1
Exhibit 10.3
MAINTENANCE AGREEMENT
MAINTENANCE AGREEMENT, dated as of February 28, 2001, and
effective as of the Effective Date (as defined in Section 3) (this "Agreement"),
by and between NEC Corporation, a Japanese corporation with its principal place
of business at ▇-▇, ▇▇▇▇▇ ▇-▇▇▇▇▇, ▇▇▇▇▇▇-▇▇, ▇▇▇▇▇ ▇▇▇-▇▇▇▇, ▇▇▇▇▇ ("NEC"), and
Cray Inc., a Washington corporation with its principal place of business at ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ ("Cray"). NEC and Cray are
sometimes hereinafter collectively referred to as the "parties."
RECITALS
A. NEC and Cray are parties to a Distribution Agreement,
dated as of February 28, 2001 (the "Distribution Agreement"), pursuant to which
parties have agreed that Cray shall become the distributor of certain products
of NEC upon the terms and subject to the conditions set forth therein.
B. The parties have agreed that the maintenance, repair and
technical support of such products shall be handled in accordance with this
Agreement, commencing from the Effective Date.
NOW, THEREFORE, the parties, in consideration of the premises and
the mutual covenants and agreements contained herein, and intending to become
legally bound, hereby agree as follows:
SECTION 1
MAINTENANCE OF PRODUCTS
1.1 Definitions. Except as otherwise defined in this
Agreement, all capitalized terms shall have the meanings assigned to them in the
Distribution Agreement.
1.2 Scope. Pursuant to the terms and conditions of this
Agreement, Cray will be the primary provider of maintenance services to
customers, and will perform installation and support services (including,
without limitation, preventative and corrective maintenance, upgrades and
configuration changes) for all hardware (the "Hardware Products") and software
(the "Software Products") contained in the Products (such services hereinafter
individually and collectively referred to as "Maintenance Services"). NEC will
provide technical support and other assistance to Cray in connection with the
Maintenance Services in accordance with the terms of this Agreement. Schedule A
sets forth the specific obligations of and procedures to be followed by NEC and
Cray with respect to the Maintenance Services and NEC's support thereof.
1.3 Access. Each party shall take all actions and make
available on a timely basis all information and materials reasonably required
for the other party to perform its obligations hereunder. No party shall be
liable for any claims, errors or omissions resulting from untimely or incorrect
information provided by the other party. Each party shall give the other
1
2
party access to its premises during regular business hours and at such other
times as are reasonably required, after prior consent has been obtained, to the
extent reasonably necessary for the other party to perform its obligations
hereunder.
SECTION 2
SERVICES; PAYMENT; INDEPENDENT CONTRACTOR
2.1 Payment. Invoices issued hereunder shall be due 30 days
after receipt by the payor. All amounts due on invoices shall be paid in United
States Dollars by wire transfer to the account specified by the payee. Invoiced
amounts not paid when due shall be subject to late charges for each month and
portion thereof that the invoice is overdue, with such late charges calculated
at the lesser of (i) 18% per annum and (ii) the maximum rate allowed by
applicable law.
2.2 Independent Contractor. All services required of NEC under
this Agreement shall be performed by NEC as an independent contractor, and
employees of NEC providing such services shall at all times be under NEC's sole
direction and control. Neither NEC nor any other person or entity performing any
services hereunder on behalf of NEC shall be deemed for any purpose to be the
agent, servant, employee or representative of Cray in the performance of this
Agreement. The relationship of NEC to Cray under this Agreement shall be that of
an independent contractor. Nothing in this Agreement shall be construed to mean
that NEC is a partner or a joint venturer of Cray.
SECTION 3
TERM
The term of this Agreement shall be conditioned upon and commence
upon the date (the "Effective Date") of the closing under the Stock Purchase
Agreement and shall terminate (i) with respect to Sections 1, 2.1, 2.4, 2.5,
2.6, 2.7, 2.8 and 3.3 of Schedule A immediately upon a notice of termination
delivered pursuant to Section 5, and (ii) with respect to all other provisions
of this Agreement, five years after a notice of termination is delivered
pursuant to Section 5.
