Software Development and Services Agreement - Red Hat Software Inc. and Building Number Three Ltd.
AGREEMENT
This is a software development and services agreement Red Hat
Software, Inc. ("Red Hat"), a Connecticut, USA corporation, and Building
Number Three, Ltd. ("B3"), a Private Company, limited by shares and
registered at Companies House Cardiff, Wales, United Kingdom, enter into
this agreement as of the last date following the signatures below.
1. DEFINITIONS.
A. "Linux" means the Red Hat Linux operating system computer software for Intel
and compatible based computers, version 5.0 and later versions released by Red
Hat during the term of this Agreement.
B. "Red Hat Product" means the product of Red Hat currently known as "Official
Red Hat Linux" for Intel-based computers, version 5.0 and later versions
released by Red Hat during the term of this Agreement.
C. "B3 Software" means any and all software provided to Red Hat by B3 pursuant
to this Agreement.
D. "Bugs" means errors in a software program that cause the software to fail to
function as intended.
E. "Source Code" means software in written form which is easily understood by a
human knowledgeable in the art of computer programming.
F. "Binary Code" means software in machine-readable form that is not easily
understood by a human knowledgeable in the art of computer programming, but
which is understood and used by a computer to run the software.
K. "Confidential Information" means any information identified as being
Confidential Information by either party, either orally or in writing, at the
time it is disclosed, or designated as confidential in writing (either
electronically or by other means) within 30 days of the disclosure, provided
that the information (a) was not publicly known or generally in the public
domain prior to the disclosure, (b) does not become generally known or part of
the public domain through any improper action or disclosure by the receiving
party, or (c) can be shown to have been in the rightful possession of the
receiving party prior to having been identified as Confidential Information by
the disclosing party.
2. WORK MADE FOR HIRE.
A. B3 shall perform software development and consulting work as follows:
1. Develop, enhance, fix bugs, and otherwise work to improve the kernel
of Linux,
--------------
**[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
-2-
as directed by Red Hat;
2. Perform high priority bug fixes and other custom development or
consulting work, as directed by Red Hat;
3. Perform other work or services related to Linux, as directed by Red
Hat.
B. The Source Code to be written by B3 pursuant to this Agreement shall be a
work made for hire, and Red Hat shall be the sole owner of the copyright of the
Source Code.
3. ADDITIONAL SERVICES.
From time to time, B3 shall send a representative designated by Red Hat to Red
Hat's offices for consultation and other purposes related to this Agreement. Red
Hat and B3 agree to cooperate in selecting dates and times for such meetings.
Red Hat shall bear the reasonable travel costs and expenses incurred by the B3
representative in attending these consultations.
4. PAYMENT.
A. In consideration for the work outlined in this Agreement, Red Hat shall make
monthly payments to B3 in accordance with the provisions of Schedule A. Both
parties may modify at any time the amounts to be paid by Red Hat to B3, but any
and all such modifications shall be in writing and shall be signed by both
parties in order to be effective.
B. Payment shall be made in U.K. funds on the last standard business day in the
United States of each month for the work performed that month. Work performed
for less than a full month shall be prorated accordingly. Payment shall be made
via bank wire transfer, or other means agreed to by both parties. Red Hat shall
bear the risk of any fluctuation in currency exchange rates between U.S. and
U.K. currency.
5. NON-EXCLUSIVITY.
This Agreement is a non-exclusive agreement, and both parties remain free to
enter into similar agreements with third parties. In the event that B3 enters
into an agreement with a third party in which B3 performs software development,
consulting, or other services related to Linux, B3 shall inform Red Hat of that
agreement before or at the time it enters into such agreement. Nothing in this
section limits or supercedes the provisions of Section 7.
6. OUALITY AND TESTING.
B3 shall thoroughly test the quality of all Source Code and Binary Code it
delivers to Red Hat in accordance with customary practice within the industry.
All such code delivered to Red Hat by B3 shall be of commercial production
quality. Red Hat shall have the option to test all such code
--------------
**[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
-3-
pursuant to its own quality assurance procedures, and may reject any code it
reasonably believes does not meet commercial production quality. In the event
that bugs are discovered in the B3 Software, B3 will use its best effort to
correct the Bugs in a speedy manner.
