Master Outsourcing Agreement for Maintenance Services

EXHIBIT 10.2.6


MASTER OUTSOURCING AGREEMENT


(MAINTENANCE SERVICES)


This Master Outsourcing Agreement (Maintenance Services) (the "Agreement") is made as of the 13th day of December, 1999 by and between Motorola, Inc., a Delaware corporation, through its Motorola Computer Group, with its principal office located at 2900 South Diablo Way, Tempe, AZ 85282 ("MCG"), and LinuxCare, Inc, with its principal office located at 650 Townsend St. San Francisco, CA 94103 (VENDOR).


RECITALS


A. MCG manufactures, sells, distributes and licenses certain computer hardware and software products and other third party products in connection with such computer products.


B. MCG provides installation, maintenance and other services for such computer products and such third party products.


C. VENDOR is in the business of providing engineering support, training, development, and consulting services for Linux products.


D. MCG desires to establish a contractual relationship with VENDOR whereby VENDOR will provide a significant portion of MCG's support and other support related services directly to MCG pursuant to the terms and conditions of this Agreement.


AGREEMENT


NOW, THEREFORE, MCG and VENDOR agree as follows:


1. DEFINITIONS


As used in this Agreement, the following terms shall have the following meanings (such definitions to be equally applicable to both the singular and the plural forms of the terms defined). Unless otherwise indicated, references to Schedules and Exhibits shall mean Schedules and Exhibits to this Agreement, as such Schedules and Exhibits may be amended, supplemented or modified from time to time.


(a) "Base Term" shall have the meaning set forth in Section 3(a) of this
Agreement.


(b) "Customer Data" shall mean the customer contract files and other
information pertaining to the customers, as communicated and provided to
VENDOR by MCG in its sole discretion, whose service maintenance will be
provided by VENDOR on behalf of MCG hereunder.


(c) "Effective Date" shall mean December 13, 1999.


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(d) "Eligible Products" shall mean all Linux operating system software
currently or in the future supported by MCG or any of its affiliates
subject to any third party contractual terms between MCG and the third
party.


(e) "Loaned Equipment" shall mean equipment identified by MCG for the
support or servicing of Eligible Products which is to be loaned to VENDOR
as provided in Section 5 (c) herein.


(f) "Major Facilities" shall mean the Major Parts Facilities and VENDOR's
facilities in 650 Townsend St. San Francisco, CA 94103.


(g) "Service Area" shall mean the geographic location identified in
Schedule 1(h).


(h) "Services" shall mean the obligations, duties and services described
in an attached Statement of Work.


(i) "Statement of Work" shall mean all of the obligations, duties and
services of VENDOR in respect of the support and servicing of Eligible
Products including, without limitation, remote customer service, call
management, and customer tracking, as set forth in detail in the Statement
of Work attached hereto as an exhibit.
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(j) "Technical Documentation" shall mean diagnostic software and tools
(including without limitation, operations and maintenance manuals, training
materials, logic diagrams, service aids and know-how related to the
Eligible Products that are necessary or appropriate, as communicated and
provided to VENDOR by MCG in its sole discretion and to the extent MCG is
permitted under third party licenses to communicate and provide such items
to VENDOR, for VENDOR's engineers to support the Eligible Products
properly.


(k) "Transition Completion Date" shall mean the date when the transition
is completed in full and VENDOR is capable of performing the in accordance
with the standards and requirements specified in the Transition Plan, as
such date may be modified from time to time in connection with revisions to
such Transition Plan.


(l) "Transition Coordinator" shall mean an individual identified by VENDOR
who shall be acceptable to MCG and who shall serve as the Transition
Coordinator for purposes of Section 4(c) hereof.


(m) "Transition Plan" shall mean the plan created through joint effort of
VENDOR and MCG as set forth in Section 4(a), below.


(n) "Transition Phase" shall mean the period commencing on the Effective
Date and ending on the Transition Completion Date.


(o) "VENDOR Onsite Project Manager" shall have the meaning set forth in
Section 4(c).


