<PAGE>
EXHIBIT 10.17
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
LICENSE AGREEMENT NUMBER 4999RL0930
----------
This agreement and its attachments, which are hereby incorporated by this
reference, ("Agreement") is entered into by and between Network Engines, Inc.,
with a place of business at 61 Pleasant Street, Randolph, Massachusetts ("NEI")
and International Business Machines Corporation, a New York Corporation with a
place of business at 3039 Cornwallis Road, Research Triangle Park, North
Carolina ("IBM") and is made effective as of July 19, 1999. Now therefore, in
consideration of the mutual provisions contained herein, NEI and IBM (the
"Parties") agree to the following terms and conditions.
The purpose of this Agreement is to set forth the terms and conditions pursuant
to which NEI shall license the "Manufacturing Package".
The term of this Agreement ("Term") shall be from July 1, 1999 to January 31,
2002, unless terminated earlier as set forth herein.
The provisions of this Agreement, including Attachments 1 and 2 that have been
incorporated herein by reference, constitute the entire agreement between the
Parties and supersede all prior intentions, proposals, understandings,
communications and agreements, oral or written, relating to the subject matter
of this Agreement. This Agreement will not be binding upon the Parties until it
has been signed by each party's authorized representative.
This Agreement may be signed by each party's respective duly authorized
representative in one or more counterparts, each of which shall be deemed to be
an original and all of which when taken together shall constitute one single
agreement between the Parties hereto. Once signed, any reproduction of this
Agreement made by reliable means (for example, photocopy or facsimile) is
considered an original, unless prohibited by local law.
The Parties hereto have caused this Agreement to be signed by their respective
duly authorized representatives.
ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO:
INTERNATIONAL BUSINESS NETWORK ENGINES, INCORPORATED
MACHINES CORPORATION
/s/ Stephen R. Villanuez 7/07/99 /s/ Lawrence A. Genovesi 7/19/99
--------------------------------------- -------------------------------------
Authorized Signature Date Authorized Signature Date
Stephen R. Villanuez Lawrence A. Genovesi
--------------------------------------- -------------------------------------
Printed Name Printed Name
Director, OEM Procurements President
--------------------------------------- -------------------------------------
Title Title
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<PAGE>
1.0 DEFINITIONS
---------------
The singular and plural uses of the capitalized terms listed below will have the
following meanings in this Agreement.
1.1 "Corrections" shall mean any modification or revision, other than
"Enhancements," to the Manufacturing Package that correct Errors contained
therein.
1.2 "Derivative Work" shall mean a work that is based upon one or more
preexisting copyrighted works, such as a revision, Enhancement,
modification, translation, abridgement, condensation, expansion,
compilation or any other form in which such preexisting work may be recast,
transformed or adapted.
1.3 "Designee" shall mean a manufacturer authorized in writing by IBM to
manufacture the Product using the Manufacturing Package.
1.4 "Enhancements" shall mean changes or additions to the Manufacturing Package
that improve function, add new function, improve performance, or that are
otherwise included in any revisions, releases, updates, new versions, or
other changes to the Manufacturing Package. Enhancements to the
Manufacturing Package do not include separate software modules or programs
developed by NEI that are not essential to the basic operation of the
Product as defined in Attachment 1, nor do they include add-in hardware
components developed by NEI such as plug-in daughter boards or PCI adapter
cards or external hardware attachments, other than any that are defined in
Attachment 1.
1.5 "Error" shall mean any patent or latent (a) mistake, problem or defect in
the Manufacturing Package that causes the Product, when manufactured in
compliance with the Manufacturing Package as delivered by NEI, to fail to
perform in accordance with the Product specifications and requirements
defined in this Agreement or (b) incorrect or incomplete statement or
diagram in documentation included in or with the Manufacturing Package that
may cause the Product, when manufactured in compliance with the
Manufacturing Package as delivered by NEI, to fail to perform in accordance
with the Product specifications and requirements defined in this Agreement.
1.6 "Manufacturing Package" shall mean those documentation, materials, items,
Corrections, Enhancements, education, and other know-how relating to the
Product that NEI prepares for or delivers to IBM or its assigns or
Designees, including but not limited to all things described in Attachment
1.
1.7 "Product" shall mean a server computer which performs in accordance with
the Product specifications and requirements defined in this Agreement when
produced using the Manufacturing Package, or Derivative Works of the
Manufacturing Package. The Product also includes object code and
documentation, owned or licensable by NEI, which NEI includes with or is
required for the proper functioning of the Product.
