returned Product(s) is under warranty, but NEI determines that the
warranty was voided, EMC will be notified of such and given the option to
have the Product repaired at the agreed out-of-warranty repair cost. If NEI
determines that the Product(s) can not be repaired, EMC will be notified
and given the opportunity to have the Product(s) scrapped by NEI or
returned to EMC.
7.0 NEI shall ship to EMC or to a location, within the continental United
States, designated by EMC, freight prepaid by NEI, the repaired Product(s)
or a replacement Product(s) within [**] Business Days from the date the
Product(s) is received at NEI.
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EXHIBIT G
This Exhibit sets forth the terms and conditions which govern the repair of the
Product(s). Notwithstanding anything that may be construed to the contrary, EMC
shall not have an obligation to purchase any Product repair from NEI under the
Agreement.
1.0 REPAIR PROCESS AND CYCLE TIME
-----------------------------
1.1 All field returned Product(s) shall be /or repaired per standard process
and then reassembled, tested and packaged per the requirements for new
Product. All final test and inspection required for new Product(s) shall be
performed on field return Product(s) prior to its return to EMC. NEI shall
provide a maximum of [**] day standard cycle time on repair Product. In the
event that repair of a Product(s) is not completed within [**] days and the
returned product is a warranty claim, except for reasons pursuant to
Section 26.7 of the Agreement, [**].
2.0 PRODUCT SUPPORT AND PRODUCT SUPPORT DURATION
--------------------------------------------
2.1 At EMC's request, NEI shall provide the Product(s) support described in
sub-Section 2.2, below. NEI shall provide Product(s) support during the
term of the Agreement and for a period of not less than [**] years
following withdrawal of a Product(s) as described in Section 17.0 of this
Agreement. Charges for out of warranty Product repair are to be determined.
2.2 Product support shall include, but not be limited to Product:
[**]
3.0 SCRAP
-----
3.1 NEI shall make best efforts to repair all Product(s) per EMC's
specifications in Exhibit C.
3.2 Once a Product(s) has been returned [**] for repair of verified hardware
problems, NEI shall submit a scrap request to EMC's NEI Engineer for
review and authorization. NEI's requests for scrap authorization shall
include the following information:
3.2.1 Product's part and serial numbers.
3.2.2 A documented history of remedial processes performed on Product.
3.2.3 Product's failure mode or quality conformance issue.
3.3 EMC shall provide a timely response to NEI's scrap requests.
3.4 NEI may be required to return scrapped Product(s) to EMC for verification
and analysis at EMC's expense. EMC shall notify NEI of this requirement at
the time of Product's scrap authorization.
3.5 Scrap costs [**].
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Exhibit H
Software License Terms
1.0 DEFINITION
----------
1.1 Licensed Program(s): Means for each item of software programming which is
provided in conjunction with a Product, or is itself identified as a
Product on Exhibit A, (i) the latest release being generally marketed at
the time of shipment of the machine readable object code and all related
documentation normally supplied therewith, and (ii) all changes thereto and
subsequent releases thereof which NEI is obligated to provide under the
terms of this Agreement.
2.0 GRANT OF LICENSE AND RIGHT TO USE AND REMARKET
----------------------------------------------
2.1 Evaluation License - Upon request, NEI shall provide to EMC, at no charge,
one (1) evaluation copy of the Licensed Program(s).. With regard thereto,
NEI grants EMC a nonexclusive, nontransferable right and license to use
such solely for purposes of, testing, and evaluating to determine
conformance to the applicable requirements.
2.2 Sublicensing of Licensed Program - NEI hereby grants to EMC, on a
nonexclusive, nontransferable, irrevocable (except as expressly provided
herein) basis, the right and license to obtain Licensed Program(s) from NEI
for the purpose of providing such to the customers under the terms of the
break-the-seal type license agreement packaged with the Licensed Program,
if any, or in the absence of such break-the-seal license agreement, under
the same licensing provisions as used by EMC to license its own programs of
a similar nature.
2.3 Additional Authorizations - Provided EMC is in compliance with the material
provisions of the Agreement, NEI shall not invoke, at law or in equity, any
intellectual property or proprietary right, no matter when acquired, in
order to interfere with the exercise of any right or the fulfillment of any
obligation set forth in the Agreement, or to collect any moneys in excess
of the fees set forth in the Agreement.