SECTION 4
LIABILITIES
4.1 Indemnity. Subject to Section 4.2, Cray shall indemnify
and hold harmless NEC and its subsidiaries, affiliates, successors and assigns,
and their respective directors, officers, shareholders, agents and employees
(collectively, the "NEC Indemnitees"), against and from any and all claims,
demands, complaints, liabilities, losses, damages and all costs and expenses
(collectively, "Losses") arising from or relating to any act or omission of
Cray, its subsidiaries, affiliates, directors, officers, agents, subcontractors
or employees relating the Maintenance Services (including, without limitation,
any failure by any of them to strictly comply with NEC's instructions and
procedures relating to the Products); provided, however, that no NEC Indemnitee
shall be entitled to indemnification hereunder to the extent its claim for
2
3
indemnification shall be finally adjudged to be attributable to its gross
negligence, bad faith or willful misconduct, as may be finally determined by an
arbitration pursuant to Section 6.13. Subject to Sections 4.2 and 4.3, NEC shall
indemnify and hold harmless Cray and its subsidiaries, affiliates, successors
and assigns, and their respective directors, officers, shareholders, agents and
employees (collectively, the "Cray Indemnitees"), against and from any and all
Losses arising from or relating to any act or omission of NEC, its subsidiaries,
affiliates, directors, officers, agents, subcontractors or employees relating
the Maintenance Services; provided, however, that no Cray Indemnitee shall be
entitled to indemnification hereunder to the extent its claim for
indemnification shall be finally adjudged to be attributable to its gross
negligence, bad faith or willful misconduct, as may be finally determined by
arbitration pursuant to Section 6.13.
4.2 Consequential and Other Damages. Neither party shall be
liable for, and each party expressly waives any right to recover from the other
party, whether in contract, in tort (including without limitation negligence and
strict liability) or otherwise, any punitive, exemplary, special, indirect,
incidental or consequential damages whatsoever, which in any way arise out of,
relate to, or are a consequence of any NEC Indemnitee's or Cray Indemnitee's
performance or nonperformance hereunder, or the provision of or failure to
provide any service which either party is obligated to provide hereunder,
including, but not limited to, loss of profits, business interruptions and
claims of customers.
4.3 Limitation of Liability. In any event, the liability of
any NEC Indemnitee with respect to this Agreement or anything done in connection
herewith, including, but not limited to, the performance or breach hereof, or
from the sale, delivery, provision or use of any service or product provided
under or covered by this Agreement, whether in contract, tort (including without
limitation negligence or strict liability) or otherwise, shall not exceed the
aggregate of all fees then paid by Cray to NEC hereunder within the twelve month
period immediately preceding the date of Cray's claim relating thereto.
4.4 Obligation to Reperform. In the event that Cray becomes
aware of any material breach of this Agreement by NEC with respect to any error
or defect in the provision of any service it is obligated to provide under this
Agreement, and Cray notifies NEC of such breach, NEC shall promptly make
commercially reasonable efforts to correct such error or defect.
4.5 Notification and Procedures. In connection with any
indemnity hereunder, the party seeking an indemnity shall: (i) promptly notify
the indemnifying party of any claim or proceeding, or threatened claim or
proceeding; (ii) permit the indemnifying party to take full control of such
claim or proceeding; (iii) cooperate in the investigation and defense of such
claim or proceeding; (iv) not compromise or otherwise settle such claim or
proceeding without the prior written consent of the indemnifying party, which
consent shall not be unreasonably withheld, conditioned or delayed; and (v) take
all reasonable steps to mitigate any loss or liability in respect of any such
claim or proceeding. In any action in which the indemnifying party assumes
control, the indemnifying party shall not enter into any settlement without the
prior written consent of the indemnified party, which shall not be unreasonably
withheld, conditioned or delayed.
3
4
SECTION 5
TERMINATION
5.1 Termination for Breach. This Agreement may be terminated
by Cray if NEC materially breaches any provision of this Agreement and such
breach is not cured within thirty (30) days after written notice, or if such
breach is not susceptible to cure within thirty (30) days, then within a
reasonable time thereafter provided that NEC begins such cure and diligently
pursues such cure within such thirty (30) days. This Agreement may be terminated
by NEC if Cray materially breaches this Agreement and such breach is not cured
within thirty (30) days after written notice, or if such breach is not
susceptible to cure within thirty (30) days, then within a reasonable time
thereafter provided that Cray begins such cure and diligently pursues such cure
within such thirty (30) days.
