Software Distribution Agreement

Exhibit 10.16


SOFTWARE DISTRIBUTION AGREEMENT
BETWEEN
TECH DATA PRODUCT MANAGEMENT, INC.
AND
RED HAT SOFTWARE, INC.


SOFTWARE DISTRIBUTION AGREEMENT


THIS AGREEMENT, DATED AS OF THIS 29TH DAY OF APRIL, 1999, IS BETWEEN TECH DATA PRODUCT MANAGEMENT, INC., A FLORIDA CORPORATION ("TECH DATA"), WITH ITS PRINCIPAL CORPORATE ADDRESS AT 5350 TECH DATA DRIVE, CLEARWATER, FLORIDA 33760 AND RED HAT SOFTWARE, INC., A DELAWARE CORPORATION ("RED HAT" OR "VENDOR"), WITH ITS PRINCIPAL CORPORATE ADDRESS AT 5350 TECH DATA DRIVE, CLEARWATER, FLORIDA 33760 AND RED HAT SOFTWARE, INC., A DELAWARE CORPORATION ("RED HAT" OR "VENDOR"), WITH ITS PRINCIPAL CORPORATE ADDRESS AT: 2600 MERIDIAN PARKWAY, DURHAM, NC 27713.


RECITALS


A. Tech Data desires to purchase certain Products from Red Hat from time to time and Red Hat desires to sell certain Products to Tech Data in accordance with the terms and conditions set forth in this Agreement.


B. Red Hat desires to appoint Tech Data as its non-exclusive distributor to market Products within the Territory (as hereinafter defined) and Tech Data accepts such appointment on these terms set forth in this Agreement.


NOW, THEREFORE, in consideration of the Recitals, the mutual covenants contained in this Agreement and other good and valuable consideration, Tech Data and Red Hat hereby agree as follows:


ARTICLE I
DEFINITIONS, APPOINTMENT AND TERM OF AGREEMENT


1.1 DEFINITIONS. The following definitions shall apply to this Agreement.


(a) "Customers" of Tech Data shall include dealers, resellers, value
added resellers, direct resellers and other entities that acquire the
Products from Tech Data.


(b) "DOA" shall mean Product, or any portion thereof, which fails to
operate properly on initial installation, boot, or use, as applicable.


(c) "Documentation" shall mean user manuals, training materials,
Product descriptions and specifications, brochures, technical manuals,
license agreements,


Tech Data /s/ SML Red Hat /s/ TS


Page 2


-------------- **[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.


supporting materials and other information relating to the Products and
included with the Products, whether distributed in print, electronic,
or video format.


(d) "Effective Date" shall mean the date on which this Agreement is
signed and dated by a duly authorized representative of Tech Data.


(e) "End Users" shall mean the final purchasers or licensees who have
acquired Products for their own use and not for resale, remarketing or
redistribution.


(f) "Non-Saleable Products" shall mean any Product that has been
returned to Tech Data by its Customers that has had the outside shrink
wrapping or other packaging seal broken; any components of the original
package are missing, damaged or modified; or is otherwise not fit for
resale.


(g) "Products" shall mean, individually or collectively, the software
licenses, electronic products, the sealed software packages comprised
of the computer programs encoded on media together with manuals,
materials and other contents of the packages associated therewith, if
any, as more fully described in Schedule 1.1(g) attached hereto.


(h) "Return Credit" shall mean a credit to Tech Data in an amount equal
to the price paid by Tech Data for Products less any price protection
credits but not including any early payment, prepayment or other
discounts.


(i) "Services" means any warrant, maintenance, advertising, marketing
or technical support and any other services performed or to be
performed by Red Hat.


(j) "Territory" shall mean the United States, its territories and
possessions, and Canada.


1.2 TERM OF AGREEMENT. The term of this Agreement shall commence on the
Effective Date and, unless terminated by either party as set forth in
this Agreement, shall remain in full force and effect for a term of
one (1) year, and will be automatically renewed for successive
one (1) year terms unless prior written notification of termination
or non-renewal is delivered by one of the parties in accordance with
the notice Agreement.


