ODM Product Development and Purchase Agreement Between Giant Electronics And ShoreTel

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GIANT AND SHORETEL CONFIDENTIAL

Exhibit 10.16
CONFIDENTIAL TREATMENT REQUESTED

ODM Product Development and Purchase Agreement
Between

Giant Electronics

And

ShoreTel

     This ODM product development and purchase agreement (“ Agreement ”) is entered into between Giant Electronic Ltd., a Hong Kong company, with its principal place of business at 7/F., Elite Industrial Building, 135-137 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong (“Giant”), and ShoreTel, Inc. (“ ShoreTel ”), a California corporation with its principal place of business at 960 Stewart Drive, Sunnyvale, California 94085, USA. This Agreement shall be effective as of May 1, 2003 (“ Effective Date ”). Giant and ShoreTel are sometimes referred to herein individually as a “ Party ” or collectively as “ the Parties ”.

RECITALS

      WHEREAS , Giant is a manufacturer of electronics and data communications equipment, and in conjunction Elite Communication, Inc, (“ECI”) a U.S. company that contracts design work for Giant, is developing Voice Over IP (VoIP) endpoint products and associated software that are designed to be used and deployed with ShoreTel IP based communication products being developed for certain markets, and

      WHEREAS , ShoreTel is a developer of IP based voice communications systems for enterprise customers. ShoreTel is developing the ShoreTel line of IP based communications systems and software, and

      WHEREAS , ShoreTel and Giant desire to develop a joint relationship that will allow them to apply resources to develop tested, interoperable IP telephony products with ShoreTel specific, and

      WHEREAS , ShoreTel agrees to ODM several models of IP telephones (the “Product”) from Giant during the term of the agreement, where ShoreTel will purchase directly from Giant and sell such Product to channels and distribution as established by ShoreTel.

      NOW THEREFORE , in consideration of the mutual promises, covenants and conditions contained herein, the parties hereto mutually agree as follows:

TERMS AND CONDITIONS

1. TERM OF THE AGREEMENT

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GIANT AND SHORETEL CONFIDENTIAL

     This Agreement shall become effective on the date first written above and shall continue for an initial term of three (3) years, after which it shall automatically renew for three (3) successive one (1) year periods unless either party notifies the other in writing at least sixty (60) days prior to the next annual anniversary of its intention not to renew. ShoreTel and Giant entered into a Design and Manufacturing Agreement on May 1, 2003 (the “DMA”). The DMA was intended to set forth the major terms and conditions for this Agreement; hence the terms and conditions of this Agreement supersede those of the DMA.

2. ODM SUPPLY ACTIVITIES

     The purpose of the ODM supply activities is to define the terms for ShoreTel to procure the Product from Giant. The ODM Supply Activities are described in greater detail in Exhibit A – ODM Supply Activities, attached hereto and incorporated herein by reference.

3. PRODUCT DEVELOPMENT AND INTEROPERABILITY

     In consideration of the specific activities associated with the development of the Product for ShoreTel, a non-recurring expense fee (“NRE”) of **** shall be paid by ShoreTel to Giant. This fee shall be due and payable as set forth in Exhibit B. Giant, at its election, may delegate some or all of the development to ECI.

     The product development activities and are described in greater detail in Exhibit B – Product Development and Interoperability Activities, attached hereto and incorporated herein by reference.

4.

      4.1 LICENSE GRANTS

     ShoreTel grants Giant a royalty free, non-transferable, non-exclusive license to the ShoreTel, client software (in object code format only) and documentation solely for the purpose of developing products that are interoperable with ShoreTel telephony products. Such License is granted only during the period and under the terms of this agreement

     Giant grants to ShoreTel a non-exclusive, non-transferable, royalty-free, world wide license to use Giant technology (and any ECI technology licensed by Giant) associated with IP telephony, solely for the purpose of assuring that Giant IP telephony products properly operate with ShoreTel products.

     This license is granted only during the period and under the terms of this agreement.

     Giant grants to ShoreTel associated right to load firmware as mutually developed, verified and released for end user installations to the phones via the Shoreware server.

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     This includes maintenance and diagnostic utilities that reside and execute on a processor other than the phones.

      4.2 COPYRIGHT NOTICES

     Each party shall ensure that all copies of its software or collateral material in its possession or control incorporates copyright and other proprietary notices in the manner that such party incorporate such notices, or in any manner reasonably requested by the other party.

      4.3 TECHNICAL SUPPORT

     The parties agree that customer technical support programs to support end users and resellers will be developed by ShoreTel. Giant agrees to provide, upon request, reasonable technical assistance and information to ShoreTel. For those problems not easily isolated, Giant and ShoreTel agree to cooperate in troubleshooting through identification of root cause. The Parties agree to develop and document an escalation process to ensure effective hand-off of Product problems to Giant. Giant warrants that the software will perform to specifications detailed on Exhibit B and agrees to perform necessary bug fixes in a timely manner. In the event a model of the Product is manufacturing discontinued, Giant will provide support for the product for subsequent period of three (3) years.

5. PUBLICITY

     Except as may be required by law, neither party shall, without the other party’s prior written consent, which shall not be unreasonably withheld:

6. CONFIDENTIALITY

     During the course of this Agreement, each party may disclose to the other certain proprietary or confidential information, which shall be received in confidence and not revealed to third parties or applied to users other than recipient’s performance of its obligations hereunder. A mutual nondisclosure agreement, attached hereto as Exhibit C was previously executed. The term of this previously executed nondisclosure agreement is hereby extended to be co-terminous with this Agreement.