5.2 Termination Upon Certain Events. NEC may terminate this
Agreement immediately if (i) Cray files a petition in bankruptcy or makes a
general assignment for the benefit of creditors or otherwise acknowledges
insolvency, (ii) Cray is adjudged bankrupt or goes into liquidation, (iii) a
receiver is appointed for the benefit of Cray, (iv) NEC terminates the
Distribution Agreement, or (v) there shall occur a Change of Control of Cray.
"Change of Control" means (a) (x) the merger or consolidation of Cray into or
with one or more entities, (y) the merger or consolidation of one or more
entities into or with Cray or (z) a completed tender offer or other business
combination if, in the case of (x), (y) or (z), the stockholders of Cray prior
to such merger, consolidation or business combination do not retain at least a
majority of the voting power of the surviving entity or (b) the involuntary
sale, conveyance, exchange or transfer to another entity of (I) the voting
capital stock of Cray if, after such sale, conveyance, exchange or transfer, the
stockholders of Cray prior to such sale, conveyance, exchange or transfer do not
retain at least a majority of the voting power of Cray or (II) all or
substantially all of the assets of Cray.
5.3 Sums Due. In the event of a termination of this Agreement,
each party shall be entitled to all outstanding amounts due to it from services
provided by it under this Agreement up to the date of termination.
SECTION 6
MISCELLANEOUS
6.1 Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties named herein and their respective
successors and permitted assigns. No party may assign either this Agreement or
any of its rights, interests or obligations hereunder without the prior written
approval of the other party; provided, however, that (i) without the consent of
the other party, a party may assign any or all of its rights and delegate any or
all its obligations hereunder to any entity controlling, controlled by or under
common control with such party, in which event the assigning party shall remain
fully liable for the performance of all its obligations hereunder; and (ii)
subject to Section 5.2, a successor in interest by merger, by operation of law,
or by assignment, purchase or other acquisition of all or
4
5
substantially all the business of a party may acquire the respective rights and
obligations of such party under this Agreement. Any prohibited assignment shall
be null and void.
6.2 Construction. This Agreement is the result of negotiation
between sophisticated parties and no provision hereof shall be construed against
a party solely because that party was responsible for drafting the provision.
6.3 Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof.
6.4 Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, unless the
provisions held invalid, illegal or unenforceable shall substantially impair the
benefits of the remaining provisions hereof.
6.5 Amendment and Waiver. No waiver of any violation or
nonperformance of this Agreement in one instance will be deemed to be a waiver
of any subsequent violation or nonperformance. All waivers must be in writing
and signed by the party making such waiver. This Agreement may not be modified
or amended except in writing signed by each party.
6.6 Notice. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, telecopier,
courier or personal delivery:
(i) If to Cray, to:
Cray Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
With a copy to:
Stoel Rives LLP
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇
(ii) If to NEC:
5
6
NEC Corporation
▇-▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇-▇▇▇▇ ▇▇▇▇▇
Telecopy: ▇▇-▇▇-▇▇▇-▇▇▇▇
Attention: General Manager, Supercomputer
Marketing Promotion Division
With a copy to:
▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
All such notices, demands and other communications shall be
deemed to have been duly given when delivered by hand, if personally delivered;
when delivered by a recognized international express courier service, if
delivered by courier; five (5) business days after being deposited in the mail,
postage prepaid, if mailed; and when receipt is mechanically acknowledged, if
telecopied. Any party may by notice given in accordance with this Section 6.6
designate another address or person for receipt of notices hereunder.
6.7 Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
6.8 Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
6.9 Choice of Law. This Agreement will be governed by the
internal laws of the State of New York without regard to the conflicts of laws
principles thereof.