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2. APPOINTMENT AS SERVICE CONTRACTOR


(a) Appointment. Upon and subject to the terms and conditions of this
----------- Agreement, MCG hereby appoints VENDOR, as its contractor, to perform the Support for or with respect to the Eligible Products within the Service Area. VENDOR may subcontract its obligations under this Agreement to third parties provided that (i) such third parties agree to the terms and provisions of this Agreement applicable to the services provided by such third parties, which provisions shall at minimum require full compliance with Section 9 - Confidential Information; (ii) VENDOR provides MCG prior notice of the full identity (i.e., name, telephone number and address) of such third party and a description of the services being so provided, and (iii) VENDOR obtains MCG's prior written consent of such third party for the particular subcontract, which consent shall not be unreasonably withheld. VENDOR shall indemnify MCG for any and all claims made against MCG resulting out of any acts or omissions of such third parties in accordance with the provisions of Section 10(a), below.


(b) Acceptance of Appointment. VENDOR hereby accepts such appointment and
------------------------- agrees to perform the Services on or with respect to the Eligible Products within the Service Area. VENDOR agrees to perform the Services promptly, in a skillful, competent and workmanlike manner, and in accordance with the standards of skill and care exercised by equipment maintenance and service providers with respect to similar equipment.


(c) Non-exclusivity. MCG and VENDOR hereby acknowledge and agree that the
--------------- appointment of VENDOR hereunder is not exclusive. At any time, and at its sole discretion, MCG, Motorola, Inc., and any of their respective divisions, subsidiaries or affiliates may perform and/or may engage any third party to perform any or all of the Services (or any other services) within or outside of the Service Area. Nothing in this Agreement is intended to limit or restrict VENDOR's right to provide maintenance services (including services comparable to the Services) on behalf of other equipment vendors; provided, that any such
-------- services performed by VENDOR on behalf of any other vendor shall not interfere with or limit VENDOR's ability to fully and timely perform the Services.


3. TERM OF AGREEMENT


(a) Base Term. Subject to Section 3(b) hereof, the term of this Agreement
--------- will commence on the Effective Date and will, unless sooner terminated in accordance with the provisions hereof, and subject to the requirements of Section 12, end on the third (3rd) anniversary thereof.


(b) Automatic Annual Extension. The term of this Agreement shall
-------------------------- automatically be extended for successive periods of one year each; provided,
-------- that the term of this Agreement shall not be extended under this Section 3(b) if either party shall have delivered, not later than twelve (12) months prior to the then scheduled expiration date, written notice to the other party of its election not to have the term of Services to be provided under this Agreement automatically extended pursuant to this Section 3(b).


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4. TRANSITION PHASE


(a) Transition Management. VENDOR will be responsible for all transition
--------------------- management and transition planning. To the extent MCG has any suggested additions or modifications, the parties shall immediately confer and in good faith attempt to resolve any disagreements that may arise. Both MCG and VENDOR will diligently and timely perform their respective duties and tasks under a mutually agreed-upon Transition Plan in accordance with the provisions of this Agreement, the Statement of Work and the Transition Plan so that the Transition Phase will be completed successfully within the schedule established in the Transition Plan.


(b) Failure to Meet Transition Completion Date. In addition to MCG's right
------------------------------------------ to recover actual damages, in the event that VENDOR fails to perform its obligations hereunder with respect to the Transition Phase in accordance with the Statement of Work and the Transition Plan such that the Transition Completion Date does not occur on or before the date set by mutual agreement of the parties:


(i) VENDOR shall make available to MCG all personnel, equipment and
other resources in addition to such personnel, equipment and other
resources then dedicated to the MCG Transition Phase that are necessary
under the circumstances to maintain MCG's service and maintenance
operations fully operational at the same service level at which it was
operating on the Effective Date. VENDOR shall be reimbursed for use of the
technical people at the telephone only support rates. On site services
performed by VENDOR during this period will be reimbursed by the Flat Rate
Per Incident On-site Labor Rate as set forth in the Statement of Work.


(ii) If the Transition Completion Date has not occurred by the
mutually agreed date, VENDOR shall as soon as possible submit to MCG a
written plan to complete the Transition. MCG shall have a mutually agreed
to time period in which, by written notice to VENDOR, to (A) accept the
written plan, (B) terminate this Agreement as of a date specified in the
termination notice, without any further financial obligations to VENDOR or
(C) elect to stay at current implementation level of the Transition Plan.
If MCG does not provide a written response, it shall be deemed to have
elected to stay at the current implementation level. Nothing in this
Section 4 shall be intended to restrict or limit MCG's right to initiate
discussions and/or negotiations with any other maintenance service provider
during or after the Transition Phase.