Tech Data /s/ SML Red Hat /s/ TS


Page 3


-------------- **[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.


1.3 APPOINTMENT AS DISTRIBUTOR. Red Hat hereby grants to Tech Data the
non-exclusive right and license to distribute Products during the term
of this Agreement within the Territory, together with any updates or
enhancements to the Products and any new releases related to the
Products. This license includes the right to order, possess and
distribute the Products. This license includes the right to order,
possess and distribute the Products to Customers and to provide the
Products to Customers for use on demonstration units. Red Hat and Tech
Data acknowledge and agree that the license to use the Product is
solely between Red Hat and the End User and is governed by the terms of
the Vendor's standard use license enclosed with the Product. This
Agreement does not grant Red Hat or Tech Data an exclusive right to
purchase or sell Products and shall not prevent either party from
developing or acquiring other vendors or customers or competing
Products. Tech Data will use commercially reasonable efforts to promote
distribution of the Products. Red Hat agrees that Tech Data may obtain
Products in accordance with this Agreement for the benefit of its
parent, affiliates and subsidiaries. Said parent, affiliates and
subsidiaries of Tech Data shall be entitled to order Products directly
from Red Hat pursuant to this Agreement.


ARTICLE II. PURCHASE ORDERS


2.1 ISSUANCE AND ACCEPTANCE OF PURCHASE ORDER.


(a) This Agreement shall not obligate Tech Data to purchase any
Products or Services except as specifically set forth in a written
purchase order.


(b) Tech Data may issue to Red Hat one or more purchase orders
identifying the Products Tech Data desires to purchase from Red Hat.
The terms and conditions of this Agreement shall govern all purchase
orders, except that purchase orders may include other terms and
conditions which are consistent with the terms and conditions of this
Agreement, or which are mutually agreed to in writing by Tech Data and
Red Hat. Purchase orders will be placed by Tech Data by fax or
electronically transferred.


(c) A purchase order shall be deemed accepted by Red Hat unless Red Hat
notifies Tech Data in writing within five (5) business days of the date
of the purchase order that Red Hat does not accept the purchase order.


2.2 PURCHASE ORDER ALTERATIONS OR CANCELLATIONS. Up to five (5) calendar
days prior to shipment of Products, Red Hat shall accept alterations to
a purchase order in order to: (i) change a location for delivery, (ii)
modify the quantity or type of Products


Tech Data /s/ SML Red Hat /s/ TS


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-------------- **[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.


to be delivered or (iii) correct typographical or clerical errors.
[CONFIDENTIAL TREATMENT REQUESTED]**.


2.3 EVALUATION OR DEMONSTRATION PURCHASE ORDERS. Red Hat shall provide to
Tech Data a reasonable number of demonstration or evaluation Products
at no charge.


2.4 PRODUCT SHORTAGES. If for any reason Red Hat's production is not on
schedule, Red Hat may allocate available inventory to Tech Data and
make shipments based upon a fair and reasonable percentage allocation
among Red Hat's customers. [CONFIDENTIAL TREATMENT REQUESTED]**.


2.5 PROOF OF DELIVERY ("POD"). Vendor shall provide to Tech Data, at no
charge, a hard copy Proof of Delivery for any drop shipment requested
by Tech Data. The POD shall be faxed to Tech Data within [CONFIDENTIAL
TREATMENT REQUESTED]** of the initial request. [CONFIDENTIAL TREATMENT
REQUESTED]**.


ARTICLE III. DELIVERY AND
ACCEPTANCE OF PRODUCTS


3.1 ACCEPTANCE OF PRODUCTS. Tech Data shall, after a reasonable time to
inspect each shipment, accept Products (the "Acceptance Date") if the
Products and all necessary documentation delivered to Tech Data are in
accordance with the purchase order. Any products not ordered or not
otherwise in accordance with the purchase order. Any Products not
ordered or not otherwise in accordance with the purchase order (e.g.
mis-shipments, overshipments) may be returned to Red Hat's expense
(including reasonable costs of shipment or storage). [CONFIDENTIAL
TREATMENT REQUESTED]**. Tech Data shall not be required to accept
partial shipment unless Tech Data agrees prior to shipment.