2.0 GRANT OF RIGHTS AND LICENSES
---------------------------------
NEI grants to IBM, IBM subsidiaries, its and their successors, Designees and
permitted assigns, a worldwide, nonexclusive, non-transferable, right and
license to:
(a) under all copyrights and mask work rights in or related to the
Manufacturing Package and Product, to use, execute, preload, reproduce,
distribute copies of (internally and/or externally), prepare Derivative
Works, display and/or perform all, and/or any portion of the Manufacturing
Package, the Product and/or said Derivative Works in connection with the
development, manufacture, distribution and sale of Products and/or
Derivative Works in accordance with the terms of this Agreement;
(b) under any trade secret, patent application and/or patent owned and/or
licensable by NEI to make, have made, use, have used, lease, sell, offer to
sell, import and/or otherwise transfer each Product either alone and/or in
combination with equipment or software or both, and/or to practice and/or
have practiced any process and/or method;
(c) sublicense users and distributors to use, execute, distribute, display,
perform, have used, lease, sell, offer to sell, import and/or otherwise
transfer each Product either alone and/or in combination with equipment or
software or both, and/or to practice and/or have practiced any process
and/or method associated therewith.
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<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
(d) to use, execute, make, have made, have used, perform, reproduce and
prepare Derivative Works, of source code and Derivative Works of source
code either alone or in combination with equipment or software or both,
and/or to practice and/or have practiced any process and/or method
associated therewith.
Any license to use the Product name(s), logos, trade names, service names,
trademarks, and/or service marks used by NEI to identify and/or promote the
Product, including any portions thereof shall be negotiated under a separate
agreement. Notwithstanding any other provisions of this Agreement, NEI shall
have no right to use the trademarks, trade names, or product names of IBM or its
subsidiaries directly or indirectly in connection with any product, promotion or
publication without the prior written approval of IBM.
3.0 NEI'S RESPONSIBILITIES AND DELIVERABLES
-------------------------------------------
3.1 Manufacturing Package. NEI shall deliver to IBM and/or its Designees the
Manufacturing Package.
IBM shall have the right to review the Manufacturing Package, however, such
review shall be at IBM's sole discretion. Notwithstanding anything
contained herein to the contrary, IBM and/or Designees shall be solely
responsible for reviewing and accepting the Manufacturing Package and
determining the acceptability of the Manufacturing Package and its
compliance with any specifications reasonably related thereto set forth on
Attachment 1.
3.2 Manufacturing Authorization. NEI shall deliver the Manufacturing Package
to, and authorize use of the Manufacturing Package by, Designees per the
terms of the Letter Authorization included as Attachment 2.
3.3 Compatibility. NEI shall use reasonable commercial efforts such that the
Products produced using the Manufacturing Package shall be compatible with
the IBM related product offerings set forth on Attachment 1, and NEI agrees
to comply with all reasonable testing requirements suggested by IBM to
ensure such compatibility, and NEI shall perform all commercially
reasonable Corrections and Enhancements and do all other commercially
reasonable things necessary to ensure such compatibility in a timely
manner.
NEI agrees to use commercially reasonable efforts to provide the Enhancements
set forth on Attachment 1 in order to keep the Product compatible with the most
current Intel processor. The activities, deliverables and schedules related to
an Intel processor change and the time at which no further Enhancements will be
made to the Product defined under this license shall be determined by mutual
agreement of both parties and included in this Agreement by duly executed
amendment.
3.4 Certificate of Originality. Upon IBM request, NEI shall promptly provide
IBM with a signed certificate of originality (in the form attached hereto
as Attachment 3) in support of the Manufacturing Package.
3.5 Support. NEI shall provide to IBM or a Designee (a) Corrections to the
Manufacturing Package such that the Product produced from the Manufacturing
Package shall comply with all requirements set forth in this Agreement. NEI
shall provide these Corrections as soon as practicable after the
Corrections are available and in accordance with the parameters set forth
below in this subsection, but in no event later than the general
availability of such Corrections, and NEI shall reimburse IBM, upon IBM's
request, for the reasonable, actual cost to replace defective Products of
IBM's end users, Designee and in IBM, IBM subsidiaries' and distributors'
inventories if it is determined that an Error in the Manufacturing Package
caused such defective Products, provided, however, in no event shall such
reimbursement exceed the greater of either the royalty amount paid by IBM
to NEI in connection with such Products or $[**] Million dollars,
and (b) NEI's normal complete service support of the Product that it makes
available to its other licensees of the Manufacturing Package, and shall
also provide the following minimum service support:
(1) support IBM regarding the determination of whether there is or is not
an Error in the Manufacturing Package; and
(2) use commercially reasonable efforts to isolate all Errors in the
Manufacturing Package, and promptly provide Corrections to IBM and
IBM's Designee in accordance with the parameters set forth below:
Page 3 of 14
<PAGE>
(a) for Errors that result in an emergency condition that causes
critical impact to IBM schedule or that makes performance or
continued performance of any feature or function impossible or
impracticable ("Severity Level 1 Error" or "SL1 Error"), NEI
shall use reasonable efforts to provide Corrections within 24
hours of the earlier of NEI discovering the SL1 Error or being
informed of the SL1 Error by IBM, a Designee or any IBM
subsidiary.