5. GENERAL COVENANTS RELATING TO THE SERVICES


(a) Personnel. VENDOR agrees to maintain sufficient staffing levels to
---------
cause all Services to be performed in accordance with, and within the time frames specified in, the Statement of Work. VENDOR shall assign to maintenance services only trained and experienced personnel. Such personnel must be technically qualified by MCG to the appropriate level required, and as determined by MCG, for the Eligible Products to be maintained by VENDOR pursuant to this Agreement.


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(b) Loaned Equipment. MCG shall deliver to VENDOR and VENDOR shall accept
----------------
the delivery of the Loaned Equipment set forth in Schedule 5(c),
attached hereto, as prescribed in the Transition Plan and such other
Loaned Equipment as MCG shall determine is required from time to time.
Such Loaned Equipment shall be used by VENDOR solely in the
performance of the Services. Unless otherwise agreed to by MCG in
writing, such Loaned Equipment shall remain the property of MCG. Upon
delivery to VENDOR, VENDOR assumes the cost of labor for safekeeping,
maintaining and repairing the Loaned Equipment and shall keep such
Loaned Equipment in good working order and repair, subject to
reasonable wear and tear that does not adversely affect the utility or
efficiency of such Loaned Equipment. MCG shall provide the parts to
the Loaned Equipment as requested by VENDOR in connection with the
safekeeping, maintenance and repair of the Loaned Equipment. VENDOR
shall maintain complete and accurate records of the location and
condition of the Loaned Equipment and shall execute precautionary UCC-
1 financing statements and any other documents that are reasonably
necessary to protect MCG's ownership interest in such Loaned
Equipment. VENDOR shall keep all such Loaned Equipment prominently
marked with clear and readable labels, signs, or notices indicating
"MOTOROLA, INC. PROPERTY." Upon delivery of Loaned Equipment to
VENDOR, VENDOR assumes all risk of loss, theft, damage or casualty to
such Loaned Equipment including, without limitation, any such loss,
theft, damage or casualty occurring during any subsequent transfer of
such Loaned Equipment to other VENDOR facilities or to customer
locations and shall indemnify and hold MCG harmless from and against
any such loss, theft, damage or casualty.


(c) Customer Data. MCG shall provide Customer Data to VENDOR as described
-------------
in the Statement of Work.


(e) Technical Documentation. MCG shall provide to VENDOR reasonably
-----------------------
sufficient copies of the Technical Documentation at no charge to
VENDOR. All such Technical Documentation shall, to the extent owned by
MCG, remain the property of MCG including, without limitation, all
modifications, enhancements, improvements and translations
("Improvements to Technical Documentation") made to it by any party.
However, MCG hereby grants to VENDOR a non-exclusive, royalty free,
right and license, limited as further described herein, to use the
MCG-owned Technical Documentation solely for the purpose of providing
services for customers pursuant to contracts such customers have with
MCG only. To the extent Technical Documentation is licensed to MCG
from a third party, MCG shall to the extent permitted by such third
party license provide VENDOR rights under the terms of such third
party license. VENDOR shall abide by all restrictions, limitations and
conditions imposed on or in connection with such Technical
Documentation as mutually agreed by the parties. Upon termination,
expiration or cancellation of this Agreement, VENDOR shall return all
Technical Documentation, including all copies thereof, to MCG. VENDOR
shall have no right or license to copy or modify the Technical
Documentation, unless otherwise agreed to in writing by MCG. VENDOR
agrees to preserve and not remove or obscure any proprietary
information notices or other use restrictions, including without
limitation, any copyright notices, trademarks and


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restricted government rights legends. The Technical Documentation are
provided hereunder "As Is" with no representation or warranty
whatsoever. Specifically, MCG does not represent or warrant that the
Technical Documentation does not infringe any third party intellectual
property rights.


(f) Reports. VENDOR shall prepare such reports, summaries, analyses and
-------
shall supply such data and other material as specified in the
Statement of Work, and as otherwise reasonably requested by MCG.