3.2 [CONFIDENTIAL TREATMENT REQUESTED]**


3.3 [CONFIDENTIAL TREATMENT REQUESTED]**


Tech Data /s/ SML Red Hat /s/ TS


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-------------- **[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.


[CONFIDENTIAL TREATMENT REQUESTED]**.


ARTICLE IV. RETURNS


4.1 INVENTORY ADJUSTMENT. Red Hat and Tech Data will work together to
maintain reasonable inventory levels. Notwithstanding, Red Hat agrees
to accept return of overstocked Products [CONFIDENTIAL TREATMENT
REQUESTED]**. Shipments of Products being returned shall be new, unused
and in sealed cartons. Vendor shall credit Tech Data's account in the
amount of the Return Credit. Tech Data shall bear all costs of shipping
and risk of loss of those Products returned under this Section 4.1 to
Red Hat's location.


4.2 DEFECTIVE PRODUCTS/DEAD ON ARRIVAL (DOA). Tech Data shall have the
right to return to Red Hat for Return Credit any DOA Product or any
Product that fails to perform in accordance with Red Hat's Product
warranty that is returned to Tech Data within thirty (30) days after
Tech Data receives the RMA. Red Hat shall bear all costs of shipping
and risk of loss of DOA and in-warranty Products to Red Hat's location
and back to Tech Data or Tech Data's Customer.


4.3 OBSOLETE OR OUTDATED PRODUCT. Tech Data shall have the right to return
for Return Credit [CONFIDENTIAL TREATMENT REQUESTED]** Products
that become obsolete or Red Hat continues, updates, revises or are
removed from Red Hat's current price list. Tech Data is to return all
such Products in its inventory within [CONFIDENTIAL TREATMENT
REQUESTED]** after Tech Data receives written notice from Red Hat that
such Products are obsolete, superseded by a newer version, discontinued
or are removed from Red Hat's price list. Within [CONFIDENTIAL
TREATMENT REQUESTED]** of Tech Data's receipt of written notice, Tech
Data will use best efforts to provide Red Hat with reports indicating
current Customer inventory levels. These reports are intended to give
Red Hat a realistic expectation of the Customer returns that Red Hat
will be expected to accept following the expiration of the
aforementioned [CONFIDENTIAL TREATMENT REQUESTED]** return period.
[CONFIDENTIAL TREATMENT REQUESTED]**.


4.4 NON-SALEABLE. Tech Data shall have the right to return to Red Hat for
Return Credit Non-Saleable Products. [CONFIDENTIAL TREATMENT
REQUESTED]**.


Tech Data /s/ SML Red Hat /s/ TS


Page 6


-------------- **[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.


4.5 CONDITION PRECEDENT TO RETURNS. As a condition precedent to returning
Products, Tech Data shall request and Red Hat shall issue a Return
Material Authorization Number (RMA) in accordance with and subject to
Section 8.9 of this Agreement.


ARTICLE V. PAYMENT TO RED HAT


5.1 CHARGES, PRICES AND FEES FOR PRODUCTS. Charges, prices, quantities and
discounts, if any, for Products shall be determined as set forth in
Schedule 1.1(g), or as otherwise mutually agreed upon by the parties in
writing, and may be confirmed at the time order. In no event shall
charges exceed Red Hat's then current established charges. Tech Data
shall not be bound by any of Red Hat's suggested prices.


5.2 [CONFIDENTIAL TREATMENT REQUESTED]**


5.3 INVOICES. A "correct" invoice shall contain (i) Red Hat's name and
invoice date, (ii) a reference to the purchase order or other
authorizing document, (iii) separate descriptions, unit prices and
quantities of the Products actually delivered, (iv) credits (if
applicable), (v) shipping charges (if applicable) (vi) name (where
applicable), title, phone number and complete mailing address as to
where payment is to be sent, and (vii) other ...