(b) for Errors that significantly affects an IBM schedule or which
makes the performance or continued performance of any feature or
function difficult that cannot be circumvented or avoided on a
temporary basis by the end user ("Severity Level 2 Error" or "SL2
Error"), NEI shall use reasonable efforts to provide Corrections
within 5 calendar days ("Days") of the earlier of NEI discovering
the SL2 Error or being informed of the SL2 Error by IBM, a
Designee or any IBM subsidiary.
(c) for Errors that are not critical in that performance can be
continued without difficulty or loss of data by easy
circumvention or avoidance by the end user ("Severity Level 3
Error" or "SL3 Error"), NEI shall use commercially reasonable
efforts to provide correction within 15 Days of the earlier of
NEI discovering the SL3 Error or being informed of the SL3 Error
by IBM, a Designee or any IBM subsidiary.
(d) for Errors that are minor which can be easily avoided or
circumvented by the end user ("Severity Level 4 Error" or "SL4
Error"), NEI shall use commercially reasonable efforts to provide
corrections within 45 Days of the earlier of NEI discovering the
SL4 Error or being informed of the SL4 Error by IBM, a Designee
or any IBM subsidiary.
NEI shall use commercially reasonable efforts to prepare Corrections in a
manner that will be technically practical for IBM to distribute such
Corrections either separate from the Product or as a replacement for the
entire Product. Notwithstanding anything contained herein to the contrary,
NEI shall not be required to provide any service or support to any IBM
distributors or end users.
3.6 Enhancements. If NEI develops Enhancements to the Manufacturing Package,
NEI shall provide said Enhancements to IBM and Designees as soon as they
are available, but in no event later than their general availability.
3.7 Schedules. NEI shall use commercially reasonable efforts to meet all
schedules set forth herein and as may otherwise be mutually agreed upon in
writing between the Parties.
4.0 IBM RESPONSIBILITIES
------------------------
4.1 Royalty. If IBM or any IBM subsidiary announces, markets, and distributes a
product offering that includes the Product, IBM agrees to pay NEI a royalty
as set forth in Attachment 1. Except as expressly set forth in Attachment
1, IBM shall not be responsible for any royalties or other payments. Any
amount not paid when due shall bear a late payment charge, until paid, at
the rate of 1.5% per month or, if lesser, the maximum amount permitted by
law. NEI shall be solely responsible for all other costs and expenses
associated with its performance and other obligations hereunder.
4.2 Royalty Reductions. IBM may request a lower royalty for the Product when a
product offering requires a substantial discount. If NEI agrees, in its
sole and absolute discretion, both Parties will sign a letter specifying
the product offering and its lower royalty payments.
4.3 Currency & Taxes. All prices are expressed and all payments shall be made
in United States currency, and NEI shall not include sales or other taxes
that are imposed on IBM or any IBM subsidiary in connection with the use of
the Manufacturing Package or the sale and distribution of Products, which
taxes shall be the sole responsibility of IBM. Except for such applicable
taxes, NEI shall have sole responsibility for the payment of all taxes and
duties imposed by all governmental entities (other than any taxes based
upon the income of IBM or its subsidiaries) on the transactions
contemplated hereby.
4.4 Payment Logistics. The contract coordinators set forth in subsection 9.7
shall coordinate and communicate any additional logistics required in
support of royalty administration.
4.5 Recordkeeping and Audit Rights. Each Party will maintain (and provide to
the other Party upon request) relevant royalty records to support invoices
under this Agreement and proof of required permits and
Page 4 of 14
<PAGE>
professional licenses, as applicable, for a period of time as required by
local law, but not for less than two (2) years following the date any
royalties are due under this Agreement. All accounting records relevant to
obligations under sections 4.1 and 5.0(k) of this Agreement will be
maintained in accordance with generally accepted accounting principles.
Each Party may, no more often than one (1) time per year, at its own
expense and with reasonable written prior notice (not to be less than 60
days), cause an audit of the other Party's records as described in this
subsection to be performed by an independent auditor reasonably acceptable
to both Parties. The independent auditor fees charged for such services
will be mutually agreed upon in advance of the audit. The audit shall be
for the purpose of confirming the accuracy of the payment of royalties in
accordance with this Agreement.
The auditor will execute the appropriate standard confidentiality agreement
with the Party being audited and will report to the Party causing the audit
only such information obtained during the course of such audit as is
necessary to determine whether the payments made by IBM or royalties
charged by NEI hereunder were correct. To facilitate the audit, the Party
being audited will give the independent auditor reasonable access, during
normal business hours, to such records and documentation as described in
this subsection.
Any such audit caused by NEI shall be at the expense of NEI, unless such
audit discloses an underpayment by IBM in excess of ten percent (10%) of
all payments due, in which case IBM shall reimburse NEI for such expenses
and NEI shall be entitled to audit IBM again during the same year. If the
audit discloses any underpayment by IBM, IBM shall promptly make payment to
NEI of such underpayment together with the interest provided in Section
4.1.
