Exhibit 10.3


 


***Text Omitted and Filed Separately


with the Securities and Exchange Commission.


Confidential Treatment Requested


Under 17 C.F.R. Sections 200.80(b)(4)


and 240.24b-2.


 


 


Agreement
No.                


 


PRODUCT SUPPLEMENT/AWARD LETTER FOR LOW COST ARRAY (“LCA”)


 


This Product Supplement/Award
Letter (this “Award Letter”) is made on and as
of this 27th day of September, 2005 (“Effective
Date”) by and between Sun Microsystems, Inc. and Sun
Microsystems International B.V. (“Sun”) and Dot
Hill Systems Corporation and Dot Hill Systems B.V. (“Supplier”),
pursuant to the Product Purchase Agreement, dated as of May 22, 2002,
Agreement No. AR-63645, as amended, made by and between the parties (the “Agreement”). 
Capitalized terms not defined in this Award Letter have the meanings set
forth in the Agreement.  The parties
agree as follows:


 


1             SCOPE: 
Neither this Award Letter nor the Agreement constitutes a commitment by
Sun to purchase Products unless Sun, in its sole discretion, issues one or more
P.O.’s in the manner described in the Agreement.  The terms and conditions of the Agreement are
incorporated herein by reference as if set forth in full.


 


2             PRODUCT DESCRIPTIONS AND PRICING[***]:  Product descriptions and pricing are set
forth in Exhibit A to this Award Letter.


 


3             MINIMUM PURCHASE RIGHTS PERIOD:  Pursuant to the terms of Section 2.1 of
the Agreement, the Minimum Purchase Rights Period (as defined therein) is
[***].


 


4             UPSIDE SUPPORT: 
Sun may request all or any part of Upside Support quantities at anytime during the applicable quarter [***].
Supplier shall [***] sell, manufacture
and ship such Upside Support quantities to Sun on a
“first-in, first-out” basis within [***] after Sun’s written request.


 


[***]


 


Supplier shall [***]
accommodate any request from Sun to accelerate
delivery of Upside quantities of Products within the timeframes indicated above.  With respect to any request for quantities in
excess of Upside Support described above, the parties shall negotiate
in good faith acceptable delivery
dates.


 


5             SUN-UNIQUE
COMPONENTS:  The initial List
of Sun-unique Components, Leadtimes and MOQs is set forth as Exhibit B.


 


6             SPECIFICATION:  The Product Specification is set
forth as Exhibit C.


 


7             EXTERNAL MANUFACTURERS: 
The list of External Manufacturers, if any, is set forth in Exhibit D.


 


1





















 


8             BUSINESS CONTINUITY PLAN: Supplier’s business continuity plan for
the Product is set forth in Exhibit E.


 


9             LICENSED SOFTWARE: The Licensed Software [***] and updates
made thereto by Supplier during the term of this Award Letter.  This software is licensed by Supplier to Sun
as Licensed Software pursuant to Section 18.2.1 of the base terms and
conditions of the Agreement.  The
Software License Fees, if any, for the above Licensed Software are set forth in
Exhibit A.


 


10       QUALITY: 
In addition to the quality requirements in Exhibit C of the
Agreement, Exhibit F of this Award Letter, which is attached hereto
and incorporated by reference, contains component-specific requirements that
apply to those Products that Supplier may supply to Sun under this Award
Letter.


 


11       DISCLOSURE OF COSTS:


 


11.1                          Supplier is
expected to provide information [***] as to costs for certain mutually agreed
key components which are included in the Products.  Supplier and Sun will jointly identify those
components that they desire for Sun to review [***]; however, Sun and Supplier
agree that information as to Supplier’s costs need not be provided to Sun for any
items within [***] the Products, except for the items described in Exhibit H
to this Award Letter.  Sun and Dot Hill
will use reasonable efforts to complete Exhibit H within [***]
after the date of execution of this Award Letter.  Sun will review promptly the information that
Supplier provides regarding Supplier’s costs for such mutually agreed key
components and provide input to Supplier [***]. 
All information provided by Supplier regarding its costs for such
components shall be deemed to be the confidential information of Supplier, and
treated as such by Sun under the confidentiality provisions of the Agreement.


