EXHIBIT 10.13
Gateway Confidential
[LOGO OF GATEWAY]
MASTER SUPPLY AGREEMENT
THIS MASTER SUPPLY AGREEMENT (the "Agreement") is entered into effective as
of September 16, 1999 ("Effective Date"), by and between Gateway, Inc., a
Delaware corporation, 000 Xxxxxxx Xxxxx, Xxxxx Xxxxx Xxxx, XX 00000, and its
subsidiaries as determined by Gateway, Inc. (collectively, "Gateway"), and
Cobalt Networks, Inc., a California corporation, 000 Xxxxx Xxxxxx, Xxxxxxxx
Xxxx, Xxxxxxxxxx 00000 ("Cobalt").
1 Background and Definitions
1.1 The purpose of this Agreement is to establish the terms and conditions
under which Cobalt will provide certain Products (as defined in Attachment A and
listed in Paragraph 5 of an Attachment B in the form attached to this Agreement)
to Gateway. Such provision shall be as set forth in this Agreement, including
the attachments hereto and the Orders (as defined in Attachment A) hereunder.
The term "Products" as defined and used in capitalized form herein, does not
include any other products of Cobalt. This Agreement does not constitute a
purchase order.
1.2 Definitions. As used in this Agreement, capitalized terms shall have
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the meanings set forth in this Agreement or in Attachment A.
1.3 As determined by Gateway, this Agreement shall apply to Gateway's
subsidiaries and other affiliates. If an affiliate of Gateway places an Order
under this Agreement, such affiliate, and not Gateway or its other affiliates,
shall be responsible for such Order.
1.4 Relationship with Customers
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1.4.1 This Agreement is intended to allow Gateway to provide certain
products to Gateway's customers, either based on or consisting of, as determined
by Gateway, the Products provided by Cobalt under this Agreement. Cobalt
acknowledges that a primary goal of the rights granted to Gateway, and
obligations of Cobalt, under this Agreement is for Cobalt's involvement in the
development of such Gateway products to be transparent to Gateway's customers,
except as may be specifically instructed by Gateway to Cobalt to the contrary in
writing. Cobalt acknowledges that the intent of the preceding sentence is that
such customers perceive that they are dealing with Gateway only. Without
limiting the generality of the foregoing, Cobalt shall not direct any
communication to a Gateway customer or include any information in a Product that
would enable the customer to identify Cobalt's involvement. Further, Cobalt
shall not contact Gateway's customers or otherwise use or disclose any
information obtained from Gateway or Gateway's customers concerning such
customers for any purpose, and Cobalt shall not market or distribute any
products or services of Cobalt or any third party to Gateway's customers.
Gateway reserves the right to require Cobalt to disclose to Gateway's customers
Cobalt's involvement in the Products and services hereunder.
1.4.2 Cobalt shall maintain a [***] telephone number dedicated to
receiving support calls from Gateway personnel on a [***] basis concerning
Gateway products derived from or consisting of the Products. Should a Gateway
customer make an inquiry to Cobalt directly, Cobalt shall refer such customer to
a Gateway representative as designated by Gateway and explain to Gateway the
circumstances under which such customer contacted Cobalt directly.
1.4.3 Cobalt shall include Gateway contact information as specified by
Gateway in each Product and the associated Documentation. Cobalt shall also
include contact information for support as designated by Gateway. Cobalt shall
perform modifications to the Products as required in writing by Gateway. Unless
expressly directed otherwise in writing by Gateway, Cobalt shall not include any
Cobalt trade marks, services marks, trade names, logos, branding or other
references to Cobalt on or in any Product, Documentation or packaging.
1.5 Cobalt shall not, directly or indirectly, develop, sell, or otherwise
provide the Products covered by this Agreement to or for any competitor of
Gateway nor enter into any agreement to do so. For the purposes of this
Agreement, the term "competitor of Gateway" means any company or other entity
that develops, assembles, manufactures, markets or sells any product or service
that competes [***] with the products or services offered by Gateway.
2 Products and Orders
2.1 Cobalt shall provide to Gateway the Products described in Gateway's
Orders. All Orders shall be subject to the terms and conditions of this
Agreement and the terms and conditions contained in the Order. The terms of this
Agreement shall control any express conflict between the terms of this Agreement
and the terms stated in the Order; provided that, the Order shall control
specific terms such as the description of the Product, delivery schedule, and
quantity. No modification of an Order by Cobalt, nor any terms or conditions
contained in any acknowledgement issued by Cobalt shall be binding on Gateway.
If Gateway determines that a proposed modification is appropriate, Gateway shall
either cancel the modified Order and issue a new Order, or issue a change order.
The Products shall conform to the warranties set forth in Article 8.
2.2 The prices and/or pricing formula for the Products listed on
Attachment B shall be applicable to all Orders issued under this Agreement.
Mutually agreed to modifications and changes to quantities and delivery
schedules will be set forth in the individual Orders for such Products. The
parties may add or remove Products under this Agreement or change such pricing
terms by mutually executing a written amendment in the form of Attachment B.
2.3 Cobalt shall manufacture the Products to conform to the Specifications
furnished by Gateway. Cobalt shall comply with the Product Quality Guidelines in
Attachment C. The parties shall hold business review meetings no less than
quarterly to evaluate the overall performance of each of the parties and the
status of continuous improvement projects.
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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2.4 For up to 30 days after Gateway commences shipping Products to its
customers, Gateway and Cobalt shall negotiate in good faith to enter into a
written agreement whereby Cobalt will grant Gateway the option to. Such
agreement shall revise the pricing in Attachment B accordingly. Such option
shall be exercisable upon the terms and conditions set forth in such agreement.
3 Delivery of Products
3.1 Cobalt shall deliver the Products to the location specified by Gateway
on the delivery dates and in the quantities stated in the applicable Order.
Each Product as delivered shall conform to the warranties set forth in Article 8
and shall include Documentation in accordance with Section 8.1.c. Products shall
be available to Gateway on a worldwide basis.
3.2 Unless otherwise specified in the Order, Products shall be delivered
to Gateway [***]; Gateway shall have the right to reject any nonconforming
delivery upon receipt by Gateway at the final agreed point of delivery. The
costs for transportation and insurance shall be expressly accounted for in the
determination of prices to be paid to Cobalt under Attachment B or the Order. If
no such provision is made in Attachment B or the Order, Cobalt shall promptly
reimburse Gateway for all such costs.
3.3 Cobalt will [***] at the times specified in Gateway's orders. [***] If
Cobalt fails to deliver within [***] days of the specified delivery date, Cobalt
will pay for [***] or Gateway may cancel the affected Order without penalty.
3.4 Gateway shall be entitled, without penalty or other liability, to
reschedule or cancel Product order quantities on any existing Order in the
following percentages:
0-30 days [***] reschedule [***] cancellation
31-60 days [***] reschedule [***] cancellation
61-90 days [***] reschedule [***] cancellation
91 days out [***] reschedule [***] cancellation
3.5 Gateway and Cobalt will work together with regard to the rescheduling
and cancellation of Products to be delivered to Gateway in order to maintain and
achieve the maximum flexibility for Gateway. Without limiting the generality of
the preceding sentence, Cobalt agrees to use commercially reasonable efforts to
mitigate any Gateway liability for Product cancellations that are higher than
the percentages noted above by returning to its suppliers, finding alternative
purchasers or otherwise using any applicable materials, parts, or subassemblies,
that pertain to any cancelled Orders.
3.6 Upon Gateway's request, Cobalt shall comply with Gateway's Center for
Product Replenishment procedure as communicated in writing by Gateway. Cobalt
will, together with Gateway, establish means by which Product can be expedited
to designated Gateway destinations.