Any such audit caused by IBM shall be at the expense of IBM, unless such
audit reveals that a more favorable effective royalty rate has been or is
being offered by NEI to any third party who licenses the Manufacturing
Package on substantially similar terms and conditions, in which case NEI
shall reimburse IBM for such expenses and repay IBM for the amount in
overpaid royalties and IBM shall be entitled to audit NEI again during the
same year.
4.6 IBM agrees that, subject to existing applicable supplier agreements and
approval from such suppliers, it will use commercially reasonable efforts
to extend to NEI IBM component, commodity and manufacturing costs for
Products labeled with the NEI logo to be manufactured in the same location
as Products manufactured for IBM.
4.7 Both parties agree that they will work together to qualify NEI's software
to be listed on IBM's "Server Proven" supplier list as soon as reasonably
practicable. The responsibilities of each party shall be later defined in a
separate agreement.
5.0 WARRANTIES
--------------
NEI represents and warrants that at all times:
(a) The Manufacturing Package shall, as delivered by NEI: (1) conform to all
descriptions, specifications and requirements set forth in this Agreement
related to the Manufacturing Package; and (2) be free of all Errors. IBM's
sole remedy, and NEI's sole obligation, with respect to a breach of this
warranty shall be that those Products that fail to perform in accordance
with the Product specifications defined in this Agreement shall, at IBM's
sole discretion, be repaired or replaced (under a return merchandise
authorization, RMA, which shall be issued by NEI) by NEI, which repair or
replacement shall be commenced within 5 Days of IBM's written notification
to NEI, and NEI agrees to reimburse IBM for all reasonable costs and
expenses associated with the replacement of Products, including, without
limitation, all costs and expenses associated with problem diagnosis and
the replacement of Products at IBM, its subsidiaries, Designees, and its
and their distributors and customers; provided, however, that in no event
shall NEI's liability for such costs and expenses exceed the greater of
either the royalty amount paid by IBM to NEI in connection with such
Products or
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<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
$[**] dollars.
(b) NEI shall not deliver any item or process (including, without limitation,
the Manufacturing Package) to IBM that infringes any US patents that have
been issued prior to the date hereof, utility models, design registrations,
copyrights, mask work rights, trade secrets, or moral rights. If NEI knows
or becomes aware of any such actual or threatened infringement, NEI agrees
to promptly notify IBM in writing of such actual or threatened infringement
per Section 9.8 of this Agreement.
In the event NEI notifies IBM or IBM reasonably determines that the
Manufacturing Package and/or Product infringe a valid and enforceable US or
foreign patent, utility model, design registration, copyright, mask work
right, trade secret, or any other intellectual property right, IBM will
have the right to terminate this Agreement for material breach, without any
cost or liability to IBM, unless NEI is able to, within 30 Days of IBM's
termination notice to NEI, (a) secure the needed rights and licenses
regarding such infringed intellectual property or (b) modify the
Manufacturing Package and/or Product to be noninfringing. If NEI modifies
the Manufacturing Package and/or Product to be noninfringing, such modified
Manufacturing Package and/or Product must meet all specifications and
requirements in this Agreement to IBM's reasonable satisfaction, and such
modifications must be approved by IBM in writing.
(c) NEI is the owner of the Manufacturing Package or has all sufficient rights
to grant the rights and licenses granted in this Agreement., NEI maintains
records to substantiate such ownership and/or rights and licenses. NEI is
solely responsible for any royalties or for any other payments to any
third party due to IBM's exercise of IBM's rights and licenses granted in
this Agreement.
(d) NEI has obtained all necessary consents of individuals or entities required
for the use of names, likenesses, voices, and the like in the Manufacturing
Package.
(e) NEI has entered into written agreements with its employees, contractors,
licensees or other applicable third parties, as necessary for it to comply
with all of its material obligations under this Agreement.
(f) NEI has no obligation or restriction, nor will it assume any such
obligation or restriction, that would in any way interfere or be
inconsistent with or present a conflict of interest concerning its
performance under this Agreement.
(g) NEI and the Manufacturing Package are: (1) in compliance with all
applicable governmental laws, statutes, ordinances, administrative orders,
certifications, rules and regulations (including, but not limited to all
those related to health, safety, environmental and all importing and
exporting) to allow IBM, its subsidiaries and its and their distributors to
use the Manufacturing Package and distribute the Product world-wide; and
(2) not subject to any import or export restrictions.
(h) The Manufacturing Package and any supporting deliverables do not contain
any harmful code (including but not limited to viruses, worms or other
self-replicating or self-propagating programming) that can damage,
interfere with or otherwise adversely affect computers, programs or files
without the consent or intent of the computer user, and that NEI shall
enforce procedures to prevent any such harmful code from being incorporated
into the Manufacturing Package and shall promptly notify IBM of any
knowledge or suspicion of NEI of any incorporation of such harmful code
into the Manufacturing Package.