2.4 General - EMC acknowledges NEI's representation that Licensed Program
involves valuable copyright, trade secrets and other intellectual property
and/or proprietary rights of NEI. No title to or ownership thereof is
transferred to EMC hereunder. EMC shall not be responsible for any
violation of NEI's intellectual property and/or proprietary rights by any
entity other than EMC or its subcontractors. EMC will promptly notify NEI
if EMC becomes aware of any such violation and will reasonably cooperate
with NEI in the protection or enforcement of NEI's rights in Licensed
Program. EMC shall have no obligation to commence any proceedings with
regard to such violation. EMC and NEI hereby agree that the rights and
licenses granted to EMC hereunder shall be deemed made and effective as of
the effective date of the Agreement.
2.5 Restrictions - Unless otherwise specifically agreed in writing, EMC shall
not disassemble or reverse compile Licensed Program. EMC shall make no use
of Licensed Program except as permitted hereunder and shall treat and
protect such with same degree of care as used by EMC with regard to its own
materials of a similar nature and importance, and no less than reasonable
care. EMC shall not remove or alter any copyright or other proprietary
notices affixed to or embedded in Licensed Program supplied to EMC by NEI,
and shall include such in all copies made by EMC. EMC shall have no
obligation to determine the appropriateness of such notices.
3. LICENSED PROGRAM WARRANTY
-------------------------
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The following warranty is in addition to any other warranty set forth in
the agreement and shall control in case of conflict with any such other
warranty that pertains to Licensed Program(s).
3.1 For each Licensed Program shipped by NEI with its own "break-the-seal" type
of license, NEI shall provide warranty service directly to EMC and/or or
the licensee/customer, if any, in the manner specified in such license
agreement
3.2 For each Licensed Program shipped by NEI without its own "break-the-seal"
type of license, NEI warrants to EMC and the customer, if any, that, the
Licensed Program shall, from the date of such shipment until [**] calendar
days after successful installation, operate in accordance with its user
documentation, published specifications and any other requirements set
forth in this Agreement.
3.3 For each Licensed Program shipped by NEI, NEI warrants to EMC and the
customer if any, that the Licensed Program shall be Year 2000 Compliant.
3.4 If EMC reports a material deviation from the above warranties within the
applicable warranty period, and NEI is unable to correct or offer an
alternative acceptable to EMC or the customer, if any, within [**] calendar
days after receipt of the report, EMC shall [**].
3.5 NEI warrants that it shall replace [**], within [**] calendar days after
receipt of notice, any Licensed Program media or documentation shipped by
NEI that is or becomes defective within [**] calendar days after successful
installation, provided the defect is not due to accident, abuse or
misapplication after arrival.
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Exhibit I
Indemnity Country List
Argentina
Australia
Austria
Bahrain
Belgium
Belize
Bermuda
Bolivia
Bosnia and Herzegovina
Brazil
British Virgin Islands
Brunei
Bulgaria
Canada
Cayman Islands
Chile
China, People's Republic of
Colombia
Costa Rica
Cyprus
Czech Republic
Denmark
Dominican Republic
Ecuador
Egypt
El Salvador
Estonia
Falkland Island
Finland
France
Georgia
Germany, Federal Republic
Gibraltar
Greece
Grenada
Guatemala
Guernsey
Guinea
Holy See
Hong Kong
Hungary
Iceland
India
Indonesia
Iran
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Ireland
Isle of Man
Israel
Italy
Jamaica
Japan
Jersey
Jordan
Kazakhstan
Korea, Republic of
Kuwait
Kyrgyzstan
Latvia
Lebanon
Liechtenstein
Lithuania
Luxembourg
Macedonia
Malaysia
Malta and Gozo
Mexico
Monaco
Montserrat
Morocco
Netherlands
Netherlands Antilles (and Aruba)
New Zealand
Nicaragua
Norway
Pakistan
Panama
Paraguay
Peru
Philippines
Poland
Portugal
Romania
Russian Federation
Saudi Arabia
Singapore
Slovakia
Slovenia
South Africa, Republic of
Spain
Sweden
Switzerland
Taiwan, Republic of China
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Thailand
Tunisia
Turkey
Ukraine
United Arab Emirates
United Kingdom
United States of America
Uruguay
Venezuela
Western Samoa
Yugoslavia
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Exhibit J
EMC Logistics Partners
To be supplied by EMC, as appropriate
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