3.7 Cobalt and Gateway will monitor transportation pricing and service on
a quarterly basis. In the event that Gateway consents to Cobalt's use of any
carrier other than a Gateway-designated carrier to be used, Gateway will not be
responsible for freight charges in excess of amounts in excess of what Gateway
could reasonably expect to pay using Gateway's own designated carriage.
3.8 Cobalt shall complete the form of International Trade Information
supplied by Gateway and furnish it to Gateway not later than 10 business days
after the execution of any Order. Cobalt acknowledges and agrees that Gateway
requires such information to comply with its legal obligations. Cobalt shall
provide Gateway with timely written notice of changes to any of the information
provided to Gateway pursuant to this Section 3.8, and shall provide Gateway a
revised form to reflect any such changes. Cobalt agrees to indemnify and hold
Gateway harmless against any Claims arising from or related to errors or
omissions or Cobalt's failure to disclose pertaining to Cobalt-certified import
or export data.
4 Invoices and Payment
4.1 Cobalt shall submit detailed invoices for Products set forth on
Gateway's Orders. Such invoices shall include line item detail of any cost of
merchandise, cost of freight (other than costs paid by Gateway), and incidental
costs when invoicing Gateway. Cobalt shall submit such invoices to Gateway's
location indicated on the applicable Order. Such invoices shall reference
Gateway's purchase order number and will contain such other information as
Gateway may reasonably request.
4.2 Gateway shall not be obligated to pay any amounts not properly
invoiced in accordance with this Agreement. The invoice payment terms for the
Orders shall be [***] days from Gateway's receipt of the invoice. If payment is
made within [***] from Gateway's receipt of the invoice, Gateway shall be
entitled to a [***] on the amount due. Gateway may make such payments by check
or by electronic transmittal to Cobalt's designated account.
4.3 Cobalt represents and warrants that all of the prices, warranties,
benefits and other terms set forth hereunder are equivalent to or no less
favorable than the terms offered by Cobalt at any time to its other customers
and distributors of similar products. [***]
4.4 Unless otherwise agreed upon by Gateway in writing, Gateway shall only
be responsible for paying the costs described on Attachment B based on Gateway's
Orders. [***] for any costs associated with compliance with all laws and
regulations concerning imports and exports, including but not limited to any
license or other fees, taxes, duties, customs, tariffs, and government imposed
surcharges. Cobalt shall cooperate with Gateway in order to reduce to a minimum
any taxes, duties, and other fees associated with the import or export of
Products to Gateway's locations. Gateway shall have the right to [***] Cobalt
shall pay any taxes resulting from this Agreement. Upon Cobalt's request,
Gateway shall provide Cobalt a resale exemption certificate, if applicable.
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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4.5 Cobalt shall keep accurate and complete records concerning this
Agreement. Gateway reserves the right to inspect and audit such records. Such
inspections and audits shall not occur more than [***] unless Cobalt's
performance necessitates additional inspections and audits to ensure compliance
with this Agreement. Such audits will be performed by an independent third party
at Gateway's expense, except that, if Cobalt is found to not be in material
compliance with this Agreement, Cobalt shall reimburse Gateway for all costs
associated with the audit. Each audit will be conducted at Cobalt's place of
business upon at least [***] prior written notice from Gateway , except that no
such notice shall be required if Gateway has reason to believe that Cobalt has
breached this Agreement. The results of such audit shall be kept confidential by
the auditor, and, if conducted by a third party, only Cobalt's relevant
discrepancies with this Agreement shall be reported to Gateway.
5 Term and Termination
5.1 The term of this Agreement shall commence on the Effective Date and
shall continue for five years, unless earlier terminated in accordance with this
Agreement. Upon expiration of the initial term, this Agreement shall
automatically renew for successive one year periods, unless either party gives
written notice of nonrenewal at least 60 days prior to the expiration of the
then-current term or unless otherwise terminated in accordance with this
Agreement.
5.2 Either party shall have the right to terminate this Agreement without
further notice if a material breach of this Agreement by the other party remains
uncured more than 30 days after the breaching party receives written notice of
such breach.
5.3 Either party shall have the right to terminate this Agreement upon
written notice if the other party (i) becomes insolvent, (ii) makes any
assignment for the benefit of creditors, (iii) enters into any compromise with
creditors or a general agreement for referral of payment with its creditor, (iv)
makes or suffers to be made any transfer to any person, trustee, receiver,
liquidator, or referee for the benefit of creditors, (v) files a voluntary
petition in bankruptcy, (vi) suffers an involuntary petition in bankruptcy to be
filed against it, (vii) files any petition in any reorganization, arrangement,
compromise, readjustment, liquidation, or dissolution or similar relief for
itself, or (viii) becomes unable to pay its debts generally as they become due.
5.4 Upon termination of this Agreement, each party shall promptly return
to the other all information, materials, and other properties of the other
received in connection with this Agreement; provided that, Gateway shall not be
obligated to return any Products received prior to termination. Gateway's
license for any Software Product shall survive termination of this Agreement
unabridged for the longer of (a) a period sufficient for Gateway to distribute
its current inventory of such Software Product and to fulfill outstanding
Gateway customer orders, or (b) 180 days, unless such termination resulted from
a material breach by Gateway of restrictions under the terms of this Agreement
limiting such license. Gateway's license for any other Software and
Documentation (meaning Software and Documentation distributed with or as parts
of other Products, and not Software Products and associated Documentation) shall
survive the termination of this Agreement to the extent necessary for Gateway to
distribute such Products in its possession. Gateway's license to all Software
and Documentation shall survive termination in an abridged form to the extent
necessary for Gateway to support such Software and other Products for itself and
its customers. End-user licenses granted pursuant to this Agreement shall not
be diminished or abridged by termination of this Agreement.
6 Rights in Information
6.1 License
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6.1.1 Cobalt grants to Gateway a non-exclusive, worldwide right and
license during the term of this Agreement and any renewals hereof to (a) use,
execute, perform, modify, display, promote, market, and reproduce the Software
and Documentation; (b) distribute and sub-license the Software and Documentation
and Gateway's modifications thereto, to customers of Gateway in connection with
other Products covered by this Agreement, or, [***] (c) display and distribute
the Software and Documentation for evaluation purposes and to include portions
of the Software and Documentation in its promotional materials for Gateway's
products; and (d) cause any of the foregoing to be done by contractors retained
by Gateway. For Software that is not included as a separate Product on
Attachment B or an amendment thereto, Gateway's license shall be limited to
using and distributing such Software and associated Documentation in connection
with the Product in which it is included under this Agreement.
6.1.2 Deliverables. Cobalt shall deliver the latest version of the
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Software and Documentation to Gateway on golden master CD-ROMs/DVD-ROMs, or
other media designated by Gateway and suitable for duplication. Cobalt shall
furnish the Documentation to Gateway in electronic source form. Cobalt will use
reasonable efforts to cooperate with Gateway to ensure that the Software is
compatible with Gateway hardware and standard operating systems and
environments. In furtherance of this cooperation, Cobalt agrees to add Gateway
as one of its beta sites. Cobalt will provide all Enhancements to Gateway at no
additional charge within a reasonable time after they are available, but in no
event later than [***] before Cobalt makes such Enhancements generally
available. Gateway shall have the right to distribute Enhancements to its
customers [***] Cobalt shall advise Gateway of any New Release at least 90 days
prior to the scheduled release date of such New Release. Cobalt also agrees to
provide Gateway, [***] a golden master CD-ROM/DVD-ROM of each New Release at
least [***] before Cobalt releases it for general availability. If Cobalt fails
to comply with the preceding two sentences, Cobalt shall [***] incurred by
Gateway to offer a New Release on the general availability date for such New
Release established by Cobalt. Cobalt agrees that Gateway can offer its
customers a New Release at any price, if any, Gateway may deem appropriate.