(i) In the event that a more favorable effective royalty rate is granted by NEI
during the Term to any third party who licenses the Manufacturing Package
on substantially similar terms and conditions, NEI shall immediately offer
such royalty rates, terms and conditions to IBM. Such changes will be
effective as of the date the royalty decrease or improved terms are granted
and will apply to all royalties due from IBM after that date.
(j) NEI shall maintain comprehensive general liability insurance for all
reasonable claims that might arise from NEI's activities under this
Agreement.
(k) The Manufacturing Package is Year 2000 ready such that it, and the
resulting Product, are capable of correctly processing, providing,
receiving and displaying date data, as well as exchanging accurate date
data with all products which are also Year 2000 ready with which the
Product is intended to be used within and between the twentieth and twenty-
first centuries;
(l) NEI shall promptly comply with all obligations, duties and responsibilities
set forth in this Agreement.
(m) The Manufacturing Package is euro-ready such that the Product will
correctly process, send, receive, present, store, and convert monetary data
in the euro denomination, respecting the euro currency formatting
conventions (including the euro symbol, as applicable);
NEI shall provide IBM prompt written notice of any change that may affect its
representations and warranties.
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EXCEPT AS EXPRESSLY PROVIDED ABOVE IN THIS SECTION 5, THE MANUFACTURING PACKAGE
IS BEING PROVIDED "AS IS" WITHOUT WARRANTY OF ANY KIND AND NEI HEREBY DISCLAIMS
ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, WITH RESPECT
TO THE MANUFACTURING PACKAGE INCLUDING, WITHOUT LIMITATION, ALL IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE.
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6.0 INDEMNIFICATION
-------------------
NEI agrees to protect, defend, hold harmless and indemnify IBM, IBM subsidiaries
and its and their successors, permitted assigns, distributors, end users and
other customers from and against any and all claims, damages, actions,
liabilities, losses, costs and expenses arising out of any third party claim of
actual or alleged:
(a) infringement by the Manufacturing Package or Product, of any patent,
copyright, mask work right, trademark, trade name, trade secret, or other
intellectual property or similar rights;
(b) unlawful or unfair trade practices or competition attributable to NEI;
(c) violation by NEI, or Manufacturing Package provided by NEI, of any
administrative order, rule or regulation of any country where the Product
is distributed; or
(d) damage to any property, personal injury, death, or any other damage or loss
by whomever suffered, resulting from any actual or alleged defect or from
an Error in the Manufacturing Package.
Notwithstanding the foregoing, NEI shall have no indemnification obligation or
liability under this Section 6 to the extent that any such claim is based upon
(i) the manufacture, use, distribution or sale of a Product that is not
manufactured in accordance with the Manufacturing Package and specifications
provided by NEI (or in accordance with changes to the Manufacturing Package for
which NEI's contract administrator (as defined by this Agreement) has provided
documented approval), if such claim could have been avoided by such compliance,
(ii) use of the Manufacturing Package or Products in combination with other
devices or products in a manner for which they were not designed or intended by
NEI, or (iii) use of the Products in a manner for which they were not designed
or intended by NEI.
IBM agrees to defend, hold harmless and indemnify NEI from and against any and
all costs, damages and expenses arising out of any third party claim for IBM's
breach of an IBM warranty provided with a Product to such third party, excluding
those claims which would be covered under NEI's indemnification to IBM or which
are caused by a breach of this Agreement by NEI.
The indemnifying party shall pay all damages, expenses, costs, including but not
limited to reasonable attorneys' fees resulting from all such claims or
proceedings regardless of who the claims are filed against, provided that such
payment shall be contingent on: (i) notice by the indemnified party to the
indemnifying party in writing of such claim to enable the indemnifying party to
defend or mitigate the same; (ii) cooperation by the indemnified party with the
indemnifying party in the defense thereof, of which the indemnifying party shall
have control at the indemnifying party's expense; and (iii) the indemnified
party obtaining the indemnifying party's prior written approval of any
settlement by the indemnified party of such matters (which approval shall not be
unreasonably withheld). Notwithstanding the above, the indemnified party shall
have the right, but not the obligation, at its sole discretion, to participate
in any such defense at its own expense.