6.10 Force Majeure; Maintenance.
(a) If the whole or any part of the performance by NEC
of any part of its obligations under this Agreement is prevented, hindered or
delayed or otherwise made impracticable by reason of strikes, labor troubles,
floods, fires, accidents, earthquakes, riots, explosions, wars, hostilities,
acts of government, customs barriers or taxes, export/import control
regulations, interruption or shortage of or delay in transportation, inability
to obtain key raw materials, components or supplies or other cause of like or
different character beyond the reasonable control of NEC, NEC shall be excused
from such performance during the continuance of such contingency and for so long
as such contingency shall continue to prevent, hinder or
6
7
delay such performance. If the contingency specified in this Section 6.10 shall
continue for more than six (6) months from its occurrence, either party may
terminate this Agreement (subject to Section 5.3) forthwith without any
liability by giving a written notice to the other party.
(b) NEC shall have the right to cease temporarily for
maintenance purposes the operation of the equipment or facilities providing any
service it is obligated to perform hereunder whenever it determines in its
reasonable and good faith judgment such action is necessary. In the event such
maintenance is required, Cray shall be reasonably notified of such maintenance
(which notice may be given during or after any emergency maintenance).
Notwithstanding the above, NEC shall give Cray as much advance notice of any
shutdown as is reasonably practicable. Where written notice is not feasible,
oral notice may be given. NEC shall be relieved of its obligations to provide
the applicable service during the period that the necessary equipment or
facilities are shut down; provided, that NEC shall use commercially reasonable
efforts to restart such equipment or reopen such facilities as promptly as
practicable.
6.11 No Third-Party Beneficiaries. Except as provided in
Section 4, nothing in this Agreement shall confer any rights upon any person or
entity other than the parties and each party's respective successors and
permitted assigns.
6.12 Confidentiality. This Agreement shall be covered by the
confidentiality provisions in Section 10.11 of the Stock Purchase Agreement,
which shall survive the termination or expiration of this Agreement for a period
of two years.
6.13 Dispute Resolution. Any dispute, controversy or claim
arising out of or in connection with this Agreement that the parties are unable
to resolve amicably shall be determined and settled by arbitration in London, UK
in accordance with the rules then in effect of the International Chamber of
Commerce; and both parties hereby consent to the jurisdiction thereof. Any award
rendered shall be final and conclusive upon the parties and a judgment thereon
may be entered in a court having competent jurisdiction.
6.14 Survival. Sections 4.1, 4.2, 4.3, 4.5, 5.3 and 6 shall
survive the expiration or termination of this Agreement.
[THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
7
8
IN WITNESS WHEREOF, the parties have executed this Maintenance Agreement
as of the date first written above.
CRAY INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President and CEO
NEC CORPORATION
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Senior Vice President
8
9
SCHEDULE A
to
MAINTENANCE AGREEMENT
1. SUPPORT SERVICES
1.1 General.
1.1.1 Cray will make commercially reasonable efforts, at Cray's
expense, to develop its own capabilities to be the primary
provider of Maintenance Services.
1.1.2 NEC will provide on-site support in emergency situations only,
as determined by NEC in its sole reasonable discretion.
1.1.3 Upon prior written approval by NEC, Cray may subcontract all or
any part of the Maintenance Services to a Cray subsidiary or a
third party (each, an "Approved Third Party"). Cray shall
guarantee the obligations of and performance by any such
Approved Third Party.
1.1.4 Detailed procedures relating to the provision of the Maintenance
Services, including remote and on-site support, training and
special services, will be defined in the NEC/Cray Product
Support Plan (the "Operational Plan"). The Parties may amend
and/or supplement the Operational Plan in writing, as mutually
deemed appropriate. The Operational Plan shall be used solely
for operational purposes, and not for specifying contractual
obligations of either party.
2. HARDWARE MAINTENANCE SERVICE
2.1 General.
2.1.1 Cray shall perform installation and maintenance service
either directly or through an Approved Third Party on Products in
strict accordance with the procedures recommended by NEC in the
applicable documentation, provided, that if there is any
procedure not adequately covered by the applicable documentation,
Cray may perform such installation and maintenance service in a
professional manner.
2.1.2 Maintenance service to be performed by Cray shall consist of (i)
diagnosing hardware problems, (ii) tracing the problems to the
Spare Parts level, and (iii) rectifying the problems by replacing
Spare Parts.