7. CONFIDENTIALITY.
A. Both Red Hat and B3 agree that during the term of his Agreement, each party
may disclose to the other party certain Confidential Information. Either party
may designate any information it provides to the other party as Confidential
Information, and the receiving party shall not disclose that information to
third parties without the express permission of the disclosing party.
Information designated as Confidential Information shall remain confidential
until the disclosing party designates it as non-confidential or until the
information becomes public through no fault of the receiving party.
B. B3 agrees that all of its employees, contractors, and other agents shall
enter into a separate written confidentiality agreement with B3 that ensures
they will comply with the confidentiality provisions of this Agreement.
C. Both Red Hat and B3 agree that in the event either party breaches or
threatens to breach the provisions of this section, such breach or threatened
breach would cause irreparable harm to the non-breaching party, and the
non-breaching party would be entitled to injunctive and other equitable relief
to prevent such breach or to remedy an actual breach.
8. LIMITED WARRANTY.
A. Red Hat warrants that it has the right and authority to enter into this
Agreement, and that it will use its commercially reasonable best efforts to
distribute and market the Red Hat Product.
B. B3 warrants that it has the right and authority to enter into this Agreement,
and that, to the best of its knowledge, the B3 Software does not and will not
infringe upon any patent, copyright, trade secret, or other intellectual
property interest of any third party. B3 warrants that it will take all due and
reasonable care to avoid infringing any patent, copyright, trade secret, or
other intellectual property interest of any third party.
9. ADDITIONAL OBLIGATIONS.
A. Throughout the term of this Agreement, B3 shall employ and retain engineers
of world-class skills and qualifications who are practiced and capable of
performing the engineering obligations of B3 under this Agreement. Employees of
B3 who will perform work under this Agreement must be approved in advance by Red
Hat.
B. B3 shall establish and maintain sufficient office space, computer hardware,
and other equipment necessary to enable it to perform its obligations under this
Agreement in a
--------------
**[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
-4-
professional and timely fashion. In the event that B3 requires additional
computer hardware in order to perform its responsibilities under this Agreement,
Red Hat will purchase or reimburse B3 for the cost of such hardware. All such
hardware purchases must be approved in advance by Red Hat, and Red Hat agrees to
lease all such hardware to B3 at no charge to B3 during the term of this
Agreement. Upon the termination of this Agreement for any reason, B3 shall
return to Red Hat all such hardware.
10. TERM AND TERMINATION.
This agreement shall begin on the date it is signed by both parties. Either
party may terminate this Agreement by written (electronic or other means) notice
of termination, which shall be effective upon receipt, at least 30 days in
advance of termination.
11. INDEMNITY
A. B3 shall defend, indemnify, and hold Red Hat harmless from and against any
liability, suits, claims, losses, damages and judgments, and shall pay all costs
(including reasonable attorneys' fees) and damages arising from a claim that B3
Software infringes any third party's patent, copyright, trademark or other
intellectual property interest, except as provided in Section 11.B. below. The
provisions of this Section shall survive the termination of this Agreement.
B. Red Hat shall defend, indemnify, and hold harmless B3 from and against any
liability, suits, claims, losses, damages and judgments against B3 made in the
United States, provided that B3 promptly notifies Red Hat of any and all such
claims and provided that Red Hat is given control over the defense of any and
all such claims.
The provisions of this Section shall survive the termination of this Agreement.
12. LIMITATION ON LIABILITY
To the extent allowed by applicable law, IN NO EVENT SHALL RED HAT, ITS
SUPPLIERS, DISTRIBUTORS, OR RESELLERS, BE LIABLE FOR ANY DAMAGES WHATSOEVER,
INCLUDING WITHOUT LIMITATION, ANY LOSS OF PROFITS, LOSS OF BUSINESS, LOSS OF USE
OR DATA, INTERRUPTION OF BUSINESS, OR FOR DIRECT, INDIRECT, SPECIAL, INCIDENTAL,
OR CONSEQUENTIAL DAMAGES OF ANY KIND, EVEN IF RED HAT HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE
OF ANY LIMITED REMEDY. (B) EXCEPT AS PROVIDED IN THIS AGREEMENT, IN NO EVENT
WILL RED HAT, ITS SUPPLIERS, DISTRIBUTORS, OR RESELLERS, BE LIABLE FOR ANY CLAIM
AGAINST B3 BY ANY THIRD PARTY. (C) IN NO EVENT SHALL RED HAT, ITS SUPPLIERS,
DISTRIBUTORS, OR RESELLERS, BE LIABLE FOR (I) ANY REPRESENTATION OR WARRANTY
MADE TO ANY THIRD PARTY BY B3, ITS DISTRIBUTOR, OR ITS AGENTS; (II) FAILURE OF
THE SOFTWARE OR THE PRODUCT TO PERFORM;
--------------
**[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
-5-
(III) FAILURE OF THE SOFTWARE OR THE PRODUCT TO PROVIDE SECURITY; OR (IV) THE
RESULTS OR INFORMATION OBTAINED OR DECISIONS MADE BY END USERS OF THE SOFTWARE
OR THE PRODUCTS OR THE DOCUMENTATION. THIS LIMITATION OF LIABILITY IS AN
ESSENTIAL PART OF THE BARGAIN UNDER THIS AGREEMENT.
