Supplier Agreement - VA Linux Systems Inc. and Network Engines Inc.
SUPPLIER AGREEMENT
BETWEEN
VA LINUX SYSTEMS, INC.
AND
NETWORK ENGINES, INC
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TABLE OF CONTENTS
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TABLE OF EXHIBITS
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SUPPLIER AGREEMENT*
This SUPPLIER Agreement is made and entered into as of March 1, 2000, by and
between Network Engines, Inc, a Delaware corporation having its primary place of
business at 61 Pleasant Street, Randolph, MA 02368 ("SUPPLIER"), and VA Linux
Systems, Inc., a Delaware corporation having its primary place of business at
1382 Bordeaux Drive, Sunnyvale, CA 94089 ("VA LINUX").
WHEREAS, SUPPLIER is a manufacturer and/or seller of certain, parts, subsystems,
systems or the like ("Product(s)") that may be used in or with computer systems,
and VA LINUX manufactures, and/or markets and sells computer systems; and
WHEREAS, VA LINUX and SUPPLIER desire to set forth the terms and conditions
pursuant to which SUPPLIER will sell to VA LINUX, and VA LINUX will purchase
from SUPPLIER, the Product for resale by VA LINUX in or with VA LINUX's computer
systems. NOW THEREFORE in consideration of the mutual promises contained herein,
VA LINUX and SUPPLIER agree as follows:
1.0 DEFINITIONS. WHENEVER USED IN THIS AGREEMENT, THE CAPITALIZED TERMS SET
FORTH IN THIS SECTION SHALL HAVE THE FOLLOWING MEANINGS:
1.1 "AGREEMENT" means this document, and all attachments or exhibits and other
documents incorporated into this document. This Agreement may be modified only
in accordance with Section 20.18.
1.2 "BUSINESS DAY" means any day ("Calendar Day") other than a Saturday, Sunday
or public or religious holiday, which is actually observed by either Party.
Business Days commence at 8:00 a.m. PST and conclude at 5:00 p.m. PST. Within a
reasonable time after the Effective Date of this Agreement, the Parties shall
exchange lists setting forth their respective holidays for the remainder of the
calendar year. Thereafter, the Parties shall exchange such lists as the Parties
determine their respective holidays for the following calendar year. Failure to
provide a list shall not bar a day from being recognized as a Business Day. Any
requirement to provide notice or Product by a certain Business Day shall mean by
the close of that Business Day.
1.3 "CONFIDENTIAL INFORMATION" means any information of a Party, including, but
not limited to that regarding such Party's business, customers, employees,
marketing, operations, technology, products and the like, which is identified in
writing as proprietary and/or confidential, or which is disclosed orally as
confidential and confirmed in writing as confidential within ten (10) days from
the date of disclosure.
1.4 "CONTRACT MANUFACTURER" means a third party authorized by VA LINUX to
manufacture, test, assemble, package, test and deliver components,
subassemblies, finished systems or services for VA LINUX.
1.5 "COMPONENT" is a part or other constituent element of the Product.
1.6 "DELIVER, DELIVERED, OR DELIVERY" means the delivery of Product to the FOB
point set forth in Exhibit B.
1.7 "DISCLOSER" means a Party disclosing Confidential Information hereunder.
1.8 "DOCUMENTATION" means materials relating to the Product and provided to VA
LINUX, namely, the product manual set out in Exhibit A, modifications to the
product manual, and other instructions regarding the installation and
maintenance and use of Product.
1.9 "EFFECTIVE DATE" means the date first set forth above, on which date the
initial term of this Agreement shall commence.
1.10 "ENGINEERING CHANGE" means any mechanical, electrical or documentary change
to the Product.
*Portions of this exhibit have been redacted pursuant to a confidential
treatment request filed with the Commission.
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1.11 "EOL" means End of Life of the Product or a Spare Part: the date on which
such Product or Spare Part is no longer being produced.
1.12 "EPIDEMIC FAILURE" means a single root cause defect or malfunction of a
Product or Spare Part at a Failure Rate (calculated by the formula set forth
below) exceeding the failure rate limit specified in Exhibit B. Such defect or
malfunction must impair performance and/or create a safety concern, be
reasonably verified by SUPPLIER, and be due to defects in material, components,
workmanship, manufacturing process and/or design deficiencies attributable to
SUPPLIER or its subcontractors. Such defect or malfunction must not be
attributable to normal wear out, expiration of any applicable shelf life, nor
components for which SUPPLIER does not have design or change control. The
Failure Rate is based on a shipment and is calculated according to the following
formula:
A = B/C
A = Failure Rate attributable to a single root cause
B = cumulative number of Units of Product from a single shipment
and which failed for the same root cause over a [*] period.
C = total number of units of Product in a shipment.
1.13 "INTELLECTUAL PROPERTY" means all patents, utility models, design,
know-how, copyright, mask works, trademarks, and trade secrets, including, but
not limited to, engineering drawings, specifications, schematics, drawings,
diagrams, lay outs, simulation results, test requirements and definitions, in
all countries of the world, which such Party owns or controls as of the
Effective Date or may hereafter acquire during the term of this Agreement.
1.14 "JIT" means just-in-time.
1.15 "LONG LEAD TIME" means any lead time for materials, parts or components
that is greater than the minimum Purchase Order Lead Time.
1.16 "MANDATORY ENGINEERING CHANGE" means an Engineering Change that is required
to satisfy governmental standards, correct material design defects, ensure data
integrity, or for safety, environmental or other reasons as reasonably
determined by SUPPLIER.
1.17 "OPTIONAL ENGINEERING CHANGE" means an Engineering Change that does not
diminish the form, fit, function, or maintainability of the Product, and does
not alter the compatibility of the Product for VA LINUX or its Contract
Manufacturer to add additional elements, including a hard drive or software, to
the Product.
1.18 "PARTIES" means VA LINUX and SUPPLIER, collectively.
1.19 "PARTY" means VA LINUX or SUPPLIER, depending on context.
1.20 "PLANT OF MANUFACTURE" means the SUPPLIER location that manufactures,
consolidates, assembles and Delivers Product.
1.21 "PRICE SCHEDULE" means the prices at which VA LINUX shall purchase Product.
The Price Schedule is set forth in Exhibit B.
1.22 "PRODUCT" means the production Units of SUPPLIER product(s) to be sold and
purchased under this Agreement. The Product specifications are set forth in
Exhibit A, which may be amended by the Parties to include additional products.
1.23 "PRODUCT DEMAND FORECAST" means a [*]-rolling forecast setting forth, by
[*], the Units of Product anticipated to be purchased.
1.24 "PURCHASE ORDER" means a purchase order issued by VA LINUX (or its Contract
Manufacturer) for purchase of Product under this Agreement.
1.25 "PURCHASE ORDER ADJUSTMENT SCHEDULE" means the schedule for allowable
increases or rescheduling of Purchase Order quantities. This schedule is set
forth in Exhibit B. This schedule may be modified by the Parties only in
accordance with Section 20.18.
*Redacted; confidential treatment requested.
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1.26 "PURCHASE ORDER LEAD TIME" means a range of time between a minimum and
maximum time between Purchase Order Placement and the Requested Delivery Date,
as specified in Exhibit B.
1.27 "PURCHASE ORDER PLACEMENT" means the point in time at which SUPPLIER
receives a Purchase Order from VA LINUX or its Contract Manufacturer.
1.28 "QUALITY ASSURANCE REQUIREMENTS" means the quality requirements for the
manufacture of Product and Spare Parts set forth in Exhibit C hereto.
1.29 "RECIPIENT" means a Party receiving Confidential Information hereunder.
1.30 "REPRESENTATIVES" means the directors, officers, employees, agents, or
consultants of a Party.
1.31 "REQUESTED DELIVERY DATE" means the date for Delivery of Product requested
by VA LINUX or its Contract Manufacturer in a Purchase Order.
1.32 "SCHEDULED DELIVERY DATE" means the date for Delivery of Product requested
by VA LINUX or its Contract Manufacturer in a Purchase Order and accepted by
SUPPLIER.
1.33 "VA LINUX" means VA Linux Systems, Inc., a Delaware corporation having its
principal place of business at 1382 Bordeaux Drive, Sunnyvale, CA 94089, and its
majority owned subsidiaries.
1.34 "SPARE PART" means a field replaceable part associated with Product.
1.35 "SPARE PARTS FORECAST ADJUSTMENT SCHEDULE" means a schedule for allowable
increases or rescheduling of Spare Parts orders. This schedule is set forth in
Exhibit B to this Agreement. The Parties may modify this schedule only in
accordance with Section 20.18.
1.36 "SPARE PARTS FORECAST" means a [*]-rolling forecast setting forth, by [*],
the Units of Spare Parts anticipated.