10
2.1.3 It is further understood that no repair license is granted by NEC
to Cray with respect to the Spare Parts and therefore NEC will
not be required to provide to Cray any support, information or
documentation for repair by Cray of such Spare Parts.
2.1.4 The term "Spare Parts" as used herein shall mean field
replaceable units such as components and subassemblies of
Hardware Products which shall have the same List Prices for all
overall sales of Spare Parts. For this purpose the term "List
Prices" refers to NEC's standard international list prices for
the Spare Parts (which prices shall be the same for all
countries, except Japan), as published from time to time in the
Repairable Spare Parts List and the Consumable Spare Parts List.
Spare Parts shall consist of "Repairable Spare Parts" and
"Consumable Spare Parts" as shall from time to time be designated
by NEC in the form of Repairable Spare Parts List and Consumable
Spare Parts List, respectively. Spare Parts Lists, which contain
part prices, repairable/non-repairable ID, repair charge of
repairable part and part failure rate, will be periodically
provided to Cray.
2.1.5 To ensure its proper maintenance service, Cray shall purchase
from NEC and maintain in stock such quantities of Spare Parts as
reasonably recommended by NEC and accepted by Cray, unless
otherwise agreed. Cray shall store Spare Parts at all times in
suitable, dry and clean premises and comply in all respects with
any reasonable instruction for storage that may be given by NEC
from time to time. Cray shall use Spare Parts supplied hereunder
solely for its performance of maintenance service on Hardware
Products and for no other purposes, unless maintenance service
shall be subcontracted by Cray to an Approved Third Party in
which case the Approved Third Party may use Spare Parts for the
purpose of maintenance of Hardware Products. For avoidance of
doubt, Cray may not use the Spare Parts to assemble a Product
from scratch.
2.1.6 NEC will provide Cray, for use in performing installation and
maintenance service on Hardware Products, such special (i) tools,
test equipment and measuring instruments ("Tools") and (ii) test
and diagnostic programs ("T&D Programs") as shall be recommended
by NEC in writing for these purposes. The Tools will be provided
at reasonable charges and the T&D Programs will be provided
without charge. Cray shall use such Tools and T&D Programs
supplied hereunder solely for its performance of installation and
maintenance services on Hardware Products and for no other
purposes, unless maintenance service shall be subcontracted by
Cray to an Approved Third Party in which case the Approved Third
Party may use the Tools and T&D Programs for the purpose of
maintenance of Hardware Products. Cray shall not copy, reproduce,
modify or disclose, or otherwise make available to any other
person, all or any part of T&D Programs. Notwithstanding the
foregoing, Cray may copy all or any part of T&D Programs, in
printed or machine-readable form, for any purposes mutually
agreed upon by NEC and Cray;
11
provided, that Cray shall reproduce NEC's copyright notice on
each such copy. Cray shall have the right to make the material
and information referred to in this Section 2.1.6 available to
Approved Third Parties pursuant to a confidentiality agreement.
2.2 Supply of Spare Parts, Tools and Test Equipment
2.2.1 NEC agrees to supply the Spare Parts and Tools to Cray during the
term of this Agreement and for a period of five (5) years after
the discontinuance announcement of relevant Products by NEC to
Cray or the termination of the Distribution Agreement.
1) On the fifth day of each month of the term of this Agreement,
Cray shall provide NEC with an eighteen (18) month rolling
forecast for Spare Parts and Tools together with and in the
same manner as the Product rolling forecast called for by the
Distribution Agreement.
2) In the event that NEC decides to discontinue supply of Spare
Parts and Tools at any time after the expiration of the said
period of five (5) years, NEC shall give Cray at least three
(3) months' notice prior to the date of receiving final order
for such Spare Parts and Tools.
3) Any orders for Spare Parts and Tools from Cray shall be
subject to applicable lead time of not less than six (6)
months, provided that in case of emergency order NEC shall
make commercially reasonable efforts to promptly airfreight
ordered Spare Parts and Tools to Cray, consistent with the
nature of the emergency.