6.1.3 Source Code Escrow. Cobalt shall, [***] expense, maintain on
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deposit with a nationally recognized bank, trust company or escrow company,
machine readable copies of current versions of all Escrow Material. If, on the
Effective Date, Cobalt has entered into an escrow agreement regarding the Escrow
Materials with a nationally-recognized bank, trust company or escrow company,
Cobalt shall provide a copy of such escrow agreement to Gateway upon execution
of this Agreement. Gateway shall have the right to be a beneficiary of such
escrow agreement. If Cobalt (i) ceases, for any reason, to support any Product,
(ii) ceases to do business, and its business and support of the Product are not
continued by another corporation or entity which assumes and performs Cobalt's
obligations under this Agreement, or (iii) undertakes or has instituted against
it any action described in Section 5.3, then the Escrow Material shall be
delivered and released to Gateway. In such event, Cobalt grants Gateway the
right to use, execute, modify, and reproduce the Escrow Material or any portion
thereof for the purpose of supporting its customers who have acquired the
Product from Gateway.
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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6.1.4 Disclosure and Reporting Obligations. Gateway relies upon Cobalt to
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advise Gateway of any intellectual property of third parties used by Cobalt in
the Products, and any restrictions or licenses required for Gateway to integrate
Cobalt Products into Gateway's computer systems or otherwise distribute such
Products. All such third party intellectual property, and the applicable
restrictions, requirements and obligations related thereto, are set forth in
Attachment B. Cobalt has a continuing obligation to notify Gateway immediately
of any changes to such information in Attachment B by written notice to
Gateway's Authorized Representative.
6.1.5 No royalties or other fees shall be due to Cobalt except the fees
stated in Attachment B. In addition, no fees shall be payable to Cobalt for any
Software or Documentation (a) used solely for testing systems; (b) shipped as
replacements for copies found to be defective; (c) used for demonstrations to
prospective customers; (d) provided to Gateway as sample copies under this
Agreement; (e) provided to Gateway as samples for training under this Agreement;
or (f) used internally by Gateway.
6.2 Confidential Information
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6.2.1 Information disclosed in connection with this Agreement shall be
covered by the Confidential Disclosure Agreement dated May 24, 1999 between
Gateway and Cobalt. The authorized uses of such information under Paragraph 5 of
such Confidential Disclosure Agreement are hereby expanded to include the
activities covered by this Agreement. Neither party shall publicly announce or
disclose the existence of this Agreement or its terms and conditions or
advertise or release any publicity regarding this Agreement without the prior
written consent of the other party.
6.2.2 Privacy. Cobalt acknowledges the importance Gateway places on
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protecting the privacy of its customers. Accordingly, Cobalt shall use its best
efforts to safeguard any individually identifiable data acquired from or about
Gateway's customers, including without limitation, names, addresses, or credit
information, against unauthorized access or use. In addition, Cobalt shall not,
without Gateway's prior written consent, use, sell, license, lease or otherwise
transfer such data to any third party, or export such data to any location
outside of the country in which Cobalt acquired such data. In the event Gateway
agrees to allow Cobalt to use Gateway customer data to send marketing materials
to customers, Cobalt shall: (i) allow each customer to access any data Cobalt
may have regarding such customer; (ii) allow each customer to correct any
incorrect or incomplete data regarding such customer; (iii) comply with any
request by a customer to remove such customer's name from the customer lists
maintained by Cobalt; and (iv) upon receipt of a request from described in
clause (iii), provide no further marketing materials to such customer. Upon the
expiration or earlier termination of this Agreement, Cobalt shall return to
Gateway all lists and other data regarding Gateway's customers then in Cobalt's
possession. Cobalt shall not retain any copies of such data in hard copy or
electronic form.
6.2.3 Cobalt shall not export or re-export any information, materials or
products received from Gateway except with Gateway's prior written consent and
in compliance with all applicable U.S. export control regulations, specifically
including but not limited to the U.S. Export Administration Regulations.
6.2.4 Upon Cobalt's reasonable request, Gateway shall provide [***]
for the sole purpose of [***]. Such information shall be Confidential
Information of Gateway and subject to the terms and conditions of this
Section 6.2.
6.3 Intellectual Property Rights
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6.3.1 All modifications and Enhancements made to the Products and
Documentation by, on behalf of, or according to Specification provided by
Gateway are Confidential Information of Gateway and are the sole property of
Gateway. All such modifications and Enhancements shall be deemed "works made
for hire" and shall be owned exclusively by Gateway by operation of law. To the
extent any such modification or Enhancement may not, by operation of law, be
deemed a "work made for hire," Cobalt hereby assigns to Gateway all right,
title, and interest in and to such modification or Enhancement, including all
copyrights and other intellectual property rights inherent therein or related
thereto. No rights or license are granted to Cobalt for such proprietary
modifications and Enhancements. The foregoing shall not restrict Cobalt's use
or distribution of Cobalt's intellectual property existing prior to this
Agreement, but shall restrict Cobalt's use and distribution of the results of
such modification or Enhancement of such pre-existing intellectual property.
6.3.2 Trademarks. Cobalt grants to Gateway a worldwide, royalty-free right
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and license to use in the production, marketing and distribution of the
Products, all program names, trade names, and trademarks, including those of
Cobalt and third parties, used in connection with the Products. To the extent
that the Specification for a Product provides for the inclusion by Cobalt of
Gateway Marks in such Product or associated materials, Gateway grants to Cobalt
the right to use such Marks strictly in accordance with such Specification and
in accordance with any usage guidelines and policies furnished by Gateway for
such Marks. The parties agree that the Specification shall expressly address the
use of Gateway Marks if the intent is for the Product to include Gateway Marks.
Consistent with Section 1.4, such intent is assumed unless otherwise expressly
provided to the contrary in the Specification. If such contrary provision is not
made in the Specification, Cobalt shall comply with any directions further
provided by Gateway concerning the use of Gateway Marks in connection with the
Products, and the failure to do so shall be considered a material breach of this
Agreement. Cobalt shall not use any Gateway Xxxx for any other purpose and shall
not affix any Gateway Xxxx to any product other than the Products sold to
Gateway hereunder. Cobalt agrees that it will not assert any right, title or
interest in any Gateway Xxxx, nor shall it use any Marks that are confusingly
similar to any Gateway Xxxx.
7 Support, Maintenance and Training
7.1 Cobalt shall provide all maintenance and industry-standard support for
the Products, including modifications and Enhancements made for Gateway. Cobalt
will not accept requests for support from Gateway's customers or dealers
concerning the Products. Cobalt shall direct such customers to Gateway in
accordance with Section 1.4.4. Gateway shall not be obligated to provide Cobalt
with customer names or identifications.
7.2 Cobalt shall respond to calls by Gateway's representatives concerning
all problems encountered by Gateway, its customers, or resellers. Cobalt shall
establish an information technology infrastructure for the purposes of sharing
response
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information in a timely and efficient manner. Cobalt shall use its best efforts
in responding to any questions or complaints from, or problems and other issues
encountered by, Gateway, its customers, or resellers.
7.3 Cobalt's support obligations hereunder shall include but not be
limited to providing Gateway and, through Gateway, Gateway's customers with:
a All Corrections, as soon as the Corrections are available and in
accordance with the "time is of the essence" parameters set forth in Section
7.3.b, but in no event later than the general availability of such Corrections.