1.37 "SUPPLIER QUALITY AGREEMENT" means VA LINUX's Supplier Quality Agreement,
attached hereto as Exhibit C.
1.38 "UNIQUE MATERIALS" means all materials that: (a) are not catalog items; (b)
were developed by a vendor specifically to meet VA LINUX's specifications; and
(c) are not resalable or returnable.
1.39 "UNIT" means a single item of Product.
2.0 SCOPE. SUPPLIER agrees to manufacture, assemble, test, package, Deliver and
sell Product to VA LINUX (or its Contract Manufacturer) in accordance with the
terms and conditions set forth in this Agreement.
3.0 TERM OF AGREEMENT.
3.1 Term. The term of this Agreement shall begin on the Effective Date and will
end one (1) year thereafter, subject, however, to earlier termination in
accordance with Section 19.0. Notwithstanding the foregoing sentence, this
Agreement shall be automatically extended for the time necessary to fulfill
Purchase Orders placed during the Term of this Agreement (and not in the
automatic extension period) by VA LINUX or its Contract Manufacturer.
3.2 Extension of Term. The Parties may agree to extend the initial term of this
Agreement for subsequent one (1) year terms by executing a written extension no
later than three (3) months prior to the end of the then-current term.
Notwithstanding the foregoing sentence, this Agreement is, and shall always be
interpreted as, a definite-term agreement. Neither Party has made any
commitments regarding the duration nor renewal of this Agreement beyond those
expressly stated herein.
4.0 PRODUCT DEMAND FORECASTS. Product Demand Forecasts shall constitute good
faith estimates of VA LINUX's anticipated requirements for Product based on
current market conditions. Each Product Demand Forecast shall cover a [*]
rolling period (not to extend beyond the term of the Agreement) beginning with
the [*] in which such forecast is provided, and shall set forth, by month, the
Units of Product anticipated. During the term of this Agreement, VA LINUX and/or
its Contract
*Redacted; confidential treatment requested.
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Manufacturer will provide SUPPLIER with an updated Product Demand Forecast on a
[*] basis, with the exact date to be determined. Product Demand Forecasts
shall be provided to SUPPLIER's Customer Account Representative as identified on
Exhibit B. SUPPLIER shall advise VA LINUX within five (5) Business Days of
receipt of VA LINUX's Product Demand Forecast whether the forecasted quantities
are within SUPPLIER's output capability and ability to produce such Product.
Product Demand Forecasts are for informational purposes only. Such forecasts do
not authorize SUPPLIER to start manufacturing Product or purchasing Components,
nor do they obligate VA LINUX to purchase Product.
5.0 PURCHASE ORDERS.
5.1 Contract Manufacturer. VA LINUX may authorize a Contract Manufacturer to
make purchases of Product under this Agreement. Any Contract Manufacture
authorized hereunder shall agree that it will be responsible for (a) any
obligations expressly or implicitly required of a Contract Manufacturer
hereunder (e.g. and without limitation, under Sections 7.2 and 11.2), (b) the
obligations and limitations assumed by VA LINUX under Sections 16, 17, and 18,
and (c) general terms under Sections 1 and 20. The assumption of an obligation
by a Contract manufacturer shall not relieve VA LINUX of any obligation
hereunder. VA LINUX shall be responsible for the Contract Manufacturer's
performance of the obligations hereunder by Contract Manufacturer.
Notwithstanding this authorization, VA LINUX reserves the right to purchase
Product in accordance with this Agreement directly from SUPPLIER in lieu of or
in addition to purchases by VA LINUX's Contract Manufacturer.
5.2 Purchase Order Information. Purchase Orders issued to SUPPLIER shall contain
the following information:
(a) Product being purchased, referencing VA LINUX's part number;
(b) Quantity of Units requested;
(c) The applicable Unit price;
(d) Packaging;
(e) Billing address; and,
(f) FOB point, Delivery instructions, including destination address and
Requested Delivery Dates.
5.2.1 Referencing Agreement. Failure of VA LINUX or its Contract
Manufacturer to reference this Agreement on any Purchase Order shall not affect
the applicability of this Agreement to govern such Purchase Order.
5.3 Purchase Orders. VA LINUX and/or its Contract Manufacturer shall order
Product by issuing Purchase Orders to SUPPLIER. Purchase Orders may be issued to
SUPPLIER via (a) electronic mail ("email"); (b) Electronic Data Interchange
("EDI"); (c) FAX transmission; or (d) certified U.S. mail. VA LINUX and/or its
Contract Manufacturer shall issue Purchase Orders in advance of the Purchase
Order Lead Time, as set forth in Exhibit B, to allow SUPPLIER to meet the
Requested Delivery Date. In the event VA LINUX's Contract Manufacturer issues
the Purchase Order, VA LINUX will not be a party to the purchase transaction,
but will be an intended third-party beneficiary thereof.
5.4 Acceptance/Rejection of Purchase Orders. Within three (3) Business Days
after receipt of a Purchase Order, SUPPLIER shall confirm such receipt by FAX
transmission or email with the company issuing the Purchase Order. SUPPLIER's
failure to confirm receipt of Purchase Orders within three (3) Business Days of
receipt thereof shall be deemed an acceptance of such Purchase Orders. SUPPLIER
shall have the right to reject a Purchase Order if it does not comply with the
terms of this Agreement, and shall have the right to reject or condition
approval of a Purchase Order if SUPPLIER in its reasonable discretion believes
it will be unable to fulfill the order in a timely manner or with appropriate
quality (for example, if the quantity in a Purchase Order significantly exceeds
a the Product Demand Forecast).
5.5 Applicable Terms and Conditions. The terms and conditions of this Agreement
shall prevail over the terms and conditions of VA LINUX's or its Contract
Manufacturer's Purchase Orders and
*Redacted; confidential treatment requested.
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SUPPLIER's acknowledgment form or invoice. Additional, different, or conflicting
terms and conditions on a Purchase Order, acknowledgment form, invoice or any
other form shall be of no effect in a purchase transaction for Product under
this Agreement.
6.0 PRICING.
6.1 Pricing. The company issuing the accepted Purchase Order (either VA
LINUX or its Contract Manufacturer) shall pay the applicable Unit price for each
Unit of Product as set forth in Exhibit B.
6.2 Modifications. Pricing shall be based on the Product specification
and configuration. If the specification or configuration is changed and such
change increases or decreases the per Unit production cost of the Product, the
Unit price shall be adjusted accordingly by an amount agreed to by VA LINUX and
SUPPLIER.
6.3 Cost Reduction Plan. During the term of this Agreement, SUPPLIER will review
cost structures with VA LINUX [*].
6.4 [*]
7.0. LEAD TIME; CANCELLATION; RESCHEDULING OF PURCHASE ORDERS.
7.1 Lead Time. SUPPLIER's maximum Purchase Order Lead Time to fulfill Purchase
Orders is set forth in Exhibit B.
7.1.1 Lead Time Reduction Plan. During the term of this Agreement,
SUPPLIER shall review lead times with VA LINUX and shall consult with VA LINUX
regarding lead times semi-annually, setting forth the efforts SUPPLIER shall
consider to reduce Purchase Order Lead Time.
7.2 Cancellation. VA LINUX or its Contract Manufacturer may cancel a Purchase
Order, or any portion thereof, by notifying SUPPLIER by FAX transmission or
email. Upon receiving a request to cancel a Purchase Order, or any portion
thereof, SUPPLIER, within one (1) Business Day, shall notify the issuer of a
Purchase Order by FAX transmission or email of the status of the requested
canceled Purchase Order. If the reason for the cancellation is the occurrence of
a condition that would be the basis for termination for cause, as set forth in
Section 19.2, then such cancellation shall be without penalty or charge to the
company issuing the Purchase Order (either VA LINUX or its Contract
Manufacturer). In the event that such cancellation is for the convenience of the
issuer of the Purchase Order, the issuer's liability shall be calculated in
accordance with the Purchase Order Cancellation Schedule set forth in Exhibit B.
Cancellation charge(s), if any, shall become due and may, at SUPPLIER's
discretion, be invoiced in accordance with the terms and conditions of this
Agreement.
7.3 Rescheduling. In accordance with the Purchase Order Adjustment Schedule set
forth in Exhibit B, VA LINUX or its Contract Manufacturer may request to change
the Scheduled Delivery Date by notifying SUPPLIER by FAX transmission or email.