4) Except as provided in Section 5.2 of the Transition
Agreement, Cray shall purchase the Spare Parts from NEC at
the list price specified in the Spare Parts Lists, provided
that such prices shall be no greater than the prices NEC
charges its subsidiaries for the same Spare Parts. Except as
otherwise expressly stated herein, the purchase and sale of
Spare Parts shall be governed by the terms, conditions and
procedures of the Distribution Agreement (including, without
limitation, Sections 4, 5 and 6).
2.3 Repair or Replacement of Repairable Spare Parts
2.3.1 With respect to the failed Repairable Spare Parts of Products not
covered by NEC's warranty obligations under the Distribution
Agreement, NEC shall, if requested by Cray, at its sole option,
repair or replace such Repairable Spare Parts at the Repair
Charge of such Repairable Spare Parts. NEC will repair or replace
such Repairable Spare Parts to then current latest revision
level. The repair or replacement charge (the "Repair Charge")
will be defined for each repairable part in the Repairable Spare
Part List, provided, that the cost of transportation shall be
borne by Cray.
12
2.3.2 In the event that Cray requests NEC to repair a Repairable Spare
Part, Cray shall at its expense return the failed Repairable
Spare Parts to NEC's manufacturing facilities in Japan. Cray
shall, at the same time, furnish all information available to it
regarding any failed Repairable Spare Parts to enable NEC to
determine the cause and existence of the alleged failure. If
NEC's inspection reveals that such failure does not exist, NEC
shall return to Cray the Repairable Spare Parts at the expense of
Cray and Cray shall pay the repair charge for "no-failure found"
specified in the Operational Plan.
2.3.3 NEC shall use its reasonable efforts to repair the returned
Repairable Spare Parts within thirty (30) working days after it
has received such Repairable Spare Parts at its manufacturing
facilities in Japan. Upon completion of such repair, NEC shall
send to Cray repaired Repairable Spare Parts "CIP" (as defined in
INTERCOMS 2000) named Japanese airport basis. If in the judgment
of NEC the returned Repairable Spare Parts are not repairable,
NEC shall return the Repairable Spare Parts to Cray at Cray's
option and expense, and shall provide Cray with replacement
Repairable Spare Parts in accordance with Section 2.2, if Cray so
elects.
2.3.4 NEC agrees to repair or replace failed Repairable Spare Parts
during the term of and in accordance with this Agreement and for
a period of five (5) years after the discontinuance announcement
of relevant Products by NEC to Cray or the termination of the
Distribution Agreement.
2.4 Documentation
2.4.1 One set of maintenance documentation for the Hardware Products
shall be provided by NEC to Cray without charge. The
documentation will be listed in the Operational Plan.
2.4.2 A single copy of updates to the documentation shall be provided
to Cray in the English language for maintenance and updating of
existing field and library documentation.
2.4.3 Cray may use (which includes the right to translate, adapt, copy
and modify) the documentation and updates to prepare Cray's
maintenance, operation and support documents only for the purpose
of maintenance of Hardware Products.
2.4.4 Cray shall take all appropriate legal measures to protect NEC's
rights in the documentation provided to Cray under this
Agreement, including securing NEC's copyrights in all
jurisdictions in which Cray employs the documentation or portions
thereof.
2.5 Training of Cray Personnel
13
2.5.1 NEC shall, upon request of Cray, conduct training courses in
Japan or a place mutually agreeable to NEC and Cray to the extent
necessary for performing installation and maintenance of Products
hereunder. The number of Cray's trainees, the time schedule of
such training and other details shall be determined in advance by
agreement between the parties hereto. NEC shall, upon receiving
Cray's request for training, make reasonable efforts to provide
such training to Cray personnel in accordance with the time
schedule given by Cray.
2.5.2 Cray shall cause its trainees who participate in training courses
to be conducted in Japan to comply in all respects with NEC's
internal rules and regulations.
2.5.3 NEC shall provide copies of all necessary materials to each
trainee. Cray may record any or all training courses on video
tape and, after NEC's review and consent to its contents, Cray
may reproduce and distribute such video tape, for internal use
only by Cray, under Cray's name.