 


11.2                          For Products
covered under this Award Letter, Supplier will pass through [***] the benefit
of all cost reductions that Supplier achieves within those units of Products
that contain components which implement such cost reductions.  Notwithstanding the foregoing, [***] of the
cost reductions for certain mutually agreed components which are identified
solely by Sun and achieved by Supplier as a result of Supplier’s procurement of
components under Sun agreements with third parties shall be passed through
immediately by Supplier to Sun for those units of Products [***].


 


12       ALTERNATIVE SUPPLY CHAIN MODEL:


 


Sun
and Supplier agree to implement [***] for the Products that are covered under
this Award Letter, as follows:


 


12.1                                Sun will
source [***] from a Sun Contractor, and not from the Supplier.  The Sun Contractor will procure [***] for
such [***] from Supplier’s [***] supplier at [***] for Sun.  Sun field returns of both [***] will be returned
to Sun’s [***] suppliers for warranty repair or replacement.  [***].


 


12.2                                Sun and
Supplier will mutually agree to a common External Manufacturer, who will
procure, manufacture, test and ship a system level product that is described in
this Award Letter and will contain [***] which is sold by Supplier to Sun.  [***]. The detailed transaction process will
be mutually agreed to by Sun, Supplier and the External Manufacturer.  For such product, Sun and Supplier will have
the ability to use certain agreed common materials [***] within a common
process and established capacities[***].


 


12.3                                Sun will
provide backline technical support on [***]. 
The Supplier will
provide materials, technical, quality and test process support to the External
Manufacturer for those items Supplier provides which are included in the
Product, in a similar manner as


 


2





















 


Supplier does today [***].  Supplier will
continue to provide support to [***]. Supplier, the External Manufacturer and Sun will work
together to [***]
improve the quality of the Products covered under this Award Letter.


 


12.4                                Supplier will provide to Sun the same hardware and software
warranty and unexpected failure coverage support on the Product covered under
this Award Letter as on the [***].


 


12.5                                Sun and Supplier will use commercially reasonable efforts to
prepare, negotiate and complete, within [***] after the execution of this Award Letter, the following
(as applicable): (i) an amendment to existing Direct Customer Fulfillment
(“CFIT”) Addendum, and/or (ii) a Demand Replenishment (“DR”)
Exhibit to be set forth in Exhibit I [***].


 


12.6                                Sun will work directly with the External Manufacturer [***].


 


12.7                                Supplier’s
co-synch obligations, if any, under Section 2.11 of the Agreement shall
not apply to any [***] included in any [***] Product in this Award Letter.


 


13     I18N / L10N


 


All
software delivered with the product must be Internationalization (I18N) and
Localization (L10N) compliant according to the applicable provisions of the
Agreement. Software translation in French, Japanese, Simplified Chinese,
Traditional Chinese, and Korean must be delivered not more than [***] of Sun’s
post-RR for the Products under this Award Letter.


 


14     FIELD REPLACEMENT UNITS


 


Supplier
would be expected to provide [***] the following FRUs identified in Exhibit A,
[***]:


 


[***


 


Additional
units required as seed stock to be used solely by Sun [***] from Supplier’s
External Manufacturer.


 


15     EVALUATION UNITS


 


Supplier
will provide certain units of [***] Products solely for use by Sun in
connection with non-revenue sales, marketing, and engineering for each
configuration.  This number of units of
[***] Products will not exceed [***].  Additional units of [***] Products
that are intended solely for use by Sun in connection with non-revenue sales,
marketing and engineering [***].


 


16     SOFTWARE LICENSE KEYS


 


Supplier and Sun agree to work in
good faith to develop a process to enable Sun to generate license keys for the
Licensed Software covered under this Award Letter.  [***].  Supplier reserves
the right to audit [***] to ensure that Supplier has been paid the proper amounts
due from Sun for the rights granted by Dot Hill for such Licensed Software.


 


17     SCHEDULES


 


Within [***] of execution of the this Award Letter, Sun and Supplier
will use commercially reasonable efforts to revise the Statement of Work set
forth in Exhibit G to include the following:


 


3





















 


[***]


 


18       AWARD LETTER COMPONENTS:


 


The
parties agree to be bound by these terms and conditions which consist of the
Award Letter and the Exhibits indicated below:


 


ý                                    Exhibit A
(Product Descriptions and Pricing)


ý                                    Exhibit B
(Sun-unique Components, Lead-times and MOQs)


ý                                    Exhibit C
(Specification)


ý                                    Exhibit D
(External Manufacturers)


ý                                    Exhibit E
(Business Continuity Plan)


ý                                    Exhibit F
(Component Quality Requirements)


ý                                    Exhibit G
(Statement of Work)


ý                                    Exhibit H
(Items in Dot Hill Controller Subject to Disclosure)


ý                                    Exhibit I  (Demand Replenishment)


 


4





















 


The undersigned duly authorized
representatives of the parties have executed and delivered this Award Letter as
of the Effective Date.