In addition to NEI's indemnification obligations, if an infringement claim
appears likely or is made for which NEI has indemnification obligations
hereunder, NEI will use commercially reasonable efforts to immediately obtain
the necessary rights and licenses for IBM, IBM subsidiaries and its and their
successors, permitted assigns, distributors, end users and other customers to
continue to distribute, license and exercise all other rights and licenses
described in this Agreement on an uninterrupted basis. If after using
commercially reasonable efforts, NEI cannot obtain such rights and licenses,
then, at IBM's option, NEI shall use commercially reasonable efforts to modify
or replace the Manufacturing Package with a non-infringing version, subject to
IBM's technical approval of such modified or replaced Manufacturing Package and
subject to such Manufacturing Package complying with all specifications and
requirements described in this Agreement. If obtaining such rights and such
modification or replacement are not reasonably available to NEI, then NEI may
terminate IBM's license hereunder to the allegedly infringing item unless IBM
agrees to waive NEI's indemnification obligation with respect to the actual or
alleged claim. NEI agrees to reimburse IBM for all reasonable costs and expenses
associated with the replacement of infringing Products, including, without
limitation, all reasonable costs and expenses associated with problem diagnosis
and the replacement of Products at IBM, its subsidiaries, and its and their
distributors and customers. Said actions in this paragraph and any IBM approvals
shall not relieve NEI of its indemnification or other obligations. IBM shall
also have all other remedies available at law, in equity and in this Agreement.
Regarding claims that, in IBM's sole reasonable opinion, cannot be defended
separately, NEI agrees to participate with IBM and IBM's other licensors and
suppliers in the defense of such claims that may be affected by or which may
relate to a potential claim for which NEI is obligated to indemnify IBM, and NEI
will share, on a pro rata basis, in all damages, expenses, costs, and/or
judgments.
Page 8 of 14
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7.0 LIMITATION OF LIABILITY
---------------------------
EXCEPT AS MAY ARISE UNDER SECTION 6 AND EXCEPT AS MAY ARISE DUE TO A BREACH OF
CONFIDENTIALITY BY EITHER PARTY, NEITHER PARTY SHALL BE LIABLE TO THE OTHER
PARTY FOR ANY LOST PROFITS, OR CONSEQUENTIAL, INDIRECT, INCIDENTAL, SPECIAL OR
PUNITIVE DAMAGES EVEN IF ADVISED IN ADVANCE OF THE POSSIBILITY OF SUCH DAMAGES.
EXCEPT AS MAY ARISE UNDER SECTION 6 AND EXCEPT AS MAY ARISE DUE TO A BREACH OF
CONFIDENTIALITY BY EITHER PARTY, IN NO EVENT SHALL EITHER PARTIES TOTAL
AGGREGATE LIABILITY HEREUNDER EXCEED THE GREATER OF EITHER THE AMOUNT PAID AND
OWING BY IBM TO NEI HEREUNDER OR $[**] DOLLARS.
8.0 TERMINATION
---------------
Either party may terminate this Agreement, without liability for such
termination, for material breach by the other party or in the event that the
other party becomes insolvent, files or has filed against it a petition in
bankruptcy or undergoes a reorganization pursuant to a petition in bankruptcy
("Cause"). Such termination shall become effective 30 Days after receipt of
written termination notice, unless the party receiving such notice remedies the
cause cited in such notice within such 30 Day period. In the event IBM
terminates this Agreement for Cause (except for a termination pursuant to
Section 5(b)), in addition to all other remedies IBM has at law, in equity or
this Agreement, all rights and licenses granted to IBM hereunder shall
immediately become royalty-free and fully-paid-up for the Term.
IBM may terminate this Agreement, without liability, for convenience, at any
time, by providing NEI written termination notice, and such notice shall be
effective immediately upon NEI's receipt of such notice, unless the notice
provides for a longer period.
9.0 GENERAL
-----------
9.1 Confidential Information. Neither party has an obligation of
confidentiality for information exchanged under this Agreement. Should the
Parties desire to exchange confidential information, it shall be addressed
under the separately signed written agreement for exchange of confidential
information, Confidential Disclosure Agreement (CDA) #4999RL0613, which is
incorporated herein by reference.
9.2 Public Disclosure. Each party agrees not to disclose to any third party the
terms or the existence of this Agreement, without the express written
consent of the other party (any such written consent shall require, at a
minimum, a prior written confidential obligation by such third parties),
which consent shall not be unreasonably withheld, except as may be required
by law or government rule or regulation, or to establish the disclosing
party's rights under this Agreement, or to any potential investor or
acquirer of the disclosing party or its affiliates; provided, however that
if a party is seeking to disclose such information for any reason, then
such party shall limit the disclosure to the extent required, shall allow
the other party to review the information to be disclosed prior to such
disclosure, and shall apply, where available, for confidentiality,
protective orders, and the like. Such review by the other party shall not
be construed to make such party responsible for the contents of the
disclosure and the disclosing party shall remain solely responsible for
such contents.
Notwithstanding the foregoing, IBM acknowledges the desire of NEI to make a
public announcement of the existence of a relationship between NEI and IBM
and agrees to allow NEI to make such public announcement, in a form to be
reasonably mutually agreed upon by both parties, no later than thirty (30)
days after the date of execution of this Agreement.