2.5.4 In the Initial Period, NEC will provide training without charge.
With respect to each training course under this Agreement, Cray
shall be responsible for all costs associated with the travel and
living expenses of Cray employees. In addition, following the
Initial Period Cray shall pay to NEC (i) a training charge
mutually agreed in advance, (ii) machine time and training
materials provided by NEC, if any, at NEC's intra-company charges
and (iii) round trip air fares by economy class for NEC
instructors if it is agreed that the training is to be conducted
in the U.S.A. (collectively, the "Training Reimbursement"). The
Training Reimbursement shall be annually adjusted in each March
during the term of this Agreement. Such adjusted Training
Reimbursement for a given year shall be applied from the 1st day
of April of that year.
2.6 Technical Support
2.6.1 If Cray or Approved Third Parties encounter in the performance of
maintenance service on Hardware Products problems that require
NEC assistance in spite of its reasonable efforts to complete the
service without such assistance, Cray may, through facsimile
and/or electronic mail, request technical consultation of NEC
engineers in Japan by informing fully NEC of the nature of the
problems ("Escalation Call"). Only the Cray personnel listed in
the Operational Plan may make an Escalation Call. NEC shall make
reasonable efforts to advise Cray of the solution to the problems
as quickly as possible. If NEC does not have a known solution for
the problems reported by Cray, NEC will make commercially
reasonable efforts to develop a solution if so requested by Cray.
In this case, Cray shall pay to NEC an escalation charge of $*
per event (the "Escalation Charge"), provided, that no Escalation
Charge will be paid by Cray for technical consultation on the
problems caused by NEC's manufacturing defect or design fault in
Hardware Products. The
--------
* Confidential material has been intentionally omitted at this point pursuant to
a request for confidential treatment, and such material has been filed
separately with the Securities and Exchange Commission.
14
Escalation Charge shall be annually adjusted in each March during
the term of this Agreement after consultation with Cray. Such
adjusted charge for a given year shall be applied from the 1st
day of April of that year.
2.6.2 Upon Cray's written request, NEC will perform technical support
through an NEC engineering team, by facsimile and/or electronic
mail for the Products, during NEC's normal business hours, at a
monthly technical support fee of $* per installed system (the
"Support Fee"). Technical Support shall include (i) failure
analysis of the Products, provided, that Cray agrees to notify
NEC in writing of a technical description and/or data of such
failure or defect of such Products and (ii) answers to Cray's
technical inquiries (not related to any specific failure and/or
problem in the field, for which technical support will be
provided in accordance with Section 2.6.1 above). The Support Fee
does not include charges for failed part analysis which is
separately defined. The Support Fee shall be annually adjusted in
each March during the term of this Agreement after consultation
with Cray. Such adjusted charge for a given year shall be applied
from the 1st day of April of that year. Only Cray personnel
listed in the Operational Plan may make a technical inquiry.
2.7 Dispatch of NEC Engineers
2.7.1 NEC shall, upon Cray's reasonable request, dispatch engineer(s)
to Cray in order to provide technical advice on installation,
operation and maintenance of the Products supplied under the
Distribution Agreement. The necessity of such dispatch, the
number of NEC engineers to be sent, the time schedule of such
dispatch and other details shall in advance be determined and
agreed between the parties. Cray shall submit for review and
acceptance by NEC a prior written request for such dispatch,
stating the purpose of such dispatch, the desired number and
qualification of NEC engineers, the time schedule and other
details.
2.7.2 Unless otherwise agreed to by NEC, the working time of each NEC
engineer dispatched shall not exceed eight (8) hours (excluding
one hour lunch time) per day and five (5) days per week.
2.7.3 Cray shall reimburse NEC for travel and living expenses incurred
in dispatching its engineers to Cray. In addition, Cray shall pay
to NEC a dispatching fee calculated at the rate of $* per
calendar day for each NEC engineer dispatched under this Section
2.7 (the "Dispatching Fee"), provided, that no Dispatching Fee
will be paid by Cray for technical assistance on the problems
caused by NEC's manufacturing defect or design fault in Hardware
Products. The Dispatching Fee shall be applicable and paid for
the workdays from the day the respective engineer leaves Japan to
the day he leaves the place of destination (both inclusive). The
Dispatching Fee shall be annually adjusted in
--------
* Confidential material has been intentionally omitted at this point pursuant to
a request for confidential treatment, and such material has been filed
separately with the Securities and Exchange Commission.