Cobalt agrees that the licenses granted to Gateway in Section 6.1 include the
right to distribute Corrections by any means Gateway may deem appropriate,
including without limitation, distribution over the Internet, from a Bulletin
Board Service, or other electronic means, provided that such distribution shall
be limited to customers who have previously acquired the Product from Gateway.
b Assistance in isolating all Errors in any Product, and promptly provide
Corrections to Gateway in accordance with the "time is of the essence"
parameters set forth below:
i For Errors that result in an emergency condition that causes a critical
impact to the user's schedule or makes performance or continued performance of
any feature or function in the Product impossible or unpractical (a "Priority
Xxxxx 0 Xxxxx"), Xxxxxx shall use commercial best efforts to provide Corrections
[***] hours of the earlier of Cobalt discovering the Error or being informed
of the Error.
ii For Errors that significantly affect the user's schedule or which make
the performance or continued performance of any feature or function of the
Product difficult and cannot be circumvented or avoided on a temporary basis by
the user (a "Priority Xxxxx 0 Xxxxx"), Xxxxxx shall use commercial best efforts
to provide Corrections [***] hours of the earlier of Cobalt discovering the
Error or being informed of the Error.
iii For Errors that allow performance of the Product to continue without
difficulty or loss of data by easy circumvention or avoidance by the user (a
"Priority Level 3 Error"), Cobalt shall use commercially reasonable efforts to
provide Corrections within [***] of the earlier of Cobalt discovering
the Error or being informed of the Error.
iv For Errors that can be easily avoided or circumvented by the user (a
"Priority Level 4 Error"), Cobalt shall use commercially reasonable efforts to
provide Corrections [***] days of the earlier of Cobalt discovering
the Error or being informed of the Error.
c All information and materials reasonably requested by Gateway's
technical support representatives for the purposes of supporting the Products
and addressing operational issues for Gateway and its customers. Cobalt shall
comply with all procedures and mechanisms reasonably established and
communicated by Gateway for the purposes of facilitating such support.
7.4 Training. Cobalt shall provide, at [***] expense, up to [***] class
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hours of training at a Gateway-designated facility during Gateway's regular
business hours on each Product for Gateway's sales and technical support
personnel. Cobalt grants Gateway permission to videotape any and all training
sessions for use at its facilities worldwide and to use and distribute such
videotapes in further training of Gateway personnel. Thereafter, Cobalt agrees
to provide reasonable training for New Releases.
8 Warranties, Returns and Epidemic Failures
8.1 Cobalt represents, warrants and covenants as follows:
a The Products will perform in accordance with all Gateway-approved
Specifications and Documentation.
b The Products, all components of the Products, and the media upon which
any Software or Documentation is furnished, will (a) be new, (b) be free from
Defects in manufacture, materials and design, and (c) function properly under
ordinary use.
c The Documentation for each Product shall (i) be accurate and complete
with respect to the Products covered; (ii) describe in reasonable detail the
procedures associated with the covered Product; and (iii) enable users of
ordinary skill to make full use of such Product.
d Each Product (i) is designed to, and shall, operate without error or
loss of function prior to, during, and after the calendar year 2000 A.D.; (ii)
shall correctly perform all operations (including, but not limited to
calculating, comparing, sorting and sequencing) on, and produce correct and
accurate results from, and consisting of, date data, regardless of (A) the
current century, (B) the century reflected or referenced in such date data, and
(C) the source of such date data; (iii) shall process, calculate, compare, sort
and sequence all dates in a format allowing entry or processing of dates with a
four digit year, where the first two digits designate the century and the second
two digits designate the year within the century; (iv) shall correctly
recognize, process and calculate dates for "leap" years without failure; and (v)
shall correctly infer the century value upon encountering date data which does
not specify the century.
e Cobalt has tested the Products, Documentation and any media furnished by
Cobalt to confirm the absence of any computer viruses and any methods for
disrupting the normal operation of, or gaining access to, the Products or other
computing resources. Such Products, Documentation and media are free of any such
viruses, methods and other harmful code.
f The Products do not pose a threat to the safety of any person.
Gateway shall have the right to communicate any information to any third party
if Gateway deems such communication necessary to prevent injury or damage
associated with any safety hazard which Gateway reasonably believes to be
present in or related to any Product. Cobalt shall immediately correct any
safety hazard in any Product and take all necessary measures to prevent injury
to any person or property by any such safety hazard. Cobalt shall be solely
responsible for all expenses associated with the correction of such a safety
hazard.
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g To the best of Cobalt's knowledge, based on its qualitative determination,
the Product or parts it provides to Gateway under this Agreement do not contain
asbestos or PCBs, nor were they manufactured with CFCs. Cobalt covenants that
it shall not introduce into the Product or any replacements any materials that
contain asbestos or PCBs, nor shall it manufacture any Product with CFCs.
Cobalt shall use its best efforts to ensure that the suppliers of any parts used
by Cobalt to produce the Products do not use asbestos, PCBs or CFCs.
h Cobalt shall use its best efforts to use reusable and recyclable packaging
for all Products whenever possible.
8.2 In the event of a breach of any of the warranties under Section 8.1,
Cobalt shall, at Gateway's option, either: (1) provide a Correction without loss
of functionality or performance at no expense to Gateway; (2) provide a
replacement without loss of functionality or performance at no expense to
Gateway; or (3) refund or credit Gateway for all amounts paid by Gateway
hereunder for the Product.
8.3 Warranty Returns and Epidemic Failures. For purposes of this Agreement,
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"Warranty Returns" shall be defined as Products that have been delivered to
Gateway or by Gateway to its customers and rejected due to Defect(s). An
"Epidemic Failure" occurs when the same Defect or failure occurs repeatedly in a
Product, as more fully described in Attachment D. Warranty Returns and Epidemic
Failures shall be handled in accordance with Attachment D.
8.4 Cobalt will comply with guidelines for total cost adjustments based on
Defects, Errors, Epidemic Failures, and DPPM as contemplated by Attachment B and
other warranty issues, as reasonably determined by Gateway under the
circumstances and communicated in writing to Cobalt.
8.5 Noninfringement. Cobalt further represents, warrants and covenants as
---------------
follows. Cobalt possesses all requisite rights and authority to enter into this
Agreement and fulfill its obligations hereunder. Cobalt has not entered and
shall not enter into any agreement which would conflict with Cobalt's
obligations hereunder or otherwise have the effect of limiting Cobalt's ability
to fulfill its obligations under this Agreement. Title to all Products purchased
by Gateway, no matter where delivered, shall be free and clear of all liens,
encumbrances, security interests, or other adverse interests or claims. Cobalt
is the lawful owner of the Products and has the authority to grant the rights
set forth in this Agreement. Neither the Products nor Gateway's exercise of
rights with respect thereto shall infringe any patent, copyright, trade secret,
trademark, or other intellectual property rights of any third party.
8.6 Cobalt acknowledges that the Products may be used in connection with
other Products or systems or as components of a system which includes other
components. Such use shall not constitute an unauthorized alteration or change
of the Product.
8.7 Cobalt further represents, warrants and covenants as follows:
a All services, including but not limited to any professional services,
maintenance or support, provided under this Agreement will be performed in a
timely, professional and workmanlike manner and will be in accordance with
industry standards.
b Cobalt has not, and covenants that it will not, offer or give any payments,
gifts, gratuities, or anything of value to any Gateway employee or
representative, except for ordinary and reasonable business courtesies in
appropriate circumstances. A "business courtesy" is something that is
unsolicited, modest in value (generally not more than $50 in the U.S. in the
case of gifts), and does not influence or appear to influence the business
decision of the recipient. If Cobalt breaches this Section 8.7.b, Gateway shall
have the right to recover from Cobalt the greater of (A) liquidated damages in
an amount equal to the amount of the payment or gift, or (B) any losses incurred
by Gateway as a result of such payment or gift. Gateway shall also have the
right to recover any expenses, costs and fees incurred in enforcing this Section
8.7.b. Any finding by a court of competent jurisdiction that such liquidated
damages are invalid, illegal or unenforceable shall not affect Gateway's right
to pursue all other remedies available at law or in equity.
8.8 Gateway shall have no obligation to pay for Products which are not
accepted or which are reasonably determined by Gateway to be in breach of this
Agreement. Cobalt will pay all costs associated with the return of any Products.