SUPPLIER, within one (1) Business Day, shall acknowledge, by FAX transmission or
email, the request to change the Scheduled Delivery Date. If the proposed
Scheduled Delivery Date is beyond the parameters set forth in the Purchase Order
Adjustment Schedule, SUPPLIER shall use reasonable efforts to accommodate such
request at no additional charge to the company seeking to change the Scheduled
Delivery Date. If SUPPLIER's costs will be impacted by a change, SUPPLIER may
quote additional reasonable charges to the company seeking to reschedule the
Purchase Order. For any quote for additional charges to be binding, the company
seeking to reschedule the Purchase Order must accept the quote in writing within
five (5) Business Days of receipt thereof.
*Redacted; confidential treatment requested.
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8.0. DELIVERY.
8.1 Scheduled Delivery Date. SUPPLIER shall Deliver Purchase Order quantities in
full on or within [*] of the Scheduled Delivery Date. The issuer of the Purchase
Order, at its option, may consent in writing to partial Deliveries of Purchase
Order quantities.
8.2 Failure to Meet Scheduled Delivery Date. SUPPLIER shall notify the issuer of
a Purchase Order, by FAX transmission or email, of any anticipated late Delivery
of Product within three (3) Business Days of receipt of such Purchase Order. If
SUPPLIER fails to meet the Scheduled Delivery Date of an accepted Purchase
Order, SUPPLIER shall provide the issuer of such Purchase Order with written
assurance of Delivery within [*] after the Scheduled Delivery Date. SUPPLIER
shall Deliver Product in the most expeditious manner possible and the payment of
premium transportation costs associated with the Delivery of Product shall be at
SUPPLIER's expense. If SUPPLIER fails to Deliver the Product within [*] after
the Scheduled Delivery Date, then the Parties will promptly consult to develop
an action plan to address any late Delivery.
8.3 Early Delivery. VA LINUX or its Contract Manufacturer may reject and return
Product Delivered more than [*] in advance of the Scheduled Delivery Date to
SUPPLIER at SUPPLIER's risk and expense. SUPPLIER shall remain obligated for
Delivering Product in conformance with the Scheduled Delivery Date.
8.4 Over Deliveries. Deliveries of Product exceeding the quantities specified in
the accepted Purchase Order shall not be accepted without the prior written
approval of the issuer of such Purchase Order. The issuer of a Purchase Order
may return the excess Product to SUPPLIER at SUPPLIER's risk and expense.
8.5 JIT Process. SUPPLIER agrees to work with VA LINUX and VA LINUX's Contract
Manufacturer to implement the most efficient JIT process that will meet VA
LINUX's regional product requirements. After the details of this process have
been agreed to by SUPPLIER and VA LINUX and/or VA LINUX's Contract Manufacturer,
the details of the process will be presented to VA LINUX for final approval. The
JIT process will be set forth in Exhibit B.
9.0 INSPECTION; ACCEPTANCE; QUALITY ASSURANCE.
9.1 Source Inspection. VA LINUX may perform source inspections and process
audits at SUPPLIER's manufacturing facilities. The scope and method by which
such inspections are to be conducted shall be disclosed to SUPPLIER three (3)
Business Days in advance of the inspection. SUPPLIER may comment on VA LINUX's
proposed scope and method prior to the inspection going forward. The
inspections, if any, shall be scheduled at mutually agreeable times, but no more
than once every three (3) months. This provision does not relieve SUPPLIER of
its obligations hereunder, or waive VA LINUX's and its Contract Manufacturer's
rights of inspection when the Product is received.
9.2 Inspection at Destination. VA LINUX (or its Contract Manufacturer) may, at
its own expense, inspect Product at the receiving facilities to assure that
Product sold by SUPPLIER conform to the Product specifications set forth in
Exhibit A and meet SUPPLIER's warranties. If Product is determined to be
defective, the inspecting company may reject the Product by notifying SUPPLIER
by FAX transmission or email. Rejected Product shall be dealt with in accordance
with Section 15.4. SUPPLIER shall take corrective action for causes of the
defective Product prior to Delivery of succeeding lots.
9.3 Lot Failures. If the issuer of a Purchase Order can demonstrate that at
least [*] of a shipment of Product fails to conform to the Product
specifications set forth in Exhibit A, or the Quality Assurance Requirements set
forth in Exhibit C, then the issuer of a Purchase Order may reject the entire
shipment and require SUPPLIER, at SUPPLIER's expense, to verify that the
individual Units in the lot conform to the Product specifications set forth in
Exhibit A, and meet SUPPLIER's warranties, as set forth in Section 15.1-15.3, or
at SUPPLIER's option, ship conforming Product.
9.4 Non-Conforming Acceptance. VA LINUX (or its Contract Manufacturer) may
choose to accept Product that is defective in a minor respect without prejudice
to its right to reject defective Product in the
*Redacted; confidential treatment requested.
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future. If the company who issued the Purchase Order chooses to accept such
defective Product, SUPPLIER shall negotiate in good faith with VA LINUX an
equitable reduction in price, provided the defect is not attributable to VA
LINUX or its Contract Manufacturer.
9.5 No Waiver. No inspection, including source inspection, or acceptance of
defective Product shall relieve SUPPLIER from its obligations hereunder. All
rights granted to VA LINUX and its Contract Manufacturer in Section 9.0 of this
Agreement are in addition to any other rights or remedies granted in law or
elsewhere in this Agreement.
9.6 Quality Assurance. SUPPLIER shall comply with the Supplier Quality
Agreement, attached hereto as Exhibit C and incorporated herein. SUPPLIER shall
give VA LINUX three (3) months prior written notice of any requested Quality
Assurance Procedure changes if the fit, form or function of Product may be
materially affected. SUPPLIER shall give VA LINUX one (1) Business Day's prior
notice by FAX transmission or email of any emergency changes to its internal
quality assurance procedures that may materially affect Product fit, form or
function. VA LINUX shall respond to SUPPLIER's notification of such emergency
changes as soon as possible after receipt thereof. In no event shall SUPPLIER
institute such emergency changes without VA LINUX's prior written consent. If
questions regarding Product quality or testing arise, VA LINUX and SUPPLIER
shall meet at a mutually agreed-upon location and date, and at their own
expense, for the purpose of reviewing SUPPLIER's quality system and testing
procedures for the Product.
10.0 TITLE. Title to, and risk of loss for, each Unit of Product shall pass to
VA LINUX or VA LINUX's Contract Manufacturer upon receipt of the Product at the
FOB point set forth in Exhibit B.
11.0. INVOICES; PAYMENT TERMS; TAXES.
11.1 Invoices. SUPPLIER shall issue an invoice for each Delivery of Product.
SUPPLIER's invoices shall include the following information: Purchase Order
number; quantity; price; VA LINUX part number; and cross reference for
SUPPLIER's part number. SUPPLIER shall maintain invoices issued under this
Agreement for the warranty period of the Delivered Product. SUPPLIER shall not
issue an invoice until SUPPLIER Delivers Product to the FOB point set forth in
Exhibit B.
11.2 Payment. The issuer of a Purchase Order shall be solely responsible for
payment of invoices with respect to such Purchase Order, and shall pay SUPPLIER
within thirty (30) Business Days after receipt of an invoice or after receipt of
Product at the FOB point, whichever is later, unless the issuer of such Purchase
Order notifies SUPPLIER prior to the expiration of the thirty (30) Business Day
period that such Product is defective or non-conforming to the Product
specifications. Payment of an invoice shall not constitute the waiver of any
warranties on the Product. The time for payment shall not be extended solely
because an invoice is incomplete; if an invoice is incomplete, the issuer of the
Purchase Order shall promptly notify SUPPLIER in writing of all ways in which
the invoice is defective, and SUPPLIER will promptly issue a new invoice. All
amounts not paid when due will bear interest at the lesser of (x)1.5% per month,
and (y) or the highest amount allowed by applicable law. If a prior invoice is
unpaid more than thirty (30) days after the due date, SUPPLIER may extend the
date for Delivery of any outstanding Purchase Orders by one Business Day for
every Business Day that payment is late, unless such non-payment is due to a
good faith dispute between the Parties relating to an invoice, but provided VA
LINUX has paid all undisputed amounts.
11.3 Payment in U.S. Dollars. All prices and payments made in accordance with
this Agreement shall be in U.S. dollars.
11.4 Taxes. VA LINUX agrees to pay amounts equal to any taxes that are
applicable to any purchases of Products by VA LINUX hereunder, exclusive of
taxes based on SUPPLIER's net income.
12.0 COMPETITIVE PRODUCTS AND SERVICES. Neither this Agreement nor any
activities hereunder shall impair any right of SUPPLIER or VA LINUX to design,
develop, manufacture, market, service, or otherwise deal in, directly or
indirectly, other products or services including those that are
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competitive with those offered by SUPPLIER or VA LINUX, provided SUPPLIER and VA
LINUX do not use the other's Confidential Information in such endeavors.
