Varec’s Software License Agreement sets out the license use terms and conditions by, and between, Varec, Inc. and our customer.

 1.     License.  During the term of this Agreement and subject to the terms and conditions set forth herein, Varec hereby grants to Customer a nonexclusive, nontransferable, revocable, limited license to execute the Varec Software and/or the Third Party Software provided by Varec to Customer in connection with the Agreement, in object code or executable code form only (collectively, the “Software”), and to use the Varec Documentation or Third Party Documentation (collectively, the “Documentation”), in each case solely for Customer’s internal business purposes.  The terms Software and Documentation will also include any software or documentation provided by Varec to Customer prior to the date hereof.  Customer’s use of the Software is limited to operation with a hardware or software key provided to Customer by Varec.  Customer’s use of the Software shall also be limited by any other restrictions set forth in the Documentation provided by Varec in connection with the Software.

2.      General Limitations and Obligations.  Except as otherwise expressly provided under this Agreement, Customer will have no right to, and Customer specifically agrees not to:  (i) transfer, assign or sublicense the rights granted to Customer in this Agreement to any other person, or, with respect to the Documentation or Software, to transfer or distribute a copy of such items to a third party, without the express written consent of Varec, and any such attempted transfer, assignment, or sublicense will be void;  (ii) make error corrections to or otherwise modify or adapt the Software or create derivative works based upon the Software, or to permit third parties to do the same;  (iii) translate, decrypt, decompile, reverse engineer, disassemble, or otherwise reduce the Software to human-readable form to gain access to trade secrets or confidential information in the Software;  (iv) operate the Software without use of the hardware or software key(s) provided by Varec;  (v) rent, lease, or lend the Software to a third party;  (vi) allow any third party to access or use the Documentation or Software, except upon the prior written consent of Varec; or  (vii) copy or duplicate by any means the Documentation, Software, or any portion thereof, except to the extent reasonably necessary to maintain backup or historical documentation or to test, implement or use the Software.  Customer will cause all proprietary, confidential, and copyright notices, markings, or legends which appear on any item included in the Documentation or Software to be placed upon each copy or duplication.  Customer will maintain records identifying the location of the Software and all copies thereof (including all backup or archival copies), as well as the identity of the operating systems and database software with which the Software is used.  Such records will be subject to inspection by Varec during regular business hours upon reasonable advance notice.

3.      Customer Responsibility.  Customer is solely responsible for:  (i) obtaining any third-party software required for use of the Software, including any operating system software, database software, or third party applications software, excluding third-party software embedded in the Software;  (ii) conversion of any of Customer’s existing data files for use with the Software;  and (iii) taking reasonable backup precautions.  Varec will not be responsible for loss of data or documentation, whether or not attributable to the Software.  Customer shall provide, maintain and make available to Varec, at Customer’s expense and in a timely manner, such resources as Varec may from time to time reasonably request in connection with Varec’s performance of any services under this agreement.  Delays in the provision of these resources may result in delays in the performance of the services, delivery of the deliverables, and/or an increase in the price.  Customer represents and warrants to Varec that Customer has the right to use and furnish to Varec for Varec’s use in connection with this Agreement any information, specifications, data, or intellectual property that Customer has provided or will provide to Varec in order for Varec to perform the services and to create the deliverables.

4.      Ownership of the Software, Use, and Restrictions.  Error Corrections, Enhancements, New Modules, or Releases (or any other programming provided by Varec, regardless of its form or purpose) are considered Software and are subject to the rights and restrictions applicable to Software.  Except as otherwise expressly set forth in this Agreement, Varec or Third Party, as the case may be, will have sole and exclusive ownership of all right, title, and interest in and to such works (including ownership of all copyrights and other intellectual property rights pertaining to those works), subject only to the license expressly granted to Customer.  As between the Parties, Varec retains all right, title, and interest in and to all forms of the Documentation, Software, and all copies and modifications thereof, including all worldwide rights to patents, copyrights, trademarks and trade secrets in or relating thereto.  Unless otherwise agreed, Customer is entitled to make and use only the number of copies of such works as Customer is authorized to use of the Software to which they relate, and Customer agrees to return or destroy, as requested by Varec, superseded copies when replaced by such works.  Customer is not acquiring any right, title or interest of any nature whatsoever in the Documentation or Software, except the limited licenses set forth in this Agreement.