Gateway shall have the right [***]. Cobalt shall reimburse Gateway for any costs
incurred in handling warranty/quality issues. Remedies set forth in this Article
8 for breach of warranty shall not limit any other remedies available at law or
in equity.
8.9 NEITHER PARTY MAKES ANY WARRANTIES OTHER THAN THE WARRANTIES SET FORTH
IN THIS AGREEMENT.
9 Service Parts. Cobalt agrees to provide Gateway [***] days' written notice
prior to the discontinuance of any Product purchased by Gateway pursuant to this
Agreement. Upon notification by Cobalt, Cobalt shall allow Gateway to make a
final purchase of such discontinued Product at prices agreed to between the
parties. Cobalt acknowledges and agrees that Gateway's final purchase of such
Product may be in a quantity significantly higher than those reflected in any
prior Orders or forecasts from Gateway regarding such Product, and Cobalt shall
use commercially reasonable efforts to deliver the quantity specified in
Gateway's final Order. During the term of this Agreement, and for 12 months
after the termination of this Agreement, Cobalt shall make available to Gateway
(a) services and parts (including, if no longer available, a functionally
equivalent part of no lesser quality than the original part) at a mutually
agreed upon price; and (b) custom plastics, custom packing material, and other
custom components for use by Gateway in providing on-going Product support.
10 Product Recall
10.1 In the event that any of the Products are found by Cobalt, Gateway, or
any governmental agency or court having jurisdiction over such Product, to
contain a safety hazard or other Defect or condition that requires or would make
advisable a rework or recall of such Product, such party shall promptly
communicate all relevant facts to the other party. Cobalt shall promptly
undertake all corrective actions, including those required to meet all
obligations imposed by laws, regulations, or orders, and shall file all
necessary papers, corrective action programs, and other related documents
required under applicable law or regulation; provided that
[***] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
6
Gateway Confidential
Gateway shall reasonably cooperate with and assist Cobalt in any such filing and
correction action, at Cobalt's expense; and, provided further, that nothing in
this Section 10.1 shall preclude Gateway from taking such action as may be
required of it under any applicable law or regulation or business purpose.
Cobalt shall perform and provide all necessary repairs, modifications, or
replacement to the Product at its sole expense.
10.2 The parties recognize that it is possible that other Cobalt-manufactured
products might contain the same safety hazard, Defect or other condition
described in Section 10.1. Gateway and Cobalt agree that any recall involving
any Product purchased by Gateway shall be treated separately and distinctly from
similar results of Cobalt's brand products; provided that such separate and
distinct treatment is lawful and that Cobalt shall in no event fail to provide
at least the same protection to Gateway with regard to such Product as Cobalt
provides to its other customers in connection with a recall of such Product or
other Cobalt products. Each party shall consult the other prior to making any
statements to the public or a governmental agency concerning issues relating to
any product recall of a Product, except where such consultation would prevent
timely notification required to be given under any such law or regulation.
11 Indemnities
11.1 Cobalt agrees to indemnify, protect, defend, and hold harmless Gateway
and its directors, officers, employees, distributors, dealers, affiliates,
insurers, and customers ("Indemnified Parties") during the term of this
Agreement and any time thereafter against any Claim (a) arising out of or
relating to the death of or injury to any person or any damage to tangible
property caused by Cobalt or its employees or other representatives; (b)
alleging or asserting, in whole or in part, facts that, if true would constitute
a breach of any of the warranties made by Cobalt under this Agreement; or (c)
alleging or asserting, in whole or in part, negligence or other fault on the
part of Cobalt in the design, testing, development, manufacture, marketing, or
selling of a Product or undertaking any other actions with respect to a Product
or parts thereof, or (d) involving product liability, strict product liability,
or any variation thereof.
11.2 Without limiting the foregoing, Cobalt shall vigorously pursue the
defense or settlement of any such Claim, and Cobalt shall be solely responsible
for, and shall pay, any and all damages, losses, costs, settlements, judgements,
and expenses (including, but not limited to, court costs and reasonable
attorneys' fees) arising out of or related to any such Claim.
11.3 If Gateway is enjoined from using any Product, Cobalt shall, at its own
expense, use its best efforts to procure the right for Gateway to exercise all
rights granted under this Agreement. If such efforts are not successful, upon
Gateway's request, Cobalt shall promptly either (a) replace the infringing
Products with non-infringing products that have substantially the same quality,
performance, and functionality; (b) modify any infringing Product so it becomes
non-infringing without loss of performance or functionality; or (c) refund to
Gateway the amounts paid for such Products.
11.4 Gateway shall indemnify, protect, defend, and hold harmless Cobalt and
its directors, officers, employees, affiliates and insurers from and against
any liability, claim, demands or cost or expense that is the result of design
or other special requirements specified in writing by a duly authorized
representative of Gateway and actually incorporated into a Product in the
exact manner specified by Gateway. The foregoing does not apply to any
features, functions or components already included in the Product or the
Product as a whole.
12 Insurance
12.1 Cobalt shall secure and maintain at its own expense, and shall require
the same of its agents and approved subcontractors, the following insurance
with companies satisfactory and acceptable to Gateway and shall furnish to
Gateway certificates evidencing such insurance prior to commencing work under
this Agreement and thereafter as required by Gateway. Said certificates shall
contain a provision whereby the policy and/or policies shall not be canceled
or altered without at least 30 days prior written notice to Gateway. With the
exception of Workers' Compensation, every contract of insurance obtained by
Cobalt hereunder shall name Gateway as an additional insured. Cobalt shall
maintain the following minimum insurance coverages continuously for the term
of this Agreement and for three (3) years thereafter:
a Workers' Compensation and Employer's Liability Insurance covering
Company Employees which shall fully comply with the statutory
requirements of all state laws as well as federal laws which may
be applicable.
b Employee Dishonesty/Blanket Insurance with a combined single and
aggregate limit of two million dollars ($2,000,000).
c Comprehensive General Liability Insurance with a general aggregate
of five million dollars ($5,000,000).
d Errors and Omissions Insurance with a minimum combined single and
aggregate limit of two million dollars ($2,000,000).
e Product Liability Insurance with a combined single and aggregate
limit of five million dollars ($5,000,000).
f Umbrella Liability Insurance coverage with a minimum combined
single and aggregate limit of ten million dollars ($10,000,000).
12.2 Cobalt hereby represents and warrants that it has the above coverages in
effect as of the Effective Date. Cobalt represents and warrants, and the officer
executing this Agreement on behalf of Cobalt hereby certifies, that the above
stated amounts are the maximum limits currently in effect under each such
policy, and that such limits apply in general and not just for the purposes of
Gateway as an additional insured. In the event Cobalt is unable to maintain any
of the above minimum insurance coverages, Cobalt shall obtain an irrevocable
confirmed Letter of Credit in such amount in Gateway's favor.
13 Limitations of Liability.
[***] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
7
13.1 NEITHER PARTY SHALL BE LIABLE FOR SPECIAL, EXEMPLARY OR PUNITIVE
DAMAGES. COBALT SHALL NOT BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL OR INDIRECT
DAMAGES, EXCEPT WHERE A MATERIAL BREACH OF COBALT'S OBLIGATIONS TO DELIVER
PRODUCTS IN ACCORDANCE WITH ARTICLE 2 OF THIS AGREEMENT, OR A MATERIAL BREACH BY
COBALT OF THE RESTRICTIONS UNDER THIS AGREEMENT ON USE OR DISCLOSURE OF
GATEWAY'S CONFIDENTIAL INFORMATION, OR COBALT'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT CAUSED SUCH DAMAGES. GATEWAY SHALL NOT BE LIABLE FOR CONSEQUENTIAL,
INCIDENTAL OR INDIRECT DAMAGES, AND GATEWAY'S LIABILITY SHALL NOT EXCEED THE
AMOUNTS DUE UNDER ARTICLE 4, EXCEPT WHERE A MATERIAL BREACH BY GATEWAY OF THE
RESTRICTIONS UNDER THIS AGREEMENT ON USE OR DISCLOSURE OF COBALT'S CONFIDENTIAL
INFORMATION CAUSED SUCH DAMAGES. THE FOREGOING LIMITATIONS SHALL NOT APPLY
WHERE SUCH DAMAGES ARE AWARDED TO A THIRD PARTY AND SUCH THIRD PARTY'S CLAIM IS
COVERED BY AN OBLIGATION OF INDEMNITY UNDER THIS AGREEMENT.