15
each March during the term of this Agreement. Such adjusted fee
for a given year shall be applied as from the 1st day of April of
that year.
2.8 Field Change Order
2.8.1 NEC shall issue Field Change Orders ("FCO") for Hardware Products
and Spare Parts in case of recurring failure and as otherwise
required. NEC shall provide FCO kits for Hardware Products and
Spare Parts without charge in accordance with NEC's round-▇▇▇▇▇
schedule. Cray shall promptly install such FCO kits at its own
expense and its own responsibility, and shall return the replaced
parts to NEC at Cray's cost. The detailed procedures shall be set
forth in the Operational Plan.
3. SOFTWARE MAINTENANCE SERVICE
3.1 Maintenance Support
3.1.1 Scope: During the term of this Agreement, NEC shall provide to
Cray maintenance support for the Software Products on a level
consistent with that generally provided by NEC to its other
customers, including updates or upgraded versions to the Software
Products (collectively, "Updates"). The timing and content of all
Updates shall be determined by NEC, in NEC's sole discretion. The
software including Updates shall be furnished not more frequently
than twice a year. NEC shall also correct any reproducible
malfunctions and shall furnish the corrected Software, provided,
that Cray provides the detailed information of malfunctions of
the Software Products and test cases including, without
limitation, a source program which demonstrates such
malfunctions. NEC shall use commercially reasonable efforts to
promptly correct such malfunctions and promptly upon such
correction, furnish Cray with the corrected version (or portion)
of the Software Products, provided, that, in the event NEC
reasonably believes that any such malfunction will not cause
serious problems with normal use of the Software Products, NEC
may consult with Cray and Cray shall allow NEC additional time to
furnish corrected Software Products. More detailed procedures
regarding Updates and malfunction corrections shall be proved for
in the Operational Plan.
3.1.2 Fee: In consideration of the software maintenance support under
Section 3.1.1 Cray shall pay to NEC an annual software
maintenance fee (the "Software Maintenance Fee"), due on March 31
of each year, equal to the greater of (i) * percent (*%) of the
aggregate of the List Prices of all of the Software Products sold
to Cray as of December 31 of the immediately preceding year and
still in use (pro-rated pursuant to the following sentence), and
(ii) $*; provided, that the $* minimum is waived for the Initial
Period. The amount specified in
--------
* Confidential material has been intentionally omitted at this point pursuant to
a request for confidential treatment, and such material has been filed
separately with the Securities and Exchange Commission.
16
subclause (i) shall be pro-rated, in the case of Software
Products installed in the immediately preceding year, by the
number of months that such Software Products were actually
installed at the customer's site.
3.2 Technical Consultation
3.2.1 NEC shall provide Cray with technical consultation for the
Software Products, for a consulting fee of $* (the "Technical
Inquiry Fee") for each PSR (as defied in the Operational Plan).
The scope of the procedures for technical consultation shall be
defined in the Operational Plan.
3.3 Documentation
3.3.1 One set of maintenance documentation, including an English
language copy of the user's manual for the Software Products
shall be provided by NEC to Cray without charge. The
documentation will be listed in the Operational Plan.
3.3.2 A single copy of updates to the documentation shall be provided
to Cray in the English language.
3.3.3 To the extent that NEC has the right to permit Cray to do so
without payment to third parties, Cray may use (which includes
the right to translate, adapt, copy and modify) the documentation
and updates to prepare Cray's maintenance, operation and support
documents only for the purpose of maintenance of Software
Products.
3.3.4 Cray shall take all appropriate legal measures to protect NEC's
and third parties' rights in the documentation provided to Cray
under this Agreement, including securing NEC's copyrights in all
jurisdictions which Cray employs the documentation or portions
thereof.
--------
* Confidential material has been intentionally omitted at this point pursuant to
a request for confidential treatment, and such material has been filed
separately with the Securities and Exchange Commission.