13.0. ENGINEERING CHANGES.
13.1 Mandatory Engineering Changes. SUPPLIER may implement Mandatory Engineering
Changes, and shall make all reasonable efforts to provide to VA LINUX either the
revised specifications or a sample of the modified Product, at least three (3)
months prior to such changes taking effect. In the event such changes require
implementation within the three (3) month notice period to assure compliance
with federal, state or local law or to substantially lessen health or safety
risks, SUPPLIER shall promptly notify VA LINUX by FAX transmission or email.
SUPPLIER may immediately cease production of affected Products pending VA
LINUX's approval of such changes. SUPPLIER shall not make Mandatory Engineering
Changes without VA LINUX's prior written approval, which approval shall not be
unreasonably withheld or delayed. VA LINUX and/or its Contract Manufacturer may
cancel, without any liability, all or any pending Purchase Orders for Product
that will incorporate a Mandatory Engineering Change that is not approved by VA
LINUX.
13.2 Application of Mandatory Engineering Changes to Existing Product. For any
previously Delivered Product that does not incorporate Mandatory Engineering
Changes, SUPPLIER shall:
(a) if such Product is in VA LINUX's (and/or its Contract
Manufacturer's) inventory, promptly provide updated Product at
SUPPLIER's expense (including freight, parts, materials and
Documentation). Upon receipt of the updated Product, VA LINUX (or
its Contract Manufacturer) shall return the Product that does not
incorporate the Mandatory Engineering Changes to SUPPLIER at
SUPPLIER's risk and expense.
(b) if such Product is installed at a customer's site, promptly provide
updated Product at SUPPLIER's expense (including freight, parts,
materials and Documentation). VA LINUX will use reasonable efforts
to replace the superseded Product with the updated Product. SUPPLIER
shall pay VA LINUX or its authorized service Representatives
reasonable expenses for labor, travel and per diem related to such
replacement. VA LINUX will promptly return the replaced Product in
accordance with Section 15.6 to SUPPLIER at SUPPLIER's expense after
installation of the updated Product.
13.3 Fit, Form or Function Engineering Changes. SUPPLIER shall make no
Engineering Changes that materially affect the fit, form or function of the
Product ("Fit, Form or Function Engineering Change") without the prior written
consent of VA LINUX. SUPPLIER shall give VA LINUX three (3) months prior written
notice of such changes (and, at the time of notice, provide a sample of the
modified Product where practicable). If VA LINUX has not responded by the end of
the three (3) months period, the Fit, Form or Function Engineering Change shall
be deemed rejected. If VA LINUX rejects the proposed Fit, Form or Function
Engineering Changes, SUPPLIER shall not adopt such changes on Product for
shipment under this agreement. Nothing herein shall prevent SUPPLIER from
creating new revisions to the Product and selling such updated product to other
purchasers.
13.4 Optional Engineering Changes. SUPPLIER may make available to VA LINUX
Optional Engineering Changes. The cost of any Optional Engineering Changes that
VA LINUX desires to implement will be borne by VA LINUX and will be determined
through a request for quote process.
13.5 Change in Plant of Manufacture. SUPPLIER agrees to give VA LINUX three (3)
months' prior written notice in the event that SUPPLIER intends to manufacture
Products at a Plant of Manufacture other than the one(s) selected as of the
Effective Date of this Agreement.
13.6 VA LINUX Design Modifications. At any time during the term of this
Agreement, VA LINUX may modify the design and/or requirements of the Product. VA
LINUX shall notify SUPPLIER of such changes in writing. SUPPLIER shall respond
to such notice in writing within one (1) month after receipt of VA LINUX's
requested modifications whether SUPPLIER agrees or disagrees with the proposed
modification, such agreement or disagreement to be at SUPPLIER's sole
discretion. If SUPPLIER agrees
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to the requested design change, such change shall not affect the Product already
scheduled or rescheduled for Delivery as of the date such request is agreed to
by SUPPLIER.
13.7 VA LINUX Process Modifications. At any time during the term of this
Agreement, VA LINUX may suggest that SUPPLIER modify SUPPLIER's process to
manufacture, assemble, package and/or test Product. VA LINUX shall notify
SUPPLIER of such changes in writing. SUPPLIER shall respond to such notice in
writing within one (1) month after receipt of VA LINUX's requested modifications
whether SUPPLIER agrees or disagrees with the proposed modification, such
agreement or disagreement to be at SUPPLIER's sole discretion. If there is
agreement, the Parties will make efforts to modify this Agreement, including the
price schedule, accordingly.
14.0. SERVICE AND SUPPORT; DOCUMENTATION.
14.1 SUPPLIER shall assist VA LINUX with the following post-sales service and
support: (a) SUPPLIER will provide a reasonable amount of telephone support to
VA LINUX or its Contract Manufacturer during normal working hours (East Coast
time); and (b) if needed, SUPPLIER will make reasonable efforts to provide
on-site assistance at its standard consulting rate, and provided VA LINUX or its
Contract Manufacturer pays all reasonable out-of-pocket travel expenses.
14.2 SUPPLIER shall provide VA LINUX with a copy of the product manual as set
forth in Exhibit A in English and in any other available language version in
electronic form, and hereby grants to VA LINUX a worldwide, fully-paid license
to use, modify, prepare derivative works based on, reproduce and distribute such
manual to its customers for use with Product, provided VA LINUX retains
SUPPLIER's proprietary notices. The manual shall be updated by SUPPLIER as
appropriate during the term of the Agreement to reflect any changes in the
specifications of Product. SUPPLIER will also provide and update instructions
relating to use and installation.
15.0. WARRANTIES.
15.1 Right to Enter Agreement. SUPPLIER represents, warrants and promises that
it has the right to enter this Agreement and sell the Product to VA LINUX (or
its Contract Manufacturer) hereunder. VA LINUX represents, warrants and promises
that it has the right to enter this Agreement and purchase (or have its Contract
Manufacturer purchase) Product hereunder
15.2 Title. SUPPLIER represents, warrants and promises that the title to all
Product purchased by and Delivered to VA LINUX or its Contract Manufacturer
shall be free and clear of all liens, encumbrances, and security interests.
15.3 Product Warranties. SUPPLIER represents, warrants and promises that, for
the period after Delivery as set forth in Exhibit B, each Unit of Product shall
(a) free from defects in material and workmanship, (b) conform substantially to
the specifications set forth in Exhibit A, and (c) meet the quality objectives
set forth in the Supplier Quality Agreement.
15.4 Replacement of Defective Product. VA LINUX or its Contract Manufacturer
shall promptly notify SUPPLIER of any defect in or nonconformity of Product
while under warranty. The sole remedy for defect in or nonconformity of Product
while under warranty shall be that SUPPLIER shall replace the defective or
nonconformity Product by Delivery within three (3) Business Days of receipt of
notice. New warranties shall apply to replaced Product effective on the date
Delivered. SUPPLIER shall provide VA LINUX and its Contract Manufacturer written
instructions regarding SUPPLIER's RMA procedure for returns of defective or
non-conforming Product, and VA LINUX and its Contract Manufacturer shall comply
with such instructions.
15.5 Return of Defective Product. All defective or nonconforming Product that
was rejected shall be returned to SUPPLIER with a copy of the applicable
inspection report setting forth in detail all defect(s) or nonconformities for
each failed Unit of Product. SUPPLIER may, at its option and expense, re-test
the Product determined by VA LINUX and/or its Contract Manufacturer to be
defective or nonconforming. If SUPPLIER determines that the Product is not
defective or nonconforming, or that the defect is not
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attributable to SUPPLIER, VA LINUX, VA LINUX's Contract Manufacturer and
SUPPLIER shall meet within ten (10) Business Days to resolve the discrepancy.
15.6 Freight. SUPPLIER shall be responsible for freight (a) to transport
defective Product from VA LINUX customers to VA LINUX or VA LINUX service
providers, and from VA LINUX or VA LINUX service providers to SUPPLIER; and (b)
to transport replacement Product from SUPPLIER to VA LINUX or VA LINUX service
providers, and from VA LINUX or VA LINUX service providers to customers. Any air
freight transportation costs must be pre-approved by SUPPLIER to be covered
under this Section 15.6. SUPPLIER shall not be liable for Units returned with
"no trouble found."
15.7 Epidemic Failures of Product. SUPPLIER shall, at SUPPLIER's option,
promptly repair, assist VA LINUX to repair (as specified in Section 15.8), or
replace Products Delivered under this Agreement which exhibit Epidemic Failure
within one (1) year after the date of Delivery, provided VA LINUX notifies
SUPPLIER of the discovery of such defect or malfunction within such one (1) year
time period.