13.2 Force Majeure. In the event that either party is prevented from
-------------
performing or is unable to perform any of its obligations under this Agreement
due to any Act of God, fire, casualty, flood, war, strike, lockout, epidemic,
destruction of production facilities, riot, insurrection, or any other cause
beyond the reasonable control of the party invoking this Section 13.2, such
party's performance shall be excused, and the time for the performance shall be
extended for the period of delay or inability to perform due to such
occurrences; provided, that such party shall use its best efforts to mitigate
the effects of such occurrences, and such party shall give prompt written notice
to the other party thereof. However, if such inability to perform continues for
30 days, the other party may terminate this Agreement without penalty and
without further notice.
14 Dispute Resolution. All disputes under this Agreement shall be resolved in
accordance with Attachment F.
15 Notices. Notices and other communications under this Agreement shall be in
writing and sent by certified mail, return receipt requested, addressed to the
other party at its address first set forth above, provided that either party may
change its address by written notice thereof. Notices to Gateway shall be
directed to the attention of Vice President of Supply Management and copied via
facsimile to [***]. Notices to Gateway shall also be copied to Gateway Law
Department to the attention of General Counsel. Notices to Cobalt shall be
directed to the attention of General Counsel or CFO and copied via facsimile
to [***].
16 Assignments and Subcontracting
16.1 Neither party shall have the right to assign this Agreement or any
rights hereunder without the prior written approval of the other party; provided
that, Gateway shall have the right to assign this Agreement in connection with a
merger, reorganization or sale of substantially all of the assets of Gateway.
16.2 Cobalt shall not engage any subcontractor for the purposes of performing
any of Cobalt's obligations under this Agreement without Gateway's prior written
approval of the subcontractor and the agreement between Cobalt and such
subcontractor.
17 Protective Covenants. Cobalt acknowledges that the Products and services
provided under this Agreement are critical to Gateway's business and
relationships with its customers. Cobalt agrees that it shall not enter into any
transaction or business association, or engage in any activity, that could
adversely affect Cobalt's ability to fulfill its obligations under this
Agreement. Cobalt shall notify Gateway in writing at least [***] prior to any
proposed (a) merger, consolidation or sale of substantially all of Cobalt's
assets, or (b) material change in the scope of Cobalt's business or the methods
and procedures used to conduct its business. In such event, Gateway shall have
the right to terminate this Agreement in accordance with Section 5.3. Cobalt
shall furnish all information requested by Gateway concerning Cobalt's financial
condition and performance under this Agreement. Cobalt shall notify Gateway in
advance of any financial problems and any other issues or developments that
could adversely affect Cobalt's ability to fulfill its obligations under this
Agreement. Cobalt shall make representatives of its senior management available
promptly at Gateway's request to discuss any issues contemplated by this Section
17.
18 Interpretation
18.1 All rights and remedies, whether conferred hereunder, or by any other
instrument or law will be cumulative and may be exercised singularly or
concurrently. Failure by either party to enforce any term will not be deemed a
waiver of future enforcement of that or any other term.
18.2 This Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof. Any modification or addition to this
Agreement proposed by a party shall have no effect unless the other party
specifically acknowledges such modification or addition in writing.
Notwithstanding the foregoing, Cobalt acknowledges that Gateway is a commercial
contractor doing business with the U.S. Government. Cobalt shall comply with the
following clauses of the Federal Acquisition Regulations ("FAR") (48 C.F.R.
Chapter 1): (a) 52.222-26 Equal Opportunity; (b) 52.222-36 Affirmative Action
for Handicapped Workers; and (c) 52.222-35 Affirmative Action for Special
Disabled and Vietnam ERA Veterans. Gateway reserves the right to flow down
additional FAR clauses as necessary to support Gateway's obligations to the U.S.
Government, and to such extent, such clauses shall be incorporated herein by
reference and binding on Cobalt. Without limiting the foregoing, Cobalt
acknowledges that commercial catalogue pricing or market pricing analysis may be
required.
18.3 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of [***] without resort to conflict of
law principles. The United Nations Convention on the International Sale of
Goods shall not govern or otherwise apply to the transactions contemplated under
this Agreement.
18.4 Neither party is constituted an agent, partner, franchisee, employee or
servant of the other for any purpose. Each party shall conduct its business in
its own name and shall be solely responsible for its acts, conduct and expenses
and the acts, conduct and expenses of its employees and agents. Neither party
shall have the authority to bind, represent or commit the other party. Nothing
in this Agreement shall be deemed or construed to create a joint venture,
partnership or agency relationship between the parties for any purpose.
18.5 The provisions of this Agreement are severable. If any provision of
this Agreement is determined by a court of competent jurisdiction to be invalid,
illegal or unenforceable, such determination shall not affect the validity of
the remaining provisions.
[***] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
8
18.6 The headings provided in this Agreement are for convenience only and
shall not be used in interpreting or construing this Agreement.
18.7 This Agreement is in the English language only, which shall be
controlling in all respects. No translation, if any, of this Agreement into any
other language shall be of any force or effect in the interpretation of this
Agreement or in a determination of the intent of either party hereto. All
business transactions, documentation and communications whether oral or written
concerning this Agreement will be done in the English language.
18.8 The parties' respective rights, obligations and duties which by their
nature extend beyond the expiration or termination of this Agreement shall
survive any expiration or termination of this Agreement.
To signify their mutual intent to be legally bound by this Agreement, Gateway
and Cobalt have caused their authorized representatives to execute this
Agreement as of the Effective Date.
GATEWAY, INC. COBALT NETWORKS, INC.
By: /s/ Xxxx X. Xxxxxx By: /s/ Xxxx Xxxxxxx
------------------------- -------------------------
Name: Xxxx X. Xxxxxx Name: Xxxx Xxxxxxx
----------------------- ----------------------
Title: V.P. & Group Counsel Title: C.O.O.
---------------------- ----------------------
9
Gateway Confidential
ATTACHMENT A
Definitions
Each of the following terms shall have the meanings described:
1 "Claims" means assertions, claims, suits, actions or proceedings, and any
damages, liabilities, fines, penalties or other expenses related thereto.
2 "Confidential Information", as used in this Agreement shall mean components,
types of systems, new product development, technical information, data,
formulas, patterns, compilations, programs, devices, methods, techniques,
marketing plans, business procedures, customer and supplier lists, agreements
with any suppliers, financial data, projections, supplements, techniques, or
know-how, processes or other proprietary or confidential or intellectual
property information which is received from the other under this Agreement,
which is transmitted from the other party in written form and which, if
disclosed to the general public, would cause harm to the transmitting party.
3 "Correction" means any bug fix, patch, workaround or other revision to the
Product or Documentation, other than an Enhancement, that fixes an Error.
4 "Defect" means a deficiency, imperfection or insufficiency in the Product
such that it is not fit for ordinary purposes for which it was purchased, sold
or used.
5 "Documentation" means all (1) instruction or user manuals for a Product,
including but not limited to technical specifications, user manuals, data
sheets, facsimile materials, training materials, brochures, and catalogs; and
(2) packaging copy and artwork for the Product.