5.      Fees, Expenses, Payment, and Taxes.  License fees, as noted on our order acknowledgement as well as our invoice, are exclusive of any federal, state, municipal, value-added, foreign withholding or other governmental taxes, duties, fees, excises or tariffs now or hereafter imposed on the licensing, sale, transportation, import, export or use of the Documentation or Software, or any improvements, alterations, or amendments to the Documentation or Software.
a.  If Customer’s action or inaction results in non-receipt of payment by Varec for the total amount of an invoice within thirty (30) days of the date of such invoice, interest compounded at the rate of one percent (1%) per month shall be added to all amounts unpaid and outstanding.
b.  If Customer’s action or inaction results in non-receipt of payment by Varec, Varec shall have the right exercisable in Varec’s sole discretion, in addition to its other rights and remedies, to cease further performance of any services hereunder.

6.      Confidentiality.  All information disclosed by Varec to Customer that is disclosed in writing, labeled as proprietary or confidential, or if disclosed orally, information which Customer reasonably knows is proprietary or confidential (collectively, “Confidential Information”), will remain the sole property of Varec.  Customer hereby covenants that Customer, its employees and agents will not (without first obtaining the prior written consent in each instance of Varec) disclose, make commercial or other use of, give, or sell to any person, firm, corporation, or entity any Confidential Information received directly or indirectly from Varec or acquired or developed in the course of this Agreement, unless (i) required to do so pursuant to law (and then only after Customer has given prompt written notice of the legal compulsion to Varec and provided Varec with cooperation in any attempt Varec may make to gain a protective order acceptable to Varec);  (ii) it is rightfully in the possession of Customer from a source other than Varec prior to the time of disclosure of the Confidential Information to Customer hereunder;  or (iii) it became part of the public domain by any means other than an unauthorized act or omission of Customer or its agents.  The obligations set forth in this Section 6 will continue during the term of this Agreement and for any renewal periods and thereafter for a period of five (5) years following the expiration or termination of this Agreement, except that Customer’s obligations with respect to trade secrets will continue so long as such item remains a trade secret under applicable law.  Upon the expiration or termination of this Agreement for any reason, Customer’s right to possession and use of Confidential Information will terminate and Customer will immediately deliver to Varec all Confidential Information and all copies of any portion thereof and, upon completion of such delivery, certify in writing to Varec that Customer has fulfilled its obligations under this Section 6.

7.      Export.  Customer will not export any Documentation or Software or use any Documentation or Software outside the United States without the prior written consent of Varec.  Customer agrees to comply with all export laws, restrictions, national security controls and regulations of the United States or other applicable foreign agency or authority, at Customer’s sole expense, and not to export or re-export, or allow the export or re-export, of the Documentation, Software, or Confidential Information or any copy or direct product thereof in violation of any such restrictions, laws or regulations, or in violation of the embargo provisions of the U.S. Export Administration Regulations (or any successor regulations or supplement).

8.      Infringement Indemnity.  Varec will defend and settle any third party claim that the Varec Software infringes any United States copyright, or patent right of any third party, except that Varec will have no obligation under this Section 8 to the extent that the alleged infringement or violation is based upon (i) Customer’s use of the Software other than as set forth in this Agreement or in the Documentation;  (ii) any modification, combination or alteration of the Software performed by anyone other than Varec;  or (iii) Varec’s compliance with Customer’s designs, specifications or instructions.
         Varec’s obligations under this Section 8 are contingent upon Customer promptly notifying Varec of any such claim, granting Varec the sole control over the defense and settlement of such claim, and cooperating with Varec in the defense of the claim.  Customer will have right to participate with Varec in the defense or appeal of any such claim or judgment, at Customer’s option and at Customer’s expense, but Varec will have sole control and authority with respect to any such defense, compromise, settlement, appeal or similar action.
         If a claim of infringement under this Section 8 occurs, or if Varec determines that a claim is likely to occur, Varec will have the right, in its sole discretion, to (i) modify or replace the Varec Software so that it performs comparable functions without infringement;  (ii) obtain a license for Customer to use the Varec Software free of the infringement claim;  or (iii) terminate this Agreement without further liability hereunder. Varec’s total liability for any obligations under this Section 8 is subject to Section 10 o f this Agreement.