15.7.1 Recall. After a failure has reached epidemic proportions, all
Products of the same revision [lot] will be presumed defective, regardless of
the location of the Product, and SUPPLIER shall replace such Product with
Product that fully conforms to the Specifications and meets the Quality
Assurance Requirements.
15.7.2.Incidental Costs. In addition to freight, as set forth in Section
15.6, SUPPLIER shall be responsible for reasonable costs and expenses incurred
by VA LINUX and VA LINUX service providers pursuant to a mutually agreed upon
plan to verify the existence of an Epidemic Failure, provided that such costs
and expenses have been estimated by VA LINUX and pre-approved by SUPPLIER, and
that, Epidemic Failure is actually verified. SUPPLIER shall not unreasonably
withhold approval of the plan or the estimated costs and expenses.
15.8 Repair/Replacement by VA LINUX. At SUPPLIER's authorization, VA LINUX or
its authorized service providers may repair defective Products covered by this
Section 15. In such event, VA LINUX shall promptly submit to SUPPLIER in
writing, to the extent available, the serial numbers and date code of the
defective Products, the date VA LINUX received the defective unit, the nature of
the defects found, the date of the repair of the defective units by VA LINUX or
its authorized repair facility, and the quantity of Spare Parts utilized by VA
LINUX in the repair. VA LINUX shall send to SUPPLIER the defective Products or
parts removed therefrom. SUPPLIER shall provide VA LINUX with the necessary
replacement parts at no cost, and reimburse VA LINUX for reasonable costs and
expenses for labor, freight and incidental costs incurred by VA LINUX or its
authorized service providers in connection with such repair or replacement,
which costs and expenses have been estimated by VA LINUX and pre-approved by
SUPPLIER. SUPPLIER shall not unreasonably withhold approval of the plan or the
estimated costs and expenses.
15.9 THE FOREGOING WARRANTIES ARE EXCLUSIVE AND IN LIEU OF, AND SUPPLIER HEREBY
DISCLAIMS, ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED
TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
16.0. CONFIDENTIAL INFORMATION.
16.1 Disclosure of Confidential Information. VA LINUX and SUPPLIER agree that it
may be desirable to disclose Confidential Information to each other during the
term of this Agreement. Recipient agrees that it shall limit its disclosure of
the Confidential Information of Discloser solely to Representatives, who have a
need to know such Confidential Information for purposes of this Agreement.
Without limiting the foregoing sentence, Recipient agrees to treat Discloser's
Confidential Information with at least the same degree of care and protection
that it uses with its own Confidential Information.
16.2 Use of Confidential Information. Recipient shall use the Confidential
Information of Discloser only for purposes of this Agreement.
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16.3 Reproduction or Duplication of Confidential Information. Recipient may
reproduce or duplicate portions or all of Discloser's Confidential Information
disclosed hereunder, provided that Recipient shall reproduce and include in all
such copies of Confidential Information prepared by Recipient the copyright
notices and proprietary legends of Discloser as they appear therein when
originally furnished to Recipient. Further, Recipient shall not remove any
proprietary, copyright, trade secret or other legend from any form of
Confidential Information.
16.4 Exclusions to Obligation of Confidentiality. Recipient shall have no
obligation hereunder as to Confidential Information provided by Discloser that:
(a) is known to Recipient at the time of disclosure, (b) is independently
developed by Recipient provided Recipient can show that such development was
accomplished by or on behalf of Recipient without the use of or any reference to
Confidential Information supplied to Recipient by Discloser, (c) becomes
rightfully known to Recipient from a source other than Discloser without
restriction on subsequent disclosure or use, (d) is or becomes part of the
public domain through no wrongful act of Recipient, or (e) is rightfully
received by the Recipient from a third party without any duty of
confidentiality. Further, Recipient may disclose Confidential Information of
Discloser pursuant to a judicial or governmental request, requirement or order,
provided that Recipient gives Discloser sufficient prior notice to contest, or
to seek a protective order restricting further disclosure of Confidential
Information provided in response to such request, requirement or order.
16.5 Confidentiality of Agreement. The Parties agree that they shall consider
the specific terms and conditions of this Agreement to be Confidential
Information, and that neither shall disclose such terms and conditions or the
relationship between the Parties to any third party without the express written
permission of the other Party. Press releases and other like publicity,
advertising or promotional material that mention this Agreement or the other
Party by name shall be agreed upon by both Parties in writing prior to any
release. The obligations of this Section 16.5 shall not prevent the Parties from
disclosing the Confidential Information or terms and conditions of this
Agreement to any government agency or body as required by law (provided that the
Party required to make such disclosure in such circumstances have given the
other Party prompt notice or other appropriate remedy prior to such disclosure
and cooperates fully with such other Party in seeking such order or remedy), or
as deemed advisable by a Party for purposes of public or private financing,
including without limitation in an S-1 statement, provided that SUPPLIER
provides VA LINUX with an opportunity to redact material from the agreement. If
either Party discloses material terms and conditions of this Agreement in
violation of this Section 16.5, the non-disclosing Party may terminate this
Agreement with cause, in accordance with Section 19.2.
16.6 No Ownership Interest Transferred. Recipient acknowledges that it is
granted only the limited right to use Confidential Information provided herein,
and that such right is revocable at will by Discloser and not coupled with any
interest in the Confidential Information. Neither Party transfers to the other
any right of ownership in or title to any Confidential Information or other
intellectual property hereunder, either expressly or by implication, estoppel or
otherwise.
16.7 Termination of Possession of Confidential Information; Survival of
Obligations. On Discloser's request, Recipient shall: (a) promptly return or
destroy all Confidential Information of Discloser, (b) discontinue all further
use of Confidential Information of Discloser, and (c) certify in writing to
Discloser that such actions have been taken. The obligations of the Parties
under this Exhibit relating to the confidentiality of Confidential Information
shall survive and continue after any termination of this Agreement for a period
of three (3) years after the date of such termination.
17.0. INTELLECTUAL PROPERTY RIGHTS INDEMNIFICATION.
17.1 Intellectual Property Indemnity. SUPPLIER shall defend, indemnify and hold
harmless VA LINUX, its Representatives, Contract Manufacturers, and/or customers
against any claim that the Product allegedly infringes any United States or
Canadian patent, copyright, mask work right, trademark, trade secret, or any
other intellectual property right of any third party. If any such claim of
infringement is made, SUPPLIER, at SUPPLIER's expense, shall defend against and
pay any and all costs, expenses (including reasonable fees of attorneys and
other retained professionals), and damages of any kind arising
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out of such claim or resulting from any settlement thereof, whether or not that
claim is successful, provided that VA LINUX: (a) gives SUPPLIER prompt written
notice of such claim; (b) cooperates with SUPPLIER, at SUPPLIER's expense for
reasonable out of pocket expenses incurred by VA LINUX, in the defense of such
claim; and (c) allows SUPPLIER to control the defense and settlement of such
claim. SUPPLIER shall not enter into any settlement that affects VA LINUX's
rights or interests without VA LINUX's prior written consent. Such consent shall
not be unreasonably withheld or delayed. SUPPLIER shall not be responsible for
any settlement made by VA LINUX without SUPPLIER's prior written consent. Such
consent shall not be unreasonably withheld or delayed. VA LINUX may choose to
participate with SUPPLIER in the defense of such claim at its own expense, but
such participation shall be without prejudice to VA LINUX's right to
reimbursement from SUPPLIER of reasonable costs, expenses (including reasonable
fees of attorneys and other retained professionals prior to VA LINUX's
participation), and awarded damages of any kind that VA LINUX may have been
ordered to pay as a result of such claim.
17.2 Limitation of SUPPLIER's Intellectual Property Indemnity. Notwithstanding
Section 17.1, above, SUPPLIER is not obligated to defend, indemnify or hold
harmless VA LINUX, its Representatives, Contract manufacturers, independent
contractors, and/or customers if such infringement claim would not have arisen
but for: (a) SUPPLIER's incorporation of VA LINUX-supplied designs, VA
LINUX-supplied Specifications and/or VA LINUX-designed Components; (b) VA LINUX
combination of the Product with other devices, products and/or software, not
supplied by SUPPLIER, and but for the combination, the Product, by itself, would
not infringe; (c) modifications made to the Product unless at SUPPLIER's
direction; and/or (d) the installation or use of the Product contrary to the
Documentation provided by SUPPLIER.