13. MISCELLANEOUS.
A. This Agreement shall be governed by and shall be construed in accordance with
the laws of the State of North Carolina, U.S.A., regardless of its choice of law
provisions. Any dispute, controversy, or other claim arising out of this
Agreement shall be resolved in an appropriate state or federal court within
North Carolina. The parties each agree that they are subject to the personal
jurisdiction of the state and federal courts within the State of North Carolina,
and each waives the right to challenge the personal jurisdiction of those courts
over it. The United Nations Convention on Contracts for the Sale of Goods shall
not apply to this Agreement.
B. Any notice under this Agreement shall be in English, in writing, and shall
be deemed to be given upon receipt. Notices to Red Hat shall be delivered to
Contracts Manager, Red Hat Software, Inc., 4201 Research Commons, Suite 100,
79 Alexander Drive, Research Triangle Park North Carolina 27709 USA. Notices
to B3 shall be delivered to The Director at B3's registered address, which as
of June 1, 1998 is Building Number Three, Ltd., 158 Western Street, Swansea,
Wales, UK, SA1 3JZ.
C. This Agreement, including all Schedules, constitutes the entire understanding
of the parties. This Agreement supersedes and terminates all prior
representations, warranties and agreements, written or oral, regarding the
subject matter of this Agreement. Any modification to this Agreement must be in
a writing signed by both parties.
D. All covenants and obligations of this Agreement shall survive the termination
of this Agreement.
E. If one or more of the provisions contained in this Agreement is held invalid,
illegal or unenforceable in any respect by any court of competent jurisdiction,
such holding will not impair the validity, legality, or enforceability of the
remaining provisions.
F. Headings in this Agreement are used for convenience of reference only and do
not affect the interpretation of the provisions.
G. Failure or delay on the part of any party to exercise any right, remedy,
power or privilege hereunder will not operate as a waiver. Any waiver must be in
writing and signed by the party granting such waiver in order to be effective.
H. No provision of this Agreement is to be interpreted for or against either
party on the
--------------
**[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
-6-
grounds that one party or the other, or their legal counsel, drafted such
provision.
I. In the event that Red Hat is merged with or consolidated into any other
entity, or in the event that substantially all of the assets of Red Hat are sold
or otherwise transferred to any other entity, the provisions of this Agreement
will be binding upon, and inure to the benefit of, such other entity. D3 shall
not subcontract or assign this Agreement to any third party without the express
written consent of Red Hat.
J. Nothing in this Agreement shall be construed to make the parties partners,
joint venturers, representatives, or agents of each other, nor shall either
party so hold itself out.
To show their assent to this Agreement, the duly authorized officers of the
parties have signed below.
RED HAT SOFTWARE. INC. ("Red Hat") BUILDING NUMBER THREE, LTD. ("B3")
/s/ Robert F. Young /s/ Alan Cox
---------------------------------- ------------------------------------
Robert F. Young Alan Cox
President Director
Date: JUNE 10, 1998 Date: JUNE 9, 1999
----------------------------- -------------------------------
--------------
**[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
-7-
SCHEDULE A
Red Hat shall make payments to B3 according to the following schedule:
<TABLE>
<CAPTION>
B3 EMPLOYEE AMOUNT TO BE PAID
----------- -----------------
<S> <C>
Alan Cox [CONFIDENTIAL TREATMENT REQUESTED]**
Stephen Tweedie [CONFIDENTIAL TREATMENT REQUESTED]**
</TABLE>
This Schedule may be amended by both parties from time to time, but only in
writing signed by both parties.
--------------
**[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.