9.      Limited Warranties of Software.  Varec warrants that the Varec Software will substantially comply with the Varec Documentation for one year after Customer’s receipt of the original or New Releases of Varec Software.  Varec provides no warranty for any software other than the Varec Software.  The Software is of such complexity that it may have inherent or other defects, and Varec does not warrant, and expressly disclaims any warranty, that the Software or any equipment, system, or network on which it is used, will operate error-free, will meet Customer’s specific needs or requirements, or will be free of vulnerability to intrusion or attack.  Varec represents and warrants that all services to be performed by Varec as contemplated under this Agreement will be performed in a professional and workmanlike manner by individuals who possess commercially reasonable training and experience.  No warranty claim shall be effective unless Customer has delivered to Varec written notice specifying in detail the non-conformities within 90 days after performance of the non-conforming services or tender of the non-conforming deliverable.  The remedy set forth in this Section 9 is the sole and exclusive remedy for breach of the foregoing warranty.  EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 9, THE SOFTWARE IS PROVIDED ON AN AS-IS, WHERE-IS BASIS AND VAREC EXPRESSLY DISCLAIMS ANY AND ALL OTHER WARRANTIES, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF NON-INFRINGEMENT, FITNESS FOR A PARTICULAR PURPOSE, AND MERCHANTABILITY, AND ANY WARRANTY ARISING OUT OF A COURSE OF DEALING.  Varec’s warranties do not apply to damage resulting from (i) failure to use the Software properly and in accordance with the specifications and instructions provided in the accompanying Documentation;  (ii) improper installation or configuration;  (iii) accident, neglect, act of God, or misuse;  (iv) a cause not arising out of a defect in material or workmanship;  (v) damage to the Software caused by shipment or installation;  (vi) failure or defect of electrical power, external electrical circuitry, air conditioning or humidity control;  (vii) use of the Software in conjunction with an item not provided or approved by Varec;  (viii) use of the Software with any third-party software, firmware or hardware not operating in accordance with its respective specifications;  or (ix) repair or adjustment to or service on the Software by any person not authorized by Varec.

10.    Limitation of Liability.  In no event will Varec be liable to Customer or any other person and nor will Varec, Customer, or their respective Representatives be liable to the other party(s) or any other person for any indirect, incidental, special, punitive or consequential damages, including loss of profits, revenue, data, or use, incurred by either party or any other person, whether in an action in contract, breach of warranty or tort, even if Varec or the other party has been advised of the possibility of such damages.  In no event will Varec’s aggregate liability to Customer or any other person under this Agreement exceed the amounts paid by Customer to Varec under this Agreement during the six month period immediately preceding the claim, regardless of the form of action, whether in contract, negligence, tort or otherwise.

11.    U.S. Government’s Restricted Rights.  If the Software is being acquired by or on behalf of the U.S. Government or by a U.S. Government prime contractor or subcontractor (at any tier), then the Government’s rights in the Software will be only as set forth in this Agreement;  this is in accordance with 48 CFR 227.7201 through 227.7202-4 (for Department of Defense (DOD) acquisitions) and with 48 CFR 2.101 and 12.212 (for non-DOD acquisitions).

12.  Breach and Termination.
a.  Termination of License.  Customer’s license to use the Software and Documentation will be effective until terminated in accordance with the provisions of this Section 12.
b.  Termination for Breach.  Varec may terminate the licenses granted herein upon written notice to Customer if Customer breaches any term or condition of this Agreement and fails to cure such breach within ten (10) days after receipt of written notice of the breach.
c.  Effect of Termination.  Upon termination, Customer will discontinue the use of, and will return to Varec, all copies of the Documentation and Software, and will destroy and document in writing such destruction of, any embodiments of these materials stored in or on a reusable electronic or similar medium, including memory, disks, disk packs, disks arrays, tapes, and other peripheral devices.

13.    Term.  The license granted hereunder shall continue unless and until terminated pursuant to Section 12 hereof.

14.    Disputes.  Any controversy, claim or dispute (“Dispute”) arising out of or relating to this Agreement shall be resolved by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect.  Before commencing any such arbitration, the parties agree to negotiate in good faith to resolve the Dispute.  If the parties are unable to resolve the Dispute by good faith negotiation, either party may refer the matter to arbitration.  The arbitration shall take place in the County of San Diego, State of California.  The arbitrator(s) shall be bound to follow the provisions of this Agreement in resolving the Dispute, and may not award any damages excluded by this Agreement.  The decision of the arbitrator(s) shall be final and binding on the parties, and any award of the arbitrator(s) may be entered or enforced in any court of competent jurisdiction.  Any request for arbitration of a claim by either party against the other relating to this Agreement must be filed no later than one year after the accrual of the claim.