17.3 Remedy for Infringement. If the design or manufacture of the Product, or
any portion thereof, for which SUPPLIER is responsible is finally adjudged, or
in SUPPLIER's reasonable opinion is likely to be adjudged, to infringe a patent,
copyright, mask work right, trademark, trade secret, or any other intellectual
property right of any third party, SUPPLIER shall, at its option: (a) procure
the right to continue manufacturing, assembling, packaging, testing and selling
of the Product; or (b) modify the Product so that it becomes noninfringing,
provided that the same function is performed by the replacement or modified
units and the replacement or modified units have substantially the same quality
as the infringing units. If SUPPLIER elects option (b), above, then SUPPLIER
shall replace all infringing units at SUPPLIER's cost and expense. If neither
(a) nor (b), above, is available to SUPPLIER on reasonable terms, then VA LINUX
may terminate this Agreement for cause. VA LINUX shall return to SUPPLIER, at
SUPPLIER's cost and expense, any infringing Product, and SUPPLIER shall refund
the purchase price of the returned Product, subject to depreciation on a
three-year straight line basis.
17.4 SECTIONS 17.1, 17.2, AND 17.3 STATE THE ENTIRE LIABILITY OF THE PARTIES,
AND THE EXCLUSIVE REMEDY OF THE PARTIES, FOR ANY INFRINGEMENT OF ANY PATENT,
COPYRIGHT, MASK WORK RIGHT, TRADEMARK, OR ANY OTHER INTELLECTUAL PROPERTY RIGHTS
OF A THIRD PARTY.
18.0. GENERAL INDEMNIFICATION AND LIMITATION OF LIABILITY.
18.1 General Indemnity by Supplier. SUPPLIER shall defend, indemnify and hold
harmless VA LINUX, its Representatives, independent contractors, and/or
customers for any claim that the Product caused bodily injury or death to
persons, or damage to real or personal property, regardless of the legal theory
(e.g., negligence, strict liability, violations of statutes) underlying such
claims. If any such claim is made, SUPPLIER, at SUPPLIER's expense, shall defend
against and pay any and all costs, expenses (including reasonable fees of
attorneys and other retained professionals), and damages of any kind arising out
of such claim, whether or not that claim is successful, provided that VA LINUX:
(a) gives SUPPLIER prompt written notice of such claim; (b) cooperates with
SUPPLIER, at SUPPLIER's expense for reasonable out of pocket expenses incurred
by VA LINUX, in the defense of such claim; and (c) allows SUPPLIER to control
the defense and settlement of such claim. SUPPLIER shall not enter into
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<PAGE> 16
any settlement that affects VA LINUX's rights or interests without VA LINUX's
prior written consent. Such consent shall not be unreasonably withheld. SUPPLER
shall not be responsible for any settlement made by VA LINUX without SUPPLIER's
prior written consent. Such consent shall not be unreasonably withheld or
delayed.
18.2 Limitation of SUPPLIER's General Indemnity. Notwithstanding Section 18.1,
above, SUPPLIER is not obligated to defend, indemnify or hold harmless VA LINUX,
its subsidiaries, affiliates, Representatives, Contract Manufacturers,
independent contractors, and/or customers if such claim arises solely from: (a)
SUPPLIER's incorporation of VA LINUX-supplied designs, VA LINUX-supplied
Specifications and/or VA LINUX-designed Components; and/or (b) VA LINUX's
combination of the Product with other devices, products and/or software, not
supplied by SUPPLIER, and but for the combination, the Product, by itself, would
not have caused bodily injury or death to persons, damage to real or personal
property, or other injury or losses; (c) modifications made to the Product
unless at SUPPLIER's direction; and/or (d) the installation or use of the
Product contrary to the Documentation provided by SUPPLIER. VA LINUX may choose
to participate with SUPPLIER in the defense of such claim at its own expense,
but such participation shall be without prejudice to VA LINUX's right to
reimbursement from SUPPLIER of reasonable costs, expenses (including reasonable
fees of attorneys and other retained professionals prior to VA LINUX's
participation), and awarded damages of any kind that VA LINUX may have been
ordered to pay as a result of such claim.
18.3 VA LINUX's Reservation of Rights. VA LINUX reserves the right, at its own
expense, to assume the exclusive defense and control of any matter otherwise
subject to indemnification by SUPPLIER if SUPPLIER is unable to defend a claim
filed against VA LINUX.
18.4 General Indemnity by VA LINUX. VA LINUX shall defend, indemnify and hold
harmless SUPPLIER, its Representatives, independent contractors, and/or
customers for any third party claim against SUPPLIER arising from (1) a claim
for violation of third party intellectual property rights [*] and for which
SUPPLIER is not obligated to indemnify under Section 17.2; (2) a claim that [*],
and for which SUPPLIER is not obligated to indemnify under Section 18.2; and (3)
[*]. If any such claim is made, VA LINUX, at VA LINUX's expense, shall defend
against and pay any and all costs, expenses (including reasonable fees of
attorneys and other retained professionals), and damages of any kind arising out
of such claim, whether or not that claim is successful, provided that SUPPLIER:
(a) gives VA LINUX prompt written notice of such claim; (b) cooperates with VA
LINUX, at VA LINUX's expense for reasonable out of pocket expenses incurred by
SUPPLIER, in the defense of such claim; and (c) allows VA LINUX to control the
defense and settlement of such claim. VA LINUX shall not enter into any
settlement that affects SUPPLIER's rights or interests without SUPPLIER's prior
written consent. Such consent shall not be unreasonably withheld or delayed. VA
LINUX shall not be responsible for any settlement made by SUPPLIER without VA
LINUX's prior written consent. Such consent shall not be unreasonably withheld
or delayed. SUPPLIER may choose to participate with VA LINUX in the defense of
such claim at its own expense, but such participation shall be without prejudice
to SUPPLIER's right to reimbursement from VA LINUX of reasonable costs, expenses
(including reasonable fees of attorneys and other retained professionals prior
to SUPPLIER's participation), and awarded damages of any kind that SUPPLIER may
have been ordered to pay as a result of such claim.
18.5 Limitation of Liability. EXCEPT AS EXPRESSLY PROVIDED IN SECTIONS 16, 17,
AND 18.4 ABOVE, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR
ANY REPRESENTATIVES OF THE OTHER PARTY FOR THE OTHER PARTY'S SPECIAL, INDIRECT,
INCIDENTAL, CONSEQUENTIAL, PUNITIVE, OR SPECIAL DAMAGES OF ANY KIND (INCLUDING
BUT NOT LIMITED TO LOST PROFITS OR LOST SAVINGS) HOWEVER
*Redacted; confidential treatment requested.
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CAUSED AND ON ANY THEORY OF LIABILITY, WHETHER IN AN ACTION OR CONTRACT, STRICT
LIABILITY OR TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, EVEN IF ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES AND NOTWITHSTANDING THE FAILURE OF THE PURPOSE OF
ANY REMEDY. SUPPLIER'S AGGREGATE LIABILITY TO VA LINUX AND ITS CONTRACT
MANUFACTURER, REGARDLESS OF LEGAL THEORY, SHALL NOT EXCEED THE AMOUNTS PAID TO
SUPPLIER HEREUNDER DURING THE PRIOR [*] PERIOD.
19.0. TERMINATION OF AGREEMENT.
19.1 Termination Events. Either Party may terminate this Agreement effective
immediately and without further liability upon written notice to the other Party
if any one of the following events occurs:
(a) a proceeding is instituted against the other Party under any
provision of any bankruptcy laws, which is not dismissed within
three (3) calendar months;
(b) the other Party is adjudged bankrupt;
(e) a trustee or receiver is appointed by a court for all or a
substantial portion of the assets of the other Party; the other
Party becomes insolvent, ceases or suspends business;
(c) the other Party makes an assignment of all or a portion of its
assets for the benefit of its creditors;
(d) the other Party admits in writing its insolvency or inability to pay
its debts as they become due;
(e) the other Party becomes insolvent;
(f) there is a transfer of a majority interest in the equity or assets
of one Party to a direct competitor of the other Party; or
(g) the continued performance of this Agreement would result in a
violation of then current United States export regulations.
19.2 Termination for Breach. If either Party fails to perform or violates any
material obligation pursuant to this Agreement, then, upon thirty (30) Calendar
Days' written notice to the breaching Party specifying such default, the
non-breaching Party may terminate this Agreement, without liability, unless the
breach specified in the Default Notice has been cured within the thirty (30)
Calendar Day period.
19.3 Termination By Mutual Consent. The Parties may mutually terminate this
Agreement at any time by written consent. In reaching mutual consent to
terminate, the Parties shall determine their respective obligations and
liabilities.
19.4 Affect of VA LINUX's Termination on Purchase Orders. Any notice of
termination by VA LINUX under Section 19.2 above shall specify whether VA LINUX
and/or its Contract Manufacturer shall cancel outstanding Purchase Orders or
take delivery of the outstanding Purchase Orders. Upon VA LINUX's election,
SUPPLIER will fill all or a portion of outstanding Purchase Orders.