(g) Inspections. After notification by MCG, VENDOR shall attempt to
-----------
accommodate immediately but shall in no case later than 2 days allow
MCG to visit and inspect during VENDOR's normal business hours without
interference to VENDOR's business at any facility of VENDOR where
Services are performed or Loaned Equipment, Customer Data or Technical
Documents are used or stored and to inspect all records of VENDOR kept
or maintained in connection with the Services. Such representatives
from MCG may be required to be escorted by VENDOR for security
purposes. Such inspections shall include the opportunity to monitor
VENDOR's compliance with every aspect of the Statement of Work. VENDOR
will at all times requested by MCG cooperate with and assist such
persons in locating and gaining access to such facilities and records.


(h) Financial Information. VENDOR shall provide immediately notice to MCG
---------------------
of any event or condition that in VENDOR's reasonable judgment results
in or is reasonably likely to result in a material adverse change to
the solvency, financial condition or business operations of VENDOR.


(i) Quality Metric Measurements and Reporting of VENDOR's Performance. MCG
-----------------------------------------------------------------
and VENDOR will, on a regularly scheduled basis, meet to define and
mutually agree upon the Quality Metric goals for the Quality Metrics
defined in Exhibit D. VENDOR agrees to present, at MCG's monthly
quality meeting in Tempe, Arizona, the performance data for the goals
set above and provide root cause analysis and corrective action plans
for all quality metric goals missed. If the quality goals missed are
not resolved to MCG's satisfaction for a period of 3 consecutive
months, MCG shall provide written notice to VENDOR stating the
specific deficiencies and missed goals and requesting that an
appropriate member of VENDOR's senior staff at the Vice President or
Senior Vice President level attend the next MCG monthly quality
meeting and to be present at such time. Such senior staff person shall
attend the noticed MCG monthly quality meeting and shall present an
executive action plan which will define how VENDOR plans to resolve
the deficiencies and missed goals. Unless otherwise agreed to by the
parties, all such deficiencies and missed goals must be successfully
rectified within 90 days thereafter.


6. FEES


In consideration of VENDOR performing its obligations hereunder, MCG shall pay VENDOR the fees and charges as specified in the Statement of Work. All billable service


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performed in each month shall be invoiced the following month. All payments required to be made by MCG hereunder shall be due and payable within thirty (30) days from receipt of an accurate invoice. VENDOR will be permitted to increase its prices for services as set forth in the Statement of Work no greater than 5% for each year, after expiration of the Base Term. Notwithstanding anything to the contrary, MCG shall be entitled to the most favorable prices for services for equivalent type and volume of services. MCG shall provide VENDOR evidence of tax exemption for each applicable state as required, otherwise, applicable tax will be included with invoices.


7. TITLE


MCG shall retain all rights (including, without limitation, all intellectual property rights), title, and interest in and to all Technical Documentation, Customer Data, Loaned Equipment and Parts delivered to and/or retrieved by VENDOR hereunder. VENDOR shall not make any contrary representations to any third party. VENDOR shall not use, sell or encumber the Technical Documentation, Customer Data, and Loaned Equipment for its own account. VENDOR agrees to take all additional actions reasonably requested by MCG to preserve MCG's rights in all Technical Documentation, Customer Data, and Loaned Equipment, including, without limitation, keeping all Technical Documentation, Customer Data, Loaned Equipment secure and separate from any other inventory or materials which do not belong to MCG, placing and maintaining signs on VENDOR's premises or tags on the property announcing MCG's ownership and executing any documents reasonably necessary to preserve MCG's ownership interest. VENDOR shall at all times keep all Technical Documentation, Customer Data, and Loaned Equipment free and clear of any claims, liens, charges and legal processes of VENDOR's creditors and shall defend, at is own cost and expense, MCG's title to or rights in all such Technical Documentation, Customer Data, and Loaned Equipment against all claims, liens, charges and legal processes of creditors of VENDOR and shall indemnify, defend and hold MCG harmless from and against any such claims, liens, charges and processes.