15.    Force Majeure.  Neither party shall be liable for any failure of or delay in performance of its obligations (except for payment obligations) under this Agreement to the extent such failure or delay is due to acts of God, acts of a public enemy, fires, floods, power outages, wars, civil disturbances, sabotage, terrorism, accidents, insurrections, blockades, embargoes, storms, explosions, labor disputes (whether or not the employees’ demands are reasonable and/or within the party’s power to satisfy), failure of common carriers, Internet Service Provides, or other communication devices, acts of cyber criminals, terrorists or other criminals, acts of any governmental body (whether civil or military, foreign or domestic), failure or delay of third parties or governmental bodies from whom a party is obtaining or must obtain approvals, authorizations, licenses, franchises or permits, inability to obtain labor, materials, power, equipment, or transportation, or other circumstances beyond its reasonable control (collectively referred to herein as “Force Majeure Occurrences”).  Any such delays shall not be a breach of or failure to perform this Agreement or any part thereof and the date on which the obligations hereunder are due to be fulfilled shall be extended for a period equal to the time lost as a result of such delays.  Neither party shall be liable to the other for any liability claims, damages or other loss caused by or resulting from a Force Majeure Occurrence.

16.    General.  The Sections and other portions of this Agreement that by their terms are intended to survive the expiration or termination of this Agreement will survive and continue in full force and effect notwithstanding the expiration or termination of this Agreement.  This Agreement is governed by the laws of the State of California, USA, without regard to or application of choice of law rules or principles.  The United Nations Convention on Contracts for the International Sale of Goods does not apply to this Agreement.  All notices provided under this Agreement will be in writing to the addresses shown in this Agreement and will be deemed given or made on the date delivered if delivered in person, on the date delivered (or attempted delivery is refused by the recipient) if delivered by a nationally recognized overnight courier service, or on the third business day after it is mailed, if mailed by registered or certified mail, return receipt requested (with postage and other fees prepaid).  The party sending such notice will promptly send the other party a copy of such notice (which will not itself constitute notice) by facsimile or e-mail.  All notices, communications and deliveries under this Agreement must be made in writing signed by the party making the same and must specify the Section under this Agreement pursuant to which it is given or being made (if applicable).  If any provision of this Agreement is held to be invalid or unenforceable, the remaining provisions of this Agreement will remain in full force and effect.  The waiver by either party of any default or breach of this Agreement will not constitute a waiver of any other or subsequent default or breach.  This Agreement may not be assigned by Customer without the prior written consent of Varec, and any such attempted assignment will be void.  This Agreement may be signed in one or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.  The parties acknowledge that in performing their obligations each is acting as an independent contractor.  The parties do not intend to create any employment relationship and nothing in this Agreement will be construed to make either party partners, principals, agents or employees of the other.  Neither party has the authority to enter into any agreement, or make any warranty or representation on behalf of the other party, except where and to the extent specifically authorized to do so in writing.  This Agreement sets forth the entire agreement and understanding between the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of any kind and every nature between the parties relating to the subject matter set forth herein.

17.    Definitions. 
“Enhancement” means any modification or addition to the Software that changes its utility, efficiency, functional capability, or application, but that does not constitute an Error Correction or New Module.  Enhancements to the Varec Software are included in the Maintenance and Support Services at no additional charge.
“Error” means any failure of the Software to conform to its Documentation in any material respect.
“Error Correction” means either a modification or addition that, when made or added to the Software, brings the Software into conformity with its Documentation in all material respects or a procedure or routine that, when observed in the regular operation of the Software, avoids the practical adverse effect of such nonconformity.
“New Module” means a new module related to the Software which contains business logic not offered or contained in the then current version of the Software and is offered by Varec as a separate option or feature and is priced separately.  New Modules are not included in the Maintenance and Support Services and are subject to a separate charge.
“Release” means a new version of the Software that includes Error Corrections and/or Enhancements.
“Representatives” will mean the directors, officers, employees and contractors of a party and of the party’s subsidiaries and affiliates controlled by or under common control with that party.
 “Third Party” means the third party(s) owner(s) of all right, title and interest in and to the Third Party Software and Third Party Documentation.
“Third Party Documentation” means all operator and user manuals, education materials, guides, listings, specifications and other materials, including on-line information and materials, relating to the use of the Third Party Software delivered to Customer in connection with Third Party Software.
“Third Party Software” means the computer programs and data in machine-readable form specifically designated as Third Party Software in the Agreement, together with any error corrections, updates, modifications or enhancements thereto furnished by Varec in connection with the Maintenance and Support Services or otherwise.
“Varec Documentation” means all operator and user manuals, education materials, guides, listings, specifications and other materials, including on-line information and materials, relating to the use of the Varec Software delivered to Customer as described on the first page of this Agreement.
“Varec Software” means the computer programs and data in machine-readable form specifically listed on the first page of this Agreement, together with any error corrections, updates, modifications or enhancements thereto furnished by Varec in connection with the Maintenance and Support Services or otherwise.