6 "Epidemic Failures" means Product failures or Defects which exceed the
Defective Parts Per Million (DPPM) threshold established in Attachment B.
7 "Enhancement" means any improvement, addition, enhancement, or other
modification to the Software or Documentation, other than a Correction, that
improves function, adds one or more new features or functions, or otherwise
improves performance, including all translated national language versions of the
Software or Documentation that are not available as of the Effective Date.
8 "Error" means any (a) mistake, problem, compatibility or other error that
causes an incorrect functioning or non-functioning of the Product, or otherwise
causes the Product to fail to perform as warranted; or (b) incorrect or
incomplete statement or diagram in Documentation.
9 "Escrow Material" means the source code, macros, specialized routines,
procedures and documentation, and any improvements, revisions, upgrades,
enhancements, and updates thereto, that are sufficient to allow for the complete
restoration and utilization of the machine executable code of the latest version
of the Software.
10 "Xxxx" shall mean any product name, trade name, logo, or other trademark of
Gateway or Cobalt.
11 "New Release" means any Upgrade, Updated Release or Version Release, as
those terms are defined below.
12 "Orders" means those purchase orders that Gateway provides to Cobalt under
this Agreement.
13 "Products" means the Software and equipment which shall be provided by
Cobalt to Gateway under this Agreement as Ordered by Gateway. The Products
covered by this Agreement are set forth in Attachment B. Such Products include
all components contained therein and associated Documentation. Without limiting
the foregoing, equipment Products include any Software required to operate such
equipment.
14 "Software" means the source code and object code, all Documentation, all
national language versions of the foregoing, and any Enhancement, Correction, or
New Release. The Software includes Software Products and programs that are
included in other Products.
15 "Software Product" means any Software that is expressly listed on Attachment
B.
16 "Specifications" means the specifications furnished by Gateway or provided
by Cobalt with respect to the Products.
17 "Unit" means CDs, registration card, manuals and license agreement, shrink-
wrapped together.
18 "Updated Release" means a release of Product which is designated by Cobalt
in its sole discretion as a change in the digit(s) to the right of the tenths
digit in the Product version number, and which may contain one or more
Enhancements or Corrections.
19 "Upgrade" means a release of the Product which is designated by Cobalt, in
its sole discretion, as a change in the digit(s) to the left of the decimal
point in the Product version number and a replacement copy of the Product
provided to an existing end user of the Product. An Upgrade may contain one or
more Enhancements or Corrections. The packaging for an Upgrade shall indicate
that it is intended as an "upgrade" only (or similar wording) and not for use by
a new customer. Copies of the Product that are not strictly in conformance
herewith shall not be considered Upgrades
20 "Version Release" means a release of Product which is designated by Cobalt
in its sole discretion as a change in the tenths digit in the Product version
number, and which may contain one or more Enhancements or Corrections.
10
Gateway Confidential
ATTACHMENT B
Products
1 All prices shall be in U.S. Dollars. The prices include all fees for
licenses.
2 Cobalt shall provide to Gateway a twelve-month Product cost forecast.
3 The parties may mutually agree to amend this Attachment B by a written
amendment mutually executed by the parties' Authorized Representatives set forth
below, referencing this Agreement and this Attachment B. No alterations of the
terms of the Agreement shall be effective unless executed by a duly authorized
representative of Gateway's Law Department. Changes to the Authorized
Representatives designated will be effected by formal Amendment to this
Attachment B.
4 AUTHORIZED REPRESENTATIVES:
Gateway Cobalt
------- ------
Business Mgr. or Sr. Business Mgr.
Phone: 000.000.XXXX
FAX:
Email:
Address: 000 Xxxxxxx Xxxxx, M/S:
City, Xxxxx XXX Xxxxx Xxxxx Xxxx, XX, XXX 00000
5 Products covered:
Cobalt P/N Gateway P/N Item Description DPPM GOAL
---------- ----------- ---------------- ---------
[***]
6 GW P/N Unit Pricing:
Unit Pricing by Quarter Insurance $ per Unit
----------------------- --------------------
Q1 - 1999 [***] [***]
Q2 - 1999 [***] [***]
Q3 - 1999 [***] [***]
Q4 - 1999 [***] [***]
Unit Freight Costs:
Destination [***] Shipment Size units [***] Shipment Size units [***]
7 Third Party Intellectual Property (for purposes of Section 6.1.5):
Item Owner Restrictions
---- ----- ------------
8 Specifications. The complete baseline Specifications, drawings and technical
--------------
release information for all Products acquired under this Agreement are set forth
below. The format for the presentation of the Specifications and technical
release data for Products shall substantially conform to FCC requirements. CD
ROM or other appropriate media may be used in lieu of a hard-copy Specification
and technical data, provided that such media is properly described in this
Attachment B or an amendment hereto in accordance with the provisions of this
Attachment B and such media is furnished to Gateway.
[***]
GATEWAY, INC. COBALT NETWORKS, INC.
By: By:
------------------------- -------------------------
Name: Name:
----------------------- ----------------------
Title: Title:
---------------------- ----------------------
[***] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
11
Gateway Confidential
ATTACHMENT C
Product Quality Guidelines
1 Gateway has established the Supplier Quality Engineering (SQE) Program. The
function of the SQE Program is to ensure that Gateway's suppliers meet all
performance requirements. If quality issues arise, [***]. Cobalt shall support
and respond within the time frame requested, based on the critical nature of the
issue. Cobalt shall comply with the established process quality and performance
goals reasonably established by Gateway for a continuous quality improvement
program. Performance goals will be established between Cobalt and Gateway SQE
for each commodity type based on [***].
2 Cobalt shall perform [***] on all Products. [***] shall be completed and
results submitted to Gateway's supplier engineer responsible for the Product.
[***] are to be reported with respect to the original Gateway-approved design
Specification.
3 Upon [***], Cobalt [***] shall submit a capability analysis which reflects
[***]. The capability analysis shall be based on [***].
4 Product reliability must be confirmed by [***], which consists of [***]
testing. For purposes of this Agreement "[***]" means a combination of [***] in
high and low conditions. [***] shall be performed at [***] beyond
the mutually agreed upon design specification limitations set by Gateway's
Global Product Organization (GPO) and Cobalt.
5 The [***] shall specify the [***] of each Product. Cobalt shall provide a
calculated [***] amount and demonstrate the [***] for each Product by [***].
6 Cobalt shall perform a [***] test using standards reasonably established by
[***] for testing, unless Cobalt's test procedure is more rigid than Gateway's
test procedure. Testing shall include all [***] of the Product [***].
7 Supplier Engineering Change Requests (SECR) will be completed pursuant to the
guidelines provided to Cobalt and will be routed to the appropriate SECR
coordinator in North Sioux City, South Dakota, or other designated location.
Gateway's SECR coordinator will ensure that all SECR's are managed from
submission to notice of approval.
8 [***] approval is the responsibility of Cobalt, and Cobalt shall ensure that
all newly designed or changed Products meet [***] in conjunction with [***]
standards as contained in the [***] for the Product and with standards for other
countries as may be required by Gateway. Cobalt shall ensure that all
engineering changes that affect the original test grant are tested and that
grant status is maintained. Cobalt represents and warrants that Cobalt has
obtained the necessary regulatory approvals for the Product as set forth in the
specifications. Cobalt must provide approved certification information to
Gateway as received from the regulatory agencies.
9 Product purchased pursuant to this Agreement, as well as any Product that is
combined with other technology, shall meet all established industry operating
standards for that commodity and technology.
10 Gateway requires its suppliers to complete the SQE program successfully in
order to [***]. Cobalt shall follow Gateway's reasonable instructions and
otherwise work with Gateway to achieve [***] as a [***]. Cobalt acknowledges and
agrees that the criteria for [***] have been [***].