7. TERMINATION

7.1 Termination for Convenience. Either party may terminate this Agreement, at will, at any time, with or without cause, by written notice to the other given not less than one hundred twenty (120) days prior to the effective date of such notice. In no event

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GIANT AND SHORETEL CONFIDENTIAL

shall either party be liable for compensatory damages as a result of termination of this Agreement pursuant to this Subsection.

7.1.1 Obligations upon termination to continue supply of Products. In the event that Giant exercises a termination of this agreement for convenience, Giant shall guarantee availability of Product for a period of 6 months beyond date of termination and will continue to perform all support and maintenance obligations hereunder for 15 month beyond date of termination.

7.2 Termination of Cause. Either party shall have the right to terminate this Agreement for cause if the other party:

7.3 Obligations upon Termination or Expiration. The termination or expiration of this Agreement shall in no way relieve either party from its obligations to pay the other party any sums accrued hereunder prior to such termination or expiration or from its obligations with regard to Confidential Information or other such provisions of this Agreement that by their nature are intended to survive beyond such termination. Additionally, each party agrees to promptly return any property of the other party within 30 days after termination.

7.4 Manufacturing Rights. In the event that Giant terminates for convenience or ShoreTel terminates for cause, Giant shall grant ShoreTel a paid up license to manufacture Product and shall transfer to ShoreTel within 10 days its intellectual property of the Product along with latest artwork for the PWB and all other information required to manufacture the product.

8. INTELLECTUAL PROPERTY INDEMNITY

With the exception of the required feature implementation in ShoreTel products of **** and ****,

8.1 Giant shall defend, indemnify and hold ShoreTel harmless from any claim that Giant products, or any part thereof, furnished to ShoreTel under this Agreement, infringe any existing patent, trademark or copyright, or misappropriate a trade secret of any third party, provided that Giant (i) is notified promptly in writing of such claim by ShoreTel,

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GIANT AND SHORETEL CONFIDENTIAL

and (ii) ShoreTel provides reasonable assistance to Giant in the defense of such suit or proceeding.

8.2 Giant shall have the sole control over the defense and/or any settlement of any such claim and shall pay costs and damages finally awarded against ShoreTel.

8.3 In the event Giant products, or any part thereof, are in Giant’s opinion likely to become, or do become the subject of a claim, or are held in any suit or proceeding to constitute an infringement of any patent, copyright, or other proprietary right or any third party, or become the subject of an injunction prohibiting the use thereof, or any settlement requires the use of Giant products to be discontinued, Giant shall at its own option and expense either (i) procure for ShoreTel and customers of ShoreTel the right to continue using said Giant products, (ii) replace the same with non-infringing Giant products with equivalent or better capacity and performance, or (iii) modify the Giant products so they become non-infringing.

8.4 the obligation of indemnification does not apply to any claim, or portion thereof, arising from (i) the use of Giant products, or any part thereof, furnished under this Agreement used in combination with products not supplied by Giant or not specified by Giant, (ii) alteration or modification of any Giant product supplied hereunder, (iii) Giant’s compliance with ShoreTel’s designs, specifications or instructions, or (iv) the use of other than the then current unaltered release of the software product available from Giant; to the extent that the infringement would not have occurred in the absence of such combination modification, compliance with specifications, or use of other than the current release.

9. LIMITATION OF LIABILITY

EXCEPT FOR INDEMNITY OBLIGATIONS HEREUNDER AS THEY APPLY TO THIRD PARTY DAMAGES, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, OR LOST PROFITS, ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE PERFORMANCE OR BREACH HEREOF, EVEN IF THE BREACHING PARTY HAS BEEN ADVISED OF THE POSSIBILITY THEREOF.

10. DISPUTE RESOLUTION

10.1 Informal Dispute Resolution. The parties shall first use best efforts to resolve any disputes informally. If they are unable to resolve a dispute informally, the party raising the dispute shall submit a written request for escalation to the other party.

10.2 Arbitration. Any dispute arising under or relating to this Agreement, which is not resolved in accordance with Section 10.1, shall be resolved solely by binding arbitration in the state of California pursuant to this section. THE PARTIES EXPRESSLY WAIVE ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY. The parties hereby agree to conduct such proceedings in confidence without admission to

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such proceedings by any persons who are not parties to such dispute. Publicity regarding the dispute shall be released only pursuant to joint agreement of the parties.

10.3 Selection of Arbitrator. The arbitration proceedings shall be conducted in accordance with the Commercial Rules of the American Arbitration Association in effect at the time of the request for arbitration, before three (3) neutral arbitrators who have not had any business, employment, or other relationship with Giant or ShoreTel. One arbitrator shall be selected by Giant and the other by ShoreTel, and the third arbitrator shall be selected by the two arbitrators so selected. In the event the two arbitrators cannot agree upon the third arbitrator within fourteen (14) days of both being selected, the parties shall request that the American Arbitration Association appoint such arbitrator, provided that such arbitrator shall have five (5) or more years’ experience in arbitrating hardware and software disputes.

10.4 Procedure. The parties to said dispute shall provide such information, testimony,