19.5 Obligations Upon Termination. Upon termination of this Agreement with or
without cause,
(a) All rights and licenses granted to SUPPLIER hereunder shall
immediately terminate and all such rights shall revert to VA LINUX.
Notwithstanding the foregoing sentence, all licenses shall extend to
Product currently being manufactured, tested, and packaged pursuant
to accepted Purchase Orders, and all Product in the process of being
Delivered pursuant to accepted Purchase Orders;
(b) All rights and licenses granted to VA LINUX hereunder shall
immediately terminate and all such rights shall revert to SUPPLIER.
Notwithstanding the foregoing sentence, all licenses shall extend to
Product currently being manufactured, tested, and packaged pursuant
to accepted Purchase Orders, all Product in the process of being
Delivered pursuant to accepted Purchase Orders, and all Product
previously Delivered;
*Redacted; confidential treatment requested.
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(c) SUPPLIER shall immediately return to VA LINUX or destroy all VA
LINUX Confidential Information and Intellectual Property and all
materials, things, and devices related thereto or derived therefrom,
and all copies of the same, and certify by sworn statement of one of
its officers that all such materials and copies have been returned
to VA LINUX or destroyed;
(d) VA LINUX shall immediately return to SUPPLIER or destroy all
SUPPLIER Confidential Information and Intellectual Property and all
materials, things, and devices related thereto or derived therefrom,
and all copies of the same, and certify by sworn statement of one of
its officers that all such materials and copies have been returned
to SUPPLIER or destroyed;
(e) SUPPLIER shall Deliver to VA LINUX at SUPPLIER's expense, as VA
LINUX directs, all consignment, Tooling, and other property owned by
VA LINUX in SUPPLIER's possession, and, if applicable, SUPPLIER
shall direct its vendors to return all such property owned by VA
LINUX to VA LINUX. SUPPLIER shall bear the risk of loss or damage to
property VA LINUX owns under this Agreement until Delivered to VA
LINUX.
19.6 Continuing Obligations. Upon termination of this Agreement, each Party
shall be released from all obligations and liabilities to the other occurring or
arising after the date of such termination, except that the provisions of
Sections 1.0 (Definitions), 13.2 (Application of Mandatory Engineering Changes),
15.0 (Warranties), 16.0 (Confidential Information), 17.0 (Intellectual Property
Rights Indemnification), 18.0 (General Indemnification and Limitation of
Liability), 19.6 (Continuing Obligations), and 20.0 (General) shall survive
after termination of this Agreement. Termination shall not relieve SUPPLIER or
VA LINUX from any liability arising from any breach of this Agreement. Neither
Party shall be liable to the other for damages of any kind solely as a result of
terminating this Agreement in accordance with its terms. Termination of this
Agreement shall be without prejudice to any other right or remedy of either
Party.
20.0. GENERAL.
20.1 Force Majeure. Neither Party shall be liable for non-performance or delays
due to causes beyond their respective control, including, but not limited to,
acts of God, wars, strikes, fires, floods, earthquakes, labor disputes,
transportation embargoes, winter storms, and acts of any governmental agency. In
the event of such delays, the Parties shall use their diligent and good faith
commercially reasonable efforts to establish new Scheduled Delivery Dates that
will minimize the impact of such delays to VA LINUX, VA LINUX's Contract
Manufacturer and SUPPLIER. The non-delaying Party may terminate this Agreement
if the non-performance or delay continues in effect for longer than thirty (30)
consecutive Calendar Days. In such event, VA LINUX's (and/or VA LINUX's Contract
Manufacturer's) liability for payment shall be limited to payment for Product
Delivered and accepted prior to such termination. Termination due to force
majeure shall be treated as if the Agreement were terminated by mutual consent,
in accordance with Section 19.3.
20.2 Independent Contractors. Each Party is an independent contractor. This
Agreement shall not constitute an appointment of the other Party as the legal
representative or agent of the other Party, nor shall either Party have any
right or authority to assume, create or incur any obligation or other liability
of any kind, express or implied, against, in the name or on behalf of, the other
Party. Nothing herein or in the transactions contemplated by this Agreement
shall be construed as, or deemed to be, the formation of a partnership,
association, joint venture or similar entity by or among the Parties hereto.
Neither Party will make any warranties or representations on the other Party's
behalf, nor will it assume or create any other obligations on the other Party's
behalf.
20.3 Use of Name. VA LINUX shall be entitled to use the name of SUPPLIER in
promotional, advertising or other materials in connection with VA LINUX's
incorporation and resale of the Product in VA LINUX's products as long as
written permission is granted by SUPPLIER after SUPPLIER has had an opportunity
to review all materials bearing its name.
20.4 Personnel. Each Party's Representatives shall observe the working hours,
working rules and holiday schedule of the other Party while working on the other
Party's premises.
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20.5 Employment Taxes and Benefits. SUPPLIER shall report as income all
compensation received by SUPPLIER pursuant to this Agreement and pay all taxes
due on such compensation.
20.6 Assignment. The rights and liabilities of the Parties hereto shall bind and
inure to the benefit of their respective successors, executors and
administrators, as the case may be; and neither Party may assign its obligations
under this Agreement, in whole or in part, without the prior written consent of
the other Party, except to an acquirer of all, or substantially all of its
assets. Any attempted assignment in violation of the provisions of this Section
20.6 shall be void.
20.7 Subcontracting. It is understood and agreed that SUPPLIER subcontracts its
obligations to manufacture, assemble, package, and test the Product.
20.8 Equitable Relief. Because the services are personal and unique, and because
the Parties shall have access to and become acquainted with Confidential
Information of the other Party, the unauthorized use or disclosure of which
would cause irreparable harm and significant injury which would be difficult to
ascertain and which would not be compensable by damages alone, the Parties agree
that, in addition to any other remedy available to either Party at law or in
equity (e.g., injunction, specific performance or other equitable relief), the
confidentiality provisions of this Agreement, as set forth in Section 16.0,
shall be enforceable under the California Uniform Trade Secrets Act, California
Civil Code Section 3426, as amended.
20.9 Compliance with Laws and Regulations. Each Party shall comply with all
applicable federal, provincial, state and local laws, regulations and ordinances
including, but not limited to, the regulations of the U.S. and local governments
relating to the export of commodities and technical data insofar as they relate
to the activities under this Agreement. Machines, commodities, and technical
data provided under this Agreement may be subject to restrictions under the
export control laws and regulations of the United States of America, including
but not limited to the U.S. Export Administration Act and the U.S. Export
Administration Regulations. The Parties shall not export, or re-export, directly
or indirectly, any Product or related technical data without first obtaining
applicable government approval. SUPPLIER shall notify VA LINUX from time to time
of all export classifications for the Product (including ECCNs) and all unusual
export requirements of which SUPPLIER is or becomes aware.
20.10 Environmental Issues. SUPPLIER warrants that it has been issued all
permits required for the safe handling and disposal of all materials or
hazardous waste used by the SUPPLIER in the performance of this Agreement.
SUPPLIER has implemented programs necessary to monitor and maintain all required
licenses and permits and to prevent releases of materials to the environment.
SUPPLIER's employees shall have been trained to properly, safely and legally
handle hazardous materials and wastes. SUPPLIER shall notify VA LINUX, by FAX
transmission or email, immediately of the discovery of any regulatory action
taken or initiated against SUPPLIER, whether or not such action relates to or
arises out of this Agreement, that may result in fines or penalties, prosecution
or that may impact SUPPLIER's ability to deliver Product under this Agreement.
Such regulatory compliance and management of SUPPLIER's employees, facilities
and processes shall be solely SUPPLIER's responsibility.
20.11 Resolution of Disputes. The Parties agree that they will make good faith
efforts to settle any dispute, claim or controversy (a "Dispute") arising out of
or relating to this Agreement by discussion and negotiation. If such efforts
fail to resolve a Dispute, the Parties agree that, after a Party makes a written
request to the other Party, the Parties will choose a mutually acceptable
mediator to conduct a mediation between the Parties in order to resolve such
Dispute. The Parties will establish by mutual written agreement the procedures
under that such mediation will be conducted, and agree that: (a) neither Party
may unreasonably withhold its approval of the other Party's nomination of a
mediator or proposal for the use of a procedure, (b) the Parties will share
equally in the cost of any such mediation, and (c) each Party will assign a
person as its representative in such mediation. If the Parties are unable to
resolve any Dispute by mediation within ninety (90) Calendar Days after the date
of a Party's initial request for mediation, either Party may seek an adjudicated
resolution of such Dispute through a court of competent jurisdiction, provided
that nothing will prevent either Party from availing itself of a judicial
proceeding
Page 18 of 20
<PAGE> 20
earlier if it believes in good faith that injunctive relief is necessary to
prevent it from incurring serious and irreparable harm. The Parties agree that
the use of any alternative method of dispute resolution shall not be construed:
(i) under the doctrines of laches, estoppel or waiver to adversely affect the
rights of either Party, or (ii) as a waiver of the statute of limitations with
respect to any right of action related to any Dispute. All discussions and
negotiations pursuant to this provision shall be treated as confidential by the
Parties, and as compromise and settlement discussions for purposes of applicable
rules of evidence.