9.3 Freedom of Action. Nothing in this Agreement shall be construed as: (1)
prohibiting or restricting either party or their subsidiaries from
independently developing, having developed independently, acquiring,
licensing, distributing or marketing products, services and other materials
which are competitive in any form with the Product, (2) guaranteeing that
either party or their subsidiaries shall announce, or otherwise offer for
sale or lease, any product or service, including but not limited to the
Product; or (3) affecting either party's pricing of products or services,
including but not limited to the Product. Nothing in this Agreement
obligates IBM, IBM subsidiaries or distributors to announce or market
Products that incorporate the Manufacturing Package in any quantity or in
any particular manner of resale. Resale or marketing activities may be
commenced or
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<PAGE>
discontinued at the sole discretion of IBM, without notice to NEI. Each
party is free to enter into similar agreements with other parties.
9.4 Relationship of the Parties. Each party is acting solely as an independent
company. This Agreement shall not be construed to establish any form of
partnership, agency, franchise or joint venture of any kind between NEI and
IBM, nor to constitute either party as the agent, employee, legal
representative, or any other form of representative of the other. This
Agreement shall not be construed to provide for any sharing of profits or
losses between the Parties. Each party acknowledges that it has not relied
on any promises, inducements, representations or other statements made by
the other party regarding the commercial viability, profitability or
success in the market place of any Products or services, and that each
party's decision to enter into this Agreement is made independently from
the other party.
9.5 Governing Law and No Jury Trial. This Agreement shall be governed by, and
the legal relations between the Parties hereto shall be determined in
accordance with, the substantive laws of the State of New York, without
regard to any conflict of laws principles, as if this Agreement was
executed in and fully performed within the State of New York. The United
Nations' Convention on International Sale of Goods shall not apply to this
Agreement. Each party hereby waives any right to a trial by jury in any
dispute arising under or in connection with this Agreement, and agrees that
any dispute hereunder shall be tried by a judge without a jury. For
litigation between the parties pertaining to this Agreement, the prevailing
party shall be entitled to recover its attorneys fees.
9.6 Assignment. No right, interest, privilege or obligation of this Agreement
shall be assigned or delegated by either party, without the other party's
prior written permission. Notwithstanding the foregoing, no such consent
shall be required for the assignment and delegation of this Agreement by a
party to another entity pursuant to any merger or consolidation of such
party with or into such entity if the holders of stock of such party
continue to hold immediately following such merger or consolidation at
least a majority of the voting power of the stock of the surviving entity.
Any act in derogation of the foregoing will be null and void.
9.7 Force Majeure. If because of act of God, accidents, fire, lockout, strike
or other labor dispute, riot or civil commotion, act of public enemy,
enactment, rule, order or act of any government or governmental authority,
failure of technical facilities, failure or delay of transportation
facilities, or other cause not reasonably within its control, either party
to this Agreement is materially hampered in the performance in the
performance of its obligations hereunder, then, for the duration of such
contingency or, if shorter, for a period not exceeding 3 (three) months,
such party may suspend its obligations hereunder by notice to the other
party to such effect. If any such contingency shall have continued in
effect for 3 (three) months or more from the date of notice thereof as
aforesaid, the party receiving notice may at any time thereafter terminate
this Agreement forthwith by serving notice to such effect.
9.8 Communications and Notice. All communications between the Parties under
this Agreement shall be carried out through or under the supervision of the
following contract coordinators:
--------------------------------------------------------------------------------
IBM Contact Information NEI Contact Information
----------------------- -----------------------
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Contact Name Brett Lawrence William Elliott
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Address 3039 Cornwallis Rd 61 Pleasant Street
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Address RTP, NC 27709 Randolph, MA 02368
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Mail Stop B002 / GG221 n/a
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Telephone 919-543-1551 781-961-4400
--------------------------------------------------------------------------------
Fax 919-254-2167 781-961-4508
--------------------------------------------------------------------------------
Each party may change the aforesaid contract coordinators or addresses at
any time by written notice to the other party's contract coordinator.
9.9 Headings Not Binding. Headings used in this Agreement are for convenience
of reference only and are not intended to be part of, or to affect the
meaning or interpretation of, this Agreement.
9.10 Order of Precedence. In the event of an inconsistency, the order of
precedence shall be: (a) this Agreement, and then (b) any applicable
confidential agreement that may cover the subject matter of this Agreement.
Any terms contained in any invoices, acknowledgments, shipping instructions
or other forms issued under or in
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<PAGE>
connection with this Agreement that are inconsistent with, different from
or additional to the terms of this Agreement shall be void and of no
effect.
9.11 Survival. The rights and obligations in this Agreement of sections and
subsections 4.6, 5.0, 6.0, 7.0, 8.0, and 9.0, as well as section B of
Attachment 1 shall survive and continue after termination or expiration of
this Agreement and shall remain in full force and effect, and shall bind
the Parties and their legal representatives, successors, heirs and assigns.