11 Incoming [***] testing will be based on technology and testing requirements
reasonably determined by Gateway. Cobalt shall provide a reasonable number of
samples as requested by Gateway.
12 Cobalt will provide dedicated engineering and technical resources including,
but not limited to, [***] support and [***] for all Product purchased by Gateway
pursuant to this Agreement.
13 None of the foregoing shall limit any warranties or affect the quality level
of Product ordered by Gateway.
[***] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
12
Gateway Confidential
ATTACHMENT D
Warranty Returns and Epidemic Failures
1 Warranty Returns
----------------
a All Warranty Returns will require a Return Material Authorization (RMA)
number, which Cobalt will issue within two business days upon receipt of a
written notice from Gateway identifying the Defective Products and the quantity
thereof. If Gateway does not receive the RMA number within [***] business days,
Gateway will issue an RMA number that will be honored by Cobalt.
b Cobalt will pay freight one way associated with the return of Defective
Product to Cobalt. Notwithstanding anything to the contrary herein, in the
event a Defective Product has been discovered and additional Products with the
same Defect are already in transit, Gateway reserves the right to return all
such Products prior to customs clearance at Cobalt's expense and to cancel any
outstanding purchase orders for the affected Products.
c All Warranty Returns shall be returned to Cobalt within [***] days
of issuance of the RMA notice. All Warranty Returns shall be for credit, unless
Gateway notifies Cobalt in writing that Gateway will debit such Warranty Returns
against outstanding invoices payable to Cobalt.
d Cobalt will acknowledge receipt of returned Product and the quantities
received within [***] business days of receipt of the returned Product from
Gateway. If Cobalt fails to give written acknowledgment of receipt and
quantities received within the time stated, Cobalt shall be deemed to have
received from Gateway the Products and quantities listed on the vendor return
form.
e Cobalt shall support Gateway product return addresses for each Gateway
region: Americas, Asia Pacific (APAC) and Europe / Middle East / Asia (EMEA).
f Cobalt accepts financial responsibility for all warranty related
support costs incurred by Gateway associated with the handling of quality
Defects incurred within the warranty period, when such Defects exceed the DPPM
established in Attachment B. Seller agrees to reimburse Gateway upon receipt of
an invoice or debit memo. If a debit memo is issued in lieu of an invoice,
seller agrees that such monies may be deducted from any outstanding invoices yet
to be paid. Gateway expects vendors to consistently improve their Product
quality. While zero Defects may not be attainable, the Defective Parts Per
Million (DPPM) goal for commodities covered by this Agreement (see Attachment B)
will be reduced over time to constantly improve quality.
2 Epidemic Failures
-----------------
a Isolated incidences of Product Defect or failure are to be dealt with in
accordance with the standard Warranty Return procedures set forth in Paragraph 1
of this Attachment D. However, Epidemic Failures shall be handled in accordance
with this Paragraph 2. For the purposes of this Agreement, an "Epidemic Failure"
shall be defined as a single failure type, if the failure occurs in [***]
percent of any Product shipped or Total Installed Base (total of Cobalt
Product(s) installed in our systems) under this Agreement to Gateway during any
[***] period. As an integrator and original equipment manufacturer of
Personal Computer systems, Gateway employs a "just-in-time" manufacturing
methodology and does not have a wealth of supplier components in reserve.
Gateway's manufacturing approach is reiterated here to emphasize that an
Epidemic Failure in a component can be catastrophic and paralyze our production.
Time is of the essence concerning Epidemic Failures and Gateway will strictly
enforce the following procedures.
b Cobalt accepts full responsibility for Product Defects. Cobalt shall
respond to formal written corrective action request (CAR). There are three (3)
types of CARs: "Critical" (an identified safety Defect, non-shippable, causes
line shutdown, [***] of field failure, cannot be sorted); "Major" (not
identified as a safety hazard, causes line shutdown, can be sorted); or "Minor"
(not identified as a safety hazard, no line shutdown situation, can be sorted).
Upon notification or receipt of samples for a failure analysis, Cobalt must
respond with corrective actions in accordance with the following "time is of the
essence" periods: Critical failures -- within [***] business days; Major
failures -- within [***] business days; and Minor failures -- within [***]
business days.
c Cobalt's corrective actions shall consist of a replacement without loss
of specified features or performance of the affected Product. Cobalt shall
provide parts for the upgrades, perform or have performed all associated labor,
and pay for shipping of all replacement Products to Gateway or end user as the
case may be.
[***] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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Gateway Confidential
ATTACHMENT E
Dispute Resolution
1 For the purposes of this Attachment E, each party shall designate in writing
to the other the following individuals: Primary Representative, Senior Officer,
and Chief Executive Officer or Chief Operating Officer. The Senior Officer
designate shall not be an attorney. Each party may change such designated
representatives by advance written notice to the other party. Except as
otherwise provided in Paragraph 11 of this Attachment E, neither party shall
commence any action at law or in equity against the other party arising out of
the subject matter of this Agreement until the procedures set forth in this
Attachment E have been completed.
2 The party raising any dispute shall notify the other party in writing of the
dispute. Such notice shall describe the issues concerning such dispute and shall
be referred to in this Paragraph 2 as a "Dispute Notice". The submitting party
shall include with a Dispute Notice backup material reasonably sufficient to
substantiate the dispute and the amount claimed thereunder.
3 The Primary Representatives of the parties, working with the Senior Officers
as necessary, shall attempt to resolve the dispute. The parties must mutually
agree to the resolution.
4 If the parties fail to resolve the dispute under Paragraph 3 within 30 days
from submittal of the Dispute Notice, the dispute, including all supporting
documentation and the positions taken by the parties during the steps
contemplated by Paragraphs 2 and 3 above, shall be submitted for resolution to
each party's respective Chief Executive Officer or Chief Operating Officer. The
Chief Executive Officers or Chief Operating Officers shall attempt to resolve
the dispute. The parties must mutually agree to the resolution.
5 If the parties fail to resolve the dispute under Paragraph 4 within 30 days
from submittal of the dispute to the Chief Executive Officers or Chief Operating
Officers, either party shall have the right to submit such dispute for final,
binding resolution by the National Arbitration Forum under its rules and in
accordance with this Attachment E.
6 The dispute shall be decided by one neutral arbitrator.
7 The scope of the question to be decided by the arbitrator shall be narrowly
construed and shall be limited to the express issue presented. The arbitrator
shall have no authority to award damages beyond the limitations set forth in
this Agreement.
8 The party prevailing as to the entire claim shall have its costs and the
other costs of arbitration, including the arbitrator's fees, if any, paid by the
other party. If neither party prevails entirely, the arbitrator may apportion
such costs in accordance with the disposition of the matter.
9 The decision of the arbitrator shall be final and binding upon the parties,
except as to the propriety of the scope of the award and disposition; and
provided that the decision of the arbitrator must not be against public policy,
nor may it be arbitrary or capricious, as determined by whether it is fairly
supported by the evidence presented (including the failure, if any, of either
party to comply with the agreed-upon arbitration procedures), which shall mean
that the decision of the arbitrator must be such that it cannot be said that no
reasonable person could reasonably and logically have reached such result based
upon the said evidence.
10 Should either party bring a Dispute in a forum other than NAF, the
arbitrator may award the other party its reasonable costs and expenses,
including attorneys' fees, incurred in staying or dismissing such other
proceedings or in otherwise enforcing compliance with this Attachment E. This
arbitration agreement is made pursuant to a transaction involving interstate
commerce, and shall be governed by the Federal Arbitration Act, 9 U.S.C. Section
1, et seq.
11 This Attachment E shall not prevent or delay either party from instituting
formal proceedings to (a) avoid the expiration of any applicable limitations
period, (b) preserve a superior position with respect to other creditors, or (c)
seek injunctive relief to prevent an irreparable harm, including but not limited
to harm caused by a breach of confidentiality.
14