8. REPRESENTATIONS AND WARRANTIES


Each party ("Representing Party") represents and warrants to and for the benefit of the other party that on the Effective Date:


(a) Representing Party is validly existing and in good standing under the laws of the state in which its principle office is located and is duly licensed or qualified and is in good standing wherever necessary to carry on its present business and operations and to own or lease its properties and has the power and authority and all necessary licenses and permits to carry on its present business and operations (including carrying on its business as presently conducted), to own or lease its properties and to enter into and perform its obligations under this Agreement.


(b) This Agreement has been duly authorized, executed and delivered by Representing Party and constitutes legal, valid and binding obligations of Representing Party enforceable against Representing Party in accordance with its respective terms, subject to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium, or similar laws affecting creditors' rights generally and subject to general principles of equity.


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(c) The execution and delivery of this Agreement and compliance by Representing Party with all of the provisions hereof do not require any partner (or any partner or shareholder of any partner) approval and do not and will not contravene any law, rule, regulation, judgment or decree applicable to or binding on Representing Party or require any consent of a third party or contravene the provisions of, or constitute a default under, or result in the creation of any lien on the property of Representing Party under, a general partnership agreement or any indenture, mortgage, contract or other agreement or instrument to which Representing Party is a party or by which it or any of its property may be bound or affected.


(d) Representing Party is not in default, and no event or condition exists which after the giving of notice or lapse of time or both would constitute an event of default, under any mortgage, indenture, contract, agreement, judgment or other undertaking to which Representing Party is a party or upon any of the assets of Representing Party, except for any such default, event or condition which, individually or in the aggregate, would not materially adversely affect Representing Party financial condition, business or operations or adversely affect Representing Party's ability to perform its obligations under this Agreement.


(e) There are no proceedings pending or, to the knowledge of Representing Party, threatened, and to the knowledge of Representing Party there is no existing basis for any such proceedings, against or affecting Representing Party or any subsidiary thereof by or before any court, arbitrator, administrative agency or other governmental authority which, if adversely determined, individually or in the aggregate might be reasonably expected to materially adversely affect the properties, business, prospects, profits or condition of Representing Party or adversely affect Representing Party's ability to perform its obligations under this Agreement. Neither Representing Party nor any of its subsidiaries is in default with respect to any order of any court, arbitrator, administrative agency or other governmental authority, the violation of which individually or in the aggregate might be reasonably expected to materially adversely affect the properties, business, prospects, profits or condition of Representing Party or adversely affect Representing Party's ability to perform its obligations under this Agreement.


(f) Neither the execution and delivery by Representing Party of this Agreement, nor the performance by Representing Party of its obligations hereunder require the consent, approval or authorization of, the giving of notice to, or the filing, registration, qualification or taking of any other action with, any Federal, state, or foreign government authority or agency.


(h) This Agreement, Representing Party's written response to the other party's due diligence requests, and the documents referenced or delivered to the other party, individually or in the aggregate, in connection with this Agreement do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements and facts contained in such documents or writings not false or misleading.


(g) VENDOR chief executive office (as such term is used in Article 9 of the Uniform Commercial Code) is located at 650 Townsend St. San Francisco, CA 94103 and VENDOR hereby agrees to notify MCG in writing of any change in such location within 30 days of such change.


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(i) In connection with Representing Party's business, there are no collective bargaining agreements or other labor agreements to which Representing Party is a party or by which it is bound. There is and has been no unfair labor practice complaint against Representing Party in connection with its business which materially or adversely affects the business of Representing Party. There are and have been no labor strike or other material labor trouble affecting its business and no pending representation question respecting the employees of Representing Party in connection with its business.


(j) Representing Party and its affiliates have filed or caused to be filed all Federal, state, local and foreign tax returns required to be filed and have paid or caused to be paid all taxes shown to be due and payable on such returns or any assessment received by Representing Party or any of its subsidiaries, to the extent such taxes are due and payable (except to the extent (i) such taxes are being contested in good faith, or (ii) such failure to file tax returns or pay taxes would not have any material adverse effect on the properties, business, prospects, profits, or condition of Representing Party).


9. CONFIDENTIAL INFORMATION


(a) Except as provided hereinafter, for a period of five (5) years after termination or expiration of this Agreement, each party shall not disclose, publish or disseminate information received from the other party which may be required to carry out this Agreement and which the disclosing party deems proprietary and confidential, a ...