In addition;
(a) The rights and licenses granted in Section 2.0 shall survive and
continue in full force and effect after any termination of this
Agreement for Cause by IBM as specified in Section 8, for the
remainder of the Term;
(b) The rights and licenses granted in Section 2.0 shall survive and
continue in full force and effect after any termination of this
Agreement for Cause by NEI for the remainder of the Term, subject to
the payment of royalties to NEI as specified in Attachment 1 of this
Agreement;
(c) The rights and licenses granted in Sections 2.0(a) and 2.0(b) and
2.0(d) shall survive and continue in full force and effect upon any
termination or expiration of this Agreement for the limited purposes
of the repair, replacement and servicing of Products manufactured
prior to such termination or expiration;
(d) The rights and licenses granted in Section 2.0(c) shall survive and
continue in full force and effect after the termination or expiration
of this Agreement.
9.12 Severability. If any provision of this Agreement is held to be illegal,
invalid or unenforceable, the legality, validity and enforceability of the
remaining provisions shall not be affected or impaired.
9.13 Amendment/Waiver. No amendment, modification or waiver of any provision of
this Agreement shall be effective, unless it is set forth in a writing
which refers to the provisions so affected and is signed by an authorized
representative of each party. No failure or delay by either party in
exercising any right, power or remedy will operate as a waiver of any such
right, power or remedy.
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<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
Attachment 1
Manufacturing Package Description
A. The Manufacturing Package for the Product shall include, but not be limited
to the following:
A list of descriptions, requirements, know-how, code and Product specifications
which the Parties shall mutually agree upon and include in this Agreement by
duly executed amendment and which shall be sufficient in scope to enable IBM to
make or have made the Product.
B. Royalty Description.
In accordance with subsection 4.1 of the Agreement, IBM agrees to pay NEI a
royalty for each Product externally distributed (or used internally for purposes
other than test or development) by IBM or any IBM subsidiary directly to an end
user or to a distributor, or purchased at cost from NEI by IBM or any IBM
subsidiary. There are no minimum royalties due. IBM and NEI agree to negotiate
in good faith the terms of payment and reporting of royalties to NEI, but in no
event shall any royalties for distribution be paid by IBM later than 45 days
after the conclusion of each calendar quarter for the Products so distributed in
such quarter, less adjustments for returns. Upon payment, IBM shall furnish NEI
with an accounting statement of the royalties earned together with payment for
any amount of royalty shown thereby to be due to NEI.
The per-unit-distributed, royalty cost of the license for units distributed by
IBM will be as follows;
$[**] dollars) per unit for the first [**] units.
$[**] dollars) per unit for the next [**] units (units [**] through [**]).
$[**] dollars) per unit for the next [**] units (units [**] through [**]).
$[**] dollars) per unit for the next [**] units (units [**] through [**]).
$[**] dollars) per unit for any units beyond [**] units.
The license to manufacture Product will continue for the life of this Agreement
at cost of $[**] per unit above [**] units. The time at which no further
Enhancements will be made to the Product defined under this license shall be
determined by mutual agreement of both parties and included in this Agreement by
duly executed amendment.
C. Modifications to Product.
The following modifications to the Product will be made by NEI and included in
the Manufacturing Package delivered to IBM under this license;
a) NEI agrees to modify the Product mechanicals such that the hard-drives can
be removed in the field by IBM service personnel.
b) NEI agrees to reasonably support IBM in its modification of the Product
bezel to meet IBM Industrial Design (ID) requirements. IBM acknowledges
that all costs and expenses associated with such modification shall be the
sole responsibility of IBM.
c) NEI will make appropriate code changes to the BIOS (Subject to AMI
approval, as applicable), POST, CMbus, FOS and diagnostics to replace all
references to NEI in such items to references to IBM in accordance with IBM
requirements.
d) NEI will provide all currently-existing Product publications and allow IBM
to modify them to meet IBM specifications. Currently available publications
are (1) Hardware Specifications and (2) Install/Administrator Guide. In
addition, (3) Procedures for Hard File Removal will also be provided by
NEI.
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<PAGE>
e) NEI will make any necessary changes to the Product design such that the
Product meets worldwide agency certification requirements as specified in
Attachment 1 Section E, below.
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<PAGE>
D. Intel Processor Enhancements.
NEI will agree to use commercially reasonable efforts to enhance the
Manufacturing Package by adding a 600/100MHz processor/bus to the current
implementation of the Product and adding a new motherboard (planar) for the
support of a 133MHz front-side bus in order to keep the Product compatible with
the most current Intel processor. NEI will use commercially reasonable efforts
to deliver these Enhancements on a timely basis.
E. Agency Certifications.
NEI will make any necessary changes to the Product design such that the Product
meets the following worldwide agency certification requirements;
Product Safety
--------------
UL1950, CSA C22.2 No.950, TUV/CDE IEC950, Nom
Environment
-----------
Operating Temp: 10-35Deg C, 2133M alt, 8-80% Rel. Humidity Power off:
10-43Deg C, 5-80% Rel. Humidity Shipping: -40-60Deg C, 5-100% Rel.
Humidity (exc. rain)
EMC
---
FCC Class A, CE Mark EMC r
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