 


	
  Sun
  Microsystems, Inc.

  	
  Dot Hill
  Systems Corporation

  
	
   

  	
   

  
	
  By:

  	
    /s/
  [***]

  	
   

  	
  By:

  	
    /s/
  Preston Romm

  	
   

  
	
  Name: [***]

  	
  Name:
  Preston Romm

  
	
  Title:
  Director, DMG SM

  	
  Title: CFO

  
	
  Date:
  September 27, 2005

  	
  Date:
  September 27, 2005

  
	
   

  	
   

  
	
   

  	
   

  
	
  Sun
  Microsystems International B.V.

  	
  Dot Hill
  Systems BV

  
	
   

  	
   

  
	
  By:

  	
    /s/
  [***]

  	
   

  	
  By:

  	
    /s/
  Preston Romm

  	
   

  
	
  Name: [***]

  	
  Name:
  Preston Romm

  
	
  Title:
  Director

  	
  Title:
  Director

  
	
  Date:
  September 27, 2005

  	
  Date:
  September 27, 2005

  
							



 


5





















 


EXHIBIT A


 


[***]


 





















 


EXHIBIT B


 


LCA Sun Unique Inventory


 


[***]


 





















 


Engineering Specification



for the



[***] Subsystem


 


 


Specification
provided under non-disclosure

by Dot Hill Systems Corporation to:


 


 


Sun
Microsystems Inc.


910
San Antonio Road


Palo
Alto, CA 94303 USA


(650)
960-1330


 


 


This
document is the property of Dot Hill Systems Corporation and contains
information which is confidential and proprietary to Dot Hill Systems
Corporation. No part of this document may be copied, reproduced or disclosed to
third parties without the prior written consent of Dot Hill Systems
Corporation.


 


 





 


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[***]


 


2





















 


Table of Contents


 


[***]


 


3





















 


1.0       Scope


 


This
specification describes the models, standard configurations, general functions,
and performance characteristics of the [***] Subsystem ([***]) family of data
storage products. This document also includes environmental, physical,
regulatory, and other specifications. Supported servers, software, and devices
are summarized in Appendix A, Support Matrix.


 


1.1       General
Description 


 


The [***]


 


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External
Manufacturer Sites: 


 


[***]


 





















 





 


 


Technical


Contingency


Planning


 


[***]


 


 


[***]


 


[***]


 





















 





 


 


[***]


 


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CORPORATE DISASTER RESPONSE AND RECOVERY


 


	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
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CORPORATE

DISASTER RESPONSE AND RECOVERY


 


	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
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CORPORATE SAFETY


 


Title:  Corporate Disaster Response and Recovery
Policy


 


[***]


 


2





















 


EXHIBIT F


 


COMPONENT QUALITY REQUIREMENTS


 


[***]


 


 


Dot Hill Confidential Page 1


 





















 


[***] Statement of Work And Product
Requirements


 


 


[***]


 


Statement of Work



And Product Requirements


 


 


Revision 4.3


 


 


09/15/05


 


1





















 


Table of Contents


 


[***]


 


2





















 


I)
DOCUMENT HISTORY


 


I.1) CHANGE CONTROL PROCESS


 


This document will be maintained under a strict Change Control
Process;  therefore, all changes must be
documented in the following matrix.  If
changes are required after it has been reviewed and approved as indicated on
the cover sheet, those changes will not only be subject to the Change Control
Process, but must undergo a new Review and Approval cycle.


 


I.2) CHANGE HISTORY


 


[***]


 


3





















 


EXHIBIT H


 


ITEMS IN DOT HILL CONTROLLER SUBJECT TO DISCLOSURE


 


[***]


 





















 


Exhibit I


 


DIRECT CUSTOMER FULFILLMENT
PROGRAM


 


[***]