20.12 Governing Law; Venue. This Agreement shall be governed by, and interpreted
in accordance with, the laws of the State of California, excluding its choice of
law rules. The Parties agree that the United Nations Convention on Contracts for
the International Sale of Goods shall not govern this Agreement nor the rights
and obligations of the Parties. Any dispute, claim or controversy between the
parties regarding the subject matter of this Agreement or relating to the
Product, may be brought in the California state courts in and for Santa Clara,
County, California (or, if there is federal jurisdiction, the U.S. District
Court serving Santa Clara County), and VA LINUX and SUPPLIER agree to submit to
the personal jurisdiction and venue of these courts.
20.13 Notices. All communications shall be effective on receipt when sent to the
address below. Either Party may change its respective individual or department
designated for contract coordination or its address designated for official
notices by notifying the other Party in the same manner as any other notice.
For SUPPLIER: For VA LINUX:
Network Engines, Inc. VA Linux Systems, Inc.
--------------------------------------------
61 Pleasant Street 1382 Bordeaux Drive
--------------------------------------------
Randolph, MA 02368 Sunnyvale, CA 94089
--------------------------------------------
Attn.: Doug Bryant Attn.: ___________________
--------------------------------------------
Chief Financial Officer cc: Legal Services
--------------------------------------------
Email Address: Doug.Bryant@networkengines.com Email Address:
For Purchase Orders and other correspondence for which a response is due in
fewer than ten (10) Business Days, VA LINUX or its Contract manufacturer will
provide notice to: __________________.
20.14 Severability. If any term of this Agreement is found to be illegal or
unenforceable, the remaining portions of this Agreement shall remain in effect.
20.15 No Waiver. Failure of either Party to enforce any provision of this
Agreement shall not be deemed a waiver of future enforcement of that or any
other provision.
20.16 No Rights in Third Parties. This Agreement is made for the benefit of
SUPPLIER and VA LINUX and their respective subsidiaries and affiliates, if any,
and not for the benefit of any third parties.
20.17 Counterparts. This Agreement may be executed in one or more counterparts,
each of which will be deemed an original, but all of which will constitute but
one and the same instrument.
20.18 Modifications. The Parties may agree to modify and/or amend this
Agreement. Any modifications of this Agreement shall be in writing and signed by
duly authorized representatives of the Parties. This Agreement shall not be
modified and/or amended by any course of dealing, course of performance or trade
usage.
20.19 Headings and References. Section and/or paragraph headings contained in
this Agreement are for convenience and reference purposes only, and are not to
be considered in construing or interpreting this Agreement.
20.20 Construction. This Agreement has been negotiated by the Parties and their
respective counsel. This Agreement shall be fairly interpreted in accordance
with the its terms and without any strict construction in favor for or against
either Party.
Page 19 of 20
<PAGE> 21
20.21 Trademark Usage. Except as provided in Section 20.3 above, neither Party
shall, without the other Party's prior written consent, use any trademarks,
service marks, trade names, logos or other commercial or product designations of
the other Party, for any purpose, including, but not limited to, use in
connection with any Products, promotions, advertisements or exhibitions.
20.22 No Finders or Brokers. The Parties hereby state that no finders, brokers
or similar third parties have been used in connection with this Agreement or the
negotiations or other discussions culminating in this Agreement.
20.23 Governing Language. This Agreement is in the English language only, which
language shall be the controlling and governing language. Any version of this
Agreement written in a language other than English shall be for the sake of
convenience only and shall not be binding upon the Parties.
20.24 Remedies Cumulative. Except as explicitly excluded or limited herein, all
remedies, either under this Agreement or by law or otherwise afforded to any
Party, shall be cumulative and not exclusive or alternative and shall be in
addition to all remedies given hereunder or now or hereafter existing, at law or
in equity, by statute or otherwise. The election of any one or more remedies by
any Party shall not constitute a waiver of the right to pursue other available
remedies.
20.25 Complete Agreement. This Agreement, including all exhibits attached
hereto, constitutes the complete and exclusive statement of the agreement
between VA LINUX and SUPPLIER, and it supersedes all prior and contemporaneous
proposals, oral or written, and all other communications between VA LINUX and
SUPPLIER, relating to the subject matter of this Agreement.
20.26 Press Release. Within thirty (30) days of the Effective Date, the Parties
will jointly issue a press release to announce a technology sharing alliance
with no mention of a supply agreement or arrangement.
VA LINUX SYSTEMS, INC. NETWORK ENGINES, INC.
By: /s/ DANIEL R. SHORE /s/ RENE THIBAULT
Daniel R. Shore Rene Thibault
--------------------------------- ---------------------------------
NAME (PRINT OR TYPE) NAME (PRINT OR TYPE)
VP of Operations VP Sales
--------------------------------- ---------------------------------
TITLE TITLE
2/25/00 2/29/00
--------------------------------- ---------------------------------
DATE DATE
Page 20 of 20
<PAGE> 22
AGREEMENT NO.:____________
EXHIBIT A
PRODUCT DESCRIPTION/SPECIFICATION
This Exhibit will be the applicable Network Engines Product Manual
Product qualifications to be provided and will be supplemented from time to
time.
Page 21 of 20
<PAGE> 23
EXHIBIT B
PRODUCT PURCHASE PROVISIONS
I. UNIT PRICE SCHEDULE
-------------------- -------------------
-------------------- -------------------
Config #1 Basic [*]
Box with CD (VA
LINUX No.:
102114-00)
-------------------- -------------------
Config #2 Basic [*]
Box without CD (VA
LINUX No.:
102082-00)
-------------------- -------------------
II. WARRANTY PERIOD - [*]
III. PURCHASE ORDER CANCELLATION SCHEDULE
CANCELLATION OF ORDERS
VA LINUX may cancel any order, in partial or in whole, for Units issued
hereunder, by written notice to SUPPLIER prior to five (5) days before the
Scheduled Delivery Date, subject only to payment of a cancellation fee based on
the following schedule:
<TABLE>
<CAPTION>
SUPPLIER's receipt of Notice of Then the Cancellation fee will be
Cancellation is: equal to the following % of the
purchase price for the cancelled Units:
------------------------------------ --------------------------------------
<S> <C>
90 or more days prior to the [*]%
Scheduled Delivery Date
60-89 days prior to the Scheduled [*]%
Delivery Date
5-59 days prior to the Scheduled [*]%
Delivery Date
</TABLE>
IV. PURCHASE ORDER ADJUSTMENT SCHEDULE
VA LINUX may reschedule any order, in partial or in whole, for Units issued
hereunder, by written notice to SUPPLIER based on the following schedule:
<TABLE>
<CAPTION>
SUPPLIER's receipt of Notice of Then the order will be scheduled as
Reschedule is: follows:
------------------------------------ ---------------------------------------
<S> <C>
</TABLE>
*Redacted; confidential treatment requested.
Page 22 of 20
<PAGE> 24
<TABLE>
<S> <C>
61 - 90 or more days prior to the Order may be rescheduled one time up to
Scheduled Shipment Date a maximum of [*] days.
31 - 60 days prior to the Order may be rescheduled one time up to
Scheduled Shipment Date a maximum of [*] days.
0 - 30 days prior to the Scheduled No rescheduling permitted
Shipment Date
</TABLE>
V. PURCHASE ORDER LEAD TIME: 30 days minimum, 120 days maximum
VI. EPIDEMIC FAILURE RATE: [*] percent
VII. FOB POINT- [*]
VIII. CUSTOMER ACCOUNT REPRESENTATIVE- Rich McNeice
IX. JIT DELIVERY PROCESS - n/a at this time
X. UNIQUE MATERIALS - VA Linux front panel and labels.
XI. LONG LEAD TIME MATERIALS/COMPONENTS
*Redacted; confidential treatment requested.
Page 23 of 20
<PAGE> 25
EXHIBIT C
SUPPLIER QUALITY AGREEMENT
As of the Effective Date, there are no Quality Assurance Requirements. The
Parties will work together in good faith to develop a Supplier Quality Agreement
with Quality Assurance Requirements within 90 business days of the Effective
Date of this Agreement
Page 24 of 20